Kersten Wealth Management Group - Money Sense 9-27-25

Episode Transcript

Speaker 1 (00:00):
Hello, and welcome to Money Central, listening to the advisors
of Kirsten Wealth Management Group, Kevin Kirsten and Brad Kurston.

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

Speaker 1 (00:07):
Brad, the market is starting a little bit of a correction.
We've had approximately what one hundred and fifty s and
P points shaved off, so it's about two percent from
the high the SMP a couple times intra day reached
six thousand, seven hundred, but didn't quite close there. But
we have We are down into the just under sixty

(00:27):
six hundred, and we've talked about this on previous shows.
Looking for a little bit of a short intermediate term
correction for a couple different reasons. Number one, we haven't
taken any pause or breath in the market advanced since
April and May. I'm not even sure if we've had
a three percent correction if I'm thinking of that right,
And so no real catalyst even in the current sell

(00:51):
off that we're having. You know, investors are looking for
different catalysts, maybe some of the words out of Chairman Powell,
maybe who knows what they're looking for. But when you
have a smaller correction three to five percent, it doesn't
always have to come with a major news.

Speaker 2 (01:07):
So not when it's like that, I think what you
end up with is you end up with people that
missed out in April, maybe thought it was going to
be something bigger, and they got out, and then they
they're buying the dip repeatedly, and you just run out.
You you exhaust the market of those those those buyers
that turn two percent corrections into to or just stop

(01:28):
those two percent corrections at two and so, yeah, could
just slip into a three four five for no reason whatsoever.
And I think that's your point is we don't need
we don't need a reason to go down five.

Speaker 1 (01:40):
Right, So three percent would take you to approximately sixty
five hundred on the S and P. We're under sixty
six hundred now, so we're not that far away from
a three percent correction. Five percent correction would take you
just under the fifty day moving average and approximately sixty
three fifty somewhere around there, and that would not be
out of the question. I mean, still looking for a

(02:02):
fourth quarter rally. I saw some statistics Brad when May, June, July, August,
and September, which have all now been positive. Uh, November's
never been negative. And October has had a couple of negatives,
so that would be maybe what you're looking for is
a little bit of volatility going into October, and there
has when all of those months have been positive in

(02:24):
any given calendar year.

Speaker 2 (02:26):
November has never been possible, well negatives and look for
I mean, if September is another positive month and October
starts off, good look out for the doomsday ers that say,
look what happened in nineteen eighty seven and h and
nineteen eighty seven the market was up a ton going
into the big crash, So you're gonna have you know,

(02:46):
you're gonna have people laying charts over this year and
over the last three years and saying, oh this looks
like nineteen eighty seven. You have it every year or
every other year, and so beware of that.

Speaker 1 (02:58):
But I only seven times have May, June, July, and August.
Excuse me, May, June, July, August and September been positive
all in a row. Last time was strangely enough, last year.
So we had nineteen fifty eight, nineteen eighty, then nine seventeen,
eighteen twenty four, so a lot in recent history sort
of bucking the long term historical trend of in particular

(03:22):
September being the worst month of the year. But when
all five of those months are positive, October still averages
a negative return. A couple of big negative October's in
that mix. In particular, twenty and eighteen was down six
point nine percent. Twenty twenty four last year was negative

(03:42):
in the month of October as well. Two thousand and
nine was negative in the month of October. But when
you look at November, the worst month was a two
percent gain. That was twenty eighteen, and not once has
there been a negative November. A couple of negative Decembers
when that happens. Going back both twenty twenty four and
twenty eighteen, the last time we had a long stretch

(04:05):
in the summer. Like I just mentioned that we're positive.
Both twenty eighteen twenty twenty four had pretty significant downdrafts.
In December. Twenty and eighteen, of course, was the biggest
one at nine point two percent. That's the last time
the FED was sort of arguing with Donald Trump on
whether or not to cut.

Speaker 2 (04:22):
And we had tariff talk happening at the same time. Now,
wars this time is a.

Speaker 1 (04:25):
Little bit different than twenty and eighteen because the FED
didn't cave and start cutting till the end of the year,
and this time around they cut in September. But when
you look at twenty twenty four also a two and
a half percent month on the downside, I don't really
remember December being that negative. I mean, for a for
a single month, two and a half percent is fairly significant.

Speaker 2 (04:44):
What year was that? That was last year? Oh okay,
I did not remember. When you're up, when you're up
twenty six, you know you can give up a couple
percent and nobody really notices. I want to make one
point about this market though, because I'm hearing this from
a lot of people, just they're anecdotal reason to be
negative and it is not what's really happening in the economy.
I'm hearing people say, well, my college graduate can't find

(05:07):
a job. Job market must be terrible. We had, we
had the jobs numbers that were bad, but the most
recent have been pretty good. Initial jobless claims this week
were expected to be two hundred and thirty five thousand
initial jobless claims people getting on unemployment. Previous was two
thirty two. It was less, it was two hundred and eighteen.
The GDP numbers exceeding expectations. Remember six months ago it

(05:30):
was supposed to be negative. It never was, And now
we're up to the third quarter estimate three point eight percent.
And a month ago the expectation was two point eight,
and then a week ago it was three point three,
and here comes in at three point eight. So a
growing economy. But aren't we all guilty of the anecdotal?
I mean, no, no, no, we all mean.

Speaker 1 (05:49):
I just heard you say in my office just the
other day that you were like driving down the road
and you look at all these houses that are going up,
in big houses, and you said, well, market must be good.
How could it be a recession if people are building
these giant houses. It's well, it's true, that's total.

