Kersten Wealth Management Group - Money Sense 3-08-24

Episode Transcript

Speaker 1 (00:00):
Hello, and welcome to Money Centra're listening to the advisors
of Kirsten Wealth Management Group, Kevin Kirsten and Brad Kirstin.
Happy to be with you today, Brad, as the market
is smeck dab in the middle of a correction, certainly
not unexpected. As we talked about twenty twenty four being
an historic year, not unprecedented, but pretty unusual to have

(00:21):
a year like twenty twenty four where you barely had
a five percent correction, just ticked one five percent correction
on the year. And we knew this year even though
coming into the year expecting a good start to finish
wake up on December thirty first, still feel pretty decent
about the year being a positive year, but knew that
we would have more volatility throughout the year. That's exactly

(00:44):
what we're getting right now. And you know, I often
talk about I think it's actually a good thing the
market is falling as quickly as it is. For this reason,
I get more concerned bear markets and bull markets. Bull
markets take the stars up and the elevator down is
the characteristic. That is the characteristic meaning very slow gradual

(01:08):
up days. We don't want to see three four five
percent up days. That's a bear market characteristic. Our top
ten best days ever all happened in bear markets. Okay,
those are the best days ever because it's the opposite.
It's it's this this snap back up and then slow
grind down, snap back up, slow grind down. And it's

(01:30):
not two steps up, one step back or vice versa.
It's ten steps up and a giant leap back. And
the same thing on the way down. Twenty twenty two
is a perfect example of that. Was that was a
series of ten steps down, one leap up, ten steps down,
one leap up, and it's just that slow grind down

(01:51):
is more characteristic that. So this is a more typical correction.
We're right on the two hundred day moving average for
the S and P five hundred, and even the Nasdaq
kind of right at it as well. The Nasdaq kind
of has the fifty and two hundred day right here,
so kind of a logical maybe pause for this sell
off depending on what you're looking at, somewhere between a

(02:14):
five for the Dow, ten for the Nasdaq and the
SMP somewhere in the middle of that for what this
current correction is. And you're right, it's happened really quickly.
When we're taping this show here, it's almost exactly a
two week sell off. And one of the things that
I'm reminding people is you don't have to backfill the

(02:34):
story because these corrections. If we look back to the
corrections just from this this bull market period we're in,
you're not going to remember what this correction had anything
to do with. Because the tariff talk, if you're going
to backfill the story with tariff talk, is going to
come and go and you're not going to remember it
at all, because we had that same thing in twenty
sixteen and twenty and seventeen and eighteen. And if you

(02:58):
were saying that the reason we sold off was tariffs,
by twenty nineteen, we had forgotten all about it. So
let's just do a review of the last two years
real quick. We had the start of twenty twenty, well,
I'm actually going back just to the start of twenty four.
The start of twenty four ripped forward with ten percent up,
and then we had and I'm just going on, if

(03:19):
I just look at what the Financial News is going
to go back and tell me what the sell offs
were for the first sell off which started March of
March twenty fifth and ended on April fifteenth of last year.
The financial news tells me, and whether it doesn't really matter,

(03:39):
But you can go back and say what was the
sell off to even chat g GPT, it would tell
me it's inflation fears and bond yields going up. Okay,
but we don't remember why that sold off, and you
won't remember why you bought the dip or why you
got out if you did. Then the market ripped forward
another thirteen percent before it sold off in late July
early August. Now we remember that it was yen kerry

(04:01):
trade was the reason for the big sell off days,
But if somebody had got out, then they'd still be
waiting because yenkerry trade wouldn't have been a reason to
That story is still there, and if that was the
reason you got out, you wouldn't even know when to
get back in. Then the market went up as much
as it went down before it sold off a little
bit in late August, and there was really no reason

(04:24):
for it other than the political environment that we were in.
But as Trump's poll numbers got got a little bit
better and Trump won, we ripped forward another fifteen percent
before we sold off a little bit in December, and
so it was Trump one, and then the same reason
Trump won. If you google why did the market sell
off in December, it will say it's because Trump won.

(04:46):
And if you google why did the market go up
prior to the election and after the erection, you'll have
the same reason, it's because Trump won. And that's where
we are today. You have January having a period of
time where the market went up six and now we
have the market down six and you'll have half the
people say it went up because Trump won, and now
that it's going down, you'll have people saying it's going

(05:07):
down because Trump won. You can't have it both ways.
And we're gonna get over this Trump one. It's gonna
be bad. Trump one, it's gonna be good, and we're
gonna get back to fundamentals. But the tariff stuff is
gonna come and go. And even some of the bulls
for this market are out there saying, I don't know
why he's doing all this terrorf stuff. Well, he's not
saying we're gonna do teriffs for the next four years.

