Money Rehab with Nicole Lapin - Lions and Tigers and Bear Markets, Oh My!
Episode Date: June 17, 2022Riding ups and downs is an unavoidable part of being an investor. The stock market has cycles, and right now we’re in a cycle that folks in the biz call a bear market. But how should you handle your... investments during a bear market? And what is a bear market anyway? Nicole and Guy Adami (CNBC’s Fast Money) tackle these questions and more in today's episode.
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One of the most stressful periods of my life was when I was in credit card debt.
I got to a point where I just knew that I had to get it under control for my financial future
and also for my mental health. We've all hit a point where we've realized it was time to make
some serious money moves. So take control of your finances by using a Chime checking account
with features like no maintenance fees, fee-free overdraft up to $200, or getting paid up to two
days early with direct deposit.
Learn more at Chime.com slash MNN. When you check out Chime, you'll see that you can overdraft up
to $200 with no fees. If you're an OG listener, you know about my infamous $35 overdraft fee that
I got from buying a $7 latte and how I am still very fired up about it. If I had Chime back then,
that wouldn't even be a story. Make your fall finances a little greener by working toward your financial goals with Chime.
Open your account in just two minutes at Chime.com slash MNN. That's Chime.com slash MNN.
Chime. Feels like progress.
Banking services and debit card provided by the Bancorp Bank N.A. or Stride Bank N.A.
Members FDIC. SpotMe eligibility requirements and overdraft
limits apply. Boosts are available to eligible Chime members enrolled in SpotMe and are subject
to monthly limits. Terms and conditions apply. Go to Chime.com slash disclosures for details.
Hey guys, are you ready for some money rehab?
Wall Street has been completely upended by an unlikely player game stop
and should i have a 401k because you don't do it no i know
do you think the whole world revolves around you and your money well it doesn't
charge for wasting our time i will take a check
you recognize her from anchoring on CNN, CNBC, and Bloomberg.
The only financial expert you don't need a dictionary to understand.
Nicole Lappin.
As we've been talking about this week, the economy is shifting.
And we're seeing change everywhere we look.
Changes to the valuation of the dollar, changes to interest rates, and
certainly changes to our investments. And when it comes to that last category, the change we're
seeing is not the good kind. There is some comfort in the fact that all investors are going through
this together. I'm going through it, and if you've been investing, you're going through it too.
We are united in the
doomsday feeling we get when looking at our brokerage accounts. As they say, misery loves
company, and the stock market right now is looking pretty miserable. But this is an unavoidable part
of being an investor. The stock market has cycles, and right now we're in a cycle that folks in the
biz call a bear market. But how should you invest during a bear market?
And what is a bear market anyway?
To tackle these questions, I'm bringing back on Guy Adami,
investor, CNBC's legend, and former trader on the floor of the New York Mercantile Exchange,
aka the Merc.
You may remember him from episode 75 and oh my, has the economy changed since then.
This interview with Guy was such a good conversation, and we covered so much ground that you're
going to be hearing little bits of this conversation in upcoming episodes.
But today, we're going to focus on the biggies.
What should you be buying right now?
What should you be selling right now?
Or should we all just be sitting tight?
Guy.
Yes, Nicole. Welcome back to Money Rehab. Can I tell you something? I'm so excited. I figured I was a one-shot deal, like one and done, as they say.
That's like a college basketball term. But you know what? I got my second year. I'm back from
my sophomore year here at Money Rehab. I could not be happier. We're going to knock it out of
the park because that's what you do. I try. I do my best. You know, you got to make an effort in life, right? I mean, I don't
always succeed, but I always try hard. That's true. It's like my dancing skills. What I lack
in skill, I make up for in enthusiasm. But let's get to the market. What the fuck is going on?
Yeah, well, that's the question of the day. We can go back to our last rehab that we did,
and we talked about the role of the Federal Reserve. And it was November of last year,
around Thanksgiving, when this Federal Reserve pivoted. And that pivot from being extraordinarily
accommodative, in other words, putting money in the system, keeping interest rates artificially
low, that stopped. And if you go back and look, and I'm sure a lot of your listeners know this, that's about when the market topped out as well. And that's not coincidental.
