Ken Fisher Discusses Technical Investing, Stop Losses, Wealth Taxes and More–April 2025

Transcript:

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Naj Srinivas

Hello and welcome to the Fisher Investments Market Insights podcast, where we discuss our firm's latest thinking on global capital markets and current events.

I’m Naj Srinivas, Executive Vice President of Corporate Communications here at the firm. Today, we’ll hear from founder, Executive Chairman and Co-Chief Investment Officer of Fisher Investments, Ken Fisher.

In this episode of Market Insights, Ken answers some common listener questions to help you better understand the world of finance and investing.

But before we dive in, I'd like to ask you a favor. Recommend our podcast and rate it wherever you listen. In just a few minutes, you can help make this valuable information available to even more people. Thanks so much for your help, in advance.

With that, let's dig in with this month’s Ken Fisher mailbag. Enjoy.

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Ken Fisher

So every month I get these, questions that come in and I try to write them up on these little cards and bigger letters because of my age and eyesight, I try to give you short answers, which is, for me, nearly impossible to do. So the first one is, what are your thoughts on technical analysis? Are there any principles you've adopted?

I believe technical analysis is nonfunctional, and, there's really nothing from it that I've adopted. Technical analysis, logically started a long, long, long time ago. The grandfather of technical analysis, was Charles Dow, of Dow Jones and Company when he created the Dow Jones Indexes and used the three of them as a forecasting tool based on their price movements. That's why he was doing that. And, that led to Dow theory, using the same concepts to forecast. In that day and age, you had no more than paper and pencil, and they would create the charts and they would try to read things into it. I believe that's all voodoo. I think, there's been adequate documentation that price movement by itself tells you nothing at all about future price movement.

Are there, any principles that I've adopted from this? Yes. My principles are look for fundamental causality and if you don't have fundamental causality, don't get carried away with anything that looks like it might be predictive somehow.

Next one. Well, we're going to start off where I'm on the negative side of everything here today. Why don't you recommend stop losses? That's pretty easy. I don't recommend stop losses because they don't actually stop losses. Ya got the simplicity in that concept? Let me take you through that. You buy stock A now a stop loss could be set at any given level. Like if it goes down 10%, I'll sell it. If it goes down 20%, I'll sell it. If it goes down 17.25%, I'll sell it It's a discipline concept. You set a limit when it goes down that low, you get out of it. And then on that stock, sure enough you don't have any more loss. Ain’t that nice?

What do you do with the rest of money? Now let's say it's because of the bear market or correction or whatever, and it takes you out. When do you get back in? Oh. Or maybe you just sell it and buy something else. Well, okay. So now you sell it and buy something else. What stopped it from going down. The problem with the concept is, yes, it stops you from losing more money on that cash if you're sitting in cash. But it has nothing to do with whether you're going to lose money on what you do with that cash next. It has nothing to do with how you participate longer term. It tells you not at all if you're using it, as some do, to get out of the market as a whole. When to get back into the market as a whole. And it again, like the prior question about technical analysis, is something that a lot of people believe because on paper they kind of see how it in their mind could work.

Except it doesn't.

We're just going negative, negative, negative with these questions here today. Would a wealth tax be a sustainable way for a government to raise taxes. No, I mean I guess, yes. Effectively, the ultimate wealth tax is what a pure communist country does. It takes all your wealth. And they do that over and over and over and over, and that's how they sustain themselves. Is that a good way to run a railroad? No. Let me just give you some of the problems with wealth tax. And I'll try to do this really fast. Take a private business. What's it worth? Not a right way to assess that. How do you tax something when there's not a right way to assess that? Oh, we get an appraisal. Appraisals are wrong really often I'll tell you they’re wrong more than right. Somebody's going to get hurt on that. Somebody is going to be wrong. And when government does things where they do a bunch of really wrong, it's bad for everybody else too. Well, what about can we just apply it to Bill Gates? I mean, he's got all that wealth from Microsoft stock. Well, the answer is, yes he does. And you got a price on Microsoft at any given point in time. But if Bill Gates was to try to sell all his Microsoft stock at one moment in time, he'd drive the stock to the floor. How much to the floor? There's not a right way to know.

