Kersten Wealth Management Group - Money Sense 2-15-25

Episode Transcript

Speaker 1 (00:00):
Hello, and welcome to Money Central, listening to the advisors
of Kirsten Wealth Manager Group, Kevin Kirsten and Brad Kirstin.
Happy to be with you today as we work through
the breakneck speed of the Trump administration Brad, and then
the market's response to it as well. Really seems like
the market has had some days where I think it's

(00:21):
pretty telling. You look at the day a couple of
days ago. This really didn't have anything to do with
Trump policy. But the CPI report came out a little
bit hotter and then expected and we'll kind of explain
why here in a minute, but that's the inflation report,
and the market, the futures went down, the market was
a little bit spooked in the morning, and there's this

(00:41):
gradual recovery all day fallabay, a recovery the next day.
I think those are encouraging days when you have that
sort of headline news that isn't so great, and then
the market coming in and I think a lot of
people are asking these questions because Trump is working so fast,
and it seems you know, what's going to happen, what's
going on? How does this affect my portfolio? So I

(01:01):
think the market is your that's your tell. That's your tell.
And yes, we've had some down days, don't get me wrong.
And we're not currently at an all time high, although
we're very close, very close. But at the same time,
I'm worried about tariffs. Well, the market would tell you
if it's worried about tariffs. Okay, even when tariff news

(01:21):
comes out, we're gonna have a big one on on Thursday.
There's gonna be a whole announcement on reciprocal tariffs. If
another country has a tariff at a certain percentage, we're
gonna do the same. Good At the same time, the
market is not worried about it. It's up on Thursday.
I like the term that they are using reciprocal tariffs
because it's I think it surprises a lot of people.
I think it surprises a lot of people to know

(01:42):
that when you're using that term, it says, wait a minute,
they're already doing the same thing to us, right, And
so I think in the end, and this is obviously
positive for markets, we end up with no tariffs. Yeah,
she's like, well, what's the point You're doing twenty percent
on us, We're doing twenty percent on you. You know,
or or I mean are some like China is for

(02:02):
autos is the tariff is one hundred percent for ours
going there and we have nothing coming here. Well, if
we say we're gonna do one hundred and they say
they go, well, they'll go down. If we go down,
we may end up with nothing and they'll end up
at twenty five. I think we probably could live with that, right,
But it started with one hundred, right, And so these

(02:23):
these countries are acting all appalled at the moment that
we're doing this, but they've been doing it for years.
And it's the same thing with spending in NATO and USAID,
the Foreign aid. What do you mean you're gonna stop
giving us free money? I mean, this is the the
every country, every place in the world. This is the
deadbeat child living in the basement that you finally tell

(02:45):
that you have to go out and get a job. Well,
it's the same thing we're telling these countries you have
to go out and get a job and support yourselves.
And they're mad about it. And there's even some of
the contracts that DOGE is finding that we're supposed to
go for a year or two and gone on for
ten and the Treasury keeps paying. I mean, what are
those what are those people gonna say, I mean, you
haven't done any work, you're supposed to do work for

(03:08):
six months, and you've paid you for six years. We're
just gonna go ahead and stop paying that. What gripe
could you possibly have? So let's look at the overall
markets right now, SMP five hundred up three percent on
the year. That's pretty good. You're only six weeks into
the year. Looking at leaders and laggards. Still have financials
in healthcare BRAD leading the way six point three and

(03:28):
six point one financials in healthcare perspectively, materials up five
point four. How about tech minus a half a percent
year to date? Communication services up seven point three. That's
led by Facebook. Yeah, Facebook on quite a run. I
think it's twelve or thirteen straight days in a row
that it's positive. Look at large cap foreign BRAD, large

(03:51):
cap Foreign up six percent on the year. If you
look at the asset classes on the year, MidCap growth
is the leader at eight point three. So the tech
that I'm talking about year to date that's negative. That's
large cap tech. Yeah, okay, because MidCap growth is up
eight point three. So there is areas of the technology
space that is doing well. In fact, if you look

(04:12):
at the equally weighted technology sector within the Nasdaq, that
is up on the year. Yeah, while in the market,
while the Nasdaq one hundred overall, which is market cap weighted,
is down. So you also see this big really it's
a big dichotomy. Bra when you have the two best
asset classes on the year are mid cap growth and

(04:36):
large cap value. It'd be tough to find a year
where those were the two top asset classes because they're
so very, very different, but both were left behind for
the last eighteen months. And so as the market rally
just kind of shifts, broadens out, but also just kind
of shifts. You're taking from one area where things have
done really well and adding to some things that have

(04:57):
underperformed a little bit. And when you look at earnings
and valuations, there's a reason for it. Well, people wouldn't think,
you know, going back to the large cap foreign up
six percent. Europe alone, if you just look at Europe
large caps are up nine percent on the year, you
would not have guessed. And this is where people get
the idea right in the investment wrong that we always
talk about Trump's going to be really good for Europe. Well,

(05:21):
how would that be. He's gonna, you know, put the
screws on him in terms of tariffs. Well, yesterday Putin's
coming to the table to negotiate on Ukraine. European stocks
are up big on that. So there was a there
was a discount to European stocks because they didn't know
what was going to happen with Putin and Ukraine and war.

