 Good afternoon and welcome. I'm pleased to be here today with Dan Cunningham of One Day in July He is the founder and principal and we're so glad that you could join us today. Thank you It's gonna be here. Well, we were just saying that we have not spoken together I mean we've seen each other in the street, but we haven't spoken together since 2017 beginning of 2017 Yeah, and that's when you started One Day in July. It was it was just starting out. Yep So, um, all right, so how has the business changed? Well, it's grown a lot. There's 17 or 18 of us now as opposed to me. Wow last time I talked to you and And it's bigger. It's we manage a little over 600 million Dollars largely actually a Vermont there's money. It's largely Still in state incredible an index funds was really what you were talking mostly about Is that still the nature? That's still that that's still the focus. I mean, we definitely do manage other things because they come in that way, but we We really try to get to index funds low-cost portfolios helping people understand Arfi actually from the start of the company the link next to the logo has been how we're paid in a very clear table, which is We're kind of proud of that because it's always we've always been very transparent about how we're paid and Then trying to help people understand how the financial industry makes so much money from them through the fees Through the fees and and through like the big brokerage houses like Fidelity and and others I mean they're all holding so much cash and they use your money You they use your cash to loan and then they make money on the spread That type of thing is a cost to you. It's just very quiet and hard to see through So tell us just remind us about index funds and why you think they're an ideal investment vehicle Index funds don't they don't have highly paid managers making stock picks behind the scenes They basically go out to an asset class like large u.s. Companies or or u.s. Treasury bonds, and they just buy the whole thing They don't try to guess where the winners and losers are gonna be and Then they strip out as many costs as they can, you know They can often get the cost down to a 25th of what an active fund is and Academic work over the past 40 or 50 years shows that inconclusively You should be investing in indexes and That's not really at one point. That was a debate. That's not really a bunch of a debate. Yes, you can beat an index, but It's very rare that people do and how are they different from mutual funds? Well mutual fund can be a type of index fund, but a lot of mutual funds are actively Managed where people are making stock picks behind the scenes and Generating taxes potentially and driving up the cost of management driving up the cost. Yeah, got it And what are examples of? Categories of index funds. Well, you might have a small cap index or a small capitalization stock So those are you know a billion dollar market cap. I mean it doesn't sound too small, but that's considered small in the market Or your businesses that are operating with a billion dollar budget. Is that well? No It's that'd be like a billion dollar valuation got it or you might have a large cap index where you know firms like Apple Google John Deere they'll trade in that type of in that type of index and They're very diversified as well. So you're also kind of looking to control your risks But the premise of one day July was all was from the beginning that it it's not clear to people What's happening and In terms of fees and management. Yeah, and I think the You can really if you make something sound sophisticated and complicated You can really figure out a lot of ways. I think to fool people and charge them charge them And the whole point is that you shouldn't need a regulator to tell you not to do that like that's Fairly an ethical. I think like you should really say we're being paid by somebody. We should act in their interests It's that does not a lot of the time that does not happen So let's talk about the economic picture today There's it's there's a lot of upheaval people hear about the market going down and then went up the other day and and You know interest rates are going up. What how would you summarize to today's? economic picture Well, there's a lot of volatility and I personally think Much of the progress that we've made and and we by we I mean that the country has made in Moving towards index funds has been lost because of devices as people see information constantly It causes them to trade at the wrong times or they they get anxious You know because the market is constantly there. It's hard to get away from it. It's on TV everywhere. It's on your phone and You have you have these days swinging like you said up down up down What is this, you know, if you buy a building it doesn't tell you what it's worth every five seconds, but That is and partly I think people are trying to figure out all the different New sources and variables You know the markets trying to figure it out. It's really unprecedented enormous amounts of cash That have been printed and then I've been people's Accounts and then you have an economic situation that looks like it might be deteriorating But maybe not like the earnings and companies are coming in pretty well Yeah, so Todd so what's the real I mean aside from the ups and downs and The changes in interest rates and things like that. What's your assessment of the current economic order? Well, I mean, I think they I think they're It's important to remember as an investor that bad news when you feel bad and you think well It's does not look good economically that is probably going to be the best time to invest People tend to invest when they're happy and things are going well but big returns are made when things are going poorly because that's when people sell the equity market and You so you have to decouple Your emotions from Investing or else it'll be hard to do well That's easy to say, but it definitely is tougher to do. It's you want to really buy As much as you can when the