Kersten Wealth Management Group - Money Sense 3-22-25

Episode Transcript

Speaker 1 (00:00):
Hello, and welcome to money sentence. You're listening to the
advisors of Kirsten Wealth Manager Group, Kevin Kirsten and Brad Kirston.

Speaker 2 (00:05):
Happy to be with you today, Brad.

Speaker 1 (00:07):
As the market starts to try to find its footing,
we're seeing a you know, a little bit of strength
in certain areas and hit that ten point four percent
level on the downside, officially a correction according to the
books on the downside, which is a good thing. I mean,
we haven't had a correction of over ten percent going
back to October of twenty twenty three, so almost a year,

(00:32):
well pretty close to a year and a half since
we've had that correction. So we get there, we find
our footing a little bit. In the last week, we've
see some areas up. The S and P five hundred
is up a few percentage points, being led by actually
energy and financials in the last week from pretty close
to that low point.

Speaker 2 (00:53):
At individual days.

Speaker 1 (00:54):
It is tech leading the way on individual days, but
as we kind of vacillate back in and fourth it
seems like tech is giving up all its gains each
time that we see it. So we'll see we're gonna
bounce around the bottom here a little bit. I don't
know that this one's gonna be a v shape recovery
like some of the other ones we've seen, because we
have to get past a few things. Today we're taping

(01:17):
this show on Wednesday is FED Day, so that's one
of the things to get passed. But you just have
all these political things that I think we have to
kind of tick off the list to get passed. And
looking out a couple weeks that April second date looms
for a little bit of tariff.

Speaker 2 (01:33):
News too that I think we have to get passed.

Speaker 1 (01:34):
So if you look at a ten percent correction in
the S and P five hundred, it only goes to
twenty percent thirty three percent of the time on average,
So once you get to ten two thirds of the time,
it stops pretty close to there. Historically, bounces off correction
lows between ten and twenty percent average twenty eight percent

(01:55):
in the next twelve months. So if the market doesn't
see that twenty percent correction from here, the average return
twelve months later is twenty eight percent. On any correction
between ten and nineteen, two thirds of the time, you're
gonna get a average of a twenty eight percent return
after you're buying ten percent dips exactly what a lot
of people were worried, Oh, is this going to be

(02:16):
the next big one? What you should be worried about
is though, what's in your favor here and missing out
on what is historically a pretty good time to put
dollars to work. Another positive brad that that we saw,
and this is, you know, some of the reasons we
see these extremes in sentiment. We talked about the Bulbear Index,
which the next one comes out today, so we'll see

(02:36):
if it's three weeks in a row over fifty percent bearishness.
But the Davis Policy Uncertainty Index has hit the same
levels that it hit in eight, twenty eleven and twenty twenty.
Now this is policy uncertainty that would you know, the
tariffs being brought in. That's that's the type of policy
uncertainty we're seeing. But it's also the same extreme that

(02:59):
we saw into that eight twenty eleven and twenty twenty.
Those extremes and that level was hit recently in the
last week, have been followed by average gains of twenty
one and a half percent one year later. These games
assume the US economy avoids recession and earnings would keep growing.
So another way to identify an attractive entry point to
see if the correction doesn't go any further to add equities,

(03:22):
is based on the news buyers would be would be
likely to come in if trade uncertainty clears, even if
economic growth in earning's expectations drop, So that would go
to this April second deadline that Trump is talking about
and referring to. I keep seeing people like Scott Bessen
out there and Howard Lutnik talking about they are having

(03:43):
ongoing negotiations and try to avoid that reciprocal trade. I
think what we're gonna end up with it's not that
many countries. I think we're gonna end up with maybe
tariffs that stay on for a month or two with
two or three, and maybe for three to six months
with two or three. And you're gonna have ten countries
that lower their tariffs because of this this April threat,

(04:05):
and yet you're gonna have the media focused on a
few of these small countries that we really don't have
much much trade with it at all because of how
large the tariffs are in the first place. I mean,
there's not compared to the size of our economy. How
much do we really have flowing out to China. I

(04:25):
don't think it's a lot. And even the imports have
are are not that big big of a part of
our economy. The import influx, though, prior to these tariffs,
is what has has thrown the GDP number to be
a slightly negative here on the GDP now predictor. But
all of that is just a one off and and
probably it is something that is not even gonna gonna

(04:50):
happen by the time we get to the end of
the first quarter. There's a lot of other GDP predictors
that would say that we're going to go down a
little bit for one quarter, but not probably even dip
into the negative territory. Well, and we'll talk about the
FED here in a minute. I mean, I'm seeing a
lot of assumptions being made about tariffs and inflation that
I just don't I don't understand. Okay, there's this assumption,

(05:15):
and it's just you know, certainly when it's described if
this happens, then this happens. If a company has to
pay a tariff, they're going to raise their prices, and
then they're going to raise their prices isn't going to
cause all this inflation. But there are other deflationary things
going on in the economy as well. So there's this
assumption and they're talking about the FED, Well, they can't

(05:36):
lower rates. They might even have to raise rates because
tariffs will cause inflation. The FED is not Here's one
thing I know about Jay Powell. He is not going
to do anything unless he sees it in the data. Yeah,
he's not going to preemptively say let's get out in
front because we know because they don't know that we
haven't had tariffs for one hundred years. Yeah, well what
we did in twenty eighteen and they and we had

(05:57):
a deflationary period, So.

Speaker 2 (06:01):
That you're right.

Speaker 1 (06:01):
They're always data dependent and the only the only problem
with what they're looking at. And we're not probably ready
to talk about inflation yet. But there are a lot
of new indicators using different models that use a lot
more data points that are live instead of six weeks
late that I think the Fed's going to start to use.
I think they're going to stop looking at this old,

(06:23):
dead data. And I think a lot of the times
when Fed Pale is speaking like he's going to speak
this afternoon he's looking at that data, and he is
he is going to be hinting a little bit more
about the real the real time data, and how it
looks a lot more positive than the six week old
data that everyone else is looking at. Let's get back
to the correction really quick, and some perspective on that.

