Podcast (Dental)

How to Invest During a Pandemic and Post-Election Climate

December 2, 2020

Despite the tumultuous economy and market fluctuation throughout the COVID-19 pandemic, dentists should continue to strategically save money and diversify their investment options. This is especially true for those dentists in their prime earning years, where they can withstand more risk, outpace inflation and experience long-term investment growth.

In this episode of The Art of Dental Finance and Management podcast, Art speaks with James Davenport, MBA, Managing Director of Beacon Pointe Wealth Advisors. Art and James discuss what we’ve been seeing in the markets, how the pandemic and change in administration will likely affect them, and predictions on possible sectors that may perform well in 2021. James details what dentists in different age groups/life stages (25-35, 35-50 and over 50) should consider when investing. It is important to regularly meet with your financial planner/investment advisor for their expert guidance and to make sure your strategies are still viable.


Reach out to Art if you have any questions regarding dental finance and management for your dental practice. More information about the Eide Bailly dental team can be found at www.eidebailly.com/dentist


James Davnenport
James Davenport, MBA
Managing Director
Beacon Pointe Wealth Advisors


Show Notes and Resources

The Transcript

Art Wiederman, CPA And hello, everyone, and welcome to another edition of the Art of Dental Finance and Management with Art Wiederman, CPA. I'm your host Art Wiederman. Welcome to my podcast. Thank you for listening. And we're recording today on during Thanksgiving week the 23rd, first of all, very, by the time you hear this your Thanksgiving will be over. So I hope you had a really nice Thanksgiving and a good turkey and all the trimmings and hopefully everybody is staying safe. Very, very difficult time, but hopefully keep it fingers and toes crossed that we'll hopefully have some relief coming with some, you know, some just some relief coming in 2021 with some cures to this horrible, horrible COVID-19 virus.

So there is good news down the road. And while all of this has been going on, folks actually believe it or not, the stock market has been open for eight months since March the 16th, when our country basically shut down, it has not shut down. The stock market has not shut down. And today we're going to talk about where the investment markets are. I have my first, third time visitor to the podcast, my good friend Jim Davenport from Beacon Pointe Advisors.

Jim is a partner and a managing director at Beacon Pointe. Jim is going to talk about where the markets have come, where they're going, what they're doing. I mean, here's an example of the craziness of all of this. Right. OK, so if you look at. If you look at the markets here, let's just take a look at the beginning of where they were. At the beginning of this year, the Dow Jones Industrial Average started at 29,263 and everything was looking great. We were going to break 30,000. I think I might have mentioned on the podcast a while back that when I used to do a radio show in downtown Los Angeles on KRLA 1110, I interviewed a guy who wrote a book called Dow 36,000. Well, we're almost a Dow 30,000. So it was at 29,263 on March the 18th, it dropped down to 19,123. And on November 17th it reached its high as to where it was at 29,783.

Now remember the Dow Jones Industrial Average, the large cap stocks they're the 30 largest stocks. They are not in any way, shape or form what makes up the stock market. The Nasdaq, which is the tech stocks, started the year at 8,946. Then it hit on March 18th 6,904. So it was down over 2,000 points. And on November 17th, it is now peaked at 11,905. So the tech stocks have done really well. And the Russell 2000 Index started the year at 1,664, hit a low of 991 and is now back to 1,785. So look at the markets folks. The three of the main indices are actually up for the year with everything we've had going on.

So Jim is going to talk about all of that. You know what, what does GDP mean? What does the vaccine mean down the road? And we're going to talk to you guys, to the dentists about, you know, if you're 25 to 35, what should you be doing? 35 to 50 and over 50. What investment moves should you be making? So we'll get to Jim in a minute. Do a little business. I want to tell you about my wonderful partner, Decisions in Dentistry magazine. Go on to their website, www.DecisionsinDentistry.com. As I tell you every week, they've got great clinical content, a great advisory board of the who's who in clinical dentistry, great website, great CE courses.

Some of their CE courses are such courses as Improving Health with Digital Dentistry, Shared Decision Making and Evidence Based Dentistry and Managing Thermal Injury Following Endodontic Post Preparation. So these are just some of the courses you'll get very, very reasonably priced courses. Go to our partner www.DecisionsinDentistry.com, click on the box if you're looking for a complimentary 30-minute consultation from any one of us at the Academy of Dental CPAs, please check on that box and we'll get to you. We've done many of these and had a chance to talk to lots of nice folks across the country. I am I did not mention, by the way, I'm a director at Eide Bailly, dental director. And Eide Bailly is who I work for. And I'm very proud of that. And we're in Southern California, in Tustin.

And I also want to mention, if you're looking for a dental specific CPA, we got you covered. The Academy of Dental CPAs, the ADCPA works with over 10,000 dentists in our 24 member firms, of which my firm is one of them. Eide Bailly works with close to 800 dentists and go to our website at www.ADCPA.org.

A couple of announcements I want to share with you. If you are interested, send me an email at awiederman@EideBailly.com. And we are starting to do a year long series for six local dental societies across Southern California, and that's going to start on Wednesday evening, December 9th, with a tax planning and research and development credit update from myself and our team at Eide Bailly. So it's Wednesday, December 9th. Send me an email and we will get you the link to that webinar. Again Wednesday, December 9th. It will be 6:00 to 8:00 West Coast time, California time. And it will also be recorded on our website, if you can't make it.

Again, one quick update before we get to Mr. Davenport. I mentioned this in the last podcast we did and nothing has changed. I did talk to my friend Megan Mortimer from the ADA this morning, we texted a little bit about what was going on, and she sent an email that, as I mentioned, the PPP expenses are not deductible, according to the IRS. If you have a reasonable expectation of forgiveness, then you are not allowed, according to the IRS, to deduct these expenses on your 2020 tax returns. If you got 100,000 dollars in PPP money and you spent it on payroll and rent and utilities and interest, you technically at the moment cannot deduct them if you reasonably expect to get forgiveness in 2021, Megan sent an email to us at the Academy of Dental CPAs this morning, basically encouraging all of the CPAs and all the professionals to write your congressman.