(05:30):
It might go a little longer with China because they're
not gonna play fair, but there's a lot of countries
not playing fair, and that we're gonna have this tariff
talk for probably the next twelve months and the market
will get over it and it'll be a non non
news story, just like inflation and the FED has finally
become a non news story. Nobody even talks about the
Fed intra meetings like we used to, which was all

(05:51):
the talk for two years, And the same with some
of this political This political talk, it's going to wane
and by the time we get to the latter half
of this year will be back to fundamentals. I don't
really understand why on the tariff talk, which I don't.
I don't love the tariff. It's the one the tariffs
I don't. It's the one Trump policy that really, if

(06:12):
you go to free market capitalism, is not on board with.
But the reason he's doing it, you can't just look
at it by itself in a vacuum. Okay, the reason
Trump is doing Trump doesn't like tariff's either. By the way,
what do you mean he doesn't like tariffs. He doesn't
like when people tariff us the United States. Yes, okay,

(06:33):
Trump's preferred level of tariffs and by the way. He
needs to do a better job of this. Yes, get
Howard Lutnick out there, get other people out there saying,
our preferred level of tariffs is zero, but we will
only do that if the other country is zero. Correct. Yes,
now they say the words reciprocal. That's better than eight

(06:53):
years ago when he was in office, because they weren't
using that term reciprocal. It's not enough say our preferred
level of tariffs is zero and say it to you.
I hear all kinds of financial media saying we don't
even know what Trump wants. Fine, go ahead and say it.
We will go to zero when Mexico goes to zero,

(07:13):
we will go to zero when Canada goes to zero,
and maybe even say to Canada because I know there
are these agreements from past that they say, we're just
going on what you've already agreed to. Fine, we'll go
to We'll go to zero when you go to fifty
percent on dairy products because currently they're two hundred and
seventy five percent. We'll go to x when you go

(07:35):
to why But they're not doing that and they need to.
And the same with autos in China, autos in Europe
will go to zero. When you go to zero, okay,
and you agree to zero, we'll go there today and
we won't put them on. And so we're gonna have
this back and forth and they're probably doing it behind
the scenes. But yes, it doesn't that's the one thing

(07:55):
that doesn't poll very well. We've been talking about all
the eighty twenty issues where everyone's on the outside. It's
probably not preferred level of tariffs's zero. It's probably preferred
level of tariffs is zero. And stop encouraging people to
come over the border and stop fentanyl. There was a
reporter in the White House briefing room yesterday when they
were asking about one of the negotiations that's going on

(08:17):
with Canada and Mexico is to stop fentanyl. And the
reporter said, only forty three pounds of fentanyl was seized
at the Canadian border last year. Just so everyone knows,
it only takes two milligrams of fentanyl to kill a
full size man, So forty three pounds is only enough
to kill ten million people. Yeah, and she's pretty good,

(08:39):
but that would have been nice to have that at
the ready, as she knew she was going to get
asked about it and be like well, that's enough to
kill ten million. So that's not okay because he was
saying it's only forty three pounds. Who cares, what's the
big deal? Yeah, what's the big deal? I mean, you know,
there's not that much plutonium or uranium in a nuclear
bomb either, but I would think even a little bit

(09:00):
of that is bad, right, I mean, oh, it was
only it's only how much plutonium? Yeah, it's funny deal
on all this stuff with tariff back and forth. You
never hear any country accusing us of importing feentanyl to
their country. So how about the same on that we'll
do reciprocal on that you bring zero in and we'll
take zero in. Right when it comes to drugs that

(09:23):
are killing them. And to think that these countries in
terms of what's more painful now, we feel like it's
more painful right now in the United States because our
stock market has been down in the last couple of weeks, which,
by the way, no, we don't know why it's down.
Everyone thinks that that was really the point of me
doing this exercises Trump one, mark it up, Trump one,

(09:43):
mark it down. You don't know, So you don't know. Oh,
the market's down because the tariffs. Maybe maybe the market's
just down because it was up a lot. We don't know,
but we're feeling it now because the market's down. But
if you actually look at the economic data, Brad, it
is the tariffs. We only import two point seven percent
of our total GDP from Mexico and Canada two point

(10:06):
seven percent. So if they're doing tariffs, it doesn't matter
to us that much, okay, but if we do tariffs
to them, it matters a whole lot more. Now they
would say, well, then if the teriffs don't matter to us,
then what's the big deal. The point is to we're
in the driver's seat because it affects them more. We

(10:26):
can say stop or lower because we have that much.
Not so insulting. Think of it like a business. Think
of it like a business. What do you do when
you're in business and your number one customer ask you
for something? Do you thumb your nose at your number
one customer? Do you scoff and retaliate against your number

(10:47):
one customer? The United States is the number one customer
for everyone in the world. We're the number one customer.
How is the number one customer being treated? That's That's
the way Trump is looking at it. He is saying,
we are your top client, and you're taking advantage of us.
And then now even when your top client is asking

(11:08):
for something, you're getting angry at your top client. So
that makes no So the top client to do healthcare,
for instance, your top client gets charged the highest prices.
Or autos, your top client gets charged the highest prices.
And when he says, can we renegotiate these deals that
my predecessor put into place because I don't like them,

(11:31):
you say, no way. In fact, we're gonna punish you
for even asking, right, right, So the preferred level, back
to what I originally said, the preferred level of tariffs
is zero. I firmly believe that that is where Trump is.
And then a couple other concessions on let's have a
little bit of security at the border for not only

