Money Rehab with Nicole Lapin
What Professional Investors Are Doing Right Now with Kevin Simpson
Tue, 25 Mar 2025
Earliest this month, the stock market had its worst day in years. Is this the beginning of the recession we’ve been bracing for? That’s just part of what Nicole covers today with Kevin Simpson, the Founder and Chief Executive Officer of Capital Wealth Planning, an investment advisory firm with $10 billion of assets under management. Kevin and Nicole cover what moves pro investors make during stock market crashes, and where he’s seeing opportunities right now. Plus, Kevin gives his take on the stocks that are causing the biggest stir on The Street. Learn more about Kevin's work here: https://kevinsimpson.com/ All investing involves the risk of loss, including loss of principal. Brokerage services for US-listed, registered securities, options and bonds in a self-directed account are offered by Open to the Public Investing, member FINRA & SIPC. Public Investing offers a High-Yield Cash Account where funds from this account are automatically deposited into partner banks where they earn interest and are eligible for FDIC insurance; Public Investing is not a bank. Cryptocurrency trading services are offered by Bakkt Crypto Solutions, LLC (NMLS ID 1890144), which is licensed to engage in virtual currency business activity by the NYSDFS. Cryptocurrency is highly speculative, involves a high degree of risk, and has the potential for loss of the entire amount of an investment. Cryptocurrency holdings are not protected by the FDIC or SIPC. Treasury accounts offering 6 months T-Bills are offered by Jiko Securities, Inc.,member FINRA & SIPC. Securities in your account are protected up to $500,000. For details: www.sipc.org. Banking services and the Bank Accounts are provided by Jiko Bank, a division of Mid- Central National Bank. For U.S. Investments in T-bills: Not FDIC Insured; No Bank Guarantee; May Lose Value. Treasuries risk disclosures, see https://jiko.io/docs/treasuries_risk_disclosure.pdf. See public.com/#disclosures-main.
Chapter 1: How do professional investors react to market downturns?
It's so much about emotions, and that's the problem. For better or for worse, I've been in this industry for over three decades. And in the old days, we would experience one or two 10% pullbacks, almost like clockwork. And it seemed like every other year, we'd have a 20% pullback. Very often, it wouldn't be in the Gregarion calendar where you'd have it start to finish, peak to trough 20% downturn.
But throughout the course of a year, it was very commonplace. So I feel like today, maybe we've been spoiled because the past two years were so good. But I think investors are freaking out a little bit. But we're only down maybe 10%, if that. Some stocks, certainly more so than others. But on a grander scale, I mean, I think things are OK.
So you're saying historically it's gone down more gradually and now it just feels like more whiplash. We need Valium looking at the market.
No, no, we had the same type of whiplash. What we didn't have was 24 hour social media. So we didn't know what was happening all the time. I mean, Even from a Fed perspective, if the Fed cut rates or they would hike rates, you know, we didn't know about it for a couple of days, maybe a week until we read it in the Wall Street Journal.
The problem when we have volatility today is that we just feel it so intensely because we can't escape it. And that's fine. That's OK. It's just how do we mentally overcome markets when they turn down? And what do we do about it to make successful investment decisions?
You mentioned the correction, 10%. That's not a recession, to be clear.
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Chapter 2: Is a recession imminent or just a market correction?
No, no. And you're going to hear words like recession and stagflation and very, very scary things out there. But the resiliency of the labor market makes me a lot less concerned about a recession. Someday we'll have them. It's part of a normal economic cycle. When you look at the economy right now, we still have a GDP that's expanding, even though it's not expanding rapidly.
Again, the labor market is what I'm hanging my hat on as being something that's super resilient. We have CPI and PPI that didn't really freak anyone out from an inflation standpoint. And you have a Fed that last week was saying that they're there to step in with rate cuts if necessary, looking at both the labor market inflation and the broader economy. So you have a Fed put.
Problem is you don't have a Fed put here at these levels. It could be another 10 percent down before they kind of step in with the white horses. So we're not we're not through the we're not through the end of this yet because there's so much uncertainty. But I'm not overly concerned just yet about any of the real problems. brand long-term grind out bear markets.
So the white horses being rate cuts, of course. Do you think we're in this as a blip or are there going to be more bad days ahead? Have we hit the bottom yet? I think that's what a lot of people want to know.
No, I don't think we've hit the bottom, but I don't necessarily care from the perspective of thinking about it like this way. Maybe we're halfway done. So if you have a 20% roll down and then you have a bear market like pullback, which again isn't the end of the world considering how much things have gone up. If we're halfway through it, you can start to invest a little bit now.
and continue to do so over the course of the next year, thinking that dollar cost averaging will allow you to kind of lean into that volatility. And if we're wrong, and this is the bottom, well, great, we've put some money to work here.
