Revisiting Wacky Indicators (Ep 97)
It’s time to revisit some of our favorite wacky indicators that we discussed for the first time back in 2022. Today we’ll find out if Starbucks and gold prices are solid indicators of the economy’s direction. We’ll also give you an update on Social Security in the wake of the annual report released by the trustees. Can you believe that the news isn’t all bad? Listen to this episode of Make the Dough Rise to find out all the details.
Transcript - The following transcript was generated by a robot, so please excuse any typos or inaccuracies.
Brian Doe 00:01
everybody welcome to the show today we've got a cornucopia of new items. We've got a new intern Kayla that's with us for the summer. She's going to do some research into market efficiencies and whether active management can actually outperform we have some good news on social security. And we are going to talk about inflation hedges so stay tuned
00:25
it's time to make the dough rise the financial podcast with Brian Doe
Walter Storholt 00:34
it's another edition of make the dough rise. Thanks so much for taking the time to join us today. Walter Storholt here with Brian doe certified financial planner at living worth Wealth Advisors in the lake country and beyond based in Greensboro, Georgia, find us online at Living worth.com. Brian has more than two decades of experience in the financial services industry. And we've got a great show on the way today, as Brian said a cornucopia of topics. I love that, Brian, what a great word to be able to use today. Also, I just can't wait for today's episode, because this was one of my favorites, I think that we've ever done back on episode 78. When we talked about wacky indicators, and kind of looking at at the future and kind of trying to understand how maybe some of the more bizarre things out there could could maybe tell us what's happening in the economy and give us some perspective. I believe we recorded that in the fall of 2022, if I'm not mistaken. And so it will be fun. Well, it has been a while it feels like it wasn't that long ago. But you know, time flies when you're having fun. So I can't wait to get to some of these. And I understand we have some new ones to throw into the mix. So that'll be fun, along with a new person to join the show for us here at the beginning as well. Well, first
Brian Doe 01:41
things first. Walter, have you heard the good news?
Walter Storholt 01:43
Which good news? Would
Brian Doe 01:44
that be? There was a recent ranking of the 10 best Georgia retirement podcast? We're definitely on solidly in the number six position. Oh,
Walter Storholt 01:55
fantastic. One through 100. And we came in at number six. That's That's amazing. Yeah,
Brian Doe 02:01
that's it, you know, maybe it's the category or maybe it's just you know, the sheer quality of the podcast. I'm not sure I'm not sure which it
Walter Storholt 02:07
is a little bit a little bit of both. It's kind of like how you can be an Amazon Best Seller by creating a random obscure topic that nobody else has ever written a book about. And in the end, you're number one
Brian Doe 02:19
right now there's a couple on here that are actually on nationally syndicated radios that happened to broadcasts from Georgia, there's a couple that serve pretty big niches like the Teachers Retirement System. But, you know, for for our more narrowly focused and high end advice that we talk about here. Just thought it was nice to get a bit of recognition. So pat on the back to us.
Walter Storholt 02:40
I love it. So yeah, it looks like this is through feed spot. They they're the ones kind of assembling this, this data and this ranking. And number six, there it is make the dough rise. So I love it. Congrats, my friend.
Brian Doe 02:52
Thank you to you too.
Walter Storholt 02:55
All right, well, yeah, let's get into today's today's conversation then as we have, I think a really special guest someone new joining the living worth Wealth Advisors team and excited to hear a little bit more about the role that Caleb is going to be playing over the next few months with the team. Yeah,
Brian Doe 03:12
good news. I used to have a lot of interns when I was at Merrill Lynch, they've gone on to do a lot of great things. So I've got a good alumni group out there, and have not been able to attract as many good interns just because of our geography but was fortunate this summer. Kayla Marie has joined me and she is going to spend a couple months here working through the summer was going to be in the lake area. And yeah, I just wanted to introduce her and let let everybody hear her voice and we're going to be working on a project for the next couple of months. And at the end of it, she's going to come back and share her findings. So take a minute and say hello to Kayla.
