Kersten Wealth Management Group - Money Sense 8-30-25

Episode Transcript

Speaker 1 (00:00):
Hello, and welcome to Money Central, listening to the advisors
of Kirsten Wealth Management Group, Kevin Kirsten and Brad Kirston.
Happy to be with you today. Brad I mentioned in
a previous show all the boxes that we were looking
to check for twenty twenty five in terms of really
in terms of concerns on the overall market, and I
think we went into the year, I think the tariff

(00:22):
discussion was just a little bit more broad and a
little bit more pronounced than maybe we would have thought.
But certainly tariffs going into the year were a concern.
You had interest rates as a concern. You had a
potential slow down in the economy as a concern, you
have jobs as a concern, tax cut bill that might
not get done in time as a concern. And even

(00:43):
in this earning season, you know, because that's always a concern,
and that's kind of goes one for one with the
economy as well. But earning season, what are the effects
going to be, if any, on tariffs? And this week
I think we we cleared another hurdle, checked another box
in that we have the largest company in the world,
large company, the United States stock market report pretty decent earnings.

(01:06):
It did go down a little bit, but it's one
of these things where it's I think it's really concerned, uh,
not concerning, really encouraging when you see an earnings report
from from a company like Nvidia and not a recognition
by yourself. How about that I gotta do that. Uh.
And you see the reaction, which is a little bit down,
but then you also see the broad market doing pretty

(01:29):
well along with it, so and that kind of goes
along with, you know, the idea that this this rally
is broadening out a little bit. But I mean they shrug,
I'll shrug a little bit at some of these tech
earnings and saying that they're disappointing. If you're expected to
grow by fifty one percent uh year over year and
you're you're coming in in line, how is it a

(01:49):
disappointment the pe because it's just expectations. I understand expects.
But the returns of these tech stocks is fully justify
fed by the earnings going up by the same or more.
Most of these companies have gotten cheaper over the last
three years. Yeah, but it's not about that. It's about
the market seeing a leveling off, a plateauing of the

(02:15):
growth yeah, seventy five percent turns into fifty, turns into thirty,
turns into normal return. Absolutely, And by the way, Nvidia
is not even really down that much today, But I
just think it's encouraging that it didn't take everything with it,
didn't take everything with it, and so I love to
see that in the overall market. This is now eight
percent of the US stock market. And yet if you're
diversified and you have some other areas of the market

(02:37):
other than tech, if you have some mid caps and
you have some small caps, and you have some international
or even other chip companies which are doing well today,
and it's really you know, there's there's kind of two
things going on in this market at the moment. You
have the S and P five hundred, which is rallied
tremendously off those tariff lows, and I'll get back to
checking the boxes here in a second. But then you
also have other areas of the market. And I think

(03:01):
it's a really hard thing to figure out right now
because the S and P is three years in a row,
we averaged one down year out of every four. Okay,
you have three really good years in a row, you know,
on the double digit years in a row. You have
it at an all time high or or at or

(03:23):
near an all time high. And on one hand, you
might say, okay, and we've talked about this, and especially
in the short term, you a little bit overdue for
a correction. But you feel like, and the baseball analogies
are always out there, it's is it the seventh inning,
eighth inning of a nine inning game on the S
and P five hundred before there's another setback, you know,

(03:45):
like what happened in twenty eighteen or twenty twenty two.
But then I feel like, on the other hand, you
have small caps. For example, small caps hit their peak
in July of twenty twenty one. This is four plus
years later. And as we know from a charting perspective,
when you have a market that churns around for four

(04:07):
years and finally makes a high, it's not the end
of the story. Typically that's the beginning. So you have
small caps right there at that breakout point where they
would be finally erasing four years of sideways markets. You
have international and emerging markets just in the last six
months breaking out above their two thousand and seven He

(04:31):
said that right two thousand and seven levels eighteen years
of sideways action for international merging. So I feel like
there's this, yeah, it's push and pull, Like there's a
lot of chunks of the market that look like they're
poised to be breaking out, but the S and P
that's the only part where you're kind of like, is
this long in the sure? But let me continue on

(04:51):
the baseball analogy. They could all be in the eighth
inning of a game, but International is in the fifth
game of one hundred and sixty two game season, and
small Caps are in the thirtieth game of one hundred
and sixty two game season, and large Caps are in
the eightieth game of one hundred and sixty two game season.
So you're gonna take a pause and you're gonna start
the new next game in a month, and it's gonna

(05:12):
last for a while. I think that's the most encouraging
thing going on right now, is the fact that as
much as you might want to be a little bit
skeptical of the SMP and the levels that it currently sits,
I'm looking at these other areas and if I didn't
know anything about the S and P five hundred and
I just looked at those charts, they look like charts
that are set to break out and go to go

(05:33):
to new highs yep, and continue. Yeah. So that's the
tough thing right now. Yeah, because yeah, because you can't
fall in love with the thesis that things are overvalued.
I have a couple things that I was hearing, watched
a couple online podcasts, and people are falling in love
with these people that have been calling recessions for a decade.
And those people are screaming loud. And even Tucker has

(05:55):
this guy on and twenty minutes of the two hours
we'll spent on the financial markets, and I want to
spend a little time about what this guy is talking about,
because he's be embarrassed since two thousand and two. Well,
you missed out on a little bit. You can't fall
in love with what you're talking about and then just
go to your grave with it even when you get
these things. Let's go back to checking the boxes here