(05:41):
And so there's a lot more that goes into determining
whether something is fully valued, undervalued, and when when it's
going to move based on presidential politics. So if you
look at the the end, the potential end for the
fighting and in a Land for peace deal, that should
certainly help Europe's economy in stock more and recent strength
in Europe is partly attributable to that, So you know,

(06:04):
pay attention to that. Because European stocks are very very cheap,
they don't have much tech exposure. Only one percent of
GDP growth comes from that. But the discount compared to
the S and P in terms of valuations is thirty
five percent, the largest in history. So I think keep
that in mind. The same goes from from other countries
where if you if you follow traditional media, they'll say

(06:27):
there's going to be a trade war with China. That
is worrisome. Well, the market's not worried about it. It's
within a percent of an all time high, up more
than three percent on the year. And what about China.
China is up eleven point three percent on the year
if we look at their large cap index. So it's
not worried about it. Why because China is trading at
a discount because of their closed off markets and policies,

(06:50):
and will likely happen if the tariff threat is out
there is there'll be some meetings with China. It'll be
a more open and free market. And the market is
right now just starting to take that deeply discounted market
and start to move it a little bit because maybe
maybe the end is near for China being an uninvestable market. Yeah,
and hope not hope, Well, I do think hopefully because

(07:13):
I certainly believe in diversified portfolios. But if we see
this concentration coming to an end, Okay, is it good?
Is it bad? You know, I certainly think if investors
were allocated correctly, because if you look at this concentration
in the megacap seven and the outperformance there, and you
look at previous times that came to an end, you

(07:33):
could potentially get nervous. You look at the U ninety
eight ninety nine was the last time we had this
much concentration a five year run. Were the SMP or
just large cap growth in general outperformed. It's took at
last three So the percentage of stocks in the S
and P five hundred that did better than the S
and P five hundred and twenty twenty four was the

(07:54):
lowest ever twenty six percent. Twenty six percent. So what
one hundred and twenty five stocks roughly beat the S
and P hasn't been that low. Twenty twenty three was
pretty low as well, two consecutive years. Last time we
had two consecutive years this low ninety eight ninety nine. Now,
first off, you might say, oh boy, I should get

(08:15):
nervous because two thousand and two thousand and two were terrible.
Depend on what kind of investor you were, Yeah, were
you a diversified investor that had large cap value, small
cap value, MidCap value in international? You probably only lost money
in the one last year, one year, and your total
for those three years would have been positive. If you
were in. Small cap value was the best, but large
cap value was positive each of the first two years,

(08:37):
And so you went into twenty twenty two probably up
twenty five percent from that peak of the dot com bubble.
So ninety eight ninety nine people might get nervous. NASDAK
dropped eighty five percent. NASDEK one hundred dropped eighty five percent.
But if you were smart and you were diversified, you
did pretty well. And that brings me to if you're
going to diversify, what do you want to own? And

(09:00):
so LPL Research put out a piece about do you
want active or passive? Why not both? And so when
you look at this debate, this debate mostly has surrounded
brad in particular large caps and large cap growth specifically.
It's very difficult for active managers in large cab growth

(09:20):
to outperform unless they're just not buying large cab growth.
See a lot of large gap growth managers that are
buying MidCap growth just to cheat. I'm outperforming. Yeah, well,
you're not buying large cap well. In the last couple
of years, the only way to outperform would would be
to say the top seven companies represent forty percent of
the index. I'm gonna make it fifty percent of the
index that would have been the only way is I'm
gonna have even more concentration than what the S and

(09:42):
P five hundred gives me. So let me look at
some of the areas that historically have given a slight
tilt to active. Let's start with that and then maybe
get your thoughts first off, small caps in general, you know,
talk a little bit about why that might be that
a small cap manager could potentially give add some value there. Well,

(10:03):
a couple of reasons. One, the small Camp index is
the Russell two thousand, so there's roughly two thousand names
that in the universe of what we can choose. The
small Camp index for the SMP, the SMB six hundred
is the six hundred names that in general have a profit,
that are making money. A lot of them don't make money,

(10:24):
they have losses. So you have fourteen hundred companies that
have no earnings, and so there's a lot to choose from,
and there's a lot of junk in there. So if
we're not nearly as much in the S and P
five hundred, which is a large campaign, Yeah, So because
the universe is so large, and because the universe of
junkie companies is so large, it can be a little
bit easier for a manager to own a more concentrated portfolio.

(10:47):
In small cap concentration might be one hundred stocks instead
of a large cap concentration might be twenty or thirty.
But you can still outperform the manager by weeding out
the bad from the good. Another equity sector that historically
can potentially give you some outperformance if you have active okay,
and by the way, active doesn't necessarily mean mutual fund.

(11:09):
You can buy an exchange low cost exchange trade of
fund that's active as well. It sometimes means mutual funds,
but it doesn't always. But another equity sector here, emerging markets.
I think that's a great one to consider an active approach. Yeah,
because there are times that you want to step away
from countries sectors and if you're if you're owning the index,

(11:32):
you own it all. And there have been long stretches
where we didn't want to own certain countries, and I
think that's the biggest difference. And you can look through
these managers and see how different they are than the index,
and they look at it two different ways. The sector
makeup in the country. The same thing with small caps too.
There's thousands of stocks here. You might not want to

(11:52):
own every single one of them, versus the S and
P five hundred, which is a smaller index in terms
of the number of stocks. So on the equity side,
I think those are the two biggest. Those are the
two biggest small caps. I think MidCap and large cap
maybe make an argument for MidCap, but especially large cap.
You can you can certainly argue for a passive index
portfolio that keeps your costs down. This is a big

