Episode Transcript
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Speaker 1 (00:00):
Hello, and welcome to Money Cent. You're listening to the
advisors of Kristen Wealth Management Group, Kevin Kristen and Brad Kirsten.
Happy to be with you today, Brad, as we uh
kind of work through this week, we had the the
House past the.
Speaker 2 (00:15):
Well.
Speaker 1 (00:15):
What was called it's the One Big Beautiful Bill Act
is what they called it.
Speaker 2 (00:19):
Yeah, the.
Speaker 3 (00:21):
Oh bb oh bb B A. I saw it abbreviated.
They are gonna call it the o BBB, the One
Big Beautiful Bill.
Speaker 1 (00:29):
You can't help but do a little bit of a
Donald Trump uh imitation when you when you when you
even say something like that, The One Big Beautiful Bill.
Speaker 3 (00:36):
They always abbreviate. The last one was the t c
j A, the Taxing Jobs Act.
Speaker 1 (00:42):
That's fine, I mean that's you're you're literally using Donald
Donald Trump language.
Speaker 2 (00:48):
But who cares what they name it.
Speaker 1 (00:49):
But last week we were talking about the scoring and
the headlines. It's gonna blow out the deficit, it's gonna
blow out the budget.
Speaker 2 (00:57):
How will they pay for it?
Speaker 3 (00:58):
That's that was the big The big headline was how
will they pay for it? That is like saying you
gotta raise You're gonna go up your incomes going by
twenty thousand, how are you gonna pay for those taxes?
Your taxes are gonna go up by eight thousand a year,
how are you gonna pay for it?
Speaker 2 (01:12):
Well, and if we.
Speaker 1 (01:13):
Look at the last last go around, because we talked
in last week's show about how they the Congressional Budget
Office who does this scoring, never gets it right. We
talked about how SMP and Moodies and Fitch downgraded the
US debt in part because of this bill right, and
they never get it right. And yet time after time,
(01:34):
these institutions are incorrect on their assumptions and also their outputs.
And yet we go right back to them.
Speaker 3 (01:41):
They're not even They're not even a coin flip. They
are almost batting one hundred percent wrong the wrong way
when they think it, is it gonna increase or decrease
tax revenue? Is it gonna increase or decrease GDP? They'll
admit that cutting taxes will increase GDP, but they will
they refuse to use a higher GDP than the prior year.
Speaker 2 (02:05):
Makes no sense.
Speaker 1 (02:06):
Well, let's look at Let's look at an older headline
brand from May of twenty two. Congressional Budget Offices may
of twenty two forecast shows that the government now expects
to bring in more tax revenue in the decade following
the twenty seventeen Trump tax cuts than it had projected
prior to the December twenty seventeen passage of tax form.
(02:27):
Oh shocker, it doesn't look like the tax cuts, which
government scorekeepers said at the time would cost one point
five trillion over ten years, have been anything like the
fiscal nightmare that some on the left would lead us
to believe. So the very last time we did this
exact same tax plan, all the gloom and numers were
out there talking about the fiscal nightmare that this would cause.
Speaker 3 (02:49):
And now here we are just extending that and giving
a little bit more stimulus to the economy. And again
it's we're scoring it the wrong way again.
Speaker 1 (02:58):
I mean, the usual suspects were out in twenty seven seventeen.
Nancy Pelosi called it a two trillion dollar GOP tax scam.
Bernie Sanders accused Republicans of hypocrisy for supporting the tax
cuts but opposing Congress's massive spending spree. That one doesn't
make any sense to me. You're not allowed to support
tax cuts, but you oppose the spend. I like both
(03:21):
of those cut taxes and cut spending. Yeah, I don't
understand that argument from Bernie Sanders. The Biden White House
issued a press release claiming the Trump tax cuts had
added two trillion to the deficits over over a decade.
So they claimed that he had added two trillion over
a decade, something that hadn't occurred yet.
Speaker 3 (03:41):
Yeah, Well, they're claiming that they're adding to it because
somebody said it was going to happen, not that it
did happen. They said it's going to happen, but it
didn't happen, but they can all say that he did it.
Speaker 1 (03:53):
Prior to the tax cuts, the government projected forty point
seven trillion of income tax, corporate tax, and payroll tax
in the decade from twenty eighteen to twenty twenty seven,
the latest budget for and so they claimed that that
forty point seven would be thirty eight point seven. Okay,
the latest forecast project forty one point three trillion of
(04:15):
revenues for that same period, So instead of thirty eight
forty one, instead of reducing revenues by one point five trillion,
Nancy Pelosi called it two trillion. The latest forecast suggests
that tax receipts came in five hundred and seventy billion
higher than had been expected. So that's more because the
expectation was You kind of talked a little bit about
(04:38):
this in the previoust showout.
Speaker 2 (04:39):
Yeah, last week.
Speaker 3 (04:40):
Well, it just depends what you're looking at for billions
versus trillions, if you're looking at ten years. They were
projecting trillions over a ten year period of reduction of
tax revenue, and it ended up being trillions higher. We
cut the corporate tax Brad and there was a big
fear mongering about that. Three point eight trillion revenues between
(05:01):
twenty eighteen and twenty twenty seven brought in three point
nine trillion more corporate tax actually came in in that
same period of time. So the Budget Office says that
historically it is more often overestimated revenues according to the
government forecasts. To CBOs, don't I don't really see that
in what world when it comes to tax cuts, they've
(05:24):
only done it the wrong way, which is underestimate the
growth in the economy because of the stimulus from the
tax cut. They've only done it one way. They've underestimated it.
Speaker 2 (05:33):
So after the tax.
Speaker 1 (05:34):
Cuts, business investment went up nine point four percent compared
to the pre tax cuts trend. Corporations real investment rows
fourteen point two percent. So we're extending. What's interesting about this,
this so called tax cut, it's you know, it's just
like they look just like levies.
Speaker 3 (05:53):
It's a not a tax, not a new Well, the
government wasn't out there saying it's not a new cut.
Speaker 1 (05:59):
Yeah, it's not a new cut. This is not a
new cut. Yeah, but we already have the track record.
But what it'll do and what it will do, we
know what happened. Real incomes went up, business investment went up,
tax receipts went up.
Speaker 3 (06:14):
Yeah, so we know what happened last night, and we
didn't talk about it in last week's show. But part
of this new plan was to keep the corporate tax
exactly the same. We went from thirty five to twenty one.
Everybody forgets where we were. I'll hear experts come on
and say, yeah, we went down a few percentage points.
What were we twenty five? We went to twenty one. No,
we were thirty five, and we went to twenty one.
Trump wanted to go to fifteen, and they settled in
(06:36):
twenty one again because of ridiculous scoring.
Speaker 2 (06:39):
But everyone forgets where we were.
Speaker 3 (06:41):
We were one of the highest in the world at
thirty five and we're keeping it at twenty one.
Speaker 1 (06:47):
And you go back to these Congressional Budget Office scoring,
which is the holy grail. I mean, I hate to
harp on it, but everyone uses this.
Speaker 3 (06:55):
They're like, every time we're doing any kind of spending
in government, we have to rely on this.
Speaker 1 (07:01):
So let's look at some of the expectations. You tell
me good, bad, or indifferent on what they're assuming. So
about we started. We talked last week one point eight
on GDP for the next ten years.
Speaker 2 (07:13):
What are your thoughts on that?
Speaker 3 (07:14):
Well, I think it's pretty ridiculous that they even even
the Congressional Budget Office agrees that a tax cut. The
last time around, they expected it to increase GDP by
point six. It was much higher than that. But they're
saying again that it's point six of an increase to
GDP because of the tax cut extension. That means if
we didn't do it, they'd be expecting one point two.
Speaker 2 (07:37):
Now that is unusually. I think I think it's the
other way around.
Speaker 1 (07:40):
I think I think the the baseline numbers are one
eight in the dynamics two four.
Speaker 3 (07:44):
Okay, yeah, if we didn't do it, if we the
other if we didn't do it, one point eight okay.
Speaker 2 (07:49):
And I think that the.
Speaker 1 (07:51):
It cuts like a trillion off the deficit if they
use the dynamic scoring even still so, but I.
Speaker 2 (07:57):
Think it could be even higher. Yeah, I mean it's
been high.
Speaker 1 (08:00):
It's not unreasonable to expect three three and a half
percent GDP unemployment rate four point three percent this year,
four point four percent average for the next decade.
Speaker 2 (08:10):
What do you think? I think that's probably accurate.
Speaker 3 (08:13):
You could you could see that go up just because
of uh, you know, less people trying to get get work.
Speaker 2 (08:22):
Yeah.
Speaker 3 (08:22):
I guess you could see the participation rate go up
a little bit and see that tick up.
Speaker 1 (08:25):
FED funds rate averages three point two over the next decade.
Speaker 3 (08:30):
Yeah, wow, over the next decade. I could see us
getting there in the next eighteen months and for staying
there for a decade.
Speaker 2 (08:40):
Seems pretty unreasonable.
Speaker 1 (08:41):
How about this one ten year treasury bill averages three
point eight percent?
Speaker 2 (08:45):
No, you think higher? I think higher? Yeah, I think
higher for.
Speaker 1 (08:48):
A Yeah, how that would affect things? How about this one?
The tax base uh, this is in it's The number
they're using is forty two point eight. But I don't
know if this is that's billions or I have to
get get into the fine print. But the number they're
using for wages and salaries is forty two point eight.
Speaker 2 (09:08):
Okay.
Speaker 1 (09:09):
Their number they're using this is ridiculous for total wages
and salaries and this goes to tax receipts average forty
two point eight, forty three point one, forty three point two.
Speaker 2 (09:21):
What are these percentages? No, no, it's I think it's
Is it in trillions?
Speaker 3 (09:24):
Oh?
Speaker 2 (09:24):
Oh, gotcha? The dollars that they're that they're taking it?
Speaker 1 (09:27):
Yeah, yeah, ytah, yeah, I think it. Is it in
billions or trillions or whatever it is?
Speaker 2 (09:31):
Okay, So what is it for the current year?
Speaker 3 (09:32):
Forty two point eight okay, okay, and they're expecting that number.
Speaker 1 (09:38):
No, actually, I'm sorry, I'm sorry, I'm looking at this wrong.
It's a percent of GDP. It's a percent of GDP. Okay,
So they're assuming that that number is basically static, that
wages will be this will be the same forty three
percent of GDP for the next decade.
Speaker 3 (09:53):
Well, I don't have the chart in front of me.
But it it almost never changes. You could have the
highest tax tax rate be eighty percent, and you you
have the highest tax rate B twenty eight and it
won't change. This because wages as a percentage of GDP,
not the tax rate. This is wages wages, That's what
I mean. Because when when the highest bracket is high,
people cheat or figure out how to not do it,
(10:14):
and when the highest rate is low, they don't.
Speaker 2 (10:16):
How about this one? It never changes.
Speaker 1 (10:17):
Domestic corporate profits as a percentage of GDP right now
this year is eleven percent. They're estimating that corporate profits
for the next decade will average nine percent of GDP.
Speaker 2 (10:27):
How does it go down? I mean, margins are going
higher every year.
Speaker 3 (10:31):
Technology and efficiencies and AI will only increase profit margins.
Speaker 1 (10:36):
So how about this one though? In terms of billions
of dollars in terms of our our well, let's look
at the revenues. First, individual income taxes actual overall revenue
almost almost five trillion for twenty twenty four. Okay, five
point one trillion for twenty twenty five, eight trillion by
(10:58):
twenty thirty five in terms of total eight revenue, and
what is it this year?
Speaker 3 (11:04):
Five trillion so they agree it's going up. This is
the crazy thing. If you're agreeing that total tax revenue
is going up, how does it increase the deficit unless
we're going to increase spending by three trillion more per year.
Speaker 1 (11:17):
And well, in the outlays this year are six point
eight trillion, which by the way, pre COVID, yeah it
half that, it was less than four trillion, and we
did all this temporary one off spending.
Speaker 2 (11:31):
But we're still at an all time high.
Speaker 3 (11:33):
And so where they projecting it two years out on spending,
two years out on spending seven point two trillion, ten
years out ten point seven trillion.