(06:15):
for a second. Brad. We mentioned tariff's big scare in February,
March and April twenty percent sell off more than that
on the way back up, and certainly diminishing responses from
any new tariff announcements. I mean, I think Trump just
announced something additional on India, and there was no market

(06:37):
response whatsoever, so we've put that aside. In fact, I'm
finally now starting to see some reports and I'm surprised
by this. The CBO just revised the budgeting based on
tariffs coming in and what that would mean over the
next ten years. And LPL has something that I wanted
to read to talk about that potential for getting the

(06:58):
budget in line as a rest of tariffs. So we've
moved that, We've moved beyond that. We I think we
were now moved beyond. I mean, we only have we
have two more quarters of reporting left in the year,
but the first two quarters of earnings have been great
the economy, while the plateau part might apply to the
economy as well, just like you said with in videoing,

(07:20):
but still growing even the scares that we've had on
jobs numbers, I mean, we're still coming off of a
extremely low base. Then the last thing would be stop
me if I'm missing something. But the Federal Reserve and
interest rates, and certainly some of these earnings as well.
We mentioned in Nvidia, but the Federal Reserve in interest rates,
and we did have the big Jackson Hole meeting where

(07:42):
the Fed basically came out, and I can't imagine they're
not cutting in September after the speech that Pole gave,
so they certainly might not be lowering rates as much
as was originally expected. But I do think if they
get the FED funds rate down to three three and
a half, and it certainly the original expectations was it

(08:03):
was going to go down into the twos, I don't
think that's going to happen anymore. But still net positive
for the overall market, net stimulative for the overall market.
And what are we really left with? I mean, I know,
and I'm going to talk about the seasonality for September
because September seasonality stinks. It does, But where's the scare?
I mean, I, by the way, by its very definition,

(08:25):
whatever the scare is, it has to be something you're
not prepared. We're not prepared for, so it definitely could
happen well, So, but where's the scare in September? Is
it geopolitical? Is it Trump flexing his muscles on China
and tariffs a little bit? Because I think everything's so
good he can it could be maybe the market's not
expecting that, but I think probably what the market's not expecting.

(08:46):
And if this doesn't happen, I think you got to
flip the switch and be extremely bullish for the next
six months. And that is is the market pricing in.
I fed a September seventeenth FED rate cut, and all
of your returns are going to get front and loaded,
and the day of or the day after, sell the news.
The market sells the news, and you have a two
week period of weakness. That's that's definitely possible because no

(09:09):
one's talking about that, and it has to be something
that no one is talking about to be the surprise.
If everybody's talking about it, it's not a surprise. Well,
I'll tell you one thing that I know would be
a concern for a lot of Democrats, especially Democrats who
are in on CNBC, which there's a lot of them,
is the fact that the stock market could care less

(09:30):
about the back and forth and Trump firing. You know,
this woman lied, this FED governor lied on her mortgage
application is a crime, which is a crime, and basically
said that a second home was her primary residence to
get a better interest rate. Market doesn't care. In fact,
I texted you the headline it was a pre market headline.

(09:52):
In fact, almost every chiron said that the market had
sold off because Trump was recommending fire this person, and
everything on CNBC until the open for two straight hours
was can't believe you did this. The market's going to
sell off. At the time, here's the headline. And by
the way, at this time, the SMP pre market was

(10:12):
down three points, which is zero point zero five percent.
And here's the headline. Stock futures fall as Trump escalates
attack on FED independence zero point zero five. Yeah, this
is like half of a tenth. This is the that's
grade point average of the guys in animal house, zero

(10:34):
point zero. So the market does not care about that.
I don't care if he says. I mean, here's the
thing too. This woman who was a FED governor, she
does this, and obviously there's due process and an investigation.
She lawyers up. Even if Trump wants to fire a
lot of these people, it ends up taking months, if

(10:56):
not years, to finally get him out of there. And
like the thing with Powell, if he tried to fire
fire Powell, Pole would sue. He'd still be the FED
chair while the lawsuit's going on. And oh, by the way,
he's out anyway, next year yes, why why bother fire?
So the market doesn't care about that, okay at all?
And I don't care what anybody says. They talk about

(11:16):
how FED independence is the most important thing. There's too
many checks and balances. Okay, the market does not care.
They're already isn't fed it independence? The market are already political.
So s Marckett doesn't care what Trump says about the FED. Yeah,
it doesn't. It does not care what Trump says about
the FED. It doesn't care if he tries to fire him.

(11:37):
It doesn't care. And the reason you're bringing it up
is they're telling us that the market cares. Correct, but
the market doesn't care. The market does not care. So
let's let's go into September and the and the seasonality
a little bit here, Brad. I mean, we did have
a positive September last year, a good a good September
last year, so this is not perfect, but it is
historically the worst month of the year for stocks, and

(12:00):
this is typically coming out of a couple of good
months in the summer. Historically, especially June and July are
some pretty good ones. But September is the worst month
for stocks over the last seventy five years. Average gain
for September is minus zero point seven percent, making it
the worst performing month for stocks out of all twelve.
When September finishes in the red, the average loss is

(12:23):
three point eight, so it's not guaranteed to be down,
but if it's down, the average is three point eight
on the downside. This compares to the average gain in
when September is higher as three point two percent. So
the S ANDP five hund is only finished higher in
the month during one out of the last five years,
so that was last year, and over that period of time,

(12:46):
the average decline in September was only one point four percent.
Fewer than half of September's returns of the last seventy
five years have been positive, so a lot of other
months are in that seventy to eighty percent range, whereas
September is basically a coin flip or a little worse.
Since nineteen fifty, the S and P five hundred is
only positive in September forty four percent of the time.

