Jackie Hendry: The most recent jobs report seemed to give the stock market a shot of optimism after tanking in the early days of the COVID-19 pandemic in the US, but things are still pretty bleak. And to be honest, I'm as confused as most people. Luckily, Rick Kahler is here to help us out. He's the founder and president of the Kahler Financial Group, and a leader in the field of financial therapy. He's also the author of several financial books, including 2009's Wired for Wealth. Rick Kahler, welcome back to In The Moment. Thanks for being here.
Rick Kahler: Thank you, Jackie. I'm chuckling because I'm here to help shine the light on what's going on.
Jackie Hendry: Thank goodness. Please help me.
Rick Kahler: I hate to disappoint you, but sometimes nobody knows what's going on.
Jackie Hendry: Well, that makes me feel a strange sort of better. I want to start with unemployment, Rick, because I've been seeing for the last month, or probably more, that the actual percentage of unemployed people in the country is probably closer to 20%, and you referenced that in your recent column. The number reported late last week was something like 13.6%, which is still high unemployment, but not as bad as earlier this year. So folks got excited, the stock market jumps. But I'm still confused on how so many people are coming up with such different numbers of unemployment. Talk me through that first.
Rick Kahler: You'll be just as confused when I get done. I write a weekly column and it's so dangerous during these times, because what was true on Friday when I write the column and record it, can not be true on Monday. [crosstalk 00:01:57]. So, the thinking was, when you do the math, the unemployment looked like it was certainly somewhere between 205 and 25%, so I thought I was being conservative at 20%. So what happens, I think it was 14.6%, 14.8%. It goes down to 13.6% last week. It just baffles everybody. I haven't listened to a talking head that wasn't confused by this or surprised. And in preparation for this, so I could bring you the definitive law, here's what's going on. I listened to a number of shows and read a lot of things over the weekend. And everybody's confused.
I especially enjoyed listening to the ex-head of a very large mutual fund company. Very smart guy. And he says, "I have no clue exactly what's going on." And what the person said was, "We think what we got was a data head fake." Now this is a new term, we're hearing a lot of new terms these days. And what they're surmising, at least one person is surmising, is there's a box to tick on the survey form that says, "Are you unemployed, you have a job but you're not working at it?" And the intention was, this was the place you checked if you were on jury duty.
Well, this particular category has jumped to 3% of the workforce. And their thinking is, these are the folks that are receiving PPP money, who aren't working, but are still receiving a paycheck. And so it appears that the best thinking is, the stimulus program, the PPP programs, things like this, companies that are trying to continue to pay workers that are not fully working, and some are working part-time and getting paid for full-time, that this is really confusing things. For example, I think it's the airlines have to pay their workers through, I believe, it's September 30th. And they think on September 30th, we're going to see a huge spike up in the unemployed.
So the real answer is nobody exactly knows why. If you added that 3% to the 13 and a half, that we have, maybe the unemployment's closer to 16 and a half, 17%. But it is absolutely confusing when you see that the new claims for unemployment went up 1.9 million, and yet there were 2.5 million new jobs added to the economy. Are you any clearer?
Jackie Hendry: Well, the next obvious question to me, which I'm sure doesn't have a much clearer answer is, how can we clarify the surveys that we're sending out? Because obviously this is a new situation that most of us in our lifetimes, we have not seen. So of course, when you get a survey that the box is probably meant for jury duty, but it may not say that on the form. I don't know, I haven't seen it. But you make another deduction for how you need to fill that out. How do we avoid the, what is it, the data head fake?
Rick Kahler: Yeah, exactly. I don't doubt that there'll probably be some rethinking of how they do the survey, and there may be another box put on to the survey. A way to clarify this but it's like so many things. Nobody anticipated a pandemic. And how do we classify somebody who's receiving a paycheck, but isn't working? And in massive amounts and millions of people. So my hunch is, by the time the survey is rethought and redone, the pandemic will be long behind us. But we'll probably be ready for the next one, so that we have a little better data.
Jackie Hendry: So we've talked about how there's some consternation in the actual unemployment number. But it still sounds like whatever that number is, it's not as big now as it was a month or maybe two months ago.
Rick Kahler: Yeah. And it's still huge.
It's much bigger than what we saw in 2008, 2009. It is certainly second to the Great Depression, if not equal, to the Great Depression. So even though the news is better, I guess it's, how do you want to look at the glass? Is it half full or half empty? But there's still a lot of people unemployed.
