Kersten Wealth Management Group - Money Sense 4-19-25

Episode Transcript

Speaker 1 (00:00):
Hello, and welcome to Money Central, listening to the advisors
of Kirsten Wealth Management Group, Kevin Kirsten and Brad Kurston.
Happy to be with you today. Brad quick quick market
update as we get through the week here of what
his historically the Easter week is actually has a lot
of bulishness to it historically, but we may have had
that last week with the big rally that occurred leading

(00:22):
into Easter Week. Still you're todate the SMP is down
around ten percent, nine point nine to five on the year.

Speaker 2 (00:29):
Kind of exactly halfway back from the low point, which
was just shy of twenty percent, just.

Speaker 1 (00:34):
Was nineteen point nine. I actually saw somebody reference the
fact that the S and P five hundred really likes
to stop just shy of twenty percent, which is the
official bear market territory. Although you know that's just a
made up number because it's a round number.

Speaker 2 (00:51):
But it is.

Speaker 1 (00:51):
Interesting how we've had quite a few SMP selloffs that
have stopped at the nineteen percent. You had twenty eighteen,
two thoy and eleven in nineteen ninety I believe right
there was actually a recession in right around that particular time.

Speaker 2 (01:10):
But stop between nineteen point two and nineteen point nine
percent on a closing basis. A lot of them, just
like we got last week, will intra day be below
twenty and then not finished below twenty and that's kind
of we're well off of that now, so halfway back,
all of that coming kind of in a single day
as a little bit of terrorf leaf came late last week.
We talked about that last week, and now it's just

(01:32):
because we haven't had any real news. We've moved up
a little bit, moved down a little bit. If we
have a day with kind of no progress, it seems
that we give a little bit of it up. But
Trump's having these weekly cabinet meetings and press conferences where
they're kind they're kind of hinting that we're making progress
on the big fifteen countries, is what they said today,

(01:53):
with making deals having them come over to the US
kind of iron out the deal. But it will take
some time. But I think in the next week we're
probably going to see some progress on maybe the first
officially inked deal, and then I think they'll just start
to come rolling in once the groundwork, well, they have
to one of them.

Speaker 1 (02:11):
I mean, they have to get some sort of news
out there on these tariff deals. That Trump sold it,
so you better de look it.

Speaker 2 (02:18):
Wait to the eighty ninth day of the ninety day pause.

Speaker 1 (02:21):
That's right.

Speaker 2 (02:21):
There's too many countries involved. You have to start working
them out. And I'm hopeful that in the next thirty
days they haven't all worked out with those fifteen countries
that they're talking about.

Speaker 1 (02:31):
Right now, only two sectors on the S and P
five hundred are up on the year. That's energy. Excuse
me that Staples at four point two. Look at the
wrong column there, Staples at four point two, Utilities at
two point five. That's the Low Volatility Index basically, Yeah,
those two biggest sectors in that low volage and the outperformers.
These will be sectors that are outperforming on a relative

(02:52):
basis but still down on the year. And the outperformers
would be energy, financials, healthcare, in fustrials, materials, and real estate.
So quite a few outperformers as well. And the only
underperformers on the on the SMP, these would be sectors
that are performing worse than the S and P since
the beginning of the year are technology, consumer discretionary, and

(03:14):
communication services, which are both technology sectors.

Speaker 2 (03:17):
Sort of, yeah, all your performance wasn't twenty three and
twenty four and on your big up days, it's we
haven't had a single one that you've had a big
update where that hasn't been the leader. And and even
on the weakness, you get a little bit of in
Nvidia news this week, not a recommendation, buyer selling video,
but them saying they're gonna have to write down five
point five billion because of tariffs or China. It's it's

(03:41):
it's kind of odd that that in Vidia says we
have so much demand, we can't even fill all the orders,
and then there's a little bit of slow down with
orders going out to China and they say we have
to write down five point five billion. The last earnings
report they said they said they couldn't fill all the
orders because they can't make them fast enough. So why
would you have to write down five point five billion

(04:01):
if the prior report said you couldn't fill the orders
fast enough, why din't you just go send them somewhere else.
It'll be my opinion, I think they're trying to since
the markets down really lower expectations so that they look
like geniuses in the next few earnings reports. Wow, we managed.
We thought we were going to write down five point
five billion, but look how good management is. We made
our way through it and earnings are up as much

(04:22):
as we expected a year ago.

Speaker 1 (04:24):
Yeah, I mean, it's an opportunity for CEOs to kind
of if they had any bad news, they won.

Speaker 2 (04:31):
It all out, just get it all out there. All
the time.

Speaker 1 (04:33):
Yeah, you see that all the time, especially when CEOs
are new CEOs and they take over. They kind of
want to just get one bad quarter out of the
way because they can blame the last person who was
in charge. And right now they have an excuse. They
have tariffs as an excuse, and CEOs are going to
put that out there. But you know, it's interesting with
the tariff discussions, and you know, two things can be

(04:55):
true at the same time. It could be true that
Trump could have probably had the rollout be a little
bit better and had the messaging be a little bit better.
And also it doesn't necessarily mean because that messaging was
bad that we have to have some sort of economic
meltdown either. So two things can be true at the

(05:16):
same time. I think they could be over selling the
economic meltdown and Trump could have done much better job
of communications, in particular with these tariffs.

Speaker 2 (05:24):
Well, I think, but there's two fold with that. It's
companies just wanting to get all the bad news out
of the way and lower expectations. That's for their own benefit.
But all of the news media or even pole the
FED chiefs, all of the FED chiefs leaning on what
they think is going to happen, or their gut or
the surveys or the economists, and not the real data.