(11:52):
criminals coming over, but drugs that kill people. That maybe
that's kind of a is that a big ask? Is
that a biginess like it doesn't see some of these
countries should be embarrassed, especially Canada. Forty three pounds of
fennel came over. You should be embarrassed that forty three
pounds came over and that's being reported as a as
a nothing. It should be embarrassing. Now Mexico they got
their own problems with that, but Mexico seems a little

(12:15):
bit more willing to make deals than Canada. I'm not
sure what Canada is thinking, but Torneau's out in ten days.
They're gonna have a new prime minister in there until
an October election, and the polls say that it's going
to be a conservative who wins. And so maybe once
we get to that point, we can have a stronger

(12:35):
trade deal done at that point, but they're gonna have
to put a band aid on it for the next
six months. Kevin talking about diversification working in these downturns,
This is when you hope it's working. The more conservative
dividend pain sectors working. They are bonds going up when
stocks are going down. They are And even though we're
not looking at an annualized number, but just really a

(12:56):
month long number, it's pretty dramatic the difference between sectors
like utilities, real estate, even healthcare and consumer staples over
the last month up between those are and four percent.
Those are all the sectors, by the way, that are
in what is historically the low there's a low vol
there's a low volatility index that we use and that

(13:20):
we follow. Those low volatility sectors are consumer staples, utilities,
and healthcare primarily, and everything that's lower volatility is holding
up a lot better or even up in some cases
during this correction. So you have your bonds up, if
you sprinkle a little bit of low vall in your
portfolio that's flat, maybe just slightly down over the next month.

(13:43):
Over the last month, it's up. You know, consumer stables
up four point two seven percent over the last month,
and real estate also up because interest rates are down.
But then you take a look at the bond side
and you really can't find a find a bond category
that's not up a lot over the last month as
stocks have sold off, so that gives you a little

(14:04):
bit of diversification as well, and then you have the
higher growth areas selling off more than the market. So
very logical if you're going to be buying the two
hundred day moving average, if you're going to be buying dips,
you just might have to do it a few more
times this year where you buy a dip, sell the rips,
and do it again, because this market is going to
be volatile, and so a lot of logical adjustments to

(14:27):
make if you're doing that dialing up of risk this week,
either selling your bonds to go to stocks, or selling
your low volatility, or rebalancing your low volatility, and just
doing a little bit of that to buy some of
the higher growth names that if tariff talk goes away,
or if the market rebounds on earnings or any kind
of positive news. It's just like it's been for the

(14:48):
last three years. It's going to be the high beta
growth names that are going to be giving you the
outperformance again, and then you do have to have the
discipline to rebalance that again and pull risks back down
later in the year. I think you're probably going to
have three different chances this year to be buying dips
and selling rallies in the market, and that definitely can

(15:09):
smooth the road out, maybe give you a little outperformance,
but more importantly, it gives you a plan for what
you're looking for, and the plan, if you had established
it would be to be looking for these five percent
dips in the market, especially when the low volatility areas
of the stocks or the bonds give you this outperformance.
Large foreign international develop Europe is also up in the

(15:32):
last month, so that's another interesting thing to look at,
given all the tariff talk and the assumption that it
would maybe be bad for these countries. Large cat foreign
in the last month is up four point eight percent
and has been up on a lot of these down days.
Is not up today. China is up today, so that's

(15:53):
interesting to see, but large cat foreign is not. Emerging
markets are also up in the last month. So you
look at a diversified portfolio BRAD in the last month,
large cap values up, okay, your large cap growth, your
min you're small is down. Your foreign all your foreign
investments are up during this correction. It's inequities. All your

(16:14):
foreign investments are up, okay. Your short bonds are up,
Your intermediate term bonds are up, your long term bonds
are all up in the last month. Aggregate bond index
is up one percent. Mortgage backed securities one point two
T bills up one percent in the last month. So
if you're in a traditional sixty forty portfolio now high

(16:34):
to low, the S and P five hundred is down
six percent, okay, six percent from high to low. The
aggregate bond index, if you just use that benchmark. Okay.
And by the way, if you're using S and P
and that benchmark, the S ANDP is down six. The
aggregate bond index is up one. Okay, well, forty percent

(16:57):
one is point four sixty percent cent of six is
three point six year down three point two in that
in that sixty forty benchmark portfolio compared to the S
and P six, I'll give you one better. I'll give
you more if you use instead of the S and P,
if you use the All World Index, which is forty
percent international, you have that there, yeah, point seven eight

(17:20):
down over the last month. The all world indexes all
world sixty forty, all world sixty four, so forty is
the Agrivon index sixty is the all world point seven
eight over the last month. A diversified portfolio across the
entire globe of sixty percent of your portfolio, what's what's
all all world index by itself? You have that over
the last month, and this is one hundred percent equities,

(17:42):
but forty percent is an international. Uh two point five
to three negative two point five three. It's down a
little bit today, so it's probably three point five to three.
When I'm saying six percent I'm including today, so it's
probably three point five to three versus the S and
P at six. So once again, a diversified portfolio that

(18:03):
includes US, that includes US is down much less. Add
in your sixty forty for bonds and you're barely down.
Over the last month, when the SMP is in a
six percent correction. People have said, Brad, you know you
talk about where the peak is. I had a conversation
with someone almost at the peak, rolling their eyes, saying

(18:25):
why wouldn't I just buy the Nasdaq one hundred triple que? Okay,
And this conversation with somebody just buy that and forget
about it, and I talk to them about risk management
and diversification. Since that date, the NASDAK triple qs is
down eleven percent. The SMP's down six. You want to diversify,
Let's diversify even further. All world index is down three.