markets are declining But don't you also in that case have to have a kind of analysis so that you're prepared? I mean, I see it, you know, the analogy is violent buying real estate If you have figured out where you want to live how much you can spend how much cash you have and Then you go and look at houses. You're ready. Yeah when the opportunity presents itself because in your mind You know what it is that you want to buy. Yes, it's good to definitely have a sense of yeah What is my time frame before I need this money back? How much risk can I really take on before? being you know the Anxiety at the market may cause may affect my own behavior. Those are the kinds of things that You want to think about before? You get into it and what about the kinds of things to invest in I mean you said it's a good time to buy when people are selling because The price is less But don't you want to have an idea in your head of what you want to buy and what is valuable more valuable to buy in a downtime? You do. I mean, that's what we have spent a lot of years trying to figure that out in terms of Making sure that portfolios are well diversified across asset classes and that different investments are it's almost like a matrix. It's Different investments are there for different purposes and it all holds together as one portfolio So part of the portfolio might be to protect against inflation part of the portfolio is to really have Large capital gains over time those types of things and what do you invest in to protect against inflation for example? Well, I mean historically things like real estate And actually over the medium term the long term Things like stocks because that is it as inflation comes through like just think about a company like Procter and Gamble as their face of inflation They're gonna raise their prices over time and eventually those earnings are gonna Come down to the bottom line and their profits will go up. It doesn't mean the real profits will go up But their dollar profits will go up and that protects you more than most bonds most bonds are just fixed contracts So you mean a company like Procter and Gamble has Flexibility as a business to change their pricing structure and your price. Yep Unlike a bond, which is as you said it's fixed most bonds are fixed and you're locked into that that payment stream Even if there's a lot of inflation the payment stream is worth less So what do you think about Treasury bills as a 12 month investment right now? Well, it's They're paying about 4.63% on the one-year Treasury. So what's interesting to me is That's effectively risk-free if the United States government Exists in a year and pays on its debt I used to think that was joke, but I guess now if now there gets a tiny tiny risk that that might not happen But you're gonna make 4.63% What's interesting is banks that the best CDs you can get right now are about 4% and And checking deposits are about around 2% and so that doesn't really make any sense because The Treasury bond is liquid. You can sell it at any time without a penalty And it's effectively risk-free because it's US government Whereas a bank while the US the bank is protected for most CDs by the US government but they're generally penalties to get out of things like CDs and So it doesn't but that's why right now I think banks are doing well because they have this spread and And a lot of people don't know that their money could be making more money somewhere else Oh, so the banks are investing in T bills for example making that point six three and then giving you four percent They could yeah, so they could kind of have a risk-free trade going. I see a lot of the hedge funds did that in 2008 They were getting money effectively free from the US government and turning around and buying Treasury bills It's a risk-free way. I mean, it's ridiculous, but it was happening So tech stocks social media stocks for I mean, there's tech is the big category But then you're looking at the the even Amazon and Google laying off lots of people. What's happening there? Google is an interesting company because it's a little bit like Walmart in that it's a bellwether for the economy you can see things that are happening because it's so big and Google missed its earnings numbers last quarter fairly substantially and I think that's probably an indicator that companies are they're cutting their marketing budgets because that's where they can cut and There's a tendency to hold on to Staff like I don't think firms want to let go of people They have they've had such a hard time getting them getting people that they're really reticent to reverse course on that and The way that's good, you know, maybe that spreads out that makes life less painful for people but But to counter that I think you can see that the marketing budgets are being hit already And you know big tech is going to have to adjust it They're probably I mean, I don't I don't know they're 50% over staff So you have to get rid of 50% of staff in a week, but they're probably Overstaffed and what why there's so much money flowing in, you know, it's It's thought about this a lot I grew up in southern Vermont, you know We had the Bankton banner and and people supported the banner and and what these firms have been able to do is they've been able to reach into every community Every little community in the country every big city and just extract enormous amounts of money Flowing into if you've ever been to their campuses. I worked for Microsoft and college and Redmond and I mean it's just like unbelievable how much money is coming in and Now they may have to adjust a little bit and why is there less money coming in? What's that? Why is there less money coming into to these firms Facebook and Google and Amazon? Well, I mean, I think it's Facebook's getting Hit the most because their ads are simply the least valuable. I mean Google's ads are worth more generally I think most not everyone would agree, but most marketers would hold on to their Google budget before the Facebook budget and And you