(13:08):
February is the next worst month when it comes to
just positivity not necessarily returns, and that's at fifty four percent.
So but when you look at September, the trend is
your friend. As we alluded to earlier, the seasonal data
represents the typical climate for stocks, but not the overall weather.
Currently for the S and P five hundred, it's been

(13:29):
blue skies and record highs for the overall market when
accounting for momentum and trend, which is important context for
September being historically a bad month. September does it look
so bad when the S and P five hundred is
above its two hundred day, which it is right now
going into September? The average return is positive one point
three and it's up sixty percent of the time. So

(13:51):
what's going on? You look at one of the worst
Septembers we ever had two thousand and eight. Two thousand
and two is another bad one, nine to eleven two
thousand and one is another bad one. Those skew the numbers.
But in all of those years, Brad, the market was
weak all year, right, twenty twenty two was a week
September market was week was for the first ten month year. Yeah,

(14:12):
so you know, take that a little bit of grain
of salt. September could bring us a correction. But when
you're in a positive trend like we are for the market.
It's certainly a buying opportunity, like we've been talking about.
So when you look at the average September price decline
a four point two percent, when the index is below
the two hundred day, it's a minus four and the

(14:33):
September is only up fifteen percent of the time. So
that's that's even more powerful, I think than the overall numbers,
is to look at where what the trend is in
the moment. If you're going in where the market has
struggled all year long and we're under that two hundred
day average price, you're probably not putting a floor in
in September. In that envirus, it's not the environment we're

(14:54):
in now. It's one out of text year, it's one
out of ten, yeah, one out of ten positive. So
so certainly these are very important. This is a very
important context volatility for the year. We look at the
volatility index a lot of times, Brad, I'm not gonna
get into what that is, but typically the high point
for the year of volatility happens in September as well,

(15:15):
so that's something to pay attention to. So, you know,
I look at this September certainly historically it's the worst
month of the year. You can't ignore that, but you
also can't ignore the trend. And I think if we
looked at the last couple of times we had a
positive year last year as an example, twenty twenty three
is an example where the market was above its two

(15:37):
hundred day. You did get mild volatility in September and October,
but you didn't get the market that completely fall out
of bed like it did in twenty twenty two, like
it started in twenty eighteen, like it did in some
of these other bigger bear market years. Now, a month ago,
you know, we tapped the brakes on some of our

(15:58):
models with about five percent of adjustments. If we look
at kind of the area that we came out of
that we thought was a little frothy MidCap growth, call
it barely up over this one month. And one of
the reasons that it's okay just to sit and wait
in positions like that that you might be putting back
in the market is because of the yield that you're
getting and where bonds were at the time, and with

(16:19):
rates coming down that helps bonds a little bit. And
the anticipation is that the Fed's gonna cut rates will
probably move ahead of that. They really already start have
started to over the last couple of weeks, so not surprising.
Every single bond asset class if you look at every
subcategory is positive over the last month. The average is
one point three percent, a few better, a few worse,
but you can't find one that's that's not not at

(16:41):
least one percent over the last month. Whereas if you
look at the sectors over the last month, three or negative,
three or flat, and you have a few like tech
kind of pushing everything forward to give you a one
month return on the S and B five hundred and
one point five percent point being if a month ago
the breaks like we did in one of our models,

(17:02):
you've missed out on nothing. And it's okay just to
be patient with those dollars that might be your dry
powder to buy a dip. Let's take our first pause. Brad,
you're listening to Money Scents, Brad and Kevin. Kirsten will
be right back and welcome back. You're listening to advisers
of Kristen Wealth Management Group. Brad and Kevin here with
you this morning. Kevin. When we're not here at the office,
I'm listening to podcast NonStop most of them financially related,

(17:24):
and a lot of times I'm trying to get a
little flavor for both bullish and bearish. In fact, I
probably listened to more bearish people because I do want
to have some perspective. Why are they so bearish? Am
I missing something? I don't want to be in an
echo chamber of all bulls. I want to hear both sides.
So this week I'm going to talk about kind of
two sides. One that I thought was going to be bullish,

(17:44):
and the guests that they had on were somewhat negative.
But there there's always this revisionist history, this short sightedness
to what we've already been through that is baffling to me.
So the person that was on said that we really
haven't had a recept since two thousand and eight, that
even COVID, everything just bounced back so quick. And I

(18:06):
think that's pretty shortsighted for COVID, even because to not
think that COVID was a generational disruption to everything is
completely forgetting and rewriting history for what happened during COVID.
Just because the stock market bounces back in five months
does not mean that there was not just a complete

(18:27):
overhaul of everything for years. So there's a few things
that I wanted to keep reminding people of about how
ridiculous COVID was. We had. So twenty twenty March or
twenty twenty, everything gets shut down, Okay, La La California.
La in particular, did not open their restaurants until January

(18:50):
of twenty one, and when they did, it was outdoor
only with the you know, fifty percent capacity and six
feet everything. January two, twenty one, everyone else opened up
their the inside of the restaurants and lifted the six
feet mandate, mostly with restaurants March of twenty one. So
we went an entire year where you couldn't even go