(18:49):
Let's diversify further. Let's add fixed income. With fixed income,
you're down about one. That's why you don't just load
up and buy the triple que Yeah, the Nasdaq one hundred. Yeah.
And the time that people think about that is when
we've gone long stretches where it's it's worked better than
the overall market, And that's just about the time you

(19:10):
should be thinking about absolutely reducing that risk absolutely, just
about the time you don't want to own bonds because ah,
that's never done terrible. You realize in a correction why
you own them, just about the time you say, why
would I bother with the low volatility sectors, staples, healthcare utilities?
This is why, why bother with international? It's done terrible?
This is why. Okay, so yes, it may be one

(19:35):
year out of excuse me, one month out of every
six or one year out of every four that you
are happy about that, But that keeps you in the game,
that keeps you invested, That keeps you in the game
when you reduce your overall exposure to any one of
these corrections. And people got spoiled. People got spoiled because
they thought low risk, low volatility meant not only by

(19:58):
the Nasdaq one hundred, but by the MAGI And every
one of those mag seven names except for Facebook, is
down much much more than the overall market. Yeah, now,
we haven't had a rally in the last five years
that hasn't included those names. But when you're in these
sideways periods, or down periods. We almost haven't had a
rally that didn't include those selling off more. That's right,

(20:19):
we'll take our first pause. You're listening in a money sense.
Kevin and Brad Kurston will be right back. Welcome back
to the show. You're listening to the advisors of Kirsten
Wealth Management Group, Kevin Kirsten and Brad Kirsten. 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 set up a consultation to review your financial plan.
Whether you're just getting started, well on your way to retirement,

(20:39):
or already in retirement, we'd be happy to sit down
and go over things with you four one nine eight
seven two zero zero six seven or check us out
online at Kirstenwealth dot com. Brad. The headline of Wall
Street Journal about a week ago, the economy is still fine.
Americans are still gloomy. It's been interesting to watch some
of the confidence readings in the last couple of weeks

(21:01):
get to where to the levels that we consider extremely
over sold. I mentioned the American Association of Individual Investors
got to sixty one percent. Bears nineteen percent bulls. That
is the lowest level since the bottom of twenty twenty two,
when the SMP was down twenty seven percent from high

(21:22):
to low. And we hit that level recently when the
SMP was down a mere five percent. So plenty of
negativity in there in that survey. And by the way,
the most recent survey came out yesterday and it was
still elevated. It didn't get to a new high level,
but it was fifty nine percent bears. So tried to

(21:42):
go back and look and see how many weeks in
a row it ever stayed above sixty percent. Only stayed
above sixty percent twice since nineteen eighty seven, and that
was in October of eight. Only state above fifty percent
more than twice in October of eight and August of

(22:03):
nineteen ninety in the middle of that recession. Market sold
off twenty percent in nineteen ninety and that was the
only other time it was over fifty percent bears. So
this is at the tail end of selloffs when people
are at their most pessimistic, and so they these end
up being contrarian indicators. These are by signals when you
have this much pessimism, this many bears in the survey.

(22:26):
This is not a this is a leading indicator for
bull market activity because now you have people who are
out coming back in, and so you have to know
what you're looking at. Michigan consumer confidence went down six
point seven percent in February, once again a contrarian indicator,
and there's not a lot of data other than the

(22:48):
fear factor element. I mean, I saw the head economists
to JP Morgan talking about how awful these ideas aren't.
We haven't implemented anything yet, right, this is going to
be terrible, and the market is selling off based on
anticipation because everyone is spoot is force feeding the idea
that whatever is going on is awful. We have not

(23:10):
seen any numbers that are awful, and that goes to
this Wall Street Journal headline, Brad, the available data suggests
the economy remains pretty solid. Job growth was still strong
in January. Unplay employment rate dropped Even now now we're
talking about, oh, it's going going to be bad if
we don't know, well, think about even with the government
employee the layoffs. They're talking about how bad it's going

(23:33):
to be, But it might even be stimulative. If one
hundred thousand people take a buy out and get an
eight month severance package and get a job in the
middle of that. Now they're actually double dipping legally where
they have a job plus the severance. That's actually stimulative.
You're not going to see a drop in consumer spending
if people can find a job in less than eight months.