I would encourage you to write your congressmen, your representatives, your senators, and tell them that when you went to borrow this PPP money, it was promised that the expenses would be deductible and that this is not right and that you would respectfully request that they pass legislation to do this. Will they do this before the end of the year? I don't know. I don't know what they're going to do. Megan doesn't know what they're going to do. I don't think they know what they're going to do. But we do hope and think that they will at some point, whether it be before the end of the year or after we have a new a new president and a new Congress installed sometime in January. We will see.

OK, with that said, I wanted to, I'd like to introduce my good friend, Mr. Jim Davenport. Jim is as I mentioned, Jim is a managing director and a partner at Beacon Pointe Advisors. Beacon Pointe is a national wealth management firm that manages just under 15 billion dollars. That's billion with a B, right, Jim?

James Davenport, MBA That's correct.

Art Wiederman, CPA Welcome to the Art of Dental Finance. So you manage a lot of money, right?

James Davenport, MBA The firm itself manages a lot of money and respectfully, I do, and my team manages quite a bit of money as well.

Art Wiederman, CPA OK, well, that's always a good thing. So, Jim, give us again, you know, you've been on, this is your third time. We haven't had a third timer before. But I bring you back because you're nice, you laugh at my jokes and you're smart. Those are the three reasons. If you ever fail those tests, you'll never come back on the podcast again. Just, you know. Right.

James Davenport, MBA And all of those statements are incredibly funny to begin with. Especially the smart comment.

Art Wiederman, CPA But anyway. That's right. Exactly right. So give us quickly again, a little bit of your background before we get into the topics.

James Davenport, MBA Yeah, great. Art, thank you so much for having me on again. It's an honor to be the first third timer. But our game being the stock market is really the only game in town that stayed open throughout the entire length of COVID-19. And so it's pretty important to talk about. It's created a lot of headlines. And so I do think we have some good things today to talk about.

A little background. But in the business for about a dozen years. I've learned a lot of the business through my father, who was a stockbroker here locally in Orange County for about 55 years. And so it's kind of been in my blood my entire life. I'm an undergraduate from USC and got my master's degree from the Argyros School of Business here at Chapman. So I am a Southern California boy through and through.

Art Wiederman, CPA My son Forrest got his degree from the Argyros School of Business at Chapman and it puts out some smart people and the USC Trojans at the moment are three and O. So that's a good thing too if you're a USC fan, right?

James Davenport, MBA It's been a wild year in sports. I happen to be a diehard Laker fan and a diehard Dodger. Dodgers is probably my favorite professional sports team. And so the fact that the Trojans are three an O in the same year, I just, I'm waiting to wake up.

Art Wiederman, CPA Exactly. Well, as I told the audience, my football team was undefeated since 1993. That's the Long Beach State University Forty Niners. And that's when our football program ended. So there you go. So, Jim, let's jump into our topic. We have a lot to talk about. And the markets are crazy. I mean, I guess I remember before Jim, I remember before 2000. And, you know, I think it was before 2001, before the horrible attacks of September 11, 2001. I just remember the markets moved because of business news. They moved because, you know, businesses were doing well, businesses were not doing well, corporate America was doing well. And then the terrorist attacks hit. And then they started, you know, news of terrorism. This affected the markets and then 2008 and just seemed like in the last 20 years that there's a lot of news that just doesn't have to do with the markets that move the markets.

So today we've got you know, we've got obviously COVID-19 is back on the forefront. Sadly, we have, I think the country went over 200,000 cases yesterday or the day before. 1500 people sadly losing their lives. Over 250,000 people who have lost their lives. And now we're coming to Thanksgiving and two million people traveling in the United States. So these numbers may go up before they go down and before we have a vaccine. How has this whole COVID thing affected the markets?

James Davenport, MBA Well, that's a great question, and I think there's a couple of questions, and in that first statement and the first thing, the craziness of the markets. You know, the stock market, if you took a snapshot in time of every time you were to stop and look at the market, I could give you 10 to 15 bullet points of really what could affect the markets, either on a bullish level or a bearish level, meaning there's always something going on. At one moment it's trade. The next minute it's an election. Now we're dealing with a virus.

You know, the market is always feels like it's in a little bit of a crazy time because it's tough to explain, you know, the economy and the levels of the economy is based in real time. So you're looking at things in real time. The stock market, on the other hand, is really a forward-looking prediction machine. So it's trying to predict really what's going to be happening six months from now. And so I think what the market's coming bouncing back or this V shape recovery the way it has a lot to do with the Fed flooding the market with liquidity. Interest rates are at its lowest they've ever been. People are leveraging and margining money like we've never seen, which is something I think later in the conversation we'll talk a little bit about our debt and what that means to the markets.

But, you know, it is a time in which people are willing to pay these multiples for especially these growth and tech stocks. And if they're willing to pay for it and they're going to borrow to do so, the markets continue to go higher.

Art Wiederman, CPA I was just going to say, can you explain to our listeners, because, again, I'm sure we've got some people that are very sophisticated listening and we probably have some folks that are maybe new to investing and new to the markets. So we hear about the fact that the Federal Reserve is flooding the market with money and they've been doing that for a while. What does that mean?

James Davenport, MBA Yes, so they are obviously they're printing, it's basically the printing machine is on and currently as we as we are talking today, I'm very confident in telling you that the debt level in this country is going to hit 30 trillion dollars. I think that's inevitable because I do think a stimulus, a fourth stage of stimulus is necessary. Now, when that stimulus happens is a good question. Does it happen, you know, before the Congress is seated, which is on January 3rd, is it during, you know, Donald Trump or a lame duck package? Does it come then? Or does it come after January 20th when the inauguration happens? But another stimulus is coming and debt is going to approach 30 trillion dollars. And so.

