In episode #6 of The Big Bo $how, Big Bo (a.k.a. Jason Blumstein, CFA®) reviews the importance of KISS (Keep it Simple, Stupid!). How this concept helped transform a Little League team from zero wins, to consistent winners, and how it can be used for long-term sustainable wealth creation. Additional topics Discussed:
- Why Keeping it Simple is often times powerful, though not easy
- Managing wealth during periods of inflation, war, volatility, and 'uncertainty'
- How often times "the biggest enemy of growth is fear & ego."
Hope you enjoy the $how!
Episode 6 Key Takeaways:
Welcome to episode six of The Big Bo $how. Hope everyone is doing well. My name is Jason Blumstein, also known as Big Bo, CEO and founder of Julius Wealth Advisors. On episode six of The Big Bo $how, I want to talk about a concept called KISS. I'll get into what that means in a little bit.
But we're coming off of Father's Day and we're also in baseball season. I know I like to talk about football a lot. I was a football player in college, but one of my first true loves was the game of baseball. If you listen to the prior episode, you know, I pretty much just stopped playing baseball because I ended up being 6’2, 275LBS in high school. And once they said, Hey, given your skill set, you can play baseball or football and football, you're pretty much guaranteed to get a scholarship. I ended up choosing football, but in baseball again, and coming off of Father's Day and baseball, the person that taught me a lot about baseball was my dad and playing baseball. One of the biggest concepts that he used to ingrain in me and our teammate was the concept of KISS or keep it simple, stupid. The point here is that you don't really want to overcomplicate things, especially when you're young and you're starting to learn the game of baseball or really anything in life. Now, myself, I am now a father myself, and I have a child who is playing Little League baseball and I'm heading up the coaching for that team. Now, last season, going back to 2021, our team finished 0-7-1. We didn't win one game. I had 13 kids on my team. Ten of them never touched a baseball in their life. Now this year, the same nucleus of kids on my team and we started off this season 0-3, actually 0-4. And when I started to drill into the kids and my team was this concept of keep it simple, stupid of kids, and what does that mean when it relates to baseball? So first of all, a lot of the kids were going up there, the pitcher was throwing wild, and they would just swing the bat.
Now, if you ever play Little League baseball or watched it, first time kids are pitching, Most kids are wild. Maybe you'll get a strike once in a while, but a lot of balls are thrown in if someone's pitching wild, learn how to take a pitch or don't swing at the next pitch. So I taught these kids that concept of, Hey, if the pitcher is wild, why don't you wait for him to throw a strike or two before you start to swing the bat? I even instituted the concept of a take signal where I touch my hat. Now, maybe if other teams are listening to this now they know my signal. But either way I touch my hand. And if I touch my hat, that means don't swing out. The next pitch. Great. Started to walk, get people on base, get a few hits, score some runs. Awesome. The next thing I was noticing is that like a lot of little kids, they don't understand the concept of just holding on to the ball. Hey at the ball’s hit to you, you're playing third. Odds are this age you all have a strong enough arm to get them out at first base balls at the third base. Just hold the ball. Better to hold the ball, run it in call timeout than to throw the first, make an error, guy goes to second, throw the ball to second, go to third there, throw the ball, third guy gets in the park and the home run not good. So we thought of the concept to stop throwing the ball around, call a timeout.
The other thing was pitching. Our pitching was to say it slightly horrific. The biggest thing I notice about pitching is that pitchers need to learn mechanics, the mechanics of how to throw a proper pitch, to have the proper balance, to have the proper motion and really to concentrate on throwing strikes. It doesn't matter how hard you throw at this age, especially because you don't want to throw your shoulder out at such a young age, but just throw strikes, get the ball over the plate door strike. Odds are at this age, nine, ten, 11 year old kids, most of the kids in the lineup aren't hitting the ball anyways, just throw strikes. So I taught them also that if you're going to swing a lot of time, people are swinging or the indecisive check swinging this, that and the other. If you're going to swing the bat, swing the bat hard, hey, maybe you'll actually make contact, but do not make check swings or be indecisive, make a decision and go with it. And so eventually what we ended up doing is cutting down on our unforced errors. We ended up winning by nine. Losing by not hurting ourselves. And I'm happy to report that we won six of our last eight games of the season. And we've also entered the team into a Little League tournament. Now, they're too young wait a couple of years, maybe this team will make it to Williamsport. But this is the making of a team that has potential, mainly because we bought into the concept of KISS or keep it simple, stupid.