Kayla Marie 03:49
Hello, my name is Kayla Marie. I'm currently a rising sophomore at Indiana University's Kelley School of Business majoring in finance and accounting. I grew up in New Jersey my whole life and I currently just moved to Chicago so I hope to go back out to the East Coast after graduation and pursue a career in investment management in New York City.
Walter Storholt 04:09
Oh, very cool. All right. I have to ask Kayla were from New Jersey. Are you Hoboken?
Kayla Marie 04:13
So right across the Hudson River so I grew up looking at New York City my whole life
Walter Storholt 04:19
nice very cool. I am a big New Jersey Devils fan. I don't get to talk about this very often on you know, a Georgia retirement podcast but since you mentioned New Jersey, I'm gonna bring up the devils and say go devils and I've got family all over New Jersey. So you're already a cool kid in my book. No doubt about it. So what what brings you down to Georgia this summer, though? And how did you find Brian in the in the you know, living with Wealth Advisors team.
Kayla Marie 04:44
My grandparents lived down here at Reynolds Lake Oconee. So I've been coming down here for quite a while so I love to play golf with my grandparents get out on the lake with them. And it's just a great environment to hang out with my grandparents as they get older. So yeah, I was looking to spend time with my grandparents down here, and also looking for an internship. So I was fortunate enough to connect with Brian and he had a project for me that involves investment management and portfolio management, which is what I want to do with my future. So yeah, I'm looking forward to it and working on the projects that he has, for me
Walter Storholt 05:17
nice to already have some insight and and kind of, you know, goals set out in front of you, and knowing solidly what you want to do into the future. Have you been able to beat Brian on the golf course yet? I think that should be well documented and promoted here on the show if that happens?
05:33
Not yet. But I do have to mention that I was the captain and MVP of my high school's golf team. So put that to the test.
Walter Storholt 05:41
He's he's got some feeling very pressured here. Yeah, yeah, I think we should get get a camera out there, get a little film going. And I think we would have a pretty good, pretty good little video for YouTube. I know, Andrea, our producers probably taking notes in the background right now for how we can make this happen. So we
Brian Doe 05:56
may have to do something with that. I'm a little rusty on the golf. I used to be decent back in the day. But I'm like I said, I'm feeling very intimidated already.
Walter Storholt 06:05
I love it. Well, Brian, do you want to give us some more details on the project that Kayla is going to be working on, I'm sure some of the listeners will be interested to kind of know exactly what she'll be diving into. Sure.
Brian Doe 06:15
We're always refining our models and looking for the best risk adjusted returns income and ways to accomplish client's goals by matching the right assets to their goals, that that's the perennial problem that we have here issue that we deal with. And so there's a new documentary that's come out called Tune out the noise. And it's a great look and interview with some of the investment greats. Over the years, some of the more sage researchers and Eugene Fama being one of the big ones that's in here. So we're gonna dive into and do another lap around market efficiencies, whether active management can consistently beat markets. And this would be a great project for Caillou to get introduced to the world of portfolio management, your quantitative analysis, fundamental analysis, can any of these actually add value to the portfolio equation, or we will also be looking at asset matching or liability matching type investing, which is more what we pursue here. And that's matching client's goals to certain time horizons, and then choosing the right assets for those time horizons. So it'd be good to have a fresh set of eyes taking a look at this topic. And she'll come at it with an unbiased as of yet perspective. And then she'll report back what she finds. And I think it'll be interesting and good for our listeners to to do what she finds. Very cool.
Walter Storholt 07:49
Well, we can't wait to hear a little bit about what you find Caitlin having you back on the podcast that later on this summer. And best of luck to you as you work with Brian and the team and go through this journey this summer. And welcome to the show and an intern for living with Wealth Advisors. Very cool to have you as part of the crew.
Kayla Marie 08:06
Thank you. I'm very excited to get started. All right. Well, good luck. And
Walter Storholt 08:10
make sure you still make plenty of time for golf and some some fun this summer, too.
Kayla Marie 08:13
Yes, definitely.
