We’re excited to bring on Lee Hyder of Lee Hyder & Associates today to share insights and stories from 30+ years of experience. Join us as we go back and forth on the highs and lows investors face, underscoring the need for resilience and a long-term outlook.
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More About This Episode:
Learn about the value of maintaining your course during market downturns and why a realistic set of expectations is your co-pilot for successful investing. Whether you’re a pilot accustomed to precision or an investor seeking to understand the market’s nature, this discussion will give you a better idea of how a long-term strategy is built and maintained.
0:00 – Intro
2:41 – Keeping up with change in the industry
4:07 – Using technology to trade
6:58 – Returns
13:26 – Managing expectations
16:56 – Greed vs Fear
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(Note, this is an automated transcription. Please forgive any errors.)
Walter Storholt 0:01
Welcome to the pilots advisor with Ryan Fleming of first officer with FedEx on the triple seven at the hill. On this show will delve deep into tailored financial strategies, insights and wisdom crafted exclusively for those who rule the skies will help you navigate your financial flight plan with the same mastery you exhibit in the cockpit, prepare for takeoff into a journey of financial clarity and empowerment. The pilots advisor starts now.
Ryan Fleming 0:33
Welcome to another edition of the pilots advisor podcast and we have a we used to call him a guest. And I think he’s going to be we’re going to try to get him on the show a little bit more. Because you know, now that we’re going to a video podcast, he’s definitely the eye candy, we need a little bit of personality, we need a little bit of eye candy. So I’d like to welcome to the show, a former guest and co host today. He’s been a mentor of mine in this business. He’s been in the business a lot longer than me. And I would like to welcome to the podcast Lee hider. From Lehighton. associates. What’s up Lee?
Lee Hyder 1:07
Well, you know, it’s nice to be described as eye candy, especially so early in the morning. But if this is a video, and I think it is I’m sure we probably lost half the viewers already. So it’s been it’s been. It’s been a great year, though. I mean, you know, not so much a year, but it’s been a great winner. I mean, you know, we’re sitting here on the shores of Lake Erie and I honestly can’t remember the last time I had a start my snowblower So, I am loving 2024.
Ryan Fleming 1:37
Well, first of all, we are definitely not sitting on the shores of Lake area, because I’m down in South Carolina, where it’s probably at least 20 degrees warmer. But But yes, this is we are recording this after New Year. So happy 2024 is what we should say. Absolutely.
Lee Hyder 1:52
And it was an interesting 2023 Certainly, I’m sure for your clients as well as ours. But, you know, we finished off the year with a bang. And we’re really excited to see what 2024, you know, has in store for us, other than some crazy political satire that I’m sure we’ll be all living with for the rest of the year.
Ryan Fleming 2:10
Yeah, for sure. And we’ll talk about a lot of those issues. Lee, for our for our listeners, our guests, our viewers now is what will come since it is on video, how long have you been in the business? Boy?
Lee Hyder 2:21
That’s that’s a real personal question. It’s almost like asking my weight but been in the business 32 years. And you know, we’ve certainly seen a lot of changes, a lot of exciting things, a lot of new and exciting opportunities for investors today. And, you know, it’s it’s, it’s been an interesting ride for, you know, the past 32, almost 33 years. Yeah.
Ryan Fleming 2:41
And that’s the reason why I love talking to Lee. It’s interesting. I’ve been in the business since 2008. And Lee’s been a mentor of mine for a long, long time he puts up with me, he puts up with my questions. But I’ve watched a lot of older advisors kind of get to this point where they’re, they’re unable to evolve with technology, they’re unable to evolve with the changes in the industry, and it is changing rapidly. And Lee, I feel like you’re one of those chameleons that’s been able to keep up with changes that have happened over the years, and you’re open to new ideas. And so not only teaching me the business, but also being able to evolve with the business over the years, it’s been a lot of fun working with you on that.