Art Wiederman, CPA I was going to say so when they go ahead and do this, when they pass this, whether it be in November and December, probably not going to happen November and December or January or when everybody is seated in a new Congress and a new president has been inaugurated. I mean, that's probably going to drive the markets up, isn't it?

James Davenport, MBA Yeah. The sooner, listen, the sooner that that stimulus comes, the better. It is much easier to keep businesses going than it is to restart them. So if you have to close businesses and then restart them, they call that economic scarring. It's really costly way to continue productivity. And so the sooner we see that stimulus, I believe the better off these businesses will be as the businesses will just be able to just make it through this period of time before everyone is able to go back to work. Everyone is able to go back to their favorite restaurants, fly on their favorite airlines, go to their favorite hotels. The stimulus needs to come through. And the timing of that, your guess is as good as mine.

Art Wiederman, CPA Yeah, well, and I think if you if you polled one hundred people, you would probably get 100 different answers.

James Davenport, MBA And unfortunately, you know, sorry to interrupt, but unfortunately, the stimulus has become a little too political. Politics have gotten involved in what should have already taken place. Because there is a lot, both sides want to throw different things on that bill. We all know that bill needs to be passed, but the term is pork. I wish we could just put aside those kinds of games for the benefit, I think, of the overall economy and small business.

Art Wiederman, CPA No, I agree. And we're not we're not getting into politics on this program. We'll let other podcasters do that for us.

James Davenport, MBA I appreciate that.

Art Wiederman, CPA So Gross Domestic Product. And that's the as I understand it, the last I checked is that the sum of all the goods and services produced in this country, they declined the GDP declined 31.4 percent in the second quarter of this year for obvious reasons. We shut the country down and then it rebounded 33.1 percent in the third quarter. And the fourth quarter is probably not looking, like here in Los Angeles County and every state is doing this, Jim. So like in Los Angeles County, if the number of COVID cases reaches an average over, it's either four or five days, of 4,500, and then right now it's about 4,000, they will literally shut down Los Angeles County for everything except essential services. So you know, what is the fourth quarter looking like? Are we in for a tough winter in these markets or is it just kind of, you know, lock in your seatbelt, get on the roller coaster and start riding?

James Davenport, MBA Yeah, this this might be a little different than maybe what you're hearing, and I'm going to tell you, I don't. I think, like I mentioned earlier about it being a prediction machine, I think the markets are already looking forward. And the uptick that we've seen in the markets have a lot to do with the possibility of a vaccine.

So as we look at vaccines, I think it's important to pay attention. Three weeks ago, we saw Pfizer come out on a Monday and say that their vaccine is 70 percent to 90 percent. Then the following Monday, we had Moderna come out and announce to the markets, responded both of those Mondays dramatically to the upside. And then today we've had a third now AstraZeneca and the markets rebounded, and was up over a percent, almost a percent and a quarter of the Dow today. And so the markets are reacting much and are much more focused on a vaccine. The vaccine is a game changer.

And so when you talk about GDP, although it feels like you just mentioned down 31 percent and then back up 33, you know, the law numbers, if something goes down 30 percent in order for it to get back to even, it's got to be up 40, 45 percent. So we're still not we're not quite there. And unemployment is still dramatically low numbers. But as this good news starts to come about the vaccine and you see stories on 60 Minutes and others about, you know, the real challenge is getting the vaccines into people. Right. It's getting the supply chain, getting it from the manufacturer, actually getting it into the arms of the people, because as we currently sit today, about 58 percent of people that are polled are willing to take the vaccine, while 42 percent are still very concerned or considering not even taking that.

And in order to create herd immunity to COVID-19, you've got to get close to about 70 percent of the people to take the actual vaccine. So that's really where that issue is going to be coming. So every time you hear good news or you hear positive results from these major companies, some of the smartest minds in the world are working on these things because we realize that timing is everything. Again, I mentioned it's easier to keep businesses going than it is to restart them. If we can just get them to hang on long enough for this vaccine to come in, to be to work and not only work, but make people believe that it's safe enough to take. That's when, that's why you see the markets and that's why the markets are justified at these levels.

Art Wiederman, CPA Well, I think that what's going to happen is that you're going to see the messaging change and again, not getting into Republican versus Democrat. I think the messaging from the Biden administration is going to be more of a federal response. That's what they're talking about. They put a whole task force together and they're basically going to tell the American people, the science says, that this vaccine is safe. There's going to be a fourth one, by the way. Johnson and Johnson is going to come out with theirs in the next couple of weeks, I think. And I think there's will be available in the first quarter of 2021. So, you know, the messaging will be different and I think you'll see more people taking it. And that's going to help the markets because the economy, Jim, was really doing well before March the 16th, wasn't it?

James Davenport, MBA It was historically well. Unemployment across the board of any gender, race was down, the markets were soaring at a very good pace. We were, you know, we got through I think we handled coronavirus actually very well in the fact that, and I'm not talking about again, we're not getting political. So I'm not talking about masks and social distancing. What I'm talking about is the banks were much healthier before coronavirus than when we had the housing crisis or the tech bubble in 2000, 2001 or the housing in 2008. We were prepared for something like this. If you remember, in 2008 when the market fell, it basically fell for almost a year. It was almost 12 months from peak to trough.

The peak to trough for coronavirus, Art, was 19 trading days. So the peak was February 19th, which happens to be my birthday. And it bottomed on March 23, 19 trading days with the extent of the fall. And the reason was the Fed acted and acted quickly and we got money into people's hands to pay their bills. We got money to pay for some folks not to be let go, even though there was a lot of unemployment happening. And so to your point, Art, we believe that we reacted or we were in a good place to start, which benefited us in reacting to this disaster.  If we were in a bad place and the banks were in real trouble, I don't know where we would be today. So we were lucky enough. I think 2008 was well, I think we learned a lot from it. And we saw that in our reaction how quickly the Fed reacted to this situation.

