Average Retiree Spending: Will You Have Enough?
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On radio, on YouTube, streaming live on investtalk.com, and for our podcast subscribers, this is InvestTalk. Independent thinking, shared success. InvestTalk is made possible by KPP Financial, a registered investment advisor firm serving clients throughout the United States. Here is KPP Financial Portfolio Manager, Luke Guerrero.

Good afternoon fellow investors and welcome back to InvestTalk. My name is Luke Guerrero and it is Thursday, February 27th, 2025. And if you've been paying attention to markets today or recently, you've seen an uptick in volatility. And volatility is the unavoidable byproduct of change. And as we've been saying for some time, this is a year of many, many changes. Changes all around us.

And so in order to be the best investors we can be, we need to seek to recognize those changes, to understand those changes, the explicit side effects, the implicit side effects, things that you may not even think about initially when you hear about them. And so in 2025, our mission is the same as it is every single year. And that is to help make you a better and more informed investor. Now, in order to do that,

We will talk about many stories today. We will talk about markets today. We will talk about tips, advice, trends all today. But most importantly, we will be answering your finance and investment questions through voicemail, through our InvestTalk YouTube channel comments section, through our iTunes review section, and hopefully live throughout this show at 888-99-CHART. Now, before we dive into today's market performance, which was, let's say, negative.

Before we dive into those show topics and run them down, let's tackle our first caller question now. Hi, this is Brayden from Thousand Oaks. I appreciate your guys' show. Thank you very much. I was just calling to see if I could get your advice on a ETF, SCHD. It's the Swab U.S. Dividend Equity ETF. Essentially like a 20-year hold that I would just buy into kind of over the years. Any advice would be appreciated. Thank you.

Ticker SCHD, the Schwab U.S. Dividend Equity ETF does exactly as you would expect it to do by the name. It's a market cap weighted fund who selects a universe only including firms with a 10-year history of paying dividends. And so they use fundamental screens like cash flow to debt ratio, like ROE, to essentially build this portfolio with the objective being investing in quality companies with sustainable dividends with a track record of growth.

And so because of this, as you'd expect, is a tilt towards large caps. They do exclude REITs because this is really just trying to target a profitability premium with inequities. But

Another important thing is an individual cap on any name by 4%, because if you have a very, very large name that is a solid dividend payer, has a good history over 10 years, you may get overly exposed to it, especially as you contract the universe. And so looking at fund characteristics relative to this fund's benchmark, which is the entire US investable high dividend yield index,

It tilts more towards the growth side, which is interesting to me, and a little bit more towards the value side, which you'd expect, right? Its price to cash flow is about 10% less than the segment benchmark. In terms of market cap, spot on. 92.88 versus 92.34. A little bit underweight in mid-caps because there's a little, little bit more weight in the small cap universe. But it's in those sectors that you'd expect for dividend payers, healthcare, finance, consumer non-cyclicals, energy, finance.

Top names, AbbVie, Coca-Cola, all established companies that pay dividends. And so for this fund, which is passively managed, again, it's market cap weighted, that is six basis points. If what you're trying to do is target U.S. large caps with an emphasis on dividends, this is a good way to do it. This is the Schwab U.S. Dividend ETF, ticker SCHD.

We've got a lot of ground to cover in the next 45 minutes or so, and here's a little bit of what we have planned for you. My main focus point concerns this story. Average retiree spending, will you have enough?

With average monthly expenses in retirement reaching around $5,000, retirees must navigate a delicate balance between enjoying their golden years and also ensuring their savings last a lifetime. So we'll dive into that, talk about recent trends, where those costs are coming from, and have a little bit of action items for you to help prepare yourself. We'll also touch on credit scores, which are broadly taking a hit. The reason why, student loan borrowers,

Entering default or certainly risking default. So we'll dive into that, what that trend means for consumer spending going forward, as well as touch on the U.S. tariffs set to be put into place on March 4th against China, Mexico, and Canada. And should we have time at the end of the show, we'll do a brief touch point on the U.S. economy and why Americans seem to be more negative than the data suggests you should be.