Lee Hyder 3:23
Boy, let’s kind of unpack that last paragraph. Let’s see, we first started off us as a old advisor, so I’m not really sure I should take that. Then we transitioned into this old advisor turned into a chameleon. So I’m not really sure what the future has. But certainly today as as an investor, and as well, as an advisor, you really have got to embrace technology. I mean, Long gone are the days that, you know, you could just wait for your statement to come into mail to kind of see how you were doing. And it’s exciting times. And I certainly, you know, recommend and embrace technology not only for myself, but you know, even even my clients today because it really is there to just help you weather the storms of you know, volatility and the ups and downs in the market that every investor has to deal with. Well,
Ryan Fleming 4:07
absolutely. And one of the things that we wanted to talk about today with technology, and we’ll get to it probably a little bit later in the show is just how different companies are using technology to trade nowadays. And obviously, one of the ones I use with a lot of my 401k clients is Howard capital, and they have an algorithm that’s been built out for 20 plus years. And obviously, you’ve seen the numbers. I mean, it’s it’s, it’s pretty remarkable what they’ve been able to do over a long period of time, I think a track record of over 23 years now maybe. Yeah,
Lee Hyder 4:39
I mean, I mean, how are capitalism amazing. I mean, it’s really probably one of the best kept secrets in the financial industry. You know, but when you really peel the onion and you kind of really look at what’s behind what they do, I mean, their returns literally going back to some of their portfolios 2002 have really been off the charts. I mean, I think you ran over Wharton, I think it’s available to your advisers, how some of their portfolios have really outpaced the s&p for for literally, you know, many, many, many years. So it’s an exciting portfolio. And I’m sure you’ve got many of your clients looking at it, if not involved in it as as we do as well.
Ryan Fleming 5:16
Well, that’s the funny part, you know, year by year, you can’t make investment decisions on on the short term, even though a lot of investors do. But yeah, that report we ran with the strategy that we use in that 401k has outperformed the s&p by 37%, over a 22 year period. And I want to update those numbers again. So when you start looking at that, it’s like, wow, man, like it might not beat the s&p every single year. But over the long term, it definitely does. But I want to talk about some of those things that are to go ahead. Go ahead. No,
Lee Hyder 5:49
I was gonna say, and for the average investor, I mean, you know, investing in itself, you need to be courageous. You know, a lot of people think that, you know, you know, they get into a portfolio, and they may have honestly got into it at the wrong time, if there is a wrong time. And it’s about expectations. I mean, not every portfolio is going to perform immediately. But again, when you really look just going back to Howard capital, again, when you look at their historic numbers, and that’s really what it’s about, you know, their returns are very impressive. But equally, they have had some years where they’ve had some down years, and honestly, I tell my clients, I kind of embraced the down years, because it shows you it’s a real portfolio, and it’s not always going to
Ryan Fleming 6:30
it’s not a Bernie Madoff portfolio. Absolutely. I mean,
Lee Hyder 6:34
you’ve got to show some losses. But to be an investor, you need to be courageous, and you need to sit tight. And certainly you need to have confidence. And that’s probably where it starts confidence in the market. And certainly confidence into professionals such as yourself, you know, who’s helping them make their financial decisions?