Art Wiederman, CPA Now, this is interesting. I read this about an hour ago. Again, that's why we date stamp these podcasts Jim because stuff happens. I don't know if you've heard this yet, but it looks like according to the Internet that President Elect Biden is going to appoint the former chair, the chairperson of the Federal Reserve, Janet Yellen, as his treasury secretary. Did you hear that?

James Davenport, MBA You know, Art, I'm lucky enough to work with a good friend of yours. That's how we met. A gentleman named Mark Moehlman, he's a partner of mine of seven or eight years. And he is like a walking Twitter account. And when he hears news like that, he is at my door to make sure that I'm aware of it and ask my opinion for some reason.

But yeah, he made me aware of that a couple hours ago. We both had a quick conversation about it. We do believe, you know, in the last couple of minutes of the market, it rallied slightly because I think of that news. I think she's a known commodity. The markets are well aware of Janet Yellen. So it's again, remember, markets love certainty. We've talked about that in our previous podcast and the certainty of Janet Yellen. She's actually you know, she's pretty she's big on easing. She's big on getting money circulating in the markets. I would tell you that bodes well for maybe a larger stimulus package. We'll see. But I did see that. I did see that announcement today.

Art Wiederman, CPA So and as long as we're talking about Biden administration, how do you think the markets will react when in the first, second, third week, because I guess I think they inaugurate, they basically they install the new Congress and the Senate, the House and the Senate. I think it's the first week of January. Then obviously, the president is inaugurated on the 20th of January.

So how do you see, again, it's going to be a very much of a different atmosphere in Washington. How do you see the markets reacting once the new government is installed?

James Davenport, MBA Yeah, so I think that's a great question. And I was honestly in these last two or three weeks since the election is where I was most concerned. At Beacon Pointe, we like to think of policy over politics. And it sounds like you're in kind of the same camp, so we're trying to follow what policies will come into play. Let's just talk about the good news. The markets didn't fall off a cliff like some of the pundits on television said it would if Biden were to win the presidency or if Trump were to not concede right away and go the legal path. And the markets have actually held up very well. And I honestly believe it's because of one thing, and that is a divided government is good for markets. So my late father always said that the markets are always bigger than one man or woman. The president doesn't always make whether or not markets go up or down, but the ones that pass the bills like the Senate and Congress that's really what determines whether or not there is going to be certainty or less uncertainty per se in the markets.

And so with the House staying Democrat, the Republicans picked up a few seats. But we currently sit with a Senate of 50 Republicans, 48 Democrats with an election on January 5th in Georgia for two seats in which the market is telling you, just as we're sitting here today. And I told you, it's a forecasting machine. It's telling you that a Republican is going to win one of those seats. And it's right now odds favored to win both of those seats. And so with that said, we've got ourselves a divided government, which means that the administration will have less ability to maybe roll through a very progressive agenda. The tax hikes that might have been coming might be substantially less or nonexistent. And so those types of things, when we look at policies and the market, I think it's so far been a good thing. And so we've actually had a pretty good market since November 8th.

Art Wiederman, CPA So let's get into what people should be doing, Jim, and we'll talk about the debt in a second. But I mean, everybody's listening to, whoever's listening to this podcast, OK, so, Jim, what do we do? Do we panic? What do we do? I mean, talk about how an investor, how a dentist should be thinking about their investments. I mean, we have the most crazy year that any of us can remember in our lifetimes. The markets are actually up a little bit because, again, they're looking at a strong economy. We've had a one year, I'm not going to call it a blip. I mean, it was an avalanche. But, you know, once we have a vaccine that is working and that the vast majority of the American public trusts and takes, everybody will go back to work. People will start living their lives and traveling and getting on airplanes and the economy will start flourishing again.

So but what do you tell people, what are you telling your clients right now? Are they worried? Are they calm? Are they drinking heavily? I mean, what are they doing?

James Davenport, MBA Good question. It's very important at this very moment to be communicating with clients, giving them the information that we know in order to keep them calm as well about their money. I will say leading up to the election, we saw some clients that maybe we took a little more conservative approach and changed the allocation a little bit. And now since the election, I've had nothing but calls with clients that feel like they see a little more clarity. Now with the election behind us and kind of coming to the realization that we're going to have to live with coronavirus rather than trying to completely control it. And so it's actually now going the other way. We have some clients who took a conservative approach and are now asking, OK, I'm ready to kind of go back to maybe what my objectives were and the returns that I'm looking for over the next 10 years.

And we're starting to expand a little bit more into large cap stocks and fixed income, both on the municipal side and the corporate side and private credit. So to answer your question, everybody's different. There's not a boilerplate for anybody. But at the same time, I would say that some of the nerves that we had going into what was maybe the most heated election and the arguably the craziest year since I've been alive when it comes to headlines and politics. So, yeah, we're, each person is a little different. But I'm telling everybody we're going to survive. We've done it. We've lived through the Great Depression, the Great Recession, and now we've survived President Trump and possibly President Biden. And we're still going in the right direction.

Art Wiederman, CPA Because the markets believe that the fundamentals are strong, the economy is strong, and that we're going to get back to closer to the what were we at three? What was the unemployment that got as low as what, three, three and a half percent? I think it was.

James Davenport, MBA Yeah, it was. Yeah, three and a half to four.

Art Wiederman, CPA Yeah, three and a half to four. So let's talk about some of the different. Jim, let's talk about some of the different sectors out there. I mean, you've got people that are investing. Let's talk about the markets. Now. We'll be real clear. Jim is not going to tell you which stock to invest in today or which mutual fund to invest in. But we're going to talk just in general terms. In the stock market, you've got, you know, large cap, medium cap, small cap. In the stock market, where do you see the sectors? What do you like? What are you worried about? What are you thinking?

James Davenport, MBA Yeah, so this year is historic in a couple of different ways, but one way is it's a tale of really two stories, right? You've got the growth sector of the market and the value sector of the market. And over two hundred years in the S&P 500, the Warren Buffett value investing, collecting dividends has been incredibly profitable and beneficial to those that were holding valued companies. But over the last five years especially, but really 10 years, growth stocks have been the story. And that story has never been so dramatic as this year.