(06:43):
Brad three hundred and forty four trading days since the
last ten percent pullback in the overall market. And I
think that goes to maybe some of the conversations that
we're having weekly. People forget investors, you know, I think
amnesia with investing can be a good thing. I mean,
it's certainly a good thing to stick with the long

(07:06):
term and forget those periods of time where the market
corrected and you had losses. There's a certain aspect of
that that's good. And sometimes it's just because you were
busy in twenty twenty three when we had our two selloffs,
you weren't paying attention to your day to day whatever
it might be. But having that short term memory, you know,
it's like a quarterback he throws an interception. They say,

(07:28):
you gotta have a short term memory, otherwise you'll be
thinking about interceptions all day long.

Speaker 2 (07:32):
Well, that's true with investing.

Speaker 1 (07:34):
But the problem with forgetting about it and saying, I
don't really really remember twenty twenty. I don't remember twenty
twenty two. I don't remember twenty eighteen when the market
sold off twenty percent in the fourth quarter. The problem
with not remembering it is when the next one comes around,
it's like, oh my gosh, this is so unusual. Corrections
are more normal than you think. The pain for the

(07:56):
recent correction probably feels more acute due to the lack
of volatility and selling pressure for almost the entirety of
twenty twenty four, the year that averaged a new record high.
Every four trading days we had a new high. However,
according to ned Davis Research, a correction on the SMP
five hundred from nineteen twenty six well excuse me, has

(08:17):
occurred every one point one year is going back to
nineteen twenty eight. Corrections also tend to produce attracting buying opportunity.
Since nineteen fifty, the average maximum drawdown for the SMP
has been thirteen point seven, but the average gain has
been nine point five seventy three percent of years. Three
out of four years have generated positive returns, even though
the average year has a thirteen point seven percent sell off.

(08:40):
When focusing our performance for years when the SMP registered
maximum interior drawdown between ten and twenty, the average gain
has been eight point four was sixty four percent of
the year's finishing higher. Long story short, you need to
remain optimistic because history shows a ten percent or more
inter year drawdown does not necessarily mean that the market
will have a negative year. One of the most frequently

(09:03):
asked questions during a correction is when the selling pressure
will stop. Certainly we don't have a crystal ball on
that tellings exactly where the market bottom will be, but
we can look at history. Over the last few weeks,
the SMP has suffered some technical damage, including a break
below the two hundred day moving average, which we talk
about a lot about on this show. That sits today
at five seven and forty. The July highs are five

(09:28):
six hundred and sixty seven. So those are two big
areas to look at at the SMP. Where are we
at on the SMP right at the moment here, I
think pretty close to pretty close to the level right
up to fifty seven hundred. Again, Yeah, you're looking at
the highs of July being some support, and then certainly
the two hundred days, So the SPS at fifty six
fifty two creeping up on that two hundred day and

(09:49):
those highs of July, those areas will now serve as
resistance if the market rebounds, and we need to look
to see if the market can recover not only the
two hundred day, but those those highs from co closes
above that day a couple days in a road to
close above that two hundred day is now can it
can be meaningful support instead of resistance. So regarding downside risk,

(10:10):
a key support level would be about fifty five to
fifty that's where the index closed on March fourteenth. These
levels could be tested if the market breadth on the
index continues to deteriorate. Forty percent of the S and
P are trading above their two hundred day and it's
means sixty percent are below. That is the lowest reading

(10:30):
coincidentally since the ten percent correction in the fall of
twenty twenty three, So we got to relieve rally. That's
a step in the right direction, but we need to
get more stocks above that those support levels and above
their two hundred day moving average. To feel like the
corrections in the rear view mirror. A lot of times,
you know, we've had some V shaped corrections. Last August

(10:53):
was a V shape recovery. Excuse me from that correction.
But a lot of times you see a choppy market
for couple of weeks, two days up, one day down,
two days up, one day down, and then you look
back and maybe it'll look like a V shape recovery.
But when you're in the middle of it, it seems
like you're kind of going nowhere for a while. I
do think the market does it needs to get past

(11:14):
a few of these things I mentioned, getting past the
FED meeting. Let's make sure fedpal doesn't say anything stupid
to disrupt the market.

Speaker 2 (11:20):
Let's get past April.

Speaker 1 (11:21):
Second, let's make sure that we make a few deals
on tariffs and the government doesn't do anything stupid.

Speaker 2 (11:27):
I think what we need to see.

Speaker 1 (11:28):
It's only a couple weeks away and a few hours
away here for the FED meeting, so I think we're
we have a little bit of green shoots out there
that could be meaningful upside for the market, and looking
at it. When I mentioned this earlier, we see it again.
When you have volatility. That's where your opportunity lies. We
bought a little bit in a couple of our models,
not every single model on the low day. Bought a

(11:50):
little bit of technology on that low day, and some
new dollars that we're waiting on that finally are kind
of fully invested now too. Since nineteen eighty, after a
ten percent correction, the SMP has traded higher by thirteen
percent on average three months later. Since nineteen eighty, the
gains occurring ninety two percent of the time. Your three
month average after a ten percent After hitting ten percent,

(12:12):
it's thirteen point one percent ninety two percent of the time.
Looking at twelve months after correction low, the broader market
is gained twenty eight point five percent on average. These
rallies come with the benefit of hindsight, and they also
highlight potential upside of putting money to work during a correction.
Some of the best trading days of the year occur
at the correction lows, and trying to time these lows
are costly.

Speaker 2 (12:31):
If you.

