What Financial Advisors say to do now, Jim Chanos sees problems in China and a financial history lesson

Robert Hunt (0:13)

Welcome to the Robert Hunt Financial Market Update. That's your favorite host, Robert Hunt, where I take the week's financial news that can be confusing, misleading, and take us off course, and make it actionable, understandable, and clear. What a fun show we have for you today, in this week's episode. We are going to look at what other financial advisors think you should do, and surprise, surprise, or not, I don't like any of it, basically. And then, we also have a famous short seller, my name Jim Chanos, is talking about the dangers of China, and to what degree their financial problems could affect you, and could affect me. And then, I take a trip down memory lane. We do a financial history lesson. I went back for this week's show, and I looked at 2002, and 2012, and 1992, 10-year chunks to see what were they saying then in the news about financial prospects for the future. Because today, as you can imagine, the time for the easy investor has ended, right? Everyone who thought investing was easy, they have been sobered up to the reality that volatility and uncertainty is part and parcel of the investing game. And so it was cathartic for me to look back at these other times in history, and I hope the same is true for you. So let's start it off with a CNBC article headline. This is this week. It says, We have to be defensive. Here are year-end strategies from advisors amid volatility, rate, hikes, and inflation. The article continues, It's been a nerve-racking year for investors with ongoing stock market volatility, high inflation, and interest rate hikes. Many wonder if we're headed for a prolonged economic downturn. I think we have to be defensive, said certified financial planner Ivory Johnson, founder of Delancey Wealth Management in Washington, DC. While it's impossible to predict exactly what will happen, financial advisors are preparing clients for whatever will be on the horizon. Whenever I read things like this, I say, Uh-oh, here come the market timers. Disguised as economist and soothsayers of the financial future. So anytime articles like this come across your feed and you read them, you have to ask yourself, Huh, number one, where were these articles last year? Why did no one warn me about the downturn prior to the downturn? Why does everyone get scared after the downturn? And so this article continues and just warns as, you know, no surprise here that this is Lee Baker, a CFP and owner of Apex Financial Services in Atlanta. Quotes, the question for the markets becomes how much progress towards the 2% goal, that's Jerome Powell's inflation goal, Fed chair, needs to be made before they take their foot off the rate increase pedal. Secondarily, just how much pain will there be on the way? So we're about to get into market time in here. And here it is. Here's a quote that you should peak your interest the most. And make you run for the hills. The quote here is, This isn't the year to try and kill it. With two negative quarters of economic growth, there's an ongoing debate about whether the US has dipped into a recession.

But this is Ivory Johnson, has warned clients about the possibility of more volatility, pointing to the red feds' rake eggs. He has purchased gold, utilities, and consumer stables while increasing cash and reducing technology positions. Here's the quote, This isn't the year to try and kill it, Johnson added. You just want to limit the damage right now. I find this to be very bad financial advice. It does a couple of things. One, puts your clients into a fever pitch. Two, it creates complexity. Three, if the client believes that this is possible, you can kind of move into gold at a good time, sell out of gold, move into cash at the right time, get out of cash. We're going to rotate into utilities, go into consumer staples. That makes sense. You're ignoring things like gravity. It is that absurd. When I say gravity, that's this immutable law of nature that everyone on this podcast agrees with. If you jump off a 10-foot-high bridge, you will fall. Similarly, markets are efficient. There's robust data on this, and low cost wins. It is clear that rotating in and out of various categories in whatever asset class is not to the benefit of the investor. At times, it can be seen as a benefit to the advisor. It can justify higher fee structures, as well as create a posture of dependency, because it's kind of like the Wizard of Oz. I'm not sure quite how he does it, but the fire comes out of his mouth, and it sounds ominous. Well, we can sometimes, if we don't have that basic level of instruction, we can listen to things like that and say, well, gosh, maybe I need to make sense to me, right? Makes sense to me, but it violates the law of gravity, violates investing principles. So, there were some good things, though. Can't just Monday morning quarterback them all day long. I got to look up here and say, well, they say a series, iBonds, still a tremendous opportunity. I agree. These are these, I've talked about these before, these inflation protected bonds that yield 9.62 percent through October. They link to inflation. You'd lock your money up. But there you go. You can do that. But I've been seeing more articles like this where advisors, CFPs, are coming on and saying, hey, let's make all these changes and do all these moves in light of current events. I think that's absurd. I really am shocked that, I don't know what they teach on that CFP stuff sometimes, but that is just not good, and you should avoid it. Mr. Jim Chanos. So this is a famous short seller. This is an article where he discusses the problems with China. So Jim Chanos says, this is the biggest investing story that no one's talking about. Beneath all the clamor over Russia's invasion of Ukraine, and the efforts to tamp down inflation, investors are largely passing over a huge story in China. Fame short seller Jim Chanos said Wednesday. So what he says, he says, if what is going on in the world, whether it's Russia, Ukraine, whether Central Bank is losing control, whatever it might be, weren't happening right now, I think what would be happening in the Chinese real estate market will be front and center for investors, said Chanos and co-founder Wednesday on the delivery and alpha conference in New York. Whenever something like this happens, it's good to know who's saying this. Okay, fame short seller. So oftentimes folks like this, and Jim Chanos has done well in the past, short selling. He's also messed up. But they see calamity everywhere. That's their job. Okay. It's like the credit department at a bank. Their job is to look for the holes in the plot and to say no to the sales department. Turn down the loan. Okay. Few people lose their jobs turning down loans. Short sellers see problems everywhere.