You know, currently and these are round numbers, but the growth index, we're talking large cap stocks right now. The growth index is up 30 percent, while the value index, the deep value index is down three. So if you think about that disparity, that 33 percent disparity between growth and value, I've never seen it in my career and neither have a few of my partners that have been in it for a few more decades than I have, have seen a market that looks like that. So you've got all the tech names and you're in Apple and Amazon and Facebook and all those great ones, you're having an unbelievable year in the stock market.

But if you own the deep value airlines, Rietz, you know, the oils like Chevron and those kinds of companies, Disneyland, which has had a nice rally recently, and they were really rescued by the streaming service that they now have the Disney Plus. But if your company involves large groups of people coming together to produce topline revenue, it's been a really difficult year. It's been a choppy year. It's been it's been a tough year. And dividend paying stocks have not had that type of year of growth stocks.

And the reason for that would be think about those growth stocks. A lot of them have to do with financial technologies, the Internet, building stores online like Shopify, getting them out to your customers like Twilio. But we I mean, we're going cashless very quickly. So you're looking at companies like MasterCard and Visa and then you start getting into the PayPal and the Squares and these companies are doing fabulous. This is actually accentuating their abilities to grow because people are looking at screens now more than they ever have before. And so it's a tale of two markets. So what do I think? Do I think we bail value and chase the growth? I do not.

Do I think now that growth is run, we rebalance and put everything back into value? I wouldn't say that either. And the reason being is I hope that all of your listeners have gotten the advice over time to diversify your monies so that you have both growth stocks as well as value stocks. We do think that there is some good, this is going to sound funny, some good value in value stocks. I wouldn't say to leave those, but every time this new wave of corona virus, the longer it takes for the vaccine to come out, those growth stocks are going to continue to put up big returns and big earnings as we see in the near future.

Art Wiederman, CPA But it really does come down to pick a course of action. Take away, now, I know you guys have more of a conservative approach and diversifying and working with money managers. And I know, folks, there's different ways you can invest. You can pick stocks, you can individually pick stocks and just say, I'm going to follow these 20 stocks and these are the ones we'll go in and out of them and we're going to follow them. Or you can hire, and this is what this is what Beacon Pointe does. As I understand it, Jim, as you guys work with top money managers in different sectors, is that right?

James Davenport, MBA That's correct. We separately manage accounts for our stocks and bond managers and alternative.

Art Wiederman, CPA Right. So it's just a matter of basically diversification, which is what people will tell you and have told you for a 100 different years. So before we keep going, because I got a lot more I want to talk to you about. Jim, I'd like you to give out your contact information. If anybody has any questions about anything in the investing world, Jim is a really good resource. And Jim, you also mentioned that there's a podcast that Beacon Pointe puts out every so often about keeping up with what's going on in the markets. Tell us a little bit about that, too.

James Davenport, MBA Yeah, thanks for mentioning that Art. I'll hit that first. Yeah. Our Chief Investment Officer, Michael Dow, who has joined the firm a little over three years ago, has been an incredible asset to our firm and in the form of leadership and helping our company have a voice when it comes to opinions in the market, because that's what it's about. It's try to find the best way to navigate our clients through the volatility of the markets and so really finding out which motion to take and lead our clients that way.

And he's got a podcast that Beacon Pointe has founded. It's led by Michael. And he posts about every two weeks on it. And it's called Markets in Motion. So it's Beacon Pointe podcast. If you go on to your Apple podcast or wherever you get your podcast and look up Markets in Motion with Michael Dow. I think you will learn a lot. And they are about anywhere between 10 and 15 minutes long, but they are full of good information. They cover specific topics that he outlines at the beginning. And I would suggest all your listeners, if they have a chance, they want to know about the election, if they want to learn about the economy, if they want to learn about interest rates. It's a great place for good information from a guy much smarter than myself.

My information, if you want to reach out to me, my phone number, my office is here in Orange County in Fashion Island. But we've also got an office in Riverside as well as Fresno. So if you're in any of those places and you want to stop by our offices, you can reach out to me and give me a call. My phone number is 949.720.9980. And if you want to send me an email or have any questions after this podcast, my email address is jdavenport@BeaconPointe.com and Beacon Pointe has an E at the end of point, beaconpointe.com

Art Wiederman, CPA And I'll make sure that I put the information about Markets in Motion with Michael Dow into the show notes. So for those of you who get our emails and subscribe, you'll get that information also. I'll tell you one thing, Jim, that really scares the you know what out of me. There's two types of podcasts, those that use bad words and those that don't. In 102 podcasts I have not used a bad word yet and I'm not going to start today. But the debt scares me. You mentioned earlier that we're going to be at or close to with the next stimulus package, 30 trillion dollars of debt. That is such a staggering number.

I tell the story about I remember when Ronald Reagan was elected president of the United States and took office in January of 1981, our national debt was 900 billion dollars. So our national debt will have grown 29 trillion dollars in about 40 years. So, you know, at some point, every economy I mean, we've seen it in Greece, we've seen it in other countries across Europe with the EU and all this kind of stuff. At some point there's an amount of debt that the United States economy is going to have where people are going to say, wait a minute. 

Give us a preview, because nobody in Washington, this really bothers me. Nobody in Washington talks about the debt. They never, ever talk about the debt. Never, ever, ever. So where do you see this going? What happens in, you know, two years, five years, 10 years? How much time do we have until we're really going to have to address this?

James Davenport, MBA Yeah, I mean, the debt is kind of the new story of the next investment cycle, so the next, I think the next big story everybody is going to be talking about is once the smoke clears and then the printing press machines are exhausted and out of ink, these huge debt levels will become the story again. So it's, I think it's a good topic to talk about.