Speaker 2 (11:41):
But just take that.
Speaker 3 (11:42):
They're admitting that tax receipts are going to go up
by almost three trillion, spending is only going up.
Speaker 1 (11:47):
By no, they're they have spending going up four trillion.
Speaker 2 (11:52):
Okay, well, there's your problem. It's not. It's not a
tax receipt problem. Taxes are, tax receipts are going up,
and you can't.
Speaker 3 (12:00):
You can't increase spending by less than what the tax
res re seats are going up.
Speaker 2 (12:04):
That's your problem.
Speaker 3 (12:06):
So when part of this bill takes two million undocumented
immigrants off of Medicaid, and everyone's screaming that it's unfair.
What's unfair is that the American people paying taxes are
doing their part and you're blowing all the money. Anyone
with the outrage about dosee making cuts to USAID or
(12:26):
making cuts to Medicaid for people that aren't even citizens
is just fake outrage. You don't really care.
Speaker 1 (12:35):
Mandatory spending Social Security this year a trillion, four one
point four trillion, two point six trillion, and twenty thirty five.
Speaker 2 (12:43):
Those numbers. They have to know those numbers.
Speaker 1 (12:46):
Medicare nine hundred and ten billion this year, one point
seven trillion in twenty thirty five. I would have thought
Medicare was even higher.
Speaker 3 (12:57):
I would be very interested in if it's going to
even make a dent to Medicare and Medicaid spending. If
they if we do this this this price matching with
you know, we're the we're the lowest country that's on
the price.
Speaker 1 (13:09):
That's nearly a double in Medicare in ten years.
Speaker 3 (13:12):
Yeah, I mean, if there is a we're the most
favored nation on a pricing, it's kind of impact insurers
for one to the to the good and Medicare and
Medicaid to the good, and it's probably not good for
the pharmaceutical companies.
Speaker 1 (13:27):
Defense spending eight hundred and fifty five billion twenty twenty four,
in sixty billion in twenty twenty five, just over a
trillion in twenty thirty five, So that's pretty modest increase there.
Non defense discretionary in twenty twenty five a trillion and
a trillion two or almost a trillion three by twenty
(13:49):
thirty five. That's that's where the waste frauden abuse is
right there. Well, there's waste fladen abuse everywhere, but that
non defense is the biggest thing.
Speaker 3 (13:57):
That you've not Actually, I don't understand how we can't
have more efficiencies and reduce spending there with new technology
and drone technology. I mean, you're not you don't need
an infantry anymore with all the drone technology. I feel
like just with the number of troops that we would
have over time could go down with just more tech
(14:18):
as part.
Speaker 2 (14:18):
Of your defense.
Speaker 1 (14:19):
Well, and can we do better on healthcare? I mean
that's such a big line item on here, Medicare and
medicaid defense, Like you said, is that something that over
time there can be efficiencies net interest? Right now, this
year we're paying nine or fifty two billion in interest
one point seven trillion in interest by twenty thirty five.
(14:40):
Some of this is a little bit zero sum. I mean,
you know, everyone gets all worked up about interest. Most
of that interest goes back to the American people. Oh no, no,
I thought it was China.
Speaker 2 (14:51):
No.
Speaker 1 (14:53):
The vast majority of who owns treasuries is the American people.
So when the government's paying interest, that's a little bit
of a give back to the American people. It's not
even close. I thought we paid everything to China and
all these other countries. That's not true. China might be
In fact, I don't even think China.
Speaker 2 (15:09):
Is number one.
Speaker 1 (15:09):
I think Japan might be number one in terms of
owning foreign countries. But if you just look at the
foreign countries, China's one or two. But they're eliminating all
the US investors, right, So it's kind of interesting to
see that rad and look at the estimates. But if
you look at the overall in terms of money coming
into the government, money going out going from four point
(15:30):
nine trillion to eight trillion, versus spending going from six
point eight trillion to ten point eight trillion, there's your answer.
I mean people have often said, we don't have a
revenue problem, we have a spending problem.
Speaker 3 (15:40):
But here's how it can affect your investments. There's a
negative narrative out there and there will be right when
this passes if the market will probably look right through that,
but if it doesn't. You know that cutting taxes means
people have more money in their pocket and they will spend,
and that spending means more earnings for corporations and shareholders,
and you know, unexpected earnings in some cases because they
(16:03):
didn't most most companies didn't even expect the stimulus that
would come from tax cuts the last time a round,
and it will come again, or at least stay. It
won't go away, which which it would have if if
these tax cuts didn't get extended. And when we get
around to uh, you know, a year or two down
the road, we're going to have unexpectedly higher GDP, which
will be a positive for the market. You have some
(16:25):
wind at your back for what you know is coming
that the market, that the market will tell us is coming.
But the experts will say they'll be surprised by the
unexpected should have been expected, and that's where that's what
we're gonna deal.
Speaker 2 (16:37):
With for the next couple of years.
Speaker 3 (16:38):
Well.
Speaker 1 (16:38):
As I mentioned on the last show too, wouldn't it
be nice if Trump could get the benefit of some
of these forecasts that they were using under the Obama
administration when he whatever stimulus plans and he did Obama
Care and all the other things that Obama put in
place during his presidency. Starting in twenty eleven, you know,
Trump's getting one point eight percent in his scoring. If
(17:01):
if the economy is growing more, all these deficit things,
estimates don't look as bad. When Obama was doing his scoring,
he was getting the benefit from the Congressional Budget Office
starting in twenty eleven on GDP growth four point seven
six six' one five six four nine four four four
two four to.
Speaker 2 (17:21):
TWO i, mean if you.
Speaker 1 (17:25):
Scored at those levels between the mid fours and the
low sixes on the current tax, plan you'd you'd probably
have a budget.
Speaker 2 (17:35):
Surplus.
Speaker 1 (17:36):
Yeah so you, KNOW i really think that you start
to look at that and you raise an, eyebrow and you,
Know trump's been Very he's been out, There he gone
after Po, H he's gone after. Everybody it's kind of
surprising to me that he that someone hasn't gotten into
his ear about this scoring, right and he because.
Speaker 3 (17:54):
We didn't even we weren't able to do everything he.
WANTED a lot Of republicans aren't getting what they want
because of the.
Speaker 2 (18:00):
Score it's all because of.
Speaker 1 (18:01):
This, yeah So i'm wondering JUST i wouldn't have been
shocked If trump would have come out and said this
one point. Eight it's a complete. Joke, yeah you, know
these people who put this together are. Losers, yeah he
would probably listen to this.
Speaker 2 (18:14):
Show he'll he'll probably do it. Soon.
Speaker 1 (18:15):
Yeah, right let's take our first. Pause you're listening To
Money Sents kevin And Brad. Kurston we'll be right. Back
welcome back to the. Show you're listening to the advisors
Of Kristen Wealth Management. Group Kevin kirsten And Brad. Kirsten
happy to be with you. Today as a, reminder we
are professional financial advisors and our offices are In. Perrysburg
give us a call throughout the week if you want
to set up a consultation to review your. Plan whether
(18:36):
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
to two zero zero sixty seven or check us out
online at kirstenwealth dot. Com wrapping up the discussion about
THE gop tax, bill and it very well might not
even be the final version because The senate's going to
make some.
Speaker 3 (18:56):
CHANGES i, mean, yeah The senate could pass it and
then it'd be on The president's. Desk but it's almost
like prove that you did. Anything, oh we got to
go in there and mess it up a little, bit
and then we'll prove that we actually looked at.
Speaker 1 (19:06):
It so the narrative on the on The democrat side
is it's a big tax cut for the. Wealthy it's
it's actually. Not at the high. End many people's taxes
went up between the reductions in itemized deductions that you
couldn't take to his to as great of an, extent
and and a lot of write offs went, away even
(19:27):
though the actual tax brackets came.
Speaker 2 (19:30):
Down when they look at.
Speaker 3 (19:31):
The came down last, time they're exactly the same right this, time, right,
Right so those are the. Same and some deductions went,
away and many people saw an. Increase but the distributional
effect of the tax legislation they're putting in, now which
is really just an extension of the twenty. Seventeens so
we have the numbers in terms of income, percentile got
(19:56):
who got the most? Benefit, okay in order of who
gets the most, Benefit and let's Do i'm gonna do
twenty twenty.
Speaker 2 (20:05):
Six.
Speaker 1 (20:06):
Okay number one is the twenty to forty, percentile twentieth
to fortieth. PERCENTILE i don't know if you have a second,
there can you look that? Up what would be the
twentieth to forty percentile of? Income And i'll go through.
It number two would be the fortieth to sixtieth percentile of,
Income so, right smack, DAB i guess you would call
(20:26):
that middle, class, right that's the Middle number three the
sixtieth to eightieth. Percentile number four, eighty the eighty to
one hundred percentile would be the number.
Speaker 2 (20:41):
Four, okay what year are you a couple of years back?
Here i'm twenty twenty. Five, okay.
Speaker 3 (20:47):
Surprisingly. Low so this is completely against the narrative of the.
Left the twentieth to fortieth the ones that benefit the
most from this from the pass tax. Plan correct twenty.
Five this is in THE us twenty five thousand to
fifty thousand of. Income the fortieth percentile starts at fifty
five thousand of. Income, okay so IT i mean that
is who's benefiting the. Most that's who's benefiting the.
Speaker 1 (21:09):
Most breaking it down even, further who benefits the, Least
who benefits the? Least ninety five to ninety nine is
the least benefit of this current tax.
Speaker 3 (21:22):
Plan with that is ninety five percentile of income in
The United. States that is two hundred and eighty nine
thousand and seven sixty three in twenty twenty. Two so
it's gonna be a little higher than that, now so
you're probably talking about three hundred and fifteen thousand of
income is the ninety fifth.
Speaker 1 (21:41):
Percentile here's what's fascinating in twenty twenty. Six two groups
that are in the same boat in terms of their
their change to their what they owe for income income
tax ninety nine to one hundred percentile and zero to
twenty are both the same.
Speaker 2 (21:59):
In terms of their, effect which is no. Effect.
Speaker 1 (22:02):
Right, well sometimes it's like you were talking some of
these people in the lowest, percentile there's not a lot
of wiggle room because they're not paying. Anything or they'll
say they're getting a tax, Increase, well they were getting
fifteen hundred dollars and now they're not getting. Anything their
taxes are just. Zero, well that's not a tax.
Speaker 3 (22:20):
Increase you were getting a fifteen hundred dollars check and
now you're not getting that.
Speaker 2 (22:24):
Check, yeah if you're not out anything.
Speaker 1 (22:26):
Proportionally it's hard at the lowest end to probably give
you a tax cut if you're paying, zero, right how
much less is? Zero but the biggest beneficiaries of the
of The trump tax plan are between twenty and. Eighty
that is exactly the definition of the middle.
Speaker 2 (22:43):
Class middle to, lower, lower, lower middle to.
Speaker 1 (22:47):
Middle, Yes so that narrative that it's it's tax cuts
for the, rich which is odd too because the state
and local tax deduction these giant property tax. Bills the
people fighting for those write offs the most are The
democrats In, California New, York massachusetts who are fighting for
(23:09):
a write off for their constituents who have Fifty, yeah
have fifty thousand dollars property tax. Bills, yeah so would
that Be, yeah it's not gonna be somebody with fifty
thousand of income in their. State those people would be standard.
Deductors so here there are.
Speaker 3 (23:24):
Said the loudest they're shouting is to get the salt
up to unlimited or forty to fifty. Thousand, well that
is not the lower middle and middle class even in their.
Speaker 1 (23:34):
States that's, right and it is a subsidy because when
you think about, it if they get that big write,
off they pay less federal. Tax and that is basically
means that if you're In ohio and you're not In New,
york if you have the same, income you're paying more
federal tax than someone In New york because they're getting
a bigger write off because their property, tax state and
local taxes are so. High, yeah so you're effectively you're
(23:56):
taking money from the federal receip From ohio and from
In ohio and you're giving it right To New.
Speaker 2 (24:02):
York.