(19:12):
into a restaurant and have it looked normal. And people
forget this. The mass mandate for everything major around the
United States, and some places still kept it on. The
mass mandate didn't get lifted. And the main one you
would feel is the airlines April of twenty two. So
for twenty five months we were walking around with masks

(19:32):
and getting on planes with mask and here we are
just a couple of years after that, and everyone's like, oh, yeah,
that was a little blip, a little blip twenty five
months of having to leave the house with a mask,
and everyone acts like, oh, just because the stock market rebounded,
everything was fine. And the same thing with employment. Everyone
acts like the employment was normal. Five months later, it wasn't.
It was not normal for a long, long time. I

(19:54):
went on a vacation twentieth year anniversary in June of
twenty one, and I remember thinking how nice everyone was
being to us, and I even said something to the
hotel staff, this is the nicest hotel staff ever. They're like, well,
they're just happy to be back to work. This's the
first week we're back open. It was over a year
later and there was the first week they were back open,

(20:15):
and everyone just acts like, oh, yeah, COVID doesn't count
because it was so quick. It definitely counts. And so
I was thinking about this, what would you say the
market reaction is to a recession? Okay, the stock mark
reaction is a twenty percent downturn, right or something morettle
bit more? Yeah, a little bit more. So here we
have going backwards. We had one this year. Twenty twenty
two had twenty six percent, COVID had thirty five percent.

(20:38):
In twenty eighteen had twenty six years three market reactions
that are the same as a recession. Now, the only
one that probably was was there's probably two. I mean
you could call COVID that twenty twenty two was you
priced everything in bonds, had their worst year ever, stocks
took over. I mean, that's where the old well, I
don't know who's the quote, what's the old addage? The

(21:00):
stock market has successfully predicted nine out of the last
five recessions, and that's what the market did in the
last If we had, if we really had no definitional recessions,
the market predicted for the last zero. Or you could
say maybe COVID's the only one, so it predicted four
of the last I think personally for most people, though,
job losses is the real part of it, right, well,

(21:20):
that would be, But also, how do you feel like
I think if you're losing twenty five percent in your
four oh one k, I think it feels like a
recession to you. Yeah, And if it takes two and
a half years to get back to your all time high,
it probably feels like that. And for most people that
was the case because if you had bonds in the
portfolio and they took three years and your stocks took
two years. Then for most people it was two and

(21:41):
a half years to get back to your high point.
That feels like a recession. And so I just think
that everyone forgets so quickly, even April. Now people are
forgetting how painful that was and how hard it was
to buy that dip because everyone was telling you this
time it's different. But they're always telling you that, and
the next one will be the same way, and the
next one be the same way. But to act like

(22:02):
we haven't had that, we have been. This market has
just been the luckiest market ever, and you just had
to buy the market and do nothing complete. There was
plenty of reasons for people to bail and never get
back in and miss out on great times in the market.
And that's also what's happening if if you listen to podcasts,
like I was mentioning the guest that Tucker had on,

(22:24):
So Tucker has this guest on. And because I'm watching
a lot of financial stuff on just regular YouTube, watch
the Bloomberg originals, I watch a lot of things that
are just related to our business documentary type of things.
Of course, the system is going to pull out a
clip for me, twenty minute clip of Tucker's last guest

(22:45):
that is talking nothing but financial stuff. Well, to go
and look at the whole thing. It was two hours
long and only twenty minute of its financial. But my
first reaction is who is this guy? I've never heard
of him before. So, as it turns out, he's a
university he's a Cornell professor, but he's a department of
chemistry and chemical biology. And here he is going on
for twenty two minutes about what he thinks about the

(23:07):
stock market's current current valuation. Well, he's actually written some
papers on the stock market, even though as David okay, yeah,
so okay, to see if you recognize him, yea, yeah, no, no,
I've never heard of him either. So he wrote he
wrote various papers about how he thinks that we're in
a catastrophe. And he says catastrophe to to to Tucker
a couple of times, and Tucker just sits there, Oh,

(23:31):
that's such an irresponsible word, because what is he says?
We're on the verge of a catastrophic economic crisis? Was
the quote he starting a catastrophe? I mean, was it?
Was it? I mean, I know a lot of people
ourselves who lived through eight We didn't die. Yeah, like
people are still okay, Like, what's a catastrophe that's like

(23:54):
a meteor hitting earth. I don't really think that. Here's
the problem with all these He started calling this and
he and Tucker starts the whole thing off about I'm
start throwing around armageddon and catastrophe. You lose me. I agree,
And that's why I'm starting to look stuff up when
I'm listening to this. Tucker starts it off. He says,
you know you famously called famously I've never heard of
this person. He famously called the two thousand and eight

(24:15):
financial crisis. And the guy's first sentences, Yeah, I called
that in twenty and o two. Oh at O two,
you called the eight crisis. Wow. Spot on. If I
get a twenty year window, I'll call it crisis too. Yeah.
In the next twenty whears, we're gonna have one, and
it's gonna be something nobody thought of. Yeah. Yeah. So
the problem with always being bearish is when the thing

(24:37):
happens that you called, If you don't flip the switch,
what's the point in any of it? Buy and holds
the best way to go then, And that's what a
lot of the bears when they're negative, when they just
negative for years and years and years, and then when
it's finally a moment happens where some of their negativity
is panned out. I have never ever seen one one