I was reading some research this morning. I think it was Ben Bernanke, the ex-Federal Reserve chief that was thinking that maybe 40% of jobs are not going to come back. And that this recession is just getting started. This is going to be with us for a long time. And this is tough because we're wanting to grasp onto some good news, and the thought that this whole recession is going to be a V-type recession. And you can find folks that say, no, this is going to be with us a decade. I've read that. It's going to be very severe. And then other economists that say, no, six months from now, we'll bounce back. And this is pretty ubiquitous of economists. I'm thinking I should have been an economist because economists are, you can just be wrong and it's just part of it. Nobody knows.
Jackie Hendry: Economists and meteorologists, maybe. Actually, I think people get more angry with meteorologists when they're wrong.
Rick Kahler: Well, this is true. That affects your day to day life a lot more.
Jackie Hendry: So we have varying degrees of just how bleak our future looks, and yet the stock market really jumped in recent days. What's that about?
Rick Kahler: Yeah, boy, is that on our mind? I do an annual physical at the Mayo Clinic and I was there last week. And I kept getting these questions from these doctors, like what's going on with the stock market? What's going on with the stock market? And I had published my article last Monday. And so I linked them to it and kind of explained it. And then I was preparing for today, I send out a little market update every Monday, and I hadn't looked all week at what was going on with the stock market. And when I looked, I'm like, "No wonder I was getting these calls." Because last week the stock market is up 6.8% for the week. And now that's great for a year. And that followed being up 3.75% for the week before. So here, in just the course of two weeks, we've seen the stock market up almost 11%.
Jackie Hendry: Wow. Another head scratch.
Rick Kahler: This one, Jackie, I can do a little better on than the unemployment numbers. What we've seen so far is a V in the stock market. But we cannot confuse the stock market from the economy.
And I know that's really hard for a lot of us to get our heads around, but a couple months ago, either in writing or speaking, I had said, "Watch. The stock market is going to turn around and be going up." And everybody is going to be saying, "How can this market possibly be going up with how bad things are?" That's almost something you can predict with the stock market, because it did the same thing in 2008, 2009. Or certainly in 2009. And this is what markets do. There's an old adage. It says, "The market climbs a wall of worry." Well, that's nice. But why do markets go up when things are so bad?
And what we need to remember is that markets are driven by human emotion. They're driven by behaviors. And the market, the stock market, is typically about tomorrow. So the short of it is that stock markets fall when most investors believe that prices will be lower tomorrow than they are today. And that markets rise when investors believe that prices will be higher tomorrow than today., But both of those beliefs or projections are anchored in tomorrow, not what's happening today.
So that's really important. Some folks have said, "Well, now the stock market is a predictor of six months from now." And the crazy thing, crazier, is something called the NASDAQ, which is a stock exchange of mostly tech stocks, hit a new high on Friday. All time high. The Dow Jones is 8%. I think about 8% from its high. So obviously, people are feeling investors much more optimistic about going forward. Now, will this stand? When we talk about Aviza, the stock market's up 46% from the bottom. It dropped 37%, and it's up 46% from that. And as this happened very, very quickly.
Most people would be shocked to know that when you look at a global basket of stocks for the last 12 months, they're up a little over 3%. So all of a sudden we've gone from this just terrible, terrible stock market to a one that is pretty average, you know? And something else, Jackie, that really strikes me is, people like myself have, some overtly, and some inadvertently, shame people for selling out of their portfolio and going to cash. And we could talk a little bit about some of the dynamics that are involved in that, because it actually makes perfect logical sense why someone would sell when the stock market declines, and it's all in their perspective.
Jackie Hendry: Dive into that a little bit more. About why that makes perfect sense when things are low to still cash out.
Rick Kahler: Yeah. What folks like me say is, in so many words, "Why would you sell out when stocks go on sale?" This makes no sense. You need to be buying. And most people would say, "Yeah. Yeah, I guess I should, but I get scared to death and I sell out, and it makes logical sense. I should be buying because they're on sale." And, "Why do I do this?" We can say, "Well, because you get fear and the fear overloads the system", and really from anxiety, so you sell out. But it goes a step further than that.
When a store has a sale and say... Oh well, this would never happen. iPads go on sale for 50% off.
Jackie Hendry: I'm with you in this world. Let's go.
Rick Kahler: We know that's a sale.
Jackie Hendry: Right?
Rick Kahler: You need an iPad or know it's somebody who has an iPad, you want to buy that sale because let's say it's advertised as a one week or two week sale. Why do I go out and buy iPads on sale, but I don't buy stocks on sale. Well, there's a huge difference. First of all, I have all the confidence in the world the price on the iPads is going back up.