Speaker 2 (06:03):
But the other anecdotal i'll hear is I can't sell
my house. This housing market must be bad. But you
can look at the national numbers and know that it's
not even. Just this week, new home sales were expected
to be six hundred and forty nine thousand. They were
eight hundred thousand. Okay, so not even close. And existing
home sales beat again. So existing home sales are supposed

(06:24):
to be just under four and they came in at
four million. It's that's not a recession. Okay. There, You
can look at recessionary indicators the end. They don't. They
don't just dip a little bit, They fall off a
cliff and all of the major things that would say
longer recession, not a market pricing in a recession like
we got earlier. They're all screaming green light, not even caution.

Speaker 1 (06:46):
I I hate to say it, because never, I never
worry about recessions because recessions don't especially in the business
we're in. Recessions don't bother me. Bear markets too.

Speaker 2 (06:57):
Yeah, Okay, so you can have a non session bear
market like twenty two. We really didn't have a recession
in twenty two, but the market priced in a bear market.

Speaker 1 (07:06):
And because by twenty eighteen was a non recession bear market,
twenty eleven was a non recession bear market. The market
has successfully anticipated nine out of the last five recessions.
And so people are You're right, people are worried about
the wrong thing. Yeah, they should be worried about market downturns,
and they're worried about some global recession that may not

(07:28):
affect their portfolio. The problem is it will probably affect
the reportfolio, but in the meantime, they aren't worried when
the market gets a little firm. I think we're a
little bit different. Obviously, we're financial advisors. We own our
own business. We're running our own business. A lot of
regular folks, I think, are out there worried about losing
their job, which we don't really think about. We think

(07:51):
about ups and downs in our business. We think about
ups and downs in the market. We think about the
possibility of downturns in the market and how to position clients.
But we don't typically have that fear that a lot
of regular Americans feel, which is I could lose my job.

Speaker 2 (08:06):
That's more of a recession. You're worried about my job.

Speaker 1 (08:12):
But I would say, in terms of what we're doing
on a day to day basis, I'm more worried about
a bear market, which many times can happen without a recession.
I mean, I would even argue when the dot com
bubble burst, and there was a lot of different things
that went on from two thousand to two thousand and two,
I think without nine to eleven and the Iraq War,

(08:34):
there may not have been a recession in that period
of time. But in two thousand through two thousand and one,
when nine to eleven happened, it was a full blown
bear market without a recession. There was no recession. The
recession started after nine to eleven. So to me, there's
another example of a lot of pain, a lot of pain.

(08:58):
And so I mean even looking at the Nasdaq today,
which is down more than the S and P five hundred.
So even people who loaded up too much on technology,
which has been great, might continue to be great, but
it's gonna be up more and it's gonna be down
more when.

Speaker 2 (09:12):
We have these corrections. I keep telling you know, we
just tap the brakes in third week of July on
our most aggressive technology position, and conversations that are you
don't like technology, We do. But technology for ten years
has rallied off of every bottom and if it led
the way in which it has, probably eight out of

(09:33):
every ten rallies in the market, it's gonna sell off more.
Whatever goes up the most is gonna sell off the most.
We just don't know what's gonna rally coming off those bottoms,
but it seems like every time it's technology. So it's
okay to lighten up. You're gonna get a sell off
and tackle sell off more. This week's a perfect example
of that. But you're probably gonna play Devil's advocate at this.

(09:54):
But the spending for businesses is going to continue to
drive the market for the next couple of years. And
I think it's a we were already going to get
it with AI spend and business spending and technology spending,
but you're getting across the board with business spending because
of the business sentiment that the tax cut plan that
has the one hundred percent expensing and the small business

(10:18):
incentives to spend money in the tax plan from from
June July is gonna It's going to accelerate all into
a couple of year period because I think all businesses
large and small are going to think they could take
this away, I better do it now. Any project that
was a on the fence type of project is happening,
and even the AI spend is going to all happen
in the next four years because they want to take

(10:39):
advantage of the tax plan and the tax deductions that
they can get for this spending. And so I think
that the the whether it was intended or not, the
Trump's going to get the benefit of all this ai
spend all in his term because of the way the
tax plans set up.

Speaker 1 (10:55):
And there's a gap to fill though on the government side,
because they've cut back on things like Biden's Inflation Reduction
Act and all, and the Chips Act and all those
investments that were potentially going to come from the government
and are not going to happen, or if it has,
or if they do come from the government. Trump's gonna
want a piece of the pie for the US tax payer.

Speaker 2 (11:14):
We'll think about that too. Everybody's saying that's a negative
that he's taking a piece of intel and potentially this
week the news he's gonna maybe take a piece if
a lithium company wants some government handouts. But is anybody
gonna come from a government handout if you knew that
the government handout was gonna come with They're also going
to take ten percent of your company. I'm not asking
for that, So yeah, I mean think about it like

(11:38):
a big brother or mom and dad. Hey, I need
a little help for my first house. Oh okay, that's fine,
but I'm going to own half of it if I
if I do the down payment, maybe I'll figure out
how to do it On my own.

Speaker 1 (11:48):
Yeah, the businesses can say no. Intel could have said Noah,
they don't have to do it. So the other thing
that I think is different, Brad, I think in a
positive way.

Speaker 2 (11:58):
I mean, obviously there's a lot of.

Speaker 1 (12:00):
Similarities to when Trump took office in twenty seventeen and
he was fighting with the Fed. He was putting tariffs
on the economy was doing pretty well, but the Fed
was actually increasing interest rates and was very stubborn in
twenty eighteen, which caused a twenty percent sell off in
the overall market in the fourth quarter of twenty eighteen.

