Simply Money

Episode Transcript

Speaker 1 (00:05):
Tonight, is the economy running too hot again? And what
could that mean for inflation? You're listening disimply when you're
presented by all Worth Financial Amami Wagner along with Steve Ruby,
did we celebrate maybe a little prematurely? Right? We had
inflation north of nine percent? The Federal Reserve, our nation
central Bank, spent months and months laser focused on raising

(00:29):
interest rates in order to bring inflation down. And then
we thought, wow, we are to the point where we
are now lowering interest rates, and we thought maybe that
issue with the pesky inflation was the thing in the past.
Now we weren't the feds two percent goal, right, but
we were getting close. And now there's this kind of
sort of nagging feeling out there of are we going

(00:52):
to start to see inflation ticking back up? Again?

Speaker 2 (00:56):
Well, in short, hopefully not, but I think that's a
good starting point. You know, there's still predictions coming out here.
Early last week, traders were pricing in an eighty percent
chance of an interest rate cut at the end of
the year. Here on Friday, the chance dropped to a
coin flip fifty to fifty that we will see an
interest rate cuts. We're not talking about hikes here. Yeah,

(01:17):
because you know, inflation has taken off again, but a short.

Speaker 1 (01:21):
Amount of time from eighty percent down to fifty percent.

Speaker 2 (01:24):
Yeah, obviously something is driving that prediction in it being
a coin flip at this point.

Speaker 1 (01:31):
For another cut, I think investors it's interesting how investors
have reacted to this election. Initially it was like, great
Trump and we're looking at you know, all these sort
of favorable corporate policies, and as the result, you know,
markets went on a tear and then it's like it
took a few more days in maybe now they're starting

(01:52):
to say, well, but he is talking about tariffs, what
could that mean? Okay, from an inflation stand point, If
we're going to charge companies overseas more money to bring
their products here, who do you think is going to
pay for that? Right? And this is not a political

(02:12):
stance on this, This is simply how these things play
out from an economic standpoint. Most of the time, consumers
take this one on the chin. You will pay more
for things that come from outside of the US. That's
likely how that will play out.

Speaker 2 (02:27):
Yeah. A couple other things that would add towards inflationary
pressure would be if there really was a push to
deport millions of people who are currently working. You know,
these are workers maybe doing jobs that you and I
don't necessarily want to do. But we saw it in
Florida for example, where there was there was people that
migrated in pushed out, and a bunch of food died

(02:48):
in the fields.

Speaker 1 (02:49):
Yeah, not enough workers, right, And also you know what
we had during the pandemic was a lot of pressure
upward pressure on wages, right. I mean I remember thinking
back to wait a second, what minimum wage? I remember
when I was first working and again stating myself, but
you know, I don't think it was like okay, not
that bad, but what cloth And I'm like, wow, Chipoti's

(03:13):
paying twenty dollars an hour or eighteen dollars, Like that's amazing,
you know. And so a lot of these workers coming
from other countries were willing to work for lower salaries.
When that goes away, you know, then you're going to
have to you know, or businesses are going to have
to pay more for talent for workers, and as a result,
they're going to pass on those costs to you the consumer.

(03:36):
So it's almost like, as a few more weeks have
gone by post election, the question kind of this lingering
question out there of wait a second, could these potential
policies that have been talked about on the campaign trail
actually lend themselves to more pressure on inflation? And as
the result, should the Federal Reserve kind of pump the

(03:58):
brakes on lowering interest rates? You know? And I think
there's not enough information out there quite yet. But as
the result, I think what you're seeing is these predictions
starting to slide from yep, we're looking at another likely
cut to maybe not so fast.

Speaker 2 (04:12):
And to be fair, I mean, remember that money isn't
red or blue, it's green. So you know, we're talking
about the facts that you know, tariffs have an impact
on prices. This is a fact. Also last week when
we had Chief Investment Officer Andy Stout on, you know,
he gave his two cents as to why the markets
are taking off, and we talked about these exact things tariffs, trap,

(04:36):
tax cuts, and deportations in deregulation, and yeah, that's the
thing I wanted to bring up because deregulation on the
flip side is probably one of the areas that drove
the markets forward as aggressively as it did. So when
we pair all of this together. I mean, so far
we've only highlighted the fact that three of these things
are inflationary. Yeah, one is a positive for the economy,

(04:58):
which the market have reacted to very quickly. Now when
the rest of it settles in, we see a little bit,
a little bit of volatility.

