Episode Transcript
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Speaker 1 (00:00):
Hello, and welcome to Money Central, listening to the advisors
of Kirsten Wealth Management Group, Kevin Kirsten and Dennis Kirsten.
Happy to be with you today as we are wrapping
up the month of November and going into the Thanksgiving weekend.
We got a few trading days left in the month
of November, and just like we called last week, Dennis,
I'm not sure if you were listening last week, but
(00:21):
Brad and I were talking about the seasonality of the
markets between now and the end of the year, but
also the seasonality of the month of November. And strangely enough,
the month of November historically has some volatility mid month,
which we got, and it also tends to hit a
bottom around November twentieth or November twenty first, which we
also saw. And now we've seen a nice little rally
(00:43):
in the last week. Kevin recovered the all time highs
quite yet, but things seem to be moving in the
right direction, and I was noticing a few things on
the chart. First of all, we have the S and
P five hundred up a little more than sixteen percent
on the year as we tape this show today, but
in noticing a little bit of a change and a
few things in the last one week, one month, and
three month, and that is the re emergence of healthcare
(01:07):
as an investment. Healthcare was one of the most the
poorest performing asset classes at sectors not asset classes, excuse me,
poorest performing sectors in the S and P five hundred
on the year. It is now up seventeen percent in
the last three months and seventeen percent year to date.
So some of that rally has come from a little
bit of broadening out of the overall market. Because if
(01:28):
you look at the tech space, the technology asset sector
I keep saying asset class technology sector over the last
one month is down three percent. That compares to healthcare
that's up almost nine And in the last three months,
tech is up seven while healthcare is up seventeen. So
there's some other areas outperforming tech in the last three
(01:49):
months as well, communications services up fourteen. So we're seeing
a little bit of broadening out into some other areas
of the overall market and that's certainly helping the value
side of the equation. And we're seeing small caps in
the last week as well, having a pretty good month
and a pretty good week, so.
Speaker 2 (02:11):
Healthy really small camps are influenced by interest rates more
than anything. And you've seen the interest rate on the
tenure now hovering right around four percent. Right last night
was like four point h one. And small camps tend
tomorrow more money, and the lower interest rates help small camps.
(02:33):
So there's a correlation there.
Speaker 1 (02:35):
And we did have some news this week. We had
a couple of Federal Reserve people that our voting members
come out and basically hint that they're leaning more towards
a cut. We went from only a thirty percent approximately
chance of a FED rate cut in terms of what
the market was pricing in about a week ago, and
(02:55):
it's up to ninety right now now. That makes me
nervous too, because if it's priced in, they better deliver. Yeah, okay,
but they probably will put some language in there in
the next couple of weeks when they have that next
meeting that they're gonna cut, and they may put things
on pause for a little while. But as Brad and
I have talked about on this show, Denny, there's no
(03:16):
question that whoever Trump puts in place next May when
Jerome Pole's term is up, is going to be someone
who's going to favor rate cuts, especially going into a
midterm election cycle.
Speaker 2 (03:27):
Landa's room right here on that is Kevin Hasselt yep.
Speaker 1 (03:31):
And he's the current what's his current title, White House
Economic Advisor, So yes, no, absolutely, And he's got a
level head. He's you know, people say, oh, he's just
a Trump guy, but you know when you hear him speak,
he certainly is not somebody that seems to He's got
a pretty level head. And so but also Trump's not
(03:51):
going to nominate anybody who doesn't want to cut rates aggressively.
So you know, maybe look at what the expectations are
on the FEDS dot plot by the end of next year.
But I think it's going to be it's not going
to be a straight line. I mean, my prediction certainly
is that the Fed's going to cut in December, markets
pricing in. They don't want to disappoint. But I wouldn't
(04:15):
put it out of the realm of possibility that that's
the last cut until Trump's new Fed jair gets in there.
And the estimate, by the way, is slightly under three
percent for the FED funds rate by the end of
next year. That's five rate cuts from here.
Speaker 2 (04:30):
Wow, the correlation between the ten year and the more
thirty year more youth rate. Isn't that still suppost be
one and a half percent?
Speaker 1 (04:40):
Yeah, and it's it's come in a little bit, but
it's still off compared to historic historic measures.
Speaker 2 (04:46):
Right. Well, I mean I think it's right around six
percent out of thirty year now, right, so it should
be about five and a half according.
Speaker 1 (04:53):
To that historical spread, exactly exactly so, but it was
much more extreme recently. It was two and a half
or three percent a year ago. So it's it's it's
come in a little bit. And you don't really have
to have interest rates dropped dramatically. You just need that
historical spread to get back to normal for rates to
(05:16):
come down. But you know, the long term fix for
what's going on in the housing market is we need
more houses. And the only way to incentivize building more
houses so we have more supply to meet the demand
is to deregulate, put incentives in there, put tax incentives
in there for builders to build houses, some of these
(05:37):
other ideas where we're just going to strong arm the
interest rate market to make housing more affordable. I hate
to break the news to Trump, but if we went
back down to three percent thirty year mortgage rates. It's
not gonna help anybody because the value of the house
is gonna go up by just as much and the
payment's gonna stay the same. Yeah, that's the only long
term solution is more houses.
Speaker 2 (05:58):
And maybe on federal lends opening up some of that.
There's a lot of firstly about that.
Speaker 1 (06:03):
There is in yeah, there is, But at the same time,
you look at things like a builder going out there
and building a spec house for example. That helps, Yeah,
but that's a huge risk for a builder, and not
a lot of builders want to do it. So what
sort of incentives could we put in place for a
builder to build a spec house? So there's another house
(06:26):
on the market, what could we create some sort of
low interest or no interest fund to say, if you
build a spec house, we're going to give you a
year or two of interest only or no interest that
incentivizes the builder to build. It has an expiration date
one year, two years. You have two years to sell
(06:46):
the house. If you don't, you're gonna pay the interest.
You need to incentivize people to build a house, because
when you think about that eight month, ten month, twelve
month period, it takes a builder to build a house.
That's a huge outlay of money for that builder, and
yet that's exactly what this housing market needs. Back to
the stock market a little bit. Here, we have another
(07:08):
good year for the market, and I do like this
summary that LPL put out in their research blog. Another
big up year with a sharp draw down. It certainly
is not unusual for the market to have a pretty
good sized draw down mid year. They posted this chart
and looking at the average draw down in all years
(07:31):
is minus fourteen point one percent. We nearly got to
twenty percent earlier this year in March and April. And
so when you look at the type of year that
we're finishing with, even though we had nearly a twenty
percent sell off mid year, this is not unusual. You
go back throughout history, you go back since nineteen eighty,
that average is minus fourteen point one on any given year.
(07:52):
That's positive years, negative years, the average injured year draw down.
Plus you have three or four on average five to
ten percent sell offs in the middle of that here,
So what.
Speaker 2 (08:03):
Were this last time from high to low? I don't
want to interrupt here what you were saying there, but
almost been drawn down this time, it was just shy it.
Speaker 1 (08:10):
Well, they have it. They have it at eighteen point nine,
LPL has it at eighteen point nine here, Denny.
Speaker 2 (08:16):
But in April for the tarah, Yeah.
Speaker 1 (08:19):
But I thought it was nineteen point nine. I could
be wrong, But the bottom line it was almost twenty
Yeah for the in when Trump first announceds tariff's correct,
So that was almost almost twenty percent. Even though the
market is up this year, we did have that nearly
twenty percent draw down in the March and April time period.
So mention the average drawdowns fourteen percent since nineteen eighty.
(08:42):
The SMP has averaged a ten point seven percent annualized
gain since nineteen eighty. So double digit intra your declines
are often with the double digit annual gains. So you
can have a double digit annual gain many in many cases.
And also so I have a double digit intra year decline,
It's certainly not unusual, and this year is no different.
(09:04):
If anything, the long stretches like we had since April,
seven plus months without a five percent correction, that's the
that's more unusual than it is to have a ten
or fifteen percent correction mid year.
Speaker 2 (09:17):
Well, he'll sad one yep.
Speaker 1 (09:19):
So another thing they put in this in this blog
piece is the fact that positive years certainly out number
negative years. We know that since nineteen fifty it's a
little over seventy two percent positive twenty eight percent negative.
But I'm also struck by when you go back since
nineteen fifty, in last seventy five years, sixteen of those
(09:42):
seventy five years than are up fifteen percent or more.
So the double not only is a positive year of
the norm, but a positive year greater than fifteen percent
is also the norm. And then I'm also struck by
how rare the down years are, in fact, since nineteen fifty,
twenty and twenty two, which is just recently, which was
(10:04):
a twenty percent calendar year loss for the overall SMP
five hundred, that was the what fifth worst year in
the last seventy five years for a calendar year, And
it's I think it's also encouraging because, Okay, if you're
an investor and you're looking at your risk tolerance and
you say, well I weathered through twenty twenty two, wasn't
(10:26):
really that big of a deal. Well, that's the fifth
worst year in seventy five years. So if you can
get through that. You could take a lot of volatility,
and a lot of people don't even remember it exactly.
But there's only two years down twenty five percent or
more in the last seventy five that's nineteen seventy four
in two thousand and eight. It's only three years down
between fifteen and twenty five percent, nineteen seventy three, two
(10:48):
and twenty two. And there's quite a few there's eight
minus five to minus fifteen's, but I would consider those
more on the mild side of the down year. But
if you look at all the negative years between minus
five and minus twenty five plus, that's only thirteen negative years.
So you're more likely to have a positive fifteen percent
(11:12):
or more at the count is sixteen in the last
seventy five years, than you are to have a negative
year at all.
Speaker 2 (11:17):
Yeah, so I have to be around for those years.
Absolutely A lot of time people will mail out during
mad years and they wait till the mark had calmed down,
means wait for you know a lot yep.
Speaker 1 (11:33):
Historically, the S and P. Five hundred has done as
done as positive. Excuse me, I mentioned that seventy three
percent of the time I'm reading here as I'm as
I'm thinking here, But if you look at three year
period so if you average the three year rolling periods
in that last seventy five years, your number goes up
to eighty five percent of the time you make money
(11:54):
instead of seventy two. Certainly, in a ten year period
since nineteen fifty, you're ninety two percent of the time
the market is positive. And that excludes dividends you throw
in your dividend yield. This is just the value of
the S and P five hundred. Throwing those dividen yields,
it looks a little bit better. So certainly those longer timeframes,
and I always think it's good at the end of
(12:15):
the year to kind of reset and see where you are.
But this year it's turning out to be regardless of
whatever the headlines might be. We had early in the year,
we had tariffs. We've had inflation and interest rate talk
all year long, whins the Fed gonna start cutting rates.
