Ep. 2010: The Market Timing Mirage

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Thirty days of thunder, thirty days of cold. Side by side they travel through the bear markets cold. The crush on Monday miss the Tuesday climb. Tell me profit, tell me which day was time.

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Sorry. I've discovered that that was that music came after the most work I've ever put into an AI-generated talking

AI-Generated Rock and Concert Memories

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real money jingle song. I was going for, and it didn't still didn't get what I was looking for. I was going for early 1970s progressive symphonic rock in the in the style of in the but I can't say you can't say these things to Suno. You can't give it like artists, in the style of yes, Emerson Lincoln Palmer, early Genesis, uh that kind of thing. And I think I got a I it keeps coming back sounding a lot like Queen, kind of. That's what it ends up with. I don't know why it defaults to that.

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The big piano thing, the huge organ, blah, blah, blah. So you know I'm an ELP guy and I'm a yes guy, so we do share that in common, I guess.

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I in the 70s or early 70s saw both Emerson Lake and Palmer and Yes in concert. Wow. And the funny thing is Can you remember either show, though?

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That's the question.

SPEAKER_06 2:24

Vaguely, barely. I remember the wall of synthesizers that Keith Emerson played. It was a literal wall of synthesizers. Computers took up the whole stage. They were so big. And now, you know, they're the size of your phone. Um, and uh and it turned it's funny. My daughter just got a job with a company that does staging for concerts. And it was started, it's uh it's owned by a guy who used to be the tour bus driver for Yes, and he designed their Tales for Topographic Ocean set, which was the first Yes concert I saw. So a little bit.

SPEAKER_05 2:59

And he was the driver, so he was the one doing the roundabout many times.

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Yes, he was driving in the roundabout. Just checking. Yeah. Okay. Good for him. Everybody's

Buy and Hold Versus Market Timing

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famous for something. So got it.

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Speaking of roundabout, we're gonna get roundabout.

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Oh my gosh, let's talk about roundabout advice. Yeah. I I recently ran into an article because this is what I do. I read articles so that we can find stuff to talk about.

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And then you get mad and then you make me talk about them.

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And then I make you talk about them. This one comes from our once friends at Kiplinger. Kiplinger.

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By the way, you can you can go up online and see me interview Knight Kiplinger now. So Kiplinger Kiplinger, Knight Kiplinger's name. Kiplinger's is the magazine.

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The headline is Is Buy and Hold really the best strategy?

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And it's about let me just answer that. Yes. Okay, so let's move on to the questions.

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No, no, no, no, no, no, no, no, no, no, no, no, no. It it begins with the premise, and we think this is a sound premise. Remember back, for some reason, a lot of radio stations, particularly news talk stations, had the slogan, if you miss a day, you miss a lot. You know, I don't know.

SPEAKER_05 4:09

I thought if you miss an hour, you missed a lot. Okay.

SPEAKER_06 4:12

Uh if you missed the the thesis here is that if you missed 30 days, you missed a lot. If you were if you looked at the S P 500 since 1988, by and hold earned about 11.5%. So turned a dollar into 65 bucks. If you missed the 30 best days over that same period, your return dropped to just over six percent or ten dollars on a dollar. So that's uh about eighty some odd percent less money overall. If you just miss the thirty best days, so they went from sixty-five to ten. Yeah.

SPEAKER_05 4:53

Yeah. Yeah. That's a lot of loss.

SPEAKER_06 4:55

Now that's I am let's stop right there, which really basically tells you if you're trying to be in and out of the market and you just missed the best days, you could destroy your return. But of course, that's not good enough for this columnist, writer, actual financial person. Practitioner. Practitioner. He said if you run the same exercise on the 30 worst days and you just miss the 30 worst days. You're invested the rest of the time. Right. You just mean you're invested all of the rest of the time. So you catch those 30 best days.