The biggest mistake that any investor can make, even us as professionals, is to start thinking that we can time the market, that we wanna be so clever that we wanna kind of maybe get out now and try to call a bottom, because it's very, very difficult to do that. And I'm certainly not gonna try.
OK, you're way more chill than I was expecting you to be. So you didn't panic. It sounds like a lot of people did panic, especially in the really, really bad day on March 10th. What did you do? Did you buy more? I know you buy more dividend stocks.
We did. I mean, we bought J.P. Morgan, which was, again, kind of thinking that we're talking here on Monday and it's a week or so removed. But J.P. Morgan was down 17 percent. I mean, we bought more. A really good company. We actually bought some of the Qs.
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Chapter 3: What investment opportunities are available during a dip?
Very, very modest hedging. Yeah, I don't want to overstate it as being something that's going to really protect the downside, but it does a little bit and it helps to smooth out the ride. And maybe the next month or two, we can just dedicate a show and talking about what covered call writing is because let's play like let's play out the volatility and say, OK, well, we have a new administration.
Things were kind of calm for two years. Now, all of a sudden we have a constant overload of information that's causing this volatility. Maybe that continues for the next couple of years. In a range bound market, convert calls can be a really helpful way to buffer some of that volatility and also generate a little cashflow.
I mean, that's the cool part about this, right? If you did have cash on the sidelines, and some people are like, okay, I had cash on the sidelines. Now there's a dip. Now I have no more cash. So we can't buy more. But dividend stocks are now having a moment. There's so much more discussion about dividend stocks.
I think in any market downturn, people want to get a dividend, which is basically a little present from a company in the form of cash or if you are in a drip program, it's reinvested into the stock. Are you having an I told you so moment because you have been talking about this, whether it's a downturn or not, this is your thing.
No, I had my, I told you some moment on dividend paying stocks in like the year 2000 and the early 2000s. I'll tell you a very brief, funny story. But first the idea that you're mentioning dividends and dividend reinvestment and the power of compounding, that's true wealth creation. I mean, that's how we become really, really rich over time. But I remember in 1998, I was fired by someone.
This was during the dot-com bubble. It was a really sweet, like nice lady that said she wouldn't refer me to her worst enemy. And I was like, that's pretty harsh. And the reason was I bought Merck, M-R-K. I put her in an investment that I thought was a quality dividend payer in 1998, Merck.
And she wanted to own Lucent Technologies, which was a much more high-flying tech stock, very similar to some of the medium or dot-com stocks that went by the wayside. In fact, this was one that did just that. But it was like a $100 stock. They didn't really make any money. And I thought that it was a little bit outside of her risk profile. And maybe the stock was around $100, $105.
And within a year, I think it went down to like $65. And I felt very much like that was my aha moment in those early times. But yeah, dividend stocks never really go out of favor. They just become less popular when NVIDIA doubles every day. And then all of a sudden value plays a little bit more of an important role in people's portfolios.
Yeah, and if you want to take advantage of that compound effect, if you are buying a share of something, you can typically just right there on an app, just click reinvest dividends or not. And so that's what a drip program essentially is. When you were on the show in August, Kevin, we had a particularly bad day then. I feel like we always meet in these episodes. Not so pleasant times.
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Chapter 4: Are dividend stocks a safe bet in volatile markets?
As we're building portfolios, when we're newer to investing, we don't have that luxury all the time. So I think that the lesson of dividend reinvestment and securing a drip is something that I've literally practiced for over 30 years. There's nothing really that... I would own it. That wouldn't give me that dividend reinvestment ability for my investment portfolio. And I will give you a statistic.
I know no one likes to hear stats, but since 1926, so for almost 100 years, the S&P 500 has generated 10.2% per year, which is a great return. That's why we invest. That's why you teach people so wonderfully in the way that you do to get them motivated to start investing. 10.2% a year is really, really powerful.
Of that return for almost 100 years, 39% of it, almost 40% comes from dividends and distributions reinvested. If the market's up 30%, we feel like geniuses. If it's down 30%, you and I are probably talking when you jump off a bridge or at least we feel like we might want to. But overall, it's that power of dollar cost averaging, compounding and dividend reinvestment that is the secret to investing.
I mean, it definitely helps increase what you have in the market. And we know that time in the market is better than timing the market. Although we do feel like, you know, we might miss a blip because in theory, we know buy low, sell high, obviously. But when it's low, we get scared. Like, is it ever going to end?