You know, the first thing I can tell you about the debt is, I think about how we as a country are able to service the debt that we are growing. So the servicing of the debt is the problem. So we would love to increase interest rates, but we really can't. We can't increase interest rates because then we can't afford our own problems and our own debt. We tried to do it in 2018. Powell, good luck. Tried to do it and in the fourth quarter the market just started falling like a sailing stone until we stopped and started lowering rates again.

And so, you know, financial repression is when interest rates stay very low. We work to keep interest rates low while we try to make inflation a little bit hot. So we try to kind of increase inflation to a much higher level. So therefore, we're actually gaining a little bit of dollars that we are paying off that debt in turn. And so we do believe this type of strategy that Powell and the Fed are doing will continue. I'm hearing a few more folks talk about they believe interest rates are going higher, but it is very, very difficult for us as a firm to believe that we'd be able to pay for that debt if interest rates were to go any bit higher. So that's really the story. You know, tell me what interest rates and inflation levels are in the future and I'll tell you exactly where to invest. So that's the next story of the investment cycle.

Art Wiederman, CPA I mean, it's a math problem. I mean, if you have 30 trillion dollars of debt. And right now, I think, Jim, the average debt interest, the interest rate on our debt is somewhere in the one to one and a half percent. Is that about right?

James Davenport, MBA Yes.

Art Wiederman, CPA OK, so right now you've got 25 trillion dollars of debt and, you know, one and a half percent is 425 billion dollars. And I think we bring in revenues in our country somewhere between two and three trillion dollars. It just depends on the year. It's down this year because obviously businesses are not making as much money and they're not paying as much in taxes and we reduced the corporate tax and the personal tax rate. So there's all that happening.

So now if we go to 30 trillion and interest rates go to, let's say they go to three percent. OK, that's 900 billion dollars. And now you're talking about 30 to 40 percent of our budget is going just to pay the interest, not the principal, the interest on this. But it is kind of scary for me. But do you see this debt becoming an issue in 2021, 2022? I mean, is there a number that the folks at Beacon Pointe talk about and say once we get to number X, we should really start reevaluating what's going to go on?

James Davenport, MBA Yeah, I think the issue has already started and we're already concerned about it, and the reason being is there's really no interest to be paid on savings. Currently, anybody listening to this podcast or any of our clients that are sitting on cash and cash alone are losing purchasing power and they're losing it quickly. So the larger that our debt grows, the more money that we have to we have to put forth to pay or service that debt. You're seeing negative real interest yields and that is causing a loss of purchasing power.

I tell some of my clients and maybe I tell them before lunch when I'm hungry, but if an In and Out, burger costs you five dollars today and in a much shorter period of time. And we all know In and Out Burger doesn't like to increase their prices, but they have to. They're doing it at a quicker pace. And so if you've got five dollars in your savings account now, you can afford an In and Out burger. But if it's sitting there collecting no yield or no interest on that five dollars, pretty soon it won't be long before a Double Double at In and Out now costs 5.25 and you no longer have the ability to purchase that burger.

So what does that mean people have to do? Does that mean they have to throw their money in the stock market to earn dividends or growth of the markets? Does that mean that they have to put their money into bonds that are yielding at least that of inflation or cost of goods? The problem is, as folks begin to start chasing yields and we start to chase yields, that means we're going out on the spectrum, the investment grade spectrum, and taking on much greater risks.

And so where the damage of this huge debt becomes is folks will start going outside of maybe what is their risk tolerance in order to keep up with their lifestyle or their spending. So I know I went like six stages outside of what the high debt means. I went way out there. But we can all relate to that because it's not the easiest thing at the moment. And I do it for a living. And that's putting cash to work and markets in which valuations on stocks are so high. The bond market has been bullish for the last 40 years. So where really do we put money? And if we want to keep up with inflation cost of goods, do we have to go out and take much greater risk than we really should be?

Art Wiederman, CPA Well, I honestly think the answer is, is that if the cost of an In and Out burger goes from five dollars to 5.25, you tell the person making the burger that you don't want pickles, tomatoes or ketchup, and that will keep it at five dollars and solve your problem, right?

James Davenport, MBA No, because In and Out doesn't charge extra for any kind of toppings. I'm an In and Out expert.

Art Wiederman, CPA You're supposed to play along with me remember?

James Davenport, MBA I don't want to create any false rumors about In and Out burger. Hey, I will tell you, Art they just opened two In and Out burgers. I knew your podcast today the theme was going to be In and Out burgers and anybody listening now is probably turning their car and heading for one now, but they opened two new In and Out burgers this weekend in Colorado, one in Aurora and one just outside of Denver. The lines to get a hamburger. Folks waited 14 hours to get an In and Out burger in Colorado. And the sad thing Art, I kind of relate.

You know, a quick shout out to my older brother. He's a Lieutenant Colonel in the Air Force and he flies F-16s and he served in Iraq twice, two very long tours. And when he got home and flew into LAX, you would think he'd want to see his mother, who's been worried about him or his brothers or his father who have been worried sick about him. He is beelining straight from the airport to an In and Out burger before he even calls any of us to tell us that he's down safe. He's finished a Double Double or two. So you know what he's thinking about when he's not in the country.

Art Wiederman, CPA Well, again, thank you. Please thank your brother for his service to our country. That's a wonderful, wonderful thing. I want to spend the rest of the time we have. I want to talk about where do you see, I mean, what are you and your investment committees and you're thinking, do you see yourself going more towards stocks, more towards bonds, more towards international investing? I mean, where do you see the opportunities in 2021, given what we know today, November 23, which could be different tomorrow, November 24th?

James Davenport, MBA So the answer to the question about taking on or something to solve the question about taking on more risk is looking at private credit. I think if you are willing to give up a little liquidity for some access to some of the private markets, because the private markets and private equity is really a place that you can put your money in, which can keep not only keep up, but bring you returns in the mid fours, fives and even up to eight if you are, have the ability to look long term and be able to lose a little bit of liquidity. So that's a great place I think currently for money. Gold over this last year has been a nice place for folks to have money not sitting in cash, but gold has no income to it. Gold fluctuates and has, you know, 15-year kind of lull before it has these great bull runs. And so gold is another place.