(05:47):
And you see this even with employment headline here that
says Americans brace for biggest unemployment jumps since the pandemic.
You read the article and it's not what's actually happening,
because unemployment is improving every single month. We haven't had
a single blip that has hasn't been you know, the
unemployment rate might change a little bit based on how
many people we have in the workforce, but more people

(06:10):
getting jobs, less people on unemployment every single month, beating expectations.
And yet this article is out there because it's what
everyone thinks is going to happen. The probability that you
think you're going to lose your job in the next
twelve months is at a peak at fifteen point seven,

(06:30):
So fifteen point seven percent of people out there think
in the next twelve months they might lose their job.
But also at a peak is the probability that you'll
quit your job to go get another one of the
next twelve months, also at a peak at eighteen percent,
So people are worried. Fifteen percent of people think they're
going to lose their job, but eighteen percent of people
are going to leave their job to get a better
one of the That doesn't jive. And it's the same

(06:53):
with everyone relying on well the expectations or the economists think,
or people think that they're going to lose job, or
people think that inflation is going to go up. It
doesn't matter what people think. It matters what's actually happening.
And the inflation is going down, and not just if
you're looking at CPI, but you're looking at the daily data,

(07:13):
it's all going down. The only thing going up in
the inflation data is wages, and wages are up four
point eight percent in the last month, even though the
total CPI is down two point four and wages are
part of that. So think about how how many negative
components we have that wages are up four point eight
and the full CPI, the full inflationary number is at

(07:35):
two point four, and which should be a good thing.
People are making more money, but inflation is low, so
their dollar goes further. But the FED is relying on
what they're they're thinking is going to happen instead of
what's actually happening.

Speaker 1 (07:47):
Well, and the FED tries to pretend that they're this
sort of unbiased observer. And all we do is look
at the numbers, Brad. All we do is look at
the numbers, and we let that be our guide. But
what you've really seen, really since COVID, Okay, what you've
really seen since COVID is the initial response with all

(08:12):
the stimulus and then the printing of money by the government.

Speaker 2 (08:15):
Okay.

Speaker 1 (08:16):
What's interesting to me is they started this narrative on tariffs, okay,
that tariffs always cause inflation. Okay, And when COVID hit
and we blew the doors off of money supply, when

(08:38):
we blew the doors off of FED stimulus, when we
blew the doors off of money going out the door
from the government, too much money tasting too few goods.
Every single economic textbook metric that would cause runaway inflation. Okay,
they're talking about the textbooks right now and.

Speaker 2 (08:57):
Saying saying that tariffs will and and when they were
doing all these other measures that would have said this
will cause inflation, that they were, they were in denial.

Speaker 1 (09:09):
I mean, it's much more likely that gigantic money printing
and all the stimulus and all the checks we sent out,
it is much more likely that all of that would
cause inflation than tariffs. And yet the FED kept rates
artificially low for too long. So it really seems to
be that they just respond to what they want as

(09:32):
opposed to what's right in front of their faces.

Speaker 2 (09:34):
And now the frustrating thing for me is they're not
relying on real data. They're relying on what people think,
and not just economists, they're relying on what individuals think
people think, and that's what this article is. So a
lot of articles are Americans brace for? Well, but that's
not what's actually happening. And so what are Americans braced for?

(09:55):
Even on unemployment, the survey says that people think that
unemployments to go up to five point whatever. Well, it's
not there. We're at a very low point and it's
going down. People think that this is the New York
Fed survey of I don't know it's a BLS survey.
I think it's like eighty thousand individuals that the inflation

(10:17):
rate at the end of the year will be three
point six percent and the five year inflation will be
two point nine. Well, it's not. Why would any individual
know where inflation is going to be in five years?
Why are we even surveying what people think? It doesn't
really matter. If you survey people right now and says
and say, what do you think the market did last year?
Is that more important than what the market actually did?

(10:38):
Because in the year of COVID, seventy percent of people
thought the market was negative even though it was up
twenty percent. Does it matter what people think the market
did or what the market actually did and that's where
we are now. Does it matter where people think inflation
is or where it actually is.

Speaker 1 (10:52):
Well, if you go back to twenty twenty one, In
twenty twenty two, inflation was actually higher and refuse to
raise rates.

Speaker 2 (11:02):
Because they thought it was just gonna be.

Speaker 1 (11:03):
Temporary and it was going to come down, and they
were wrong. Now inflation is actually low and they think
it's going to go up and they're refusing to lower
rates because of their feelings. They they claim to be
data dependent at the FED, but they do a lot
of decision making based on their feelings.

Speaker 2 (11:21):
And that's why you and I have talked about getting
the individuals out of it and just creating a computer
program and have some individuals monitoring the computer program for
new data points. And that way you don't have individuals
that are potentially political having their decisions being made for that.
And that's why I don't like this.

Speaker 1 (11:39):
I don't like Trump, about don't I don't like Trump,
I don't like Biden, I don't like Obama, I don't
like George Bush. Whatever it might be, they could be
making decisions based on that. Yeah, And everyone is saying, well,
you're saying terrforts aren'ting to cause inflation. Well, gee, if
only there were some countries that had tariffs that we
could look at and see if it caused inflation, like

(12:00):
the entire Eurozone which was on the same trajectory as
US when they did stimulus and have trended down. And oh,
by the way, have tariffs and are increasing those tariffs,
And where is their inflation rate almost exactly the same
as ours? It went up a little bit all the
way down through September, then went up a little bit,
that went down a little bit, and they're about one
month ahead. We're at two point four. They were at

(12:22):
two point four last month.

Speaker 2 (12:24):
They just reported their data also not as delayed as
our data, and it's two point two. Where have I
been saying the data is going to be probably at
two point two next month as we report our six
week old data. And what are they doing right now?
They're cutting rates for the seventh time this week, and
so what are we doing? Well, we're political with our
FED and we don't like Trump, and we don't like
what he's doing and we don't agree with it. Therefore,

(12:45):
we're going to punish him by not cutting rates because
we think it might cause inflation, even though it doesn't
cause inflation in any other country that currently has tariffs
and is also increasing their tariffs, like Canada, who also
doesn't have inflation just like we don't, and is doing
more teriffs, not less, and Europe that's doing more, not less.