Speaker 3 (24:02):
Yeah So i'm not sure how if that moves the
needle at, all but maybe it's one of the reasons
that in twenty, seventeen, eighteen and nineteen we saw increased
federal tax receipts is because we didn't have that huge
right off for those. States and, yeah those are high
population states, too so it could be part of. It
and while they're adding a little, bit they're not adding
very much to. That it's not gonna affect too many
(24:23):
people that get this increased.
Speaker 2 (24:24):
Salt.
Speaker 1 (24:24):
Brad let's take our next pause here and get a
little bit ahead of the game on our stoppages that
we have. Here but one of the things that we've
been talking about last couple of weeks is how wrong
the experts.
Speaker 2 (24:35):
Are, yes and people.
Speaker 1 (24:37):
And experts who get it, wrong whether it's THE cbo
OR s AND P, global.
Speaker 3 (24:42):
Or even individuals who think they know what's going to
happen in the economy or what they think is going
to happen with interest.
Speaker 1 (24:49):
Rate some of these indicators that we, follow we don't
follow them because we think the indicator is a good
indicator to. Follow we think it actually tells you the opposite.
Speaker 3 (25:00):
Indicator and most people don't realize as a conturer and,
indicator and they're reported on the news like it's a
negative and they don't realize every time that figure flashes
like it, does it's not a bad.
Speaker 2 (25:10):
Sign it's a good. Sign so let's talk about vice.
Speaker 3 (25:12):
Versa ad vice versa by the, Way, yeah sometimes if
everything looks too good, right it's a it's a concurer
and indicator that things are about to get. Bad so
we'll talk about one of those and do a deeper
dive into one that we've talked about in the, past
and it's The university Of Michigan Consumer Sentiment. Survey and,
uh let's take our first our next, pause and when
we come, back we'll talk a little bit about.
Speaker 2 (25:32):
That and welcome.
Speaker 3 (25:34):
Back you're listening to advices Of, kristen wealth manager For.
Group brad And kevin here with.
Speaker 4 (25:36):
You.
Speaker 3 (25:37):
KEVIN a couple of weeks, ago we had one of
the inflationary numbers that usually comes out and it does
come out on A, friday and it's the P, pce
The Personal consumption expenses and it is it is what
individuals are spending money on and is that going up
(25:58):
or going? Down it's it's it's similar to THE. Cpi
it's not similar TO, ppi which is another kind of
leading indicator for, inflation but it's it's the actual prices
that people are. Paying it is one of the things
that The fed's looking. At sometimes people call it the
favored gauge for THE fed because it's kind of real,
time a little bit more real time at the consumer
level for price. INCREASES i say, that but it's still
(26:21):
six weeks delayed because that what they just reported was
The march. Number but what's striking to me is you'll
have all these actual reports on actual. Spending then at
the end of it you'll have THE cnbc person say
one that is a completely meaningless. Number so let me
tell you what these numbers. Were the ACTUAL pce increase
(26:42):
year over year was two point three, percent meaning what
you pay for the average of all your goods that
you spend money. On you, know things that you spend
more money on are waited a little bit less than
things that you rarely spend money, On so it's what
you actually spend money on went up two point Three
then at the end they, say and consumers expect the
price of goods over the next twelve months to be
(27:05):
seven point three percent. Increase, huh well does that matter
what you? Expect sort? Of and there's there's something that
everyone misses because when.
Speaker 1 (27:18):
Don't you think it has a lot to do with
the media pushing the narrative that, well tariffs are going
to cause runaway.
Speaker 3 (27:22):
Inflation, two there's, that and that we just had an.
Election so right before this we had Both republican And
democrats thought that the one year inflation. Number this is
from The university Of. Michigan one year inflation expectations by
Party republicans throughout twenty twenty four were the highest their.
(27:46):
Inflation one year inflation expectations hovered right around four, percent
when a little above four percent in the middle of the,
summer right around election, time we were about three and a,
half and then miraculously in twenty twenty. Five republicans are
just as, guilty but not maybe not the extreme. Here
their expectation In january went down to zero for the next,
(28:08):
year and then In february it was about a half
a percent for the next, year and then The march
one was one point two percent for the next. Year
So republicans expectation changed on a dime right on election,
day but so did The. Democrats for the entire year
of twenty twenty. Four The democrats never saw inflation expectations
(28:28):
for one year out to be higher than two point two,
percent and for the back half of the year they
expected the one year.
Speaker 2 (28:34):
Number to be below.
Speaker 3 (28:35):
Two but right after the election it shot. Up it
was four In, january right After Inauguration day it shot
up to. Six and the most recent one is the
one year inflation number For, democrats the expectation is nine
point six, Percent So republicans expect the one year number
to be one point. Two democrats expected to be nine point,
six giving us this headline number of seven point. Three
(28:56):
now when they report, it they're, like, well it's two
point three, today but obviously it's going to be higher
because consumers expect it to be. Higher, now why would
they know what it's going to cost for price of
goods to get to the. Market what would they know
about what the price of anything is going to.
Speaker 2 (29:15):
Be they don't. Know it's just what they. Expect.
Speaker 3 (29:17):
Now the only way you can read this is if
you expect things to be higher in the, future you
will go out and spend. Money, now if you expect
cars to cost more in one year and you're thinking
about buying a, car why would you. Wait you expect
A tv to be, more why would you? Wait if
you expect an iPhone to be, more why would you?
Wait so it is a contrarion indicator if the if
(29:39):
the current inflation number is low and the expected is.
Higher but it is a sort of a dumb thing
that we're. Reporting where are we getting it. From we're
getting it from this monthly number we have been DOING
i don't even know how long they've been doing This
university Of Michigan Consumer, expectations and it's this survey of
(29:59):
a bunch Of some of it is actually. MEANINGFUL i
have it in front of.
Speaker 2 (30:04):
ME i have the whole. Thing it's about one hundred.
Speaker 3 (30:06):
Questions some of it's things like are you better or
worse off than you were a year? Ago thinking about
five years, back are you better or worse? Off and
it's just a general are you better or worse off
a year from? Now will you be better at works?
Off five years from now you've been better or worse?
Off and then we get into some. Things i'm just
wondering why we're asking consumers now turning to business conditions
(30:27):
in the country as a, whole do you think during
the next twelve months we'll have good times financially or bad?
Speaker 2 (30:34):
Well how does an individual know about a business is
good financial?
Speaker 1 (30:39):
Well and they're using THIS i mean it does go
to the consumer. SENTIMENT i get it goes to the
overall consumer, Sentiment but some of these questions aren't really sentiment.
Related you're asking the consumer to make a, prediction to.
Speaker 3 (30:52):
Make a prediction or the next, question in the last few,
months have there been any changes to business?
Speaker 2 (30:57):
Conditions what do they? Know? Right?
Speaker 3 (31:00):
What you just could be a twenty five year old
recent graduate who lives here In. Toledo you're asking, him
how are things In New york? Today are how's that
a car dealership doing In? Columbus or what if business?
Speaker 1 (31:11):
Conditions what if the person's a. Dentist, yeah they are
they paying attention to business conditions in their dentistry. PRACTICE
i mean some some businesses are a little bit more
in tune to. CONDITIONS i, construction, trucking all. That, fine
you want to ask, them but they don't know where
these people, Work they.
Speaker 2 (31:30):
Don't know anything about.
Speaker 3 (31:31):
Them and some of these you're leading them into a political.
Speaker 2 (31:35):
Question here's here's.
Speaker 3 (31:36):
One and how about a year from, now do you
expect that the country as a, whole the business conditions
will be?
Speaker 2 (31:44):
Better these are really poorly, worded.
Speaker 3 (31:45):
As a whole business conditions will be better or worse
than they are at the, present or just about the, same,
better about the same or. Worse oh, well who's? PRESIDENT
i Like, trump it'll be. BETTER i don't Like, trump
it'll be. Worse i'm sure nobody is saying about the
same same thing next five, years same, question business. Conditions,
(32:08):
yeah individuals know a lot about.
Speaker 2 (32:09):
That how about the.
Speaker 3 (32:10):
Government is the government doing a good job or a bad? Job,
well of course it's going to be, political and they
ask questions about is the government doing a good job
or a bad? Job on inflation or. Unemployment, now most
people don't know what the government's doing about unemployment or.
INFLATION i, mean we know people listen to the show
probably know that THE fed.
Speaker 2 (32:30):
Exists most people don't even know what THE fed.
Speaker 3 (32:33):
Is or what they're, doing or any government program that
is doing anything about. Unemployment but here we. Are let's
ask the, consumer how about? This what do you think
will happen to interest? Rates, now experts are bad at
predicting interest. Rates this is asking what you think interest
rates are going to do over the next twelve. Months
you think they're going to go, up stay the, same go,
down or you don't. Know we're asking individuals what they
(32:56):
think interstrates are. Doing the experts are always wrong about.
It most aren't even a coin flip on. It they
get it wrong more than they get it. Right next five,
years the outlook for. Prices here we are inflation. Questions
the only thing you should be saying this, says in
five to ten, years what's your outlook for?
Speaker 2 (33:14):
Prices?
Speaker 3 (33:14):
Higher, lower about the, same OR i don't. Know, well
since we have inflation and we haven't had a deflationary
period in a, very very long, time you should be
saying higher because that's the right answer for the last
one hundred. Years or you could SAY i don't, know
because you're a. Consumer but here we are asking. CONSUMERS
(33:35):
i did mark a few that seemed like these are
questions you could ask to ask someone during.
Speaker 2 (33:40):
The next year or.
Speaker 3 (33:40):
Two how do you expect your family income to? Be,
now this is a question that a consumer can. Answer
do you expect your income to go, up be the,
same go? Down or you don't? Know the next twelve,
months same, question in the next five in the next five,
years same.
Speaker 2 (33:54):
QUESTION i, mean.
Speaker 3 (33:57):
Here's another one THAT i marked as good and, bad
and it's about buying a. House do you expect to
be buying a? House, okay you can ask that. Question
do you expect to be selling a? House that's a good.
QUESTION i, mean those are questions that a consumer, knows
but we're gonna ask them if they think in interest
rates are going. Up it seems crazy buying an. Automobile
do you expect gasoline to be? Okay buying an, automobile
(34:18):
a consumer knows if they're going to buy an. Automobile
do you think the price of gasoline will go up
during the next five?
Speaker 2 (34:23):
Years?
Speaker 3 (34:23):
Okay most people are going to say. Yes guess what
you'd have been wrong more than. Right it's about a
flatline for the last twenty. Years so questions about family,
INCOME i get questions about things that consumers can't possibly.
Know why are we relying on any of? This it
does seem Odd but the one thing you have to
know about The university Of michigan consumer. Sentiment when sediment is,
(34:44):
low we're usually marking a bottom for the, market and
sediment right now is at almost an all time.
Speaker 2 (34:52):
Low you look at a, chart you.
Speaker 3 (34:54):
Go back to nineteen seventies on, this you have all
of these low, points and all of them usually mark
The Great recession two thousand and, eight they marked the
two thousand through two thousand and one. PERIOD, Covid all
of those are. Low we're lower THAN covid right. Now
so if, ever it's going to be a contrarian indicator
that people who are negative on the economy aren't fully
(35:16):
invested in the, market or people who are negative on
the economy are going to be pleasantly surprised that they
get a raise or have more money in their pocket
and go spend. It this is the time that we're
in because The Consumer Sentiment, survey when you look at the,
chart is at one of these inflection, points at a low,
point and so if it's a contrarier, indicator, again it's
(35:37):
good for the economy.
Speaker 1 (35:38):
Today, well you brought up the question they're asking in
that survey about inflation AND, cpi And i've talked to
a lot of clients about. This and the difficult thing
about a jump in inflation like what we had in
twenty well really mostly twenty twenty, two but you could
argue it was twenty twenty one through twenty twenty three
that that jump in inflation that we had is everyone
(36:00):
wants prices to go back to where they, were but
there's not a lot of precedent for NEGATIVE cpi prices going.
Backwards typically prices go, up they, plateau they might increase,
Less hopefully they'll increase less than the long term. Average
so you can work off some of that. Excess but
if you're going to do outright deflation at right, deflation
(36:23):
those are periods of times you don't want to live.