(23:55):
So we're doing this speculation as to the nation's largest
employer or the government at making some cuts, But we
still have more government employees than than we did a
year ago. And that number, if we look at a chart,
is a straight up number from the last three years.
So if we can manage to do it with a
couple hundred thousand less employees, it'll still be more than

(24:16):
we had eighteen months ago. Certainly, you look at the
consumer confidence numbers, and some of it is just returning
back to the level of equilibrium, because the numbers spiked
tremendously after the election, and then where we're coming back
down to is basically where we were on election day.
The other part is you got partisanship at where Democrats

(24:37):
have turned very pessimistic since the election. No surprise there,
but when they're out there just pounding the table about
how awful everything is, it does start to sink into
consumer's confidence a little bit. Obviously, Republicans have been optimistic
compared to Democrats when the Michigan surveys have been released,
the anxiety about the future, not the present. In both

(24:58):
Consumer Conference Board and University of Michigan surveys, assessments of
individual's current situation are about where they were in October,
whereas expectations for the future have slid have slid pretty
pretty dramatically. So much of the anxiety, when questioned is
about inflation. It's been stubborn lately. Consumer price inflation rose

(25:18):
more than expected to three percent in January, the last
month when Biden was president. Still the measure closely most
closely watched by the Federal Reserve is around two point
five percent and likely moving lower. If you looked at
the inflation now now cast aspens, so they have been
dropping like a rock. Yeah. So that's that's a bright
sign and one that would lead the Fed to making

(25:40):
earlier cuts. And I know that just with the economic
activity over the last week, you've seen the anticipation that
the Fed could cut as soon as April start to increase,
and definitely by June it's almost one hundred percent. We're
going to get one by June on the surveys, right.
So you look at these fears and there's very little
evidence that any slump in consumption at present could foreshadow

(26:03):
a recession. And you looked at retail sales falling a
little bit in January, but econmists blame seasonal distortions and
the coldest January in the last fifteen years. As part
of that, Walmart shares went down on a prediction of
softer sales growth in the coming year, not any weakness
at the cash register, just a prediction from Walmart. Republicans

(26:23):
and Congress are planning to extend the tax cuts and
possibly add new ones that certainly will be stimulative to
the overall consumer as well. Lesson is that political leaders
are vulnerable to a public that is deeply unhappy, not
in just in US, but around the world. They have
punished incumbents at a staggering rate in recent years, and
the honeymoons have been breathed. So that's the thing that

(26:44):
Trump probably mostly has to worry about with the tariff talk,
is is he going to have as much the mandates
there obviously won the election. I haven't heard Stephen A.
Smith of ESPN, arguing with the people the views, saying,
when eighty nine percent of all counties shifted to the right,
that's a mandate, no matter you know how small the

(27:07):
the overall vote, the overall vote was, But do you
lose that a little bit? Do you lose some of
that bargaining power if the market's in the middle of
a ten or fifteen percent correction, do you lose some
of that strength? Because the Democrats will fight even harder
then because they'll they'll say, see it's not working, and

(27:28):
they'll want to get Basically what they want to do
is put on the prevent defense until the midterm election.
Yeah exactly, but you've got you've got a lot of
things that are going to be happening. And I think
if you're people are looking more day to day. Sure,
but there are still a lot of people that look
at monthly statements and quarterly statements. If a selloff lasts
less than a month, or certainly less than a quarter,

(27:51):
I don't think you're going to have as many people
notice as listening to this show or or that we
talk to. Obviously, I'm a little bit biased because we're
in markets, we're in the bond market, the stock market,
et cetera. Brad. But when Trump talks about the golden
Age for the United States of America, and I get it,
a lot of people are not invested, okay, and those
are some of the people that have been hurt the
worst with inflation. You know, if you weren't invested, you

(28:15):
didn't get the benefit of the big stock market boom.
All you felt was higher prices and not being able
to afford things. I understand that. But when Trump is
trying to tout the golden age for the United States,
there is no world where you can get done with
a year or two years of your presidency and brag

(28:39):
about the Golden Age for America with a negative stock market,
with a market that's ten percent lower than where you start.
You know, you could you could say, you could say
wages are going up and we're fully employed. It's about
ranking and prioritizing what people feel the most, Okay, Because
I would argue that if the stock market's up twenty

(29:01):
five percent from the time he took office, every other
economic number could be bad and it would be better
for Trump than if wages were up, inflation was down,
and the market's down fifteen percent. If all those numbers
are better than when he took office, no one cares
because they're four oh one k is down, that's right,

(29:23):
So you gotta be a little bit careful. Yeah, And
that's the thing with twenty twenty two. Inflation was going
up and the stock market was down, so it woke
everybody up. If inflation was up but the stock market
was up, I'm not sure we were gonna be talking
about it. And it's the same thing here. If you
look back and this is just a two week blip
where we went down seven percent and no tariffs actually

(29:47):
ever get implemented. A year from now, you're gonna you're
gonna look at the chart. You'll be like, what was that?
What happened right there? No one will remember. I couldn't
remember what happened a year ago when we sold off
at the end of March. I couldn't remember. And it
was that inflation peaked up for one little blip and
interest rates spiked and it freaked the market out. I'll

(30:07):
bet moment, but nobody I didn't remember it. It was one
year ago. I'll bet most people don't remember. Brad twenty eighteen,
the S and P lost twenty percent in the fourth
quarter ended on Christmas Eve in the Trump presidence. In
the Trump presidency, it had I thought it had more
to do with I thought it had more to do

(30:28):
with all of the Russia negotiation talk. But when you
look back, and this is how you remember it too,
it was that the Fed went too far and both
of those things were happening at the same time, and
then the Fed had to retreat and actually cut rates,
and the market took off for the next fifteen months.
Let's shift the conversation to the Fed, because when you
look at where we are on bond prices right now