Speaker 1 (05:06):
Not only that we're still spending, right, and as the
result of us still spending, that's also an upward pressure.
The October you're talking about, the consumer is still spending. Yes, yeah,
that's true. I'm not talking about the government, though. The
government is also sales spending. That just remain that's a
daily But the October retail Sales report came out Friday,
and it's showing that we're spending over the last couple

(05:28):
of months. In fact, eight of the report's thirteen categories
that it looks at sall an increase month over month.
We're buying electronics, we're buying cars, and record numbers and
seeing its strongest gains in three months. So you always wonder, Okay,
as the consumer starts to feel pressure, you start to

(05:49):
worry about your job, you start to fear of recession,
you start to pull back on spending. If we're not
there and it appears we're not. Is this yet an
another potentially inflationary pressure to add to the mix?

Speaker 2 (06:05):
Yeah? Sure, I mean there's obviously a lot of moving
parts that the Fed has to look at when they
make these decisions. You know, when it comes to spending
and the stock market companies, they want an environment where
it costs less to do business, So they're also really
looking for interest rates to go down because then borrowing
cost goes down and there's more opportunity to spend and

(06:28):
invest in the company. So it's TBD.

Speaker 1 (06:33):
You're listening to simply money presented by all Worth Financial.
I meanywag. You're a long with Steve Ruby as we
try to digest what the Federal Reserve is also trying
to digest right now. We have seen this, I think
so many times over the past few years. It looked
like the Fed was surely going to take one step,
and then a few days before vote, a couple of

(06:53):
weeks before vote, whatever, that looks like, new data came
in and it completely changed the trajectory of where we
thought things were going. We were looking at the likelihood
of another interest rate cut in December. Now to your points,
you've we've got a coin flip, and there will be
more data that comes out over the next couple of
weeks which will hopefully help to point us in the

(07:14):
direction that the Fed could be going. Why do you
care about all this when we talk about the economy, Well, listen,
if these companies aren't happy, if these companies are worried
about inflation, if they're worried about the cost to borrow money,
well the market could drop. And that means your four
oh one K is going to feel that pressure too.
And if I don't need to remind anyone, but your

(07:35):
four O one K has been feeling the opposite of
pressure over the last couple of years. It's been going gangbusters.

Speaker 2 (07:41):
Yeah, the market's been in an absolute tear. So if
you've been on the sidelines, sitting in cash due to
to fear of some kind, you've really missed out. If
you're hopping back in because of greed, we don't know
when the markets are going to go back down, but
at some point they will. They've they've been on a tear.
Our four to one k's have been growing. Your four
one should be growing unless you're again sitting on the sidelines.

(08:03):
You know, we told you pre election to expect some
volatility post election, and.

Speaker 1 (08:09):
That means markets up as well as down.

Speaker 2 (08:11):
Yeah, volatility is you know, I think it comes with
a negative connotation that just means the markets are going
to drop. Volatility means up too, ups and down swings
in the market, and that's exactly what we're seeing right now.

Speaker 1 (08:24):
We're also seeing health stocks getting hammered. Why President elect
Donald Trump made the decision to nominate RFK Junior and
as the result of that right as the Department of
Health and Human Services, and as the result of that,
he has had some very vocal opinions. He's a vaccine skeptic,

(08:46):
he has some opinions that are kind of the opposite
of maybe what you would expect in this position. And
as the result, you have this entire sector of healthcare
stocks that are like, wait a second, what's going to
happen here? That uncertainty is playing out, and I think
it just goes to underscore the larger conversation that we
have time and time again, which is you never know

(09:08):
what's coming toward a certain sector, toward a certain certain company.
So to go all in on any one thing is
going to It's going to be so much volatility that
you're not going to be able to sleep at night,
or you shouldn't be able to sleep at night. It's
I mean, you look back to the pandemic and I
know people who are like, I'm going all in on
these companies that are producing vaccines because they're only going

(09:29):
to go up from here. Right, you could have gone
all in at that time, not seeing this one coming
and as a result feeling like you got punched in
the gup.

Speaker 2 (09:37):
Right now, you got kicked in the teeth, punched in
the web, both at the same time. Yeah, So that
is an example of some post election volatility. Another one
is Tesla in and of itself on the flip side. Yeah,
elon muscowll buddy buddy with Trump here, there's been some
massive increases in the value of Tesla stock.

Speaker 1 (09:56):
Yeah again, diversity, it's all volatility. It's it's down swings,
it's upswings, and it's really just trying to absorb everything, right,
to metabolize all the new information coming from you know,
President elect Trump, what his plans are, who he's putting
into place. You know, markets are trying to look out

(10:17):
and say on the horizon and say, okay, what does
this mean and what does that mean? And I think
for all of it, it's just short term volatility. There
were people who before the election were saying, pull me out,
I want to go to all cash, right, and if
you did, you missed that brilliant upswing those first few
days you were, you know, really hurting from that. But
there's going to be volatility in the short term.