Ryan Fleming 6:49
Well, I definitely have plenty of confidence in how our capital and what we’re doing and how the algorithm works, and how we’re able to look at momentum in the markets and stuff like that. But you brought up an interesting point that I definitely want to talk about. I had a client, and this is an older client, you know, and all he wants to talk about the s&p 500. And I said, Hey, well, look at this, this is the long term performance. Well, guess what I got him as a new client, in August of this year, right, as the market starts tanking. And within like, a month and a half, he’s he’s, you know, talking to me every like five days going? Well, this obviously is not keeping up with the s&p, this is a horrible portfolio, you know, and it’s like, Dude, you, you signed up to the very raw, like, perfectly wrong time. And we’re in a down market. Now. I can’t, I can’t, you know, fixed when you came into the portfolio, but you had, you know, it was funny to me that the client, not understanding that the market is going to do it, the market is going to do and I can’t spit out a return immediately, based off what’s going on in the market, if that makes sense. No,
Lee Hyder 7:52
it’s ironic, you say that I actually had almost an identical story with a client that came in in August. And then in October, he was down about 13%. You know, and immediately he was comparing some of the things he was doing on his own that were up. But number one, he wasn’t comparing apples to apples. I mean, he was only in our portfolio for about six weeks compared to you know, his other portfolio that he was in all year. But the irony of it was, by the end of the year, literally, I mean, it was like October 27, he was down 13%. But by the end of the year, he was up 1%. So literally in about six weeks, he had about a 13% swing in the portfolio. Now the sad part is, you know, many people are going to make a knee jerk decision and their portfolios down 13%. They get scared, they listen to the TV, the radio, the internet, they’re smart golfing buddies, and they make a very dangerous decision and say, well, the portfolio is not working. It’s not what you said it is and they get out. And in that case, had he done that he would have missed that 13% bump in literally of, you know, a five, six week period of time. Well,
Ryan Fleming 8:55
I view that as like, Hey, you don’t have a long term picture of how this is going to work over the long term when we make investment decisions. It has to be unemotional. It has to be long term. And there’s a long term track record there. That definitely works. I had another client that got in and he goes, Hey, well, the s&p was I think we finished this year at like, 25%. He started with us in April. And immediately he’s like, Well, you know, we didn’t outperform the s&p 500. And I was like, Well, you know, the s&p did this from the time you signed up till the end of the year, and it was like 11.3% During that same time period we did 14%. Right. You know, so, So in actuality, we outperformed, you know what he would have been in, but once again, clients don’t under they don’t get it man, they look at snapshots. I
Lee Hyder 9:45
think the hardest thing for clients really is setting the expectation. And you can show a client that you know, this particular portfolio and personally I kind of like to, you know, almost what I call sell or introduce the downside of a portfolio. meaning, if a client can’t tolerate the downside that this portfolio has produced in the past, then they’ll never achieve the return that they want. So the hardest thing for a client to do is really accept now they all say, oh, no, no, I understand there’s risk. And hey, in 2008, I tolerated, you know, the downside of the market. But it seems very funny that, you know, even if you just get maybe a small 10% correction in a portfolio, that all of a sudden they panic, they forget what they said, they forget, they were a long term investor portfolio
Ryan Fleming 10:30
doesn’t work. Yeah, it doesn’t work. Oh, my God. See, now, this is where you don’t understand pilots, though, Lee, and I need you to start understanding pilots, you know, I’m a pilot. So you’ve gotten to know me well, over the years, pilots are all type A, they’re all experts in everything. And they want all of the upside and none of the downside and want their cake and they want to eat it to
Lee Hyder 10:52
nothing, no matter what that if you can find it, you know, and when you when you find that portfolio, or that plane that’s only going to go up and never has to land. You know, let me know, I’ll I’ll sign up for that trip any day.
Ryan Fleming 11:03
But But isn’t it amazing that that’s what clients expect? Well, I think
Lee Hyder 11:07
you know, that the challenge is, there’s so much information out there today, you know, and it’s very dangerous, you’ve got the TV 24/7, you’ve got the radio, you’ve got the internet, you’ve got so called smart friends. And I’m always amazed at these, you know, they’re smart friends that, you know, they have the lifestyle that, you know, their friend will say, Well, geez, you know, my buddy is really smart. He’s got the big house, and he’s got the beautiful car, and he travels all over the world. Little does, you know, that same person comes into my office and borrowed half of his 401k. On alone, it’s got $20,000 on credit cards. So you got to be real careful where you take advice or who you point to to be that North Star to give you advice?