This is a one week sale, two week sale, get them while supplies last. If that drop on the iPad was iPads just went down by 50%, because the new iPad is going to come out in two months or one month, and we're trying to get rid of these things. I'm not necessarily going to go out and buy with everything that I can get, or that I need in the iPad world, because I know the price is never coming back.
And that is a huge difference when I'm looking at stocks, and I'm watching them go down, I'm watching this market go down. If I have an underlying conviction that stocks are going to be bouncing back, then I'll have the courage to buy. But if my belief is that they're not coming back, why in the world would I buy? In fact, I probably want to sell what I have because the belief is they'll be cheaper tomorrow. I might hold off buying that iPad that has that initial drop because, A, it's last year's model. And B, it's probably going to get cheaper, and I'll wait till it goes down another 50 bucks or something. It's the same thing with stocks. Just wait, things are bad. We looked around, things are bad, and they'll get cheaper.
So that is really the underlying, we call them money scripts. In the work that I do, the belief is that, when the stock market drops and things are bad, it probably will get worse. So let's sell out, at least redeem some of the investment I have now, because I can buy it back later. Now, depending on when you sell out, that can be true. But most of us, our brains are just perfectly wired to do the wrong thing at the wrong time, and we sell out too low, and we wait too long to get back in.
But that's what's going on with somebody who, probably about 6% of our clients, put extra money in at the bottom. Well, they had just a hardwired belief that, "Oh, this is a sale." Things are going to go back. And maybe we had 1% of our clients that just completely sold out because it wasn't a sale. It was, this is the new normal. The stock market is going to be down here for a long time. Things are not coming back. And the crazy thing, Jackie, is that you can find plenty of experts to affirm both positions during a time like that.
Jackie Hendry: I need 90 seconds to absorb this. We're going to take a short break and we're going to continue this conversation on the other side. I'm talking with Rick Kahler, president and founder of the Kahler Financial Group, a leader in financial therapy. He's helping me really grasp our current situation. When unemployment is still so high, why is the stock market jumping up so high as well? Talking me through all kinds of things.
We just finished talking about these ideas behind whether or not you cash out when things are in a particular situation. And as you were explaining that, you talked about how, basically, either way, when you're looking at the stock market and making your decisions, it's more about what you think is going to be happening tomorrow than what is actually happening today. And of course, in our current situation, when so much is unpredictable, and information changes day to day in a fairly unprecedented situation, I'm just curious how you and people in your field are dealing with the current situation, and advising your clients when things really are that unpredictable.
Rick Kahler: Yeah. The advice that's given in my profession is as wide and varied as the opinions of economists. So you'll have some advisors that will attempt to time the markets and sell out, and try to sell high and buy low. You'll have other folks, like myself, who are incredibly boring and just say, "Well, whatever you're feeling, whether you're feeling fearful or hopeful or whatever it is, don't do anything with your portfolio. Just leave it alone." And that can be a real challenge, especially when things are going down. And there's so much fear that we're dealing with. And that's one of the reasons that the investor, they have some emotional intelligence. They can be aware of what they're feeling, typically is going to do better through times like this, because they'll be able to separate the fear, the uncertainty, the difficult emotions from the actions or behaviors., And feel the fear and not let that translate into a behavior, which would be to sell out.
So, it typically takes a good amount of awareness to weather a storm like this, to have that confidence that things are bad, but I've just designed my portfolio in my investing when times were good. And changing it when it's really bad out, the evidence probably suggests that things aren't going to go well for me.
Jackie Hendry: I'm going to shift gears a little bit because you also sent to me another piece looking at, as people are continuing, many people continuing to work from home, and our day to day lives are still fairly up-ended. You mentioned a recent survey asking full-time workers, who are working remotely, about the downsides of working from home, and those top five negative aspects. Most of them dealing with that kind of almost social, emotional wellbeing. Like feeling distracted, feeling, isolated, things like that. Talk to us a little bit about why that's something you feel is important to highlight.
Rick Kahler: Yeah. Well, I can pull from my own experience with this. Our company shut down working at our physical office on March 16th, I believe. I kind of thought maybe I was the only person that works, that was experiencing some of the things that I was experiencing. I read this particular bit of research. I was like, "Oh, good. I'm normal." And the research, as you mentioned, showed that the top two things that people are experiencing are, distractions, a lack of focus, and that had about 40%. And then feeling isolated, another 40%. And that really nailed what I was feeling. I've never worked at home in my whole life. And unlike a lot of my associates, I wasn't prepared to work at home. I didn't have a home office. Yes, I traveled a week or two weeks out of every month, but I have laptops, and smartphones, and tablets that I work off of. But, that's not like my three screens at the office, and my microphones and my video equipment, and everything else. So I just wasn't set up. And the feeling of being displaced, just that the surrealness of that, and sitting at my dining room table, wondering, am I really at work, or am I at home? Just adjusting to those dynamics. The blurring of work and personal life was 34% of the respondents and adjusting to the new dynamics was 34%. And in my case, lack of technology. Now, most folks didn't struggle with it. My staff didn't struggle with that because they just took their computers and went home. I didn't have a designated place right away to put my computers except on the dining room table, and that got voted down.