Speaker 2 (10:37):
And if you have a diversified mix within your portfolio,
then it gives you an opportunity to rebalance during volatility. Yeah,
in this example, and this is very honed in, but
let's say you had Tesla and healthcare stocks. Now is
a perfect opportunity to maybe sell some of your Tesla,
to buy some of the healthcare stocks while they're down,
because healthcare stocks aren't always going to be down, just

(10:58):
like in COVID they were on a tear. Tesla is
definitely volatile stock, but the principle remains the same. When
you have a diversified mix, sometimes some of your investments
are going to be up, sometimes some are going to
be down. When you rebalance your buying low and selling high,
which is exactly what you want to do.

Speaker 1 (11:13):
Unnatural, right, you're telling people to sell a stock that's
on a tear right now, and it's that fear component
and that greed component.

Speaker 2 (11:22):
Right.

Speaker 1 (11:22):
Wait, I don't want to Why would I sell something
that's going so doing so well for something that's not
doing so I've had people.

Speaker 2 (11:29):
Come into meetings and they bring a little list of
like three or four different tickers, like why we have
this one, this one, and this one. They're all down
right now. It's like, well, those that's some of the
bond side of your portfolio. Interest rates been going up,
we need that as a cushion to soften the blow
when when stocks go down at some point in the
future or when interest rates go down, those bond prices
are going to go back up. So the investor sees
it as hey, this one's losing I should get rid

(11:51):
of it. But the money manager or the financial planner
sees it as an opportunity. Yes, So you know, keep
in mind there are plenty of opportunities during volatile whether
things are going up or down.

Speaker 1 (12:01):
I come across investors all the time who are maybe
going it alone for years, you know, in that accumulation phase,
and when I ask, okay, like this is what you
have in your four one K how did you choose
these particular investments. Well, I just looked at it, like
top five that you know based on what performance based
on performance in the past year, and like, oh my goodness,
you know, could have gotten hammered on this one. This

(12:23):
is not true diversification. It's hard to figure it out
on your own. I'm not saying that you can't, but
I don't think that's the way to look at it.
I'm gonna, you know, look at my flour one k
here's the top few things that have been doing well lately.
I'm going to go with those, right. It does it's
not diversification. Here's the all Worth advice, diversify, Diversify diversify.
Coming up next, why some investors could get stuck with

(12:46):
a big tax bill. How to figure out if this
could be you. You're listening to Simply Money, presented by
all Worth Financial here in fifty five KRC, the talk station.
You're listening to Simply Money, because anybody all Worth Financial,
I mean, you Wagner along with Steve Ribe. If you
can't listen to our show every single night, well you
don't have to miss the thing we talk about. We've

(13:07):
got a daily podcast for you. Just search simply money.
It's on the iHeart app or wherever you get your podcasts.
There is a cycle that I would say that's very
familiar to Cincinnati sports fans, and it goes something like this.
At this point in the Bengals season, we start to
ask ourselves what do pitchers report to red straining camp?

(13:29):
And then usually after like the first week of baseball,
we start talking about the Bengals. It's just how it
works around here. So I think it makes sense that
we're talking about the Reds right now because a lot
of us might be dunnish with the Bengals.

Speaker 2 (13:42):
Sure, sure, and some sports business news for you. You're
not going to see Red games Reds games on Bally
Sports Ohio. Next year. MLB will be producing and distributing
the game. So if you've watched the Reds via cable
or satellite provider those games, they're still going to be
available for you to watch and that same provider in
twenty twenty five, so that's not changing. For existing TV

(14:02):
packages that include fan dual sports, that's what it's going
to be on. I mean, we've talked about it's frustrating,
isn't it. Amy has this look on her face.

Speaker 1 (14:11):
It's just over shaking my head. It was like years
ago on the show, everyone was talking about cutting the cord.
It was ridiculous how much we were forced to pay
for cable, and so we were going this way of streaming.
And now it's like, Okay, you've got to have Netflix. Okay,
you've got to have Amazon Prime, and you've got to
have a paramount to watch Yellowstone and now you have

(14:33):
to have another plan in order to just watch the
hometown baseball team. Sure apparently similar to other clubs, right,
fans here are going to have the option to purchase
only Reds games or bundle a local package with MLBtv
this year. These packages, and this is just an example,

(14:54):
if you were Padres, Rockies or Diamondbacks twenty bucks a month,
one hundred bucks for the season, or you you could
watch all MLB games and you're going to pay two
hundred dollars for this season to change to change.