Ryan Fleming 11:47
Well, I think what I’ve learned is, I’m just going to determine who I want to work with and who I don’t want to work with, because I’ve watched so many horrible decisions made by pilots also, where they have unrealistic expectations, where they really don’t, you know, they don’t know what they don’t know, I recently had a client that wanted to take $900,000 out of his 401k to buy a house. So first off, he didn’t want to get a mortgage, which even at rates the way they are now I’d still want my money working for me somewhere else, right? Yeah, absolutely. He didn’t want to do that wanted to pay cash for it. And his plan was to take $900,000 out of his 401k. And he’s 55 years old. And I’m like, timeout, Brother, let’s let’s, let’s back up a little bit. First of all, this is a retirement account, you’re gonna get hit with a 10% penalty to even take money out, you know, let alone the bad decision of paying cash for a property. Right? Let alone you haven’t paid taxes on any of this money. It’s all tax deferred. And you know, even though he was the expert coming to me, all of a sudden, he’s like, oh, wait a second. Yeah,
Lee Hyder 12:53
I think I think the tightrope that, you know, sometimes we have to walk is, it appears people are really asking for advice. But I think sadly, a lot of them are not really asking for advice. They’re asking us to confirm what they think they want to do. And then when we bring to their attention, that it’s really probably not the most prudent or best decision to get them where they want to go, then it becomes a little resentful. And, you know, quite often at that point, they make bad decisions.
Ryan Fleming 13:19
Well, for sure. And I, I’m pretty honest, when I have my initial meeting with people, I say, this is the tough love program, you know, I’m going to tell you, if I think what you’re trying to do is not right, and I’m not, I’m not going to sugarcoat it. And maybe we’re not a good fit for each other. But I think more and more, and I’ve learned this from you, I’ve learned it from other advisors in the industry, that really, you are, when you have a meeting with a client, you’re looking to see how if this is going to be a good client, that they’re going to be coachable to make sure that they’re going to be able to understand how markets work. You can teach them and they have realistic expectations. How do you handle issues like that with clients?
Lee Hyder 13:59
Well, first, first of all, number one, I think the first thing you have to really do number one, as I’ve said a few moments ago is you’ve got to really set the expectations and are their expectations realistic or not. And then what’s a little different about I know how you run your practice and how we run our practice, is we have a philosophy, you know, we have a particular strategy, a philosophy that’s time tested over a long period of time that ultimately is going to give them the returns that that they’re seeking. The challenge that a lot of people have though, is you know, they don’t have an investment philosophy, their investment philosophy is well I want to make money. And then the question is, well, how are you going to do that? Well, I just want you to pick the good stuff, you know, so we really have to break it down. And as I know, You’ve written some books, I’ve written a few books I teach at universities as well. It really starts at an education. I mean, you know, our our core philosophy is not do what I say because I’m smarter than you. It’s let’s get into a conversation. Let me share with you my philosophy let me see if you have a philosophy and if not, let’s see if we can help you accept a philosophy that makes sense. And when we do that we’ll design a particular portfolio in your 401 K or your other investments that you can live with not only in the good times, because it’s certainly easy to be an investor when the markets doing well. But the real challenge, you know, when the, the rubber meets the road is when the market is going to vote, you know, volatility, you know, how does the client really deal with it, and to me, that’s the important thing and education tends to get them over that hump.
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Ryan Fleming 16:56
That is the case of greed versus fear. Like when the markets were having a big correction and 2022. You know, the far majority of my clients are still working and I go, this is great. Where’s your money at right now let’s go buy into this market at a you know, 20 30% discount, we make most of our money in a down market, we just don’t realize it. Well, the funny part is when there’s that dumpster fire out there, everybody’s running away from it, when they should, they should be running towards it. Right? They should be running towards it.