(13:06):
We have all of these data points that show us
that tariffs don't affect it because one people who just
make a different choice, and two the amount of dollars.
Everybody says, oh, twenty five percent, tariff price goes up
by twenty five Well, no, what if that good has
ten percent of the product is going to have a
teriff on it?

Speaker 1 (13:23):
Well, I mean you look at what the Fed has
done when they started cutting in September, right, did they
cut again? They cut one time?

Speaker 2 (13:28):
No, no, they have They did fifty and two twenty fives.

Speaker 1 (13:33):
Are you sure they did two twenty fives or one.

Speaker 2 (13:35):
At least one? Yeah, we'll pull that up. But yeah,
they started with the fifty, so yeah, you're gonna call
it as three or four. And by the way, the
Eurozone is on the same path. But they just kept
going and they're on their seventh and so they could
have we're lower now than we were when they did
the fifty, and yet we're still on hold and we're
trending down. And if they're looking at any real time data,

(13:56):
which you know they are, they know they're up against
it here and they're hoping that in the next month
the real time data changes, because here's what they're gonna do.
They're gonna say, yeah, we're gon we're gonna look at
the CPI while it's in our favor, and then when
the real time data is in our favor, we're gonna
go back and look at that, because right now they're
looking at old data because it's a it's two point
four percent on inflation instead of the current one point four.

(14:17):
And then if the one point four changes, they're gonna
flip flop. But if it doesn't, they're going to be
looking at a one point something by June, and they're
gonna have some real answers. And I don't even think
Paul will make it till June. Trump's gonna push to
get him out of there and get back to someone
that is actually looking at the data instead of using
their gut that has been wrong more than it's been right.

Speaker 1 (14:39):
Well, and you look at it. And what did somebody
say when they were talking about conspiracy theories in Congress?
They said, the only difference between the truth and the
conspiracy theory is six months. Yeah, and you look at
our FED funds rate. He lowered fifty. We got to
figure out when they stopped. I see if you can

(15:03):
find that, Brad, because what I was going to point
out is, Okay, here we are in September. We kind
of think maybe Kamala Harris will win.

Speaker 2 (15:11):
So we're gonna cut a few times.

Speaker 1 (15:13):
Well, they know it's stimulative. Okay, it's better for the incumbent,
but we're not political. Better for the incumbent. Biden's in office,
Kamala is running. Now, let's cut, let's stimulate. Yeah that way, okay, yep,
and then we'll kind of get Trump's in. We can't
do that, okay.

Speaker 2 (15:29):
So here are your dates. September eighteenth fifty cut, November seventh,
right before the election cutka, December eighteenth cut. So you
had if you count the fiftys two, you got four cuts.
The last raise was July twenty sixth of twenty three.

Speaker 1 (15:45):
Okay, but what I mean, what's the thought process in
twenty twenty five we've had. Did we have any inflation
numbers tick up?

Speaker 2 (15:56):
You got a couple of flat lines. But the only
reason you would have it tick up is if you
were taking off lower number, your point two on a
month where you're kicking off a zero. Okay, you're gonna
tick up a little bit, it's just the math. But
it's a steady decline. Now, September was a relative low point,
and then everyone ticked up a little bit going into
the second week of December, and then it's all been

(16:16):
straight down since then.

Speaker 1 (16:17):
Then why did we cut?

Speaker 2 (16:19):
Yeah, right before the election, from September to the first
cut till December eighteenth of the third cut, the third
time they took action, the inflation was going up the
whole time. So now here we're in a.

Speaker 1 (16:32):
Situation where we think and we feel, and we're basing
it on that. Just like we thought and we felt
that the COVID stimulus would only be temporary inflation, which
it wasn't.

Speaker 2 (16:44):
They're all drinking the same kool aid. Every FED chief
that comes out, they all say the same thing. They're
all talking tariffs, and we know, we know tariffs will
do this. We know we're gonna have this. It's just
not yet. And every time there's an economic report that
comes out, everyone on TV is saying this the one.
This is the employment report that will show all of
the cuts to jobs that DC had. Oh shoot, doesn't

(17:07):
show it. Well, let's look at Washington, DC and Virginia area.
Oh shoot, it doesn't show it. And this is the
report that's going to show the tariff impact. There was
one this week and it was the import prices, and
it was supposed to go shoot way up because of tariffs.
You know what, it was negative point one, significantly below
the expectations, even though right before the report comes out

(17:29):
they tell you it's going to be the one that's
going to show the impact, and the same thing every
time they show the inflation numbers, this is the one
that's going to show the impacts of tariffs. Oh it's negative.

Speaker 1 (17:39):
And I keep hearing many of the people in the
FED talk about the smooth holly tariffs of the nineteen thirties.
I don't know how you can do a comparison with
our current economy, which is a service based economy, not industrial.
I don't know how you can make a comparison to
the nineteen thirties. Yeah, the stock market was a bunch

(18:00):
of railroads and steel companies and iron companies.

Speaker 2 (18:06):
How many tech companies run in there?

Speaker 1 (18:07):
Zero?

Speaker 2 (18:08):
Right?

Speaker 1 (18:09):
How many healthcare companies were in there?

Speaker 2 (18:10):
Yeah?

Speaker 1 (18:11):
Zero?

Speaker 2 (18:11):
How many?

Speaker 1 (18:12):
I mean you could go right through the sectors. Brad
Automobiles would be one that would be similar. But there
was industrial stocks YEP, and railroads and which are probably
in that category as we speak. But it's not the
same economy. You can't say back then the tariffs did this, Therefore,
ninety years later, the terraffs will do this.

Speaker 2 (18:33):
Well, I saw one this week that said that this
is bigger than smooth Holly. And then you get in
and look at and they look at the dollar amount
of expected race for terrats versus the dollar bunt. Oh well,
oh that's we can look at that ninety years later
and look at a dollar amount.