SPEAKER_05 5:29

Remember, one was $10, one was $65, and this is the If you miss the 30 worst days, $487. Okay, I could have checked that box.

SPEAKER_06 5:40

Right. I'll take it. So now here's the question for you. We know how to miss the 30 worst days. I mean the 30 best days. We know how to do that. How do you miss the 30 best days, Don? You don't invest. No. How do you miss the 30 best days? Oh, you don't invest, right? You don't invest.

SPEAKER_05 5:56

You don't put the markets. Or you try to market time or whatever. So I can guarantee you if you have it all in a money market fund, you will miss the 30 best days.

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So how do you make sure you capture the 30 best days?

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You buy and hold. You get in the market and you stay there through the market. The whole market.

SPEAKER_06 6:13

You just buy the whole darn thing. That's it. Okay. That's great. That is so simple. That's the kind of advice we like to give on talking real money. If you want to make sure you're in there for the 30 best days and get that extra return that involves, then just be in the market. But what if you're one of those folks who says, oh, no, no, no, that's not good enough for me. I'm special. I want the $487, or that's 17% return. So I need a way to miss the 30 worst days, Mr. Practitioner of money management stuff. How do I do that? How do you do that, Tom? Come on, tell me how.

SPEAKER_05 6:48

Risk management strategy. Risk management strategy. Doesn't that sound good?

SPEAKER_06 6:53

Well, that's what he said, but how do you do it?

SPEAKER_03 6:56

I don't I don't know how you do it.

The Myth of Avoiding the Worst Days

SPEAKER_03 6:58

He's not very specific. Well, there are two ways, I think, to do it.

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I can only think of two ways to do it.

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Okay.

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One is to know before they happen which days are going to be the worst days. You gotta know this is the day before, basically. Put it in order, you sell everything, and then the day after that worst day, you get back in. But now you have to do this 30 times over the course of 30 years. Some odd years. 38 years, yeah. Yeah. How how how how how good do you think you're gonna be at that?

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Not very good. Yeah.

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If if the traffic to actually there's two other ways, but go ahead with your one. Okay, there's one other way that you just mentioned. If you don't want those worst days, just be in money market. Yep.

SPEAKER_05 7:46

Or bonds, I guess. Lose money in bonds. Uh there is a third. There is. It's it's not as readily available as the first two. That would be time travel. Because you could go back and you know buy and sell at those days. Yeah.

SPEAKER_03 8:01

Um that's so I I I watched outline.

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You don't even like science, you don't even like science fiction. Apparently not.

SPEAKER_04 8:10

But you said other ways that can do it. That's a way that's a good thing. I w I meant ways that actually exist. Oh, okay. Well, I'm gonna tell you that even this guy's plan doesn't exist either.

SPEAKER_06 8:21

Yeah, this guy says basically, you you you yeah, to be in during the 30 best days, you diversify, diversify, diversify. However, he says, quote, while no one can predict the future, thoughtful, thoughtful. There are some buzzwords in here. Thoughtful portfolio construction, which means think about how you construct your portfolio, which means actively manage it. Really, that's the read between the lines, that's what's there. Because he goes on to say, and the inclusion of writs risk management strategies. What does that mean? Well, he claims that they can allow an investor to avoid prediction by keeping you out of the market during times of volatility.

SPEAKER_05 9:12

But he goes on to imagine the best and worst days do not scatter randomly in market history. Since 1988, a best or worst day has occurred within twenty-one trading days of another best or worst day, more than 70% of the time, which I think goes against what he's saying here. Right. Because you've got to be bang in, bang out, you've got to be moving all over the place.

SPEAKER_06 9:32

Well, and he's saying be out during periods of volatility, but it was during those periods of volatility that both the best and the worst of times. Gosh, that sounds like a book. Uh please don't. It sounds like the the best and worst happened during the more volatile times. As a matter of fact, we look back at 2008, and 2008 was filled with the best and worst of days.

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That fall had a lot of the really bad days and a lot of the really the good days.