(12:15):
one I believe in. If you're looking at fixed income, okay,
and there's a lot of different fixed income categories on
here that talk about the potential for outperformance if you
have an active manager. Let's start with corporate bonds. High
quality corporate bonds are just corporate bonds in general. Why
I think, especially in the fixed income world, you can

(12:36):
get the potential for outperformance. You never hear anybody, you
never see an article, you never hear anybody talking about
how when managers can outperform the index. You never hear
it in bond world because most do, and there's a
lot of reasons for it. The universe for bonds is
even larger than stocks. The dollars that are there, the
amount of issues are are greater, But the amount of

(12:58):
issues that may managers get presented to them that never
make it to the open market and never make it
to the index is pretty large. The number of issues
in muni bonds that are non rated because they're so
small that there's no point in paying for the rating.
We'll just take it to XYZ Mutual fun Company, have
them do their own rating and buy the whole thing
if they want it. That is rampant in the bond world.

(13:21):
So if you think that you're going to own an
individual bond or you're going to own the index, and
you're the same as what a manager looks at, you're wrong.
They're looking at everything firsthand, sometimes buying all of it,
and what's left for the index is second tier, and
what's left for you is all the crap nobody wanted.
I had a client who worked in the finance department
of Owens, Illinois for most of his career, and he

(13:44):
was in charge of issuing the bonds of Owens Illinois,
and I had the same conversation with him about that,
and we were talking about what they would do when
they would issue a bond, they wouldn't go to market.
They would just call PIMCO. For example, he said, I
just call Pimco's like, do you want it? We're not
even gonna offer this to anybody else. We're gonna offer

(14:06):
it to you. And of course PIMCO, being as big
as they were, also had negotiating power on the pricing,
and then by the time you saw that portfolio traded
on the secondary market, you didn't get the deal that
Pimco got. Just like when Warren Buffett did his bonds
with Bank of America and the preferred stock that he got.
Nobody else could get that deal. Nobody else could get
that deal. So if you buy a Berkshire Hathway, which

(14:29):
is basically an actively managed fund, okay, or you bought
something through PIMCO, you're getting something that you can't get
on your own. What drives me crazy as I see
these portfolios at these wirehouses, Brad and they have all
these ten and twenty thousand dollars bonds. That is all
the junk that was left over that the big boys
didn't want. Yeah, the manager said no, They go to

(14:49):
the next manager, they say no, They get all the
managers and they pass then it goes to the open
market and then you're looking at it. Same thing as
true in the high municipal bond space, in my opinion,
there's a lot that doesn't go to market that goes
directly to the big mutual funds. Okay, So that's another
area of small caps emerging markets on the equity side,

(15:13):
investment grade corporate bonds or corporate bonds on the bond side,
and also high yield municipal bonds. I think all municipal
bonds there's such a big we see it as high
as twenty five or thirty percent of a bond portfolio,
an actively managed community bond portfolio that is non rated.
All of that is stuff that's not going to market

(15:33):
because they're doing their own research and it's such a
small issue that the company doesn't want to pay for
s ANDP to rate it and put it out on
the market. So finally, let's go to passive because passive
is great. It can keep your overall cost down. If
you're looking at your blended cost, you do some passive,
it brings your overall costs down. Some of these passive

(15:53):
portfolios are two or three one hundreds of a percent.
I'm not gonna use basis points. Nobody knows what that is.
Two or three one hundreds of a percent. Okay, that
that you can own the portfolio, own the portfolio, to
own five hundred stocks, to own fifteen hundred different stocks.
So you're getting it for not free, but pretty close
to it. Large cab growth or maybe even large caps

(16:15):
in general, but more so large cap growth. If you
look at the historical outperformance measures. Okay, that's just simply
because these megacap names, there's only so many of them
that are in large cap growth. You know, there's five
hundred stocks in the S and P, there's two hundred
and fifty large cap growth, roughly two hundred fifty large
cap value in these large cap growth portfolios, maybe forty names.

(16:39):
They're all known. How you going to how are you,
as an investor or or the manager gonna find out
something about any of them that the mapoll doesn't already know.
Everything's priced in. Not a recommendation to buy or cell apple,
But how are you or the manager going to find
out something that's not already priced in in something so
highly or you know, something so liquid and traded so

(17:01):
often so you might want to go passive there. You
look at the S and P five hundred growth for
example passive index. Here's some bond categories, and I think
I agree with this one. Treasuries. You can't create value
buying treasuries. Yeah, it just is buy a treasury portfolio.
You want to buy something low cost because for one,

(17:24):
your potential's not as much, so you don't want to
have the fee eat into that. So I think anytime
you're buying treasuries that if you want that that exposure,
you can buy it an ETF form. You don't have
to buy the actual treasure. Yeah, And the appeal to
that is you want to buy a three month treasure,
you can buy an ETF form where there's maybe ten
treasuries in there and it's continually rolling, so you don't
have to find the next three month treasury. You just

(17:46):
own the three month treasury ETF and it just keeps
rolling for you always own that, and you're getting the
yield of that, the average yield of all those bonds
in the portfolio. And then the last thing on the
list is any ultra short portfolio, which would include some
treasuries but all also corporates that are about to mature
to measure the amount of outperformance you can get is
not going to be enough to overcome a half a

(18:08):
percent fee from the manager. Right, so ultra short in
terms of passive government bonds or treasuries and large cap
or large cap growth in particular. You look at that
approach if you have no idea, if you're looking at
your four oh one K, you're looking at your statement
for your investment account, your rollover IRA, whatever it is,
and you have no idea. It's like, I don't know