(30:48):
and yields, it's hard to believe that the Fed won't
have to They're gonna have to follow the rates. I mean,
typically the FED funds rate pretty close to the one
or two year treasury. The one in the two year
treasury at four percent right now, so looking at that,
they're fifty basis points too tight based on what the

(31:11):
market is saying. The ten year treasuries at four and
a quarter. So when you look at the surveys, I
think it's gone from ten to fifteen. On the next meeting,
which I think is just coming up in a couple
of weeks. It's March, so I think it at a
reasonable inflation number. There's an argument for a quarter or
earlier than later. So next week we can we get
a CPI and a PCE on Friday, and then they

(31:33):
meet the following week. This might be the first time
they surprise the surveys and actually cut earlier. They've done one,
pause and now cut. They may cut and say we're
still measured and we're still going to do it slowly,
which basically tells the market we're going to do at
every other meeting for a while. This might be the
first surprise because the market has given it a little
bit of a sell off and rates have come down.

(31:55):
This might be the one. Any politicking in there that
they don't like Trump, so they won't want to do it.
I think it's the other way around. I think you
get a little bit more politicking of of people pressuring
FED chiefs to say, hey, we got to keep this
thing going, and and we're already with tariffs gonna be
slowing the market down. Did you find that inflation? Yeah?
So yeah. For March, which gets reported in UH coming

(32:19):
up next week, it's point two four on CPI and
about the same for PCE brings it in at two
six two six five for both those numbers, and the following
month it's zero point oh one is the current and
PC is point one, and so that takes it down
to two three to two four. So you're trending down
to this two and a half level, and still you
know once a quarter making another leap down if you

(32:41):
know that, they could get down to the low twos
or even under two for a for a month or
two at some point this year, so they have room
to go. We're trending down the right way. We barely
hit three for one month and right back down. So
here we are two six next week, maybe the following
month at two four. They can they can cut and
not have to worry. We saw it was about fifteen
percent for this March meeting. The next meeting after that

(33:04):
is the first week of May. What was the percentage
for that, meaning that was more like fifty but coming
up from like a twenty five percent number. But the
June meeting was was a ninety percent er, and but
all that means is it was ninety They give the range,
so they say by June it's going to be this,
So by June, it's ninety percent, ninety five percent that
we're going to have at least one quarter point cut.

(33:25):
So that's that's kind of how they do it. If
you look at by June, we're gonna have two cuts,
that was like a thirty five to forty percent number. Yeah,
I mean they're to me, they're they're way off at
the moment. They're they're between four two five and four
and a half on on their range four to three
three as of last night's close. Yeah, I think they're
they're they're they're point five tighter than they should be

(33:48):
right now. Yeah, So to me, it looks like we're
probably more likely baking in three cuts, maybe four cuts
this year the year, And if the first one is
in two weeks, I think it would be I think
it would be a positive sign for the market and
may be where the market finds its footing. And if
we keep the inflation numbers and check the long run
level of neutral for the Fed is probably more like

(34:09):
three and a quarter, somewhere around three and a quarter.
And if the Fed funds is at three and a quarter,
ten youre treasuries at four and a quarter, you're gonna
see mortgage rates down, you're gonna you're that is a
positive for the overall market. We'll take our next pause.
You're listening to Money Cents Kevin and Brad. Kirsten will
be right back and welcome back. You're listening to advisors
of Kirsten Wealth Management Group, Brad and Kevin. Kevin. We

(34:30):
talked a lot about the social security change that affects
really only nine states, but one of them is Ohio,
and that's doing away with the windfall elimination provision and
the government pension offset provisions. Now that those are gone,
everyone's going to be getting a lump sum of if
you already are getting SOCID security and have been affected

(34:52):
in past payments, or if you reapplied because you were
getting nothing because of those. The lump sums are going
out a lot quicker than we were anticipating, maybe two
months quicker. Just this week we were hearing of people
getting their deposits into their checking account for the back
payment backdated to January first of last year. So for

(35:12):
these people it ended up being a fourteen month back
payment of a lump sum, and then in April actually
fifteen month because in April then they're going to start
to get their their their first monthly check without the reduction,
or their first monthly check for some people at all
from Social Security. So a lot sooner than we anticipated.
They really the guidance that we're getting is only only

(35:35):
for complex cases, is what they said. Will it take
till May. I'm not sure what complex cases are, but
maybe somebody that is not getting a widow benefit and
they have to do a little bit of research, maybe
some X spouse benefits. You might have to do a
little extra research. But that's what we're hearing. The other
thing that maybe somebody was married to one of those
one hundred and fifty year olds. Yeah, could be, and

(35:56):
they have to do a little extra research. The other
thing they're talking a lot about is reminding people that
even these lump sums and the increased payments are taxable.
You know. Taxability of Social Security is being talked about. Yeah,
they're talking about taking it away at all. So it
was not always taxable. You know. In the nineteen eighties,
Reagan made fifty percent of your tax of Social Security

(36:19):
taxable at whatever rate you're at if you were above
the bottom bracket. Clinton in ninety three made it eighty
five well, two different tiers. There was a tier for
fifty and a tier for eighty five percent of your
Social Security. Now not the tax practice at eighty five percent.
Sometimes I tell this to people and they're like, well,
I only get to keep fifteen percent, No, eighty five
percent of your Social Security? Then is your income at