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So if you were trying to time the market, you had to get out when the market had one of those really great days and then get back in right after it had one of those really bad days, both of which are nearly impossible from an emotional standpoint to pull off.

SPEAKER_05 10:17

I think that's correct. I think the other thing people forget is you have to be correct twice, right? You have to get out or get in, and then the other, yeah, the other way. I think they also forget taxation, because you gotta you if you're buying and selling things, there's gonna be tax hits there. And then um depending on where you are, there could be costs involved and all that. So it's it's not as easy as he makes it sound. Plus, I like to look at history and the people that you do know, the names you do know. You don't know this guy's name because it's I don't know.

SPEAKER_06 10:47

No, he's just another CFA.

SPEAKER_05 10:49

He's just another guy writing for for he's not a guy writing for Kiplinger.

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I mean, they basically sold so much of their content now that he's one of and here's the disclaimer, they say. The author of this article is a participant in Kiplinger's advisor intel program, a curated network of trusted financial professionals.

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That pay Okay.

SPEAKER_06 11:13

Well it says no, he's it says experts are invited to contribute and do not pay. Well, okay. Well, okay.

SPEAKER_03 11:20

All right, that's fine.

Famous Market Timers and Their Track Records

SPEAKER_05 11:22

Hey, that's good. How do we get into this deal? We should get that deal, man. But I want let's bring up some of the people that that don't hold themselves out as market timers, but are market timers. And they're very well known. Um how about Ray Dalio, for example? I mean, he's recognized as the smartest stock market guy, I guess, other than the guy in Omaha.

SPEAKER_06 11:44

What do you mean he's not recognized as a market timer? That's his whole gate, that's his whole shit.

SPEAKER_05 11:48

But he wouldn't, he wouldn't I think if you typed him in into whatever AI service you're using, they wouldn't say market timer. They'd say market strategist. I mean, he runs the largest hedge fund in the world still, right? I mean, it's like 150 billion or some number. I'm shocked because he has predicted what 15 of the uh the recessions that have never occurred. He he regularly says it's over. Get your money and run for the hills.

SPEAKER_06 12:16

Um Yeah, I know because I just looked it up, and yeah, he he is described, he practices market timing.

SPEAKER_05 12:22

Okay. All right, fair enough. I think if you asked him, he would not say that because it's such an unpopular term.

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But he is.

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It's like admitting you're a politician. Nobody says that. How about even more well-known to many of our younger listeners? The always exciting, the guy who's told you gold, silver, and bitcoin are the way to go forever. Robert Kiyosaki. I mean, he's a well-known author. He's a guy, uh, by the way, speaking of interviews, you can see my interview of Mr. Kiyosaki up online from 20, whatever years ago. His tune hasn't changed, I'll say that. Um, and I did pick on him a bit in the interview because I think his advice is poor. But he regularly says, the end is near, you got to get out. It's time that, you know, this time is it, the baby boomer's gonna run out of money, et cetera, et cetera, et cetera. Very well-known timer, right?

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Right. I was just gonna say, though, all of the the these Robert Kiyosaki and and Dalio are actually known as timers. That's that's their whole gig.

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Right, right, right. I didn't say they were good at it. No, they're trying to get it.

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I just said they do it.

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And then, if that's not enough, if you really want to follow, you know, guy who was very well known, very popular author, not as popular as the guy I'm looking at right now, apparently today.

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Which shocked the heck out of me.

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But he was Harry Dent Jr., the potato chip guy, uh, who you know worked around demographics and said, well, the baby boomers are all getting old, they're gonna die soon. So that's gonna lead to X.

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And I haven't died yet, Dad.

SPEAKER_05 13:52

Nah, you're still hanging in there, not quite dead yet. So I mean, so the thing is, Harry Dent is he's another guy who's been on the wrong side of the, and he writes a book about it every time. So you can say, in 2001, you said this, and he's been wrong basically every single time he's predicted what the markets will do.