(12:21):
And we're a little bit more ahead of that now
in terms of the Fed, even though Trump is still
fighting with Jerome Powell. I mean, the writing is on
the wall for a couple of cuts, at least one
more cut before the end of the year. And if
you look at the feds dot plot, which is their
prediction of where they'll be, we're talking about being somewhere
around three percent by the end of next year, and

(12:44):
being at three percent, I mean we're four percent today,
so that's four more. So that would be two or
three this year and another one or two next year
to get all the way down to the three percent range,
and I think that that's a net positive. Powell, when
he had a speech this excuse me last week when
they cut rates a quarter percent down to between four

(13:06):
and four and a quarter, talked about there being no
risk free path. Whether you cut or you don't cut,
you have issues. If you cut and you're too you know,
you're too late, you could they're.

Speaker 2 (13:17):
Gonna worry about inflation. If you don't cut, they're gonna
worry about what it does to job or they're in
this mode where they have to they've waited long enough
so they can cut, maybe back to back meetings, but
then they're going to be in a pause, cut, pause,
cut cycle because they don't want to go too far
and cause inflation. Even though everyone would argue that you
didn't cause inflation when when rates were zero, why would
it cause inflation now? Well, I think one of the.

Speaker 1 (13:38):
Things that was acknowledged to in this meeting is there
was these huge revisions to the jobs numbers going back,
and had the FED known that those revisions would have happened,
they would have been cutting in May and June.

Speaker 2 (13:51):
And that's why that's why people got fired. Everyone asks like, oh,
Trump just fired people because they were they were not
his people. There were people now doing their job. You
shouldn't have to have this many revisions. And if the revisions,
you know, I think there were people in the government
that are thinking, did you hold back information so that
Powell wouldn't cut because it would hurt Trump or hurt

(14:14):
the economy? I mean, could it be that. I don't know,
but they just got rid of those people. You're either
bad at your job or there was something bad happening.
Either way, you gotta go. And so I if you're
it's a point of position. You can fire whoever you want.

Speaker 1 (14:30):
Yeah, And because of those weak job numbers, Trump's appointee
Steven Miron wanted a half a percent cut and he
was the only one that supported a half a percent cut.
But that was interesting to see. But if you look
at what the market is pricing in the FED, the
Fed is saying that they're not going to get to
They're not going to get to three percent by the
end of next year. The Fed is saying somewhere between

(14:52):
three as low as three and a quarter as high
as three and a half by the end of next year.
The market is pricing in a lower funds by the
end next year just under three. So we'll see, you know,
whether those two numbers come closer together in the coming months.
And then the Fed anticipates continued rate cuts through twenty
twenty seven and then leveling off after that, whereas the

(15:14):
market is predicting that the Fed cuts rates more dramatically
and then raises rates. That's where the market is at
the moment, which I mean, it's it's hard to go
that far out into twenty twenty seven, but that's where
the market is at the moment. So it's net positive
to the economy, it's net positive to the overall market.

Speaker 2 (15:32):
You know.

Speaker 1 (15:32):
One of the things that we'll have to look at
is how does this affect mortgage rates. Initially, in the
first hour, we had the ten year treasure go under
four and just like in twenty twenty four, we had
rates moved down four point two.

Speaker 2 (15:44):
Today in the month below even be higher. It's just
under four point two. But you had mortgage rates and
the ten year moved before the rate first rate cut,
and then have kind of slowly moved up after. So
kind of the low point for rates this year, and
the low point for mortgages was that day or two
before the first rate cut, and then also way back

(16:06):
in April when all the turmoil was happening, you had
rates down a little bit. So who knows if this
is this the low point of the year. But if
the Fed keeps cutting, we're gonna see We're gonna see
all rates go down a little bit. I think the
market just needs to see that it's not just a
one and done that we're gonna cut a few more
times in the next six months.

Speaker 1 (16:23):
The home affordability index is still extremely high. I mean
when you look at the way they measure home affordability,
of course is price of the house plus what it
costs to own the house as well, and they're also
doing some comparisons against rent. But home affordability has come
down a little bit because the medium sales price of

(16:46):
a house has come down. The peak was about six
months ago, and it's come down a little bit because
home prices have come down and interest rates have come
down a little as well. But we are still we're
a twenty plus year high. I mean, the last time
we were anywhere near this level of affordability was back
in I guess you can look at two thousand and four,

(17:10):
two thousand and five, where we're still lower than that,
but that's about the last time we were this close.
The peak affordability was twenty and thirteen, interestingly enough, with
zero rates near zero and prices much lower than they
are today. But when you look at affordability versus the
thirty year mortgage, I mean something's got to give here.

(17:30):
I mean we either need to see dramatically lower prices
or dramatically lower rates, or somewhere in between, because the
affordability just is not there for regular people. Well, and
that's why you're seeing a record number of houses being
sold still for cash, because the cash deals typically don't

(17:51):
factor in the affordability because those people just have a
ton of money. But it will come into play at
some point. And when you look at this index and
you lay it over to of the thirty year mortgage,
I mean you would have to see number one, some
continued level of decrease in the value of homes, and
then to get to some level of equilibrium, you'd probably

(18:11):
need to see the thirty year mortgage rate into the
mid to load of mid fives.

Speaker 2 (18:18):
Well, I think to get to a level of equals,
I think one of the reasons we're a year away
from that, but it will happen. Is Powell's not the
Fed chief forever, and when Trump's guy gets in there,
if Pole hasn't already cut to a level that that
forces rates down and therefore forces long term mortgage rates down,
it's gonna happen. They're gonna do it in rapid succession.

(18:39):
They might even do a cut as soon as the
nominee gets in, and so it's going to happen. They
want to drive the economy forward, and so at that
point with the wind at the back, especially if it
comes with a mid term election sell off prior to that,
because I think it's late May early June that the
new point e is going to get in. If you
have any kind of dip in the market and then

(19:01):
you're gonna have a new Fed chief in that's going
to drive rates down, you've got to buy that dip
and buy that adjustment to what will be mortgage mortgage
rates for the back half of twenty twenty sets.