Now, how does this concept relate to creating wealth and sustainable wealth and investing? Well, the first thing that's going on right now that anyone's been paying attention to is that the markets are in bear market territory, which means that they're down by more than 20%. Low has been about 23% down in the S&P 500. NASDAQ has been down worse, over 30% down, mainly because one of the things I talk about a lot on this show and if you're a client or a prospective client of Julius Wealth Advisors, I see that many people treat investing like gambling. That's not what you're doing. And I'll share a little story. I was at a friend's house over the weekend with a bunch of people over and they root and they start to talk about investing. And a conversation came up and a couple people started talking about how they relate it to gambling. And of course, these individuals thought they can probably time markets this, that and the other. And I was enjoying my time with some friends and eating and having a couple of drinks. And honestly, I almost lost my appetite, mainly because of the way this mindset that these people were showing and is really sad because this is a mindset that, in my opinion, is permeated across this country, which is also why, in my opinion, there is a financial literacy gap in this country of two of two statistics that I point out all the time to people that the majority of Americans are living paycheck to paycheck and that the real percentage of millionaires hasn't increased in over 20 years. And it's mainly, in my opinion, due to this lack of financial literacy. And again, many people think, quote unquote, the stock market, it's gambling, it's not, folks, what you're actually doing is you're investing in pieces of businesses for people.
Now, the funny thing is that it is sadly comical. Again, I was with my brother in law last week at my niece's graduation, and mentioned the concept that he loves this analogy, where the analogy I give to people is that it's an article of clothing which just say shoes go on sale for 20% to 30% off. Everyone always wants to go out and buy it. Hey, I want a pair of shoes. There are $100 now they're $80 and maybe even $70. Well, hey, that's a bargain. I may go buy it. Hey, let's go. Let's do it. Now, if that same shoe company stock or that equity or owning a piece of their business went down by 20% to 30%, it was at $100 a share. Now it's at $80 a share, maybe $70 a share. People get scared and they actually run away. And I'll ask you this question to ponder. What do you think is going to create more value in wealth over your lifetime? Is it going to be buying those pairs of shoes that were 20 to 30% off? Or is it going to be buying the equity or piece of business of a shoe company that was down 20 to 30%? My best guess is that and this is time tested, it's going to be owning a piece of that shoe company versus those actual pair of shoes.
Now, again, I always like to tell people a concept that numbers don't lie. People do. People get emotional. And at a time like this, when the market's down 20%, bear market territory, emotions are high. If you look at the sentiment of people, it's negative. There's bearishness, indicators. It's 58% of the people are bears or very close to all time highs. If you look at the data now, let's look at actual other data. Now, if you go back to the 1950s, there have been 11 other bear markets again, when the S&P 500 dropped 20% or more. During this time, the average decline has been 34% and the length of a bear market has been 13 months with the. Recovery taking another 23. So again, from peak to trough bear market has lasted about 13 months. And then getting back to the prior peak, another 23 total of close to three years. Right. However, a couple of these bear markets for the 2000 tech bubble, followed by September 11th and the 2007 financial crisis, where if you strip those out because in my opinion, for a variety of different reasons, number one, if you think about September 11th, was the attack on the U.S. So we went to war. Hopefully that never happens again. But this hasn't happened currently. Right. So I wouldn't really think what's going on right now is similar to what took place during the September 11 timeframe. Additionally, the financial crisis. Now, people, if you think about the financial crisis, the financial crisis was an attack on our banking system, mainly due to poor underwriting standards. People were giving people mortgages that there was a thing called ninja loans or no income was necessary.