We also have some voicemail questions ready to play, including one on 401k rollovers and one on Broadcom Inc. That is A-V-G-O, as well as some questions that came in from the comment section of the InvestTalk YouTube channel. And hopefully at some point throughout the show, live calls from you.

Now we're going to do a short break, and on the other side, we'll briefly touch on today's market activity. Please remember that you can call anytime and leave your questions on the InvestDoc Voice Bank 888-99-CHART, or you can call between 4 and 5 p.m. Pacific time to speak with me or Justin during the live stream and radio show.

Okay, got to get serious with my finances. I've been working a long time and I know there's still got to be more that I can do to build my wealth quicker. I don't want to have to work forever. If you are not maximizing your employer-sponsored retirement plan, KPP Financial can help.

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Our approach includes creating custom investment allocations tailored to your goals and risk tolerance. That can make a big difference in your favor. Maybe it's time to tune up my retirement plan. For more information on how you can take control of your retirement savings, visit our website, kppfinancial.com. KPP Financial. Sounds good.

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2025 rolls on and you might have some fresh questions for Justin or Luke. Call InvestTalk 888-99-CHART.

Let's touch on the market today pretty briefly. It was a bloody day in markets, decidedly negative, stocks ending near worst levels. The Dow down 45 basis points. S&P 500 down over a percent and a half at 1.59%. NASDAQ almost down three at 2.78%. And Russell 2000 small caps down 1.59%. So what dragged the market down? Well, big tech was mostly lower. NVIDIA, a drag from post-earnings digestion.

Tesla extending its big weekly decline under other underperformers included semi software chemicals, airline names, not a lot of good performers on the day, but relative outperformers included large cap banks, insurers, exchanges, and payment systems. Dollar index was up 80 basis points, gold down 1.2% and crude oil up 2.5% ending back above that $70 a barrel threshold.

So what was the overarching driver here? Well, the easy one to grasp for is more uncertainty about administration policy. You have Canada and Mexico tariffs, which are now set to go into effect on the 4th of March, in addition to a 10% discount.

tariff on China as well. You had the discussion of tariffs on Europe yesterday. You had that broad tech sell-off in the wake of earnings. But you also have growth concerns. You have an upward revision of PCE from Q4. You have worries about stagflation. You have January durable goods orders, which topped forecasts. You have weekly jobless claims, which jumped to higher than expected, 242,000 from a prior 200,000. And so all of this is leading people to

pare back on equity allocations, understandably.

Now, in terms of other news on the day, there was a meeting between President Trump and the UK Prime Minister where the UK Prime Minister urged President Trump to not abandon Ukraine in their fight against Russia, but that didn't really make much effect on markets. So looking ahead to the end of the month, which is tomorrow, we'll be looking at core PCE and PCE, the preferred metric of inflation from the Fed, hopefully maybe getting a little glimmer of a clue towards the path of cutting rates.

going forward. Let's keep things moving and get to another question. This one coming from the InvestTalk comment section over there on our YouTube channel.

and while you check us out and again it's in a different format we don't really do the full 45 minute show you can pick and choose what you want to listen to maybe you're a market rap kind of guy maybe you're a questions kind of guy maybe you're a focus point kind of person but while you're over there if you have a question you can leave it right there in the comment section of our investdoc youtube channel let's get to one right now from somebody named stalk lover funny name stalk lover says would you love your opinions and thoughts on defense contractors specifically bah

Good time to buy? I can see Europe expanding on defense spending while we tighten up our budget in the US, but some of these names look too cheap to ignore down here long term. What are your thoughts?

So let me pull this up here on my other screen as well. So BAH is Booz Allen Hamilton. It is a management and technology consulting firm. It's within the aerospace and defense industry. Their primary clients are defense clients. They do have some civil government clients as well and intelligence clients. See about intelligence is about 17% of their business. Defense clients 47, civil clients about 34.

And like most of the industry, it's been a rough time. You know, they're down 24% over the first 52 or rather the last 52 weeks. Year to date, they're down 13%. They're actually underperforming their industry as a whole by pretty significant margins. But within that sub-industry, aerospace and defense hasn't done particularly well.

