Let's Talk Money

August 27th, 2023

Episode Transcript

(00:00):
And good morning and welcome to let'stalk money here on eight ten and one
oh three one WGY. I'm RyanBouche. I will be with you all
today, Glad to be here,Happy to be with you all for the
next hour. So so welcome.I hope you're having a great weekend,

(00:20):
and let's get things started. Ifyou have any questions, you want to
talk about the markets, you wantto talk about financial planning, topics,
retirement planning, whatever it may bethat is top of mind, give me
a call. You can reach meone eight hundred talk WGY. That is
one eight hundred eight two five,five, nine, four nine. A

(00:42):
lot that I want to discuss today. We can recap this week in the
markets kind of a you know,a bit of an up and down week
kind of you know, similar towhat we've been seeing, you know,
mostly this past month. Right inAugust, we had such a sort of
rocket ship increase in the markets overallstarting this year off, and participation in

(01:10):
mostly all the indices as well,maybe outside of energy, but other than
that, a lot of strength inthe market to start the year. But
we're seeing a little bit more ofyou know, some choppier weeks choppier trades,
and August has definitely been a littlebit up and down as I look
at it so far a month today, having a lot more volatility,

(01:32):
and this week was no different.The good thing was though, that we
had a nice strong clothes to theweek. Friday was a good day in
the markets, and you know,with the ups and downs throughout the week,
the SMP was up almost a percent, the NAZAC had a nice bounce
up two point three percent. Sothe markets were able to snap a three

(01:53):
week losing streak this week. Sosome positive news heading into the weekend and
hopefully into next week, and we'lltalk a little bit about what's driving that.
Really. The big news on Fridaywas Federal Reserve Chairman Jerome Powell giving
some commentary. They're at their JacksonHole's summit to close out the week and

(02:14):
so had some commentary. Was youknow, relatively balanced. I would say
I think market sort of fell inline with market expectations, which is why
markets sort of had a catalyst followinga speech, because in the morning markets
were actually down pretty significantly, andit was nice close to the day and
close the week, but you know, probably a lot more to do with

(02:38):
market expectations there, although they didhe did talk about the potential for further
rate increases. They're talking about,you know, inflation still higher than where
they want it to be, andthey're going to be data dependent as they
move forward. And we'll talk abouthow one that's affecting the markets, right,

(02:59):
but we'll also talk about how that'simpacting the interest rate environment and what
those expectations are moving forward, becausewe've you know, not only have we
had this great run up in greatyear so far for the equity markets,
the interest rate environment continues to comeup. And I talked a little bit

(03:20):
about it, and I can diveinto it in more detail, but sent
out a just a commentary to ourclients yesterday talking about this a little bit
in terms of how far we've comesince March when when yields were just in
a free fall, right, ifyou remember with Silicon Valley Bank and that

(03:42):
fear around a prolonged banking crisis reallyput a lot of fear into the markets,
mainly on the interest rate side andinterest rate environment. But you know,
we've we've gradually and continually gained yieldsfrom there, and we'll talk about
how you know what's again, what'sdriving it, kind of what may be

(04:02):
some catalysts for that moving forward.How we're looking at this interest rate environment,
how that plays into client's portfolios,right, because you know, now
there's there's more options out there,and the dynamic of a you know,
let's call it a sixty forty orfifty fifty balanced portfolio. It's a lot

(04:24):
more attractive today than it was Idon't know the last ten, twelve,
fifteen years in terms of where theinterest rate environment was and how low rates
were and yields were. It's hardto make money in the fixed income side,
but that has changed and there's goingto be more opportunity from here.
So we'll talk about that. Howwe're thinking about our client's portfolio, some

(04:46):
of the changes or strategies were implementingthere and just you know, high level
what what do we look at,what's driving some of those decisions, and
you know how you can be thinkingabout that as well. We had major,
major headlines middle of the week,right we had Navidia huge, huge

(05:08):
earnings blowout, both top line,bottom line everywhere. Margins are good.
Uh, you know, a lotof the market. The stock was way
up in after hours trading, butyou know, kind of came back to
reality, and you know, rightnow, I think in terms of future
growth in the market, whether it'sNavidia, this whole AI sort of resurgence,

(05:32):
this is going to be a thisshould be a good catalyst for the
markets. But as we saw intoThursday, in over the week, you
know, wasn't wasn't really the massivecatalyst to propel the markets for markets actually
traded by the time you know,we got to the next day and in
regular trading hours, market actually tradeddown pretty significantly that day. So again,

(05:58):
good news there. And I think, you know, with the AI
boom and the you know, positivityaround that, I think that's going to
create obviously opportunities in the market,and again could be a good economic catalyst
as we've sort of kind of comethrough this timeframe where a lot of expectations