Speaker 1 (18:45):
Right right, Yeah, what we close this segment with this.
And this is where it's like, wait a minute, you guys,
you keep going back and forth. Like you said, two
things can be true at the same time. I can
maybe not necessarily agree with all the tariffs or even
the the way that they went about releasing the tariff information,
and also agreed that the FED is way off base

(19:08):
and should be cutting because the terriffs won't be that
big of a deal. But one thing I think Trump
has to worry about is and you know, there's this
mixed messaging from Howard Lutnik and other people like we're
gonna bring all these manufacturing jobs back. Howard Lucknes says
we're gonna have somebody screwing in all the screws. And
then they shifted and they're like we're gonna have somebody
screwing in all the screws to the iPhones. No, no, no,
we're gonna have robots doing it. And it's like it's

(19:30):
all over the map a little bit in terms of
what we're gonna do. But when it comes to manufacturing,
Frank Lutz did a Frank Luntz did a survey and
the two questions were this, do you think America would
be better off if more people worked in manufacturing? Eighty
percent of respondents agreed with that statement, twenty percent disagreed.

(19:50):
Do you think you would be better off if you
worked in manufacturing? Only twenty five percent of people agreed
and seventy three percent disagreed. So manufacturing is great for
the American people as long as I don't have to
do it.

Speaker 2 (20:04):
Ye is it is the climate change of the current
economic environment. I think we should do something about climate change.
Are you going to fly less? No? No, no, I'm
not going to do anything, but I wish everyone else
would do a lot of things that would improve the environment.
Or are you willing to make sacrifices? No, no, no, I'm
not willing to do anything, but everyone else should do

(20:27):
a lot.

Speaker 1 (20:28):
And then on the Republican side, I think we should
have more tariffs so we can bring back manufacturing.

Speaker 2 (20:34):
Do you want your kids to work at manufacturing? Absolutely not.

Speaker 1 (20:36):
Do you personally want to work in manufacturing? Absolutely not.

Speaker 2 (20:39):
And the same thing with consumer surveys. I think consumer
spending will go down. Is your spending going down? Absolutely not? Right.
I think people will cancel their Netflix bill? Are you no? Right?

Speaker 1 (20:51):
Right? So I think that's a problem because and the
reason it's obvious, the reason why sixty to seventy percent
of the American population works any service based industry, not
in manufacturing. So of course you're gonna do a survey.
Those people are happy with their jobs. They don't want
to go to manufacturing. So who's it gonna be. Is
it gonna be population growth? Is it gonna be legal immigration? Yeah,

(21:14):
that's fine. But we have four percent unemployment. So we
already have unfilled jobs in this country. You have to
go look at what's the current unfilled job graph? Seven
and a half million unfilled jobs. Okay, so we don't
have the problem that Trump and Lutnick and Navarro were stating.

(21:35):
Now do we have geographically in the country? Maybe a
bigger problem in certain areas than others. Sure, but nationwide,
we don't have the problem that they're that they're saying.
So they're they're they're they're a solution now in search
of a problem. They're not. They're not They're not a
problem in search of a solution. So I think that
you know, do what you want to do, get it

(21:57):
resolved by June with most of these countries, and move on.
Move on to tax cuts, move on to deregulation. I mean,
even on the tax cuts now now they're getting you know,
now they're talking about you know, I've been a big
proponent Brad of doing the the higher tax bracket for
five million and up, ten million and up. But what

(22:18):
do they do. They're just going to take the top
bracket and raise it the six hundred thousand dollars bracket.
People are proposing that. Even in Republican circles, they're talking
about raising the corporate tax.

Speaker 2 (22:29):
Yeah. So these are things that is not good.

Speaker 1 (22:31):
This is not good, not good for markets, uh to
to talk about those things to try to make the
idecentivize companies to come back here.

Speaker 2 (22:40):
The first thing you you did that that worked was
lowering the corporate tax. Right, if you want to do
it further and let them make their own choice to
come back. You need to lower it further.

Speaker 1 (22:49):
But Trump has all these pet projects like no tax
on tips and that he wants to be able.

Speaker 2 (22:54):
To tell me to pay for it.

Speaker 1 (22:56):
Yeah. Yeah, So let's take our first pause. You're listening
in a money sense. Kevin and Bradhurston will be right back.
Welcome back to the show. You're listening to the advisors
of Kirsten Wealth Manager Group, Kevin Kirsten and Brad Kirsten. Brad.
Check out our weekly I want everybody to check out
our weekly market commentary. I think it's a pretty good one.
It's on Kirstenwealth dot com. Looking at a chance for

(23:17):
a stock market bottom is chance for a stock market
bottom is in, but far from certain. Just kind of
goes to some of the some of the signals that
we're looking for to see when we hit that low
nineteen point whatever a couple of weeks ago, is that
a bottom? Are we is a stock market low in
in the short to intermediate term? So we look at

(23:37):
different things in this commentary. Number one, what are the
charts tell us? What are earnings estimates as those come
in telling us and looking at the year on target
for the S and P and looking at the valuations,
you know, earnings assumptions, and looking at current valuations on
the overall market. Looking at volatility. We saw the volatility

(23:57):
index peak at sixty come down, very bullish signal. Historically,
when you get a top in the volatility index, that
drops precipitously. So that's a very bullish signal there. So
check that out at Kurston Wealth dot com. You know,
we're professional financial advisors here, so we're going to be
putting out content on our website if you want to
call us throughout the week to set up a consultation

(24:19):
to view your financial plan. Like I always say when
you whether you're just getting started, well on your way
to retirement, or already in retirement, be happy to help
you out. Four one nine eight seven to two zero
zero six seven. We had tax Day this week, Brad,
and uh, I think I remember this, but I'm gonna
dust it off, uh because every time I get my

(24:40):
tax return and I shake my head in terms of
I mean, yes, are we more complicated than most. We're
running a business, so we have business things going on expenses.
I get it, But you and I we don't have
you know, we don't have a bunch of other things.
We focus on this business. We don't have a bunch
of real estate. We don't have a lot going on.
And every single year, look at the tax return, I'm like,

(25:01):
what is this monstra?