And then finally, we do like large cap, both dividend paying stocks and we like growth stocks. So we like having a little and both. And I know that sounds like a lot of different answers. I kind of gave you the order in which new money is being put to work, being private credit, gold and then large cap stocks. But, you know, some of these big companies, they've got a lot of cash on their balance sheets, including things like Apple and Microsoft. I'm not saying invest in those, but I know what kind of cash they're sitting on. And so some of those companies, their dividends are not in any kind of danger. And to be collecting a little bit of cash and reinvesting that cash while you're waiting for the markets to improve, that's a good place to have your money.

Art Wiederman, CPA That's great advice, Jim. I want to I want to touch on the different ages that my dentists who are listening to this podcast are at. So let's talk to dentists who are 25 to 35 years old. They're just getting started. They're listening to this podcast. We want to motivate you to start saving money, save early. I know you've got student loan debt. I know your payments are 2,000, 3,000, 3,500 a month. I know they're you know, the mountain looks high to climb. I know it's scary times, but get in the habit of saving money.

So for my younger dentists, who either just maybe starting to, maybe they're going to put their first five or 10,000 dollars away in an IRA, or maybe they're going to start a simple IRA in their new dental practice. What do we tell to new investors who are just getting started? I know it depends on their risk tolerance and everything. But what do you tell the younger people that you're advising, Jim?

James Davenport, MBA Yeah, and you talk about risk tolerance, but this is really the part of that would be the time horizon. So now we're talking about ages between the ages of 25 and 35. And the discipline to save money is one thing. And that, you know, I applaud anyone that has that discipline to take some of your income and set it aside for later time in your life. But here's the challenge that I will challenge all of your listeners and anybody that cares. And the challenge becomes you need to have your money working for you.

And when you're 25 and 35, you have the ability to take on types of risk that you're not going to be able to have when you actually have more money. That's the hope, right? When you're older, you have more money. So when you're starting, not only do you just want to put that money aside, say, in an account at Charles Schwab or Fidelity or some of these accounts that don't charge you anything for an account and then trades for ETFs and stocks are free. There's no commissions to any of those. And by the way, I don't work for either of those companies, but I just threw them out because I'm very familiar with both Fidelity and Charles Schwab. And so putting some money away in there and then getting that money working for you is the best advice I've ever received, because you have the scarce commodity of time.

Time is really the magic bean to growing your money. So if you can start early and you can start compounding and you can start not paying taxes in say an IRA. Or if you make under a certain amount of money, you can start a Roth IRA where you're compounding that money year in and year out without having to pay any taxes while it's invested. Really the smartest way for a 25 to 35 year old to get started. And don't be afraid to take on some risks, and especially if it's in a retirement account, you can't touch that money until you're 59 1/2 without penalty anyway. So unless you're going to take that money and use it, just pay attention to something else while the markets recover, because they always do.

Art Wiederman, CPA All right, let's talk to my doctors who are in mid-career, 35 to 50 years old they're out there. They've been in practice maybe five to 20 years. Their practices are doing well. Let's put 2020 behind us because we know that nobody did great in 2020. But the dental profession has been very resilient. It's come back significantly. So I got my doctors who are 35 to 50. They're just starting, Jim, they're just starting families or they've got young children. They're planning for college. They're buying their first house or maybe their second house. So how do you talk to somebody in mid-career, 35 to 50 about investments?

James Davenport, MBA Yeah. So usually this is a prime earning years of your life, right? When you're reaching close to 40 until you're about 55, 60 is really some prime earning years. And so you are taking on some new expenses like college tuition or a new home. But you really want to try to avoid purchasing things. You want to be buying assets, things that will be appreciating. So things like homes is good, as well as putting some money aside, if you can, again, to your retirement, opening things like a profit sharing or a pension plan, things that once you reach are out of those times. And I'm sure you're going to ask me that question next. You are building a substantial pot of wealth so that once you do get towards retirement or into retirement, you don't have to really radically change your lifestyle and you'll have something there to help suffice the loss of the salary that you have currently. So if we can get rid of debt, if we can start paying off our debts. Remember, we're purchasing assets, not things. And then we're also, if there's any money left, we are putting some of that aside for later in life and retirement.

Art Wiederman, CPA And folks. Let me just share this with you again. My philosophy is you can invest in different things. You've got many different food groups. You've got stocks and bonds. You get real estate. I personally have, I mean, I've owned my own home since the age of about 27, I think it was, or 28. And I think it's a great thing to do. I've never been one to buy multiple properties. Maybe I should have. I don't know, I haven't had the time to manage it or invest it. I put most of my money in the stock market and the stock market since 1920 has had an average return, Jim, of six to eight, six to nine percent. That's been you know, it's been up and down, but it's been very, very consistent for 100 years. Right?

James Davenport, MBA Correct.

Art Wiederman, CPA So if you look at this, folks, start saving money, get in the habit, don't go out and take the next 10,000 dollars and put it down on a 100,000 dollar on automobile to make you feel good because you're going to get to the point when you're 50, 55, 60 where maybe your arm starts to hurt or maybe your back starts to hurt and you get tired of doing what you're doing, ok.

I mean maybe you've done it for 30, 35 years and you don't want to do it anymore and you want to be able to go to work because you want to. But if you don't want to, you want to be able to not go to work. And the best way to do that is to start saving. Make it a bill every single month. Please think of me as the little angel on your shoulder telling you to please, please do this. And, you know, people like Jim can help you do that.

So let's get to the over 50 year old doctor who's in the, I mean, he or she is in the prime of it. I mean, they've been practicing 20, 25 years. They're at the top of their game.  Clinically, they're as good as it gets. They built a practice and now they've got another maybe 10, 15 years left to go. What do we look at for them as far as philosophy of how you teach them how to invest?