Through we had outright deflation negative zero point four percent
in two thousand and, eight two thousand and.
Speaker 2 (36:31):
Nine do we want?
Speaker 1 (36:33):
That that's a fifty seven percent drop in the overall
stock market we had, Outright, boy you don't really have
very many years, Here.
Speaker 3 (36:40):
No not not, years you have months and, quarters and
that's it. Right going, back we find another negative. Here
you got to go back a long way to find
out other.
Speaker 1 (36:49):
Negatives nineteen fifty, Five, no not the, size nineteen fifty
five negative point. Three so from fifty five to, nine
those are the only two.
Speaker 3 (37:01):
Years, yeah we're asking that question as if somebody would
possibly be able to answer that question.
Speaker 1 (37:07):
Correctly nineteen forty nine minus. One, okay how about this
one last time we had sustain Negative, boy this is
unbelievable and a very different economy back. Then nineteen thirty
minus two point seven, prices nineteen thirty one eight point,
nine negative thirty, two ten point, three thirty, three five point.
(37:28):
Two this is the last time we had a major
drop in prices as measured by THE cpi probably not
something we want to go back.
Speaker 2 (37:34):
To that's The Great.
Speaker 3 (37:34):
Depression so you, know let me do one more here
before we wrap it, up and it's it's one of
the ones THAT i, said this is probably one people
would know about their own, situation but it's so, political
and it is do you expect to lose your job
in the next twelve?
Speaker 2 (37:47):
Months?
Speaker 3 (37:48):
Now that seems like a pretty decent question to. Me
but right before the, election the three month moving average
on this had had this at seventeen percent of people
answering thought that they were going to lose their job
in the next twelve. Months, now the unemployment rate is under.
FIVE i suppose you could lose your job and find
one right, away so that would count in. There but
(38:09):
you have a lot more job quitters than you have
job firings in this. Economy but miraculously it goes up
on election day by ten percentage points from round seventeen
to around twenty. SEVEN i, mean do you think because
of the election everything's going to? Change the economy is
not as political as everyone makes it out to, be.
Speaker 2 (38:33):
Especially.
Speaker 3 (38:34):
Stocks you, know stocks are made up of shareholders and
board of, directors that's job is to increase shareholder.
Speaker 1 (38:42):
Value one of the worst decisions anyone can make is
to buy or sell their stocks based on.
Speaker 3 (38:46):
Politics, yeah even if it's not your political party in.
Office you can dial down risk a little bit if you.
Want it makes you feel. Better but doing nothing has always.
Speaker 1 (38:56):
Been getting or you're getting completely, out is a terrible.
Decision doing nothing if you had a plan in, place
whoever is in, office whether you agree with them or,
not if the plan was sound, before it shouldn't require
a major change based on the political affiliation of whatever
the new.
Speaker 3 (39:12):
PRESS i feel like we talk about this a, lot
but we're going to have to keep talking about because
WE'RE i think the political environment is because of twenty
four hour news and your phone having all the news
right at your. FINGERTIPS i think people are more susceptible to,
this this whip, song and it's so easy for people
to move in and out of the market now it
didn't used to. BE i think it's affecting people's decisions
(39:33):
and the ease of doing doing that.
Speaker 1 (39:37):
Too it's too easy and it's a. Problem, Right but
take our last. Pause you're listening to Money, Sense kevin
And Brad, kirsten we'll be right. Back welcome back to the.
Show you're listening to the advisors Of Kristen Wealth Management,
Group Kevin kirsten And Brad. Kirsten wrapping up, Here brad
just going to go with go through the beyond the
news with you here and get your thoughts on some
of the headlines. Here broad And straw from Its april
(39:59):
clothes low On april eight through five to, seven THE
s AND p searchs thirteen percent four hundred and sixty
of the index components. Advancing of those, gainers ninety one
rallied more than twenty, percent including five, stocks which serves
more than forty percent of seen a lot of numbers
that Was aprily to the end of the month essitionally
(40:20):
go Through may, Seventh may, seventh so this one's a
little bit. Older but that's one of the positives about
this market from the low is the broad based nature
of what we've. Seen in, fact the advanced decline line
gives a little bit more of an indicator of the
market moving. Higher, typically when the advanced decline line hits
an all time, high the market's not far. Behind and
(40:41):
that has.
Speaker 2 (40:42):
HAPPENED i, mean that's a one month.
Speaker 3 (40:43):
Return and sometimes we get these inflection points when everything
feels so bad and we say something like, that like
the average rally off the bottom is fifteen, percent and
it seems. Ridiculous, well here you are with an UNUSUAL
v shape recovery where the one month return off of
this bottom was Twenty in.
Speaker 1 (41:01):
A Recent gallup, poll the stock, market the stock, market hold,
on let me go back. Here while the stock market
has outperformed real estate handily in THE us over the
last half, century in a Recent gallup, survey thirty seven
percent Of americans think real estate is the best long term,
investment compared to sixteen percent for.
Speaker 2 (41:17):
Stock, well that's like one.
Speaker 3 (41:18):
Of those after a big, year you survey people and
say how did THE s AND p five hundred do last?
Year and about a third of them say it's, negative
even when it's, positive even when they're. Investors so people don't.
Know they assume because they're not in real, estate it
must be. Great and that's you, Know, well and in
real estate is a great. Investment everyone should use that
as part of building their. Wealth but there's a couple
(41:38):
of things that get. Missed Number, one most people the
way they make money in real estate is because they're leveraging. It,
yeah they're putting twenty percent down and they're. Leveraging if
you did that on your own portfolio and average ten
percent a year in the stock.
Speaker 1 (41:49):
Market number, two nobody calculates how much money they put
in their house every. Year, yeah your stock. Portfolio you
don't have to write a check to fix the. Furnace, yeah,
okay so. Nobody nobody calculates the full cost of ownership
of a home as. Well it is a great investment
for a lot of, people but the numbers it's not even.
Speaker 3 (42:07):
Close, yeah you're not looking at net performance a lot
of times on that when you're looking at your, statement
even if you have cost of your investments or advisory,
fee you're looking at the net when you're looking at
that end of the year.
Speaker 2 (42:18):
Return. Correct, correct not buying.
Speaker 1 (42:20):
It even though THE s AND p is rallied significantly
from The april eighth low The American association Of Individual,
investors this is a survey we talk a lot on this.
Show the bears sentiment declined to fifty one point, five
but it is above fifty percent for a record going
back forty. Years for the eleventh straight, week people are
still more bearish than bullish on the overall.
Speaker 3 (42:43):
Market it's coaturinon indicator when that happens going forward higher
than expected returns net.
Speaker 1 (42:51):
Selling similar to the jump and bearishness scene across investor sentiment.
Surveys in recent, months The Charles Schwab Trading Activity, index
which tracks the amount of shares bought and sold by,
clients saw its biggest one month drop net selling Since
march of twenty twenty going Into. April so it's certainly
a positive. Sign comparing that.
Speaker 3 (43:08):
To the if there's ever a stock that seems like
it's a recession, proof especially in the short, term but.
Speaker 2 (43:14):
They all go.
Speaker 3 (43:15):
Down AND i don't understand why The Robin hoods and The,
schwabs these trading, platforms Tdumrior, trade all those trading. Platforms
when the market is going, haywire they buying and, selling
they have to be increasing the. Revenue and yet just,
indiscriminately everyone is selling every stock even though you know what's,
coming which is they're going to have a great.
Speaker 1 (43:34):
Quarter right call this The doge. Effect Brad Ditching, washington D.
C active home listings In WASHINGTON dc metro area increase
twenty five point one percent year on year In, april
the largest increase since twenty, fifteen and far higher twenty.
Fifteen it was about right Before trump was. Elected, again
far higher than the fourteen point two percent increase on
(43:55):
a nationwide. Basis interesting that nationwide are up fourteen point two,
Percent so that's that's a good thing for.
Speaker 3 (44:04):
Prices, yeah we were saying it would take a little
bit of a drop in interest, rates but eventually if
interest rates don't, drop people finally throw in the towel and, say,
WELL i was waiting till interest rate drop to, move
but Now i'm just going to do.
Speaker 1 (44:16):
It how about welcome to the real. World on college,
graduates in twenty twenty, five the average pre tax income
of those college graduates with a job was sixty eight,
thousand four hundred thirty two percent less than the one
hundred and one, thousand five hundred they said they thought
(44:36):
they would make when.
Speaker 2 (44:37):
Survey oh this is what they thought they're going to
make versus what they're actually. Making, yep, yep.
Speaker 1 (44:40):
Yep so what to major? In what not to major?
IN i mean this is kind of. Obvious college graduates
to manage are in foreign languages and general social. Sciences
have the lowest annual saturies within five years of their.
Graduation this compares with the highest majors right, now computer
science computer engineering is all most one hundred percent. Higher
(45:01):
it's interesting, THOUGH ai with computer science and computer, engineering
especially at the low, level might be you, know taking
taking a byte.
Speaker 2 (45:10):
Out of, that out of that.
Speaker 3 (45:11):
Salary, yeah in the years to, Come, yeah if you're
gonna definitely have to be majoring in things on how
to make businesses more efficient with USING ai and be
AN ai expert if you want to get that first.
Speaker 2 (45:23):
Job that's.
Speaker 1 (45:24):
Right, so you, know looking, overall as we go into
the summer, Here, brad you, know we talked in previous
shows about seeing a lot of similarities not only with
THE covid cycle but also the twenty eighteen. Cycle here
we are now at this, Point april eighth is the,
low so we're a month roughly a month and three
(45:44):
weeks in both of those rallies saw new all time
highs in four four months and six, months well five
months FOR covid, Respectively and certainly wouldn't expect to, say,
oh there's all clear and no more, volatility because even
THAT covid sell off and corresponding recovery had two different
ten percent selloffs later on in the.
Speaker 2 (46:05):
Year well one happened In.
Speaker 3 (46:08):
June you had a thousand point down nowaday and a
ten percent sell off in about a four day. Period
that was right Around. June and so here here you.
Were you, know your bottom FOR covid Was march twenty.
Third you thought you were, Fine you're up twenty five,
percent and then you give up ten and then you
rally again to finally make that all time. High from
the headlines AROUND covid were kind of similar to what
we're seeing, now but WITH covid it was reopening vaccines
(46:32):
all those. Others i'll wait Till i'll wait till the economists back.
Open i'll wait till we have a vaccine and we're
gonna hear that around the tears about. Tears i'll wait
till the till the trade war's. Over i'll wait till
the tariffs are, lower and the market's not going to.
Care it's forward looking. Now the scale ON covid was much.
Greater it was a thirty five percent. Downside so it
only stands to reason that those those aftershocks in the overall.
(46:54):
MARKET i mean twenty twenty ended up being a great,
year but those after shocks were a little bit, bigger
more than ten percent two different times later. On BUT
i would anticipate we'd have some aftershocks here in the
s AND p five, hundred BUT i think it's going
to be more along the lines of that five to
seven percent range would be what the after shocks after
we had that big downturn In march And.
Speaker 2 (47:16):
April, YEAH i.
Speaker 3 (47:17):
Think you've got The trump theater that will see that
and come out and whether it's get a deal done
quicker so they can have a news conference on it
or have maybe some some countries have a further pause
once we get to the ninety, day knowing that they
need a little bit of support of the.
Speaker 1 (47:35):
Market AND i think that the individual investor will swoop
in and buy those dips if when that. Happens you,
know it's interesting to look at the surveys that a
lot of the surveys we talked, about it was the
individual investors that came in and bought The april eighth,
low and it was the institutional, investors the hedge funds that were.
Selling so it's. INTERESTING i often say that investors never
(47:56):
learned their. Lesson but the last couple of sell offs we've,
had there's Been may you're buying.
Speaker 3 (48:00):
And all the doomsdayers were the billionaires that bringing out ON,
tv and the individual investors were the ones with the.
Inflows we're holding Stead, yeah so that's interesting and encouraging to.
See thanks for listening. Everyone we'll talk to you next.
Speaker 4 (48:12):
Week 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
(48:32):
AT lpl dot com and their website Is kirstenwealth dot.