Speaker 2 (25:02):
Yeah, you're not even talking about preparing it to give
it to somebody. But you get it back and you
try to comb through and say, okay, are the numbers
that I gave my accountant in here? And you just
start looking at page after page, just like what is happening.

Speaker 1 (25:14):
It's impossible. So it came across my desk is April
of twenty fourteen, and it is our former Secretary of Defense,
Donald rumsfeld Is. So I'm just gonna read it. It's
not that long. It's a letter he sent to the
Internal Revenue Service with his tax return in twenty fourteen.
I have sent in our federal income tax and our
gift tax returns for twenty thirteen as in prior years.

(25:37):
And by the way, there's a line on there on
your tax return when you sign it that says do
you want to give more?

Speaker 2 (25:43):
No?

Speaker 1 (25:43):
No, to the best of mine, everything is accurate. Yes,
you're signing it saying this is this is this is accurate?
You're a testing Yes, okay, so Runsfeld says, as in
prior years, it is important for you to know that
I have absolutely no idea whether our tax returns and
our tax payments are accurate. I say that despite the

(26:05):
fact that I am a college graduate and I try
hard to make sure our tax returns are accurate. The
tax code is so complex and the forms are so
complicated that I know that I cannot have any confidence
that I know what is being requested, and therefore I
cannot and do not know. And I suspect a great
many Americans cannot know whether or not their tax returns

(26:27):
are accurate. As in past years, I have spent more
money than I wanted to spend to hire an accounting
firm to prepare our tax returns, and I believe they
are well qualified. This note is to alert you folks
that I know that I do not know whether or
not my tax returns are accurate, which is a very

(26:47):
sad commentary on governance in our nation's capital. If you
have questions, let me know and I will ask the
accountant to be in touch with you to try to
provide you additional information you may think you need. I
do hope that it's so point in my lifetime. I
am now in my eighties. He has since passed away
and we haven't fixed this. By the way, I am
now in my eighties, so there are not many years
left that the US government will simplify the US tax

(27:10):
code so that those citizens who sincerely want, sincerely want
to pay what they should are able to do it
right and they know that they have done it right.
I should add that my wife of fifty nine years
is also a college graduate and has also signed the
joint return, but she also knows that she does not
have any idea whether or not our tax payments are accurate.

Speaker 2 (27:33):
Yeah, why are you even signed?

Speaker 1 (27:35):
It's like it's like going to a golf course and
you sign that piece of paper on the golf cart
that says you're a you're a you're signing off your
right to sue if something happens right or something.

Speaker 2 (27:44):
Well, it's just so sign.

Speaker 1 (27:46):
Are they ever going to come to anybody and say, well, no, no,
you said like you said, it's accurate. I have no
idea if it's accurate. I mean, I'm too complicated trying
to go through and you everybody who's listening probably has
the same thing.

Speaker 2 (27:58):
There's a number.

Speaker 1 (27:59):
I'm gonna try to find that number, and it's like
one A C form blob whatever. Yeah, see form blank.
Then you go over to that form yeah, and then
you look at all those numbers and then it says
C form whatever, and then it takes you to another
form and now you're down this rabbit hole of forms
till you finally get the number that you were originally
looking for. And then you got to go all the

(28:21):
way back to the ten forty yeah and start all over.

Speaker 2 (28:23):
Yeah. And it's like.

Speaker 1 (28:26):
If we as professional financial advisors, being in the numbers world,
have a hard time doing this. It is so ridiculous
what our tax code is talking about. Think about your
kids when they're getting their first first job. Even if
they go to someone and take it all in, it's
only a little bit of garbage in, garbage out. They

(28:47):
might leave something out that needs to be taxed and
they don't know it. And you're talking about in this case,
college graduates, and we're talking about ourselves or college graduates,
and there's not going to be any way for them
to know if it's accurate.

Speaker 2 (29:00):
And I just think there's a lot of people in
the same boat. You're hoping that it's accurate. You're hoping
you don't get a letter. But if you do get
a letter, you're like, yeah, it kind of figures I
had no idea what I was doing. Yeah. Yeah.

Speaker 1 (29:11):
And then you just if you have an accountant, then
you just send it to them and say, do you
have any idea what this means?

Speaker 2 (29:15):
Yeah, and they usually do and yeah, but they're not
surprised by getting letters because even the penalties, if you
had one, are sort of impossible to figure out. And
I did have an accountant at one point. If you
ever had a penalty with Perrysburg, they're like, we can't
figure out how they calculate. Just let them send you
the letter and whatever it is, it is. Yeah, And
that's the accountant telling you that, right. Well.

Speaker 1 (29:35):
The Wall Street Journal on that theme put out a
op ed that said tax Day lessons for the GOP Congress,
keep it simple and don't forget the current tax code
is highly progressive. The passage of another tax Day accompanied
by the usual sticker shock and harrowing calls to accountants
trying to figuring outline one Z two B three B
four B five. This is what I was talking about,

(29:56):
And generally gnashing of teeth offers an opportunity to take stock.
As the GOP prepares to pass a tax bill this year,
it could learn something from the IRS's annual festival of suffering.
So when you look to start, the point of the
tax code is to raise revenue for the government, meaning
complexity is the enemy. The estimate in twenty twenty four,
according to two analysts at the Tax Foundation, was that

(30:19):
Americans would spend seven point nine billion hours that year
complying with IRS filing and reporting requirement.

Speaker 2 (30:26):
What a waste of manpower.

Speaker 1 (30:28):
I mean, you have I don't know if this is
a better way, but you have a daughter who lives overseas.
They don't even file tax reas.