(18:29):
what this portfolio is. I don't even know if it's
active or passive or not. Give us a call and
we could go over it with you and make sure
you have the right mix. Because if we truly are
getting away from the over concentration I mentioned at the
beginning of the segment, twenty six percent of the S
and P five hundred names outperformed the index. It's two
years in a row under thirty percent. Last time that happened,

(18:53):
wanted you went on a five year run where you
wanted to have these other areas both active and passive.
But all the other areas where where active matters more,
A lot more areas we're active matters and so what
does that look like in your four to one K
or what does it look like if you're doing it
on your own and your rollover? I right y, yep,
let's take our first pause. You're listening to Money Sense
Kevin and Brad Kirsten. We'll be right back. Welcome back

(19:15):
to the show. You're listening to the advisors of Kirsten
Wealth Manageer Group. Kevin Kirsten and Brad Kirsten, happy to
be with you today. As a reminder, we are professional
financial advisors and our offices are in Perrysburg. Give us
a call throughout the week if you want to sit
down and have a consultation to review your financial plan,
whether you're just getting started, well on your way to retirement,
or already in retirement, we'd be happy to sit down
and go over things with you four one nine eight

(19:37):
seven to two zero zero six seven or check us
out online at Kirstinwealth dot com. Brad, we had a
of a strange CPI, that's the inflation report UH this week,
which was a little bit hotter than expected three percent
in January, up from two point nine in the previous
Shelter costs that's you know, you're every living expense from

(20:01):
rent to people purchasing houses. That was point four energy
rows one point one over the month from the rise
in gas prices. Bird flu was a major factor in
hotter food inflation, causing egg prices to rise fifteen point
two percent, the largest increase in roughly a decade, and
pushing annual prices up fifty three percent. Now, two things

(20:23):
on the egg thing. Okay, people need to stop losing
their minds over eggs. I mean I was watching the news.
Denny was mentioning this too. No matter what channel you
flipped to, it was to talk about eggs. Now, now
that you kind of dig into the numbers and you
realize that eggs are actually a disproportionately large part of CPI,

(20:46):
of CPI because they're a disproportionately large part of food
at home, which is in the CPI. Okay, I get it.
But the news is just blindly picking up on that
and assuming that everyone is going crazy over their eggs.
And I know people are going crazy over their eggs,
but sorry, when eggs are five dollars, yeah it does.

(21:08):
That's a lot. But is that going to ruin your life? Right?
I don't understand just to go get something else. But
it's a one off, you know, if we have bird
flu and we have to to kill all these these
these chickens, Okay, it's are we going to be without
that many chickens forever? No, it's just a matter of time.
But you can kind of look at the CPI and
realize that we have one off news stories affecting everything

(21:32):
that went up more than the prior month. Talk about
that food from home really quick though, as it pertains
to the bird flu. So well, you're killing all these
these I know why that's happening. But eggs. What is
the cost of eggs as a percentage of food from
home food? It's a quarter of it. So you got milk, eggs, poultry,
and meat, so imagine this a quarter of it. So

(21:53):
you go to the grocery store. Okay, now, well you
know this better than me, probably because you follow it.
But what were eggs recently when they were quote unquote cheaper?
We were cheap. The most of the eggs that are
that are affected are not cage free, range free, and
pasture raised because they're not as affected by a bird

(22:13):
flu because they're not getting a cat don't get in
that just mean no, there's a point. Some haven't changed
at all. Some have not changed at all. The only
ones that have are the lower end, and they've gone
from two dollars to seven dollars, two dollars to eight dollars.
But just do this math in your head. Just do
this math in your head. Okay, it's a quarter of
the CPI and it went up six bucks. But since

(22:35):
when if it's a quarter of the CPI, since when
it's not a quarter of your grocery No? Since when
do people go to the grocery store? They and they
spend eight dollars, and they spend eight dollars and their
total bill is going to be thirty two? Right? No,
it's not so. Or back when eggs were cheap and
you spent two dollars, was your total bill eight? No?

(22:57):
Well I think this is this is the logic. It though.
If I if I'm gonna buy a big roast, I
might eat on it for a week. I guess I
don't know what they're thinking. I buy a bunch of
ground beef, I'm gonna eat on it for two weeks.
And but milk I need to get more, and eggs
I need to get more. I don't know how many
eggs would you have to buy, Brad, It's not it's
it can't do CPI across or they can't do it.

(23:19):
I get that they can't do it. However, it's not
accurately reflecting. No, it's what your grocery bill is. No,
it's not okay. And but people are losing their mind
from a market perspective, and I think as the day
went on on Wednesday, investors came to this realization, how
many eggs if you look at a typical shopping trip
you do, how many eggs would you have to buy

(23:39):
to make it a quarter of that bill? Five dozen? Yeah,
it's the most ridiculous. And I'm going to the grocer
store once a week, so I'd have to buy five
dozen every week. No one does that, right, So so
it may have affected It did affect the headline number,
but it's not affecting people's everyday lives like the media
would lead you to believe. Well, here's how you know

(24:01):
it's affecting the headline number. This is the last three
three months, point this is food at home? Is the
month month over month increase point two point three. I'm sorry,
where we are the line off point two point four
point three, and then January was point five. Now they're
saying that eggs alone was point one of that. Okay,
it could be as much as point two and the end.