So there's no right way to know where to set the wealth tax out. But isn't that okay if we just do it kind of like it x percent a year forever? Well, let's think that one through too because that's also nonsense. What happens if the wealth keeps going down? How does that work? If the wealth from the value of the business, whether public stock or private stock or real estate or this or that, just keep going down. Let's say it's real estate. If you do it in real estate, well, we have a real estate tax. But that's exactly why in California they created the system that limited what you could do in property taxes so they wouldn't drive people to be forced to sell. Wealth taxes are not a great macro way to raise money. And particularly on the biggest assets that folks have, in the broader sense, which is businesses that they created, that they own, or businesses in general. It's a terribly destructive process. We are just continuing on the no, no, no path today. I've never seen so many questions where all I can say is, no, it's wrong, no, it's wrong, no it's wrong. We can do this to the very end. No, we're not going to do it at the very end. But we got one more to go before we get to one where I don't do it.

Will tariffs bring more manufacturing back to the U.S. and create new opportunities for investors? No. I understand why a lot of people think they will. They won't. We have a very long history of tariffs in this country and all over the world. They do not do this. I understand why a lot of people think they might. It’s a little bit of a pipe dream.

I know it's, kind of, a lot of a pipe dream, but it's mostly just taking a pipe to America. The fact of the matter is, and the way they're being done is even stupider. But, when you put the tariffs up in this country or if you did this in any other country, tariffs are always worse for the country that imposes them than the country that they're imposed upon. If we assume they're being done for economic reasons, which is what this question is about. And the reason that's the case is because unlike what President Trump says, we are not the biggest economy. I understand why he thinks we're the biggest economy. We're the biggest country economy. But for example, the eurozone is one economic block. It's got one set of policies, and it is bigger than we are. We, the land of the free, the home of the brave, the greatest country in the world, is 25% of global GDP. The rest of it, therefore, is, 75% of global GDP. It's three times our size.

Whatever we do in tariffs, that other three quarters can trade amongst themselves, they will take away from us wherever they can to keep it cheaper to them trying to trade amongst themselves. And in the process. it will hurt them less than it helps us. Now let me just go a different direction because if people don't get it. We don't even have the mechanisms in this country to collect the tariffs that President Trump has been trying to impose. The Customs Border Protection Agency subset, that is the tariff collector, it processes, which you can read about them in my upcoming New York Post column, are not setup to avoid what will become if the current tariffs President Trump is talking about are maintained particularly as universal tariffs.

But otherwise anyway, the biggest black market in U.S. history. And I'll be writing about that as to why it'll create a huge black market, but it doesn't pull manufacturing in because you wonder if after he puts the tariffs in, just think about this. People don't think about this, I'm not giving you a short answer, but the tariff stuff is just about the stupidest stuff I've ever heard.

President Trump is going to get all these verbal agreements from people to build plants in America, and he's going to brag about those. But there's no assurance they can build a plant. Let's say you want to put a plant, a greenfield plant, in America. Well, it's with all the help the federal government could possibly give you, you're still obligated to go and figure out where you're going to locate the plant. You got to apply to the municipality and state for permitting. You got to put up with all of their regs on all kinds of things. There's a lot of engineering and back and forthing with the government. All that takes time. And you've seen this differently when the government goes ahead to build a road. Once they break ground on it, it still takes them a long time. Nothing wrong with that. Just the way it is. If a company were to actually want to start today on a new major plant in America, if they were to want to, it's going to take them a good five years to get the plant up and running. And they all know that, they're not stupid. They've built plants before.

Now what else do they know? That five years from now, there's a good chance that you don't have the Trump administration. In fact, it's certain that you won't have the Trump administration. Oh, that's right. President Trump's time is over after 2028. And then you might have a Republican administration with somebody that agrees with all this stuff, or a public administration that doesn't or you might have a Democratic administration. And a presidency that can impose the tariffs, can reverse the tariffs. You follow that? A president can put the tariff on, another president can take the tariff off. All you see and top Trump saying this back and forth. Now, you know, almost daily about this category, that category, the other categories all of it which creates uncertainty of course.

So they know it'll take them five years to build a plant. But they know that before the five years over, the good chance the tariffs might get reversed. Why would you want to do that? You follow the logic here? When there's an economy three times bigger outside of America that you focus on.

Let's say you make very expensive, small things. The private sector has been really, really good, forever at dodging tariffs. The process for collecting by the CPB. I’m supposed to end this quickly but I can't do it. I got to tell you I got to tell you, you can read about this online as to the processes that they require. They don't inspect every darn package. They only have 2500 employees and an antiquated computer system and can't possibly do that. They require the importer to declare what it is and what the tariff on it is, according to the tariff rate. And then, they spot check and whatever they find in violations, they go back to impose a fine. Collect and or impose a fine depending on whether they think it's intentional or not. Now, a lot of this is done by freight forwarders, not by the manufacturer themselves.