Com 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
Hello, and welcome to Money Cent. You're listening to the
advisors of Kristen Wealth Management Group, Kevin Kristen and Brad Kirsten.
Happy to be with you today, Brad, as we uh
kind of work through this week, we had the the
House past the.
Speaker 2 (00:15):
Well.
Speaker 1 (00:15):
What was called it's the One Big Beautiful Bill Act
is what they called it.
Speaker 2 (00:19):
Yeah, the.
Speaker 3 (00:21):
Oh bb oh bb B A. I saw it abbreviated.
They are gonna call it the o BBB, the One
Big Beautiful Bill.
Speaker 1 (00:29):
You can't help but do a little bit of a
Donald Trump uh imitation when you when you when you
even say something like that, The One Big Beautiful Bill.
Speaker 3 (00:36):
They always abbreviate. The last one was the t c
j A, the Taxing Jobs Act.
Speaker 1 (00:42):
That's fine, I mean that's you're you're literally using Donald
Donald Trump language.
Speaker 2 (00:48):
But who cares what they name it.
Speaker 1 (00:49):
But last week we were talking about the scoring and
the headlines. It's gonna blow out the deficit, it's gonna
blow out the budget.
Speaker 2 (00:57):
How will they pay for it?
Speaker 3 (00:58):
That's that was the big The big headline was how
will they pay for it? That is like saying you
gotta raise You're gonna go up your incomes going by
twenty thousand, how are you gonna pay for those taxes?
Your taxes are gonna go up by eight thousand a year,
how are you gonna pay for it?
Speaker 2 (01:12):
Well, and if we.
Speaker 1 (01:13):
Look at the last last go around, because we talked
in last week's show about how they the Congressional Budget
Office who does this scoring, never gets it right. We
talked about how SMP and Moodies and Fitch downgraded the
US debt in part because of this bill right, and
they never get it right. And yet time after time,
(01:34):
these institutions are incorrect on their assumptions and also their outputs.
And yet we go right back to them.
Speaker 3 (01:41):
They're not even They're not even a coin flip. They
are almost batting one hundred percent wrong the wrong way
when they think it, is it gonna increase or decrease
tax revenue? Is it gonna increase or decrease GDP? They'll
admit that cutting taxes will increase GDP, but they will
they refuse to use a higher GDP than the prior year.
Speaker 2 (02:05):
Makes no sense.
Speaker 1 (02:06):
Well, let's look at Let's look at an older headline
brand from May of twenty two. Congressional Budget Offices may
of twenty two forecast shows that the government now expects
to bring in more tax revenue in the decade following
the twenty seventeen Trump tax cuts than it had projected
prior to the December twenty seventeen passage of tax form.
(02:27):
Oh shocker, it doesn't look like the tax cuts, which
government scorekeepers said at the time would cost one point
five trillion over ten years, have been anything like the
fiscal nightmare that some on the left would lead us
to believe. So the very last time we did this
exact same tax plan, all the gloom and numers were
out there talking about the fiscal nightmare that this would cause.
Speaker 3 (02:49):
And now here we are just extending that and giving
a little bit more stimulus to the economy. And again
it's we're scoring it the wrong way again.
Speaker 1 (02:58):
I mean, the usual suspects were out in twenty seven seventeen.
Nancy Pelosi called it a two trillion dollar GOP tax scam.
Bernie Sanders accused Republicans of hypocrisy for supporting the tax
cuts but opposing Congress's massive spending spree. That one doesn't
make any sense to me. You're not allowed to support
tax cuts, but you oppose the spend. I like both
(03:21):
of those cut taxes and cut spending. Yeah, I don't
understand that argument from Bernie Sanders. The Biden White House
issued a press release claiming the Trump tax cuts had
added two trillion to the deficits over over a decade.
So they claimed that he had added two trillion over
a decade, something that hadn't occurred yet.
Speaker 3 (03:41):
Yeah, Well, they're claiming that they're adding to it because
somebody said it was going to happen, not that it
did happen. They said it's going to happen, but it
didn't happen, but they can all say that he did it.
Speaker 1 (03:53):
Prior to the tax cuts, the government projected forty point
seven trillion of income tax, corporate tax, and payroll tax
in the decade from twenty eighteen to twenty twenty seven,
the latest budget for and so they claimed that that
forty point seven would be thirty eight point seven. Okay,
the latest forecast project forty one point three trillion of
(04:15):
revenues for that same period, So instead of thirty eight
forty one, instead of reducing revenues by one point five trillion,
Nancy Pelosi called it two trillion. The latest forecast suggests
that tax receipts came in five hundred and seventy billion
higher than had been expected. So that's more because the
expectation was You kind of talked a little bit about
(04:38):
this in the previoust showout.
Speaker 2 (04:39):
Yeah, last week.
Speaker 3 (04:40):
Well, it just depends what you're looking at for billions
versus trillions, if you're looking at ten years. They were
projecting trillions over a ten year period of reduction of
tax revenue, and it ended up being trillions higher. We
cut the corporate tax Brad and there was a big
fear mongering about that. Three point eight trillion revenues between
(05:01):
twenty eighteen and twenty twenty seven brought in three point
nine trillion more corporate tax actually came in in that
same period of time. So the Budget Office says that
historically it is more often overestimated revenues according to the
government forecasts. To CBOs, don't I don't really see that
in what world when it comes to tax cuts, they've
(05:24):
only done it the wrong way, which is underestimate the
growth in the economy because of the stimulus from the
tax cut. They've only done it one way. They've underestimated it.
Speaker 2 (05:33):
So after the tax.
Speaker 1 (05:34):
Cuts, business investment went up nine point four percent compared
to the pre tax cuts trend. Corporations real investment rows
fourteen point two percent. So we're extending. What's interesting about this,
this so called tax cut, it's you know, it's just
like they look just like levies.
Speaker 3 (05:53):
It's a not a tax, not a new Well, the
government wasn't out there saying it's not a new cut.
Speaker 1 (05:59):
Yeah, it's not a new cut. This is not a
new cut. Yeah, but we already have the track record.
But what it'll do and what it will do, we
know what happened. Real incomes went up, business investment went up,
tax receipts went up.
Speaker 3 (06:14):
Yeah, so we know what happened last night, and we
didn't talk about it in last week's show. But part
of this new plan was to keep the corporate tax
exactly the same. We went from thirty five to twenty one.
Everybody forgets where we were. I'll hear experts come on
and say, yeah, we went down a few percentage points.
What were we twenty five? We went to twenty one. No,
we were thirty five, and we went to twenty one.
Trump wanted to go to fifteen, and they settled in
(06:36):
twenty one again because of ridiculous scoring.
Speaker 2 (06:39):
But everyone forgets where we were.
Speaker 3 (06:41):
We were one of the highest in the world at
thirty five and we're keeping it at twenty one.
Speaker 1 (06:47):
And you go back to these Congressional Budget Office scoring,
which is the holy grail. I mean, I hate to
harp on it, but everyone uses this.
Speaker 3 (06:55):
They're like, every time we're doing any kind of spending
in government, we have to rely on this.
Speaker 1 (07:01):
So let's look at some of the expectations. You tell
me good, bad, or indifferent on what they're assuming. So
about we started. We talked last week one point eight
on GDP for the next ten years.
Speaker 2 (07:13):
What are your thoughts on that?
Speaker 3 (07:14):
Well, I think it's pretty ridiculous that they even even
the Congressional Budget Office agrees that a tax cut. The
last time around, they expected it to increase GDP by
point six. It was much higher than that. But they're
saying again that it's point six of an increase to
GDP because of the tax cut extension. That means if
we didn't do it, they'd be expecting one point two.
Speaker 2 (07:37):
Now that is unusually. I think I think it's the
other way around.
Speaker 1 (07:40):
I think I think the the baseline numbers are one
eight in the dynamics two four.
Speaker 3 (07:44):
Okay, yeah, if we didn't do it, if we the
other if we didn't do it, one point eight okay.
Speaker 2 (07:49):
And I think that the.
Speaker 1 (07:51):
It cuts like a trillion off the deficit if they
use the dynamic scoring even still so, but I.
Speaker 2 (07:57):
Think it could be even higher. Yeah, I mean it's
been high.
Speaker 1 (08:00):
It's not unreasonable to expect three three and a half
percent GDP unemployment rate four point three percent this year,
four point four percent average for the next decade.
Speaker 2 (08:10):
What do you think? I think that's probably accurate.
Speaker 3 (08:13):
You could you could see that go up just because
of uh, you know, less people trying to get get work.
Speaker 2 (08:22):
Yeah.
Speaker 3 (08:22):
I guess you could see the participation rate go up
a little bit and see that tick up.
Speaker 1 (08:25):
FED funds rate averages three point two over the next decade.
Speaker 3 (08:30):
Yeah, wow, over the next decade. I could see us
getting there in the next eighteen months and for staying
there for a decade.
Speaker 2 (08:40):
Seems pretty unreasonable.
Speaker 1 (08:41):
How about this one ten year treasury bill averages three
point eight percent?
Speaker 2 (08:45):
No, you think higher? I think higher? Yeah, I think
higher for.
Speaker 1 (08:48):
A Yeah, how that would affect things? How about this one?
The tax base uh, this is in it's The number
they're using is forty two point eight. But I don't
know if this is that's billions or I have to
get get into the fine print. But the number they're
using for wages and salaries is forty two point eight.
Speaker 2 (09:08):
Okay.
Speaker 1 (09:09):
Their number they're using this is ridiculous for total wages
and salaries and this goes to tax receipts average forty
two point eight, forty three point one, forty three point two.
Speaker 2 (09:21):
What are these percentages? No, no, it's I think it's
Is it in trillions?
Speaker 3 (09:24):
Oh?
Speaker 2 (09:24):
Oh, gotcha? The dollars that they're that they're taking it?
Speaker 1 (09:27):
Yeah, yeah, ytah, yeah, I think it. Is it in
billions or trillions or whatever it is?
Speaker 2 (09:31):
Okay, So what is it for the current year?
Speaker 3 (09:32):
Forty two point eight okay, okay, and they're expecting that number.
Speaker 1 (09:38):
No, actually, I'm sorry, I'm sorry, I'm looking at this wrong.
It's a percent of GDP. It's a percent of GDP. Okay,
So they're assuming that that number is basically static, that
wages will be this will be the same forty three
percent of GDP for the next decade.
Speaker 3 (09:53):
Well, I don't have the chart in front of me.
But it it almost never changes. You could have the
highest tax tax rate be eighty percent, and you you
have the highest tax rate B twenty eight and it
won't change. This because wages as a percentage of GDP,
not the tax rate. This is wages wages, That's what
I mean. Because when when the highest bracket is high,
people cheat or figure out how to not do it,
(10:14):
and when the highest rate is low, they don't.
Speaker 2 (10:16):
How about this one? It never changes.
Speaker 1 (10:17):
Domestic corporate profits as a percentage of GDP right now
this year is eleven percent. They're estimating that corporate profits
for the next decade will average nine percent of GDP.
Speaker 2 (10:27):
How does it go down? I mean, margins are going
higher every year.
Speaker 3 (10:31):
Technology and efficiencies and AI will only increase profit margins.
Speaker 1 (10:36):
So how about this one though? In terms of billions
of dollars in terms of our our well, let's look
at the revenues. First, individual income taxes actual overall revenue
almost almost five trillion for twenty twenty four. Okay, five
point one trillion for twenty twenty five, eight trillion by
(10:58):
twenty thirty five in terms of total eight revenue, and
what is it this year?
Speaker 3 (11:04):
Five trillion so they agree it's going up. This is
the crazy thing. If you're agreeing that total tax revenue
is going up, how does it increase the deficit unless
we're going to increase spending by three trillion more per year.
Speaker 1 (11:17):
And well, in the outlays this year are six point
eight trillion, which by the way, pre COVID, yeah it
half that, it was less than four trillion, and we
did all this temporary one off spending.
Speaker 2 (11:31):
But we're still at an all time high.
Speaker 3 (11:33):
And so where they projecting it two years out on spending,
two years out on spending seven point two trillion, ten
years out ten point seven trillion.