(24:23):
But the the annual number for food at home is
one point nine, so it's one of the lower things.
Let's go to energy. Energy was let's take fuel oil
negative two point eight, negative three point eight, negative two
point three, negative one point four, and then the last
two months two point one six point two. So here
we have all these negatives. One is it seasonal or

(24:44):
is it the fire? It's a one off. It had
been trending negative. Fuel oil on the twelve month is
negative five point three. So because we have a blip
where at six point two and it had been negative
roughly three percent, of course you're going to get a
one off monthly number on CPI is going to be
a little bit weird. Take a look at there was
a few others, oh, they said. Shelter was also one

(25:06):
that was a little bit of a one off for
the fires, people having to move out of their homes
and then all across the western region having to go
take up shelter somewhere else, and so that was inflated
prices from that as well. And that's all hotter number
two than prior months. So you have three different areas
of CPI, food at home and fuel costs, energy in general,

(25:30):
and shelter that were a little hotter because of these
things that are going to go away. So it is
a little disingenuous that you see. And by the way,
this is the January number in it. I don't even
think it ends on January thirty first. I think it's
a It ends on the twenty fifth. And everybody is
out saying, well, Trump ran on gonna lower inflation. He's
doing a fine job, isn't he. Look at this number. Okay,

(25:52):
this is a January number. The inauguration was on the
twenty if he took off, so the twenty first. Okay,
what did you think he was gonna do? You killed
all the chickens the first two weeks of January, and oh,
by the way, the eggs when they're going to market
are two weeks later. And here we are, and maybe
people should think about buying the higher quality eggs because

(26:12):
those birds aren't getting flu. Why is that they're being
treated better? They're out in a pasture eating grass, and
if one dies, they just go ahead and keep that
one away from the other ones. The same thing with
the beef. Yeah, the beef that are roaming out on
a plane are not as susceptible as the ones that
are closely confined to their own herd. Right, that's right.

(26:33):
So yeah, I think there's a lot that was in
that CPI report that won't be lingering in the months
to come. So I think the Fed will still be
on track to cut in the summer. And I think
that those FED fund rates are going to continue to
come down. And I don't know when Trump's going to
start putting some pressure on, but they certainly want interest

(26:54):
rates lower from for two reasons. Number One, it helps
with the debt that they want to show that they
cut the deck because the interest payments are so high.
But obviously they want to help people who are financing
mortgages and things like that. So we'll see. So let's
take our next pause. You're listening to money Scents Kevin
and Brad. Kirsten will be right back and welcome back.
You're listening the advisors of Kirsten Wealth Management Group, Brad

(27:15):
and Kevin we're here with you, Kevin. I think there's
a lot of information about about Elon's DOGE Committee that
people don't realize that are out there. If you go
to x and you follow DOGE on there, you just
typed either DOGE or Department of Government Efficiency. Every single

(27:36):
day they probably post ten different things that they cut.
And I'm hearing people for a while. Anderson Cooper was
what was trending because he was out there saying to
everyone who say this, why is it bad that we're
cutting this waste? And he's saying, show me the proof,
show me the proof, and everybody had to point out
to him, you know they're posting it. You're posting the proof.
They're posting screenshots of the Treasury bill that went a

(28:01):
number that went out and all the line items for
what it looks like. It looks very very animal. It
looks like it's from nineteen eighty five. This screenshot, So
whatever whatever information system they're using, looks so weird. But
you can't argue with some of the things that they're doing.
You cannot. So one of them was I just printed

(28:23):
out a few. I mean there's hundreds and they're all
out there, and how can you stand up on the
other side of this argument and say you're you're the
stuff you're gonna read, You're for that. Yes, well let
me give you one. Okay, I'm gonna do it across
all categories. This is NIH Okay. Now, are they cutting
the ANAH but not yet National Institute of Health yep.

(28:44):
So they granted thirty five billion dollars to research institutions
last year. Nine billion of it went to basically overhead.
So some of these these areas and so the top
three Harvard, Yale, Johns Hopkins, okay, in the last it's
tough to look at what the actual number is, but

(29:05):
the rate for what they call the indirect rate, the
overhead we're gonna give you a billion, and what's actually
going into research? Right? The old rate for Harvard was
sixty nine percent, was overhead sixty seven and a half.
For Yale, Johns Hopkins was sixty three. The new rate,
if you want to accept the grant research is fifteen percent.
The rest of it has to go into the actual research.

(29:27):
I have another idea, Now, how are you gonna argue
with that? All the research, all the research that we do,
benefits the rest of the world. There is very little
from a healthcare standpoint. Big things that are coming out
of Europe, for example. I think Trump should make that
part of the tariff negotiation. We'll cut the tariffs. And

(29:50):
by the way, you're gonna pay if you're gonna give
a grant, you're gonna give a grant to Johns Hopkins
for the research that they do that benefits your citizen. Yes,
otherwise you're not getting it right. So I mean, I
think that that is a perfect example of something that
Trump could hold their feet to the fire to say,
you know, all you're doing is taking our technological advancements

(30:12):
in healthcare and basically stealing it and not doing any
of the money or the work on the front end.
There were multiple I think everybody's probably heard this now,
there were multiple news agencies that were getting huge dollars. Now,
some of it was hidden with these expensive subscription services. Reuter's,
I guess has one that's an expensive subscription service. NASA

(30:34):
spent a million dollars on the subscription service to Reuter's,
but total was nine million last year for Reuter's subscription.
The one that they complained about I heard recently was
the Bloomberg subscription service which is very, very expensive. It
is ten twenty thousand dollars a year. They were complaining
that the FED had that. No, No, the Fed should