Speaker 1 (19:12):
Once again, will mortgage rates come down? If they cut,
will they come down? They're just gonna keep cutting until
they do. That's my point is they're just gonna keep going.
They're gonna drive rates down until you get there. Well,
I personally think that they would need more than rate cuts.
They would need to do some sort of Operation Twist
or QE where the FED is in there actually buying bonds.

Speaker 2 (19:32):
Again.

Speaker 1 (19:33):
The reality is when you look at when mortgage rates
were low, it had it had not that as much
to do with the actual level of the FED bunds rates. Yeah,
they would have to come in and do q E.

Speaker 2 (19:45):
Well, is that why we're pushing to have Fanny and
Freddie go public again and do an IPO so the
government can literally just tip the scales to pull everything down.

Speaker 1 (19:54):
Well, it would have to be not even necessarily q
it'd have to be more the Operation Twist where they're
eyeing and creating artificial demand for the ten.

Speaker 2 (20:04):
Year treasury, Yeah, to drive long term rates down.

Speaker 1 (20:07):
Yeah, and that that would be the way to bring
mortgages down is to buy just have the FED by
ten year treasury.

Speaker 2 (20:13):
So they're not immune from doing that sort of market manipulation.
And so if it doesn't any treasury close at four
seventeen today, yeah, So if it's not doesn't happen naturally,
it's they're going to do it. It's a it's a
you know, maybe we're nine months away at the longest
from that from that starting to happen. But taking our
first pause, we get back.

Speaker 1 (20:32):
I want to continue to talk about this push and
pull of because we're hearing a lot of talk is
it nineteen ninety nine or two thousand, is it nineteen
ninety five? And we're in the early inning still and
I saw a really good kind of set of bullet
points on the positive side. I want to talk about
maybe some of the things that concern us. There was
a headline out of Invidia this week that that I

(20:54):
think is a little bit concerning and maybe I would
have to have somebody smarter than me explain why in
Vidia did this to justify it, but does sound like
peak market type of information. So we take our next 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 Kirsten Wealth Management Group, Kevin Kirsten
and Brad Kirstin.

Speaker 2 (21:14):
Happy to be with you today, Brad.

Speaker 1 (21:17):
As a reminder to everyone out there, we are professional
financial advisors and our offices.

Speaker 2 (21:21):
Are in Perrysburg.

Speaker 1 (21:22):
Give us a call throughout the week if you want
to set up a consultation to review your financial plan.
Whether you're just getting started, well on your way to retirement,
or already in retirement, be happy to sit down with
you four one nine eight seven to two zero zero
sixty seven or check us out online at kirstenwealth dot com.
Headline is in Vidia to invest in open Ai and

(21:44):
open Ai will use the cash to buy in Vidia chips.
Yeah right, I mean you're going to talk about late
nineties bubble style. So in Nvidia is going to give
open Ai one hundred billion dollars and they're going to
use one hundred billion dollars to buy to buy in
Vidio chips. I mean, like I said, something needs to

(22:08):
be smarter than me on how this works.

Speaker 2 (22:10):
No, I get you, it's why does it sound? It
sounds weird? Because why do you need to do that
because they don't make any money for starters? Yeah, but
in video makes money and they don't, right, right, But
well they're getting all their money from private equity investors.
H and so in video is happy. But is that
drying up? Like have you exhausted real that or just

(22:31):
go public? But you're right, are we Are we creating
false demand? Is it? It feels like, you know, the
the government manipulating rates to do things. It feels a
little bit manipulative. It's like a shell game. Yeah.

Speaker 1 (22:43):
Right, So I see stuff like that, I get concerned.
But I did see searching for the bulls and don't
chase false alarms. And of course you see other things
you think, Okay, we're all right, We're all right when
we look at I mean, and I like the headline
here because I agree with this for the most part.
I mean, I try to be the appropriate amount of

(23:06):
bullish and not being overly bullish.

Speaker 2 (23:11):
Because you get you and I do this all the time.
Let me go find something that's perish. Let me go
find something this bullish. There's a little bit of truth
in both, and uh and and and somewhere in the
middle is the real truth.

Speaker 1 (23:20):
I mean, honestly, if I can keep my my personal
mindset at seventy five percent bullish twenty five percent bearish,
that's right where I should because that's what the market
does in terms of how often it has a down year. Yeah,
but I think what happens is people get themselves ninety
nine percent bullish or even sometimes ninety nine percent bearish,
But I love the headline here. One of the biggest

(23:40):
mistakes investors make with a secular growth theme like AI
is worrying too early about how it will end. Okay,
I I agree with that. Maybe that's you know, that's
maybe that's where I'm leaning.

Speaker 2 (23:52):
Okay, people are worried about that for the last three years,
and when they stop worrying about it is the end.
But that's not that's not where we are today.

Speaker 1 (23:59):
We need to watch for young flags, but history shows
that are usually more false alarms than fatal ones. Bull
markets and transformative themes like AI are built on exactly that,
climbing the wall of worry. Make no mistake, the AI
spect is a spectacular boom. It will become a bubble,
is it now or is it three years?

Speaker 2 (24:17):
An hours? At five years from now. That'd be like
saying in nineteen ninety six, the Internet's going to be
a bubble. Well, it was another two hundred percent later
in the market. Yep.

Speaker 1 (24:26):
When we talked about the dot com mania that consumed markets,
in the culture itself, and by nineteen ninety nine it
had gotten completely out of control. But it was the
entire decade of the nineties. And I even just went
back and look at the Nasdaq brad from nineteen ninety five,
the Nasdaq was at seven hundred and fifty and got
to over four thousand. Okay, if we go back five

(24:49):
years on the current Nasdaq, it was at ten thousand.
Now it's at twenty two thousand, and we did. We
talked a little bit about this on the previous show.
But that's that's not the same kind of bubble. Yeah,
I mean we that's not the same nas Deck.