Speaker 2 (11:41):
But just take that.
Speaker 3 (11:42):
They're admitting that tax receipts are going to go up
by almost three trillion, spending is only going up.
Speaker 1 (11:47):
By no, they're they have spending going up four trillion.
Speaker 2 (11:52):
Okay, well, there's your problem. It's not. It's not a
tax receipt problem. Taxes are, tax receipts are going up,
and you can't.
Speaker 3 (12:00):
You can't increase spending by less than what the tax
res re seats are going up.
Speaker 2 (12:04):
That's your problem.
Speaker 3 (12:06):
So when part of this bill takes two million undocumented
immigrants off of Medicaid, and everyone's screaming that it's unfair.
What's unfair is that the American people paying taxes are
doing their part and you're blowing all the money. Anyone
with the outrage about dosee making cuts to USAID or
(12:26):
making cuts to Medicaid for people that aren't even citizens
is just fake outrage. You don't really care.
Speaker 1 (12:35):
Mandatory spending Social Security this year a trillion, four one
point four trillion, two point six trillion, and twenty thirty five.
Speaker 2 (12:43):
Those numbers. They have to know those numbers.
Speaker 1 (12:46):
Medicare nine hundred and ten billion this year, one point
seven trillion in twenty thirty five. I would have thought
Medicare was even higher.
Speaker 3 (12:57):
I would be very interested in if it's going to
even make a dent to Medicare and Medicaid spending. If
they if we do this this this price matching with
you know, we're the we're the lowest country that's on
the price.
Speaker 1 (13:09):
That's nearly a double in Medicare in ten years.
Speaker 3 (13:12):
Yeah, I mean, if there is a we're the most
favored nation on a pricing, it's kind of impact insurers
for one to the to the good and Medicare and
Medicaid to the good, and it's probably not good for
the pharmaceutical companies.
Speaker 1 (13:27):
Defense spending eight hundred and fifty five billion twenty twenty four,
in sixty billion in twenty twenty five, just over a
trillion in twenty thirty five, So that's pretty modest increase there.
Non defense discretionary in twenty twenty five a trillion and
a trillion two or almost a trillion three by twenty
(13:49):
thirty five. That's that's where the waste frauden abuse is
right there. Well, there's waste fladen abuse everywhere, but that
non defense is the biggest thing.
Speaker 3 (13:57):
That you've not Actually, I don't understand how we can't
have more efficiencies and reduce spending there with new technology
and drone technology. I mean, you're not you don't need
an infantry anymore with all the drone technology. I feel
like just with the number of troops that we would
have over time could go down with just more tech
(14:18):
as part.
Speaker 2 (14:18):
Of your defense.
Speaker 1 (14:19):
Well, and can we do better on healthcare? I mean
that's such a big line item on here, Medicare and
medicaid defense, Like you said, is that something that over
time there can be efficiencies net interest? Right now, this
year we're paying nine or fifty two billion in interest
one point seven trillion in interest by twenty thirty five.
(14:40):
Some of this is a little bit zero sum. I mean,
you know, everyone gets all worked up about interest. Most
of that interest goes back to the American people. Oh no, no,
I thought it was China.
Speaker 2 (14:51):
No.
Speaker 1 (14:53):
The vast majority of who owns treasuries is the American people.
So when the government's paying interest, that's a little bit
of a give back to the American people. It's not
even close. I thought we paid everything to China and
all these other countries. That's not true. China might be
In fact, I don't even think China.
Speaker 2 (15:09):
Is number one.
Speaker 1 (15:09):
I think Japan might be number one in terms of
owning foreign countries. But if you just look at the
foreign countries, China's one or two. But they're eliminating all
the US investors, right, So it's kind of interesting to
see that rad and look at the estimates. But if
you look at the overall in terms of money coming
into the government, money going out going from four point
(15:30):
nine trillion to eight trillion, versus spending going from six
point eight trillion to ten point eight trillion, there's your answer.
I mean people have often said, we don't have a
revenue problem, we have a spending problem.
Speaker 3 (15:40):
But here's how it can affect your investments. There's a
negative narrative out there and there will be right when
this passes if the market will probably look right through that,
but if it doesn't. You know that cutting taxes means
people have more money in their pocket and they will spend,
and that spending means more earnings for corporations and shareholders,
and you know, unexpected earnings in some cases because they
(16:03):
didn't most most companies didn't even expect the stimulus that
would come from tax cuts the last time a round,
and it will come again, or at least stay. It
won't go away, which which it would have if if
these tax cuts didn't get extended. And when we get
around to uh, you know, a year or two down
the road, we're going to have unexpectedly higher GDP, which
will be a positive for the market. You have some
(16:25):
wind at your back for what you know is coming
that the market, that the market will tell us is coming.
But the experts will say they'll be surprised by the
unexpected should have been expected, and that's where that's what
we're gonna deal.
Speaker 2 (16:37):
With for the next couple of years.
Speaker 3 (16:38):
Well.
Speaker 1 (16:38):
As I mentioned on the last show too, wouldn't it
be nice if Trump could get the benefit of some
of these forecasts that they were using under the Obama
administration when he whatever stimulus plans and he did Obama
Care and all the other things that Obama put in
place during his presidency. Starting in twenty eleven, you know,
Trump's getting one point eight percent in his scoring. If
(17:01):
if the economy is growing more, all these deficit things,
estimates don't look as bad. When Obama was doing his scoring,
he was getting the benefit from the Congressional Budget Office
starting in twenty eleven on GDP growth four point seven
six six' one five six four nine four four four
two four to.
Speaker 2 (17:21):
TWO i, mean if you.
Speaker 1 (17:25):
Scored at those levels between the mid fours and the
low sixes on the current tax, plan you'd you'd probably
have a budget.
Speaker 2 (17:35):
Surplus.
Speaker 1 (17:36):
Yeah so you, KNOW i really think that you start
to look at that and you raise an, eyebrow and you,
Know trump's been Very he's been out, There he gone
after Po, H he's gone after. Everybody it's kind of
surprising to me that he that someone hasn't gotten into
his ear about this scoring, right and he because.
Speaker 3 (17:54):
We didn't even we weren't able to do everything he.
WANTED a lot Of republicans aren't getting what they want
because of the.
Speaker 2 (18:00):
Score it's all because of.
Speaker 1 (18:01):
This, yeah So i'm wondering JUST i wouldn't have been
shocked If trump would have come out and said this
one point. Eight it's a complete. Joke, yeah you, know
these people who put this together are. Losers, yeah he
would probably listen to this.
Speaker 2 (18:14):
Show he'll he'll probably do it. Soon.
Speaker 1 (18:15):
Yeah, right let's take our first. Pause you're listening To
Money Sents kevin And Brad. Kurston we'll be right. Back
welcome back to the. Show you're listening to the advisors
Of Kristen Wealth Management. Group Kevin kirsten And Brad. Kirsten
happy to be with you. Today as a, reminder we
are professional financial advisors and our offices are In. Perrysburg
give us a call throughout the week if you want
to set up a consultation to review your. Plan whether
(18:36):
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
to two zero zero sixty seven or check us out
online at kirstenwealth dot. Com wrapping up the discussion about
THE gop tax, bill and it very well might not
even be the final version because The senate's going to
make some.
Speaker 3 (18:56):
CHANGES i, mean, yeah The senate could pass it and
then it'd be on The president's. Desk but it's almost
like prove that you did. Anything, oh we got to
go in there and mess it up a little, bit
and then we'll prove that we actually looked at.
Speaker 1 (19:06):
It so the narrative on the on The democrat side
is it's a big tax cut for the. Wealthy it's
it's actually. Not at the high. End many people's taxes
went up between the reductions in itemized deductions that you
couldn't take to his to as great of an, extent
and and a lot of write offs went, away even
(19:27):
though the actual tax brackets came.
Speaker 2 (19:30):
Down when they look at.
Speaker 3 (19:31):
The came down last, time they're exactly the same right this, time, right,
Right so those are the. Same and some deductions went,
away and many people saw an. Increase but the distributional
effect of the tax legislation they're putting in, now which
is really just an extension of the twenty. Seventeens so
we have the numbers in terms of income, percentile got
(19:56):
who got the most? Benefit, okay in order of who
gets the most, Benefit and let's Do i'm gonna do
twenty twenty.
Speaker 2 (20:05):
Six.
Speaker 1 (20:06):
Okay number one is the twenty to forty, percentile twentieth
to fortieth. PERCENTILE i don't know if you have a second,
there can you look that? Up what would be the
twentieth to forty percentile of? Income And i'll go through.
It number two would be the fortieth to sixtieth percentile of,
Income so, right smack, DAB i guess you would call
(20:26):
that middle, class, right that's the Middle number three the
sixtieth to eightieth. Percentile number four, eighty the eighty to
one hundred percentile would be the number.
Speaker 2 (20:41):
Four, okay what year are you a couple of years back?
Here i'm twenty twenty. Five, okay.
Speaker 3 (20:47):
Surprisingly. Low so this is completely against the narrative of the.
Left the twentieth to fortieth the ones that benefit the
most from this from the pass tax. Plan correct twenty.
Five this is in THE us twenty five thousand to
fifty thousand of. Income the fortieth percentile starts at fifty
five thousand of. Income, okay so IT i mean that
is who's benefiting the. Most that's who's benefiting the.
Speaker 1 (21:09):
Most breaking it down even, further who benefits the, Least
who benefits the? Least ninety five to ninety nine is
the least benefit of this current tax.
Speaker 3 (21:22):
Plan with that is ninety five percentile of income in
The United. States that is two hundred and eighty nine
thousand and seven sixty three in twenty twenty. Two so
it's gonna be a little higher than that, now so
you're probably talking about three hundred and fifteen thousand of
income is the ninety fifth.
Speaker 1 (21:41):
Percentile here's what's fascinating in twenty twenty. Six two groups
that are in the same boat in terms of their
their change to their what they owe for income income
tax ninety nine to one hundred percentile and zero to
twenty are both the same.
Speaker 2 (21:59):
In terms of their, effect which is no. Effect.
Speaker 1 (22:02):
Right, well sometimes it's like you were talking some of
these people in the lowest, percentile there's not a lot
of wiggle room because they're not paying. Anything or they'll
say they're getting a tax, Increase, well they were getting
fifteen hundred dollars and now they're not getting. Anything their
taxes are just. Zero, well that's not a tax.
Speaker 3 (22:20):
Increase you were getting a fifteen hundred dollars check and
now you're not getting that.
Speaker 2 (22:24):
Check, yeah if you're not out anything.
Speaker 1 (22:26):
Proportionally it's hard at the lowest end to probably give
you a tax cut if you're paying, zero, right how
much less is? Zero but the biggest beneficiaries of the
of The trump tax plan are between twenty and. Eighty
that is exactly the definition of the middle.
Speaker 2 (22:43):
Class middle to, lower, lower, lower middle to.
Speaker 1 (22:47):
Middle, Yes so that narrative that it's it's tax cuts
for the, rich which is odd too because the state
and local tax deduction these giant property tax. Bills the
people fighting for those write offs the most are The
democrats In, California New, York massachusetts who are fighting for
(23:09):
a write off for their constituents who have Fifty, yeah
have fifty thousand dollars property tax. Bills, yeah so would
that Be, yeah it's not gonna be somebody with fifty
thousand of income in their. State those people would be standard.
Deductors so here there are.
Speaker 3 (23:24):
Said the loudest they're shouting is to get the salt
up to unlimited or forty to fifty. Thousand, well that
is not the lower middle and middle class even in their.
Speaker 1 (23:34):
States that's, right and it is a subsidy because when
you think about, it if they get that big write,
off they pay less federal. Tax and that is basically
means that if you're In ohio and you're not In New,
york if you have the same, income you're paying more
federal tax than someone In New york because they're getting
a bigger write off because their property, tax state and
local taxes are so. High, yeah so you're effectively you're
(23:56):
taking money from the federal receip From ohio and from
In ohio and you're giving it right To New.
Speaker 2 (24:02):
York.