(30:54):
have Bloomberg. They should have Probably Bloomberg probably has their
own just for the Fed. And it's probably very expensive,
but I think people don't realize how much it costs. Yeah,
you're talking here, you're talking about subscription services for the government.
Those subscription services are for lobbyists to get inside. Here's
what the story is. It's going to come out tomorrow

(31:15):
about the government. Well, the government doesn't need that. Why
does the government need to know what's going on in
the government. That's what that service is for. I saw
the description of it. It's basically to get ahead of
a story that's going to come out in a few hours,
and you're going to jump ahead of it. Well, the
story is about the government, So why does the government
need to subscribe to that? And so here's another one. Okay,

(31:36):
here's a line item right now. You cannot argue the
line item is on here. It's Doache posted the exact
thing and what it was there for. So this is
another Thompson Ruters. They posted the screenshot. They posted the
screenshot the description of the payment that went out, and
this is across the board for all of these are
your tax dollars for Time, Reuters, Politico, all of them

(31:57):
had a dollar a dollar figure that was similar with
the description that said active social defense, large scale social defense, deception,
active social engineering defense, active social engineering defence. Then they
have an acronym for it, AESD. That way they could
just say, no, that's for a SD. Oh what is that?

(32:18):
Active social engineering defense, large scale social deception, large scale
social deception. So they government was paying Ruters. H do
you know what this one was for? In particular, this
is from twenty twenty COVID nineteen spending. So what do
you think that was for? Large scale social deception? Regarding

(32:39):
COVID nineteen paid to Reuters so that every time something
comes out, you do what we want you to say.
Now what's the truth, and don't look into anything, look away,
don't post anything that we don't tell you to post.
And for that we're gonna pay you nine million dollars.
Sounds good. Yeah, So those contracts are done. Now everybody
that was saying that the the that big media was

(33:03):
on the side of the democrats, I mean, here are
the receipts for it. They were actually getting paid. So
if you want real news, you got to go to
other places other than this. And so they literally had
social deception on the stub of the check. And yet
there are still people that think, oh no, it was

(33:24):
in the New York Times, I can believe it. And
they're getting paid by the government to post whatever the
government says. So those are the sorts of things that
are done. Those are the sorts of things that are
getting cut. There's a lot of DEI spending. It's unbelievable.
Every day doges posting another one hundred million that's not
getting spent. That was the biggest one that got cut
out of the Department of Education. Everybody says, what, you

(33:46):
don't want to educate our students. Okay, it was twenty
nine DEI grants totally one hundred million that they cut out,
and none of them had anything to do with educating students.
It was just paying bureaucrats to create new rules and
then try to follow those rules. Well, and I heard
Ron DeSantis in Florida talking about FEMA, and he want,
you know this, this argument, get rid of FEMA. Oh

(34:09):
my gosh, you don't want to help people who go
through disasters, and DeSantis said, no, I mean, it depends
on who you're going to trust, right, And maybe this
is why the federal government has some of these programs.
Desanta said, just give me the money. Yeah, and I
know how to allocate it. By the time you launder
it through FEMA, I get seventy cents on the do

(34:29):
And that's the same thing with the Department of Education. Okay,
it's one more layer. We don't need give it to
the states to do what they want. When you add
a layer, money gets taken away. But then again, do
you want to give that money directly to Gavin Newsom
for the fires or do you want to control it?
So yeah, I mean it depends on who you're giving
the money to. Think I'd rather give it to a
even a liberal state, then give it to the government

(34:52):
for them to give a celeberal stake exactly exactly. It's
going to save money and that's all they're doing. So
anyone who's out there saying, oh, I don't even belie it,
showed me the receipts. It's all out there. Every line
item that they're cutting they post about once an hour.
We found something else to cut, and then they show
you what it is and they cut it. And so
all of them are taking your tax dollars and not

(35:13):
wasting it on things. I don't know how anybody's not
for that. There's a lot of people that are upset
that we have a lot of debt. This is fixing
it well quietly, Brad. In Congress, they're showing some support.
A lot of people on TV, CNN, MSNBC haven't been
But if you look at some of these committee meetings
that were going on, and James Freeman at the Wall
Street Journal pointed this out, you know Trump is being

(35:35):
attacked on CNN and MSNBC. But interestingly, even as they
offered harsh partisan criticism, democrats on the panel yesterday could
not pretend that the level of fraud is in gigantic.
Here's a Democrat from New Mexico, Melanie Stansbury. I grew
up working for a mom and pop family business and
understand the necessity of balancing the books, making sure we

(35:56):
can deliver and have fiscal responsibility. That's what the here
to hearing is focused on. To make sure the federal
government is doing what they're supposed to do and digging
into the more than two hundred and thirty six billion
in improper payments that we see going out the door
every single year, and we needed to get to So
you mentioned proper payments, but are going to completely bogus things.