Speaker 2 (25:01):
It was a Nasdaq with five out of twenty five
companies made money, and today they're the healthiest companies in
the world and trying to figure out what to do
with their cash. And you got companies like Nvidia throwing
it at private equity. So I want to get your
take on this.

Speaker 1 (25:15):
This is five reasons why this current cycle is fundamentally
stronger than the nineteen nineties. The economics are still rational.
You talk about spending, AI spending, capex is chasing real
demand where it wasn't. There was no real demand because
the Internet was no It was if you build it,
they will come, and it was a lot of hope yep.
So you know, if you look at where the demand

(25:39):
is and they're just filling that gap, whether it's any
of the megacap names, they're filling an actual demand for
AI spending the only irrational move.

Speaker 2 (25:50):
You know.

Speaker 1 (25:50):
Zuckerberg has his billion dollar engineer raids, which signals metas desperation. Otherwise,
hyperscalers are funding Capex with cash without destroying their margins.
That's another thing too, they're not.

Speaker 2 (26:02):
Doing it with They're not going into taken on debt,
taken on leverage to do so right.

Speaker 1 (26:08):
Number two, by the shortage and short the abundance the
industry when it comes to AI. There's still a shortage
of GPUs, high bandwidth memory, flash, critical power, electricity, turbines, transformers,
nuclear energy. There's still a shortage, So buy the shortage,
short the abundance. We haven't gotten too abundance yet on

(26:30):
this buildout, so we're not quite there yet. Number three,
which I think is the most important because this is
really what took us down in two thousand and eight, Brad.
This is cash driven, not credit driven. This boom has
been largely funded by cash. Credit has only just started
flowing into this space this year. Contrast that with the
dot com era, where late stage was fueled by IPO

(26:50):
capital and credit. Rising credit costs killed the party. The
bell ringer time Warner buying aol on credit in January
of two thousand, a deal that now ever made economic sense.

Speaker 2 (27:01):
So well, let's look at the last two major because
you can go to eight two and that financial crisis
was all leverage as well, whether it was the real
estate itself or the banks just taking on excess leverage.
So you've got the last two that were leveraged, and
so you can look right at that and even though
this is a different sector having its boom, there's no leverage.

(27:22):
There's no leverage involved, so it would be tough to
see something larger than a normal market correction happen at
this point.

Speaker 1 (27:29):
There's there's a final chart in here which we're we
can't show obviously on the podcast or radio, but it's
from Morgan Stanley and talks about how we've had two
big transformations in the last thirty years with capital expenditures,
certainly the dot com era, and actually you see a
boost here when we had the big shale boom for oil,

(27:50):
so you see a big capital expenditure boom. AI infrastructure
could be the third. But if you look at this chart, Brad,
in terms of total capital expense for the entire S
and P five hundred, we're still not even above the
shale spending and we're nowhere near the spending from the
dot com era. So it's kind of interesting to see.

Speaker 2 (28:10):
Set on a percentage based on the economic size or
the actual dollar cap x to the percentage of sales
for the S and P five Okay, okay, So that
that that's what you have to look at if we
were if we were under it dollar wise, it would
be h a long way to go. But yeah, that
that's a more accurate way to look at it.

Speaker 1 (28:28):
Yeah, so in looking at it, you you use a
dot common analogy, and it looks like we're more in
the early infrastructure phase as opposed to the late phase.
We haven't had that big moment in AI where we've
gone past the original build out and then you know
all the potential that comes.

Speaker 2 (28:47):
To see the who are the beneficiaries of it? And
I think there's going to be a couple of things
that happen over the next couple of years. One the
government has to get involved to for the back end,
and they started with there's news on that that this week,
with lithium being something that the government is going to
invest in and has to not only throw money at that,
but also has to throw money at the electric grid

(29:08):
and infrastructure for the utilities, so that if there's an
AI data center getting bilt in your backyard, it's not
all the residents around it that are going to have
to pay for it. They have to be follow that
up and do it quickly, and so the government needs
to be that's where they need to be spending their money.

Speaker 1 (29:23):
So possible catalysts coming up, and I agree, I agree
with all of these. Really, we're going to see accelerating
cloud revenues in the third quarter. We're going to see
more hyperscalar infrastructure deals, sovereign AI deals, We're going to
see more international money come into alternative intelligence. She saw
a big announcement this week from China and Ali Baba.

(29:46):
What will Apple do? I mean, Apple doesn't have much
in the AI space, and they're they're the eight hundred
bound garride.

Speaker 2 (29:51):
Rather they're late to pivot. Will unlike everyone else, will they.

Speaker 1 (29:54):
Go out and buy an open AI which they could?
Will they partner with Gemini, Google's Gemini, So we'll take
a look at that, and then what about the open
Ai IPO? Could that be the peak when open Ai
does their IPO could be as much as a trillion night.
We've had a few of those, you know, when Facebook
finally went public, it was a little bit of a

(30:14):
of a near term peak. When Ali Baba went public,
that was the twenty and fifteen sixteen peak, and then
we kind of went sideways for a while after that IPO.

Speaker 2 (30:25):
So yeah, that sometimes can mark the near term end.
It's not ever a they don't mark a bubble bursting,
but they can. We can flatline for a.

Speaker 1 (30:35):
While in the year two thousand, Cisco and Sun Microsystems
peaked before they before the bubble bursts, at one hundred
times forward earnings in Nvidia today is at thirty five times.
So there, you know, history never repeats, but oft in rhymes,
we're not quite there in terms of the year two thousand,
but certainly the signals you have to be careful of,
especially when you see that original story I looked at

(30:57):
and you kind of raise an eyebrown and say, okay,
explain to me what this means. When Nvidia is giving
a company who isn't a public company money to buy
their chips with their own money, and yet are they
going to somehow report that as earnings on their bottom line?