Speaker 1 (12:34):
Those best days will happen after the drop, and if
you miss one best day a year for the S
and P since nineteen ninety, your gain would only be
six percent a year. This compares to nine point eight
for buy and hold. Take out the two best days.
You missed the two best days once a year, and
your average in your return drops to three percent. You
might as well your own treasuries. If you're going to

(12:54):
try to time the market, you might as well own
treasure well. And I think some people might say, well,
it sounds like you got are time in the market. Look,
most of what we're doing is contrarian. When when we're
fielding calls from clients that are saying at after market drops, boy,
I think I need to be more conservative. Likely we're
already planning out a strategy for adding risk. And when

(13:15):
on the way back up, people feel pretty good, Okay,
I'm fine now, and on when the market gets to
an all time high and beyond, what we're starting to
hear from from the average investor is you know what
I'm feeling like, I need to be more aggressive well,
or I think I should think about these individual stocks,
or what about only the Nasdaq one hundred for my investments.

(13:35):
When we're starting to hear things like that, it's not
because we're hearing that, but it's just because of history
telling us we're probably at a stage where this market
is a little frothy and setting up for a little
bit of a correction. It is the opposite that most
people need to be thinking about, but they can't, and
I really don't blame them. The loss of version is strong,

(13:57):
but in order to smooth out the road, you need
to be adding risk after the dips, taking risk off
the table above a market normal market performance line. If
you think about that normal market performance line, you just
draw that straight eight ten percent line from lower left

(14:18):
to upper right. The market is moving a little above it,
a little below, and a little above it, a little
below it. If you just think about that, are we
above or below that long term line? And when we're
below it, like a ten percent correction would give you,
we're adding risk and we're above it. We need to
be thinking about taking risk off the table for near
term withdrawals, certainly, or for a dry powder to buy

(14:39):
a dip. That's a successful strategy, but that's not what
most people are doing. They're falling victim to what they're
hearing on the news. And right now it's all seeming negative.
Starting to turn a little bit this week, but last
week was a very negative cycle, and that is I
have been saying, that's what the bell at the bottom
sounds like maximum pessimism, and the bell the top is

(15:00):
maximum optimism, and we're a long way from that. Most
of the best trades we've ever made, and this is
just being honest, they don't feel great. No, what do
you mean, They don't feel great. If you're buying while
the market is dropping, it never feels good. Everything also
you ever see is telling you that everything's gonna get worse.

(15:21):
If you make a trade that feels really good in
terms of now now listen, if you've done your research
and all that stuff, that feels But if you're just
doing it because it feels good, like in videos going
straight up, it would feel good. If I want to
get on the train, my portfolio is going down, I'm
getting out, you will feel good. You'll feel good for
a day, okay, But most of the best trades anyone

(15:41):
has ever made, okay, it feels terrible in the moment.
Selling at the top, buying at the bottom never feels good. Yeah,
because everything all around you is flashing the other signals correct.
And that's if you've done it enough and bought these
dips enough, you know what signals sound like and feel like,

(16:01):
and and so it being a contrarian has you doing
all of that. You're going the other way of everything
you're hearing and reading. And the reason why it's so
difficult for investors and advisors is because it is that
mentality goes against almost every other aspect of your life, okay,

(16:21):
every other aspect of your life. When something is doing poorly,
there's there's a reason to stop doing it. There's a
reason to stop doing it. Yeah, you know, you're you're
gonna you're looking for doctors. You're not gonna say he's
done five bad surgeries in a row.

Speaker 2 (16:36):
He's two for a good one.

Speaker 1 (16:37):
Yeah, you're you're not gonna say that. You're you're looking
for someone who never has a downturn in their skills.
But the market doesn't work like that. The market you
have to run into the into the building on fire
when the market is going down. And so it goes
against every instinct we have for risk avoidance. You're you're

(16:57):
you're going into something that looks risky, but people benefit
from that during corrections. Stake our first pause, you're listening
to money Cents Kevin and Brad Kurston will be right back.

Speaker 2 (17:06):
Welcome back to the show.

Speaker 1 (17:07):
You're listening to the advisors of Kirsten Wealth Manager Group,
Kevin Kirsten and Brad Kirsten. As a reminder, we are
professional financial advisors and our offices.

Speaker 2 (17:15):
Are in Perrysburg.

Speaker 1 (17:16):
If we want to give us a call throughout the
week to set up a consultation or review your 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 review things with you four one nine eight
seven two zero zero sixty seven or check us out
online at Kirstenwealth dot com. FED meeting today, Brad. Tariff questions,
I'm sure are going to come post meeting. Inflation questions.

(17:39):
I'm sure you're going to come a couple different things.
Paul has been pretty adamant that he he reacts to
actual data. So we think on the tariffs, we think this,
we think that that's not gonna I would go that
has caused him to be a little bit slow. Although

(18:01):
I would say that the data on inflation started trending
in twenty twenty one, in twenty twenty two started trending higher.
I don't think they started cutting. No, they did, excuse me,
raising rates until March, and it started trending in November.
And I even look at that. If you were going
to look for them to start raising rates, I in

(18:24):
my opinion, you'd have to see three four percent for
like three months before they'd raise rates, you know, or
race were the first time they raised seven point five. Okay,
so they went a lot. They thought it was going
to spike up and come back down, right, and well,
they're not gonna fall. They were thinking that the spike
was going to be five ish and come down, and
it got to seven point five and they finally reacted.
And the other thing that they have a mandate on

(18:46):
is economic data and making sure if the economy is
slowing down, if people are losing jobs and that number
is ticking up, they have a mandate there as well,
which would lead them to cut rates. So we'll see,
I mean the inflation numbers without question, so you know,
point this out to our listeners. The inflation numbers are
going down. Yeah, And so everyone could talk all they