SPEAKER_06 14:10

Yeah, his latest book is entitled What to Do When the Bubble Pops: Strategies for the Coming Economic Winter. Uh, and I went and looked at it on Amazon. I looked at the Kindle edition because it's a that's the popular way people buy books these days. Yep. And uh I just want to see how well he's doing six years after he published this book. And I know this is not a fair comparison because it's been six years, but Harry's book is uh ranked number six hundred and sixty-five thousand in the Kindle store, I'm rounding. Which sounds good in some ways. Well, because there are millions of books in the Kindle store. Yeah. A lot. And and congrats, Harry, on still being up there. But there's this other author. Um it's not the same kind of book.

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He wrote about the markets of the mid-19th century.

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But I certainly I I certainly haven't seen this this one quoted in the financial media much at all at all, except his own financial media. Uh that's the author of the book, The Line Uncrossed, a historical novel.

SPEAKER_05 15:14

How about a great let's turn that into a great holiday gift of some kind? Let's send those out. I've got still some sitting here.

SPEAKER_06 15:20

So Harry was what, 665,000 in the Kindle store?

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Yeah, kind of down there.

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Shocked me when I saw this. I went, wait, I know how much money I'm not making. Uh I'm number 321,000 in the Kindle store.

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You're twice as good as Dent. And you have never predict mispredicted a uh uh bear market either, by the way. I can we can say that safely. Yeah. So oh, by the way, uh speaking of video, I did send to Don video of a TV show we recorded together 24 years ago where we talked about market timing. And guess what we said? The same thing we're saying now. It hasn't changed at all in 25 years. No, it really hasn't. It hasn't. And the same stuff comes up because guess what was going on in 2002? The market had been down for a bit, and people are it's never gonna end. Well, turns out, yeah, it kind of did end.

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Although I did not recognize those two people on that video.

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It's a little hard at all. My wife's like, Who's that? Oh, that's you. Yeah, I got it.

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Yeah, I mean, yeah.

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We're young, good looking.

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I was gonna say I was a whole lot better looking back then.

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Me too. So what can you say? Anyway.

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So that's the end of my story. What time is

Listener Questions: Annuities and Commissions

SPEAKER_03 16:34

it? What time it's question time. Oh, good.

SPEAKER_06 16:37

It's question time. And today it's just Tom reading your questions. He's not actually talking to anybody on the phone. He's just doing it the old-fashioned way. He prints them to a piece of paper and then he reads them. And you were supposed to send me one of those, weren't you?

SPEAKER_03 16:54

I did send you one of them. Where didn't it come? How come it didn't come through? I don't know what to say I sent you.

SPEAKER_06 17:00

Oh, here it is. Oh, yeah. It went to junk.

SPEAKER_04 17:03

Of course it did.

SPEAKER_05 17:04

Isn't that where I belong always? Sorry. Speaking of old shows. Uh, this comes from Anonymous in Chicago, Illinois. After my husband passed, with no knowledge of personal finance, I relied on friends' recommendations. First red flag. In June 2024, I purchased $450,000 in the Equitrust Market 7 FIA with a 1.25% income rider. Current value, uh, she says $410,000. Surrender $463. Also purchased Equitrust Bridge LTC, long-term care hybrid annuity for $250,000. Current value $266, surrender value $241.

SPEAKER_06 17:48

Can I stop you there while we're in the numbers phase? Because I immediately heard something that perked my ears up. Yes. She put $450,000 into the fixed indexed annuity. Yep. Right? Yep. And she said her surrender value today is $463, she says. She can take out $463 out of five.

SPEAKER_05 18:14

Yeah, because you would think the surrender would be lower than that.

SPEAKER_06 18:17

So that must be actually then because here's what here's this makes no sense. I think the person may be fibbing.

SPEAKER_04 18:24

Oh.