Speaker 2 (30:33):
They don't file it. Whatever got with hell? That's correct. Yes,
if you get another job, that one's going to get
with held. That's correct.

Speaker 1 (30:39):
The seven point nine billion man hours is equal to
three point eight million full time workers doing nothing but
tax return paperwork the entire year. Three point eight million workers.
So that is roughly equal to the population of Los Angeles.
What does this cost the economy? The estimate is four

(30:59):
hundred and thirteen billion and lost productivity, not to mention
that the IRS estimates that Americans spend roughly one hundred
and thirty three billion annually out of pocket to do
their returns. Republicans used to talk about streamlining the taxgo
That was twenty fourteen. Donald Rumsfeldt was appealing to Republicans
at that point in time. Republicans used to talk about
streamlining the tax code, that people could file their returns

(31:21):
with the IRS using a postcard. Remember that, remember, Oh yeah,
car yep. And that's still a good goal and appealing message,
but its intention with President Trump's campaign promises to add
new pages to the revenue code by more carve outs.
We're going to carve out tax free tips. We're going
to carve out tax free overtime. You know when you
do that, tax free tips, tax free overtime, writing off

(31:45):
interest on auto loans, you're creating more, you're creating another form.
Oh now we have to wait, you need to report
those on this schedule. Yep, tax free tips that gets
reported on a new form. Overtime on an and now
they got to change the W twos, so more complexity.

Speaker 2 (32:04):
Oh yeah, you're going to have to have either a
separate line item or just an entirely different W two
that comes out to you that includes your portion that
was tips.

Speaker 1 (32:13):
Yes, and I'm not saying it's not good in theory
over time and auto loan, you know, writing off the
interest on auto loans. But if you could end up
in the same place financially with your taxes with just
the simplification, then what's the difference. But no, we have
to I mean the tax code BRAD is riddled with

(32:35):
just politicians trying to gain votes. Oh, I want to
get that voting block, so I'm going to give them something.
I want to give that voting block, So I'm going
to give them something. And Trump is no different. Maybe
the GOP can't ignore everything Trump has pledged to voters,
but the simpler the better. Second lesson for Republicans who
still think it's a good idea to raise the top
income tax rate that's being talked about right now. I

(32:58):
think a five million in up would make sense, even
a two million and up would be okay. Yeah, but
they're talking about just raising the top bracket. Do they
know how much the US already soaks the so called
affluent irs. Data for twenty twenty two shows the top
one percent of filers pay forty point four percent of
all revenue, The top ten percent pays seventy two percent

(33:20):
of all money that goes into the government, the bottom
fifty percent pay three percent. And that's an overstatement because
it doesn't account for the refundable credits, which are treated
as spending. The US tax code is already highly progressive.
In other words, as Republicans draw up the reconciliation bill
to extend their twenty seventeen tax reform, there will be
arguments over many details, but a way to steer that

(33:42):
debate in a better direction is to keep in mind
the reality of the currently complex and progressive tax code
that Americans truly hate.

Speaker 2 (33:50):
Yeah, by the way, yeah, everyone hates it. Whether you're
a low income or high income, you hate how complex
it is. What's interesting is this is just like it
reminds me of the Social Security debate, where people who
are affected are more for change than people that aren't
affected when you talk about social security. I was having
a conversation with someone who is currently in the twelve bracket.

(34:10):
She's older, and she was complaining about taxes, and I said, well,
what would you like to happen. She said, I would
like a flat tax, and I said.

Speaker 1 (34:18):
Well, your taxes will go on.

Speaker 2 (34:19):
She was complaining about people in the high bracket not
paying a lot because of deductions, and she said, I
would like a flat tax. So I was like, well,
it's funny because people in a high bracket would also
like deductions. Why would you like it?

Speaker 1 (34:31):
And she said, because also like a flat tax.

Speaker 2 (34:33):
You mean would also like a flat tax. She said,
I might pay more, but there would be less people
that make millions that figure out a way to pay nothing. Sure,
because flat tax proposals take away all exemptions and deductions,
and so in her mind, would seventy percent of high
earners pay less. Sure, But that thirty percent that would
pay more is the is the one that always bothered

(34:56):
her because she knows there's people that are making millions
that pay nothing because of how the code is constructed,
and they've figured out a way to pay nothing, and
that bothers her more than the other seventy percent that
pay what they should. That's a good way. So that
is why I think we need to go back to it,
because it would simplify. It takes away deductions and exemptions,
and that is part of the reason that's so complicated,

(35:18):
And there then would be no denying that somebody who
makes more pays more, because we're all paying the same percentage,
and clearly somebody that makes a million versus one hundred
thousand pays more dollar wise. And if everyone's for it,
why are we fighting it. Steve Forbes's LA proposal when
he ran in nineteen ninety six was seventeen percent flat,

(35:38):
and he said we could balance the budget with seventeen
percent flat, no exemptions, no deductions, and at the time
he wanted a higher business income tax. It was twenty
eight at the time, and he wanted it to be
thirty five. I think if we've revisited it, I think
people would be surprised, or politicians would be surprised how
many voters on both sides would be for it, because
there's this illusion that the high income brack get nobody

(36:01):
pays it. Now, there are a lot of people that
pay it, but because there's these individual few maybe that
are popular or in real estate, and they have all
these deductions, there is this illusion that the vast majority
of people in the highest bracket are off finagling their
way to not pay it.

Speaker 1 (36:18):
Would you keep pre tax IRA four oh one K contributions?

Speaker 2 (36:24):
Well, that's not a I mean that is just coming
out prior to beginning on the return. It's just not
part of your income. So I think you got to
keep that. Okay, Yeah, I mean I don't think it would.
It doesn't make the tax return more complicated.

Speaker 1 (36:37):
I mean, if you want an influx of money, you
could just get rid of it and say everything's got
to be a ROTH contribution.

Speaker 2 (36:43):
Yeah, that's one way to do it.