(19:08):
want about tariffs here, talk about pet peeve on TV.
Everyone is relying on the monthly CPI number that is
six weeks old by the time it reports. So the
one that just reported in the mid March is from January.
It's the January first through January thirty. First number that
they report March fifteenth. Okay, it's six weeks old by
the time they report it. And everyone on TV is

(19:30):
saying we're probably already going to see inflation go up
because of tariffs, and then when it didn't and it
was below expectation to say, well, it's just well, we'll
see it next month or the following month. Well, guess what.
There are real time data points. Trueflation is out there
and you don't have to have a subscription. You can
look at a lot of data on truthflation dot com.
They trueflation looks at fifteen million data points to determine

(19:53):
your actual cost of goods for the average person and
waits it based on what the average person spends at
for groceries, utilities, housing, and doesn't look at all of
this old data that the BLS looks at, and the
BLIS looks at a lot of things. They say they're
looking at eighty thousand data points, they actually post them all.
It looks like about five thousand to me. But whatever,

(20:15):
there must be more data points in there. But this
is fifteen million data points every single day and trueflation.
When I look at it looks like it changes twice
a day. And the number went from in the mid
twoes down to one point three in the last month,
and so about six weeks ago it started to trend

(20:35):
down and went all the way down to one point three.
Today it sits at one point seven, but it is
hovered between one point three and one point seven for
the last two weeks. And some of the things that
are coming down our food like people would feel, and
a lot of talk about eggs.

Speaker 2 (20:49):
It's back down there.

Speaker 1 (20:49):
We're not going to be worrying about eggs in the future,
but the ones that are there. Was everyone surprised by
the eggs we killed. We killed all the chickens. Yeah,
you kill all the chickens. You didn't see the unintended
consequence of that.

Speaker 2 (21:03):
I mean, I'm surprised actually that.

Speaker 1 (21:05):
Well, these are mustagers been only the egg laying chickens
because we didn't see the chicken the chicken breast price
go up. There was no surcharge at Chipotle. But yeah,
so here we are, we're right back down to where
we were, and we're probably gonna overshoot, actually, because people
changed behavior and said, I'm not even gonna look at
eggs as I go to the grocery store. We're probably
gonna have some sale prices pretty soon, and it's gonna

(21:27):
it's gonna overshoot.

Speaker 2 (21:28):
To the downside.

Speaker 1 (21:29):
But there's a few here that are really Trumpet related.
We oil price on inauguration day was eighty dollars. Since
a day it's below sixty seven, and so gasoline's gonna
keep going down. It was three eighty a year ago,
it was three twenty five on inauguration day, it's three
eighteen today. Diesel is the same trend. And all of
it has to do with Yeah, somebody I heard somebody

(21:52):
else say, oh, imports are down. That must be a
teariff thing. No, imports are down because production is up.
We don't need it. So since inauguration day, we're down
a million three barrels per day of imports. Well, why
because we're producing more, because we're allowed to produce more.
And the same is gonna go with natural gas and
all those prices are gonna come down, and so we're

(22:14):
gonna have and part of what is already showing up
in trueflation is utility prices spiked way down, Electric and
gas utilities spiked down. And I don't know if it holds,
but if there's anything this administration is doing, it's allowing
a little easier production of oil, production of natural gas.
And so if companies know that they're not going to

(22:36):
have pushback, they're gonna go out there and try to
make a profit and increase things like that, and all
of that is deflationary. And so is if we're making
goods here instead of making it over season shipping it here. Eventually,
it is deflationary. So all that shows up in trueflation.
Today it sits at one point seven, and so for
the next two months, what is forecasted for CPI for

(22:57):
next month is actually a negative and so we're dropping
off a point four today. The the the inflation number
six at two point eight. In three weeks they're gonna
post probably a zero or a negative number, and so
you're gonna see the CPI number that everyone looks at
for the FED to be at two point three to
two point four from where it is today at two

(23:19):
point five or two point eight, and might go down
below two the following month. The FED is definitely cutting
if we see a below two number. Now they're gonna
cut and pause maybe, but we're not. They're not going
to be cut in to day. And I guess there's
a risk of me saying that because it's gonna post
on Saturday and this is this is happening in three hours,

(23:39):
but the market's not expecting it.

Speaker 2 (23:41):
So they're not going to do it.

Speaker 1 (23:42):
But they might be doing it at the following meeting,
and they might do two of the next three meetings
because they can, and that'll be very stimulative to this
economy to have some slightly lower interest rates because we
have inflation under control. And I think that's the silver
lining that's out there that no one is talking about
because they're they're so convinced that tariffs are going to

(24:03):
be permanent, and if tariffs are permanent, they're so convinced
that that's gonna be inflationary. Yeah, and and so what
they do today, what they do in the coming months.
But the reality is, if you see a two percent
inflation number, you're you're you're going to see the FED cutting.
I know Donald Trump obviously would like to see the

(24:24):
FED cutting. And is there a president that doesn't want
to see the FED cutting. I mean is that exclusive
to Donald Trump? I mean every every president's like cut
rates make everything better. But we have been in a
restrictive mode for quite some time. I mean restrictive would
be the Fed funds rate is above CPI. Fed funds

(24:46):
rate has been above CPI for almost a year, So
we've been restrictive. Uh, and certainly that's brought inflation down. Uh.

Speaker 2 (24:56):
People.