We had the tax extension of the Trump tax cuts,
which we're going to talk about a little bit later
(12:35):
in the show. We've had debates obviously within Congress of
what they're going to do with the healthcare credits, that
was one of the reasons we had the government shut
down the debate there so, but that's a lot of
the usual back and forth in Congress. Tariffs is a
(12:56):
fairly new thing each and each and every time Trump
has taken office.
Speaker 2 (12:59):
But that's in the Supreme Court right now, so we'll
see what happens there. Problem if they don't a lot,
right that happen.
Speaker 1 (13:07):
But I look at a year like this, I look
at a your like last year. Quite frankly, even a
year like twenty twenty two when the market was down,
and there's there's this instinct for people to say, for
investors to say, boy, isn't this market crazy? Isn't this unusual?
Whether it's when the market's going higher and trending higher
(13:29):
or when when they're in the middle of a correction,
like have you ever seen anything like this?
Speaker 2 (13:33):
Yeah?
Speaker 1 (13:33):
And you know what I would often say is yes,
I have, many many times. That's why we're so obsessed
at our firm on the historical side of the market,
because number one, I think it's I think it's comforting
to look at that historical and say, Okay, no, this
has happened before. But also I think the tendency is
to is to kind of overvalue the moment you're in.
(13:56):
We do it with elections, most important election of our lifetime.
We do it with markets. This is the most unusual
market in our lifetime. It's not. It isn't I mean,
and certainly this year is a perfect example of that.
Where you might think that that near twenty percent sell
often any was a big deal, and then you look
at history and you say, no, this has happened before
(14:18):
in the market has recovered.
Speaker 2 (14:20):
Well, I know you and Brad always say you look
at odds or probability, and when you have a period
of time like we have now with three fairly years,
are the odds slightly less positive going forward compared to
We just had the three year anniversary of the more
or less the bottom of the market in twenty two
(14:41):
October in October of twenty two. So when you look
at that and bottom now started moving higher October of
twenty two, one of the odds or the probability of
the next three years being menial. Just had the three
year anniversary of that, And yes, what the S and
P five hundred average you returned the last three years
(15:01):
twenty point five percent per year.
Speaker 1 (15:03):
And what did I mentioned in the last seventy five years,
your average return is ten point seven. So that's that's
a great point, Denny. When you bring up, how do
you tilt the odds in your favor? Yeah, okay, well
all periods ten point seven in the last seven seventy
five years. Yeah, but there three years ago, you bought
(15:24):
after the market had dropped from high to low twenty
seven percent from high to low twenty percent for the
calendar year, but twenty seven percent from high to low.
And look what happened. You tilted the odds in your
favor by buying low, and you turn what was an
average return in the last seventy five years of ten
point seven in the last three years, you doubled that.
Speaker 2 (15:45):
Yeah, so when you were fully invested with most people are.
Speaker 1 (15:49):
Not right, right, I understand that. But just looking at
the market and saying when it's down twenty seven percent
is now the time to buy kind of the wrong question. Because,
by the way, we're not even at the anniversary of
the three year low. So the anniversary of the three
year low was October mid October twenty twenty two.
Speaker 2 (16:07):
When we are what's today, It's November.
Speaker 1 (16:12):
But here's my point when people are trying to get
too cute, when they're buying in September when it's down
twenty one, or early October and it's down twenty two,
or mid October when it's down twenty seven, or mid November.
I'm talking three years ago, when it's down twenty and
it's rallied back a little bit. What's the mentality when
(16:33):
it's down twenty Well, it might drop a little bit
more when it's down twenty five. Oh, it might drop
a little bit more when it's down twenty seven, might
drop a little bit. You don't know.
Speaker 2 (16:42):
Zero good, somebody might say.
Speaker 1 (16:44):
And then it rallies back a month later. We're talking
November of twenty two. That's that three year anniversary. Well,
it rallied seven percent and now we're only down twenty.
Maybe I'll wait until it goes back to that low again. Well,
the investor that didn't wait has a three year average
in your return on the S and P of over
(17:04):
twenty percent. So deciding in that moment three years ago,
what day you're gonna invest or what day you're gonna
rebalance and reallocate some more money to stocks, getting that
day perfect doesn't matter, because you're looking at the three
year average that is not a perfect three year back
to the low day and the number is still really good. Yeah,
(17:28):
so you don't have to be perfect. Yeah, but what
month maybe slightly matter, but it probably is. But are
you going to be upset if you did twenty percent
per year over three years? And that's the point. And
so you know, I think that this year is shaping
up to be a good year, a year that certainly
has precedent. We've had years like this, We'll have years
(17:51):
like this again. And I think next year. We've often
talked on this show that there's a little bit of
push and pull. I think there's a lot of ECN positives.
The one big beautiful bill that Trump put in place
is going to put a lot of stimulus in the
economy next year. At some point next year, the Fed's
going to cut rates more aggressively. But we also have
(18:12):
a market that not maybe is on the higher end
of its valuation range, So that's something to be worried about.
We have tech companies spending money handover fist, which is
a stimulus to the economy. The earnings numbers that came
in the last quarter, which are in our market commentary
pretty good, So there's a little bit of push and pull.
(18:33):
Midterm election years historically bring a little bit more volatility.
That's something to be aware of and concerned with. So
it certainly isn't the slam dunk it was three years ago.
But we still have some positives. So let's take our
first pause and get to some of those positives when
we get back from the break, both on the earnings
front and how companies are doing, and also some of
(18:53):
the stimulus that's coming from that the extension of Trump's
tax cuts that happened this summer. You're listening to Money Scents.
Kevin and Dennis Kirsten will be right back. Welcome back
to the show. You're listening to the advisors of Kirsten
Wealth Management Group. Kevin Kirsten and Dennis Kirsten happy to
be with you today. As a reminder, we are professional
financial advisors and our offices are in Perrysburg. Give us
(19:14):
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, we'd be happy to sit down and
review things with you four one nine eight seven two
zero zero six seven or check us out online at
kirstenwealth dot com. You can find information about our firm there,
as well as things like our weekly market commentary, which
(19:35):
this week Dennis focuses on Corporate America cleared a very
high bar this earning season, and we saw some pretty
good numbers. I mean, you take away all the noise
that the stock market gets with the Fed interest rates,
Trump and his tariffs. The bottom line is our company's
making money. And if companies are making money, their stock
(20:00):
I can go higher. I mean, that certainly is the
bottom line. There S and P five hundred earnings per
share growth is tracking over thirteen percent for this quarter.
Ninety five percent of companies have reported, and they've cruised
passed the seven point four percent consensus. Revenue grew pretty well.
On top of that eight point four percent, it typically
strong two and a half percent above expectations, So we
(20:23):
said we had good, good earnings upside surprises. We're seven percent.
That matches the ten year average, and and so eighty
two percent of companies beat on earnings. The five year
average is only seventy eight, so that's a little bit
better than expected as well. Revenue on average was seventy
six percent beat versus the five year average of seventy percent.
(20:45):
Fastest earning growth came from tech, financials, and utilities.
Speaker 2 (20:50):
You mentioned revenue growth I was over eight percent. I'm
not sure if you mentioned that I was reading, but
all the numbers they exceeded. And we've really had a
multiple years in a row now were multiple quarters in
a row with very strong growth, where by double growth
for four or five quarters in a row. As far
as earning growth, going back to gosh, let's see you
(21:16):
here twenty five primarily twelve point nine to twelve point one,
thirteen point five, they were estimating seven point two from
the fourth quarter here, and we'll see some of them
made me driven a little bit by the tariff shutdown
or not the tariff, but the government government shut down,
(21:38):
you know that slowest things down a little bit. They
were estimating that will hurt aconomic growth in the fourth
quarter by about half maybe from instead of three maybe
one and a half, so that will hurt a little bit.
Speaker 1 (21:51):
Yeah, it's interesting. I mean, obviously, no surprise technology led
the way with earnings. Financials maybe a little bit of
a surprise there they're the second fastest earnings grower. And
how about utilities, there's been utilities historically has been the
defense for the overall market. But now utilities are kind
of attached at the hip with the AI build out
(22:13):
and the demand that we're going to see on the
on the grid here in the coming years. So utilities
interesting to see have become a little bit more of
a growth oriented sector as opposed to value, which it
has been historically.
Speaker 2 (22:27):
In our backyard. There's one a few miles from here
in Paris, Paris, the Meta face Danial Center, yep.
Speaker 1 (22:37):
And I'm looking at the earnings growth per share estimates
going into twenty twenty six. This next quarter, the fourth
quarter only seven point two percent growth estimate. So that's
nothing that that seems like a reasonable bar to leap over. Yeah,
but if once we get into the first quarter of
(22:57):
twenty six, so those earnings will start in April of
twenty sixth any boy, I tell you what, it's gonna
be tough, tougher. Eleven point seven twelve point sevent. These
are the percent earnings growth estimates twelve point seven twelve
point eight and the fourth quarter of twenty six the
estimate is a sixteen point five percent year on year,
(23:19):
so bars much higher after this quarter for earnings.
Speaker 2 (23:24):
Well, the I know we're in into the beautiful mill
here in a minute. But a lot of these tax
branks will start to be seen by people in their
paychecks when the deductions for taxes won't be less and
their home pay won't be more. And the feeling is
that won't be a stimulus, but people will they have
(23:45):
feeling like they have more money in their pot things
might be quote more affordable. You that's some word they're
throwing out there a lot, the affordability problem, and that
it is a problem out there. But the lower probably
sixty percent of tax payers from a percentage point of view,
(24:05):
and benefit the most from the from the mill.
Speaker 1 (24:08):
That's right. So hopefully that stimulus which we haven't really
seen from that one big beautiful bill first of the
year exactly. I mean, well, no, some of it is retroactive,
but some of the newer things, yeah, uh don't. I mean,
if you were paying whatever rate you were paying was
was locked in to January first, to twenty twenty five.
Speaker 2 (24:30):
But even when people knew their taxes early on, you know,
a lot of that there'll be more refunds.
Speaker 1 (24:35):
You're right, You're right, yeah, because it's retroactive. So for example,
if you've got the age sixty five extra six thousand
dollars deduction and everything else remain the same, you're going
to get a refund because you did all your withholdings
based on.
Speaker 2 (24:49):
Or your estimates from the following year won't be less
than right.
Speaker 1 (24:53):
So so you know that goes to what are some
of the positives I mentioned some of the things that
we're concerned about next year. It's a midterm election year.