Brian Doe 08:14
And the main thing is we have to have her over for pizza and see what her pizza and culinary skills are like,
Walter Storholt 08:20
there you go. Absolutely. Yeah, we'll, we'll be making sure. Maybe that's where the bet for the golf can be, you know, who who treats who treats to the dough or the sauce or something like that for for a pizza party. Sounds great. Well, again, looking forward to hearing from Kayla a little bit later on this summer. But let's get to these wacky indicators, kind of a check in on some of the things that we looked at a few years ago, Brian and I understand that you also have some new ones to bring to the forefront. So you want to give us a primer. Again, for those who maybe didn't hear that initial episode back in 2022. What in the world are we talking about? We're talking about wacky indicators.
Brian Doe 08:55
Well, we're looking at consumer behaviors and in shifts that they make during different economic times. As a gauge to you you heard about consumer price index, inflation and all these, you know, big macro numbers. But sometimes if you look down on the ground at what what people are actually doing, that can give you a sense of what's actually happening out in the environment. And so in the past we've talked about the market for lipstick, Champaign underwear, frozen pizzas, mac and cheese and some of the other you know, Buffett contra indicators that that you may want to want to use as far as your investment guides are taking a pulse or temperature, the market and the economy. I've got a couple of new ones to add to the list that have been either performing contra to their historical behaviors or just just kind of a new fun one to add to the list. So just a couple to add here today.
Walter Storholt 09:53
That's all no perfect, that sounds good. Well, let's start checking through these which ones do you want to tackle first?
Brian Doe 09:58
Well, gold is the one that it everybody seems to have a curiosity about when we're in inflationary environments, the people who are typically the ones who are trying to sell gold, they're gold brokerages, they ramp up the ads, and they, you know, market or talk about ways to put gold in your IRA and protect your retirement and inflation is going to be this crushing thing. But you can defend that with gold or silver and precious metals are different commodities. And gold as of late really has not been effective at tracking inflation. It's been very much doing its own thing. So a lot of people who thought they were going to hedge with inflation, it has just not been the case.
Walter Storholt 10:44
Interesting. Yeah. And it gets a lot of marketing around it, right. So no wonder it's so present and so on, on top of mind for people, when
Brian Doe 10:51
so many people see these ads that they cleverly disguised as maybe like a podcast clip or an interview or something that looks like it's not an advertisement, a news article, even Yeah, it looks like a news article. And so these people are offering this very helpful advice. But if you scratch just a little bit below the surface, you'll find that a lot of times, there is just an ad for some type of gold sales. And I've watched those things persist, you know, for years, and in environments like we're in today, where we are having inflationary pressures, you will see more of those come out of the woodwork and they'll resonate more because we are actually in a inflationary environment. And I think that just to cut to the chase, the main hedge against inflation that has consistently worked and is going to allow you to increase your purchasing power, not lose the value of the dollars in the savings that you've got. It's consistently been the stock market, the stock market, regardless of political leadership, inflationary environments, any other variables that you want to look at, that are even distressed types of situations, the stock market, as long as you give it time, obviously, we're not talking about short time periods 123 years, but in three to five to 10 year time periods. The best hedge that you can have against inflation the best net real return that you'll be able to use to increase or keep up your purchasing power is just continues to be the stock market.