So there's this old mantra, Nicole, don't fight the Federal Reserve. And that's typically said
when they are adding liquidity to the system and keeping interest rates low. And if you are
fighting the Federal Reserve, you're being bearish under those circumstances. Well, if that's true,
the same should hold if you're fighting them now, you're being bullish because they are now
not accommodative and they're trying to raise interest rates at a time when
maybe the economy isn't ready for it. You know, it's crazy. Back when I was at CNBC
a million and a half years ago, I remember going on and saying the economy is like a junkie for
these low interest rates. Like we can,
we're addicted. We can't get off. Same thing happened for the next 10 plus years. So this last decade of time was not typical. I mean, it's not always when you're going to have these crazy
low interest rates, but just to rewind bear and bull for those who don't know, you said
bearish and bullish if you're against the Fed or with the Fed, can you unpack that? Yeah, so let's play the game. So I am now 58 years old, as hard as that to
believe. But when I was a young lad, the big commercial on TV was for Merrill Lynch. And the
commercial was a bunch of bulls running. And I used to look at my father, I'm like, what is the
point of this commercial? And he tried to explain to me that if you're bullish, in other words,
all these bulls running, you think things are going higher.
You're optimistic.
The converse side of that is if you're bearish, you think things are going lower.
So Merrill Lynch sort of honed in on that.
And that's sort of the vernacular of the market now.
OK, so bears hide and hibernate.
Bulls charge ahead.
That's right.
OK, so when you have low interest rates or a low interest rate.
No, but hold on a second.
It's interesting you said that.
Let's go back to the zoo.
This is your rodeo, as they say, if we're going to use farm animals.
But bulls stampede.
And if you think about it, you don't want to get in the way of that stampede.
But they also have a way of collectively running off a cliff.
Bears hibernate, and they're sort of in hiding for months at a time, if not longer.
But when they come out of hibernation, that's when you really have to watch out.
So as these bears continue to, the bulls are running seemingly off a cliff right now,
the bears at the same time are coming out of hibernation. So you have a lot of
weird factors coming out for you people that want to play Bronx Zoo here on Money Rehab.
The Wall Street Zoo, it's a crazy set of animals,
I tell you. So when the bears come out, what does that mean? So they've been hibernating,
they've been chilling, they have some energy, and they come out and they what, drag the market down
more? That's exactly right. They're trying to take advantage of what they perceive to be weakness in
the market. And this weakness is coming on the back of a couple of things. As I mentioned,
a Federal Reserve that's trying to raise interest rates, number one.
But number two, at a time when things are slowing down, and I'm sure your viewers and
listeners know, things are effectively slowing down.
And they're slowing down for a number of reasons, not least of which inflation is running amok.
Now, the problem with that is this is the same inflation that the Federal Reserve had
been begging for for years.
And one of the reasons they kept rates as low as they were is because they were trying to spark inflation, trying to create inflation, trying to get things working through the system.
And one of the comments that I made and I might have made on the podcast last time we did it is be careful what you wish for because you might just get it.
we did it is be careful what you wish for because you might just get it. And not only did the Fed get the inflation that they coveted, they got it in spades. And now they're trying to tamp it down.
So there's sort of all these factors at work right now that are allowing the bears to come
out of hibernation and, quite frankly, feast quite well on some of the low-hanging fruit
that the markets provided them.
I'm here for this analogy. And as long as we can extend it, the United States has not,
not recovered from a single recession or depression in U.S. history. So if you really
lean into financial literacy during these crazy financial times, this is when great fortunes can
be made, right? Well, that's exactly right. And there's that old adage,
it's stocks are one of the things that,
you know, when they get cheaper,
people seem to flee from.
When in reality is,
if you look at the stock market as an asset,
which historically that's exactly what it is,
these are levels that if you have the timeframe
that you spoke of,
especially if you're younger,
you should be diving into with both feet, not to suggest where're at some sort of market bottom. Nobody can predict that. But what
I will say is, to your point, we will recover from this as an economy. And subsequently,
we will recover from this in terms of the market. So just arm yourself appropriately and understand
some of the changes that are going on in the world. Obviously, technology today is a much bigger role than it was 10 or 15 years ago. Energy is starting to
rear its head again. The financial sector has been out of favor. But you know what? Banks in
this country aren't going away anytime soon. So just understand some of the dynamics going on
and arm yourself accordingly. Yeah. And until then, DCA your face off, dollar cost average.
We're putting little bits at a time
on an automatic buy schedule.
So you're not trying to time the market
because you can't do that unless you are psychic,
in which case, get after it.
DCA your face off.
That should be like a bumper sticker tagline.
I mean, that's fantastic.
DCA and chill.
That's my advice. Hold on to your
wallets, boys and girls. Money rehab will be right back. One of the most stressful periods of my life
was when I was in credit card debt. I got to a point where I just knew that I had to get it under
control for my financial future and also for my mental health. We've all hit a point where we've
realized it was time to make some serious money moves.
So take control of your finances by using a Chime checking account with features like no
maintenance fees, fee-free overdraft up to $200, or getting paid up to two days early with direct
deposit. Learn more at Chime.com slash MNN. When you check out Chime, you'll see that you can
overdraft up to $200 with no fees. If you're an OG listener, you know about my infamous $35 overdraft fee
that I got from buying a $7 latte
and how I am still very fired up about it.