Last two midterm election years, negative year for the stock market,
the last two three out of the last six negative markets,
a little pricey. We just went through earnings. Earnings are
(25:14):
going to be double digits next year. I mean, it's
pretty much baked in the cake. Even if we got
a little bit of a reduction, you're going to see
double digit earnings growth. We mentioned the fiscal side of
it with the One Big Beautiful Bill Act. So let's
get into that One Big Beautiful Bill Act, which we
talked a little bit on this show. But we're getting
to the end of the year and people are going
to start to do more planning, So let's get a
(25:36):
little bit more into it. One of the most significant
aspects is the permanent extension of the Trump individual tax
cuts that were due to expire at the end of
the year. These brackets will continue to be adjusted with
inflation over time. So not only are there extra deductions
and right off stenny in the bill, but the brackets
themselves stayed the same, but the income levels go up
(25:56):
a little bit, can and will continue to do so
with inflation.
Speaker 2 (26:00):
Right. One of the other things in there is the
salt deduction, the standard local taxes. And we'll just make
sure where I see where you are, Okay, sorry about that,
all right, make sure we're on the same page here.
Speaker 1 (26:15):
Yeah, So the state and local tax deduction right off,
get into that and what that means. It really only
applies to the people who itemize, which is a much
smaller number than it's ever been.
Speaker 2 (26:27):
Well that's who. Yeah, the house of the standard deduction,
well that was capped ten thousand dollars previously previously, and
that the new number there. Is that a permanent thing
or is that a four year thing? On that one?
Speaker 1 (26:44):
You know, I don't have that here, but it goes
from ten thousand to forty thousand. Oh, no, it is.
It is temporary twenty twenty five to twenty twenty nine. Okay, yeah,
so it goes from ten thousand to forty thousand. Now
keep in mind, let's look at the state and deduction, okay,
because the itemizers would be the biggest ride offs would
(27:04):
be interest on your mortgage. The state and local tax
right off added up, and you can do up to
forty thousand. Now, but there is an income phase out
for that. But property property tax is part of that.
State and local salt. That's that's part of it. So
think about I don't.
Speaker 2 (27:23):
Think Morgan applies to that.
Speaker 1 (27:24):
That's but it's an itemized deduction. I'm referring to itemized deduction, okay, okay,
So when you look at itemized deductions, there's a lot
of itemized deductions you could take, but in general, your
itemized deductions have to exceed your standard deduction to make
it worthwhile, which.
Speaker 2 (27:40):
Was greatly increased in the twenty seventeen correct.
Speaker 1 (27:43):
So your standard deduction is thirty one thousand, five hundred
for a married couple fifteen thou seven to fifty individually.
In addition, Trump put in if you're over sixty five,
you get an extra twelve thousand dollars for a married couple,
so that that takes you up to forty three thousand,
(28:03):
five hundred, and then the old additional write off for
over sixty five state, So actually the standard deduction for
a married couple over age sixty five going into next year,
and this is retroactive to the beginning of this year's
forty six seven hundred dollars.
Speaker 2 (28:22):
Which means your itemize.
Speaker 1 (28:24):
Your itemize have to be greater than that. So your
mortgage interest, your state and local taxes, and property combined,
and you're charitable all have to add up to more
than forty six thousand, seven hundred. Ye, or it's a
moot point. Yeah, you're going to be a standard at I.
Speaker 2 (28:39):
Don't know what the clack percent was or is, but
I believe before then I went into effect, about thirty
percent of class players were able to itemize. That was
at least unt and a half and it's probably only
about ten or fifteen percent now.
Speaker 1 (28:53):
Yeah, and even on that state and local tax right
off going up, there's an income phase out, so if
someone's in the top bracket, chances are your not getting
that forty thousand anyway. So for the vast majority of
our listeners. It's going to be a standard deduction, and
you'll get a little bit of a bump if you're
over the age of sixty five. But by the way,
(29:13):
that over age sixty five right off. That also has
an income phase out, and it's a that's a pretty
low income phase out. Actually it starts at one hundred
and fifty thousand on that phase out, so it's a
much lower income phase out than say the state and
local tax But the point is the tax cuts were extended.
In fact, they were added upon the standard deduction went
(29:34):
up the tax rates went up. I saw a study
that was done for next year. The average refund and
this isn't going to be everybody, but the average refund
is going to be approximately thirty five hundred dollars, and
that's stimulus right into the economy. Home equity interest is
capped at a seven hundred and fifty thousand dollars mortgage,
so that was in there as well.
Speaker 2 (29:54):
That's the same thing I think, isn't it. That's what
it was.
Speaker 1 (29:57):
Yeah, Yeah, Home equity loan interest deduction disallowed unless the
loan was used to improve the home. No clean vehicle
and energy credits for both individuals. And there's quite a
few things in here that are temporary. I mentioned that
six thousand dollars right off for over age sixty five.
That's only a four year right off. That was the compromise.
(30:18):
Trump's original goal was can we get Social Security be
tax free? That was one of his campaign promises. That
that was dead in the water. The compromise is, let's
give an extra write off to people over the age
of sixty five. Some of the other temporary items are
no tax on tips for the next four years up
to twenty five thousand, no tax on overtime up to
(30:39):
twelve thousand, five hundred, and the car Loan intrat deduction
is also something that he wanted to encourage people to
buy US manufactured cars. That's for the next four years.
But I mean to me, that's another one. I put
that in the bucket, Nenny, with the fifty year mortgage.
How much of a dent is your car loan entry
(31:00):
really going to make in your tax situation?
Speaker 2 (31:02):
Well, for one thing, how many paint blind and miles
in the first place?
Speaker 1 (31:07):
Exactly? You know so? And if you do, and let's
say you had a five percent car loan okay, and
you bought a fifty thousand dollars car, which is an
expensive car though becoming more and more than norm Okay,
we're talking about two to three thousand dollars of a
write off and and so I don't know, it's not
(31:28):
really I understand it was a campaign promise, so he
wanted it in there, But I don't think it's going
to move the needle on people buying US cars versus
non US cars. People are still going to buy the
cars they want to buy. So so permanent changes to
the charitable First of all, you can get one thousand
dollars for single filers, two thousand dollars for joint filers.
(31:50):
You don't have to itemize to get that charitable. So
if your charitable deductions are smaller and you you were
either looking at doing the qualified charitable distribution, if you're
over seventy and a half, you can do up to
two thousand dollars now for a married couple and still
take the standard deduction. Nice.
Speaker 2 (32:11):
Yeah, so there's a.
Speaker 1 (32:12):
Little wiggle room there to do some charitable and get
a write off even if you take the standard deduction.
So I think that's that's that's a good one. By
the way, speaking of the qualified charitable, which is the
distribution from your IRA, if you're over seventy and a half.
Speaker 2 (32:28):
Seventy three, well, no, it's seventy and eleven and a half.
Speaker 1 (32:31):
You can do it at seventy and a half. I
don't know what good it does you because you're not
required to take it with all, but you can do
it starting next year. So this one wasn't retroactive. Firms
are now required to put that on your ten ninety nine.
It used to be if you had a thirty thousand
dollars required distribution and you gave five thousand to charity,
(32:53):
you basically had to manually account for that when you
do your taxes. There was nothing on your ten ninety nine.
They are now creating a code for the qualified charitable,
which I think is making going to make people's lives
a lot easier.
Speaker 2 (33:06):
That don't mean for the here's talk return No.
Speaker 1 (33:08):
Twenty twenty six, Okay, companies technology wise didn't have time,
and I don't know if it's every company. I know. LPL,
who we were work with is not going to have
it on the ten ninety nines that come out in
two months, but it will be in future years accounted for.
So if you did a charitable in twenty twenty five,
and this is for any of our clients listening, to
(33:28):
still keep all those stubs in receipts and give it
to your tax person, but in future years it will
be accounted for on your ten nine years.
Speaker 2 (33:36):
We have a lot of clients that use that, yep,
and so a way to reduce their claxes on.
Speaker 1 (33:42):
The estate planning side. With the one big beautiful bill,
let's talk about wealth transfer on death. It's thirteen point
nine to nine million per person. So yeah, that was
set to decline to seven million.
Speaker 2 (33:54):
Yeah.
Speaker 1 (33:54):
So in terms of avoiding a state tax, that's the
amount of money each individual can have twenty eight.
Speaker 2 (34:00):
Million dollars fifteen. The new bill is.
Speaker 1 (34:04):
Going to fifteen excuse me, yeah, so thirty million. Yeah,
and you have to have more than thirty million, all right,
if you do, we'll talk about it right right. And
that is now index for inflation, which is nice to
a state tax rate's forty percent above that level.
Speaker 2 (34:20):
So so by the way, for those listeners that are
in Ohio, one is the Ohio state tax heavin, The
answer is zero and been that way for a lot
of years.
Speaker 1 (34:31):
So the last two items we have on So that
was some of the individual things. I think the big
ones are the extra sixty five deduction that people have
and I want to come back to, Well, let me
just do that right now. There's a phase out there
at around one hundred and fifty thousand on that sixty five.
So if you're married filing jointly, that's a twelve thousand
dollars right off. So that's two or three thousand dollars
(34:53):
for a lot of people. And there's some ways I
just add up, meeting with a client this week, how
do we get our income down in the coming years
so that we can get those deductions. Now there's a
push and pull here. We have people that are increasing
income and doing Wroth conversions, but now you have some
people on the other end, Well, can we decrease our
(35:15):
income so that we can qualify for more of these.
Speaker 2 (35:17):
Right Another thing is if you're over sixty five, you
have the Medicare part me in if you're in the
certain level.
Speaker 1 (35:24):
You have to pay. You have to pay attention to
those uh Medicare Premium uh IMA levels as well. But
if we're just talking about the sixty five. I had
a meeting with somebody and we're going to map it
out for future years because he had thirty thousand a
taxable interests at the bank CDs money markets, and then
he also had a fair amount of capital gains. So
(35:47):
on the taxable interest easy switch switch to tax free
do tax free municipal bonds get still a good level
of interest in those those certain those tax free unions
still pay a good level of interest. But your switching
to tax free interests. By the way, side, note you
mentioned irma tax free interest adds to your irma income
(36:08):
for Medicare, Yeah, but it takes it off for the
purposes of federal income tax. So that's one thing that
person can do. And then invest your after tax account,
your joint accounts, your trust accounts more in a more
tax efficient manner, whether you're buying individual stocks or ETFs,
staying away from mutual funds which split off capital gains,
and you can reduce your capital gains bill as well
(36:31):
to get that income level down. So two different things
you can do. If you have a lot of taxable interest,
you can bring it down so you qualify for more
of these tax write offs, or get your capital gains
down by investing in some indexes and individual stocks. So
we get back from the break, let's go to the
other side of the stimulus, which is tax breaks for
(36:51):
businesses and incentive programs, which might be that extra boost
the market and the economy needs next year. You're listening
to Money Sents Evan and Dennis Curston will be right back.
Welcome back to the show. You're listening to the advisors
of Kirsten Wealth Manage for group, Kevin Kirsten and Dennis Kirsten.