(25:00):
of them become positive and say, what's interesting about it
is many of them will reference pe ratios. A lot
of them will reference the Cape ratio. And what's interesting
about it is to a person, if that's their reason
that numbers too high, okay, fine, but when that number
comes down, they don't get positive. Right, If that's the

(25:23):
whole reason you're negative, if it resolves itself, why don't
you get positive? So you didn't even listen to this guy.
But that's exactly what his point was. When he got
to it. He says, people are looking at four year history.
I don't even think you should look at twenty year history.
I think you should look at one hundred and twenty
year history. The market determined if it's overvalued. I look

(25:43):
at twenty five different metrics, and the one that I
like is the Cape ratio. Now, if you just AI,
is cape ratio a good predictor of the market? Is
cape ratio good for predicting? Is what I wrote into
AI this what the AI produces. Okay, I'm not feeding
at any any negativity. The CAPE ratio is flawed because

(26:05):
it uses a decade of earnings data, fails to account
for changes in corporate accounting practices like share buybacks, doesn't
incorporate future growth prospects or innovation, and includes significant historical
dips like two thousand and eight to skew valuations, leading
to potentially misleading conclusions about the market's true over or undervaluation. Okay,
The main point it wants to make is that future

(26:27):
growth through innovation, technology advancements, productivity gains are not accounting for.
That's the whole point why the market has changed and
why you can't look at one hundred and twenty year history.
One hundred and twenty year history, it was seventy five
percent railroads one hundred and twenty years ago, okay, and
zero and zero tech? Zero tech. So do you think
zero for railroads from nineteen hundred as we're laying track

(26:48):
across the United States should be valued the same as
a tech company that could start today and be making
money tomorrow, and zero will be the same. Zero healthcare,
I believe too, right, there wouldn't have been No, I
don't know. There's no publicly traded healthcare is zero healthcare,
zero tech, And yet Tucker will have this guy. So
he said, I look at one hundred Toway, Oh that
makes sense? Really does it make sen? It doesn't make
sense at all. And there were other things in here

(27:10):
that I just it's so easy to fact check. At
one point, do you realize the lunacy of this one
hundred and fifty one hundred year history. So let's say
that you were just in a regular business environment, you
had nothing to do with the stock market, and you're
going to do a presentation to your CEO, and you
walked in with a bunch of slides from eighteen eighty. Yeah,

(27:30):
and you said, I am basing what we should do
with our company right now based on what happened in
eighteen eighties. I think it'll repeat, because I think it'll repeat. Now.
That gets you laughed out of the conference room. But
if somebody with stocks, it doesn't, which is strange to me. Yeah,

(27:52):
and to say, and he went on to talk about
personal spending and all of this other stuff. So you're
telling me I should compare my spending to that of
my great great grandfather spending. No, and earnings from today
should be the same as as this nineteen hundred stock mark.
I mean there weren't even that. I don't have the

(28:12):
sat right in front of me, but I'm pretty sure
the percentage of income spent on food one hundred years
ago was through the roof. Yeah, yeah, and the other
that's one of the big efficiencies. He was making a
couple other points that I want to point out. Okay,
He says that the only reason the stock mark from
eighty one to ninety nine did what it did was
because falling interest rates. Well, from eighty one to eighty three,

(28:34):
interest rates went from seventeen to thirteen. Would you rather
have interest rates fall from seventeen to thirteen or do
what they've done over this last year, go from four
and a half to four. Okay, four and a half
to four is not as big, but I'd rather have
low rates. Interest rates went up from ninety five to
ninety nine, so it's not the whole time, no, yeah, right,
And it's in a period of time where we had
hyper growth rates from ninety five to ninety nine. So

(28:57):
I just don't let yourself watch things like this and
not No, he wants to go that out based in fact,
he wants to go that far back. For most of
the forties and fifties, interest rates went up as well. Yeah,
and it was a good time to invest. Yes, So
that's you can't do that. So the fact checking, though,
I want to do something, so I eventually listen or
watch the whole thing. The other ones that just give

(29:17):
me a couple examples of ones. It's just like, this
is so easy to look up and if anybody has
any common sense, So one of them, he says. The
most meaningful thing I thought he was going to ask
him about were universities, because he's a university professor, and
it's that I actually trust. So talking about admissions, talking
about the endowments, talking about everything that Trump's doing and

(29:38):
pulling pushing, the push and pull there with the spending. Fine,
this guy should be pretty much the expert. But he says,
he's talking about endowments. He says, I just looked this up.
Harvard's been spinning off revenue from their endowments since sixteen
fifty six. He says, sixteen fifty six. There was only
one stock trading in sixteen fifty six, the East India

(30:00):
Trading Company, it was not around in sixteen fifty six,
the university was. But if you just google, when did
Harvard start their endowment? Nineteen seventy four. So he's only
off by one hundred and twenty years on something that
is so simple to look up. One hundred You said sixteen,
he said sixteen fifty six. He's off by three hundred years.
He's off by three he's by three hundred years. You're right, Yeah,

(30:22):
so he's just off by three hundred years. Any And
to start the sentence, he says, I just looked this up.
What are you looking it up on? It's pretty easy
to find out when somebody started their endowment, takes one
little search. And so it's just I'm bringing it up
because there are people that will watch something like Tucker
and come out of this guest thinking we're in for
a catastrophic economic crisis. I can't invest until that's over with,

(30:45):
and even when it happens, I probably won't invest because look,
this guy told me not to invest. This chemistry professor
from Cornell said don't invest. And well, the funny thing
is the negativity sells. We know this, and it's what
people want to watch. It's what gets people excited. But
the ultimate irony around negativity is the extreme environment that