Speaker 1 (24:57):
Rick Santelly on CNBC does this all the time. He
does the culative. I think the cumulative is valuable because the
cumulative is what we feel when he says, you know,
from five years ago, or you know from three years ago,
we're up twenty some percent, that's what you feel. The
number of two percent inflation. No one ever feels that, well,

(25:18):
we're too. Everyone says we got inflation under control, and
we only have two percent inflation, And people roll their
eyes because you feel the cumulative effect of inflation. If
something was one hundred dollars and now it's one hundred
and twenty, and then a year later it goes to
one twenty two, that doesn't make you feel any better.
But we're going to be in a mode now take
take the cumulative number is the number that affects politicians. Yeah, yeah,

(25:42):
that's the number that affects politicians. But if we go sideways,
especially on food, for the next couple of years, people
will feel like the cumulative is in the rear view
mirror and they're gonna forget about it. If eggs and
milk are at the same level twelve months from now,
we're gonna feel like we have we have zero inflation
on accumulative almost because they've've kind of absorbed it and

(26:06):
have gotten used to it. And then they're gonna say, wow,
we haven't this, This hasn't gone up, but I don't
need it to go down anymore. Well, the irony about
it is Trump certainly is out there saying he would
like to see lower interest rates. But there's no question,
I mean, there's i say, more liberal people on the feather's,
more liberal people everywhere in Washington. So this is not

(26:26):
a big thing to say. But you know, more often
than not, they're going to be against Trump. They don't
like the tariffs, okay, And the irony of it is,
if Trump hadn't done the tariffs, we'd probably be further.

Speaker 2 (26:40):
Along toward a rate cut.

Speaker 1 (26:41):
Yeah, I mean, you know, I don't agree that that
it's a slam dunk. By the way, I'm not saying
tariffs won't cause inflation. I'm just saying I think it's
ridiculous when people were out there saying it's a slam
dunk that it will. You can't know that. We've talked
on this show. One of my biggest pet peeves is
people declaring things to be true that they can't possibly know.

(27:02):
One of them is that tariffs will cause inflation. Okay,
it's a maybe, it's not a guarantee, but the problem
is if enough people think it, the FED might hold
off on their rate cuts. If enough people think it,
it becomes true. You kind of roll your eyes at a
lot of the technical analysis when we look at the
two hundred days, and I agree, I think it's all

(27:23):
sort of just staring at a chart until you see
a line you like. But we have to talk about
it because so many people buy on those dips or
sell on those rallies in those technicals, and the same
thing is true with tariffs. We have to talk about
the idea that they might cause inflation because that's what
everyone's thinking.

Speaker 2 (27:41):
And so.

Speaker 1 (27:43):
If anything, there's a real possibility of this push and
pull with the markets, where before this correction happened, there
would have been almost no chance of the FED cutting
if the market was sitting at all time highs and
we were talking about tariffs. Now it's you know, the
numbers are coming in that okay, maybe the FED might cut.
It's only because the SMP dropped, that's true. You know,

(28:05):
the FED sits there and says we only look at
inflation and unemployment because those are their two mandates. We
don't look at the stock market. That's so ridiculous. I mean,
they had done a couple cuts last year with the
market close to all time I'm gonna close my eyes
if I don't know anything about inflation and CPI and unemployment.
If the SMP goes down twenty that's cutting. They're cutting.

(28:29):
They're cutting one full percent. Yeah, so don't tell me
you don't look at the SMD. I want a few
FED cuts. So maybe what we need them to do
is we need them to cut soon. Because of the
market rallies. Maybe they're going to hold off a little bit,
and I'd like to get a couple cuts in because
I think.

Speaker 2 (28:44):
It would be healthier for everything.

Speaker 1 (28:46):
I mean if you're just using some of the old
metrics in terms of what is stimulative and what is
stimulating the economy, what is contracting the economy. We've been
in that contract mode for a year. I mean, they
could go down to three and a half on the
Fed funds right what is.

Speaker 2 (29:04):
It four in a quarter right now?

Speaker 1 (29:05):
Yeah, they go to three and a half and we're
not stimulating if they go to three and a half,
we're just getting.

Speaker 2 (29:10):
To basically neutral.

Speaker 1 (29:12):
Yeah, So that's the thing that we have to pay
attention to over the next Well, if you fed me
how speech matters more, because I would like to hear
him be dismissive of all the tariffs are going to
cause inflation talk, and we'll see if he don't know,
there's no way he's going to be a dismissive of that.
He'll say we'll wait and see the data. He always

(29:33):
says we'll wait, And.

Speaker 2 (29:34):
That would be great.

Speaker 1 (29:34):
Yeh to me, that's blowing it off. Yeah, I'd be
fine with that if at least he says that. All right,
let's take our next pause. You're listening a money cents
Kevin and Brad Kirsten will be right back.

Speaker 2 (29:44):
Welcome back. To the show.

Speaker 1 (29:45):
You're listening to the advisors of Kirsten Wealth Management Group,
Kevin Kirsten and Brad Kirsten.

Speaker 2 (29:50):
Brad.

Speaker 1 (29:50):
It is March Madness Tournament's getting started here this weekend,
and it's always interesting to see the schools that are
participating and all the stuff that's going on with college
sports with NIL payouts and schools that are participating in
the NIL and then of course the schools like the
IVY Leagues which are participating and NIL, but they're also

(30:12):
losing a lot of funding from Donald Trump Ace. Well, right,
it's amazing to me these these IVY League schools. And
what was the one I saw recently from Trump. It
was like four hundred million dollars to Columbia University. Yeah,
that was like a four It was one hundred million
a year, and it was all for research grants. But
still that's still money that the university gets and gets
to pay to people doing the research and pay to

(30:34):
PhD students. And I mean it's still money that their
endowment fund. Yeah, has got to be huge. I just
saw recently Harvard is now up to if you can
get into Harvard if your family income is under two
hundred thousand, it's free, Okay, Yeah, and then it kind
of ratchets up, and I think you're probably two fifty

(30:55):
in below and you're still getting a discount that is unbelievable.
Under two hundred thousand, you can go to Harvard for free.
I mean, well, I have a seventeen year old and
I'm getting stuff all the time, and it's all about
these these elite schools and if if your incomes under this,
you can go for free. And but you know, if
you're having to pay the four two year tuition, you
better plan ahead because I'm looking at the Yeah, that's

(31:16):
not for the masses. That's not for the masses, And
that's only for the IVY leagues that have the big
endowments and and want to use it to make sure
that it kind of levels the playing field. But yeah,
for most people, you're not going to an IVY league.
You're going to one of these schools that might be
in the tournament. And I'm looking at the entire bracket.
Only one school for a four year tuition is under

(31:37):
one hundred thousand, and that's BYU at ninety one thousand.
Only a few that are just over McNeice whatever Edwardsville
is what is the South?