Now, they did report earnings from Q3 of fiscal year 2025. Their fiscal year ends in March. And those earnings did beat estimates, but guidance wasn't too great, it looks like.

they also have decided to shift a lot of their focus or some of their focus on quantum computing and satellite servicing technology so looking to expand beyond their traditional work now it's a 14 billion dollar market cap company it has a little bit of debt 3.9 billion but overall what i'm seeing here is a company who is likely to be on the wrong side of a trend most of their business is done within the united states 98

And so if you're looking for a name that could potentially grow from your European expansion, this isn't the one you're looking for. And so because of that, yes, it does look cheap. It's still trading at 16.3 times forward-looking earnings. The trends just aren't in its favor. And the chart is saying that. So for now, I would keep it on my watch list. Certainly don't see any buy opportunity anytime in the near future. That is BAH Booz Allen Hamilton.

Looks like we have our first live call. Chris from Maine asking about Civi and listening to the podcast. Yeah, hey Luke. Thanks for taking my call. Yeah, I wanted to talk about that oil and gas company, the Steel Justins kind of quote. I've been taking it to the chin with that one lately. So, if you...

Yeah, well, you know, a lot of people have been taking it to the chin on this one, too. We hold Civi at a smaller weight relative to our energy weights in one of our strategies, but we're still holding it.

And the reason why it's doing really poorly, down 41% over the past 52 weeks, down 16% year to date, a brutal 16%, is just where oil prices have been moving. We've had four straight weeks up until this week of declines. We lost the $70 barrel level. We recently got it back today. But there is not anything that is likely to, at least in the short term, I think, push back.

oil prices sustainably and meaningfully higher, right? They've started to come back down. They came back down in the wake of the election. They started to move down again after there seemed to be maybe the beginnings of a resolution in the war, you know, in the Russian, in the

war between Russia and Ukraine. And so all of this would likely lead to increased supplies, lower prices. At the same time, you don't really have demand as high. And so anytime you have a company that is selling a commodity, you're tied directly to that price, right? And so 84% of its business is crude oil. Not a lot of it is natural gas, only 13%. So this is going to be uniquely exposed to crude oil prices, which are not great.

Now, with that in mind, it's trading at 4.4 times forward-looking earnings, well below its five-year average. It's trading at 1.3 times its cash flow. I mean, it's very, very cheap. And so I would say, you know, I think Civi is a solid company, right? Their cash flow has improved. Their profitability looks pretty good considering how poor a year it was last year. But either way, I think if you're a long-term investor, these oil names, these energy names are...

Still an essential part of your portfolio. I don't think I would be adding more here, but I don't think unless you move towards an energy name that is more exposed towards natural gas as well, that you're likely to have a better investment experience in the energy space for at least a little bit. So we're still holding on to Civi for our clients. We may pick up some more soon, as soon as it looks like it's starting to do a little bit of a technical correction. But it's not really a business problem from what I can see. It's really just that the price of oil is down. Thanks for the call.

Now we're moving into a break and still to come, my main focus point.

More answers to your voicemail questions. We already have one live call from our friend Chris in Maine, and we're hoping to get a lot more. I think we actually set a record recently, at least a local record, I would say my record on Friday for having seven live calls in one day. We only got to one of my talking points beyond the focus point. So let's try and get eight today. Let's try and beat it. I know Justin will be jealous. Give me a call at 888-99-CHINES.

Luke Guerrero is here and ready to tackle your questions. I would like to know more about a company which I've been tracking for some time. Quick question on a very risky play. It is a company that caught my attention because the ROE is like close to 100%.

InvestTalk is ready 24-7. And I was just wondering, are there any investment accounts with different banks that you would recommend? Something that may offer good resources? Call InvestTalk. 888-99-CHART.

Your questions are free. The answers are unbiased. Luke Guerrero is here now, ready to take your calls live. InvestTalk, 888-99-CHART. Let's go to Nick from Hayward. There's a question about Tesla, listening on AM 1220. Do you own it or are you looking to buy it?