We're talking about the extension of Trump's tax cut. It
was called the One Big Beautiful Bill Act OBBA if
(37:13):
you're googling it, but it's kind of an absurd name,
but nonetheless it was the extension of his tax cuts
from twenty sixteen, and there were some additions on there,
some of which are only short term four year rite offs.
But we mentioned some of the things that at the
individual levels that you can do to take advantage of it.
(37:33):
And then as I mentioned, as we mentioned on previous shows,
still might make sense to look at that Roth conversion
if you're in the one of the lower brackets, especially
the twelve percent bracket. If there's any money you can
get out of your IRA and convert to your WROTH
and stay in that twelve percent bracket. I had mentioned
someone who was way above the twelve percent bracket and
some strategies to get yourself down. But you actually, I said,
(37:57):
somebody just asked me this. They said, well, you know,
on the on the on the wroth IRA, or how
do I structure my withdrawals? You know, you don't want
to have no income either. In some cases, uh, you
want to have some income in doing that wroth conversion
if you have wiggled room, especially in the twelve percent bracket,
can make sense. But let's move on to some of
(38:18):
the things that are more stimulative to the overall economy.
At the business level, Denny, So, tax breaks for businesses
were added, and some were made permanent. The qualified business
income deduction was made permanent, twenty percent deduction for pass
through income. In addition, the phase out amounts were increased.
The law also made permanent depreciation deductions for research and development.
(38:41):
I think that's a that's a big thing. If companies
can invest in their firms research through research and development
and get an additional tax rite off that it certainly
incentivizes that behavior. Capital gains exclusions for holders of qualified
small business stocks. Stock owners take advantage of this exclusion,
can take advantage of this exclusion. And there there's the
(39:04):
depreciation part of it. Am I am I missing this
here because I know that that was another big one
as well. Uh, the accelerated depreciation, which is going to.
Speaker 2 (39:11):
And greatly expense things right up front if they have
aal investment, right having to spread out the depreciation over
many years.
Speaker 1 (39:19):
And I mean you think about whether it's a more
service related business like ours, where you could go in
and say, you know, maybe we're going to overhaul the
computer system and you can get that upfront right off,
or maybe more capital intensive businesses that are going to
go out and buy data centers, data centers or big
heavy machinery and be able to depreciate and get an
(39:41):
accelerated write off. That incentivizes investment into the economy.
Speaker 2 (39:45):
And it's important for them to understand and made permanent.
Now that's kind of a loose word in a way,
but a lot of like this last bill had an
expiration day for the whole thing at the end of
this year, so right now it's permanent in the law.
It's pretty hard to change. That's not saying that you
know someone else's control that it wouldn't be change, but
(40:07):
a lot harder.
Speaker 1 (40:08):
That's right. So they've also extended the Opportunity Zone program
for investments in designated areas of the country. This now
runs for another ten years with special Rural area incentives
until twenty twenty three. This was created to incentivize investment
in rural areas thirty percent step up in tax basis
(40:28):
for investments in those opportunities the zones. We've seen some
areas get a lot of investment because of the tax
incentives that resulted. But I really think the big one
is the additional upfront depreciation expense that businesses can do
for major investments in their companies. I think that that's
(40:49):
a big that's a big thing that companies can do,
and that's a stimulus that goes right into the economy.
So I mentioned we have some tax breaks for businesses,
some some ways that they can have additional rite offs
next year. Then you take all of the additional rightofs
that are coming at the individual level, which will basically
(41:11):
we have stimulus checks going out next April and maybe
even sooner because we're going to see higher levels.
Speaker 2 (41:18):
Of refunds stimulus.
Speaker 1 (41:21):
I mean, if the average I think I saw the
average was thirty five hundred, did you see I don't
have it in front of the number I thought I
saw the average was thirty five hundred. And if you
have an average check going out to a taxpayer family
unit of thirty five hundred dollars, I mean, imagine if
we were just look what happened during COVID when we
sent checks out to people. I mean, this is really
(41:42):
their own money coming back, but it's still a stimulus
to the overall economy. So I think fiscally from the
tax point of view, and also at the business level,
we're getting some extra stimulus next year, which can certainly help.
We're getting a little stimulus from rate cuts. A big
thing that makes me worry. I know history is not perfect,
(42:02):
but that midterm election, you're.
Speaker 2 (42:04):
Domn well, uh, party in power usually lose the seats
well in the in the House, the Republicans they have
what two seat majority right now, so it's pretty thin.
They got to talk about the affordability thing. I think
the whole immigration thing stopping things that the border was good,
but you know, this rounding everybody Up's nice to round
(42:26):
up criminals. This is not you know, from a public
relations point of view, I'm not sure this is going
over real.
Speaker 1 (42:32):
Well, and you're giving the Democrats ammunition for their campaigns
next next time.
Speaker 2 (42:38):
Yeah. So, and you know, we need an immigration policy.
I mean, we've recently come up with people that we
know family members or close friends. Uh, somebody we know
on a close friend of ours, their son married a Mexican.
You know, Dreamer basically came here, which he was five
(43:00):
years old. Red went from Hollenge works for Veriason Frankly,
and you know, high level position, supervisory positions. She's stole
down a US citizen even though she's been trying. I
don't understand that one.
Speaker 1 (43:13):
I don't understand why it takes that long. I agree
with you. So, we definitely need an immigration policy, and
we haven't had one period. And I think Trump needs
to get off the tariff train a little bit. You know,
we keep talking about how we're going to finalize these deals,
and I think companies have kind of put in some
stop gaps, but would need to settle on something.
Speaker 2 (43:34):
Well, the problem is he may have a four year term,
but he doesn't necessarily have four years governed.
Speaker 1 (43:40):
Exactly right, And I think the unfortunate not I don't
know if it's unfortunate or not. The thing about the
tariffs is he's putting a lot of these in and
this is going to be in the Supreme Court. He's
putting these tariffs in under executive order, which is great.
It allows him to move quickly, but it also shows
that they can be unwound very quickly by the next
president as well. Yeah.
Speaker 2 (44:02):
I mean it's helping us in the long term, but
you know, we just operate a short term thing here. Anymore.
Midterms right around the corner.
Speaker 1 (44:12):
Yeah, and whoever the next president is can unwind anything
unless it goes through Congress. It's not permanent nothing. I mean,
nothing even in Congress is permanent. But you get a
little bit more staying power on something that you get
through Congress, like the extension of the tax cuts.
Speaker 2 (44:28):
Well, there's a lot of good things going on out
there that they do a better time of letting people know.
Speaker 1 (44:33):
That's true, and that's always the toughest thing in a
midterm and that's why you get that party in power
that loses seats. Let's take our last pause. You're listening
to a money sense Kevin and Dennis Kirsten will be
right back. Welcome back to the show. You're listening to
the advisors of Kristen Wealth Management Group, Kevin Kurston and
Dennis Kirsten. Danny. One of the things that drives me
nuts about our politicians is the double standard by which
(44:57):
they live by. I had a client recently who worked
for a major accounting firm and the number of hoops
this client had to go through in terms of what
they could invest in. They couldn't invest per SEC regulations
in any company or firm or fund or index for
(45:18):
anyone they audited. Oh wow, well there's only there's only
a couple of firms. You know, These major firms audit
basically everybody. And the hoops this client had to jump
through in terms of what they could invest in because
there was a conflict of interest in terms of who
they audited. Similar And I made a joke with him.
I said, well, if you just quit your job and
(45:38):
join Congress, there's no conflict of interest. You can buy
whatever stock you want even though you regulate. So what's
interesting is the regulators that are regulating these these people
who work at these auditing firms. They're the regulators and
they can buy whatever they want, but the people do
in the auditing cannot. So I found it interesting. And
(45:59):
you had a story here in terms of a double
standard on somebody who's in Congress.
Speaker 2 (46:04):
Well, this is an article in the Washington Exlament by
Byron York And when a government's five million dollar mistake
leads to a Covida scam and a house member's indictment.
Uh So, anyhow, I mean summed up this way? All right,
this is a Democrat representative, Sheila Cheerfulness McCormick of Florida,
(46:26):
and three hot defendants. Okay, so summed up in a
simple question, women, who knew if someone accidentally deposited five
million dollars into your bank account? Okay, wow, that happens.
Doesn't happen very often. We can point out the mistake
or would imit back.
Speaker 1 (46:45):
And the bottom line is this congressman, this Democrat woman, woman,
she got a COVID stimulus check of some kind which
was two decimal places off exactly.
Speaker 2 (46:56):
It was supposed to be fifty five and seventy eight dollars,
and they moved the decimal point, took place to the
right accidentally clarehole air and it ended up being five
million and seventy eight dollars. So they sat on it
for amount a month thinking what we are doing this money?
Can we have it back? I can hear the wheels turning.
(47:16):
So finally about six weeks later, well, they they opened
up about they ended up long story short, I don't
have time to do the whole story here, but they
had about seven or eight or nine shell accounts in
family members and friends and so on, and the money
started being dispersed out. I want to I want to
(47:39):
explain more when we have a future show. But you
know this sounds like to me a perfect description money laundering.
Speaker 1 (47:46):
Well, they're trying to cut the pie up and figure
out a way to shuffle it out to these shell corporations.
But the bottom line is, I mean they have she
got she got a fake amount of money from the government,
and instead of pointing out the error, she tried to
steal the money. And back to my original point, if
this isn't a congressman, and there's a lot of fraud
that happened during COVID and people were arrested, good and
(48:08):
that's good. But here's somebody that's trying to get away
with something, thinking that her status as someone in Congress,
nobody would notice no, and it'll allow her to get
away with it. And I'm really, frankly the double standard
with our congress people in terms of breaking the law
and never having any consequences. And this is just another
(48:28):
example of that.
Speaker 2 (48:29):
It's, Uh, there's a paper trail a mile long here
to more or less prove this. Emails, text messages, you
name it.
Speaker 1 (48:36):
And it's what do they say? Rules for thee but
not for me?
Speaker 2 (48:40):
And Uh, if they were to walk into a bank
with a mask on course during COVID, you would have
been stolen five million dollars and walked out the door.
What's gonna happen to him?
Speaker 1 (48:51):
Yeah, it's your responsibility in that situation to point out
the error and if you go spend the money, you've
broken the law. Yeah, thanks for listening everyone, We'll talk
to you next week.
Speaker 2 (49:04):
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 two
zero zero six seven or eight hundred eight seven five
seventeen eighty six. Their email address is Kirstenwealth at LPL
dot com and their website is Kirstenwealth dot com. Opinions
(49:25):
voiced in this show are for general information only and
are not intended to provide specific advice or recommendations for
any individual. To determine which investments may be appropriate for you,
consult with your financial advisor prior to investing. Securities are
offered through LPL Financial member Finra SIPC
Hello, and welcome to Money Central, listening to the advisors
of Kirsten Wealth Management Group, Kevin Kirsten and Dennis Kirsten.