(06:20):
of recessionary factors pulled back, slowdowns, whatever it may be, this could
be that catalyst to keep earnings high, keep momentum, keep growth going.
But I think what you're seeing,you know, a lot of that had
been priced in already and just judgingby this week's trading and what we saw

(06:41):
could be an element of it doesn'tmean that, you know, it's not
a positive area moving forward and thatthere couldn't be some you know, intermediate
to longer term growth from it.But certainly the immediate takeaways right from this
week and how we're kind of lookingat that is a little bit of a
maybe a lot of that has beenpriced in so far. And we'll talk
about some of the other general themesthat we're seeing right now in the market,

(07:05):
especially like I said, August hasbeen a little bit of a slower
month versus the rest of the year. We're seeing a little bit of a
pullback. Frankly, it's not entirelysurprising. We actually talked about this.
I probably talked about it on radioa few weeks ago. I've been talking
about it with clients and our clientcommunications in that you know, when you

(07:28):
have years where I think January wasa was a huge run up to start
the year, we're seeing significant outperformancein the growth sector, which you know
over time that tends to happen,right a lot more upside. You know,
you can kind of see more priceholtility on the up and the down,
and when you're in a good market, that tends to play out and

(07:49):
markets tend to be up versus beingdown, and so that's a good place
to be. And so we sawyou know, kind of a major catalyst
to start the year there, andwhen that happens, especially when the first
two quarters of the year, it'snot unsurprising to kind of see a little
bit of a lull as we getinto the third quarter, especially August,

(08:09):
and you know, just on ayou know, cyclical basis, that tends
to be a little bit of aslower time for the market and it doesn't
hold up as well. So againI don't think it's anything to be overly
concerned about. But again, ifyou have cash on the sidelines, you're
implementing a strategy, it's important totake this all into account. It's important

(08:33):
too, you know, we're youknow, as we lead the investment committee
and make decisions on client's portfolios.There's a lot that goes into it,
right. You can base a loton fundamentals and you know, different ways
to sort of look at the valuationof the stock market, but you know,
at the end of the day,that is not everything. There is

(08:54):
a lot more that goes into itthan just pure fundamentals. And you're looking
at some technicals, looking at someyou know, charts to kind of help
make decisions. And again certainly notday traders here and not trying to make
a you know, quick dollar here, quick dollar there, but understanding sort
of you know, where the marketthemes are, where maybe some momentum,
where some of the trends are certainlycan help to make you know, higher

(09:18):
level, longer term investment decisions.So those are the things we're doing now.
And again a lot of these themeshave been ones that we've been talking
to clients about and so talk alittle bit about that as well. Again,
phone lines are open, got anyquestions, Give me a call one
eight hundred talk WGY. That's oneeight hundred eight two five five nine four

(09:39):
nine. And you know some ofthe theme this week. And you know,
it's it's amazing we we get youknow, we meet with a lot
of prospective clients every week. We'rewe're meeting with folks and talking to them
and it's amazing to me sometimes whenyou know they come in and they share

(10:00):
with us. Yeah, I've beenyou know, working even a long term
advisor working with and uh, youknow, they don't hear much from them,
whether it's you know, emails tocheck in and give them some guidance
on the market, calls, whateverit may be. And it's always amazing
to us. And like I said, we were when we meet with any
perspective client. I mean, oneof the major points that we want to

(10:24):
drive home is how important our communicationis and in communication style as well.
Right, we want to we wantto make this stuff approachable for for clients
and the folks that we build relationshipswith and work with, and we want
them to understand what we're doing justas much as you know, hopefully as
much as what we're how much weunderstand what we're doing, We really want

(10:46):
them to be keyed into the decisionswe're making, the thought process that goes
into it. Whenever we make,especially a tactical trade within the portfolios,
letting our clients know, hey,this is what doing and this is why
it's so and so important for usthat our clients are on board and understanding

(11:07):
of what we're doing, because ithelps them feel comfortable. You know,
this is it's money, right,it's it can it can feel stressful at
time, especially you know, ifyou get some volatility like we've seen this
last month and understanding and feeling confidentin the approach that you're taking within your
portfolio is so key. With that, I'm going to take a good to

(11:31):
go to our phone lines. Nowwe have Jim in Saratoga. Jim,
how are you doing today? Good? Ryan, Thank you for doing a
show today. Absolutely, thanks forcalling. Yeah, I got a couple
questions and then I'll hang up andjust listen to your commentary. Okay,
perfect. I've got a broke I'vegot a broke Bridge account, my brokeridge

(11:54):
account of Beyonce. It's through Vanguard, so it's been low cost type of
accounts and I've held it for twentyfive or thirty years. So anything that
I sell in the brokerage account,I'm paying large capital gains because I've been
in stuffer for that long. Mymy four oh one K. Obviously,

(12:15):
you don't have to pay capital gainswhen you when you make out changes.
So and what I'm curious about isI'm I'm invested one hundred percent in stocks,
you know, across the boards.The question that I have is,
at some point in time, shouldI be looking at my four oh one