Walter Storholt 12:33
Interesting that it continues to beat out even all the the pomp and circumstance surrounding gold and stock market continues to kind of rank above that in the context of this conversation. Not the only classic indicator out there. I remember very clearly, you kind of talking about some other really unique when's the last time around as well? Well,
Brian Doe 12:53
this time we're gonna talk about the Starbucks indicator, obviously, Starbucks is known for their, what 456 $7 coffee drinks and they've got drive throughs everywhere. They're, they're popping up and ubiquitous. But lately, Starbucks sales have dropped off their stock is at about a I think it's at about a five year low. It's really dropped precipitously. And Starbucks stock has performed incredibly well over long time periods. It has had as volatile moments and you know, leadership changes and things like that. But we're seeing headlines now like Starbucks earnings hit by inflation, rising worker costs, and even dampening sales in China. So we're seeing this inflationary pressure the we've talked about demographic collapses in populations that are creating worker shortages. And that's driving up wages for frontline workers. So all of those things I think are coming in to say if I'm going to get my jolt of caffeine in the morning, maybe I don't need the you know, $7 grande mocha for oppa choppa latte, whatever they Yeah, that's crazy drinks are I'm just a spray to straight espresso and cream drinkers. That's all I do. But yeah, I think people are looking for places to cut back and kind of like the mac and cheese index when when times are tough everybody switches to the cheaper standard foods. We're seeing a dramatic cut back on some of these luxury items. That is necessity as people believe they are they're looking for other and cheaper options that
Walter Storholt 14:39
they start to be the first to go when people are feeling that pinch a little bit more. A little bit more heavily it sounds like Yeah, very much so. Okay, so we've got the Starbucks indicator I you know, I can almost I can almost jump on board without I don't go to Starbucks but even my favorite local coffee shop. I'm trying to cut back a little bit just it's, it's making me question that like I do I really need that second cup today. I really need the latte over just the regular coffee. And you start seeing that creep in and small ways, I think. Yeah.
Brian Doe 15:08
And we've got an iced espresso maker at home. So I just made my own it at home and I sunk the big investment in the the nice machine. And then so now I don't even have to go pay for surprisingly, one of the new developments in Greensboro, which, in the last several years, we've gotten Chick fil A, we've gotten Burger King. And so these are these are major developments now down in Greensboro, but we also got a Starbucks Jersey Mike's a Longhorns and a Taco Bell. So Greensboro is booming. Yeah,
Walter Storholt 15:41
so it's coming along a lot. We could probably do indicators for all of those.
Brian Doe 15:45
We do a Greensboro migration indicator, right? Yeah, there
Walter Storholt 15:49
you go. I love it. I love it. All right, what else catches your eye from an indicator standpoint,
Brian Doe 15:53
no new ones. But I would like to do one more lap around an old one, the Buffett indicator. And this is a this one we talked about last time. And it is basically taking the total value of public equities divided by the country's gross domestic product. So you can think of it as a price to sales ratio for the entire economy. Well, if we look at it, as of March 31, the total stock market valuation was about just shy of $56 trillion. And annualized GDP is at 28 trillion. So right now the market is at 199% Market cap to GDP. Okay, so that's that sounds kind of wonky, what's the big deal? Well, the the current ratio is is about 60%, above the historical trend. And this suggests that the stock market is strongly overvalued relative to gross domestic product. It's just one measure. It's just a, an indicator, but it's worth paying attention to because so much has happened with accelerated growth. We had a lot of money pumped into the system after COVID. And I think a lot of that is being worked out by the Fed. They're trying to decrease money supply and things like that. But a lot of money out there chasing a lot of assets. And you're seeing it in home prices. We're seeing it in the stock market. And so it's just a just a cautionary one to keep an eye on.
Walter Storholt 17:27
Okay. Yeah, that's a good one to know about that. So the Buffett indicator that we talked a lot about a couple of years back, and it's good to revisit that one as well. There have been some other things that have popped up in the news, do we count these as, as indicators as well, what's kind of happening in the social security world, Brian?