Speaker 2 (31:48):
I don't even know what it is.

Speaker 1 (31:49):
SIU Zradsville, Southern Illinois University, edwards Okay, very good. It's
got to be one of the first times in the tournament.
I don't remember them being in. They're a sixteen seed.
There are one hundred and twenty one thousand a year. No, no, no,
for the four years.

Speaker 2 (32:01):
For the four years.

Speaker 1 (32:02):
Oh my gosh, So here you are. It's thirty thousand
a year roughly. But most of these I would say
the bulk of them are around the two hundred and
fifty thousand level.

Speaker 2 (32:10):
And I'm not.

Speaker 1 (32:12):
Sure if they're doing it for I think they're doing
it not for in state, but if you're an out
of state. But a lot of these schools are accepting
more and more out of state because it's how they're
gonna make money. It's how they're going to fund things
like the nil and and and they're going to attract
the out of state by throwing a bunch of money
into the universities, building new dorms and requiring students to
be there for two years in their dorms so that

(32:34):
they can make money off the real estate. But yeah,
you take ones like I'm looking at Michigan here three
hundred and two thousand, five hundred for the for the
four years. So do the math on that you're talking about.

Speaker 2 (32:45):
Is that out of state? It's going to be out
of state?

Speaker 1 (32:46):
Yeah, yah, yeah, I think they're all out of state
when I'm looking for even Louisville. Louisville is on here.
It's two hundred thousand a year. So that out of
state is they're doing it as roughly, and they're doing
it on everything here. On what I'm looking at that
you could use a five twenty nine for So what
is that? That's tuition, room board, books, computers, any other
fees that the school would have. And if you're on campus, yeah,

(33:09):
your food counts. If you're off campus, your apartment counts,
but probably not your food. That wouldn't be probably justified.
But a lot of things count and what they're counting.

Speaker 2 (33:20):
You think you're off campus food would not count. I
mean you're at school. It's a good question, but I
highly doubt it.

Speaker 1 (33:25):
Yeah, yeah, it's part of your in the dorm and
it's going to be in the cafeteria.

Speaker 2 (33:30):
That definitely counts.

Speaker 1 (33:31):
One of the top four seeds one of the top
four seeds, that's what they call. Yeah, So Auburn is
two hundred and twenty seven thousand for the four years.
Duke is three point fifty.

Speaker 2 (33:39):
I'm going to just round him here.

Speaker 1 (33:41):
Houston is one hundred and fifty seven thousand. Reasonable there, Yeah,
I think they're fairly selective. Houston is I saw that
on a very low especially for out of state acceptance rate.
And then Florida, which also has become pretty selective because
people want to go head south. All the Florida schools
have become a lot more selective. One hundred and eighty
thousand for Florida. Big school down there in Texas which
is always top of the list for academics is Rice,

(34:03):
but they're not in it, but Rice is always Yeah,
let me see, ivs are probably going to be the
tops of the list. Yale is three point fifty three.
That's got to be the most I see on the list,
and Zaga's about three hundred. So yeah, between Duke and Yale,
you've got your at three hundred.

Speaker 2 (34:20):
And fifty thousand.

Speaker 1 (34:21):
So well, and I think you know, we have kids
in college right now. The five twenty nine plan has
been a great tool it's been a great tool to
save money for college. And there's some other things you
can do with a five twenty nine plan now, But
every single time I take a withdrawal to make those payments,
I see that little number there that says how much
was principle, how much was earning, how much was earnings?

(34:42):
And you know that's all tax free money. Where you
made money in the stock market and it's all tax free.

Speaker 2 (34:49):
Now.

Speaker 1 (34:49):
A couple different things to point out on the five
twenty nine place. First of all, you get a minimal
right off in the state of Ohio. Let's just talk
about Ohio. If you're doing one of the Ohio plans,
it's either van Guard Blackrock, And if you do it
with Vanguard Blackrock, you get a state tax deduction of
four thousand per child. It's you know, depending on your

(35:10):
tax bracket, couple hundred dollars. Whatever right off it does,
you do carry that forward. So even if you want
to say I'll just do ten thousand in the first
year and let it ride, you can then just do
it do that same deduction. Time value of money is
very important with the five twenty nine plans because you
only have the eighteen years really not a lot of
value you get to opening a five to twenty nine
plan when your child is a junior in college.

Speaker 2 (35:31):
You need that time.

Speaker 1 (35:32):
So I know that it's convenient for people to do
monthly contributions, but a bigger lump sum is definitely more
bang for your buck. I see that a lot with
brand parents. They'll just do a lump sum at birth
and you get a lot more bang for your buck.
The other thing is, if you have an advisor that
can guide you through the process, I think you can
do better than the target date funds. Or they're not

(35:53):
target retirement, they're target college date funds. And the reason
why is, let's say, for example, your child was a
senior in high school or even a junior in high
school in twenty twenty two, okay, and your target date
fund was scheduled to go one hundred percent out of
the market because they call that the college income portfolio,
or ninety percent out of the market in twenty twenty two. Well,

(36:15):
the S and P five hundred at that point was
down twenty five percent from high to low. Create a
portfolio be one hundred percent stocks until at least when
your child is in seventh or eighth grade and then
maybe start thinking about pulling a I like to look at.