know and Facebook has Has spent a lot of money on this metaverse idea, which doesn't seem to be taking off But they have They you know and they had a big tail and from the pandemic era. So all of those things are starting to peel back at the same time I Don't think anyone is too sad for them. I mean they still are enormously profitable firms So one of the things we're talking about before is that the market is not performing well or it's pretty volatile this year But last year performed very well So I know that people are upset that yeah, the value of their stocks are down, but they they made 20% in 2021 so to talk about the trends in the market and how to watch Well, that's important because there's a saying in finance that you can you can prove or disprove anything by the starting and ending dates of the graph and It happened that the market really peaked right around January 1st of this year But if you back up a little bit more in time to last summer And we're basically where we were. I mean summer of 2021 forward and so you have to remember the market was running up substantially in 2021 and And so now some of that is just valuation the valuations are coming down and resetting in Some asset classes like small cap. They're historically pretty cheap now But part of investing is that there are years. It's roughly about every seventh year on the S&P 500 that you lose money Things don't always they don't go up in straight lines but do you still think that the market as a long-term investment vehicle is is a Healthy enterprise and worth I do. I mean I think it's it's funny You know, you could be a pessimist and short the market and you sound really intelligent when you're pessimists That's funny, but you say things. Oh, I didn't know that was that was gonna blow up or but an optimist Don't necessarily sound intelligent. So you see a lot in the media in the in the national media you always see these very negative stories about all these things are gonna happen and That would have been a read that would have been a terrible bet over the past 10 50 or 100 years to bet against the United States A lot of people did it did not work out. Well, like the people who were optimists ended up far wealthier and I think that's just part of kind of what What works in the news? but in terms of the growth of the markets and the Nasdaq and the Dow and the value of business in the United States It seems to just essentially be growing growing growing I mean and if you're calm and you keep your money in the market no matter what happens up or down it ultimately Increases in value, right? I mean is that yeah, I mean there can be long periods of time like the 1970s and the 1930s Where things kind of bounce around it doesn't necessarily mean next year. It's gonna be great, but Over time, I mean the United States does tend to work its issues out It's kind of amazing like especially relative to the rest of the world at the moment like People are kind of down on the US for a lot of reasons a lot of valid reasons frankly, but we Relative to the rest of the world. We have our act together right now Pretty well in what respect would you I mean we have a there there is As of today at least rule of law. There's a very good court system. There's a very well-developed bankruptcy system Which is critical to an economy Americans are actually fairly ethical I know like you may not think that with like with what's going on politically But there is a culture in the United States of not cheating people and that doesn't exist in every other nation I mean a lot of nations are Not quite as honest. So it's hard to do business. We have a big financial system. We have a Historical culture of taking risks and then it goes back to kind of Westward expansion You know those things are so we break out of the box we come up with new industries So should we be worried about how much money the government's printing? I mean, I I think that's definitely a cause for concern I I don't think people have I Don't think people realize how much money got printed like a trillion dollars is not a billion it's not a little bit more than a billion and the the checkable deposits in In Consumers bank accounts and individual citizens bank accounts as well including nonprofits is about five trillion dollars today That was about a trillion before the pandemic So the money that's been produced is tremendous and That's just never happened at that percentage level didn't happen in World War two. I mean, it's just a mind-boggling amount of money And so what impact will that have on the value of on what impact will that have? Well, I think it's You know, you're seeing very high inflation rates and in the Federal Reserve It's an interesting dynamic because in one hand that they led the political arm the White House In the Federal Reserve are kind of fighting each other the Federal Reserve is trying to get inflation under control and And that could be difficult with that much money because that the money hasn't even all flown through the system yet a lot of it hasn't been assigned to projects and things and so The Fed governors expect the interest rates to stop at around five percent, but there is a Probability that that could go a lot higher than that to slow the inflation down And why is raising the interest rates seen as the mechanism for slowing inflation? Could you explain that? It just puts a break on it puts a break on the economy and on the transaction flow because as things get more expensive like Like using automobiles as an example as the loan costs go up People start to reconsider the decision and then as the transit is the transaction volume slows The auto dealers start saying well, you know what to try to get the transaction volume back. I need to lower the price or Last weekend the board of directors of Walmart met and said we are not going to take any more price increases We have enough inventory that's up to the suppliers to be more creative so they're putting a hard stop and Walmart has a Lot of market power so they can determine