Happy to be with you today as we are wrapping
up the month of November and going into the Thanksgiving weekend.
We got a few trading days left in the month
of November, and just like we called last week, Dennis,
I'm not sure if you were listening last week, but
(00:21):
Brad and I were talking about the seasonality of the
markets between now and the end of the year, but
also the seasonality of the month of November. And strangely enough,
the month of November historically has some volatility mid month,
which we got, and it also tends to hit a
bottom around November twentieth or November twenty first, which we
also saw. And now we've seen a nice little rally
(00:43):
in the last week. Kevin recovered the all time highs
quite yet, but things seem to be moving in the
right direction, and I was noticing a few things on
the chart. First of all, we have the S and
P five hundred up a little more than sixteen percent
on the year as we tape this show today, but
in noticing a little bit of a change and a
few things in the last one week, one month, and
three month, and that is the re emergence of healthcare
(01:07):
as an investment. Healthcare was one of the most the
poorest performing asset classes at sectors not asset classes, excuse me,
poorest performing sectors in the S and P five hundred
on the year. It is now up seventeen percent in
the last three months and seventeen percent year to date.
So some of that rally has come from a little
bit of broadening out of the overall market. Because if
(01:28):
you look at the tech space, the technology asset sector
I keep saying asset class technology sector over the last
one month is down three percent. That compares to healthcare
that's up almost nine And in the last three months,
tech is up seven while healthcare is up seventeen. So
there's some other areas outperforming tech in the last three
(01:49):
months as well, communications services up fourteen. So we're seeing
a little bit of broadening out into some other areas
of the overall market and that's certainly helping the value
side of the equation. And we're seeing small caps in
the last week as well, having a pretty good month
and a pretty good week, so.
Speaker 2 (02:11):
Healthy really small camps are influenced by interest rates more
than anything. And you've seen the interest rate on the
tenure now hovering right around four percent. Right last night
was like four point h one. And small camps tend
tomorrow more money, and the lower interest rates help small camps.
(02:33):
So there's a correlation there.
Speaker 1 (02:35):
And we did have some news this week. We had
a couple of Federal Reserve people that our voting members
come out and basically hint that they're leaning more towards
a cut. We went from only a thirty percent approximately
chance of a FED rate cut in terms of what
the market was pricing in about a week ago, and
(02:55):
it's up to ninety right now now. That makes me
nervous too, because if it's priced in, they better deliver. Yeah, okay,
but they probably will put some language in there in
the next couple of weeks when they have that next
meeting that they're gonna cut, and they may put things
on pause for a little while. But as Brad and
I have talked about on this show, Denny, there's no
(03:16):
question that whoever Trump puts in place next May when
Jerome Pole's term is up, is going to be someone
who's going to favor rate cuts, especially going into a
midterm election cycle.
Speaker 2 (03:27):
Landa's room right here on that is Kevin Hasselt yep.
Speaker 1 (03:31):
And he's the current what's his current title, White House
Economic Advisor, So yes, no, absolutely, And he's got a
level head. He's you know, people say, oh, he's just
a Trump guy, but you know when you hear him speak,
he certainly is not somebody that seems to He's got
a pretty level head. And so but also Trump's not
(03:51):
going to nominate anybody who doesn't want to cut rates aggressively.
So you know, maybe look at what the expectations are
on the FEDS dot plot by the end of next year.
But I think it's going to be it's not going
to be a straight line. I mean, my prediction certainly
is that the Fed's going to cut in December, markets
pricing in. They don't want to disappoint. But I wouldn't
(04:15):
put it out of the realm of possibility that that's
the last cut until Trump's new Fed jair gets in there.
And the estimate, by the way, is slightly under three
percent for the FED funds rate by the end of
next year. That's five rate cuts from here.
Speaker 2 (04:30):
Wow, the correlation between the ten year and the more
thirty year more youth rate. Isn't that still suppost be
one and a half percent?
Speaker 1 (04:40):
Yeah, and it's it's come in a little bit, but
it's still off compared to historic historic measures.
Speaker 2 (04:46):
Right. Well, I mean I think it's right around six
percent out of thirty year now, right, so it should
be about five and a half according.
Speaker 1 (04:53):
To that historical spread, exactly exactly so, but it was
much more extreme recently. It was two and a half
or three percent a year ago. So it's it's it's
come in a little bit. And you don't really have
to have interest rates dropped dramatically. You just need that
historical spread to get back to normal for rates to
(05:16):
come down. But you know, the long term fix for
what's going on in the housing market is we need
more houses. And the only way to incentivize building more
houses so we have more supply to meet the demand
is to deregulate, put incentives in there, put tax incentives
in there for builders to build houses, some of these
(05:37):
other ideas where we're just going to strong arm the
interest rate market to make housing more affordable. I hate
to break the news to Trump, but if we went
back down to three percent thirty year mortgage rates. It's
not gonna help anybody because the value of the house
is gonna go up by just as much and the
payment's gonna stay the same. Yeah, that's the only long
term solution is more houses.
Speaker 2 (05:58):
And maybe on federal lends opening up some of that.
There's a lot of firstly about that.
Speaker 1 (06:03):
There is in yeah, there is, But at the same time,
you look at things like a builder going out there
and building a spec house for example. That helps, Yeah,
but that's a huge risk for a builder, and not
a lot of builders want to do it. So what
sort of incentives could we put in place for a
builder to build a spec house? So there's another house
(06:26):
on the market, what could we create some sort of
low interest or no interest fund to say, if you
build a spec house, we're going to give you a
year or two of interest only or no interest that
incentivizes the builder to build. It has an expiration date
one year, two years. You have two years to sell
(06:46):
the house. If you don't, you're gonna pay the interest.
You need to incentivize people to build a house, because
when you think about that eight month, ten month, twelve
month period, it takes a builder to build a house.
That's a huge outlay of money for that builder, and
yet that's exactly what this housing market needs. Back to
the stock market a little bit. Here, we have another
(07:08):
good year for the market, and I do like this
summary that LPL put out in their research blog. Another
big up year with a sharp draw down. It certainly
is not unusual for the market to have a pretty
good sized draw down mid year. They posted this chart
and looking at the average draw down in all years
(07:31):
is minus fourteen point one percent. We nearly got to
twenty percent earlier this year in March and April. And
so when you look at the type of year that
we're finishing with, even though we had nearly a twenty
percent sell off mid year, this is not unusual. You
go back throughout history, you go back since nineteen eighty,
that average is minus fourteen point one on any given year.
(07:52):
That's positive years, negative years, the average injured year draw down.
Plus you have three or four on average five to
ten percent sell offs in the middle of that here,
So what.
Speaker 2 (08:03):
Were this last time from high to low? I don't
want to interrupt here what you were saying there, but
almost been drawn down this time, it was just shy it.
Speaker 1 (08:10):
Well, they have it. They have it at eighteen point nine,
LPL has it at eighteen point nine here, Denny.
Speaker 2 (08:16):
But in April for the tarah, Yeah.
Speaker 1 (08:19):
But I thought it was nineteen point nine. I could
be wrong, But the bottom line it was almost twenty
Yeah for the in when Trump first announceds tariff's correct,
So that was almost almost twenty percent. Even though the
market is up this year, we did have that nearly
twenty percent draw down in the March and April time period.
So mention the average drawdowns fourteen percent since nineteen eighty.
(08:42):
The SMP has averaged a ten point seven percent annualized
gain since nineteen eighty. So double digit intra your declines
are often with the double digit annual gains. So you
can have a double digit annual gain many in many cases.
And also so I have a double digit intra year decline,
It's certainly not unusual, and this year is no different.
(09:04):
If anything, the long stretches like we had since April,
seven plus months without a five percent correction, that's the
that's more unusual than it is to have a ten
or fifteen percent correction mid year.
Speaker 2 (09:17):
Well, he'll sad one yep.
Speaker 1 (09:19):
So another thing they put in this in this blog
piece is the fact that positive years certainly out number
negative years. We know that since nineteen fifty it's a
little over seventy two percent positive twenty eight percent negative.
But I'm also struck by when you go back since
nineteen fifty, in last seventy five years, sixteen of those
(09:42):
seventy five years than are up fifteen percent or more.
So the double not only is a positive year of
the norm, but a positive year greater than fifteen percent
is also the norm. And then I'm also struck by
how rare the down years are, in fact, since nineteen fifty,
twenty and twenty two, which is just recently, which was
(10:04):
a twenty percent calendar year loss for the overall SMP
five hundred, that was the what fifth worst year in
the last seventy five years for a calendar year, And
it's I think it's also encouraging because, Okay, if you're
an investor and you're looking at your risk tolerance and
you say, well I weathered through twenty twenty two, wasn't
(10:26):
really that big of a deal. Well, that's the fifth
worst year in seventy five years. So if you can
get through that. You could take a lot of volatility,
and a lot of people don't even remember it exactly.
But there's only two years down twenty five percent or
more in the last seventy five that's nineteen seventy four
in two thousand and eight. It's only three years down
between fifteen and twenty five percent, nineteen seventy three, two
(10:48):
and twenty two. And there's quite a few there's eight
minus five to minus fifteen's, but I would consider those
more on the mild side of the down year. But
if you look at all the negative years between minus
five and minus twenty five plus, that's only thirteen negative years.
So you're more likely to have a positive fifteen percent
(11:12):
or more at the count is sixteen in the last
seventy five years, than you are to have a negative
year at all.
Speaker 2 (11:17):
Yeah, so I have to be around for those years.
Absolutely A lot of time people will mail out during
mad years and they wait till the mark had calmed down,
means wait for you know a lot yep.
Speaker 1 (11:33):
Historically, the S and P. Five hundred has done as
done as positive. Excuse me, I mentioned that seventy three
percent of the time I'm reading here as I'm as
I'm thinking here, But if you look at three year
period so if you average the three year rolling periods
in that last seventy five years, your number goes up
to eighty five percent of the time you make money
(11:54):
instead of seventy two. Certainly, in a ten year period
since nineteen fifty, you're ninety two percent of the time
the market is positive. And that excludes dividends you throw
in your dividend yield. This is just the value of
the S and P five hundred. Throwing those dividen yields,
it looks a little bit better. So certainly those longer timeframes,
and I always think it's good at the end of
(12:15):
the year to kind of reset and see where you are.
But this year it's turning out to be regardless of
whatever the headlines might be. We had early in the year,
we had tariffs. We've had inflation and interest rate talk
all year long, whins the Fed gonna start cutting rates.