Speaker 2 (36:32):
It a little bit differently than the target DAVE for
a year at a time, year at a time.

Speaker 1 (36:35):
So let's say you've had a nice run in the market,
three four or five good years in a row. Maybe
you take freshman year tuition out of the market. Okay,
now you've given yourself another year of wiggle room. And conversely,
when the market goes down, if you've had money set aside,
maybe you put it back in. I like to be
a little bit more dynamic with those allocations, but not

(36:57):
for the first not for the first ten years, not
for the first maybe even thirteen fourteen years. Yep, And
get enough money in you know, early, if you can,
if you can, I mean, the monthly contributions is not
is not a bad way of looking at it either. Well,
I want to say you can now can if you
don't use it all, you can now convert some of
it to a roth ira up to thirty five thousand,

(37:18):
and you can always change to a different beneficiary of
that five twenty nine. So if you don't use all
of it, you could change to another child, or you
could just save it for that child, and when that
child has their child, you as the now if you're
the parent, you as the now grandparent. Let's just switch
it to that child's child. And so I've had some
people that have used that as their strategy. They thought
their child was going to go to college, maybe they

(37:38):
went for a year or two, and then those leftover funds.
We were talking about the raw strategy, but they said,
better yet, let's just wait till they have kids, and
we'll just change it to our now grandchildren and that'll
be the strategy. And that way, that child's still getting
those dollars, the benefit of those dollars that they didn't
use for college.

Speaker 2 (37:57):
In longer term. Two.

Speaker 1 (37:57):
It can also be some of it in state planning
tool as well, because the money that you put in
the five twenty nine plan is not part of your estate.
So if someone is at the point where they might
be paying estate taxes, I think the maximum contribution is
almost four hundred thousand.

Speaker 2 (38:13):
That's gone up.

Speaker 1 (38:14):
It's a five hundred and seventy five now five to
seventy five. You could put it so you could potentially
overfund if you wanted to, Yeah, the five twenty nine
plan and then later on do things like roth conversions
or split it up among grandchildren or great grandchildren. So
if you ended up overfunding something and you had three
or four hundred thousand in it, but then you have

(38:37):
you know, if you had three or four kids, you
might end up with twelve grandchildren, So you could split
that up at a later date if you wanted to,
and then that money would also be out of your estate.
So one other thing, I just want to talk about
strategy that we have employed. You talked about front end
loading these five twenty nine, I ran a couple of
illustrations for someone. We were going to do a couple

(38:57):
hundred dollars a month for eighteen years. But instead of
doing that, what is the amount that we had to
do to achieve the same end goal by just taking
a lump sum. So we ended up taking the lump
sum out of a non retirement account they had invested,
and then doing our monthly back into that non retirement account.
Because it allowed us to have even more tax deferred earnings,

(39:18):
because now we have eighteen years to have tax deferred earnings,
instead of some of the dollars that we're putting in
only have a year, some only have two because we
were contributing all the way up to age eighteen and
age seventeen, and those don't have as long to grow.
So there's two ways to think about it. I can
put less in and get more at the end and
certainly more tax deferred dollars. Or I can put the

(39:41):
same end that I was going to put in and
have more tax deferred earnings at the end. So even
if you're doing a monthly I would encourage people to
even front end load that monthly. Let's get a higher
monthly in for the first five years and then stop
and start recontributing back to your own non retirement account.
It shouldn't ever come from your retire wirement savings. Okay,

(40:01):
there's a lot of different ways to pay for college.
You can pay out of pocket, you can get loans,
you can do whatever. If there's no you can't borrow
money to pay for your retirement. So if you're choosing
between your four to one K contribution and your five
twenty nine four one K number one, you got to
max that out first. If you're choosing between like in
the example you gave Brad, between your non retirement investment
and your five twenty nine Okay, now we can start

(40:23):
talking about the five twenty nine in addition to your
retirement savings. But you got to you got to take
care of your retirement first, uh, because there's there's only
one way to pay for that, and there's a lot
of different ways you can pay for college.

Speaker 2 (40:34):
But it's a great tool. Five twenty nine. I don't
know when that.

Speaker 1 (40:37):
Started, but two thousand, two thousand and one, Yeah, pay
like that. I think it's a it's a it's a
great tool to to save for college. It's essentially a
wroth Ira for college. And uh, you even get a
little bit of a tax right off on the way in,
so you get a little bit of double assistance on taxation,
at least at the state level. We're gonna take our

(40:59):
last as you're listening to Money Since Kevin and Brad Kirsten,
We'll be right back.

Speaker 2 (41:03):
And welcome back.

Speaker 1 (41:04):
You're listening to the advisors of Kirsten Wealth Management Group,
Brad and Kevin.

Speaker 2 (41:06):
Here. Kevin.

Speaker 1 (41:08):
One new story this week that I think is going
to go on for a little while here is we
talk about how the mag seven companies, so the seven
largest companies in the world, mostly tech, have been on
an acquisitions binge for the last five years, and for
somebody like Microsoft, you can go back twenty years that
they have been doing acquisitions in various tech fields. One

(41:31):
of the reasons that they've they all want to expand
their their reach and not be kind of a one
trick pony and something like Microsoft. They don't want to
just be software and have kind of evolved with a
lot of their acquisitions. It's one of the reasons that
we weren't bothered by the concentration of the performance of
the largest tech companies because they're all such big conglomerates

(41:53):
and if they didn't do any acquisitions. We talked about
a show six months ago, this would be another nine
hundred companies that they represent. They're not the Mag seven.
They're more like the Mag seven hundred, and some of
them are very very large companies that they bought. And
I bring it up because Google this week made a
bid to buy a company I had never heard of before.