Speaker 2 (31:12):
You know, well, at least they're investing in something. When
when we see these companies that have to hire a
financial team to manage their cash just to get two
three four percent instead, then you've run out of good
ideas and that's a terrible place for a company to be.
And that's that's where Apple's been. That's where Apple's been,
and that's why their stock is underperform. Not a recommendation

(31:33):
to buy or sell any of these names we mentioned,
but they're the most important names in the market, so
we need to talk about them. But I definitely think
that you know, apple strategy has always been well, wait
for the rest of the companies to figure it out
and then we'll incorporate that into our phone after the fact,
and we'll see if they have some kind of big
announcement next year that certainly could be a catalyst to

(31:54):
push the market hire as well. So you know, we
see conflicting things. We have high valuation, but we have
low debt on the corporate side in this country, so
we don't have that two thousand and eight style credit
driven bubble. We have some high valuations like we had
in the year two thousand, but not as high backed

(32:16):
by real earnings. So I think that there's some push
and pull there, but you can't say it's nearly as
expensive as the year two thousand and you also can't say,
on the credit side of things, Brad, that we have
the debt concerns that we had in two thousand and eight.
So maybe the regular season is coming to an end
and we're just coming to the playoffs, just like the
baseball season. And sometimes these playoffs, especially for certain sports

(32:39):
like NBA and hockey, they go on forever. So we'll
see what inning we're in or what part of the
season we're in. But the transition is going to be
happening with a lot of these things with AI over
the next couple of years. And so I think there's
jobs that we haven't even don't even realize exist yet.
Well be it wouldn't be an entire market. And so
you and I were talking about jobs numbers, talk briefly

(33:00):
about it when we come back, because I think open
the number of open jobs is a little bit of
a backstop for the market. But I don't even think
we know where these open jobs are gonna become in
the next couple years, because I think there's gonna be
millions created by this AI boom. Let's take our next pause.
You're listening to the advisors of Kirston Wealth Management Group.
We'll be right back and welcome back. You're listening to

(33:21):
the advisors of Kirston Wealth Management Group, Brad Kirsten and
Kevin Kurston here with you. Kevin will talk a lot
about this current economy and jobs and if it still
has legs. And I think one of the things you
can look at is, because we have so much history
to look at is available jobs and this is really
a big, bigger macro thing. Are we going to be
in a more longer term slowdown. Well, when you look

(33:43):
at the job openings, of course there's more. There's more
people in the economy, so you do have to kind
of you can be in a trading range for a
while with number of job openings and then it gets
to a higher point and we're in a range there.
So what I'm pointing out is in two thousand we
got to about five million open jobs and then it
went down to about three, and then it went up

(34:04):
again to about five and seven and then went down
to about two million open jobs. With the bigger country,
you're going to always be at a higher point. It's
a higher high. And that's where we in two thousand
and nine through two thousand and eighteen, we went from
two to six five and a half. Okay, then we

(34:24):
dipped and then we went to twelve post COVID open jobs,
and now we've come down ever since. But I want
to make I want to make one other point, because
we have kind of steadily come down and been in
a range for the last year between seven and eight
and we're at the low point of that. When the
economy is shrinking, open jobs shrink, and so open jobs

(34:45):
from two thousand to two thousand and two went from
five million to two million. When we're expanding, it's going
from two to five. The next one was two to seven.
And when it's shrinking like it did in during COVID,
like it did in the dot bubble, bursting like it
did in the eight it's it's it's kind of a
leading indicator. We start to lose jobs and it goes down.

(35:06):
We're at a little bit of a of a of
a tipping point right now. We've come down from twelve,
which was ridiculous open jobs, down to seven, back up
to eight, and now back down to seven. I would
say the new kind of line in the sand that
we reached at the end of eighteen nineteen era pre COVID,
it is kind of a level that you would look

(35:28):
at and say, boy, if we went lower than that,
that would be concerning.

Speaker 1 (35:31):
And so I think that especially things in pre COVID.
We have three hundred and thirty million people in this country. Today,
we have three hundred and forty three million, so we have.

Speaker 2 (35:39):
More people, and we have the same number of open
jobs as a previous peak. I think that previous peak
needs to be our floor.

Speaker 1 (35:44):
And so but I will also say I think our
population might shrink this year. Yeah, I mean you can
definitely see Biden's immigration policies and the uptick and population.
I mean, this is the number of the chart I'm
looking at is so steady. And then in twenty twenty four,
our population jumped from three thirty four to three forty

(36:05):
two in one year. I think that we might see
that population go down a little bit, but still the trend.

Speaker 2 (36:11):
Is well I think there's something like two and a
half million people who have voluntarily deported so that they
can get on the fast track back in. So it
might just be a one year blip and then you
have more immigration the next year. But I do think
that that if you have a shrinking job a job
availability that employers don't have to pay more. You know,

(36:33):
when there's a lot of available jobs, you have to
pay more to get that person in the door. But
if you don't have to give a raise because there's
not a job for somebody to move to, if you
don't have to pay more to get the next new
employee in, then it is not a healthy economy because
then people don't have more money to spend to increase
their spending the following year. So I think we're at
that cusp. But if anything's going to change it it

(36:56):
is new jobs that don't even exist yet because of
this entire AI boom. And so the next year will
give us that answer, are we gonna stay at seven
million or grow? And if we grow, you'll probably hear
people who were bearish say, yeah, but we didn't know
AI was going to create that job because that job
didn't exist yet. That happens all the time, and I