Speaker 2 (15:08):
To two things, there is a small silver lining. They're
ending blackouts for fans so you'll actually be able to
watch the games. And two, I think this is still continuing,
but I have T Mobile as a provider for my phone,
and I get free MLB really yeah, I forgot last year,
I missed the deadline. So really stupid about that one
because there was games I wanted to watch and I couldn't.

(15:30):
But that's an opportunity to save a couple hundred bucks
a month and be able to stream my sports teams
up in Cleveland.

Speaker 1 (15:38):
Your sports teams aren't any better than our sports teams.

Speaker 2 (15:40):
Guardians and the Cabs Calves are the best in the NBA.

Speaker 1 (15:43):
Righta, all right? Fifteen to talking about your Browns.

Speaker 2 (15:47):
Oh, they're terrible and they're not mine anymore. I switched
to the Bengals just in time for them to stink.

Speaker 1 (15:51):
Thank you.

Speaker 2 (15:52):
Oh you're not welcome.

Speaker 1 (15:55):
All right, Well, there will be more information out about
where and how you'll be able to watch the Reds
when we get closer to the twenty twenty five season.
For those of you who are counting down, stay tuned.
No question. The stock market has been absolutely on fire
for at least a year, about two years now. This
great ride for stocks could come with an unexpected tax

(16:19):
bill if you're not paying close attention. And also, you
have mutual funds in a certain kind of account.

Speaker 2 (16:26):
Yeah, specifically mutual fund capital gains paying out in an
after tax brokerage account. This means you're holding them outside
of a four to one K fire a retirement account.
When stock investors sell their shares for a profit, they
typically come away with a capital gain. Assuming they hold
the shares in a tax will brokerage account for more

(16:48):
than a year. There's a certain percentage you have to
pay based on your earnings. It can be worse for
people that actually on stock through mutual funds because they
may be taxed on the funds trading profits even though you,
as somebody holding that mutual fund, didn't sell any shares.
I've seen this over the span of my career. People

(17:08):
are like, even when the markets are down, I had
a tax event in my brokerage account. Why did that happen?

Speaker 1 (17:15):
This is confusing, And I was just thinking about the
fact that we recently on Asked, the advisor had a
question about what's the difference between mutual funds and ETFs,
And I don't know that we got to the depth
of talking about it as we are here, but any ETFs,
there is a component of that that's not creating any
long term gains within those within those investments. Right, mutual

(17:39):
funds are set up differently, and they can throw off
large capital gains in years like this, and most funds
do what they can to mitigate them. But we're we're
starting to see that some of these funds are throwing
out tax bills that are super catching people off guard.
And by the way, the timing of these tax bills
when you are just learning about this late November early December,

(18:02):
and maybe you have less time than to sell losses
to try to harvest those gains, you could be in front,
not so great surprise when you have to file your taxes.

Speaker 2 (18:12):
In a world where exchange traded funds exist, you really
shouldn't be holding mutual funds in a taxable account. Unfortunately,
I do see this in the industry. It firms that
aren't employing fiduciary financial planners. I'm talking about those that
are on commissions and they sell you m loaded mutual

(18:33):
funds for a kickback that also have high expense ratios
in taxable accounts, or they're not actually doing any tax
planning or tax lost harvesting, and here you are sitting
on a pile of money that you're like, Okay, well
it did grow this year. I'm happy I didn't sell
anything Why am I getting a tax BILS because your
advisor in quotation sold you a mutual fund inside a
taxable account and they probably shouldn't have done that again,

(18:55):
because ETFs exist. A way to combat this is don't
invest in mutual funds inside of a tax wile account.
There's an ETF. The way they're set up is, especially
an indexed ETF where it doesn't take a lot of
trading inside of that fund itself. The way they're set
up will not flow through taxes capital gains taxes to
you if you don't sell.

Speaker 1 (19:17):
I think it's important to understand not only what you're
invested in, but how the different kinds of accounts could
be impacted by these investments. Ask questions when you're working
with an advisor, and I think that's an excellent point.
If you're not working with the fiduciary, they may not
be pointing these things out to you. Here's the all
Worth advice. Please always consider the tax implications when it

(19:37):
comes to your investments. Thanks for listening. Coming up next
the NKU Norris take on your UC Bearcats. You've been
listening to Simply Money, presented by all Worth Financial here
on fifty five KRC, the talk station