I have a few shares, but I'm thinking if it's low enough, at what price should I buy a few more maybe? That's what I want to know from you. And thank you for the great show. Thank you. Thank you. Thank you for calling. You're a big part of it.

Now, Tesla, ticker TSLA, I think is probably one of the most well-known companies on earth. They have those nice little cars that drive around. They are electric vehicles, really a pioneer in moving electric vehicles to the mass markets. Now, year to date, it's down about 30%, but in spite of that, it's up 41% over the past 52 weeks.

Now, no matter your opinion on Elon Musk, on his politics, on his stewardship of the company, I think everyone can agree that like him or dislike him, he's a pretty polarizing figure. And so, you know, there has been some talk about boycotts in Europe of buying cars and boycotts in various countries of buying cars. And in terms of it bearing out, you've seen revenue growth fall off. You've seen revenue fall in some countries.

And, you know, I do need to preface this by saying, if you had asked me a year ago, before it had gone up 41%, is Tesla a good buy? I would have said no. And the reason why is because the relative valuation is far outside of anything realistic to me. Think about this. Tesla is a trillion dollar company. It's a trillion dollar company. It's larger than the entire US auto market, every other car.

okay, you want to say it's about automation and cyber, whatever. Well, it's bigger than the robot subsector of technology as well. It is larger than anything to the point where the downside risk to me is just huge. It's huge. It's trading at 95 times forward-looking earnings. It's trading at 68 times cashflow, 10 times sales. And so in order for this to

There are some things that could benefit Tesla, right? You have the US government stepping back in terms of subsidizing other car companies where Tesla's already profitable. All these other competitors are not. That could benefit Tesla. But either way, given where growth is headed...

given where sales of their cars are, I just cannot in good conscience say that it is a justified trillion dollar company. And so for me, again, could be wrong. I was wrong a year ago. When things aren't trading like fundamentals, when they start trading more like vibes and memes, I kind of start to step away and say there are better places, safer places, less risky places to put my money. Now, it doesn't mean it's not going to return well, but for me, I just think the fundamentals have

gone far away from what the valuation is saying. Thanks for the call. Let's keep things moving with another caller question now. - This is Randy, the Iowa trucker again. I've got a 401k that is just severely underperforming the market, and I know you've talked about that before, but I'm still working even though I'm well past the age where I can start taking it out with no penalty.

And I've heard you talk about moving your 401k to rolling it over to an IRA. Can I do that while I'm still working? Can I take a large portion of it and start a standard IRA so I can avoid, I can't pay those taxes, so I need to avoid that until I start actually taking the money out. How difficult is that to do, to take that and roll a portion of it or a large portion of it or whatever amount into a standard IRA so that I can try and get better returns?

- A great show, I really like it. Thank you. - That's a great question, and it's actually relevant 'cause I had a client ask me this the other day as well. And the answer is, as often is the case, it depends. Now if you're under 59 1/2,

you really can't do it without penalties generally but if you're over 59 and a half well that's when you can start to roll over some or maybe even all of the assets from your 401k into an ira now this is plan dependent some plans may not let you roll over a part you may have to roll over all of it so then let's go into what are kind of the pros and cons here now the first pro is 401k plans tend to be expensive not all of them but generally

The fees associated with being in that plan, if they're not paid for by the business, can really cut down on returns. Also, there are limited fund options. And that's one of the reasons why we suggest when you leave a company, when you're able to, to roll out of your 401k.

You know, other than the lower fees, it also could have better estate planning. It could be easier to Roth convert. Those are all pros. There are cons, right? You don't have that loan option anymore. If you ever need a loan, you can usually take it out at a far lower rate out of your 401k plan. The most important part, along from the creditor protection you get from that plan, is employee matching. If you no longer contribute to the 401k plan, you may not get that employee match.