Speaker 1 (36:45):
I mean it's sort of you're sort of borrowing from
the future when you do that.

Speaker 2 (36:48):
Yeah. But if the goal is to balance the budget today.

Speaker 1 (36:51):
Way said no more new contributions on a pre tax basis.

Speaker 2 (36:54):
Yeah, we're just doing only WROTH from here on out. Yeah.

Speaker 1 (36:58):
Again, you'd be I think they'd be shocked how many
people before it. Then you can have your postcard. I
understand they have all these little carve outs, tax on
tips over time. You know, people love their home mortgage
right off, all these things, But there's a universal hatred
for doing their taxes. Whether you do it yourself or

(37:19):
you pay for it, there is a universal hatred for
your tax return. So I mean, would I guess this,
I don't even know if the CPAs would would they
be they'd still have work?

Speaker 2 (37:31):
Yes, of course they got more work than they want. Yes,
find a CPA that'll take it in unless you call
them six months before and say I want to get
on your list. Right, there's more work than they can
even handle. So I do maybe the way around it,
because people say, well, I've built my life around the
current tax code. Maybe give people a five year where

(37:52):
you can go on the old code if you want,
or you can go to the new code and we'll
give you five years of still being able to do
the old ones. Like, no one's going to pick that. Well,
if it's a flat tax, I mean, if you've built
your life around real estate deductions and depreciation and all
kinds of other stuff, and your parent nowhere near it,
but you'd have to be paying. If it's seventeen's the number,

(38:12):
you'd have to have your effective rate below seventeen.

Speaker 1 (38:15):
And if you're currently in a thirty seven percent bracket
with all the extras that are on there, probably only
getting it down to twenty five twenty seven.

Speaker 2 (38:22):
You're killing it. You're getting down in the twenties. But
you can't be with all the extras that are on
top of the high bracket, with investment surcharges, investment Obama
care surch charges. You know, the real rate is over forty.
So if you if you got it down to twenty nine,
you're killing it. But you're nowhere near with the flat
rate's going to be.

Speaker 1 (38:43):
Yeah, I haven't seen a lot of surveys on that,
but be curious what the how the American population would
would respond to that kind of survey in terms of.

Speaker 2 (38:54):
This is our proposal.

Speaker 1 (38:55):
Get you're ten ninety nine, you get your W two,
you play a flat rate even rate on you know,
capital gains too, because we don't even have a.

Speaker 2 (39:03):
Lot of low income people that would say, thank god,
they're finally making the rich pay their fair share.

Speaker 1 (39:08):
Well, it does eliminate cheats. There's really no way to cheat. Yeah,
that's exactly right. And yeah, then we don't need as
many IRS agents. Right, let's take our next pause. You're
listening to Money Sense Kevin and Brad Kurstin will be
right back. Welcome back to the show. You're listening to
the advisors of Kirsten Wealth Manager Group. Kevin Kirsten and
Brad Kirsten Brad I'm just gonna throw some stats at you.
I get a couple of my favorite people on X

(39:31):
that I follow consistently that just kind of fire stats
out to kind of give you an idea of where
the market currently stands and what's going on underneath the hood.
So I'll start with this one. International stocks are outperforming
the US by fourteen percent this year, on pace for
their widest annual outperformance on record. So if we look

(39:51):
at if.

Speaker 2 (39:52):
They annualize it, I mean i'd be a pretty big annualization.

Speaker 1 (39:55):
Yeah, you have international developed stocks are up five point
five percent on the year, SMP five hundred US large
cap stocks minus ten. So no, that's not annualized.

Speaker 2 (40:08):
Oh you're just saying if we finished here, Yeah.

Speaker 1 (40:10):
That's not annualized. So kind of an interesting stat We
like international. Part of the reason why I like international
is look at what they're European Central Bank is doing, right, Brent.

Speaker 2 (40:20):
Right, Yeah, you're not fighting the FED when you're investing internationally.
They're all doing stimulus. China's doing stimulus. We talked about
that six months ago and they were throwing gasoline on
the fire. Not only are they doing stimulus, similar to
what we did post COVID, but they're buying their own
stock market as part of their stimulus.

Speaker 1 (40:37):
Another stat on here, average thirty year mortgage rate in
the US for each decade nineteen seventies eight point nine,
average nineteen eighties twelve point seven. On your thirty year
mortgage nineteen nineties eight point one, two thousand and six
point three, twenty ten, four point one, twenty tens four
point one, twenty twenties five point one, all time low

(41:00):
January twenty one, all time or excuse me, recent peak
seven seventy nine October of twenty three, current rate six
point eight. So that's sort of in line with the
higher end of what we saw in the two thousands.

Speaker 2 (41:16):
Yeah, but you put it into respective, This last five
years very low historically, and we are trending down over
the last year. We had a little kind of a
low point in September. Last week actually had a low
point for two days, and I we're up a little
bit on that, but the trend, the overall trend is down,
and whether the FED delays or not, they're going to

(41:36):
have to cut a few times this year and that'll
take it down as well.

Speaker 1 (41:38):
Gold's having a great run, hit it all time high recently,
and I saw a statistic about gold that said it actually,
if you look at the inflation adjusted, which is kind
of sad, but it just finally eclipsed its inflation adjusted
all time high.

Speaker 2 (41:55):
Which means it finally got back to above inflation. Yeah. Yeah.

Speaker 1 (41:59):
So if you compare that to the S and P
five hundred, for example.

Speaker 2 (42:04):
Inflation adjust is like eight.