(42:14):
That's a cybersecurity company called Whiz for thirty two billion dollars.
They were about to go public, but they are privately
held and if they would have gone public, they would
have been a large MidCap company. But This is another
example of people missing how much is in these companies.
This one's gonna go on for a while. I think

(42:35):
there's gonna be a little antitrust fight here because Google
did buy a few other cybersecurity companies. But I don't
know why this would be monopolistic. I mean, the largest
five cybersecurity companies in the world are larger. Each one
of them individually are larger than what Google's going to
be here if they make this purchase. But it is

(42:57):
worth pointing out that you have I'm looking at their
largest bi dollar amount of acquisition.

Speaker 2 (43:02):
They purchase Ways for.

Speaker 1 (43:03):
A billion, YouTube for a billion six back in two
thousand and six, double Click for three billion in two
thousand and eight, and as Last for three billion back
in fourteen, and the other cybersecurity company they bought was
five billion two years ago. They're all these companies that
would be worth ten to one hundred billion dollars if
they were publicly traded, like YouTube. But it just goes

(43:28):
to people getting obsessed with how large some of these
companies are. They're large because the small and mid sized
companies are being bought up at premiums, and so all
of them are more like Berkshire Hathaway than they are
like the old IBM when it was the largest company
in the world. They're all just conglomerated. So it'll be

(43:49):
interesting to see if this one gets held up. I'm
not sure why it would. It's not like it's another
cyber security company buying a cybersecurity company and create a monopoly.
It is somebody that's not in the business trying to
get in the business, and that's what they were trying
to do in two thousand and twenty two when they
bought this other company that I also had never heard of,
that they bought up for five point five billion. So

(44:12):
I don't think it should get held up, but there's
a lot of talk that they're thinking about dragging it
through the courts a little bit longer with antitrust. But
it'll be interesting if to see if Trump's going to
be kind of on the side of growth and tech
and these the kind of the all the tech entrepreneurs
that were with him during the inauguration, if that was

(44:36):
meaningful or not, because it sort of seemed like he
was on their side with things like this, and it
would be a little more fast tracked. But that's not
the speculation right now.

Speaker 2 (44:47):
Yeah, Well, we'll see. I mean they got a lot
of cash.

Speaker 1 (44:50):
I mean all these companies when you look at their
earnings reports, they have tremendous amounts of cash. So they
don't spend it. It's a drag on the portfolio, so
you want them to spend it. So not a recommendation
or by yourself any of these stocks. We're talking about,
just news that's out there and thought we'd share it.
I think that that's a positive. When companies are out
there paying premiums for mid and small sized companies, it's
telling you that these companies think they're undervalued. And I

(45:12):
think small amid the sideways moves we've seen for four
years is if the stocks don't move, companies are going
to get bought up.

Speaker 2 (45:20):
Yep.

Speaker 1 (45:21):
A couple of minutes left, Brad. Lastly, we're getting into
tax season. Taxes are due April fifteenth, and we're looking
at some things that people need to look out for.
And one of the things that's sort of an alert
that I saw, and there was actually even an article
on the Wall Street Journal, is watch out for fraud
on your tax return. You know, identity theft can happen
and we're seeing upticks in people getting someone taking someone's

(45:46):
real information such as data burso security number, and filing
a fake tax return in that person's name to steal
a refund. The fake return claims a made up refund
that typically goes to the fraudster's account, So when the
real taxpayer files their actual return, the computers reject it
because they've already processed a return with the same name,
and the real filer has to resolve the problems. Victims

(46:06):
must file abidatas to prove their identity, submit paper returns,
and wait for the refunds, so that process is getting
longer and longer. So you know, another reason to protect
your personal data that you put out there and be
very very careful to forestall fraudulent refunds. The IRS encourages
taxpayers to apply for a six digit PIN, which stands

(46:26):
for ippin, which stands for Identity Protection Personal identification numbers,
so you can talk to your account about setting one
of those up. For taxpayers who have them, the IRS
computers reject the returns who don't have that PIN up.
Probably even more important if you're doing your own taxes
and or if you're one of the filers that maybe
you're forced to file late because of k ones, you'd

(46:51):
be probably be more susceptible to have somebody try to
steal it ahead of time. If your identity was stolen
in twenty twenty, it took the IRS about one hundred
days to resolve it. In twenty twenty before it took
the IRS almost seven hundred days to resolve if your
identity was stolen. So look, look to set up that
that pin number and make sure it's something that isn't one, two, three, four,

(47:12):
five six either, So you know, there's there's That is
certainly one of the biggest things that you can do.
And as of last year, only ten million out of
the two hundred million taxpayers had done one of these
pin numbers. So, but we're always on the lookout for
ways that people can protect themselves against identity theft. And
I don't think their tax return a lot of times

(47:34):
is something that they're they're worried about, especially if you're
using a CPA, but it does happen, So uh, look
to do that pin number and just be careful with
your personal information out there because it does take a
lot of time to resolve. And another I mean We've
said it before. The IRS is never gonna call you.
The IRS is not going to text you. If something
somebody says they're from the IRS, they're not on the phone.
And if they text you, you definitely do not click

(47:55):
on that, or you've just put a malware on your phone.

Speaker 2 (47:58):
That's right.

Speaker 1 (47:58):
So well, thanks for listening everyone one. We've got the
March Madness happening this weekend and we'll see which high
tuition school ends up advancing to the Sweet sixteen. Thanks
for listening.

Speaker 2 (48:07):
We'll talk to you next week.

Speaker 1 (48:12):
You've 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
five seventeen eighty six. Their email address is Kirstenwealth at
LPL dot com and their website is Kirstenwealth dot com.

(48:33):
Opinions 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