(36:40):
your rate whatever your rate ends up being. And so
they're talking about taking all of that away. Think about
that for somebody that might be getting a thirty thousand
dollars lump sum in an additional twenty five thousand throughout
the year and fifty thousand more from Social Security and
you're not taxed on it. You're talking about a ten
thousand dollar or savings for some people. And so a

(37:02):
big difference if if the Trump, if Trump gets his
wishes on that, or not taxing overtime or not taxing tips.
There's a lot of people, even if you didn't vote
for him, that are going to have a big boost
to their their take home pay or their their net
income if those things are not taxed. And Social Security

(37:24):
affects nearly every retiree now, especially those in Ohio now
because of these two provisions being taken away. If you
have any questions about those or you haven't applied, just
give us a call and we'll kind of help you
through it. Give you a direct number to call for
Social Security to get them to start. Because of this

(37:44):
Fairness Act that just got pasted at the end of
the year, let's just keep it consistent, right, I mean,
you put money in your retirement account, pre tax, you'r
four one k yep, pre tax. It comes out including
the growth taxable. Yeah, okay. You put fifty percent of

(38:06):
your Social Security contributions are pre tax, fifty percent you
pay tax on yeah okay, So when it comes out,
why is it just all fifty right? I don't think
anybody should get it tax free. If you got a
deduction on part of it, yeah, you got a deduction
on part of it. Okay. Why is anybody getting it
tax free? Yeah? Yeah, if even if they just rolled

(38:27):
it back to the original fifty percent is taxable. And
I don't understand why. Yeah, I mean it's it's a
political ploy to get votes. But why isn't it just consistent.
Let's just not have any double taxation. I mean, the
people who are paying the eighty five, which is a
lot of people, that's a low level. Yeah, I think
it's forty grand or something. Yeah, you're paying more tax

(38:49):
than you then you got the benefit of when you
were working. Yeah. Yeah, it's a double dip. It's a
double dip. I mean, there's a lot of double taxation,
you know things out there. But why isn't it just
consistent in terms of what you put in versus what
you get out? I never never really understood that. But
I tell you what, Brad, I can't believe how many

(39:10):
meetings I'm having where people are benefiting and getting lump
sums plus more monthly here with people in Ohio. If
you're not getting Social Security and it's because you have
a state pension and you're not sure, give us a
call or just call social Security and ask them does
this apply to you? And if you're calling social Security

(39:31):
and you get a voice prompt, just say Fairness Act
and they have dedicated people just for that new Act
and helping you through the process. Let's take our next pause.
We come back. We're going to talk a little bit
more about retirement planning and making it simple. You're listening
to Money Sens Brad and Kevin Kirsten. We'll be right
back Welcome back to the show. You're listening to the
devisors of Kirsten Wealth Manager Group, Kevin Kirsten and Brad Kirsten.

(39:55):
Last night's segment here Brad and we're talking financial planning.
As a reminder, we are financial advice. If anybody has
any questions about what we're going to talk about here
coming up or throughout the show, or you want to
sit down and view your financial plan four one nine
eight seven to two zero zero sixty seven or check
us out online at Kirstenwealth dot com Financial Plan. What
is that I need a financial plan? Someone told me

(40:18):
I need a plan. Yeah, if I don't have a plan.
And by the way, I know people who don't even
start investing because I don't have a plan. Yeah, well,
I know people won't work out unless they have a
workout plan or a personal trainer. Tell I need someone
to tell me what to do. I need to read
this book about nutrition. I need to read this book

(40:41):
about lifting. And I need to read this book about
how I need to eat nine thousand grams of protein.
That's the hot thing right now. It's like it's overwhelming.
It's overwhelming in the healthcare space, it's overwhelming in the
financial space, and the simpler the better. The simpler the better.
With your health and wellness, go walk, start walking, maybe

(41:05):
run a little bit even in Sometimes we're don't as much,
we're not dumbing it down on this radio show. Sometimes
it is as easy as we're talking about. It should
be easy investing and the same thing. I know people
who have spent thousands of dollars on a quote unquote
financial plan just so they can have a book, and
they have no idea. What's in it? Yeah, no idea.
I know people who spend thousands of dollars on an

(41:25):
assuss plan, yes, and a trust just so they can
have a They bring it to me and it's one
hundred and eighty pages and I say, what what is that?
What's in this? And they don't know? Okay, well who's
the trustee? I don't know what's at say happens after death?
I have no idea. And most of their goals could
have been accomplished by just simply making sure beneficiaries were named. Yeah, okay,

(41:46):
well how about financial planning. People sit down, they pay money,
they get these plans. You need this, you need this analysis.
Let's have this back and forth saw an article in
US News twenty five times rule. Like it great? I
like it so simple. Yeah, okay, when you look at
the twenty five times rule, save twenty five times your

(42:06):
annual expenses and you'll be fine. It's sort of the
sister rule to the four percent withdrawing four percent of
your retirement income annually from investments. But it's an easy
off the top of my head, what I need. If
I need one hundred thousand, I need two point five million.
Boom done? Are you at two point five million? No?
Keep working like it's the easiest thing in the world. Now.