And so if you're interested in it, I think it could be a good idea, especially if your returns are far underperforming the market, be it because of fund options or fees that are eating away at it. But you're gonna have to go to your plan. You're gonna have to look at your options. If you're over 59 and a half, which I believe you said you were, rolling out into an IRA from that 401k, saving money, having more options could be beneficial for you. And if you'd like some help, feel free. Head over to investdoc.com, click the portfolio review button where you can look at your specific circumstance

rather than just talking in generalities. Thanks for the call. And really a very important call because I think that it is something that affects a lot of people and they don't really know where to start. Now in the next InvestTalk, we'll be looking into this question. Is pre-IPO investing worth the risk? The lure of the high stakes world of pre-IPO investing teases these astronomical returns.

But there are risks, there are uncertainties. So is it worth it for anybody? Is it worth it for you? That's tomorrow. But for now, I'm Luke Guerrero, ready to take your calls, hoping for more live ones. You know the number, 888-99-CHART. Got a question for Justin or Luke? You're the best person to ask it. I wanted to pick your brain about Apple. What did you think about their earnings call? Is this a good time to add to my position? Call InvestTalk, 888-99-CHART.

It's about time we get to our main focus point today, which is really pinpointing an issue that the average retiree is facing, which is that spending is really outpacing what they have.

And that's because on average retirees spends $5,000 per month and that's made up of housing and healthcare and food costs. And in a way what they've saved throughout their lives can't really sustain those levels of spending. The median 401k balance for those ages 60 to 69 is $210,724.

So what does that mean? Well, it means that if you use the 4% rule, which is a general guideline of what should be safe in terms of drawing down your retirement, you're left with $702 a month. $5,000 a month in expenses, $702 from your 401k. Now yes, there's social security, but the average benefit's only $1,976. And so how do you cover that gap? At a time when you're no longer working or maybe you're forced to in your golden years go back and get a job,

Well, first you want to think about beforehand, what are my biggest expenses going to be? For housing, it's your mortgage, your property taxes, your utilities, any maintenance that needs to be done. For healthcare, you have your Medicare premiums, your co-pays, your prescriptions, your long-term care. As you get older and more into your advanced years, some of those things become more expensive. Food and transportation, we're talking dining out, vehicle upkeep, any travel you want to do.

And so we looked at 60 to 69, but the thing about drawing down your retirement is the overall balance decreases. So what about if you're in your 70s? For those who are 70 years or older, the average balance is $106,654. So how do you bridge that gap? One is the catch-up limit. You can maximize your retirement contributions. If you're over the age of 50, you can contribute up to $31,000 annually to your 401k.

Another is delaying social security. If you wait until age 70, your benefits may increase by up to 8% per year. I already mentioned one of them, having to work, part-time work in your retirement. I remember when I was younger, my grandma would work at the local Kmart. I don't even know if Kmart's around anymore, but there was one right by where we lived. Or maybe you want to focus your assets on rental income or sources of passive investments to help supplement those savings.

But more importantly, you can't just address one side of the equation. You need to think in advance how you can cut your discretionary expenses, downsize your home, reduce unnecessary luxury within traveling, not cut out traveling entirely, eliminate those unnecessary costs in order to extend those savings. And so I think the key takeaway here is that for most people, you're going to need to combine multiple income streams to afford your retirement, your 401 , your Social Security,

other investments outside of your 401k, which you should be saving with, other savings that you have. And so in order to sustain a comfortable lifestyle, the best piece of advice, the best piece of advice, as is the case for anything, think about it early, prepare room.

Let's get back to our listener questions. This one coming in from the InvestTalk YouTube comment question bank. It's on ticker AKAM from our friend Nautilus49. Nautilus49. That's for Akami Technologies. A-K-A-M-I is how you spell Akami Technologies.

And the question is: I would like to know your opinion about Akami. Do you think this would be a good opportunity to buy for a long-term hold? Just waiting for this to pull up here. Sometimes my internet doesn't like me, but nonetheless, we go forward. So Akami Technologies is a global provider of cloud services. They specialize in delivering, optimizing, and securing content and business applications over the internet.

Now, over the past 52 weeks, it's down about 27.74% on an annualized basis. One of the reasons could be that growth has slowed quite a bit, right? They were averaging 6.6% on an annualized basis going back five years. But that's really stopped, right? From 3.8 billion in 2023 to 3.9 billion. That is not solid growth there.