But if you’re Toyota shipping cars in, well, it's pretty hard to hide that. But if you're making little expensive things like electronic components, you make a gargantuan kid stuffy, and you stick them inside the kid's stuffy, you ship them to where you're saying to go to because the kid's stuffy is supposed to be worth $17 rather than the $5,000 of the stuff that's inside it. Tariff rate on $17 instead of $5000. And you're going to see the biggest increase in the kid's stuffy market in history. It's called a black market. It’s called smuggling. It called sneaking. It's called cheating. But the world will do that endlessly, and always has on tariffs, everywhere. Let's miss catalog it. Let miss characterize it. Let's change one little part. If he keeps the reciprocal tariffs, let's ship it from the high tariff country into a low tariff country. Repackage it, split the difference with that person and ship it into America. So I'm just telling you that no, they won't. Because the reality is the rest of the world has no incentive to take something it takes five years to do and might not be in existence five years from now.

So this one I'm going to give you a bit longer answer on too, but this one is more positive instead of negative or not positive, but I've got other things to say to you. What are your thoughts about life and long-term care insurance, and is it a smart investment?

A. First, I'm not a real super expert on this topic. B. I don't need to be. C. The answer really comes down more to features about you than it does about life or long-term care insurance. I got a piece of advice for you, however, that I don't think you can lose on, and it's this. If this is the kind of a question, not even this question necessarily, but the kind of a question that you often have in your head about investing or otherwise. There's a really nifty thing you can do, and you don't have to do it way I'm going to tell you to do it. You can do it otherwise, but get a free, fairly capable AI system, an app that answers questions and ask the question. What are the positives and negatives of long-term care insurance? Now I'm going to recommend an app to you.

I have no investment in the app. I got nothing to do with it, but I know it works pretty darn well and it's free. They got one you can pay for that's more advanced, but you don't need that. And this is a thing called Perplexity. And you can look it up online. And add it to your, iPad or your computer or smartphone and ask it the question, what are the positives and negatives of, Long-Term Care Insurance. And it will tell you a pretty good answer that will focus you back to what are the features about you that are the good ones and the bad ones? I'm going to give you one more piece of advice on this topic.

The insurance agents that sell long term care and life insurance get paid pretty heavily for the products that make the insurance companies the most money, and you do not want to be getting your advice from the sales guy and the insurance agent. Could they got every incentive to tell you all the positives about it for you, but every incentive to not tell you the negatives about it for you and they'll say, oh, that's not true, that's not true, that's not true.

But the commissions they get on these things are big enough, like on long-term care insurance, it's typically about two thirds, three quarters of the first year, fees that you have to pay, which, you know, it's going to be thousands and thousands of dollars. Now, I'm not going to go through the positives and negatives of, like long term care insurance because in fact, for some people it's very appropriate. And for others it's not appropriate at all. That's for you to decide. But I think if you just took something like Perplexity or another AI system, you can ask a question to and get an answer back and ask what are the positives and negatives of category X. You get the positives, you get the negatives. Think yourself through in that regard before you ever talk to an insurance agent, it’ll give you the full set of positive, the full set of negatives. And know you want the stuff, more or less, before you ever talking that you're trying to sell it to you. And that's my answer to that. Thank you for listening. I babbled too long today, but I do that most of the time. I appreciate you paying attention and your interest. I hope you'll be back next month when I cover more of these as I do every month. Thank you.

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Naj Srinivas
That was Ken Fisher answering listener questions as part of his monthly mailbag. Thanks to Ken for sharing his insights with us.

If you want to learn more about the topics discussed today, you can visit the episode page of our website, Fisher Investments.com. You'll find a link to that in the show description. While you’re on our website, you can also subscribe to our weekly digest, which rounds up our latest commentary and delivers it right to your inbox every week. And if you have questions about investing or capital markets that we can cover in a future episode of Market Insights, email us at marketinsights@fi.com.

We'd love to hear from you, and we'll answer as many questions as we can in a future episode.

Until then, I'm Naj Srinivas. Thanks for tuning in.

Disclosure:
Investing in securities involves the risk of loss. Past performance is no guarantee of future returns. The content of this podcast represents the opinions and viewpoints of Fisher Investments and should not be regarded as personal investment advice. No assurances are made we will continue to hold these views, which may change at any time based on new information, analysis, or reconsideration. Copyright Fisher Investments.