Brian Doe 17:45
So one law, I don't know if you would call this an indicator or just a piece of good news. The latest data out from the Social Security Administration is that the Trust Fund, which is set to help pay Social Security benefits, as taxes come in, if there's a shortage of inflows relative to outflows being made for payments to Social Security, this trust fund is being used to fill that gap or fund that gap. Well, during the COVID era, and past couple of years, the time period in which that trust fund was set to run out got increased to 2033. So there's there's something that needs to be happened to fix Social Security by 2033. Well, whether it's good economic news, or strong employment, or more people paying in whatever it is, that date has been now extended to 2035. So they've actually added two years where the Social Security Trust Fund is expected to survive. Well, that's good news, because it means that those that are dependent on and collecting Social Security, as the boomers go into retirement and have created a large cohort of people collecting Social Security, you've had Gen X as a smaller group that's earning and paying in and in the millennials will be at at lower wage rates. Still, as they're getting a ramped up in their careers. It's created an imbalance where we've got more people collecting then you have have paying in. So how they bridge that gap. Well, great news that is lasting a couple extra years. But if you look at what's how they fix that and who that's impacting. It is current earners. If you look back to go back 25 years, let's say in 1999, you paid FICA tax at a rate of 6.2% plus your employer paid 6.2%. So a total of 12.4% of your earnings, had to go to FICA The cap on that earnings has now increased in 2024, to 168,600. So there has been over the last 25 years a 132% increase in FICA taxes for people that are earning in the, you know, in the sub $168,000 range. Well, that's, that's a big chunk. If you are self employed, you have to pay both sides of that, and your federal tax and your state tax and your sales tax and your ad valorem tax and your property tax and all these other things. So I think it was we look at that, we have to say, on one hand, it's nice that we've extended the viability of Social Security. But that's also coming at a cost to those people that are creating the demand and the in driving the economic growth for, you know, things like having children buying houses, consumer goods, and durable items and things like that. So it's not so much an indicator, it's just a nice data point that they've done some things to shore up Social Security, I just hope it continues to be sustainable. Yeah,
Walter Storholt 21:07
hopefully not just another, you know, temporary band aid, but steps in the right direction for I guess correction and longevity for the system, not a bad deal there. So that is very good news.
Brian Doe 21:19
And to be fair, like you're if you're earning above certain income calves, whether you're single or or, or married, they're taxing Social Security benefits as well. So the rate at which they tax, your Social Security benefits, those were set back in the 80s. And they they really haven't changed much. They're starting to change now. But they didn't change for decades. Whereas this cap on wages, they keep lifting it and lifting it lifting it. And so earners are paying more in, but the recipients are still paying tax on the benefits like it's 1985. Okay,
Walter Storholt 21:56
very good. Any other indicators or newsy notes worth hitting on today's episode? Brian?
Brian Doe 22:01
No, I think we've hit plenty and have enough to look forward to hear and, and just want to share a few pieces of good news. And then we'll look at a couple of these indicators to give people a sense of what's going on. It's
Walter Storholt 22:14
always fun to to kind of look at these and and revisit some from last time around as well. So very cool. If you are interested in learning a little bit more about just what goes into putting together a solid financial and retirement plan. I know today's episode is just kind of a fun one and looking at some interesting pieces of information that might go into maybe Brian's approach to thinking about the economy and things on a larger scale. But when it comes down to it, you really need to focus on your individual situation, what's going to work for you to get to and all the way through retirement. And if you're looking to take control of your financial future in that way, but not exactly sure where to start. Brian doe tenured CFP with more than 20 years of experience can be your trusted partner. As a CERTIFIED FINANCIAL PLANNER professional, Brian meets the highest standards of training and ethics always putting your best interests first. So if you would like to, we'd certainly invite you to take advantage of a complimentary 15 minute call with Brian. And you could gain some clarity on your financial goals and start preparing for a more secure tomorrow. Don't miss out on the opportunity, all you have to do is go to living worth.com and click book a call that's living worth.com and click book a call. Or you can always dial 706451 9800 to get in touch as well. And we'll have that contact information in the description of today's show so you can find it easily. Brian, thank you so much for the help and all the extra guidance, I think on today's show was really helpful and we look forward to chatting with you again next
Brian Doe 23:41
month. Sounds great. I'll look forward to it as well.
Walter Storholt 23:43
That sounds great. That's Brian Doe. I'm Walter Storholt. Thanks for joining us and we will see you next time on make the dough rise.
23:59
make the dough rise is brought to you by Livingworth Wealth Advisors with a central office in Greensboro, Georgia, but serving the lake country and yet the podcast is available on Apple podcast, Spotify and all your favorite podcasting apps. Subscribe today and never miss an episode. Just search for make the dough rise with Brian doe. You can also visit make the dough rise.com To listen to recent episodes. If you'd like to contact the show or schedule a complimentary financial review is Brian and the team. Just go to make the dough rise.com and get in touch through the website or call 706-451-9800 Thanks for listening to make the dough rise. Investment
Announcer 24:38
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