SPEAKER_06 18:25

Uh because I just looked it up, and the surrender charge is nine percent the first year, eight percent the second year.

SPEAKER_05 18:33

Let's assume it's the third year just for sake of argument. Okay.

SPEAKER_06 18:35

Oh, that that's that would probably be right. Yeah, that'd be right then. Yeah, yeah, yeah, yeah, yeah. 8%. Yes, that'd be about right. 7-8%. Okay. Yeah, that does make sense. So that shows you what the surrender charge is.

SPEAKER_05 18:46

Um, you continue to look on that, and I will continue reading. She says months later, I read Don's book, Financial Physics, and for the last two years have been listening to talking real money. Here's the important part. I would not buy either annuity today. Yay! Yay, good work. Uh, I do not have a financial advisor. Yesterday, the insurance agent telephoned me out of the blue, suggesting I take distributions of fifty-one thousand dollars annually, now before the seven-year term ends, so my money can get to work. So that means it's not getting to work in the annuity, I guess. I don't know what that means. Uh, I said I'd think about it. I wonder whether he will earn another commission. Um probably not taking the money to get the city.

SPEAKER_06 19:30

No, probably no. Here's what I think he's doing. Here's what I think he's doing. I in fact, I this is exactly what he's doing. Because she can take the numbers, the number tells you everything. Yep. He she she can take 10% without penalty, without surrender charge.

SPEAKER_03 19:45

That's right.

SPEAKER_06 19:46

So he's saying take that 10% out so it can work for you. There's the in there is the hidden the hidden uh incentive. He's gonna put that $51,000 into another product that is going to pay him a another commission. Yeah. And the commission, did she tell you what her age was?

SPEAKER_05 20:04

No. Uh yes, she did. She is 73.

SPEAKER_06 20:10

Did you see that? I saw I see it. 73. Uh at 73 I ran. Uh, the commission, I believe the commission on this particular product, this equit pro twist.

SPEAKER_03 20:19

Equitwist? Equitwist product. Got to twist me too. It was eight and a half percent. Good Lord.

SPEAKER_05 20:26

Eight and a half percent on half a million we can do the math.

SPEAKER_06 20:30

I'm looking at their commission, Groove.

SPEAKER_05 20:31

Oh, no wonder he called.

SPEAKER_06 20:34

And there then there are also if they here's the thing they don't tell you about. Uh they have Equitust Equitwest.

SPEAKER_04 20:41

Doing a kid. Equitust you actually.

SPEAKER_06 20:44

Equitwust has a uh sales volume bonus.

SPEAKER_04 20:48

I thought 20 words.

SPEAKER_06 20:50

Yeah. If you make just five million in qualified annual sales, you get an extra one percent commission.

SPEAKER_05 20:57

Good lord.

SPEAKER_06 20:58

If you get to ten million, you get an extra one and a half percent commission. And if you get to fifteen million, you get two percent extra, which would put it at ten and a half percent potentially.

SPEAKER_05 21:08

So you can run the number then. That's a nice afternoon's work. Anyway, she goes on. Is Equitrust B plus rating assigned the companies in financial trouble? If I wait until age 78, by the way, yes, perhaps I do B Plus worries me a little bit, but if I wait until age 78 in 2031, the projected distributions would be 63,000 annually. One of his ideas is that I would need less from my Vanguard 6040 portfolio, which he says a million and a half plus a hundred thousand traditional IRA. Here's the part that this this is the part that should have been first rather than last. I receive thirty thousand dollars annually from my husband's pension and social security. My annual expenses are fifty-five thousand dollars. Now, take the one point five million times four.

SPEAKER_06 21:53

Yeah, the four percent rule.

SPEAKER_05 21:55

Four percent rule. That's you know, one would be forty plus another twenty. Yeah, okay.

SPEAKER_06 22:01

How much?

SPEAKER_05 22:02

1.5.