(31:07):
they're all portraying. What's funny is the people who have
a little bit more positive outlook on the United States
of America global economies. You can invest, you can make
money in markets. We know they're rewarded over time. But
what's interesting is the environment that some of these extremists

(31:28):
lay out on the downside. What's interesting is if it happened,
everybody's in the same boat anyway. Like, if what he's
saying happens, not only do the people who are positive
lose lose money, but actually he loses money too, because
the scenario they lay out is things like banks failing

(31:49):
and so so, where was your money? Was it in
a bank that failed, in bonds that failed? You say,
the government's going to fail because we've issued too much debt.
Did you own treasuries? Did you own money markets? No,
I don't own treasuries. I own money markets and CDs.
What do you think those buy? Right? Yeah, oh, I
didn't know my CD is backed by a treasury, of
course it is. Or they might say, well, I own yes,

(32:11):
money markets and CDs, and I'll do that until the
government starts paying down debt. Well, they're paying down debt
every month with tarifs. Well terift's are still bad. I
don't like that. That's not the way I wanted them
to pay a debt. Or or they'll say, well, I'm
gonna buy gold because when everything gets bad, I can
use my goal. Oh you can use your gol. So
in your scenario, we're gonna go back to the wild
wild West, and we're gonna just lop off a little

(32:31):
bit of the gold to pay for your You are, yeah,
like you really think that all the grocery stores are
out of business because those are publicly traded companies. Every
company that you do business with to support your daily
life goes out of business. And you're gonna be able
to walk down the street with a bar of gold.
What good is it? You could hit somebody with it,
that's about all. It's not worth anything. So what's weird

(32:53):
is the they use this as a reason to a
lot of times buy gold or buy certain things. But
the ultimate irony is the environment they're laying out. Even
they lose, bad for everything. It's bad for everything, and
I mean on a much smaller scale, Brad that happened
in two thousand and eight. Okay, you think about people

(33:16):
who are just invested in the market, Well, did you
do a bad loan? No? Did you overextend yourself on
your mortgage? No, I didn't have anything to do with that.
Did you go buy a bunch of bad mortgage backed securities. No,
I didn't have anything to do with that. I stayed
away from all that. I just invest in blue chip stocks.
And guess what happened. Everything went down. Everything went down.
So that's why it is completely meaningless to do these

(33:39):
market overvalued end of the world scenarios. If and when
we have our next scare and the market corrects twenty
or thirty or thirty five percent, fine, buy it. That's it.
That's it. It's that simple. And the people who are
doing this and it's not just this gentleman and it's

(34:00):
all over the place with the gold ads and talking
about you know, the well, the dollar is going to
obviously fail. Okay, if the dollar fails, your gold's worth
nothing because you just bought your goal in dollars. And
when you get all excited about the value of your
gold going up, what is the value of gold when
everyone prices it every day what's the value of it

(34:21):
in dollars three thousand whatever dollars? Yeah, oh no, no, no,
but I'm not exposed to the dollar. Oh, you're not
exchange it for your gold. Your gold is valued. In fact, actually,
if you look at the gold rally that we've had
the majority of the rally that we've had in gold,
if you if you're Japanese and you bought gold in yen,

(34:44):
you've made almost no money this year. So it's it
has everything to do with the currencies that everyone's afraid
of in the first place. So so you know, it's
you can't get caught up in those in those scare
tactics because they have lost people way more money than
they ever protected when they're finally right. I'm paying attention
to it a little bit more when it's a somebody's

(35:06):
been extremely bullish, who becomes extremely bearish, or vice versa.
But somebody's been bearished for twenty five years yea, and
never let me just repeat what I said. Those people
have lost individuals more money than they ever protected when
they were eventually right. Oh, I was eventually right, and
the market corrected fifty percent. And let's take a look

(35:28):
at the numbers. Oh wait, it went it went up
one hundred and fifty worse off exactly. So you have
to be very, very careful because, like we always say,
the negativity sells the being positive or just being overall positive.
You don't have to be like, oh, the market's gonna
go straight up every day. We know that's not true.
But if you just have a net tilt to being positive,

(35:49):
you're going to be rewarded over time. Take our next pause.
You're listening to money since Kevin and Brad Kristen will
be right back. Welcome back to the show. You're listening
to the advisors of Kristen Wealth Manageer Group. Kevin, Kristen
and Brad happy to be with you today, Brad. As
a reminder, we are professional financial advisors and our offices
are in Perrysburg. If you have any questions about anything
that we've talked about in the show, if you want

(36:10):
to set up a consultation to review your financial plan,
give us a call at four one nine eight seven
two zero zero sixty seven or check us out online
at Kirstenwealth dot com. So, if you think about what
we've been talking about, you're nervous about the market, you know,
you've you've read something that concerns you, or you're out
and you don't know a way back in. Give us

(36:31):
a call and we can. We can design a plan
to get you to the appropriate allocation to get you
back in. If you look at what we're going to
talk about upcoming, which is the tax plan and how
it affects investors. We're going to talk a little bit
about roth conversions. If that's a buzzword you've seen online.
Give us a call and we'll sit down and go
over and see if it makes sense for you. I'm
getting a lot of questions on the Trump bill that