Speaker 3 (24:02):
Yeah So i'm not sure how if that moves the
needle at, all but maybe it's one of the reasons
that in twenty, seventeen, eighteen and nineteen we saw increased
federal tax receipts is because we didn't have that huge
right off for those. States and, yeah those are high
population states, too so it could be part of. It
and while they're adding a little, bit they're not adding
very much to. That it's not gonna affect too many
(24:23):
people that get this increased.
Speaker 2 (24:24):
Salt.
Speaker 1 (24:24):
Brad let's take our next pause here and get a
little bit ahead of the game on our stoppages that
we have. Here but one of the things that we've
been talking about last couple of weeks is how wrong
the experts.
Speaker 2 (24:35):
Are, yes and people.
Speaker 1 (24:37):
And experts who get it, wrong whether it's THE cbo
OR s AND P, global.
Speaker 3 (24:42):
Or even individuals who think they know what's going to
happen in the economy or what they think is going
to happen with interest.
Speaker 1 (24:49):
Rate some of these indicators that we, follow we don't
follow them because we think the indicator is a good
indicator to. Follow we think it actually tells you the opposite.
Speaker 3 (25:00):
Indicator and most people don't realize as a conturer and,
indicator and they're reported on the news like it's a
negative and they don't realize every time that figure flashes
like it, does it's not a bad.
Speaker 2 (25:10):
Sign it's a good. Sign so let's talk about vice.
Speaker 3 (25:12):
Versa ad vice versa by the, Way, yeah sometimes if
everything looks too good, right it's a it's a concurer
and indicator that things are about to get. Bad so
we'll talk about one of those and do a deeper
dive into one that we've talked about in the, past
and it's The university Of Michigan Consumer Sentiment. Survey and,
uh let's take our first our next, pause and when
we come, back we'll talk a little bit about.
Speaker 2 (25:32):
That and welcome.
Speaker 3 (25:34):
Back you're listening to advices Of, kristen wealth manager For.
Group brad And kevin here with.
Speaker 4 (25:36):
You.
Speaker 3 (25:37):
KEVIN a couple of weeks, ago we had one of
the inflationary numbers that usually comes out and it does
come out on A, friday and it's the P, pce
The Personal consumption expenses and it is it is what
individuals are spending money on and is that going up
(25:58):
or going? Down it's it's it's similar to THE. Cpi
it's not similar TO, ppi which is another kind of
leading indicator for, inflation but it's it's the actual prices
that people are. Paying it is one of the things
that The fed's looking. At sometimes people call it the
favored gauge for THE fed because it's kind of real,
time a little bit more real time at the consumer
level for price. INCREASES i say, that but it's still
(26:21):
six weeks delayed because that what they just reported was
The march. Number but what's striking to me is you'll
have all these actual reports on actual. Spending then at
the end of it you'll have THE cnbc person say
one that is a completely meaningless. Number so let me
tell you what these numbers. Were the ACTUAL pce increase
(26:42):
year over year was two point three, percent meaning what
you pay for the average of all your goods that
you spend money. On you, know things that you spend
more money on are waited a little bit less than
things that you rarely spend money, On so it's what
you actually spend money on went up two point Three
then at the end they, say and consumers expect the
price of goods over the next twelve months to be
(27:05):
seven point three percent. Increase, huh well does that matter
what you? Expect sort? Of and there's there's something that
everyone misses because when.
Speaker 1 (27:18):
Don't you think it has a lot to do with
the media pushing the narrative that, well tariffs are going
to cause runaway.
Speaker 3 (27:22):
Inflation, two there's, that and that we just had an.
Election so right before this we had Both republican And
democrats thought that the one year inflation. Number this is
from The university Of. Michigan one year inflation expectations by
Party republicans throughout twenty twenty four were the highest their.
(27:46):
Inflation one year inflation expectations hovered right around four, percent
when a little above four percent in the middle of the,
summer right around election, time we were about three and a,
half and then miraculously in twenty twenty. Five republicans are
just as, guilty but not maybe not the extreme. Here
their expectation In january went down to zero for the next,
(28:08):
year and then In february it was about a half
a percent for the next, year and then The march
one was one point two percent for the next. Year
So republicans expectation changed on a dime right on election,
day but so did The. Democrats for the entire year
of twenty twenty. Four The democrats never saw inflation expectations
(28:28):
for one year out to be higher than two point two,
percent and for the back half of the year they
expected the one year.
Speaker 2 (28:34):
Number to be below.
Speaker 3 (28:35):
Two but right after the election it shot. Up it
was four In, january right After Inauguration day it shot
up to. Six and the most recent one is the
one year inflation number For, democrats the expectation is nine
point six, Percent So republicans expect the one year number
to be one point. Two democrats expected to be nine point,
six giving us this headline number of seven point. Three
(28:56):
now when they report, it they're, like, well it's two
point three, today but obviously it's going to be higher
because consumers expect it to be. Higher, now why would
they know what it's going to cost for price of
goods to get to the. Market what would they know
about what the price of anything is going to.
Speaker 2 (29:15):
Be they don't. Know it's just what they. Expect.
Speaker 3 (29:17):
Now the only way you can read this is if
you expect things to be higher in the, future you
will go out and spend. Money, now if you expect
cars to cost more in one year and you're thinking
about buying a, car why would you. Wait you expect
A tv to be, more why would you? Wait if
you expect an iPhone to be, more why would you?
Wait so it is a contrarion indicator if the if
(29:39):
the current inflation number is low and the expected is.
Higher but it is a sort of a dumb thing
that we're. Reporting where are we getting it. From we're
getting it from this monthly number we have been DOING
i don't even know how long they've been doing This
university Of Michigan Consumer, expectations and it's this survey of
(29:59):
a bunch Of some of it is actually. MEANINGFUL i
have it in front of.
Speaker 2 (30:04):
ME i have the whole. Thing it's about one hundred.
Speaker 3 (30:06):
Questions some of it's things like are you better or
worse off than you were a year? Ago thinking about
five years, back are you better or worse? Off and
it's just a general are you better or worse off
a year from? Now will you be better at works?
Off five years from now you've been better or worse?
Off and then we get into some. Things i'm just
wondering why we're asking consumers now turning to business conditions
(30:27):
in the country as a, whole do you think during
the next twelve months we'll have good times financially or bad?
Speaker 2 (30:34):
Well how does an individual know about a business is
good financial?
Speaker 1 (30:39):
Well and they're using THIS i mean it does go
to the consumer. SENTIMENT i get it goes to the
overall consumer, Sentiment but some of these questions aren't really sentiment.
Related you're asking the consumer to make a, prediction to.
Speaker 3 (30:52):
Make a prediction or the next, question in the last few,
months have there been any changes to business?
Speaker 2 (30:57):
Conditions what do they? Know? Right?
Speaker 3 (31:00):
What you just could be a twenty five year old
recent graduate who lives here In. Toledo you're asking, him
how are things In New york? Today are how's that
a car dealership doing In? Columbus or what if business?
Speaker 1 (31:11):
Conditions what if the person's a. Dentist, yeah they are
they paying attention to business conditions in their dentistry. PRACTICE
i mean some some businesses are a little bit more
in tune to. CONDITIONS i, construction, trucking all. That, fine
you want to ask, them but they don't know where
these people, Work they.
Speaker 2 (31:30):
Don't know anything about.
Speaker 3 (31:31):
Them and some of these you're leading them into a political.
Speaker 2 (31:35):
Question here's here's.
Speaker 3 (31:36):
One and how about a year from, now do you
expect that the country as a, whole the business conditions
will be?
Speaker 2 (31:44):
Better these are really poorly, worded.
Speaker 3 (31:45):
As a whole business conditions will be better or worse
than they are at the, present or just about the, same,
better about the same or. Worse oh, well who's? PRESIDENT
i Like, trump it'll be. BETTER i don't Like, trump
it'll be. Worse i'm sure nobody is saying about the
same same thing next five, years same, question business. Conditions,
(32:08):
yeah individuals know a lot about.
Speaker 2 (32:09):
That how about the.
Speaker 3 (32:10):
Government is the government doing a good job or a bad? Job,
well of course it's going to be, political and they
ask questions about is the government doing a good job
or a bad? Job on inflation or. Unemployment, now most
people don't know what the government's doing about unemployment or.
INFLATION i, mean we know people listen to the show
probably know that THE fed.
Speaker 2 (32:30):
Exists most people don't even know what THE fed.
Speaker 3 (32:33):
Is or what they're, doing or any government program that
is doing anything about. Unemployment but here we. Are let's
ask the, consumer how about? This what do you think
will happen to interest? Rates, now experts are bad at
predicting interest. Rates this is asking what you think interest
rates are going to do over the next twelve. Months
you think they're going to go, up stay the, same go,
down or you don't. Know we're asking individuals what they
(32:56):
think interstrates are. Doing the experts are always wrong about.
It most aren't even a coin flip on. It they
get it wrong more than they get it. Right next five,
years the outlook for. Prices here we are inflation. Questions
the only thing you should be saying this, says in
five to ten, years what's your outlook for?
Speaker 2 (33:14):
Prices?
Speaker 3 (33:14):
Higher, lower about the, same OR i don't. Know, well
since we have inflation and we haven't had a deflationary
period in a, very very long, time you should be
saying higher because that's the right answer for the last
one hundred. Years or you could SAY i don't, know
because you're a. Consumer but here we are asking. CONSUMERS
(33:35):
i did mark a few that seemed like these are
questions you could ask to ask someone during.
Speaker 2 (33:40):
The next year or.
Speaker 3 (33:40):
Two how do you expect your family income to? Be,
now this is a question that a consumer can. Answer
do you expect your income to go, up be the,
same go? Down or you don't? Know the next twelve,
months same, question in the next five in the next five,
years same.
Speaker 2 (33:54):
QUESTION i, mean.
Speaker 3 (33:57):
Here's another one THAT i marked as good and, bad
and it's about buying a. House do you expect to
be buying a? House, okay you can ask that. Question
do you expect to be selling a? House that's a good.
QUESTION i, mean those are questions that a consumer, knows
but we're gonna ask them if they think in interest
rates are going. Up it seems crazy buying an. Automobile
do you expect gasoline to be? Okay buying an, automobile
(34:18):
a consumer knows if they're going to buy an. Automobile
do you think the price of gasoline will go up
during the next five?
Speaker 2 (34:23):
Years?
Speaker 3 (34:23):
Okay most people are going to say. Yes guess what
you'd have been wrong more than. Right it's about a
flatline for the last twenty. Years so questions about family,
INCOME i get questions about things that consumers can't possibly.
Know why are we relying on any of? This it
does seem Odd but the one thing you have to
know about The university Of michigan consumer. Sentiment when sediment is,
(34:44):
low we're usually marking a bottom for the, market and
sediment right now is at almost an all time.
Speaker 2 (34:52):
Low you look at a, chart you.
Speaker 3 (34:54):
Go back to nineteen seventies on, this you have all
of these low, points and all of them usually mark
The Great recession two thousand and, eight they marked the
two thousand through two thousand and one. PERIOD, Covid all
of those are. Low we're lower THAN covid right. Now
so if, ever it's going to be a contrarian indicator
that people who are negative on the economy aren't fully
(35:16):
invested in the, market or people who are negative on
the economy are going to be pleasantly surprised that they
get a raise or have more money in their pocket
and go spend. It this is the time that we're
in because The Consumer Sentiment, survey when you look at the,
chart is at one of these inflection, points at a low,
point and so if it's a contrarier, indicator, again it's
(35:37):
good for the economy.
Speaker 1 (35:38):
Today, well you brought up the question they're asking in
that survey about inflation AND, cpi And i've talked to
a lot of clients about. This and the difficult thing
about a jump in inflation like what we had in
twenty well really mostly twenty twenty, two but you could
argue it was twenty twenty one through twenty twenty three
that that jump in inflation that we had is everyone
(36:00):
wants prices to go back to where they, were but
there's not a lot of precedent for NEGATIVE cpi prices going.
Backwards typically prices go, up they, plateau they might increase,
Less hopefully they'll increase less than the long term. Average
so you can work off some of that. Excess but
if you're going to do outright deflation at right, deflation
(36:23):
those are periods of times you don't want to live.