(36:18):
She was referencing just money that's just completely improper. Yeah,
and I think that now that they're digging into Social
Security and Medicare, they're realizing everyone says, you can't cut
anything in Social Security Medicare, we need all that. No,
there's a lot of fraud there. There's a lot of
dead people getting payments. There's a lot of illegal immigrants
getting payments. And now we find out what so security
there are people that are getting double payments. So listen

(36:40):
to this last year's and these numbers are going to
be end up being bigger. But the Government Accountability Office
PEG the fraud the annual fraud losses UH at around
five hundred billion for the federal government annually, annually, annually. Okay,
now you're getting to some big numbers here as a
percentage of our total budget. One of the witnesses at
the hearing, Heywood Talcove of Lexus Nexus, I think you

(37:02):
heard him. He said that for over a For a decade,
a silent war has been waged against American taxpayers. We
continue to pay benefits to deceased and incarcerated individuals, direct
money to bad actors flagged on the do not pay list,
and overlook look duplicate social security numbers by not following
best practices. During the pandemic, a simple cross check of

(37:23):
PPP loan recipients against IRS records would have exposed a
massive fraud and prevented payments to transnational criminals who sold
their or quote unquote sauce on the dark web. To
stop this, we must reclaim control of our systems, not
just from the criminal syndicates, but from the flawed systems
enabling them. So the private sector overall has a fraud

(37:44):
rate of around three percent, The government is around twenty percent. Okay,
so the staggering five hundred and twenty billion dollars fraud
estimate might be too low. So look at this, some
of these exchanges to this guy from Lexus Nexus, how
much do you calculate his way wasted due to waste,
fraud and abuse in the entitlement programs Medicare and Social Security?

(38:06):
Right right now? My number between federal, state, and local government.
Is you can save one trillion a year by simply
putting in front end identity verification, eliminating self certification, and
monitoring the back end of the programs that are providing
the benefits. So I mean, if you look at that,
so think about that. Everybody is trying to fear monger
for the last ten years. You can't cut so Security

(38:28):
and Medicare, and all they're doing, they're not touching Social
Security and Medicare. All they're doing is taking fraudulent payments
and making them a thing of the past. To save
a trillion dollars. How can you argue against that? How
can you be a seton? They found one They found
one hundred and fifty year old. At least Elon said this,
I don't know, you don't know if you had anything
to back it up, And there was a shocking number

(38:49):
of people over like one hundred and ten receiving benefits.
So I did see something on X where there was
somebody that worked in in those departments and said it
was it was a regular practice to put in eighteen
seventy five as a birth date if you didn't know it.
But my argument would be if you don't know a birthdate,
you shouldn't be getting a payment, okay, right, so just

(39:10):
don't pay it out. And that person, if it's a
true payment, it's on them to call it. So on
them to call you. You don't just put in a
birth date, okay. So they were saying that person could
have been alive or they could have been dead, but
they weren't likely getting a payment for the last fifty
years if they were dead. It's just that somebody put
something in. But my argument would verify it that more

(39:31):
likely than not, is probably fraud. Because you have a birthday,
you can't verify. Simply verify it. Let's take the practices
that businesses. I mean, this is why it's good to
have someone who ran businesses in charge of the country.
Take the practices that businesses due where they don't want
to be defrauded because they want to make their earnings
and they want to make money, and push that into

(39:53):
the federal government. So that I mean, these numbers might
end up being the trillion dollar number that Elon Musk
originally thought. Take our next pause. You're listening to money sense,
Kevin and Brad Kirsten. We'll be right back welcome back
to the show. You're listening to the advisors of Kristen
Wealth Manager Group, Kevin Kirsten and Brad Kirsten wrapping up
the show here. Brad, we do this every couple of

(40:14):
every couple of shows where we just talk about some
stories that we've heard. Were you gotta watch out for fraud.
I mean, we talked about fraud in the government. Think
about all these people that are out there trying to
get creative and try to figure out ways to defraud
the government. Well, guess what, they're out there and they're
trying to defraud individuals as well. And as much as

(40:36):
we're all appalled at the fraud and the government because
that's your money, that's tax payer money, it happens unfortunately
at a at a bigger scale a lot of times
for individual I saw a demographic stat for who gets
to fraud of the most most dollars in a given year. Actually,
the younger people under twenty five was the biggest number.
Now one, there are more of them than the highest end,

(40:57):
which was over the age of seventy five. I think
I think the group was over the age of seventy five.
I think I think the young people and I've seen it.
They're so trusting of any link or anything they see
on their phone. You know, whatever it is. If they
saw it on a TikTok thing or if they saw
it on Instagram, they know this problem. It must be true.

(41:19):
You know. I have no problem doing that. So our
generation was actually the lowest demographic. We're skeptical of everything. Right,
I see something on my phone or I even get
something in the mail, I'm like, that's no way. Gen X. Yeah,
gen X everything skeptical of everything. By the way, I
saw in terms of the skepticism. And there was a
psychologist talked about I think you were there too, where

(41:40):
they said that the challenge you're blowing up is what
made all of us gen Xers so skeptical. Okay, because
we believed in everything and they and they hyped up
that challenger thing with the with the teacher, and we
trusted our government and then right in our face when
we're a kid. I was in the seventh grade, it

(42:00):
blows up and we're like, we can't trust anything. We can't.
So it's ingrained from a child it's ingrained from childhood
for the gen xers to be distrusting. Yeah, and not
and not want to be scammed. Yeah, so I would
say those are the two if you're a listener that
you need to warn and talk about. And what I
want to talk about today is the older generation did

(42:23):
not grow up with a cell phone and is not
used to now maybe using it as their only form
of communications, and they are so much more susceptible to
the big scammer. And what we're hearing. There was a
local one with someone being scammed out of buying gold
bars and delivering it to somebody. It was a it
was a night. It was an eighty nine year old
Slovenia woman who it was a million dollars in gold bar.