(42:27):
I would put one caveat to that, and it would
be if your needs are high, twenty five times great.
If your needs are low and social Security is going
to cover half of it, Okay, maybe twenty five times
is a little excessive, but it does give you a cushion.
But also the same thing with a pension. If you
have a pension and social Security and that's going to
cover half your needs, Okay, maybe your number is different,

(42:47):
but it's still just a number we have to get to.
There was a commercial out a couple of years ago
talking about what was your number? Because that's the other
thing too, is people want to compare themselves to other people,
but person a's number is completely unrelated to person B.
Person A might have no debt, person B might have debt.

(43:08):
A might be a spendthrift, person B might not spend
that much money. So everybody's number is different. Even within
your own friend group, your number might be different. But
the twenty five times rule to me is as good,
if not better, than the one thousand dollars financial plan
you spent that money and that you get, which is

(43:29):
no guarantee. Everyone acts like that, that expensive financial plan,
which hey, we could spit you out one two. But
most of it is nonsense. And I spent half the
meeting poking holes in the whole thing, and I would
poke holes in anyone else's too, because it is all hypothetical,
and most of it is a straight line return, and

(43:49):
none of it is realistic, especially if we're looking out
more than two years. You do a twenty year projection,
or at ten years until retirement and then twenty years
into retirement, it's all nonsense. None of it is can
possibly be accurate. So it's such an easy thing for
you to track the twenty five times rule. It gives
you a measure if you're on track, behind or a

(44:11):
head where you want to be with your current finances.
It provides a good starting point to just something to
think about, something to always have anything to get there.
The psychology behind it moves the needle for people who
might not otherwise otherwise be as focused on their savings
goals because they don't know what they need to save. Okay,
what is enough? Okay, I'm gonna tell you right now.

(44:32):
Nine very few. I can't never say never, but ninety
nine percent of people who follow the twenty five times
rule had a successful retirement. Sure, Okay, so you can
look at all these other variables, you can look at
all these other things people have going on. If you
save twenty five times what you need after factoring out

(44:53):
pensions and social securities, you'll be doing better than ninety
nine percent of people. Okay, So figure out what you
think that number is. Multiply by twenty five and see
if you're on track and it's going to be way
less than what you're currently spending, especially if you have
kids in the house or if you're still paying down
a mortgage and you're not gonna have it in retirement,

(45:14):
and the big ex expenditures are out of the way.
It might be a lot smaller number, and now you
can start to think, Wow, I'm either there or I'm
really close to it. If I'm thinking about twenty five times,
is what I need to fill in the gaps of
all the retirement income I'm going to need. Yeah, and
it's not perfect, it's not one size fits all, but

(45:35):
to me, it's a lot better than some of these
plans that I see out there that are that are
unnecessarily confusing Brad in terms of what people need to
put in their financial plan. Now, it doesn't account for
a few things. Living longer than say, thirty years of retirement. Yeah,
probably doesn't account for an extreme amount of longevity, but

(45:58):
no plan does. No plan does. It probably doesn't account
for the person who underspends, right, they might not need
to save as much. Okay, someone who's who is making
it work on three percent of their assets. If they
have a million dollars, they don't need forty a year
thirty thousand a year per million, we'll cut it for

(46:19):
that person. Well, that person doesn't need to have twenty
five times. Probably twenty times will be just fine for
that person. So it's not a one size fits all,
but it's one of those things where if it covers
ninety nine percent of people, you don't need to go
out there and do all this work for a plan.
Make sure you're on track for twenty five times, and

(46:41):
then maybe sit down once you get to twenty five times,
start thinking about the other variables in your life that
might make that number need to be more or less less.
And all it might mean is retire a year early
or work one more year. That's it. But now we're
talking about I'm within a year of when I I
thought I was going to retire, and that's the more
thinking what if the twenty five times rule is too

(47:03):
much for me and I've saved more? Well, never had
anyone get to retirement say I wish I hadn't a
save so much? Right, Okay, I do have people that
saved way more than they needed to. And when they
we get to that point where like, can I afford
to retire and we find out that they don't need
a whole lot out of the investments, the answer is yeah,
you could have probably retired years ago, but they weren't
the point where that where their job was killing them. Well,

(47:25):
what I find with those folks, Brad is there's a
certain level of freedom and peace of mind that that
extra money they save provides that even if they don't need,
that money is well worth it just for the ability
to take less risk and enjoy their retirement more. Thanks
for listening everyone, We'll talk to you next week. You've

(47:47):
been listening to Money since brought to you each week
by Kirsten Wealth Management Group. To contact Dennis Brad or
Kevin professionally, call four one nine eight seven to two
zero zero six seven or eight hundred eight seven fives
seventeen eighty six. Their email address is Kirstenwealth at LPL
dot com and their website is Kirstenwealth dot com. Opinions

(48:08):
voiced in this show are for general information only and
are not intended to provide specific advice or recommendations for
any individual. To determine which investments may be appropriate for you,
consult with your financial advisor prior to investing. Securities are
offered through LPL Financial member FINRA SIPC