In that time, margins have started to slide as well. They had a high in 2021 when a lot of cloud security names are doing well. But that's fallen from 18.8% down to 14.4% in 2023, then 12.7% this year, though it is projected to pick back up again. Now, cash flow, though not moving negative or towards the negative, is pretty flat overall. It's an $11 billion market cap company. They have about $4.6 billion in debt.

And so one thing they do have going for them is they have secured some major cloud contracts over the past couple years. They are introducing a managed container service aimed at helping enterprises develop scalability, which could be good for startup companies, which could be good for companies that are looking to scale and expand. But overall, you're in an industry that demands growth and you're just not achieving. Forward-looking price earnings, 12.5. That is about the low of the past five years, the low being 11.9.

It had a huge fall off in February. And that huge fall off is directly related to earnings and forward-looking guidance. Dropped from $100 a share all the way down to about 76. Now it's since rebounded to about 77, 87 per share. It's down 18.59% year to date. And the reason is growth. The reason is margins. The reason is cashflow being stuck. And so within the cybersecurity sector, it is a grow or die business. And so for AKAM Akami, I'm gonna have to pass.

Let's head back to the InvestTalk with Voice Bank for a question that came in earlier from Delaware.

Hi, I'm Lauren from Delaware. I have a question for you gentlemen, and that is about what is going on now, the Broadcom, Taiwan Semiconductor and Intel issue. What do you think about it? How important is it? And are there going to be a winner? I looked today at what happened to Broadcom and I think, okay, is that a good sign or a bad sign? Really appreciate some information about this. Thank you very much.

So Broadcom, that's sticker A-V-G-O, it's a global technology leader, designs, rather, develops and supplies a broad range of semiconductor materials to a whole host of companies. More recently, they've been pretty successful because they have been paired up with Apple for quite some time within their chip manufacturing.

And you look at it at first glance, in their most recent forward-looking guidance, their CEO estimated that the chip industry will grow from $60 billion to $90 billion in revenue by 2027. But I think what's going on here is a general overall rotation. Now, Intel's something different. Intel's problem has been, well, not good usage of capital, right? They had a big injection from the Biden administration.

They had wind at their backs from a desire to bring ship manufacturing back to the United States. And their internal foundry system is just slower than it has been. Getting that up to speed is slower than it has been. Now, a Broadcom, as I pull this up here, Broadcom itself is up 52% over the past year.

but down 14% year to date. And you've started to see that rotation. Some of it spurred on from deep seek though. I don't give as much credence to that as others do. I've always said that if you can make models cheaper, you increase demand from other companies that couldn't afford those large comprehensive complex models that should increase drive in turn, drive up demand at companies like Broadcom companies like Nvidia, they may raise prices because there is so much demand, but either way, the market gets larger.

But you're definitely seeing this rotation. You saw it today from NVIDIA. Yes, it's down 14.68%. That's Broadcom. It's down 7.11% today. And a lot of that is from Broadcom.

a miss in gross margins from Nvidia. This sector tends to move in a similar fashion. And so although I can separate it from the problems that Intel has, generally speaking, Druckenmiller says this, I've said this before, about 60% of the return is just what the overall market's doing. Another 30% is what that sector is doing. Maybe 10% is what the company's doing. And so if all those companies are going down, Broadcom is likely to follow.

And so as we see this rotation, I think it's probably smart to stay out of Broadcom for now, keep it on your watch list. Likely seeing a little bit of a correction, hopefully a good time to enter pretty soon. Thanks for the call. Student loans. Nobody likes student loans. But some people, 43% of borrowers, actually haven't begun to resume payment. Now, why is that a problem?

That means that 9 million people are at risk of credit score drops. 2 million are expected to fall into what's known as subprime status potentially within the next six months. And the knock-on effect of this is that these missed payments are now starting to hit credit scores with borrowers on average who are student loan holders losing up to 129 points.

Now, for the individual, this matters, right? Higher mortgages, higher auto loans, credit card rates are higher. And so it is more difficult to spend, to save, to acquire assets for those who are burdened by all this debt. Now, common reasons for mispayments could be they don't have the money. Could be confusion over loan status. All the changes that have happened over the past couple of years could be outdated contact information.