SPEAKER_06 22:03

1.5. Oh 1 million would be uh So 140 plus half that again, 20.

SPEAKER_05 22:09

You had it right. 60,000. 60 plus 30 is how much?

SPEAKER_06 22:12

Ninety, the last time. Nine thousand.

SPEAKER_05 22:14

Her annual expenses are how much? Fifty-five thousand. Yeah. So why in the world did you need an annuity? You didn't. You didn't. And you still don't? You don't. I mean, so if my surrender was ahead of both, I would go ahead and take my money out now. Bye.

SPEAKER_06 22:29

Yeah, actually, I would just to get it away from this guy.

SPEAKER_05 22:32

Exactly. Because I don't know what to do with the money.

SPEAKER_06 22:35

I would say, I'm sorry, sir. I want you out of my life. You are not a fiduciary. You are not looking out for my best interest. You didn't take any, any of my situation into account when you made this. Just sold me a product. Pitch. And you sold me a product that I believe made you an 8.5% commission, maybe more. Uh and prove me wrong, because show me, show me the commission that they paid you then. Show me what the insurance company paid. He'll say, they didn't pay me a commission. Oh, yeah, right.

SPEAKER_05 23:02

That's the cost base that's being high now is a consideration for taxes, but wouldn't be that much.

SPEAKER_06 23:09

Yeah, and the the the only good news is it doesn't look to me like you would have any kind of a taxable effect doing this or anything to speak of. It's gonna be small. I mean I would get my money back. You're ahead of where you were. Exactly. You know, you put two years ago you put $4.50 in, so you're not gonna suffer a net loss. Nope. Um and uh just put it all over at Vanguard.

SPEAKER_05 23:34

Yep. Nothing wrong with that. By the way, she adds, love the music and the dad jokes.

SPEAKER_06 23:41

Yeah. Okay. Well, thank you for loving the music. I worked really hard on today's.

unknown 23:47

No.

SPEAKER_06 23:49

No, I I I I I can only give her half a point.

SPEAKER_05 23:53

How much for the music then?

SPEAKER_06 23:55

The music, she gets half a point. It's a one point for music.

SPEAKER_05 23:58

I'm okay with that. Okay.

SPEAKER_06 23:59

So she only gets half a point. Okay, that's fair enough.

SPEAKER_05 24:01

Um should we do one more here?

SPEAKER_06 24:02

Yeah, we need to do one more.

SPEAKER_05 24:03

We're running a little long, but um and a quick update at the end on the easy passive income businesses. I want to tell you.

Roth or Traditional Contributions?

SPEAKER_05 24:10

Oh, we're not running long. We're okay. All right, okay. Uh Brett from Seattle, Washington, writes, Hi Don and Tom. I'm employed at a local municipality that has a 457 plan. I'm 50. I think my health will allow me to work until I'm 60. Wait, wait, wait.

SPEAKER_06 24:26

Are you expecting to be in bad health in 10 years?

SPEAKER_05 24:28

Okay, we shouldn't joke about that because who knows? Yeah, maybe when I will retire with a pension, I'm contributing 10,000 annually to 10,000 annually to my 457 and trying to make it more as my kids finish growing and move out over the next few years. My 457 has traditional and Roth contribution options. When I logged in to look at increasing my contribution, I saw a message about last year's earnings exceeding the IRS threshold and needing to contribute any age-based makeup amounts with the Roth option. Yes, if your income is high enough, you can the makeup portion, which I always forget, it's like $7,000 or $8,000 or something this year for people over the age, the whopping age of age 50, has to go into a Roth component. It cannot go into the pre-tax. Uh, he says my W-2 last year's $176. Short story long. Can you recommend a calculator that shows the effects on my paycheck if I choose $100 traditional or 100 Roth or a mix?

SPEAKER_06 25:26

Well, okay, here's the That's hard. Well, no, there is a calculator. I looked, and there is one. Charles Schwab has one.