So, I've ticked all the boxes on these. And I think what I have experienced is very, very similar to what a lot of people that have been forced to work at home, and still are working at home, and some who may not go back to a physical office. It's a real sea change for us.
Jackie Hendry: Right. I know, we here at SDPB, not all of us, but many of us, ended up... We began working from home and I was one of them. And at first I was just like, all right. I felt much less distracted. I felt like I was much more productive at first because I could just sit and not think about talking to anyone else. I had my checklist. Boom, boom, boom. Here we go. I felt great. But then as those weeks wore on, now, I find myself identifying much more closely with these more common responses here. The distraction and isolation, and blurring between work and personal life. Because I had my little home office set up downstairs and now I get bored being down there. So sometimes I'm on the couch, sometimes I'm in bed, sometimes I'm at the counter. And I bring that up because I think what you say has so much validity, in that people are adjusting to the sort of surreal product of our current situation with the pandemic, and many people may not. We're discovering just how many jobs can be done from home. Yeah, go ahead.
Rick Kahler: Yeah. That is amazing. And, so being an investor in commercial real estate right now is a little frightening, because we don't know what percent of companies aren't going back to their office. But there certainly is a subset. Is it 5% of it? Is it 10%? Is it 20%? We don't know. And I think you hit on what one of the other real issues has been. Certainly has been for me is the isolation. I'm used to being able to wander in and interrupt my associates and talk, a lot of synergy and bounce ideas back and forth. Now that's really effortful. Right. I have to set up a GoToMeeting or a Zoom meeting with them. It's not as spontaneous. And that isolation can set in, and I don't know if this affects you, but I know a lot of our associates are parents. And of course they've had kids at home, and now they've been homeschooling kids. And there's some that are like, "Please let me go back to the office."
I can't have a break. I love my kids. I wasn't cut out 24/7 to be at home with them.
Jackie Hendry: A lot of adjustments. And when you mentioned, before the break, talking about different areas, seeing a jump in the NASDAQ, saying mostly tech stocks. Quite high. I don't think I'm stretching too much to say that makes a lot of sense when we're looking at the need for that technology to help us do our jobs at home. It's kind of curious. Kind of just imagining whenever the pandemic is done, what our lives are going to look like afterwards. Because we talk about back to normal and it seems unlikely that the pre-pandemic normal is what we're actually going to end up in, once this is done.
Rick Kahler: Yeah, highly unlikely, certainly for the next year or two. And pandemics... Talked with Lori about this in a previous show, how pandemics fracture relationships in split society.
And what we're seeing happening in society right now was really totally predictable. Not necessarily in the specifics, but in the generalities. The same thing happened in 1350 during the Black Plague. Now there was a subset of people that were taking things very seriously, and sequestering themselves away. And another subset of folks, or I forget the exact quote, but making merry, and doing whatever they wanted, and just shrugging the whole thing off. One of the big differences that we have today is technology. And how would this be? How would our experience of this be if we didn't have Zoom? If we didn't have GoToMeeting? I mean, the isolation would be even exponentially worse.
So I think we can be very thankful for the technology we've had, and everybody needed technology at the same time. I waited two months before I could get my computer set up at home, get all the parts in, and all the parts still haven't arrived because everybody was needing the same thing. But I'm finding, I don't need to go into the office now to work. And it's really, for most listeners, I'm sure they've already dealt with this. I'm just kind of late to the party. I was coming into my office when nobody was here and working. So it is a game changer. And how this is going to change things, we're getting maybe a little glimpse, but we still don't know how all of this is going to roll out.
Jackie Hendry: It's an intriguing place for us to leave our conversation. So as we start thinking ahead, we've talked a bit about the unemployment, how we're looking towards tomorrow often when we make some of our decisions, as opposed to what's happening today. But it's an interesting time to be trying to make those decisions.
But thank you to Rick Kahler for being here to help explain this to us. It's just the start, I think, of many of us beginning to understand these things, but I appreciate you being here to talk us through it. So thank you for your time today.
Rick Kahler: Well, thank you, Jackie. I appreciate chatting with you and answering what questions I could.