It could be a belief that loans are still in forbearance. Remember, student loan relief just ended in October after three years of paused payments. But many borrowers were either unaware or unprepared for what was coming next. And so beyond the individual, right? We already talked about the increased costs for people when they're trying to buy a home or a car or anything. There's also an economic impact, right?

What is consumer spending but the aggregate sum of what everybody is spending? If a section of people are able to contribute less to growth, well, that hurts the overall economy. Higher borrowing costs don't just affect those who have worse credit. It raises borrowing costs as a whole. It tightens credit standards. It slows...

the auto market, but it also slows the housing market. You have fewer people buying homes. You have fewer homes changing hands. You have fewer people upsizing, downsizing because others can't afford it. And this is what we've seen. We've seen mortgage denials and loan denials increase. It's forced many borrowers to miss home payments, miss car payments, miss home and car purchases. And if there are errors,

It's likely that the CFPB is what it has been doing for quite some time, helping consumers in terms of these issues, is no longer really there to help consumers. Now, banks and lenders in turn are now having to adjust, right? They have to adjust their policies because they're expecting more delinquencies and reduced loan approvals. How else do banks make money other than lending long from the assets that are in their book?

And so what is the advice for any student loan borrowers out there? Well, first you should check your loan accounts because like I said, some people are just not aware that pauses are done. You should set up auto payments. You should monitor your credit reports. Everybody out there should always be monitoring their credit reports. And so with this,

As we're getting trickles of macroeconomic data that looks to be worse, this could be another problem that really dents in what is a strong economy, but what is starting to show cracks. Because what is the problem for the individual, if there are too many of them, becomes the problem for the collective whole.

We've got plenty of time before our next break, so let's fit in this question right now on GSEW from the InvestTalk YouTube comment section question bank. And it says, hey guys, I love listening to you guys. Thank you for your show. What do you guys think about adding GSEW ETF to my portfolio?

Well, GSEW is the Goldman Sachs Equal Weight U.S. Large Cap Equity ETF. It tracks an index that consists of around the 500 largest U.S. stocks, then it equally rates them. And so this kind of differs from what you see in an S&P 500 fund, for example, where you have a market cap weight.

And so over the past year, it's up about 16%. The MSCI USA Large Cap Index, which is not equal weighted, that is a market cap weighted index, is up about 19.92%. It's a pretty large fund, right? About a billion dollars. But because it's equal weighting, there's not much management involved there, though they do have to rebalance to maintain that equal weight. And so they charge about a nine basis point fee, so relatively cheap. Now it's only large caps. Again, it tracks the US Large Cap Index.

But, you know, inherently when you have equal weights, right, equal weighting means deviating from market cap weights. And so that does a couple things. One, it changes your sector weights, right? Your sector weights are not going to be exactly the same because there aren't the same amount of companies in each sector, but they're going to be dramatically different. The MSCI USA Large Cap Index has 42% technology. This one is 17.72. Finance is a big difference. All of these sectors is a pretty big difference because you're equally weighting each name agnostic of what name it is.

Another thing that's going to do is that's inherently going to give you a tilt towards smaller large cap companies. Why? Well, if you're market cap weighted, each company is representative of how big it is in the market. If you're equal weighted, every company is the same, meaning smaller names will be overrepresented and larger names will be underrepresented.

Now, over time, because of the inherent premium for investing in small caps over the long run, that tends to lead to higher expected returns. And so if you're looking to attack the U.S. large cap asset class, I think GSEW is a pretty solid way to do it because within those large caps, as I said, it's going to overweight those small cap names and slightly underweight those large cap names.

It hasn't really done well relative to the market cap weighted index over the past couple years, but over the long term, given what we know empirically, I think it might. That's GSEW Goldman Sachs Equal Weight U.S. Large Cap Equity ETF. Thanks for watching. This is InvestTalk. I'm Luke Guerrero. We have one goal here to help you achieve your financial freedom. Our work continues after this break, our final break. So get your questions in now at 888-99-CHART.