We had the tax extension of the Trump tax cuts,
which we're going to talk about a little bit later
(12:35):
in the show. We've had debates obviously within Congress of
what they're going to do with the healthcare credits, that
was one of the reasons we had the government shut
down the debate there so, but that's a lot of
the usual back and forth in Congress. Tariffs is a
(12:56):
fairly new thing each and each and every time Trump
has taken office.
Speaker 2 (12:59):
But that's in the Supreme Court right now, so we'll
see what happens there. Problem if they don't a lot,
right that happen.
Speaker 1 (13:07):
But I look at a year like this, I look
at a your like last year. Quite frankly, even a
year like twenty twenty two when the market was down,
and there's there's this instinct for people to say, for
investors to say, boy, isn't this market crazy? Isn't this unusual?
Whether it's when the market's going higher and trending higher
(13:29):
or when when they're in the middle of a correction,
like have you ever seen anything like this?
Speaker 2 (13:33):
Yeah?
Speaker 1 (13:33):
And you know what I would often say is yes,
I have, many many times. That's why we're so obsessed
at our firm on the historical side of the market,
because number one, I think it's I think it's comforting
to look at that historical and say, Okay, no, this
has happened before. But also I think the tendency is
to is to kind of overvalue the moment you're in.
(13:56):
We do it with elections, most important election of our lifetime.
We do it with markets. This is the most unusual
market in our lifetime. It's not. It isn't I mean,
and certainly this year is a perfect example of that.
Where you might think that that near twenty percent sell
often any was a big deal, and then you look
at history and you say, no, this has happened before
(14:18):
in the market has recovered.
Speaker 2 (14:20):
Well, I know you and Brad always say you look
at odds or probability, and when you have a period
of time like we have now with three fairly years,
are the odds slightly less positive going forward compared to
We just had the three year anniversary of the more
or less the bottom of the market in twenty two
(14:41):
October in October of twenty two. So when you look
at that and bottom now started moving higher October of
twenty two, one of the odds or the probability of
the next three years being menial. Just had the three
year anniversary of that, And yes, what the S and
P five hundred average you returned the last three years
(15:01):
twenty point five percent per year.
Speaker 1 (15:03):
And what did I mentioned in the last seventy five years,
your average return is ten point seven. So that's that's
a great point, Denny. When you bring up, how do
you tilt the odds in your favor? Yeah, okay, well
all periods ten point seven in the last seven seventy
five years. Yeah, but there three years ago, you bought
(15:24):
after the market had dropped from high to low twenty
seven percent from high to low twenty percent for the
calendar year, but twenty seven percent from high to low.
And look what happened. You tilted the odds in your
favor by buying low, and you turn what was an
average return in the last seventy five years of ten
point seven in the last three years, you doubled that.
Speaker 2 (15:45):
Yeah, so when you were fully invested with most people are.
Speaker 1 (15:49):
Not right, right, I understand that. But just looking at
the market and saying when it's down twenty seven percent
is now the time to buy kind of the wrong question. Because,
by the way, we're not even at the anniversary of
the three year low. So the anniversary of the three
year low was October mid October twenty twenty two.
Speaker 2 (16:07):
When we are what's today, It's November.
Speaker 1 (16:12):
But here's my point when people are trying to get
too cute, when they're buying in September when it's down
twenty one, or early October and it's down twenty two,
or mid October when it's down twenty seven, or mid November.
I'm talking three years ago, when it's down twenty and
it's rallied back a little bit. What's the mentality when
(16:33):
it's down twenty Well, it might drop a little bit
more when it's down twenty five. Oh, it might drop
a little bit more when it's down twenty seven, might
drop a little bit. You don't know.
Speaker 2 (16:42):
Zero good, somebody might say.
Speaker 1 (16:44):
And then it rallies back a month later. We're talking
November of twenty two. That's that three year anniversary. Well,
it rallied seven percent and now we're only down twenty.
Maybe I'll wait until it goes back to that low again. Well,
the investor that didn't wait has a three year average
in your return on the S and P of over
(17:04):
twenty percent. So deciding in that moment three years ago,
what day you're gonna invest or what day you're gonna
rebalance and reallocate some more money to stocks, getting that
day perfect doesn't matter, because you're looking at the three
year average that is not a perfect three year back
to the low day and the number is still really good. Yeah,
(17:28):
so you don't have to be perfect. Yeah, but what
month maybe slightly matter, but it probably is. But are
you going to be upset if you did twenty percent
per year over three years? And that's the point. And
so you know, I think that this year is shaping
up to be a good year, a year that certainly
has precedent. We've had years like this, We'll have years
(17:51):
like this again. And I think next year. We've often
talked on this show that there's a little bit of
push and pull. I think there's a lot of ECN positives.
The one big beautiful bill that Trump put in place
is going to put a lot of stimulus in the
economy next year. At some point next year, the Fed's
going to cut rates more aggressively. But we also have
(18:12):
a market that not maybe is on the higher end
of its valuation range, So that's something to be worried about.
We have tech companies spending money handover fist, which is
a stimulus to the economy. The earnings numbers that came
in the last quarter, which are in our market commentary
pretty good, So there's a little bit of push and pull.
(18:33):
Midterm election years historically bring a little bit more volatility.
That's something to be aware of and concerned with. So
it certainly isn't the slam dunk it was three years ago.
But we still have some positives. So let's take our
first pause and get to some of those positives when
we get back from the break, both on the earnings
front and how companies are doing, and also some of
(18:53):
the stimulus that's coming from that the extension of Trump's
tax cuts that happened this summer. You're listening to Money Scents.
Kevin and Dennis Kirsten will be right back. Welcome back
to the show. You're listening to the advisors of Kirsten
Wealth Management Group. Kevin Kirsten and Dennis Kirsten happy to
be with you today. As a reminder, we are professional
financial advisors and our offices are in Perrysburg. Give us
(19:14):
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, we'd be happy to sit down and
review things with you four one nine eight seven two
zero zero six seven or check us out online at
kirstenwealth dot com. You can find information about our firm there,
as well as things like our weekly market commentary, which
(19:35):
this week Dennis focuses on Corporate America cleared a very
high bar this earning season, and we saw some pretty
good numbers. I mean, you take away all the noise
that the stock market gets with the Fed interest rates,
Trump and his tariffs. The bottom line is our company's
making money. And if companies are making money, their stock
(20:00):
I can go higher. I mean, that certainly is the
bottom line. There S and P five hundred earnings per
share growth is tracking over thirteen percent for this quarter.
Ninety five percent of companies have reported, and they've cruised
passed the seven point four percent consensus. Revenue grew pretty well.
On top of that eight point four percent, it typically
strong two and a half percent above expectations, So we
(20:23):
said we had good, good earnings upside surprises. We're seven percent.
That matches the ten year average, and and so eighty
two percent of companies beat on earnings. The five year
average is only seventy eight, so that's a little bit
better than expected as well. Revenue on average was seventy
six percent beat versus the five year average of seventy percent.
(20:45):
Fastest earning growth came from tech, financials, and utilities.
Speaker 2 (20:50):
You mentioned revenue growth I was over eight percent. I'm
not sure if you mentioned that I was reading, but
all the numbers they exceeded. And we've really had a
multiple years in a row now were multiple quarters in
a row with very strong growth, where by double growth
for four or five quarters in a row. As far
as earning growth, going back to gosh, let's see you
(21:16):
here twenty five primarily twelve point nine to twelve point one,
thirteen point five, they were estimating seven point two from
the fourth quarter here, and we'll see some of them
made me driven a little bit by the tariff shutdown
or not the tariff, but the government government shut down,
(21:38):
you know that slowest things down a little bit. They
were estimating that will hurt aconomic growth in the fourth
quarter by about half maybe from instead of three maybe
one and a half, so that will hurt a little bit.
Speaker 1 (21:51):
Yeah, it's interesting. I mean, obviously, no surprise technology led
the way with earnings. Financials maybe a little bit of
a surprise there they're the second fastest earnings grower. And
how about utilities, there's been utilities historically has been the
defense for the overall market. But now utilities are kind
of attached at the hip with the AI build out
(22:13):
and the demand that we're going to see on the
on the grid here in the coming years. So utilities
interesting to see have become a little bit more of
a growth oriented sector as opposed to value, which it
has been historically.
Speaker 2 (22:27):
In our backyard. There's one a few miles from here
in Paris, Paris, the Meta face Danial Center, yep.
Speaker 1 (22:37):
And I'm looking at the earnings growth per share estimates
going into twenty twenty six. This next quarter, the fourth
quarter only seven point two percent growth estimate. So that's
nothing that that seems like a reasonable bar to leap over. Yeah,
but if once we get into the first quarter of
(22:57):
twenty six, so those earnings will start in April of
twenty sixth any boy, I tell you what, it's gonna
be tough, tougher. Eleven point seven twelve point sevent. These
are the percent earnings growth estimates twelve point seven twelve
point eight and the fourth quarter of twenty six the
estimate is a sixteen point five percent year on year,
(23:19):
so bars much higher after this quarter for earnings.
Speaker 2 (23:24):
Well, the I know we're in into the beautiful mill
here in a minute. But a lot of these tax
branks will start to be seen by people in their
paychecks when the deductions for taxes won't be less and
their home pay won't be more. And the feeling is
that won't be a stimulus, but people will they have
(23:45):
feeling like they have more money in their pot things
might be quote more affordable. You that's some word they're
throwing out there a lot, the affordability problem, and that
it is a problem out there. But the lower probably
sixty percent of tax payers from a percentage point of view,
(24:05):
and benefit the most from the from the mill.
Speaker 1 (24:08):
That's right. So hopefully that stimulus which we haven't really
seen from that one big beautiful bill first of the
year exactly. I mean, well, no, some of it is retroactive,
but some of the newer things, yeah, uh don't. I mean,
if you were paying whatever rate you were paying was
was locked in to January first, to twenty twenty five.
Speaker 2 (24:30):
But even when people knew their taxes early on, you know,
a lot of that there'll be more refunds.
Speaker 1 (24:35):
You're right, You're right, yeah, because it's retroactive. So for example,
if you've got the age sixty five extra six thousand
dollars deduction and everything else remain the same, you're going
to get a refund because you did all your withholdings
based on.
Speaker 2 (24:49):
Or your estimates from the following year won't be less
than right.
Speaker 1 (24:53):
So so you know that goes to what are some
of the positives I mentioned some of the things that
we're concerned about next year. It's a midterm election year.