SPEAKER_05 25:33

That will show you what your income will be, et cetera.

SPEAKER_06 25:37

The Roth versus traditional IRA calculator.

SPEAKER_05 25:40

You go to Schwab.

SPEAKER_06 25:41

And it just asks you questions. Yeah. Okay. Um it's it you you put in your tax year, your filing status, you know, modified, adjusted, gross, et cetera. And it does some it well, actually, this I think it just Oh, never mind. No, this just tells you how much you can contribute to each.

SPEAKER_05 25:59

Um it doesn't show you what it would mean to your income if you did some pre-tax, some post-tax. There's got to be something else.

SPEAKER_06 26:09

Um I'm I am not finding one. But here's the thing these are these are everything you're gonna do with this is gonna be a guess. Because you're guessing what your future needs will be. That's true. You're guessing what your future income from your portfolio might be based on how big your portfolio gets between now and then. Future tax rates. You're guessing your future tax rate and brackets.

SPEAKER_05 26:34

And the government. I mean, whatever they're gonna be taxing.

SPEAKER_06 26:36

The reality is the difference between the two is gonna be small. Because you sp it's pay the taxes now or pay them later. That's really what it is.

SPEAKER_05 26:47

But at 176, he didn't say if he's filing jointly or single. Um at 176 trying to think I don't have the tax table in front of me, but um the fact is probably it sounds like your tax rate's gonna be higher today than it would be later. So under that circumstance, then I would still crank up the pre-tax and then and do the Roth for the the makeup part.

SPEAKER_06 27:13

You have to do the Roth.

SPEAKER_05 27:15

Exactly.

SPEAKER_06 27:15

You have to do the Roth. There's just no choice. But should you add additional Roth? We think that strategy is blown out of proportion.

SPEAKER_05 27:24

Yeah, I think it's overshadowed.

SPEAKER_06 27:25

To its to its its value. So um I see if I can find anybody else that has one that might do this. Um I don't like the company, but oh yeah, this one does it. Oh, okay. Yeah, might be worth looking at. Voya, the orange rabbit company. Well, they have an orange rabbit and an orange squirrel. Uh yeah, this is a traditional versus Roth 401k, 403B, 457 calculator. So you put in your current age, age at retirement, annual contribution, uh and it'll give you total after tax at retirement. Um But again, it's just it's real rough. It's real rough. And you gotta put in you put in your tax assumptions and then you gotta change those and you know, your what your rate of return is gonna be.

SPEAKER_05 28:13

And but I will add it'll be probably the first and last time Don will ever send you to Voya. So you might want to take vegetables.

SPEAKER_06 28:21

It's really the only time. Um I can find right now. I was I thought the Schwab one did it, but I didn't actually go try it, and it

Is Passive Income Really Passive?

SPEAKER_06 28:29

doesn't. No, it does not. All right.

SPEAKER_04 28:30

Um, so now we're gonna talk about we're gonna talk about something really important. Something else, speaking of trying.

SPEAKER_06 28:35

You know, there is a the fire movement is big on passive income. Yeah. You know, put your money in that, get a check every month or every week, whatever it is.

SPEAKER_05 28:43

Yeah.

SPEAKER_06 28:43

And now it's been all the rage to uh try to find a business that just gives you income without doing any work.

SPEAKER_05 28:49

And would you believe the hottest one in America today is according to the to the Wall Street Journal. I almost fell over when I read that. I did too. I read the article and I went no. Ladies and gentlemen, now let me give you the business opportunity of today and tomorrow. Yeah, a quarter at a time, yeah, the laundromat.

SPEAKER_06 29:08

You know, we watched the show Young Sheldon years ago, um, and Sheldon's grandmother bought a laundromat, and the only way she could make it work financially, yeah, was to have illegal gambling in the back room.

SPEAKER_04 29:24

They think that mentioned it in the article.

SPEAKER_06 29:26

Did it really?