What the prices are what the prices are going to be they have not that power shifting back to the retailers now And that should help to kind of break inflation somewhat But I don't understand that how slowing the economy breaks inflation Well, just in that everybody who participates has to start to say well I'm going to use price to try to get my business back Or and that includes in the labor market So like to get that the transaction volume going again, I'm going to cut prices or I'm going to hold prices where they are I'm going to stop start promoting things at lower prices But then don't you run the risk of having to lay people off because you're not Getting well. Yeah, that that does trickle through to the labor market. So then the labor cost starts to come down as well So you have you have less inflation from the labor market because you either don't want more labor Or you're or some a business that's going to ask for it at a lower price I don't know. It just doesn't sound very like a good outcome. Well, yeah, I mean it You could go the other way and get into a deflationary place, but it's it's not necessarily it's not necessarily painless like it's Breaking in like Volcker broke inflation in in the early 80s and it was a very severe recession But what if they did nothing with the inch with the with the interest rates? What if they kept them at 3%? Then it you would probably what they fear is they fear inflation being baked in so that expectations starts to set in that prices are going to keep rising and I see so not to interrupt you but so the housing market is is concrete I can understand that as long as the interest rates were low the people were It was easier for them to borrow money to buy a house Yeah, and the rates the prices of the housing was going up and up and up for other reasons not just the Interest rates combination of reasons. Yeah, but the slowing the making it more expensive to borrow money Is slowing down the real estate market, right? Which that means that the prices of the housing stock is coming down in order to move that housing stock That's right. So it's cooling the increase. It's cooling the increase businesses in the country that Economies tend to like predictable outcome. So You know a 2% inflation rate or something between 2 and 3% is good So I can see why that would be good for real estate because it's been the value of it is in the Kind of in the minds of the beholders. Yeah, but a product that Walmart buys from a company seems Kind of a different kind of animal if you're trying to limit the the price of it because the cost is Labor and materials and that's not in the eye of the beholder or is it well I mean, I I think Like the re one of the reasons why the Federal Reserve doesn't want those prices going up or taking Walmart as an example is Inflation Disproportionately harms the lower class and lower middle-class people economically You know wealthier people can absorb inflation more. So someone like Walmart is going to say You know, that's bad for our customers That's bad for us as a business because they're they're going to buy less stuff Needed this different question. Well, there's that they're gonna buy less stuff and And so we're gonna try to hold the line and we're gonna tell Procter and Gamble That no you have to come up with something something else now To do this to produce this in a more efficient way. Okay, so How do people get in touch with you and when they so do people call you when they Inherit some money or they've decided to start saving as a young person for their job And who comes to you and why it's a broad range at one day in July and one of the things that that I've actually learned in it in this is that only about one in a hundred Americans have a financial advisor at all and our firm is set up so that we We serve as a very broad range of people people who are starting out and People who are older and have significant sums It's partly we like it. It keeps the job interesting partly. It's also That's I think what the need is in The country is I most of the firms want to go to the high end. I mean Honestly, that's where You know the focus is that is not the focus of one day in July. We're trying to really look at something that Helps everybody and so how do people get in touch with you? I think we have some info We may not have it on your food if they search for one day in July online at the information is there Oh, there it is and we have about ten advisors Around Vermont that can help and what if I already have a portfolio that's invested in other things? Is there a reason I would come to you? Yeah, I mean we have an internal software team ourselves And we've built something called the simulator so we can people will often ask well How am I doing or how can I see what is going on? And so we can go back to take statements from five or seven years ago Put that in the simulator and show them Okay, well if you invested in low-cost index funds after fees you should be here Mm-hmm, and then they can look at that independent of us and say well You know where am I relative to that point right and how what would the incentive for them to be selling their current equities? To put them in index funds now Well right now with a lot of equities down It's actually easier to switch because there aren't as many tax issues, right? So at the moment it's a good time for a lot of people. It's pretty it's easy Yeah, and and retirement accounts. There are no tax issues And even if there are sometimes we just try to hold positions and work our way around it. Yeah Well, I'm so glad that you came to visit. I always find it invigorating and I always learn something So Dan Cunningham. Thanks so much for joining us one day in July And I think it's important just to know that Dan and his team are interested in Transparency and in education, which I think is really important in a financial advisor Who has got your interests at heart so it's good to hear and thanks so much. Yes. Thank you for having me great to see you Thanks for watching