Last two midterm election years, negative year for the stock market,
the last two three out of the last six negative markets,
a little pricey. We just went through earnings. Earnings are
(25:14):
going to be double digits next year. I mean, it's
pretty much baked in the cake. Even if we got
a little bit of a reduction, you're going to see
double digit earnings growth. We mentioned the fiscal side of
it with the One Big Beautiful Bill Act. So let's
get into that One Big Beautiful Bill Act, which we
talked a little bit on this show. But we're getting
to the end of the year and people are going
to start to do more planning, So let's get a
(25:36):
little bit more into it. One of the most significant
aspects is the permanent extension of the Trump individual tax
cuts that were due to expire at the end of
the year. These brackets will continue to be adjusted with
inflation over time. So not only are there extra deductions
and right off stenny in the bill, but the brackets
themselves stayed the same, but the income levels go up
(25:56):
a little bit, can and will continue to do so
with inflation.
Speaker 2 (26:00):
Right. One of the other things in there is the
salt deduction, the standard local taxes. And we'll just make
sure where I see where you are, Okay, sorry about that,
all right, make sure we're on the same page here.
Speaker 1 (26:15):
Yeah, So the state and local tax deduction right off,
get into that and what that means. It really only
applies to the people who itemize, which is a much
smaller number than it's ever been.
Speaker 2 (26:27):
Well that's who. Yeah, the house of the standard deduction,
well that was capped ten thousand dollars previously previously, and
that the new number there. Is that a permanent thing
or is that a four year thing? On that one?
Speaker 1 (26:44):
You know, I don't have that here, but it goes
from ten thousand to forty thousand. Oh, no, it is.
It is temporary twenty twenty five to twenty twenty nine. Okay, yeah,
so it goes from ten thousand to forty thousand. Now
keep in mind, let's look at the state and deduction, okay,
because the itemizers would be the biggest ride offs would
(27:04):
be interest on your mortgage. The state and local tax
right off added up, and you can do up to
forty thousand. Now, but there is an income phase out
for that. But property property tax is part of that.
State and local salt. That's that's part of it. So
think about I don't.
Speaker 2 (27:23):
Think Morgan applies to that.
Speaker 1 (27:24):
That's but it's an itemized deduction. I'm referring to itemized deduction, okay, okay,
So when you look at itemized deductions, there's a lot
of itemized deductions you could take, but in general, your
itemized deductions have to exceed your standard deduction to make
it worthwhile, which.
Speaker 2 (27:40):
Was greatly increased in the twenty seventeen correct.
Speaker 1 (27:43):
So your standard deduction is thirty one thousand, five hundred
for a married couple fifteen thou seven to fifty individually.
In addition, Trump put in if you're over sixty five,
you get an extra twelve thousand dollars for a married couple,
so that that takes you up to forty three thousand,
(28:03):
five hundred, and then the old additional write off for
over sixty five state, So actually the standard deduction for
a married couple over age sixty five going into next year,
and this is retroactive to the beginning of this year's
forty six seven hundred dollars.
Speaker 2 (28:22):
Which means your itemize.
Speaker 1 (28:24):
Your itemize have to be greater than that. So your
mortgage interest, your state and local taxes, and property combined,
and you're charitable all have to add up to more
than forty six thousand, seven hundred. Ye, or it's a
moot point. Yeah, you're going to be a standard at I.
Speaker 2 (28:39):
Don't know what the clack percent was or is, but
I believe before then I went into effect, about thirty
percent of class players were able to itemize. That was
at least unt and a half and it's probably only
about ten or fifteen percent now.
Speaker 1 (28:53):
Yeah, and even on that state and local tax right
off going up, there's an income phase out, so if
someone's in the top bracket, chances are your not getting
that forty thousand anyway. So for the vast majority of
our listeners. It's going to be a standard deduction, and
you'll get a little bit of a bump if you're
over the age of sixty five. But by the way,
(29:13):
that over age sixty five right off. That also has
an income phase out, and it's a that's a pretty
low income phase out. Actually it starts at one hundred
and fifty thousand on that phase out, so it's a
much lower income phase out than say the state and
local tax But the point is the tax cuts were extended.
In fact, they were added upon the standard deduction went
(29:34):
up the tax rates went up. I saw a study
that was done for next year. The average refund and
this isn't going to be everybody, but the average refund
is going to be approximately thirty five hundred dollars, and
that's stimulus right into the economy. Home equity interest is
capped at a seven hundred and fifty thousand dollars mortgage,
so that was in there as well.
Speaker 2 (29:54):
That's the same thing I think, isn't it. That's what
it was.
Speaker 1 (29:57):
Yeah, Yeah, Home equity loan interest deduction disallowed unless the
loan was used to improve the home. No clean vehicle
and energy credits for both individuals. And there's quite a
few things in here that are temporary. I mentioned that
six thousand dollars right off for over age sixty five.
That's only a four year right off. That was the compromise.
(30:18):
Trump's original goal was can we get Social Security be
tax free? That was one of his campaign promises. That
that was dead in the water. The compromise is, let's
give an extra write off to people over the age
of sixty five. Some of the other temporary items are
no tax on tips for the next four years up
to twenty five thousand, no tax on overtime up to
(30:39):
twelve thousand, five hundred, and the car Loan intrat deduction
is also something that he wanted to encourage people to
buy US manufactured cars. That's for the next four years.
But I mean to me, that's another one. I put
that in the bucket, Nenny, with the fifty year mortgage.
How much of a dent is your car loan entry
(31:00):
really going to make in your tax situation?
Speaker 2 (31:02):
Well, for one thing, how many paint blind and miles
in the first place?
Speaker 1 (31:07):
Exactly? You know so? And if you do, and let's
say you had a five percent car loan okay, and
you bought a fifty thousand dollars car, which is an
expensive car though becoming more and more than norm Okay,
we're talking about two to three thousand dollars of a
write off and and so I don't know, it's not
(31:28):
really I understand it was a campaign promise, so he
wanted it in there, But I don't think it's going
to move the needle on people buying US cars versus
non US cars. People are still going to buy the
cars they want to buy. So so permanent changes to
the charitable First of all, you can get one thousand
dollars for single filers, two thousand dollars for joint filers.
(31:50):
You don't have to itemize to get that charitable. So
if your charitable deductions are smaller and you you were
either looking at doing the qualified charitable distribution, if you're
over seventy and a half, you can do up to
two thousand dollars now for a married couple and still
take the standard deduction. Nice.
Speaker 2 (32:11):
Yeah, so there's a.
Speaker 1 (32:12):
Little wiggle room there to do some charitable and get
a write off even if you take the standard deduction.
So I think that's that's that's a good one. By
the way, speaking of the qualified charitable, which is the
distribution from your IRA, if you're over seventy and a half.
Speaker 2 (32:28):
Seventy three, well, no, it's seventy and eleven and a half.
Speaker 1 (32:31):
You can do it at seventy and a half. I
don't know what good it does you because you're not
required to take it with all, but you can do
it starting next year. So this one wasn't retroactive. Firms
are now required to put that on your ten ninety nine.
It used to be if you had a thirty thousand
dollars required distribution and you gave five thousand to charity,
(32:53):
you basically had to manually account for that when you
do your taxes. There was nothing on your ten ninety nine.
They are now creating a code for the qualified charitable,
which I think is making going to make people's lives
a lot easier.
Speaker 2 (33:06):
That don't mean for the here's talk return No.
Speaker 1 (33:08):
Twenty twenty six, Okay, companies technology wise didn't have time,
and I don't know if it's every company. I know. LPL,
who we were work with is not going to have
it on the ten ninety nines that come out in
two months, but it will be in future years accounted for.
So if you did a charitable in twenty twenty five,
and this is for any of our clients listening, to
(33:28):
still keep all those stubs in receipts and give it
to your tax person, but in future years it will
be accounted for on your ten nine years.
Speaker 2 (33:36):
We have a lot of clients that use that, yep,
and so a way to reduce their claxes on.
Speaker 1 (33:42):
The estate planning side. With the one big beautiful bill,
let's talk about wealth transfer on death. It's thirteen point
nine to nine million per person. So yeah, that was
set to decline to seven million.
Speaker 2 (33:54):
Yeah.
Speaker 1 (33:54):
So in terms of avoiding a state tax, that's the
amount of money each individual can have twenty eight.
Speaker 2 (34:00):
Million dollars fifteen. The new bill is.
Speaker 1 (34:04):
Going to fifteen excuse me, yeah, so thirty million. Yeah,
and you have to have more than thirty million, all right,
if you do, we'll talk about it right right. And
that is now index for inflation, which is nice to
a state tax rate's forty percent above that level.
Speaker 2 (34:20):
So so by the way, for those listeners that are
in Ohio, one is the Ohio state tax heavin, The
answer is zero and been that way for a lot
of years.
Speaker 1 (34:31):
So the last two items we have on So that
was some of the individual things. I think the big
ones are the extra sixty five deduction that people have
and I want to come back to, Well, let me
just do that right now. There's a phase out there
at around one hundred and fifty thousand on that sixty five.
So if you're married filing jointly, that's a twelve thousand
dollars right off. So that's two or three thousand dollars
(34:53):
for a lot of people. And there's some ways I
just add up, meeting with a client this week, how
do we get our income down in the coming years
so that we can get those deductions. Now there's a
push and pull here. We have people that are increasing
income and doing Wroth conversions, but now you have some
people on the other end, Well, can we decrease our
(35:15):
income so that we can qualify for more of these.
Speaker 2 (35:17):
Right Another thing is if you're over sixty five, you
have the Medicare part me in if you're in the
certain level.
Speaker 1 (35:24):
You have to pay. You have to pay attention to
those uh Medicare Premium uh IMA levels as well. But
if we're just talking about the sixty five. I had
a meeting with somebody and we're going to map it
out for future years because he had thirty thousand a
taxable interests at the bank CDs money markets, and then
he also had a fair amount of capital gains. So
(35:47):
on the taxable interest easy switch switch to tax free
do tax free municipal bonds get still a good level
of interest in those those certain those tax free unions
still pay a good level of interest. But your switching
to tax free interests. By the way, side, note you
mentioned irma tax free interest adds to your irma income
(36:08):
for Medicare, Yeah, but it takes it off for the
purposes of federal income tax. So that's one thing that
person can do. And then invest your after tax account,
your joint accounts, your trust accounts more in a more
tax efficient manner, whether you're buying individual stocks or ETFs,
staying away from mutual funds which split off capital gains,
and you can reduce your capital gains bill as well
(36:31):
to get that income level down. So two different things
you can do. If you have a lot of taxable interest,
you can bring it down so you qualify for more
of these tax write offs, or get your capital gains
down by investing in some indexes and individual stocks. So
we get back from the break, let's go to the
other side of the stimulus, which is tax breaks for
(36:51):
businesses and incentive programs, which might be that extra boost
the market and the economy needs next year. You're listening
to Money Sents Evan and Dennis Curston will be right back.
Welcome back to the show. You're listening to the advisors
of Kirsten Wealth Manage for group, Kevin Kirsten and Dennis Kirsten.