(42:47):
There was a call from federal people saying claiming to
be federal agents and they were scammers. What would they say?
They explained. The sophisticated scheme was they chase the caller ID.
Obviously they posed as US marshals. Hello, this is Officer
Hally O'Brien. You can call me back as soon as
you can. The fraudsters said they were looking for a

(43:09):
thief who was trying to steal her identity, the woman's identity,
and they needed her help to catch the criminal. So
here you are, someone's trying to defraud you, and we're
the government and we're here to help, which Reagan said,
that's the scariest thing in the world, but people still
fall for it. The scammer said they did not want
to do business with anyone who had less than a million,

(43:32):
so you look at it, and they wanted She went
and had three scepter items. It was a total of
one million worth of gold bars to pay the government
to catch this fraudster. So odd that they were using
fraud to claim they were going to catch a fraudster. Well,
so the second one I saw the same thing. That's
why we're talking about another gold bar scam in Florida.

(43:53):
One point seventy five million, seventy six year old woman
who got a call from a government to apartment that
was designed to uh give her free escro account and
holding of gold bars. So she she withdrew money out
of her investment account, bought gold bars, and then all
in one I think the one in Toledo was multiple,

(44:16):
maybe three different courier drops. This one was the curry
The government courier would meet her outside of her condo
and outside the gates of the condo, she was supposed
to take the gold bars, pack them in boxes and
give them to the courier who would deliver to her
escoral account in Washington, d C. Yeah. Yeah, we'll take
them right to Fort Knox. Yep. Where that outside of

(44:37):
Virginia West Kentucky? Oh, this is in Kentucky. Okay, I
thought it was in Virginia. Yeah. But in any event,
it's always things that are difficult to trace, you know,
whether it be gold bars or I've seen these scams
cryptocurrenc yep, you know some you know, the scam I
I mentioned a little over a year ago that that

(44:59):
I heard about was somebody who, thank goodness, didn't end
up getting scammed, but they had called and said something
about an erroneous direct deposit and that she they had
mistakenly put thirty thousand dollars into this person's account and
she owed it back, and she owed it back, and
the way they wanted it back was for her to

(45:20):
go to an ATM Bitcoin ATM. It happens to be
one over the Michigan Border's actually more now because they're
in a lot of to go to an ATM, a
bitcoin ATM and then read them the numbers and from
that they were just gonna be able to take that
bitcoin from Once you read them the numbers, it's gone.
It's gone. So the only way to get it back
is if they send it to you. And they're not

(45:41):
sending it back to you, so there's no one to call.
It's not traceable. They can probably see the line item
on the ledger, but you're not getting it back. It's gone.
And part of that scam is is you know if anybody,
if you verified it with anybody, they would wake you
up and say, oh, well that doesn't sound right. Let's
let's let's go ahead and verify. But this part of
that's scam is keep you on the phone and keep

(46:02):
you on the phone long enough that you're not making
correct decisions right, and they've worn you down, and don't
hang up the phone. If you hang up the phone,
the police are going to come because you have got
our dollars. And the way to get out of this
this jam that you're in is for to listen to
my instructions. And they might say they're from the IRS,
they might say they're from a government agency. All of

(46:22):
it's just right sound like they're from the government agency.
Because it sounds like a police interrogation. We'll just keep
you going until you admit to say right, right, right.
So that's all part of the new scam, this cold
bar one. I'm not sure what why that has become
the thing other than another way, just like cryptocurrency bitcoin,
to not be able to trace the transaction. Yeah, I

(46:43):
mean the fraudsters, unfortunately, are everywhere. I mean, there has
to be more now, right, because it's easier. Fifty sixty
years ago, you wanted to steal money, you had to
like rob a bank. Yeah right, yeah, now you're robbing people. Yeah,
I mean, why would anyone buy our bank? Robbery is down?
We have to look at that. They got to be down.
Why would someone bother? Well, there's cameras everywhere, but yes,

(47:08):
these these both of these are little old ladies and
there's no cameras on them. The bank robbers don't even
have to get out of their desk, yeah right, they
don't have to make a phone call. And in the
case of the bitcoin ATM, just read me some numbers
and poof, I've got your money. So you have to
watch out, you know, as as you get older or
you're you're it's maybe it's your parents or them. Yes,

(47:30):
and and and be especially careful with anyone who's widowed. Brad, Yeah, right,
because at least if you have a spouse that you're
bouncing this idea off on, right. But if someone's alone
and they don't have anyone, and maybe they never paid
the taxes, and they don't realize that the I R. S.
Only sends you a letter, they don't send you an email,
a text or call you on the phone. But they

(47:52):
might not realize that that's the case. But I bet
more often than not, when you hear about these scams,
and you read about these scams, it's it's someone who's
who's by themselves because they don't have that other person
to say stop, whoa, yeah, this this doesn't sound right,
This doesn't sound right. So just as always, be careful,
look out for your loved ones, look out for those
scams because they're getting more and more sophisticated by the day.

(48:15):
Coming to the end of the show, if anyone has
any questions throughout the week, as I mentioned before, if
you want to set up a consultation to review your
financial plan, give us a call four one nine eight
seven two zero zero sixty seven. Thanks for listening, We'll
talk to you next week. You've been listening to Money
since brought to you each week by Kristen Wealth Management Group.

(48:36):
To contact Dennis Brad or Kevin professionally called four one
nine eight seven to two zero zero six seven or
eight hundred eight seven five seventeen eighty six. Their email
address is Kirstenwealth at LPO dot com and their website
is Kristenwealth dot com. Opinions voiced in this show are
for general information only and are not intended to provide

(48:56):
specific advice or recommendations for any individual. To determine which
investments may be appropriate for you, consult with your financial
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member FINRA SIPC