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Hey guys, Paul from Michigan here. Love the show. I was wondering if you could take a look at Raymond James Financial, RJF. Everything looks pretty good, although it looks like it might be a little bit expensive at the moment. I think it was just at a 52-week high. So if you could take a look at that one and give your feedback, I'd really appreciate it. Thank you very much. Bye-bye.

Raymond James Financial is a financial services company. They do wealth management, investment banking, asset management, and capital market services for governments, for individuals, for businesses. Now, over the past year, it's up about 26.75%. It had a pretty solid 2024, up 39.3%. Year-to-date, it's down about 2.3%. Over the past few months, it's down, well, about 10%.

Now in terms of cash flow, its cash flow was negative in 2023, moved back into positive territory in 2024. It does pay a dividend about 1.32%, which is generally where it's been over the past five years. And they have been buying back shares. Now it's a $31 billion market cap company with about $4.395 billion in debt, so debt doesn't seem to be an issue.

And what we've seen from the banks recently is, well, generally positive trends, especially in investment banks. Now, I always say that, well, if you're an asset management business, then asset management fees are really what drive your revenue. But this is more than that, right? It's more than wealth management. It's investment banking as well. And so what are some of the potential tailwinds? Well, some of the tailwinds for banks broadly could be lowered capital requirements, right?

It could allow banks to send more money out there into the market, try and earn interest, try and get income. Another is a return of a lot of deal flow to investment banks, something that certainly Raymond James would benefit from. Now over Q4 2024, Raymond James reported 36% increase in adjusted net income. And so they are seeing some of the benefits of

looser capital that we saw coming out of a high inflationary environment. Revenue on an annualized basis, 13.3% growth, 13.3% growth. Now margins aren't as high as a lot of their competitors, right? In some of these businesses, we're talking 30% margins. Their margins around 14%. And in terms of the relative valuation, what's about where it has been on average?

And so generally speaking, I'm not seeing a lot of issues here, right? We had a rough 2023, but they certainly righted the ship. They're buying back shares. Their dividend's consistent. They don't have a lot of debt. Their growth looks pretty solid, even from last year, right? Almost $2 billion in growth, higher than their five-year average. And so yes, they're coming off of a high where they were about, I don't know, $170 a share back down to $151. But overall, from a fundamental perspective, looks pretty solid.

Now, they are at some major support levels. So from a technical perspective, I would wait to see any directional moves here. It could really go either way. But either way, RJF, Raymond James, I like it. Thanks for the call. Now, we don't have much time, so I want to briefly touch on...

The potential for an increased trade war. Trump has confirmed that 10% tariffs on China, Mexico, and Canada will take effect on March 4th. Now, what's happened from there? The U.S. dollar has strengthened. The Chinese renminbi has weakened. And markets are starting to potentially price in lower growth. Because trade wars are multi-sided. Canada has vowed retaliation. They've planned $30 billion in counter-tariffs against the U.S. China...

Has it been as aggressive? They've warned that there will be no winners. They've said they will sue at the World Trade Organization. But one thing that I think is not as talked about, just given how it is not as imminent, is this reciprocal tariff issue, this plan that is still set to take place on March 2nd, raising fears of really global trade disruptions at a time that we are just starting to reset coming outside of the post-pandemic world. Now, as we've seen in the recent past,

A decision to input tariffs on a certain date doesn't necessarily mean it will go into place. But as countries are scrambling, as diplomatic missions are scrambling, it's important for us as investors to understand what the economic consequences may be and to adjust our portfolios accordingly. I'm Luke Guerrero. This completes another InvestTalk program. We thank you for listening and we encourage you to tell your friends and family members about our free podcast downloads.

Get yours anytime at iTunes, Google Play, and Spotify. And please be sure to leave us a rate and review while you're over there. Remember, we can help you better understand your risk number. We can help you better understand your portfolio dynamics. We can also help you optimize your 401k. It all starts at investtalk.com. Just hit the free portfolio review button. It is a free and confidential service. Independent thinking, shared success. This is InvestTalk. Good night.

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