Washington, DC -- (ReleaseWire) -- 05/17/2016 --DAWN BENNETT: Jeff Cox is the finance editor for CNBC.com where he manages the coverage of financial markets and Wall Street. He's also the author of Debt, Deficits and the Demise of the American Economy, published in 2011. His newest book, The 30-Minute Millionaire: The Smart Way to Achieving Financial Freedom, is out now. Jeff, welcome to Financial Myth Busting.
JEFF COX: Thank you, Dawn.
BENNETT: I'd love to hear what you say about the smart way to achieving financial freedom in this type of market.
COX: Well, look, Dawn, like Bob Dylan said, the times, they are a-changin'.
BENNETT: They are.
COX: For sure. You know, I kind of feel like the easy money has been made over the past several years—the Fed has been propping up the stock market—and things are going to get much more difficult now. So The 30-Minute Millionaire basically aims to get investors out of a short-term mind-set. It outlines plans for which people can manage their portfolios in 30 minutes a week. In fact, I believe with my co-author, Peter Tanous, that actually spending more than 30 minutes a week is a waste of time. And what I mean by that is there's basically an information overflow out there, and that may sound curious, coming from somebody who works for CNBC, but there really is. There's actually too much information out there, in some ways. And we want an investor to be able to tune out the news from the noise, to make things simple. And the book is basically what this is about. It's only about 160 pages, and it gives you a blueprint for what we believe is going to be the future of investing.
BENNETT: One of the things that you dig into is wealth through passive investing, not active trading. And there are a number of new automated investment companies, like Wealthfront. I'm a bit skeptical: can an actual algorithm make somebody rich, and is an algorithm consistent enough to be able to do it over and over again?
COX: Well, we're definitely not pushing algorithms, and I share the skepticism over active investing. And basically, you know, one of the main messages from the book is that we're trying to get investors to stop picking stocks. We don't believe that the retail investor, the average investor out there, the mom and pop investor, who does not play the markets for a living, really has the time to dedicate to being a good stock-picker. Now, I'm not sure if anybody's really good enough at it. When you look at what the record for active managers is, basically about one in five of them right now is beating a basic market benchmark. And this is what we talk about when we're talking about passive investing; it's basically just tracking market indexes, where instead of picking individual stocks, you're picking individual sectors, maybe like the energy sector, maybe like the industrial sector, whatever it is. You're not picking individual companies, so this is why you don't have to spend tremendous amounts of your time. Look, I work with people all day, people like Jim Cramer, who actually endorsed this book, and a number of other guys, who are traders; they do this for a living. And, you know, look, if you want to do that, that's terrific, and there's people who make a lot of money doing it. But I just don't believe that the average person with a job and a family and kids and a life to live really has the time anymore to dedicate the amount of time that it takes to be a good picker of individual stocks. So The 30-Minute Millionaire gets you away from that kind of a life; it gets you towards a much easier life, as far as investing goes. And with the book, we basically run a portfolio, a model portfolio, based on something called the Monte Carlo theory, which pretty much lays out time-tested scenarios for what returns will be, using our program. And it's really easy and it's really simple, and this is not a get rich quick scheme; this is a get rich smart scheme. We want investors to use time their wisely, to look towards the future, to not try to make a quick buck, but to think in terms of the future and to, as you say, utilize passive investing towards achieving their goals.
BENNETT: So if you're not talking about using a computer to invest, and you're talking about index funds or ETFs that represent different asset classes, that's your idea about partaking in passive investing. But let's talk about timing, because, you know, if Janet Yellen, for example, begins to normalize interest rates, it's probably going to throw the US into a recession. And, I mean, the 25 basis points hike in December led to a 10% correction in the next two months, so it just looks like the U.S. is hanging on by a thread. This is a central bank market, right? There's no free market out there.
COX: Yeah, yeah. No, free market, no question.
BENNETT: This is a central bank market; it's being propped up. So talk to the listeners about your idea, which I agree with, but I agree more when fundamentals and research make a difference, I think, in the market place, rather than sometime like now.