So that's, you know, if you look at the banking system, the banking system is fairly healthy right now. If you listen to comments by Jerome Powell earlier today testifying to Congress, he said our banking system is strong. If you look at some of the things that went in place during the Dodd-Frank regulation, was there meant to make our banking system strong. Right. So if you strip those two time periods out, the average decline for the bear market was about 30%. The length lasted ten months, and then it took another 17 months to recover. So again, about two years. So right now we are about six months into a bear market with a 23% decline. Again, so if you look at either the 30% decline, I would argue you're probably closer to the bottom than the top 30%. 23, that's another 7% that those bear markets lasted about ten months. We're sitting at month six. So again, maybe another four months. Again, no one has a crystal ball. There's no magic elixir. I just try to look at data and let the data drive decision making and not emotions. So remember the concept of KISS. Keep it simple, stupid when it comes to creating wealth, when it comes to if you're someone out there that's coaching a little League team, remember this simple concept and I think will help you out over the long term. And we'll be right back after a quick commercial break. And when I get back, we're going to talk about four ways for you to help manage your wealth during periods of uncertainty.
All right, we're back from our commercial break. Hope you like that commercial. And now we're going to talk about four ways to help manage your wealth during periods of uncertainty. And again, really, when you say the word uncertainty, I always like to joke around people and say, well, hey, what really is certain in life, as they say, besides death and taxes? So really, I would say that this is kind of a way to think about managing your wealth during all times. But again, right now it is a little bit heightened because we are at a heightened level. Of uncertainty, with the markets declining, with inflation, with a war in Europe between Ukraine and Russia. Some politics in the US. So again, I thought it would be helpful to address this in this episode.
So the four ways I always like to coach people into looking at their finances and building what the first thing you need to do is check your balance sheet. Now, as a CFA® charterholder, one of the biggest things that I learned during that and also with my time as an equity research analyst, they want to understand the company, a company's balance sheet, because one of the first things that can go wrong with a company, even if they have a great product or service, is the balance sheet. And when I talk about a balance sheet, for those that do not know what I'm talking about is taking an inventory of your assets. Those are things that you actually own and your liabilities. Those are things that you owe or others. And that difference between your assets and your liabilities is essentially your net worth. So when you think about checking your balance sheet, you want to make sure that you have ample liquidity. This liquidity can come in the form of true cash or ways to tap into liquidity of all of your assets. Now, your balance sheet should have liquidity and the proper structure of your liabilities or your debt. Well, a lot of people say, well, debt is a four letter word. What I like to try to coach people thinking is that well, that you need to sort of understand that you need to really have a more nuanced approach of understanding your balance sheet, your assets and your liabilities. But the first place to start is to look at your balance sheet.
Step number two is to look at your cash flow. Your cash flow is simply your income minus your expenses. Now, your income, a lot of times a lot of people don't have the luxury of adjusting their income. Most people and most Americans are W-2 employees, meaning they work for other people. And especially during periods of uncertainty. You know, the job market has been very hot lately, but typically during periods of uncertainty, it takes a pretty bold individual to go in to their boss and demand a raise. So I would probably say there's probably not a ton of flexibility to adjust your income and a better place to look at your expenses. Now, when it comes to your expenses, you want to get a simple budget out. And I always like to tell people, look at separating your needs from your wants. Now your needs are what you need to pay your mortgage. You need to pay for your car. You have health insurance. You got to probably yep, some people have real estate taxes.
So these are things that you need to pay for. Now there's also wants and these wants are separated in nuanced ways as well. For example, while you need to eat right, we all need to eat. And especially me and, you know, love eating. But do you need to go out for dinner five times a week or do you want to go out for dinner five times a week? You see the difference there? Well, you know, you probably don't need to go out to dinner five times a week. So maybe you eat at home three days of the week out of the five. Or do you want to order that tomahawk steak or do you need to order that tomahawk say, well, odds are you don't really need to. You want to. So maybe you order a burger instead. Burgers, Very delicious. So that's the first thing you want to look at. And I'd also if you're anything like me during the pandemic, you've probably signed up for a lot of subscriptions for streaming services. I know with my kids, I have all the streaming services out there. So look for things like this. While you know, it might not seem like a big dollar amount, if you look for these things where you're separating needs from wants, the dollars can add up. So that's the second thing that I always tell people to look at. First check your balance sheet, two check your cash flow.