We're talking about the extension of Trump's tax cut. It
was called the One Big Beautiful Bill Act OBBA if
(37:13):
you're googling it, but it's kind of an absurd name,
but nonetheless it was the extension of his tax cuts
from twenty sixteen, and there were some additions on there,
some of which are only short term four year rite offs.
But we mentioned some of the things that at the
individual levels that you can do to take advantage of it.
(37:33):
And then as I mentioned, as we mentioned on previous shows,
still might make sense to look at that Roth conversion
if you're in the one of the lower brackets, especially
the twelve percent bracket. If there's any money you can
get out of your IRA and convert to your WROTH
and stay in that twelve percent bracket. I had mentioned
someone who was way above the twelve percent bracket and
some strategies to get yourself down. But you actually, I said,
(37:57):
somebody just asked me this. They said, well, you know,
on the on the on the wroth IRA, or how
do I structure my withdrawals? You know, you don't want
to have no income either. In some cases, uh, you
want to have some income in doing that wroth conversion
if you have wiggled room, especially in the twelve percent bracket,
can make sense. But let's move on to some of
(38:18):
the things that are more stimulative to the overall economy.
At the business level, Denny, So, tax breaks for businesses
were added, and some were made permanent. The qualified business
income deduction was made permanent, twenty percent deduction for pass
through income. In addition, the phase out amounts were increased.
The law also made permanent depreciation deductions for research and development.
(38:41):
I think that's a that's a big thing. If companies
can invest in their firms research through research and development
and get an additional tax rite off that it certainly
incentivizes that behavior. Capital gains exclusions for holders of qualified
small business stocks. Stock owners take advantage of this exclusion,
can take advantage of this exclusion. And there there's the
(39:04):
depreciation part of it. Am I am I missing this
here because I know that that was another big one
as well. Uh, the accelerated depreciation, which is going to.
Speaker 2 (39:11):
And greatly expense things right up front if they have
aal investment, right having to spread out the depreciation over
many years.
Speaker 1 (39:19):
And I mean you think about whether it's a more
service related business like ours, where you could go in
and say, you know, maybe we're going to overhaul the
computer system and you can get that upfront right off,
or maybe more capital intensive businesses that are going to
go out and buy data centers, data centers or big
heavy machinery and be able to depreciate and get an
(39:41):
accelerated write off. That incentivizes investment into the economy.
Speaker 2 (39:45):
And it's important for them to understand and made permanent.
Now that's kind of a loose word in a way,
but a lot of like this last bill had an
expiration day for the whole thing at the end of
this year, so right now it's permanent in the law.
It's pretty hard to change. That's not saying that you
know someone else's control that it wouldn't be change, but
(40:07):
a lot harder.
Speaker 1 (40:08):
That's right. So they've also extended the Opportunity Zone program
for investments in designated areas of the country. This now
runs for another ten years with special Rural area incentives
until twenty twenty three. This was created to incentivize investment
in rural areas thirty percent step up in tax basis
(40:28):
for investments in those opportunities the zones. We've seen some
areas get a lot of investment because of the tax
incentives that resulted. But I really think the big one
is the additional upfront depreciation expense that businesses can do
for major investments in their companies. I think that that's
(40:49):
a big that's a big thing that companies can do,
and that's a stimulus that goes right into the economy.
So I mentioned we have some tax breaks for businesses,
some some ways that they can have additional rite offs
next year. Then you take all of the additional rightofs
that are coming at the individual level, which will basically
(41:11):
we have stimulus checks going out next April and maybe
even sooner because we're going to see higher levels.
Speaker 2 (41:18):
Of refunds stimulus.
Speaker 1 (41:21):
I mean, if the average I think I saw the
average was thirty five hundred, did you see I don't
have it in front of the number I thought I
saw the average was thirty five hundred. And if you
have an average check going out to a taxpayer family
unit of thirty five hundred dollars, I mean, imagine if
we were just look what happened during COVID when we
sent checks out to people. I mean, this is really
(41:42):
their own money coming back, but it's still a stimulus
to the overall economy. So I think fiscally from the
tax point of view, and also at the business level,
we're getting some extra stimulus next year, which can certainly help.
We're getting a little stimulus from rate cuts. A big
thing that makes me worry. I know history is not perfect,
(42:02):
but that midterm election, you're.
Speaker 2 (42:04):
Domn well, uh, party in power usually lose the seats
well in the in the House, the Republicans they have
what two seat majority right now, so it's pretty thin.
They got to talk about the affordability thing. I think
the whole immigration thing stopping things that the border was good,
but you know, this rounding everybody Up's nice to round
(42:26):
up criminals. This is not you know, from a public
relations point of view, I'm not sure this is going
over real.
Speaker 1 (42:32):
Well, and you're giving the Democrats ammunition for their campaigns
next next time.
Speaker 2 (42:38):
Yeah. So, and you know, we need an immigration policy.
I mean, we've recently come up with people that we
know family members or close friends. Uh, somebody we know
on a close friend of ours, their son married a Mexican.
You know, Dreamer basically came here, which he was five
(43:00):
years old. Red went from Hollenge works for Veriason Frankly,
and you know, high level position, supervisory positions. She's stole
down a US citizen even though she's been trying. I
don't understand that one.
Speaker 1 (43:13):
I don't understand why it takes that long. I agree
with you. So, we definitely need an immigration policy, and
we haven't had one period. And I think Trump needs
to get off the tariff train a little bit. You know,
we keep talking about how we're going to finalize these deals,
and I think companies have kind of put in some
stop gaps, but would need to settle on something.
Speaker 2 (43:34):
Well, the problem is he may have a four year term,
but he doesn't necessarily have four years governed.
Speaker 1 (43:40):
Exactly right, And I think the unfortunate not I don't
know if it's unfortunate or not. The thing about the
tariffs is he's putting a lot of these in and
this is going to be in the Supreme Court. He's
putting these tariffs in under executive order, which is great.
It allows him to move quickly, but it also shows
that they can be unwound very quickly by the next
president as well. Yeah.
Speaker 2 (44:02):
I mean it's helping us in the long term, but
you know, we just operate a short term thing here. Anymore.
Midterms right around the corner.
Speaker 1 (44:12):
Yeah, and whoever the next president is can unwind anything
unless it goes through Congress. It's not permanent nothing. I mean,
nothing even in Congress is permanent. But you get a
little bit more staying power on something that you get
through Congress, like the extension of the tax cuts.
Speaker 2 (44:28):
Well, there's a lot of good things going on out
there that they do a better time of letting people know.
Speaker 1 (44:33):
That's true, and that's always the toughest thing in a
midterm and that's why you get that party in power
that loses seats. Let's take our last pause. You're listening
to a money sense Kevin and Dennis Kirsten will be
right back. Welcome back to the show. You're listening to
the advisors of Kristen Wealth Management Group, Kevin Kurston and
Dennis Kirsten. Danny. One of the things that drives me
nuts about our politicians is the double standard by which
(44:57):
they live by. I had a client recently who worked
for a major accounting firm and the number of hoops
this client had to go through in terms of what
they could invest in. They couldn't invest per SEC regulations
in any company or firm or fund or index for
(45:18):
anyone they audited. Oh wow, well there's only there's only
a couple of firms. You know, These major firms audit
basically everybody. And the hoops this client had to jump
through in terms of what they could invest in because
there was a conflict of interest in terms of who
they audited. Similar And I made a joke with him.
I said, well, if you just quit your job and
(45:38):
join Congress, there's no conflict of interest. You can buy
whatever stock you want even though you regulate. So what's
interesting is the regulators that are regulating these these people
who work at these auditing firms. They're the regulators and
they can buy whatever they want, but the people do
in the auditing cannot. So I found it interesting. And
(45:59):
you had a story here in terms of a double
standard on somebody who's in Congress.
Speaker 2 (46:04):
Well, this is an article in the Washington Exlament by
Byron York And when a government's five million dollar mistake
leads to a Covida scam and a house member's indictment.
Uh So, anyhow, I mean summed up this way? All right,
this is a Democrat representative, Sheila Cheerfulness McCormick of Florida,
(46:26):
and three hot defendants. Okay, so summed up in a
simple question, women, who knew if someone accidentally deposited five
million dollars into your bank account? Okay, wow, that happens.
Doesn't happen very often. We can point out the mistake
or would imit back.
Speaker 1 (46:45):
And the bottom line is this congressman, this Democrat woman, woman,
she got a COVID stimulus check of some kind which
was two decimal places off exactly.
Speaker 2 (46:56):
It was supposed to be fifty five and seventy eight dollars,
and they moved the decimal point, took place to the
right accidentally clarehole air and it ended up being five
million and seventy eight dollars. So they sat on it
for amount a month thinking what we are doing this money?
Can we have it back? I can hear the wheels turning.
(47:16):
So finally about six weeks later, well, they they opened
up about they ended up long story short, I don't
have time to do the whole story here, but they
had about seven or eight or nine shell accounts in
family members and friends and so on, and the money
started being dispersed out. I want to I want to
(47:39):
explain more when we have a future show. But you
know this sounds like to me a perfect description money laundering.
Speaker 1 (47:46):
Well, they're trying to cut the pie up and figure
out a way to shuffle it out to these shell corporations.
But the bottom line is, I mean they have she
got she got a fake amount of money from the government,
and instead of pointing out the error, she tried to
steal the money. And back to my original point, if
this isn't a congressman, and there's a lot of fraud
that happened during COVID and people were arrested, good and
(48:08):
that's good. But here's somebody that's trying to get away
with something, thinking that her status as someone in Congress,
nobody would notice no, and it'll allow her to get
away with it. And I'm really, frankly the double standard
with our congress people in terms of breaking the law
and never having any consequences. And this is just another
(48:28):
example of that.
Speaker 2 (48:29):
It's, Uh, there's a paper trail a mile long here
to more or less prove this. Emails, text messages, you
name it.
Speaker 1 (48:36):
And it's what do they say? Rules for thee but
not for me?
Speaker 2 (48:40):
And Uh, if they were to walk into a bank
with a mask on course during COVID, you would have
been stolen five million dollars and walked out the door.
What's gonna happen to him?
Speaker 1 (48:51):
Yeah, it's your responsibility in that situation to point out
the error and if you go spend the money, you've
broken the law. Yeah, thanks for listening everyone, We'll talk
to you next week.
Speaker 2 (49:04):
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 two
zero zero six seven or eight hundred eight seven five
seventeen eighty six. Their email address is Kirstenwealth at LPL
dot com and their website is Kirstenwealth dot com. Opinions
(49:25):
voiced in this show are for general information only and
are not intended to provide specific advice or recommendations for
any individual. To determine which investments may be appropriate for you,
consult with your financial advisor prior to investing. Securities are
offered through LPL Financial member Finra SIPC
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