Speaker 1 (42:06):
And the inflation adjusted at all time high was consistently
achieved virtually every time you make it all time yeah,
throughout the eighties, nineties and through today. So it's nice
that gold's up and it's had a three year run now.
Twenty twenty three was thirteen percent, twenty twenty four was
twenty six percent. Year to date was twenty seven point
seven percent. So it has been a decent hedge, especially

(42:30):
this year against the market dropping. But it isn't always
a hedge against against the market falling. I mean, it
held up pretty good in two thousand and eight at
four point three percent, Brad, but look at the year
two thousand, gold drop five point four percent in the
year two thousand. If you look at the early nineties

(42:52):
when we had a pullback almost twenty percent in nineteen ninety.
Gold went down three point one in nineteen ninety, eight
point six in nineteen ninety one, five point seven in
nineteen ninety two. So it's the batting average is not
very good. And also the batting average is not very
good with inflationary periods. When inflation is going up, it
tends to not do what people think. Look at it now,

(43:14):
we've had inflation going down for a year and at
a low point in September and a low point today,
and gold's going up. If it were an inflationary hedge,
as inflation goes up, it would be going up.

Speaker 2 (43:25):
It's doing the opposite. So it's not what most people think.
If you own it, that's fine, you're doing great. But
it's it's not what people If you want a real
inflation heade you buy, you buy stocks.

Speaker 1 (43:36):
It's not a long it's not a long term way
to beat inflation.

Speaker 2 (43:41):
It just isn't.

Speaker 1 (43:41):
No, when you're the same place you were in nineteen
eighty adjusted for inflation, this is not a good way
to beat inflation. How about we were talking about mortgagees
for a second. Let's go back to that Brad monthly
mortgage payment needed to buy the average home. In April
of twenty twenty, it was fourteen hundred and eighty four dollars.
So the average price home, excuse me, average price home,
the median price home fourteen eighty four in April of

(44:04):
twenty twenty, and we're at an all time high ten
dollars per month to buy the average price home. Kind
of a crazy statistic to look at what it costs
to get to that average price home, average mortgage payment.

(44:24):
How about the Fed we were talking about the Fed
Fed funds rate market expectations. What is the market pricing
in at the moment? No cut in May?

Speaker 2 (44:32):
Yeah, it was got all the way up to about
fifty percent, and that evaporated here over a ten day period.
To be the next cut is about a fifty to
fifty coin flip in June.

Speaker 1 (44:41):
Now, yep, June of twenty twenty five, twenty five basis
point cut is expected July, another one September, another one October.
No cut expected December cut, So that is four cuts
before the end of the year. That is I mean,
that is a substantial amount. I think it's a little

(45:04):
bit late, but it is a substantial amount.

Speaker 2 (45:06):
Rep you do get to the point where we're past
the ninety days, so the Fed will know what's going
on with tariffs or lack thereof by then, So maybe
that's what they're thinking, but it's not their messaging.

Speaker 1 (45:16):
The S and P five hundred through yesterday, excuse me,
through two days ago, down ten point three percent in
the first seventy two trading days of twenty twenty five.
It's actually the fifth worst start ever for the S
and P five hundred, and pretty positive looking at some
of the other numbers, but it depends on the environment

(45:38):
that we're in. Okay, if you look at the other
five periods of time. Nineteen thirty two, the market went
up eight percent through today, through the end of the
year nineteen thirty nine to fifteen percent twenty twenty thirty
five percent increase. Two thousand and one, we were down
ten point six percent, and we went down another two
point seven but there was a that was nine terrorist attack.

(46:02):
Nineteen forty two, the market was down ten percent and
went up twenty five percent.

Speaker 2 (46:07):
Pretty old. You really only have two recent ones, and
you're telling me, if we don't have a terrorist attack,
the market it's gonna look pretty good.

Speaker 1 (46:12):
Yeah, right, right, right, You're looking at that twenty twenty
two was down seven point eight. That's the most recent
first quarter drop that we had, and it did go
down another twelve point six between now and the end
of the year. So there's some mixed signals there on
will we rally through the end of the year. Is
is it going to be like COVID where we hit
a bottom in the March April timeframe and have a

(46:33):
nice rally through the end of the year. Is it
going to be like twenty twenty two where some you know,
bad economic headlines starts showing up. Yeah, and it just
and everything just lingers for a while and lingers. But
here's the good news, even if it is twenty twenty two,
because maybe that's a fear of a lot of investors,
Even if it is twenty twenty two, we hit our
bottom in October and went straight up after that, So

(46:54):
I think we can all be patient and even if
it is that wait around that long. Take our last pause.
You're listening to Money Cents Kevin and Brad Kurston.

Speaker 2 (47:00):
We'll be right back.

Speaker 1 (47:02):
Welcome back to the show. You're listening advisors of Kirsten
Wealth Manager Group. We kind of messed up our time
in there. We only got about a minute left. What
we'll be looking for next week in the markets earnings.
We kind of had a strange Dow Jones Day today
because United Health.

Speaker 2 (47:14):
Yeah, that's worth mentioning a night of Health is pulling
the Dow down by about seven hundred points, and so
without that we'd have a day where the Dow might
be up to three hundred points, up about a half
a percent. Like the rest of the market today Thursday,
you've got small caps up one percent, you got the
S and P five hundred up, say a half a percent,
But the Dow is going to make some headlines because

(47:34):
it's down a lot. United Health Group is such a
big component of it. They reported today. Next week you
got you got some tech companies, You've got Amazon, you
got Tesla. It's it's going to be an earnings mover
and it'll all be all this talk of is tariff's
going to make its way into the conference calls and
who's worried about tariffs and who's guiding down for tariffs.

(47:55):
We got to get past this because everybody's going to
talk about tarifs because they can and just use it
as their or get out of jail free card because
it's not my fault YEP.

Speaker 1 (48:03):
Thanks for listening everyone, we'll talk to you next week.

Speaker 2 (48:09):
You've been listening to Money since, brought to you each
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or Kevin professionally, call four one nine eight seven two
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dot com and their website is Kirstenwealth dot com. Opinions

(48:30):
voiced in this show are for general information only and
are not intended to provide specific advice or recommendations for
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Speaker 1 (48:36):
To determine which investments may be appropriate for you, consult
with your financial advisor prior to investing.

Speaker 2 (48:42):
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