James Davenport, MBA Yeah, so, you know, Art, that's really the target market for our group. We are very good at helping folks really realize what they've accumulated and then really look at what's the next steps and what does it look like going forward. And so in the fear of sounding a little self-serving, as you get to that age, I would highly recommend you find an investment professional or an advisor that can give you some good advice on what to do with that money that you've saved. So you talked about it, Art, and I applaud you telling all of your listeners how important it is to save money.

And I will tell you, with zero interest rates now, it's not, that's the first step of it. You need to save money, but you also need to get that money working for you or you will not be able to afford that burger once inflation. Once that burger now costs five dollars and twenty five cents and you've got five dollars. Super important to get working and get that money working for you while you're doing other things like spending time with your family and traveling when we can do that again and everything else that, all of the different hobbies and things you want to do in retirement.

So I think it's important to find somebody who can help take the emotion out of the decision making, because once you've saved all that money over the years, you get this instinctual fear of, well, I now have to keep this money and I could run out of this money and how do I invest this money? And I would tell you, finding a professional who can give you good sound advice, who can understand what your objectives are and what risks you're willing to take and then get your money invested in a very smart way. That's probably the best advice I could give somebody. I'm not just saying, I'm not the only guy in town that does it. There are many out there who are really good at it.

I would suggest finding a fiduciary, not suitability. So I'd look for a group that is professional at giving great advice, not selling products. So stay away from the product sellers. Get with the good advice people who are going to help you navigate and it help you take the emotion out of the market so that between February 19th and March 23 of this year, you don't panic and sell all of your good bonds, all of your good investment grade, your Microsoft stock, when you just clear out of everything because you're scared, you start getting rid of a lot of good stuff. And that stuff from the bottom to today, it's up 60 percent.

So if you sold and on March 23rd because you were scared and you weren't secure or too afraid of where the markets were going, you missed out on 60 percent in the S&P 500. So just to keep in mind, it's an emotional, behind your health, your doctor. And then I would say, honestly, Art, here's a plug, your CPA, right? You listen to your CPA, he gives you great advice on how to save money, not put yourself in any kind of risks. And then third, you're talking to an investment advisor who's going to give you some great advice on how to invest that money.

Art Wiederman, CPA And my doctors who are conservative and many dentists are conservative. And I love my conservative dentists that I talk to all the time where they just save the money and they're not looking for 20 percent return. They're not looking for the next home run. And this, you know, slow and steady wins the race is going to get you to the finish line. It's the doctors out there who just, you know, they can't keep 10,000 dollars in their pocket. They've got to go take a trip. They've got to go buy a car. They got to go buy something else. They've got to do this and they don't save and. Oh, well, it'll be OK. And well, you know guys, my legacy is I've told you before, is I want all my doctors that I work with to have the financial ability to retire when you want to at the level that you want to. And it's hard.

And the fact is, is that regardless of whether we're in a booming economy or a pandemic, the investment markets are very, while they're not predictable, we know what they do and people like Jim know what they do. So, Jim, I'm going to ask you one more time, because we're just about out of time. This does go by, you know, really, really quickly, more quickly than I would wish it would. But give out, again, the name of the podcast that people can listen to, which again, will put the show notes and how they can get a hold of you.

James Davenport, MBA The podcast is called Markets in Motion. So Markets in Motion. It's wherever you get your podcast, Apple podcast, Michael Dow. It's terrific information that I think everyone on here for 10 minutes of your morning drive with your coffee every two weeks, I think you'll learn something.

And then my information, my email address is jdavenport@BeaconPointe.com. And my office phone number is 949.720.9980. And I'll just leave you what this is. I'm a financial resource. It's what I love to do. And if I don't have the answers, which I don't have a ton, I know a lot of good people that do, including a good tax advisor and Mr. Art Wiederman, but gentlemen like that that I can refer you to. So if you have any questions, we are in the lucky business of not charging by the hour over here at Beacon Pointe. So I am available to talk about markets or talk about your financial situation or help you plan with any of the investing that you have in your portfolio. So thanks again, Art.

Art Wiederman, CPA And Jim, also, as a side note, will be able to advise you whether to go to In and Out or McDonald's or Burger King or Wendy's or whatever you need for your favorite burger. Absolutely. Jim, thanks a lot. Hang on. Before we're done here, I'm going to sign off in a minute here with some information for my listeners.

Again, everybody, thank you so much for listening. I hope this information is valuable to you. You should listen to these podcasts, you know, learn as much as you can about this, because nobody's going to care more about your money than you are.

And so if you need to get a hold of me in my office in Tustin, my number is 657.279.3243. My email is a awiederman@EideBailly.com.

Again, if you want me to, if you want to register for our webinar on December the 9th, which is going to be on taxes and the research and development tax credit for six local dental societies here in Southern California, email me at awiederman@EideBailly.com.

Please listen to our partner Decisions in Dentistry magazine. Well, not listen to them, go to their website at www.DecisionsinDentistry.com. They've got great clinical content and great continuing education courses. If you are not working with a dental specific CPA, please go to our website, that is www.ADCPA.org. That's the Academy of Dental CPAs. 24 CPA firms across the United States that represent over 9,000. I'm sorry, I keep saying that, we're now over 10,000 dentists.

Again, my firm is in Southern California. We work with at Eide Bailly, about seven to 800 dentists in our firm, firm wide. So, again, ladies and gentlemen, thank you for the privilege of your time. Hopefully the information is going to be helpful to you. We've got some great, great guests coming up on some different topics in the near future. We will be taking Christmas week off, as I do every year. But now that we've gone past the 100 podcast mark, we're really excited about 2021. I think it's going to be a great year for everyone.

So with that being said, ladies and gentlemen, tell your friends about our podcast. Please subscribe on your iPhone or your Android and please keep listening because we're going to keep bringing this great information to you. So for today, this is Art Wiederman. This has been the Art of Dental Finance and Management with Art Wiederman, CPA. Thank you for listening and we'll see you next time. Bye bye.