(37:17):
think this era is not going to be any different.
So a year from now, we won't know until we
know if it starts to tick up the availability of jobs,
then you know wage increases are going to continue, and
you know a lot of other good things are going
to happen in the economy. The other thing we were
talking about in the other break and move on from
now we've got a lot about us is all of
these individual stocks, especially in the tech sector, that are

(37:38):
making headlines. And we're twenty four to seven on stock news,
Unlike you know, it's grown every year, and there's you know,
there are kids trading stocks. There are people that I
didn't even know that that have jobs where you would
think that they are busy all day long, and they're
asking me about their stock trading portfolio, And I think,

(38:01):
shouldn't you be performing surgery. Don't you have a job
where you're working all day long? Well, how can you
even the market's open from nine thirty to four you
work during that period, Well how are you trading? And
so here are all these people trading, and I think
it can And every time I'm saying the same thing
to them, which is all of the gambling analogies that
they're giving me should be a tell to them that

(38:23):
they shouldn't be doing it. Any stock can go to zero, okay,
the market cannot. So with your retirement dollars and not
your funny money, you shouldn't be thinking about individual stocks
at all. And that is one way that you can
ruin your retirement. Gambling can ruin your retirement. And most
if I said that to somebody, they think, oh, if.

Speaker 1 (38:41):
You start thinking, if you start thinking, should I double Downah.

Speaker 2 (38:45):
Should I roll the dice? Should I do something that
is the same as gambling, then you are gambling. And
I think if I say that to somebody that gambling
can ruin your retirement, they think, I'm not sitting down
at the slots hours on end. Well, a lot of
people do the gamble, but they're doing it with a
stock portfolio and makes them feel better. The reason makes
them feel better because the stock market's legitimate. Yes, but

(39:07):
any stock can go to CD.

Speaker 1 (39:08):
It feels sedy to go to the casino. Yeah, but
if I'm in the stock market, it legitimizes the gambling.

Speaker 2 (39:15):
Here's the difference. If you go to the casino and
you say, oh, I'm gonna have fun tonight. I'm gonna
lose one hundred dollars, No big deal. Oh I'm gonna
bet on sports. I'll bet five dollars, ten dollars. Oh
I lost a hundred, No big deal. How many people
are investing one hundred dollars in a stock? Almost no one.
So you're you're five, ten, twenty times more on what
you're investing, and if it doesn't work, you do it again.

(39:37):
And you don't know anything about these stocks. You only
know that they went up yesterday. And I'm gonna pile
in a day because you think that this momentum will
continue because you know somebody that you think knows something.
They nobody knows anything. Okay, any of these stocks can
go to zero. And I want to just point out
a little bit of history with it. Okay. Lehman Brothers

(39:58):
was a company. This is nineteen eighteen fifty. It was
the fourth largest investment firm in the world. Goldman, Sachs, Morgan, Stanley, Merrill,
then Lehman. It went to zero. Enron was a top
twenty company in the world. It went to zero. If
people worked for Enron, a lot of people had their
entire portfolio because they're like Enron can't go to zero. Oh,

(40:20):
it went to zero.

Speaker 1 (40:22):
Owens Corning locally went to zero. It's a stock now again.
But the original shareholders, yeah, went to zero.

Speaker 2 (40:29):
I mean smaller companies that people laugh about and think about,
like Blockbuster. Blackbuster was a stock. I mean, if you
liked renting videos, you probably thought that was a good stock.
Sears was the biggest company in the world in the
late sixties and early seventies. It was a dow component.
It went to zero. Kmart had two five hundred stores

(40:50):
at one point today. I didn't even know that they
had it. I looked it up. They have nine stores
ones in Guam Tour in the US Virgin Islands. But
Kmart went from two thousand and five hundred to nine.
I thought about Kmart because you and I both watched
the Martha Stewart documentary and I couldn't believe how recent
they had made this deal with her. They made the
deal in nineteen ninety seven and it ended in two
thousand and nine. I thought by two thousand and nine

(41:12):
Kmart was done because you didn't see any here locally.
But they're pretty much done now. But at one point,
when they're making deals with Martha Steort, You're like, oh,
that's a good retailer. When would that ever go to zero.
So there's all these stocks that people think it can't
go down, it can't go to zero. Any stock can

(41:33):
go to zero. Nine Dow components in the history of
the Dow have gone to zero, have gone bankrupt, and
some of them you think, oh, that's forever ago Well,
GM had a bankruptcy, Sears had a bankruptcy. Bethlehem Steele
was a Dow component until nineteen ninety seven and it
went bankrupt in two thousand and four years later. John's

(41:54):
Manville was a Dow component. It had a bankruptcy. Dow
Corning had had a bankercy and now since emerged. But
if you're in the old stock go to zero. Chrysler
was a Dow component, Okay, it didn't go to it
didn't have its bankruptcy when it was a Dow component.
But people look at stocks that are being talked about
or that are Dow components and think they're invincible. It happens, okay,

(42:18):
and it can happen to any company, even the biggest
companies in the world. And it's happened before it'll happen again.
I can come up with a scenario where any of
the five biggest companies in the world can go to zero.
You don't even need to come up with the scenario.
It just happened.

Speaker 1 (42:33):
It happens like no one could have come up with
the scenario where Seers goes out of business, okay, because
they couldn't even imagine the Internet.

Speaker 2 (42:39):
Yeah, they couldn't imagine that Amazon was just going to
deliver right to your house. They couldn't even imagine somethings
were delivering houses. The technology that's going to put the
today's company out of business, you can't comprehend it. Yeah,
it just it just yeah, it'll be most people can't
comprehend what AI it does right now. Think about what
it's going to do in ten years and so it'll
make a lot of companies go to zero. Stop gambling, okay,

(43:03):
you don't need a gamble, especially when you're retired, and
a lot of people start this stock gambling when they
retire because now they finally have time. And if you're
working and doing this, stop gambling. Just stop. It's by
the time you have enough money to have it really
hurt you really shouldn't be doing it, so stop doing it.