SPEAKER_05 29:27

It's something about other things you can add on. I don't think they said illegal.

SPEAKER_06 29:30

Yeah, she had illegal slots. So those quarters that you were putting into the since you have a roll of quarters anyway, why not take them back to the back room and put them in the slots?

SPEAKER_05 29:39

But I all kidding aside, this is one of those topics that comes up used to be more regularly. I don't hear it as much anymore, but how do I make passive income on my money? I don't want to do anything. I just want to, you know, invest in something and get my check every month, every week. And there's a lot of, and the article points this out, there's a lot of anxiety, especially among younger people, around AI, around employment, that kind of thing. So I want something that's gonna make me easy. And there's a guy, I'm not gonna give his name, but he has a tweet. Well, the Wall Street Journal did. I know TikTok. Well, I don't want to give too much free promotion, but TikTok is the laundry, it's called laundromat laundromat laundromat money. I gotta get it laundromat. Laundromat, I think. I don't know why uh you and the the lisp thing earlier got me going. Uh, and he went on, he went on, he went online and showed everybody's quarters, etc. And he had uh for five days he had fourteen hundred dollars.

SPEAKER_06 30:36

In quarters.

SPEAKER_05 30:37

Yeah. Which sounds really good, I guess.

SPEAKER_06 30:41

Um don't you have to have a building that you either rent or own?

SPEAKER_05 30:46

They quote some other people that do this for a living. There's how guess did you have any idea how many when I read the piece, I was shocked the number of laundromats in America. Do you remember the number?

SPEAKER_06 30:56

I don't remember the number.

SPEAKER_05 30:57

30,000. I thought, God, how many people are going out to do their laundry? Anyway, 30,000. Um, and you can smaller location cost 300,000, large operations can take uh can cost up to three million dollars. But they do say the average profit margin. Now they're not specific what about the the margin, what is that, you know, before taxes, whatever, but they say the average profit margin, and this is in quarters too, is 24%. That sounds pretty good. That sounds pretty good to me. Uh now you gotta collect the quarters, you gotta but the people that do this well, oh, there is a they they did there is one that tried a video gambling terminal. They said it didn't work out too well. Customers they point out we're winning so much the company that owned it took it back. That never happens in a in a gambling establishment. Um, but I just so make sure you put the quarters in the right place if you want to have a dry clothing. Uh the thing is when I all these things come up because everybody, as I said, wants an easy, passive income. And we're going to tell you, having owned numerous businesses over the years, I've yet to find one.

SPEAKER_06 32:07

There's no such thing. A lot of people think it's real estate. Well, I'll just buy a house and rent it to somebody. Yep. Really? Have you ever owned a house? They don't require any work. Oh, and tenants aren't pains in the neck. They don't demand anything. They don't leave you high and dry. They don't trash the place. That never happens.

SPEAKER_05 32:26

The broken toilet and the oven that doesn't, I mean, all those things that go as being a landlord.

SPEAKER_06 32:31

Yeah. Now you can pay a management company to do that, but that sucks down your returns.

SPEAKER_05 32:36

And it's not none of these are as easy as they appear, I'll put it that way. That's the point about the laundry match.

SPEAKER_06 32:41

There is no sure thing. None. They don't exist. No. No sure thing. Not a single one. Then all the money would be in those. No wealth without risk.

SPEAKER_05 32:50

Thank you. Oh, thank you, uh, Mr.

Ask Us Your Financial Questions

SPEAKER_05 32:52

Gibbons, for that.

SPEAKER_06 32:53

Yeah. And thank you for being a part of our little program. Give us a call. At uh well, not a call. A question, a verbal question. Yes. At talkingrealmoney.com. Click on the microphone button. Those go on the Friday QA. Or ask a question using the ask a question button or meet with one of our advisors for free for nothing with no obligation. It's easy. Just click on meet an advisor. And remember, every single weekday, we're talking real money.

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SPEAKER_01 33:26

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