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John’s conversation with special guest Dr. Jim Burns, primarily focuses on two interconnected themes: the current significant stock market decline and the psychological and emotional challenges associated with retirement, particularly in the context of market uncertainty.

Market Update

The program begins with an acknowledgement of the severe market sell-off, noting that the S&P 500 had dropped significantly week-over-week and year-to-date, nearing bear market territory (a 20% or more decline from its peak). All major indexes, including the Dow and NASDAQ (already in bear market territory), experienced substantial losses. Interest rates on the 10-year and 2-year Treasuries had slightly decreased. John Berkley introduced his “JDB indicator,” which compares Baron’s value to Baron’s growth index, revealing that both value and growth stocks had declined, although value stocks were still performing better year-to-date. As value investors at Uncommon Cents Investing, they had been anticipating this shift. The breadth of the market was described as “horrendous,” with a vast majority of stocks declining.

Retirement Mindset

The discussion then transitioned to the fear associated with both the declining market and the transition to retirement. Dr. Jim Burns highlighted the VIX, a measure of fear in the market, which had reached levels higher than during the COVID pandemic and close to the peak of the 2008 crash, indicating significant market anxiety. The hosts and Dr. Burns discussed how abrupt changes like tariffs, COVID, and the 2008/2009 crisis create uncertainty that Wall Street dislikes.
The conversation delved into the challenges of retirement, with Dr. Burns drawing on his experience in recognizing patterns in people approaching this life stage. A key point was that for many, the decision to retire is more difficult than imagined, moving beyond the simple desire to reach a certain number of years of service. Legitimate concerns arise regarding income sufficiency in retirement, especially with fixed pensions that may not be indexed for inflation. Retirement is portrayed as a significant life transition, and some individuals struggle with the unknown and the potential for idle time. A major concern highlighted was the lack of purpose in retirement after leaving a long-term career. Dr. Burns emphasized that while financial planning is crucial, many retirees find themselves unhappy despite having enough money because they lack a sense of purpose. Travel was discussed as a common activity in retirement but not necessarily a fulfilling purpose. True purpose provides a reason to get up in the morning and a feeling of being needed. The possibility of part-time work in retirement, leveraging years of accumulated knowledge, was presented as a way to maintain a sense of purpose and community connection. The challenges of habit change in retirement and the frustration of not being able to maintain previous levels of productivity due to aging were also discussed. The impact of aging on energy levels and the increased awareness of mortality were noted. It was suggested that older adults who remain active and have a sense of purpose tend to be better adjusted.
Returning to the market uncertainty, Dr. Burns provided insights into potential future scenarios. He clarified that the current downturn constitutes a correction (more than a 10% drop) but could potentially become a bear market (a 20% or more decline) if the S&P 500 drops another 3%. Past corrections have been V-shaped (rapid recovery), as seen with COVID, but this one could be L-shaped (slow or no immediate recovery) or U-shaped (more gradual recovery). If it turns into a prolonged bear market, it could last about a year and culminate in a “selling climax,” which can lead to very bad investment decisions driven by fear. Dr. Burns discussed the psychological phenomenon of loss aversion, where people feel the pain of losses more acutely than the pleasure of gains, leading to potential panic selling at the bottom of the market. He referenced Jeremy Siegel’s book “Stocks for the Long Run,” which illustrates the long-term upward trend of the stock market despite short-term volatility. Examples from the COVID market drop showed that even when advised to buy during a significant downturn, very few investors actually did. John Berkley emphasized his personal strategy of buying during market collapses, viewing them as opportunities when assets are “on sale”. He highlighted the resilience of the economy and human ambition, suggesting that demand will eventually rebound. The potential for AI to drive productivity gains and support higher market valuations was also mentioned. The importance of controlling fear with intellect and a long-term perspective was stressed.
The hosts also mentioned that Uncommon Cents Investing had not received an overwhelming number of alarmed calls, possibly due to their consistent communication about market volatility. They noted the recent downward momentum in the market and anticipated potential follow-through. John Berkley personally expressed that they had been anticipating a market correction and were prepared to navigate it.
The show concluded with thanking Dr. Burns, providing contact information for Uncommon Cents Investing, and mentioning the availability of the show recording. There was also a brief announcement about Wisconsin’s Aging and Disability Resource Centers (ADRC).