(36:53):
went through the OBBA, and one of the things I
I just wann't want to reiterate on this show, Brad is,
for the most part, this was an extension of existing
tax cuts, and I think part of it is the
marketing of it. If they would have called it the
uh what was it? What was the original It was
called the Taxing Jobs Act, the seven call it. They

(37:13):
called it twenty seventeen Taxing Jobs Acts Extension Plan, right
or that. Yeah, no one would have said anything. There
were some new things, but a lot of the new
things that were put in were Trump campaign promises that
are going to expire and business related effect anyone exactly.
And what I find interesting though, is the assumption a
year ago at this time was Trump would lose, his

(37:36):
tax plan would go away. And one of the things
that we were hearing this time last year was you
need to run out and convert your whole ira or
to a wroth now, Yeah, because are going up because
Trump's gonna lose. So do it now while you still
have the chance. Right And by the way, even if
Trump had lost, I don't think that that is a
wise decision because even if taxes had gone up a

(37:59):
little bit, were they gonna go up for you? That
was the whole point. Were several shows if Kamala had won,
she probably would have only been around for four years
and then taxes would have went back down. Yeah, so
it did. It didn't make any sense to once again
a bunch of fear mongering to get people in the
door to say we'll help you with that. There are

(38:19):
situations where the wroth conversion makes sense, but in most cases,
brad people are already in the bracket where when they
start taking IRA distributions or when they start needing to
be required to take IRA distributions at age seventy three.
Most people are in the twelve percent bracket anyway. I

(38:41):
mean that's the bracket that you know it jumps to
twenty two. And if you're still working and thinking about it,
then you're probably in a higher bracket now, and therefore
so will your ROTH conversion versus where you're gonna be
at seventy three, seventy four or seventy five when you
required distributions are gonna start anyway, So for you to
do a WROTH now while you're still working and do
it in a high bracket when you know your required

(39:03):
distributions is are going to be a low bracket does
not make any sense at all. And yet everyone was
making these blanket statements last year that it's a done deal,
you have to do it, you should do it at
least with part or sometimes all. Well, all for some
people would have taken you up to the highest bracket.
I have two scenarios where of the Roth conversions makes sense,
both of them are someone who's not working. Okay, because

(39:26):
both both the scenarios I can think of, and I'm
doing multiple people in each of these scenarios. Okay, Okay,
first of all, not working, because when you're working, your
income's higher, you're gonna convert, you're gonna add to that,
you're going to jump up a bracket. The standard deduction
went higher. Of course, if you're over sixty five and
you're retired but you're not taking IRA distributions, it went

(39:48):
even higher, especially for married filing jointly, another thirteen thousand
dollars higher. So there's just shy of forty five thousand
dollars of your income it's going to fall under the
standard deduction. Therefore you're not taxed on it. So if
you look at that twelve percent bracket, okay, and you say,
you know, I have some headroom here, I have ten
twenty thirty thousand dollars where I'm still gonna pay twelve,

(40:09):
you can do it now. Chances are from that point,
chances are, when you're seventy three and you have to
take a required distribution, you're gonna be in the twelve anyway. Yeah.
So here you're front end loading the roth conversion to
max out twelve, but your RMD is gonna be twelve anyway,
So what are you doing. You're gonna be you're twelve
now and you're gonna be twelve, then all you're doing
is paying the tax early. You'll have a little bit
more flexibility when you get later in retirement with if

(40:32):
you need some extra money for long term care, whatever
it is. Hey, you have a one time expense. Now
I have a tax free source to take it from,
so I don't jump myself up. That's the reason. You're
really helping your kids more than anything. Now, if you
already have non retirement sources for those one time expenses,
it's also not very necessary. But if you have none
and everything's in an IRA, then topping out the twelve
brackup makes a little bit of sense for the one
time expenses later. Right the other the other group, because

(40:55):
then it jumps to twenty two, and then there's a
twenty four. The other group is the twenty four to
thirty two people, the twenty four to thirty two people.
It's a big jump. It's a big jump. It's eight percent.
If you have headroom in the twenty four percent bracket,
I don't really see a point of saying, well, I
have I will go room in the twenty two percent bracket.
I want to avoid the twenty four To me, that's negligible.

(41:15):
But if you're gonna jump to the thirty two when
you in either scenario, if when you start taking your
required distribution in age seventy three, you're gonna jump a bracket,
the Roth conversion should consider you should consider it. So
but many people, as I said last year, were we're
talking about individuals, you know, rush out, and I saw
so many saying do the whole thing. Yeah, so you're

(41:38):
gonna front end load thirty nine point six percent and
all in one year. There would never have been a
scenario where that's okay, right, I mean, you can do
it all in one year, You're you're you're losing half
of it. I don't care. If they said this in
the last year, you can do a Roth conversion, there
wouldn't have made It wouldn't have made any sense to
do it. Right. So here's the basic rule. This is
in the Wall Street Journal too. Here's what it makes sense,

(42:01):
all things considered, the tax rate on the dollars going
into the ROTH should be lower than the tax rate
on the IRA dollars expected it withdraw pretty simple formula,
pretty simple formulta. Yeah, but you know we have thirty
seven trillion of debt brad and we have to raise
taxes at some point they haven't. Maybe they've gone I mean,
look at the high bracket. Look at the average bracket's

(42:22):
gone down for forty years. So everyone says that, but
there's a couple of blips up. The trend is lower,
not higher. So yeah. Other thing to look at too
would be if you have a larger required distribution, you
want to do a roth and spread it out too,
because you could potentially have additional Medicare expenses. If you

(42:44):
have a giant required distribution, that kicks you up a
little bit on those what they call IRMA premiums for Medicare.
State taxes are part of this too. By the way,
the Iran owner state has an inheritance or a state tax.
A conversion could lower that, but also just the state
taxes on the withdrawal as well is something something to consider.