If I had Chime back then, that wouldn't even be a story.
Make your fall finances a little greener
by working toward your financial goals with Chime.
Open your account in just two minutes
at chime.com slash MNN.
That's chime.com slash MNN. That's Chime.com slash MNN. Chime feels like progress.
Banking services and debit card provided by the Bancorp Bank N.A. or Stride Bank N.A.,
members FDIC. SpotMe eligibility requirements and overdraft limits apply. Boosts are available
to eligible Chime members enrolled in SpotMe and are subject to monthly limits. Terms and
conditions apply. Go to Chime.com
slash disclosures for details. Now for some more money rehab.
If you don't have a long-term horizon, if you have less than five years, if you're in retirement,
if you're already getting Social Security, or if you're nearing retirement or need the money,
what would you suggest? Don't get too cute. This is not meant to be glib by any stretch of
the imagination. But one, you're not going to be able to time this correctly, number one. Number
two, you're at a place now where if that's your time horizon, you should be absolutely enjoying
yourself and not getting caught up in the day-to-day permutations and fluctuations in the
stock market. It's just not healthy. So enjoy these years and don't get crazy about the stock market
because at the end of the day, it's about being happy.
And if watching the market makes you unhappy,
then you got to be doing something else.
It's about being happy at the end of the day.
I think you make an excellent point.
And I'll say this as well.
Some of the most miserable people that I've ever met
are some of the wealthiest people. So just keep that in perspective as well. Some of the most miserable people that I've ever met are some of the wealthiest people.
So just keep that in perspective as well. Okay. So if you're older, if you have a short
term time horizon that you're dealing with, you wouldn't suggest, I guess you said,
don't get too cute. Does that mean don't go into bonds or treasuries or series I bonds?
I think so. And again, I'm not a licensed advisor. I don't
pretend to be one. But what I'll say is it's a very difficult... My sense is for the majority
of those people, they've been in the market for the lion's share of their lifetime and they should
remain in the market. And at this point, trying to time things based on some of the moves that
we've seen. And quite frankly, if you think about it, if you got out of stocks a few months ago and got into the bond market, there's been an equally
aggressive move to the downside in the bond market as well. So that has not been a safe haven
by any stretch of the imagination. So even if you think things are going to work out with the stock
market selling off, being in the bond market hasn't been all that right either. So it's really
hard to try to game this out. I say it on the show all the time, Fast Money, that if you had told me these things
were going to happen 24 hours ago, then asked me, how is the market going to behave? I'd say I'd be
right maybe 50% of the time. So even sometimes if you know the outcome in terms of the news,
you're not going to know what the market's going to do on the back of it. So try to figuring out
and game it now. I think, and I'm going to use this term, I think it's a bit of a fool's errand.
What? Markets are irrational? Say it ain't so. Yeah, I mean, it's really important to try and
take emotion out of it. Buy low, sell high is one of the few adages to try and stick to. The problem
is you don't know where the low is. You don't know where the high is. So don't try to pretend like you do.
With interest rates, though, just on a sort of overall level, when interest rates go up,
that's good for savers.
So the savings accounts that you were getting bubkis in, you know, point one basis point
or whatever, point zero one percent.
Now I'm going to actually become real interest rates.
Finally, right. We, finally, right?
We're finally starting to reward people that have been trying to do it right for all these
years when rates were kept artificially low for literally decades.
That hurt the savers.
And in some ways, it forced them out the risk curve.
It forced them to be in things that they might not want to have been in.
For example, stocks, which wound up doing pretty well,
but now we're seeing the other side of that mountain.
So one of the ramifications for artificially low interest rates,
it forced people out the risk curve.
Now with rates getting back to some semblance of normalcy,
albeit at an extraordinarily fast pace,
to your point, it's going to reward people that are trying to do it the right way,
trying to do it by saving. For today's tip, you can take straight to the bank. Again,
it bears repeating. Got it there. The stock market has recovered from every single dip
and recession in U.S. history. So if you have the time horizon, don't get off the roller coaster in
the middle of the ride. Pros like Guy don't cash out of investments or good investments, rather, when the stock market falls. They actually buy more
and use the reasoning that good investments are essentially having a sale. And who doesn't love
a good sale? Money Rehab is a production of iHeartRadio. I'm your host, Nicole Lappin.
Our producers are Morgan Lavoie and Mike Coscarelli.
Executive producers are Nikki Etor and Will Pearson.
Our mascots are Penny and Mimsy.
Huge thanks to OG Money Rehab team Michelle Lanz for her development work,
Catherine Law for her production and writing magic,
and Brandon Dickert for his editing, engineering, and sound design.
And as always, thanks to you for finally investing in yourself so that you can get it together and
get it all.