Step number three, making investments. Now, the only way or the best way to get to step number three is to go through steps one and two, because what I find during times of uncertainty is that people tend to want to shy away from continuing to make investments in their. Longer term wealth creation process. Either way, their emotions get ahead of themselves and they want to sell. The other day I got a text message or call from a friend or a client, and he's like, Oh, should we sell out of our 401k? They're in their late thirties. I mean, you can't really touch your retirement account to your 59 and a half. Why would you sell your retirement account, especially now when the markets are already down 23%? So again, it's more of an emotional decision than a logical decision. Additionally, if you have the proper balance sheet and the proper cash flow, if you're able to still continue to kick off cash flow at times like this, you do not want to stop the miracle of compounding. Right. And the miracle of compounding goes into what I've taught. What I often tell people is that to create sustainable wealth, you really just need two things. You need time, which if you're in your mid-thirties to mid-forties, you have a lot of time on your hands. If you've been younger, you even have more time in your hand. I, for one, understood these concepts when I started, when I was 20, right? Every single paycheck put away money, got a raise, put away more money. Market was down. 2007, 2009. Put away more money. Right. Because you understand the concept that you actually own businesses.
And this goes back to what I talked about in the first segment of that. If a pair of shoes goes on sale for 20% or 30%, people want to rush out to buy it. But if the stock of the shoe company goes down 20 or 30%, people shy away. You know, if you were and if you were looking to invest in quality businesses, quality, I'll emphasize quality. These great businesses should bounce back over time. And all you're doing, let's say, for example, you're investing, making up a number here, $10,000 a month. Well, if it goes if the price goes down now, you're actually buying more shares. Pretty simple map. If you're investing the same 10,000 and it goes down by 20%, you're actually buying more and you have the time and you have the flexibility to not stop this miracle of compounding and using times like these and times of uncertainty to your advantage.
And the fourth thing, which I talk about a lot and I've talked about previously on this show, is changing your behavior again at a time like this, emotions tend to get the best of us. Focus on your behavior. And this is why what I talked about in my last podcast, The Power of a Coach, The power of a coach, someone that can help you take an objective, look at your life, make objective decisions between your balance sheet, your cash flow, your investing is how you're allocating your capital that really just has your best interest at heart versus the emotions that sometimes get cut up when you're working with either just your spouse or just yourself. So again, I think behavioral coaching is extremely important. We emphasize this a lot at Julius Wealth Advisors. I would tell you, if you're if you need this coach, I would argue many people need this coach to reach out to us www.juliuswealthdvisors.com phone number is 201-289-9181 To experience the power of behavioral coaching someone that can take an objective look at yourself and your finances and help you make better decisions that are driven by data and not necessarily emotions. Again, coaching is a very important part of my life. I've experienced great coaches in my life, whether it be football, whether it be baseball, whether it be in the working world where I was able to learn under other mentors and reading books about people like Warren Buffett and Charlie Munger, who emphasize the lack of emotions that it takes to create sustainable wealth.
So I really want to emphasize step number four, the power of changing your behavior. So with that said, this is going to wrap up episode six of The Big Bo $how. I hope you understood and value the concept of KISS. Keep it simple, stupid. Try not to overcomplicate things in life. Look at the data, but the data make your decisions for you and tends to try to take the path of least resistance. Life is hard. Life is difficult. A lot of different nuances play. And if you keep things simple, it will help, in my opinion, with many facets of your life, and especially when it comes to creating long term sustainable wealth. And I'll end this with a quote that my friend recently sent to me. He sent me this quote or the quote is: The biggest enemies of growth are fear and ego. I'll say that again. The biggest enemies of growth are fear and ego, which we talked about in the show. So if you want to grow, you want to have longer term sustainable wealth. You can't let what's going on right now cause fear. Fear causes emotions. Emotions make you do irrational things. And also the power of behavioral coaching. A lot of people do not want to have a coach because they can think. They think they can do it all themselves.
Okay. Again, I gave the analogy in the last show of working out. Listen, when I was playing sports. I know how to work out. I used to bench 365 LBS. I squatted over 500LBS. I ran a 4.95 40. I was 275LBS. Okay. Now, however, right now I don't work out as hard as I do. Not because I don't know how, but because I don't have a coach that's motivating me and pushing me and looking at me objectively and saying, Jason, you need to do this or Jason, you need to not do that.
So again, the biggest enemies of growth are fear and ego. So wrap it up. Episode six of The Big Bo $how — kiss. Live a life of Integrity, Living the life of knowledge and always live a life of your passions. All the best. Until next time.
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