And when you have cash on the sidelines, you also think, well, is it just going to keep going up? And so now I need to put my money to work. These are the plights of the retail investor, which is, I think, you've euphemism for just folks like us that don't have all the Bloomberg terminals and other fancy technicals that you guys have.
Don't be fooled by our multiple screens. You know, it's very, very hard to separate that emotion from it. I mean, we have to think of everything as a math equation. We look for companies that are profitable businesses, and if they can earn more money next year than they did this year, in all likelihood, their share price will trend in the right direction over time. Investing is really easy.
But the application of trading, knowing when to buy, when to sell, when to move in, when to kind of dial back a little bit, that part can be just incredibly emotional. And if you let the emotions bleed into the decisions, that's when you're more apt to make a mistake. So for us, it's always thinking like, well, if it's down 10%, we'll put some money to work.
If it's down 20, we'll put a lot more to work. And that's a hard thing to separate the emotion from it.
For sure. Yeah. Hold on to your wallets. Money Rehab will be right back. You know what I say about financial progress? Every step, even baby steps, get you closer to the finish line of your financial goals. When you open a time checking account, you are one step closer to a better financial future.
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Chapter 5: How do experts like Kevin Simpson view market timing?
That's my favorite stock. I mean, I'm absolutely bullish. It had a 20-day run where it just seemed like it couldn't go down, and it definitely got higher than the valuation deserved and warranted. Now that it's pulled back, it's absolutely a buy. The reason it's pulled back is because investors are fearful of advertising pullbacks, which would affect Meta's profitability.
But from a Mag7 valuation standpoint, maybe NVIDIA is close, but this is very, very reasonably priced. They pay a dividend now, which is why we like it. They just had a modest dividend increase recently. For the past three years, they've been buying back shares, so they've reduced the float. This is also a stock that's getting into hardware to compete with Apple.
I wear the Meta Ray-Bans, and I swear by them. So not that that's a reason to buy a stock, but they're super cool.
Okay. I didn't know that people were actually wearing them, but good to know. How about NVIDIA?
So NVIDIA also a pretty good buying opportunity here. The problem is everyone already owns it. And you think like, gee, it was just 150. Now it's 110 or so. Should we buy more? Can it go to 90? Can it go to 80? It could. It could.
So the thought process there is, again, you're just trying to continue to buy it at valuations that make a lot more sense because looking at their earnings, people get freaked out because it's not 200% growth. But 30 to 60% growth is really, really good. You know, Apple's growth is maybe 9%. NVIDIA's growth is probably 20% to 30% when you kind of take away some of the hype.
And this is a CEO that has this pulse on what's happening with the future. I wish they paid more of a dividend. They do pay one penny a quarter. To me, that's a rounding error down to zero. But for anyone on the planet besides me that doesn't own it, you can certainly start buying shares here at this level.
Why the heck do they even give a penny a quarter?
Because dividend managers can then say it pays a dividend. They can put it in their strategy. I think that's cheating.
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Chapter 6: What is Kevin Simpson's take on current stock picks?
One we didn't talk about last time was FedEx. The company just cut full year results because of uncertainty in the economy and also shipping because of tariff concerns. What do you think about FedEx?
If you wanted to roll the dice and you want to be a speculator that on April 2nd, when we have the big tariff reciprocal day and we find out that we were just kidding, then you're going to see a big bounce in FedEx and probably UPS because FedEx Why wouldn't you?
If you believe that there will be some type of tariffs, maybe not as massive as the headlines are suggesting, but you're still concerned about tariffs as a reality, you may want to hold off on FedEx. We used to own UPS. We haven't owned it in about two years and probably haven't owned FedEx in about six or seven years, although it did really, really well for a stretch recently.
I think I would probably stay away from it until we get a little bit more clarity next month on tariffs.
I don't know. My thought process around it is that it's a negotiating tactic that President Trump can't just come out and say, just kidding, psych, no tariffs. He's going to lose his bargaining power. What do you think?
I agree with you.
Okay. You're not saying that because you want to come back.
I just think about 2018. We had a little bit of a peek into the playbook. You have a reasonable negotiating stance when you put a big tariff out there and all you can do is negotiate down. You can't start at zero and negotiate up. In 2018, there were lots of things with the tariffs that were exceptions or exemptions and things could really flow through.
I think the Apple iPhone was probably one of them back in 2018. But there was a 20% pull down in the stock market at that point. The Fed was actually in a rate hiking cycle at that moment. We're in much better shape here, I think, than we were from an economic standpoint than we were in 2018. So when you think of tariffs, and again, like anything political, you're just like one side or the other.
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