COX: Yeah, well, let me just start off by saying one of the chapters in the 30-Minute Millionaire is called Fear the Fed. And I share a lot of your skepticism and a lot of your worry, in terms of how much influence central banks are going to have over the markets and are having over the markets and will continue to have over the markets, unfortunately. Because really the only thing we have going for us right now, as far as the market goes, is monetary policy. Washington's in a mess, where it's eternal stalemate, and there really aren't any growth policies being enacted at the federal government level. So from an investor standpoint, you really need to know a lot about central banks. But, you know, one of the things that central bank involvement has done is it has tamped down volatility in the markets, and that's been rough for stock-pickers, who want volatility. Now, what we're going to have going forward, I think, is really still a volatile market, and in a volatile market, I think investors are just better off not trying to time markets, not trying to go with the ebb and flow of things, because what's going to happen is that you're going to be trying to sell at tops and buy at bottoms, and market timing is almost impossible. I mean, it really, really is. So this is why I think now, more than ever, you need a long-term view of the markets. It was funny, I was talking to my stepdaughter the other day, and she's read the book, and she said-- she was looking at her 401k, and saw that, of course, January and February were very bad months, and she was-- you know, she was worried about it. And she said, 'Gosh, I was looking at it, and I was thinking, "Why am I even putting money into this? I mean, I'm actually losing it."' And I told her, that's exactly the wrong mentality that you want to have in this market. You don't want to be looking and making decisions based on one or two months of results, because, you know, we're going to get into these periods of volatility, and I think you very well may be right about the possibility of a recession coming, but you know what? Recessions have historically really not been the death knell of the markets. Markets can go up during a recession, and even if the market overall doesn't go up during a recession, there are absolutely pockets of opportunity that you can find, things that do better in times of recession. I think we actually could be heading towards a period of—and you have to be a child of the '70s to remember this, but stagflation—you know, you're going to see the Fed raising rates, because they're feeling the pressure from inflation, but into a weak overall economy. So this is going to create a lot of problems; one of the investing theses in our book is using real assets, and we are fans of gold; we do believe that investors should have gold in their portfolios.
BENNETT: Jeff, do you differentiate between physical gold ETFs, and miners?
COX: Yeah, the miners are a little tougher to play; there's different dynamics at work there. But we think that the GLD, the ETF for gold, I mean, it has done a really good job of tracking gold prices, and think that that's a really good pick for investors. Again, we really won't advise them trying to pick individual gold miners; we think that just using the GLD ETF is a really solid way to play the metal.
BENNETT: And what about a silver ETF? Do you have one that you recommend?
COX: Yeah, silver's a little bit trickier, but we do think that there are definitely plans here. I don't have a particular ETF—the iShares Silver Trust ETF is one, SLV. There's also SIVR; that's also a pretty good one. That's the physical silver shares ETF. And also the USLV, which is a traders ETF; that's three times long. The Silver Fund EFT is a pretty good one as well.
BENNETT: You know, your book promises risk mitigation. I mean, I can imagine that's one of the reasons why you're recommending gold, physical gold.
BENNETT: And I wonder, if there's a massive crash around the corner, how do you mitigate that risk? I mean, for example, when Apple reported its first decline in quarterly revenue in more than 10 years last week, it really does make you wake up. I mean, Apple is pretty much the best America's economy has going for it, yet it's not doing well. It just seems as if even companies like that keep doing worse and worse. It doesn't make sense, also because the market continues to go up at the same time. So again, risk mitigation; how do you go about recommending that right now?
COX: Well, to get to your point on Apple, one of the things that a lot of investors, and especially stock pickers, don't realize enough is that a great company does not always make great stock. Apple is a great, great company, and Apple's going to be around as long as Apple ever wants to be around, and investors can choose to be in Apple, and there'll always be at least some level of cash stream going on there. But risk mitigation is not about putting all of your apples into one basket, so to speak. What you want to do is make sure that you're diversified. This is why we like index funds. Of course, where we started this conversation, as far as risk mitigation, things like gold are going to help you mitigate risk, because they're not only inflation hedges, but gold is also what we call a non-correlated asset, which is a big part of what we talk about in there as well. And as I said earlier in the conversation, correlations have been so high. And of course when we talk about correlations, it just means the tendency of everything to move in the same direction. Gold is starkly negatively correlated to the stock market, which means that if the stock market's falling, it's a pretty good bet that gold's going to be rising. There are other choices that we outline in the book as well for non-correlated assets. Look, hey, if you get into a major market crash, you know what? Everybody's going to lose money for the time being. But even in the crash that we had in 2008, I mean, look where we are, in relation to that. We were at 666 back in March of 2009, and now we're over 2000 on the S&P 500. So there'll be opportunities, if we do see something that severe, as far as the market goes. But the big picture here, in terms of looking at big market events like that, is to not look at things in the short-term environment, to have that five, seven, ten year plan in mind, that, 'Look, we're not going to get disturbed if the Fed raises rates a quarter of a point and the stock market loses 12%.' That's not going to be treated as an end of the world event by somebody who follows the 30-Minute Millionaire. It might be treated as an end of the world event if somebody's trading the market, or somebody's heavily leveraged in one direction or the other. But for folks who have a longer-term perspective, those kind of gyrations are not going to rattle them.