Through we had outright deflation negative zero point four percent
in two thousand and, eight two thousand and.
Speaker 2 (36:31):
Nine do we want?
Speaker 1 (36:33):
That that's a fifty seven percent drop in the overall
stock market we had, Outright, boy you don't really have
very many years, Here.
Speaker 3 (36:40):
No not not, years you have months and, quarters and
that's it. Right going, back we find another negative. Here
you got to go back a long way to find
out other.
Speaker 1 (36:49):
Negatives nineteen fifty, Five, no not the, size nineteen fifty
five negative point. Three so from fifty five to, nine
those are the only two.
Speaker 3 (37:01):
Years, yeah we're asking that question as if somebody would
possibly be able to answer that question.
Speaker 1 (37:07):
Correctly nineteen forty nine minus. One, okay how about this
one last time we had sustain Negative, boy this is
unbelievable and a very different economy back. Then nineteen thirty
minus two point seven, prices nineteen thirty one eight point,
nine negative thirty, two ten point, three thirty, three five point.
(37:28):
Two this is the last time we had a major
drop in prices as measured by THE cpi probably not
something we want to go back.
Speaker 2 (37:34):
To that's The Great.
Speaker 3 (37:34):
Depression so you, know let me do one more here
before we wrap it, up and it's it's one of
the ones THAT i, said this is probably one people
would know about their own, situation but it's so, political
and it is do you expect to lose your job
in the next twelve?
Speaker 2 (37:47):
Months?
Speaker 3 (37:48):
Now that seems like a pretty decent question to. Me
but right before the, election the three month moving average
on this had had this at seventeen percent of people
answering thought that they were going to lose their job
in the next twelve. Months, now the unemployment rate is under.
FIVE i suppose you could lose your job and find
one right, away so that would count in. There but
(38:09):
you have a lot more job quitters than you have
job firings in this. Economy but miraculously it goes up
on election day by ten percentage points from round seventeen
to around twenty. SEVEN i, mean do you think because
of the election everything's going to? Change the economy is
not as political as everyone makes it out to, be.
Speaker 2 (38:33):
Especially.
Speaker 3 (38:34):
Stocks you, know stocks are made up of shareholders and
board of, directors that's job is to increase shareholder.
Speaker 1 (38:42):
Value one of the worst decisions anyone can make is
to buy or sell their stocks based on.
Speaker 3 (38:46):
Politics, yeah even if it's not your political party in.
Office you can dial down risk a little bit if you.
Want it makes you feel. Better but doing nothing has always.
Speaker 1 (38:56):
Been getting or you're getting completely, out is a terrible.
Decision doing nothing if you had a plan in, place
whoever is in, office whether you agree with them or,
not if the plan was sound, before it shouldn't require
a major change based on the political affiliation of whatever
the new.
Speaker 3 (39:12):
PRESS i feel like we talk about this a, lot
but we're going to have to keep talking about because
WE'RE i think the political environment is because of twenty
four hour news and your phone having all the news
right at your. FINGERTIPS i think people are more susceptible to,
this this whip, song and it's so easy for people
to move in and out of the market now it
didn't used to. BE i think it's affecting people's decisions
(39:33):
and the ease of doing doing that.
Speaker 1 (39:37):
Too it's too easy and it's a. Problem, Right but
take our last. Pause you're listening to Money, Sense kevin
And Brad, kirsten we'll be right. Back welcome back to the.
Show you're listening to the advisors Of Kristen Wealth Management,
Group Kevin kirsten And Brad. Kirsten wrapping up, Here brad
just going to go with go through the beyond the
news with you here and get your thoughts on some
of the headlines. Here broad And straw from Its april
(39:59):
clothes low On april eight through five to, seven THE
s AND p searchs thirteen percent four hundred and sixty
of the index components. Advancing of those, gainers ninety one
rallied more than twenty, percent including five, stocks which serves
more than forty percent of seen a lot of numbers
that Was aprily to the end of the month essitionally
(40:20):
go Through may, Seventh may, seventh so this one's a
little bit. Older but that's one of the positives about
this market from the low is the broad based nature
of what we've. Seen in, fact the advanced decline line
gives a little bit more of an indicator of the
market moving. Higher, typically when the advanced decline line hits
an all time, high the market's not far. Behind and
(40:41):
that has.
Speaker 2 (40:42):
HAPPENED i, mean that's a one month.
Speaker 3 (40:43):
Return and sometimes we get these inflection points when everything
feels so bad and we say something like, that like
the average rally off the bottom is fifteen, percent and
it seems. Ridiculous, well here you are with an UNUSUAL
v shape recovery where the one month return off of
this bottom was Twenty in.
Speaker 1 (41:01):
A Recent gallup, poll the stock, market the stock, market hold,
on let me go back. Here while the stock market
has outperformed real estate handily in THE us over the
last half, century in a Recent gallup, survey thirty seven
percent Of americans think real estate is the best long term,
investment compared to sixteen percent for.
Speaker 2 (41:17):
Stock, well that's like one.
Speaker 3 (41:18):
Of those after a big, year you survey people and
say how did THE s AND p five hundred do last?
Year and about a third of them say it's, negative
even when it's, positive even when they're. Investors so people don't.
Know they assume because they're not in real, estate it
must be. Great and that's you, Know, well and in
real estate is a great. Investment everyone should use that
as part of building their. Wealth but there's a couple
(41:38):
of things that get. Missed Number, one most people the
way they make money in real estate is because they're leveraging. It,
yeah they're putting twenty percent down and they're. Leveraging if
you did that on your own portfolio and average ten
percent a year in the stock.
Speaker 1 (41:49):
Market number, two nobody calculates how much money they put
in their house every. Year, yeah your stock. Portfolio you
don't have to write a check to fix the. Furnace, yeah,
okay so. Nobody nobody calculates the full cost of ownership
of a home as. Well it is a great investment
for a lot of, people but the numbers it's not even.
Speaker 3 (42:07):
Close, yeah you're not looking at net performance a lot
of times on that when you're looking at your, statement
even if you have cost of your investments or advisory,
fee you're looking at the net when you're looking at
that end of the year.
Speaker 2 (42:18):
Return. Correct, correct not buying.
Speaker 1 (42:20):
It even though THE s AND p is rallied significantly
from The april eighth low The American association Of Individual,
investors this is a survey we talk a lot on this.
Show the bears sentiment declined to fifty one point, five
but it is above fifty percent for a record going
back forty. Years for the eleventh straight, week people are
still more bearish than bullish on the overall.
Speaker 3 (42:43):
Market it's coaturinon indicator when that happens going forward higher
than expected returns net.
Speaker 1 (42:51):
Selling similar to the jump and bearishness scene across investor sentiment.
Surveys in recent, months The Charles Schwab Trading Activity, index
which tracks the amount of shares bought and sold by,
clients saw its biggest one month drop net selling Since
march of twenty twenty going Into. April so it's certainly
a positive. Sign comparing that.
Speaker 3 (43:08):
To the if there's ever a stock that seems like
it's a recession, proof especially in the short, term but.
Speaker 2 (43:14):
They all go.
Speaker 3 (43:15):
Down AND i don't understand why The Robin hoods and The,
schwabs these trading, platforms Tdumrior, trade all those trading. Platforms
when the market is going, haywire they buying and, selling
they have to be increasing the. Revenue and yet just,
indiscriminately everyone is selling every stock even though you know what's,
coming which is they're going to have a great.
Speaker 1 (43:34):
Quarter right call this The doge. Effect Brad Ditching, washington D.
C active home listings In WASHINGTON dc metro area increase
twenty five point one percent year on year In, april
the largest increase since twenty, fifteen and far higher twenty.
Fifteen it was about right Before trump was. Elected, again
far higher than the fourteen point two percent increase on
(43:55):
a nationwide. Basis interesting that nationwide are up fourteen point two,
Percent so that's that's a good thing for.
Speaker 3 (44:04):
Prices, yeah we were saying it would take a little
bit of a drop in interest, rates but eventually if
interest rates don't, drop people finally throw in the towel and, say,
WELL i was waiting till interest rate drop to, move
but Now i'm just going to do.
Speaker 1 (44:16):
It how about welcome to the real. World on college,
graduates in twenty twenty, five the average pre tax income
of those college graduates with a job was sixty eight,
thousand four hundred thirty two percent less than the one
hundred and one, thousand five hundred they said they thought
(44:36):
they would make when.
Speaker 2 (44:37):
Survey oh this is what they thought they're going to
make versus what they're actually. Making, yep, yep.
Speaker 1 (44:40):
Yep so what to major? In what not to major?
IN i mean this is kind of. Obvious college graduates
to manage are in foreign languages and general social. Sciences
have the lowest annual saturies within five years of their.
Graduation this compares with the highest majors right, now computer
science computer engineering is all most one hundred percent. Higher
(45:01):
it's interesting, THOUGH ai with computer science and computer, engineering
especially at the low, level might be you, know taking
taking a byte.
Speaker 2 (45:10):
Out of, that out of that.
Speaker 3 (45:11):
Salary, yeah in the years to, Come, yeah if you're
gonna definitely have to be majoring in things on how
to make businesses more efficient with USING ai and be
AN ai expert if you want to get that first.
Speaker 2 (45:23):
Job that's.
Speaker 1 (45:24):
Right, so you, know looking, overall as we go into
the summer, Here, brad you, know we talked in previous
shows about seeing a lot of similarities not only with
THE covid cycle but also the twenty eighteen. Cycle here
we are now at this, Point april eighth is the,
low so we're a month roughly a month and three
(45:44):
weeks in both of those rallies saw new all time
highs in four four months and six, months well five
months FOR covid, Respectively and certainly wouldn't expect to, say,
oh there's all clear and no more, volatility because even
THAT covid sell off and corresponding recovery had two different
ten percent selloffs later on in the.
Speaker 2 (46:05):
Year well one happened In.
Speaker 3 (46:08):
June you had a thousand point down nowaday and a
ten percent sell off in about a four day. Period
that was right Around. June and so here here you.
Were you, know your bottom FOR covid Was march twenty.
Third you thought you were, Fine you're up twenty five,
percent and then you give up ten and then you
rally again to finally make that all time. High from
the headlines AROUND covid were kind of similar to what
we're seeing, now but WITH covid it was reopening vaccines
(46:32):
all those. Others i'll wait Till i'll wait till the economists back.
Open i'll wait till we have a vaccine and we're
gonna hear that around the tears about. Tears i'll wait
till the till the trade war's. Over i'll wait till
the tariffs are, lower and the market's not going to.
Care it's forward looking. Now the scale ON covid was much.
Greater it was a thirty five percent. Downside so it
only stands to reason that those those aftershocks in the overall.
(46:54):
MARKET i mean twenty twenty ended up being a great,
year but those after shocks were a little bit, bigger
more than ten percent two different times later. On BUT
i would anticipate we'd have some aftershocks here in the
s AND p five, hundred BUT i think it's going
to be more along the lines of that five to
seven percent range would be what the after shocks after
we had that big downturn In march And.
Speaker 2 (47:16):
April, YEAH i.
Speaker 3 (47:17):
Think you've got The trump theater that will see that
and come out and whether it's get a deal done
quicker so they can have a news conference on it
or have maybe some some countries have a further pause
once we get to the ninety, day knowing that they
need a little bit of support of the.
Speaker 1 (47:35):
Market AND i think that the individual investor will swoop
in and buy those dips if when that. Happens you,
know it's interesting to look at the surveys that a
lot of the surveys we talked, about it was the
individual investors that came in and bought The april eighth,
low and it was the institutional, investors the hedge funds that were.
Selling so it's. INTERESTING i often say that investors never
(47:56):
learned their. Lesson but the last couple of sell offs we've,
had there's Been may you're buying.
Speaker 3 (48:00):
And all the doomsdayers were the billionaires that bringing out ON,
tv and the individual investors were the ones with the.
Inflows we're holding Stead, yeah so that's interesting and encouraging to.
See thanks for listening. Everyone we'll talk to you next.
Speaker 4 (48:12):
Week 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
(48:32):
AT lpl dot com and their website Is kirstenwealth dot.
Com 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
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