Lee Hyder 17:25
And as you say, a dumpster fire it. Yeah, I mean, I mean, really a good financial adviser is like a fireman. I mean, we run into the burning building, because that’s when some of these incredible opportunities are on sale. You know, and if you went to the supermarket, and if a steak used to cost you $15 a pound, but for some reason now it was selling for, you know, 799 a pound, I would assume you would probably fill up your cart with a lot of those items that you know, you’re going to use in the future. And it’s the same thing in the market, take advantage of down opportunities, don’t be fearful, that’s when people really, you know, make a significant amount of money in the market?
Ryan Fleming 17:59
Well, absolutely, we make that money in the down market, we just don’t realize it and I know clients know to buy low and sell high. I know they know that. But they just don’t do it. And emotions cause us to do the exact opposite. And what I find interesting is when the market started taking off again, here the last, you know, month or two of 2023, all of a sudden, all this money showed up, hey, can you get me in the market? Hey, can I got this to invest? Hey, I’ve been sitting on this, you know, $50,000 Can we get in the market? And it’s like, Well, where were you? You know, three months ago, right? I mean, because the message is out there, the messaging is out there. Clients just let their emotions drive their decisions, which doesn’t help them with investing.
Lee Hyder 18:40
One of the things I kind of pride myself on is I sometimes and maybe this is because I teach and maybe this is because I write boring books on investing is I try to find, you know, like metaphors or examples that really just are very simple, but they make sense. And one of the ones that I use with investors quite often as it relates to a down market and how to deal with it is you know, if like, here we are in Ohio, and even though we have no snow on the ground, you know, if you looked at some of my trees, you would wonder why I don’t take an axe to them, because they look dead. You know, the branches are brittle, there’s no leaves on them. And it just, they look like a dead tree. But we all know that, you know, you don’t cut a tree down in February because there’s no leaves on it and the branches are brittle. Now very honestly, you know that tree may not come back next year. But what has always happened. And you know, we used to have a peach tree in our backyard, you know, many many years ago. And the tree would go through periods of time where it was dormant and it didn’t produce the fruit that it used to. But then a year or two years later, all of a sudden we had a bumper crop and we were rewarded for not cutting the tree down and it’s the same thing in a portfolio. Portfolios go through periods they go through cycles, but that’s not a time to throw out the portfolio to cut the tree down and and look for a better nursery.
Ryan Fleming 19:57
Well, absolutely the Li and I’ve I’ve all always enjoyed your metaphors. Just you know, it makes something that’s going on in the market or something that we’re dealing with as advisors and you’ve always had a way to explain it where it makes sense. We’re like, Ah, okay, well, that’s great.
Lee Hyder 20:14
I’m not a big fan of your metaphors of old or chameleon, like, but we could we can work on that with you.
Ryan Fleming 20:20
Well, those aren’t metaphors. Those are just facts. Okay. All right.
Lee Hyder 20:24
I’m looking at my green wrinkled skin. You may have a point there and I know that chameleon Well, what
Ryan Fleming 20:29
are your only like, 45? Right. But yeah,
Lee Hyder 20:31
I’m almost double 45 You know what I’m actually believe it or not, and I’m sure your viewers are gonna say they can’t believe it either. And, you know, looking at this incredible video, no makeup, no surgery, but I’m actually going to be 68 in March. Perfect. It’s March 11. So if any of the viewers you know, you don’t want my address to send me a card or a gift or you know, anything, you know, where you know this could this chameleon would would certainly appreciate it.
Ryan Fleming 20:53
Well, and what let’s give Lee the props he deserves he’s down like 25 pounds. He’s looking great. I mean, you’ve really really taken a turn over the past year and just probably are more energetic and I’ve seen you in the past five energetic
Lee Hyder 21:08
Wow, that’s that’s that’s a new one too. I liked it. Yeah, it’s, it’s, you know, you get to a certain place in your life, you know, kind of like investing where you got to, you know, take an assessment of where you are and where you want to be and, you know, we’re sitting tight, we’re trying to take care of ourselves.
Speaker 2 21:26
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