BENNETT: I would agree with you; historically gold and the stocks are not correlated. But right now, gold and stocks seem to be going up, and I think the reason stocks are going up, or staying up, is because Janet Yellen is really full dove. I mean, there's nothing the stock market doesn't like about free money, plus negative interest rates might be on the table for next year. I mean, that's sort of bullish for stocks, but it's also bullish for gold. So I don't know if I agree that they aren't correlated. I don't know how to answer this. I mean, we are in a world of easy money and, presumably, negative interest rates. And I think it's good for both stocks and gold, but probably better for gold, do you think, in the long run, and not so much for stocks, because they don't have the earning support anymore?
COX: Well, I do think better for gold in the long run, for sure. And let's just talk about the Fed a little bit. I mean, I think that Janet Yellen and some of the other folks at the Fed, like Charlie Plosser and people like that, would like to get back on a normalization plan, as far as rates go. I think that they would like nothing more than that, to be able to gradually increase rates and to give themselves a little bit of dry powder, should we get that recession that's probably going to fall right into the next president's lap, I would imagine. And I think that the Fed would really like to have that breathing room. I do think, however, that it's going to be very difficult for them to be able to do that. Looking at the current numbers, I think you'd be lucky to see one quarter point hike this year.
BENNETT: Yeah, I agree.
COX: I don't think we're going to see anything more than that. I just don't think that there's the sort of political will, so to speak, at the Fed to move any quicker than that. In fact, they just recently put up a post on CNBC.com a couple of days ago that posited that the Fed basically has almost like a third mandate now; in addition to price stability and full employment, their third mandate is basically creating a perfect world, and they're just looking for perfection before they'll go and raise interest rates. And of course, they're never going to find it, but that's not going to stop them from looking.
BENNETT: Jeff, can you please tell our listeners where to get your book The 30-Minute Millionaire: The Smart Way to Achieving Financial Freedom?
COX: They can get it at Amazon, they can get it at Barnes & Noble, all the major booksellers. It's in a lot of the bookstores. You can also find it on Newsmax.com, which is our publisher, and Humanix is the parent company there. We are going to have an infomercial also actually pretty soon for those folks who get Newsmax TV, so they'll learn more about a book and they can pick and buy it wherever the book is sold.
BENNETT: Thanks, Jeff, for being on Financial Myth Busting.
For over a quarter century, Dawn Bennett has been successfully guiding clients through the complexities of wealth management. Dawn Bennett provides individual investors, corporations and foundations with holistic investment strategies. Her unique vision and insight into market trends makes Bennett a much sought after expert resource with regular appearances on Fox News Channel, CNBC, Bloomberg TV, and MSNBC as well as being featured in Business Week, Fortune, The NY Times, The NY Sun, Washington Business Journal in addition to her highly regarded weekly talk radio program - Financial Mythbusting. Through prudent and thoughtful advice, Dawn Bennett has strived to consistently provide the highest quality of guidance.
About Dawn Bennett
Dawn Bennett is CEO and Founder of Bennett Group Financial Services. She hosts a national radio program called Financial Myth Busting http://www.financialmythbusting.com.
She discusses educational topics and events in the financial news, along with her thoughts on the economy, financial markets, investments, and more with her live guests, who have included rock legend Ted Nugent, as well as Steve Forbes and Grover Norquist. Listeners can call 855-884-DAWN a as well as take podcasts on the road and forums for interaction.
She can be reached on Twitter @DawnBennettFMB or on Facebook Financial Myth Busting with Dawn Bennett.