(43:24):
It's it. You don't know. You think you know something
because you watch TV. By the time it's on TV,
everything that they talked about is already priced in. What
you would have to know to have it go up
or down would have to be something in the future
that's gonna happen that no one's talking about yet, and
you can't know that.

Speaker 1 (43:40):
If you need the fix, put five bucks on Thursday
night football you call it a day.

Speaker 2 (43:45):
Yeah, that's it. Make it me a reasonable amount and
you're never gonna do you need five dollars on a
football game. You're never gonna do five dollars on a
stock no, So just get your fix that way. Yep.

Speaker 1 (43:54):
Absolutely, we can take our last pause. You're listening to
Money Sens Kevin and Brad Kirsten will be right back.
Welcome back to the show. You're listening to the advisors
of Kirsten Wealth Management Group, Kevin Kirsten and Brad Kirsten
quick planning idea for the end of the show. This
is more of a clarification. This came from the Secure
Act a couple of years ago and then the irs.
Typically when we have these big changes comes in and

(44:17):
has to clarify things. They've clarified the new beneficiary IRA rules.
Maybe talk about that in a future show, but they
have clarified one thing and that is the age fifty
and older catchup provisions, which there was some confusion and
they pushed it off. Originally, the secure X said, if
you're going to do the catchup provision after the age
of fifty, it has to go into a WROTH four

(44:39):
oh one k that part of it, so seventy five
hundred dollars this year. But they gave companies a little
bit of a reprieve because some companies they weren't ready.
They weren't ready they didn't have a WROTH option and
so they weren't ready to do that. And then the
other added thing that came a little bit more recently
was there's a super catchup, the super Ketchup super Ketchup

(45:02):
provision where from sixty to sixty three you can add
another four thousand, well you can get to eleven thousand,
two hundred and fifty. Now these are still phased out
for people making more than one hundred and forty five
thousand dollars.

Speaker 2 (45:17):
Is the regular catchup also phased out.

Speaker 1 (45:19):
So okay, let me just clarify a little bit here.
So the phase out is the ability to do it
pre tax. If you make less than one hundred and
forty five, you can still put it in pre tax.
If you make more than one hundred and forty five,
you have to put it into the wroth. Now, anybody
can put any and all of their four to one
contributions into a wroth, even your ketchup, that's your choice.

(45:41):
But if you make less than one hundred and forty
five thousand, you can go either way with it. If
you make more than one hundred and forty five thousand,
you have to put it in the wroth.

Speaker 2 (45:50):
Now you say have to With some of these four
to one k's, you're not even going to be given
a choice. It's just gonna happen for you. They're gonna
have it available, and it's gonna get moved over and
it could be I'm not sure, or if they're going
to look at your income or not.

Speaker 1 (46:02):
And so if you're making less than hundred forty five
thousand and you want the tax break, you'll still be
able to get that tax break. If you're making more
than one hundred and forty five thousand, you'll have to
take it as a wroth contribution. Now, if you're only
fifty years old and you have fifteen years to retirement,
still think it makes sense. Even though you're not getting
a tax benefit. I mean, seventy five hundred dollars, you're

(46:23):
going to build up, including compounding, you're gonna build up
well over one hundred thousand dollars in a wroth by
your age sixty five.

Speaker 2 (46:31):
A lot of people by that point you're married, filing
jointly income has you at at a level where you
can't make a wroth contribution on your own anyway, The
row four to one k is the only way to
do it, so you might as well. And it's not
a bad idea tax planning wise to have sources that
are non taxable and taxable into retirement. If your company
does not offer the wroth option, you're out of luck.

(46:53):
You actually won't be able to can't do you just
won't be able to do it. Or if you're over
those thresholds, if you're over.

Speaker 1 (46:57):
Those stressholds, income thresholds, and and you won't be able
to do it. More and more companies are offering it,
but you will not be able to do it at all.
And one thing I found interesting too is for the
self employed, this does not apply. This is only for
W two FIKA withholding individuals. So if you're self employed,
you have a solo or an individual four oh one K,

(47:19):
or if you've created your own four oh one K
for your small business, you will not be affected by this.
Your employees, if their W two, would be affected by it,
but you wouldn't be affected by this. So you could
still make a pre tax contribution with your catchup dollars.

Speaker 2 (47:34):
So that also means it doesn't affect your step contributions
that could have a catch up, your defined benefit and
contribution plans that might have catchups, all of those can
still go in as pre tax.

Speaker 1 (47:45):
So yeah, So I mean a lot of people, if
they're self employed, they like the pre tax to get
that savings. But I still think I mean, even if
you're self employed, I mean you could do it if
you want. I mean, you can open up a WROTH
component to your four oh one even if you're self employed.
But for the people who are working and you're making
over one hundred and forty five thousand dollars in a year,

(48:07):
I still think it makes sense. I wouldn't leave that
on the table, that option because most of those people
who are making more than that, and there's a little
bit of an overlap there, Brad, but they're making too
much to do a traditional WROTH contribution anyway.

Speaker 2 (48:20):
Right, So it's really your only way into a rock well, right,
and think about if you have that money and your
other option is to do a non retirement account, the
wroth's better. You're gonna grow tax deferd and have it
come out tax free. If you do a non retirement account,
the dividends of capital gains are taxed along the way,
and when you come out, you're gonna have more tax
on it. So it's still a better option until you've
maxed everything, yep. As long as you don't need the

(48:41):
money before age fifty nine and a half, the WROTH
option is better. 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

(49:01):
hundred eight seven five seventeen eighty six their email address
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

(49:22):
prior to investing. Securities are offered through LPL Financial member
Finra SIPC