(43:05):
What about the heirs If the air is the spouse inheriting,
a wroth might reduce the widow's penalty because when you're
filing as a single person versus Mary, there is a
little bit of a penalty there. So if they have
more wroth dollars it could help. It could help a
widow or a widower. So, but a lot of times
it's fine if you want to help your children, but

(43:25):
you're in many cases I see those ross eventually go
to the children, Brad, And that's fine. I mean, there's
certainly you know nothing to you know, that's that's certainly
an admirable thing to want to do, is to have
your kids not have to worry about too much in taxes,
especially when the iras are going to have to come
out in ten years so and obviously during your lifetime

(43:45):
you'll have more time than that, So I mean that's
the big thing. I mean, we certainly saw some adjustments
to other things like charitable the salt deduction went up
for people making less than five hundred thousand, so your
state in local tax right offs if you make less
than five hundred thousand and got a little bit better.
A lot of these two and three year things, like
the sixty five hundred dollars additional deduction for people over

(44:09):
sixty five it's temporary, the no tax on tips temporary.
What else was in there. There's a lot of three
and four year things. Yeah, some of the I think
people think that a lot of the business deductions for
being able to kind of front end load and deduct
expenses all in one year are going to be things
that get taken away after a four years. So the

(44:29):
businesses I think are thinking, I better get my spending done.
And that's why a lot of the AI spending is
happening right now, because they can expense at all. And
so let's not let another administration get in there and
change the business taxes. So I think a lot of
businesses are thinking they have four years as well. Here's
a charitable item here, new limit for itemized charitable deductions.

(44:51):
You are disallowed a portion of reduction equal to a
half a percent of your adjusted gross income. So whatever
you give away to charity, if you made three hundred
thousand dollars, they're going to subtract fifteen hundred off of it.
So so that's another sort of penalty. Now, I don't
know why we're continuing to make giving to charity a
math more difficult. I'm not sure. But mentioned the additional

(45:14):
senior deduction, the sixty the extra sixty five hundred, I believe,
is that right? Right? Yes? It is? Yeah, And then
so that certainly gives people a little bit more space
on the ROTH conversion discussion too. But the Roth conversion
is a big buzzword out online, so I just always
want to maybe bring it up periodically on this show.
We do it for people. It's not perfect. It can

(45:36):
help you, but in most cases, too Brad, your benefit
of a Wroth conversion, you don't feel it right away. No, right,
you're gonna feel it a decade from now, a decade
from now when you have a one time expense and
you don't jump yourself up a bracket. But in most cases,
it's a I'm gonna pay twelve and later I'm gonna
pay twelve. It's it's it's not doing what you think

(45:56):
it's gonna do, which is, if I don't do it,
I'm missing out on this great opportunity. Now, the great
opportunity is the great opportunity if you to write a
giant check to the irs, that's the opportunity you're missing
out on if you don't do it. Tell your kids
and grandkids when they first get started in the world
and they're doing the four to oh one K do
the raw tharly, that's the great opportunity. Yeah, Because you're
in a little bracket already and you have thirty forty

(46:18):
years to accrue tax free earning. So let's take our
next pause talk a little bit about the advice you
should be giving your kids and grandkids and talking about
that first investment in the first retirement plan and the
proper thing to do. You're listening to the advisor Christon
Wealth Management Group. We'll be right back and welcome back.
You're listening to advisor to Kerston Wealth Management Group. Brad
and Kevin here with you this morning. Just a couple
of minutes left. Kevin, I think the advice that most

(46:41):
parents and grandparents should give to their young ones when
they're first investing is the advice Charlie Munger gave in
the late nineties during a shareholder meeting, and that was
the quote, is the first one hundred thousand is a
he says b word, but you gotta do it. Find
a way to get your hands on the first one
hundred thousand, even if it means walking everywhere. After that,

(47:04):
you can take your foot off the gas. And that's
the important thing. Is investing early. Now that's that's mid nineties,
late nineties, so that's probably the equivalent of two hundred
thousand investing early and getting the first one hundred or
two hundred thousand invested, and then you can start to
spend some money. Don't live beyond your means. Don't status jump.
You make your first job and now you're living like

(47:24):
somebody that's that's you're making one hundred and you're living
like somebody that's making two hundred. Don't do it. Everybody
is in this mindset that, especially the younger people, Oh,
I better travel for I have a kids and a family,
and they're spending more than they're even making, and they're
foregoing the first investment. The first investment right away is
the most important one. Investing in the retirement plan when
available is the most important one right away. And it

(47:47):
should be a wroth for one kay, It should be
a wroth till you're probably thirty five or forty years old.
You got to get that going early. The biggest benefit
for a wroth is time. Get it going at a
young age. It is extremely important to get that going
right away. Don't lose any of those matching contributions. Certainly
recommend that to your kids and grandkids as well. But
start with that roth contribution early in life, and then

(48:08):
when you start making more money, then you can switch
to pre text. Thanks for listening everyone, We'll talk to
you next 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

(48:32):
is Kirstenwealth 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

(48:53):
FINRA SIPC