(12:37):
k and you know, getting outof some of the stock holdings that I
have there and going more into shortterm these you know, income side of
it. Now I see through myFidelity account, I can buy you know,
nine months CDs or three month CDsor and you know they're paying five

(13:00):
five and a half percent. Sothat's that's the that's the one question,
you know, whether whether I shouldlook at that in my four or one
K account doing that. And thenthe other question I have is it seems
like healthcare and the Russell two thousandhave been lagging. I think the Russell
two thousand. I bought an ETFoff of the Russell two thousand, and

(13:24):
I think I'm still down twenty percent. Again, I don't I'm not selling
it. I don't need it immediately, but it seems like it's lagging in
terms of recovery compared to the Sand P or the market in general.
So thanks for your time and havea great day. Absolutely, Jim.
Now, thank you for the calland two really good questions, and so

(13:45):
I'll try to go on. I'llanswer you for your second question for us
actually, because you know you're topof mind and Jim's asking about the Russell
two thousand and healthcare overall. Sowhen we're looking at the market environment this
year. You know, Russell soin for listeners that maybe aren't familiar Russell
two thousand is more small cap companies, so companies that are smaller in size,

(14:13):
and you know, they can definitelytrade a little bit differently than maybe
our typical large cap companies that aremaking up right the S and P five
hundred or the NASTAC that maybe we'rea little bit more familiar with. In
the Russell two thousand, small capshad been lagging for quite some time,
and you know, I think abig element of this, right is when

(14:35):
we talk about the first half ofthe year through mid May, it was
the big seven that made up allof the gains in the SMP five hundred
for the year. It was Amazon, Tesla, Google, Apple, Microsoft,
the video I think I'm missing one. I'm sure someone can fill me

(14:58):
in, but those were the companies. It was these large cap growth companies
that were really driving the market.And you know, to begin the year,
we weren't seeing a lot of participationfrom other areas of the market.
When we actually you can find iton our website under our insights, under
our webinars. We did a webinarin the third quarter of the our latest

(15:26):
market update, right, we didit in July thirteenth, so you can
see it's Q two, twenty twentythree market update. And there's I know,
there's a chart in there that showsthe discrepancy between large caps and small
caps, and when you look atit through the first half of the year,
that discrepancy was stretched to the max. It was about as far of

(15:50):
a disconnect as you could get historicallyspeaking. And so you know, how
do we view that. Well,One, if if you were sitting in
small caps wasn't doing great versus thoselarger cap piers and was certainly an underperformer.
On the flip side, that tradetends to reverse itself. And what

(16:11):
we started seeing in the last coupleof weeks or last couple of months is
not only did we start seeing strengthin small caps, but we started seeing
strength in small caps cyclicals. Andwhat that historically shows is underlying economic strength
that's typically a very very strong catalystfor more longer term growth. Now,
you know, we've also been talkingabout the volatility in August so far,

(16:34):
so that is absolutely true that we'veseen a little bit more volatility and that
the market has cooled off a bit, but we're not looking at these markers
or indicators to make you know,one day or one week trades. You
know, these are some of thecatalysts that we're looking for for a longer
term sort of direction of the market, and those are really really good indicators.

(16:56):
And we've talked about that bigger breadthof the market starting to participate.
So yes, I think small capsin along those lines. You know,
I talked about growth. Well,healthcare had a great year last year.
It's a little bit more of adefensive strategy and they have lagged to start
the year. But you know,depending on how your portfolio is built,

(17:18):
it could be a nice defensive areain the market to just you know,
have a little bit of a sectorallocation there, because again, it's going
to trade a little bit different thanthe larger cap companies that make up you
know, those those six or sevencompanies make up nearly thirty percent of the
SMP five hundred right now. Sowhen things are good there, well it's
great, but like we saw lastyear, when things slow down in those

(17:41):
areas of the market, it maybe nice to have a little bit of
diversification that can hold up. Inhealthcare, did that last year, So
so I hope that covers the healthcareIn the small cap conversation, Jim,
for you on the flip side,you know, it sounds like you have
most of your investments in portfolio andequities right and depending on it didn't catch

(18:03):
how old you are, but dependingon your level of risk tolerance and understanding
of the markets. You know,some people can feel comfortable doing that right
because we know over time again stockstend to be up and if you're a
long term investor, you've probably accumulatedconsiderable wealth and so that's an amazing thing.

(18:25):
As you're getting to the point whereyou're thinking about it, and it
sounds like maybe you are thinking about, you know, needing to pull distributions
because you were talking about the taxrates on your long term gains and that
Vanguard brokerage account versus what's happening inyour four O one K account. Yeah,
you could have huge, huge gainsin that brokerage account. If you're
getting them at long term capital gainsrates, it's either going to be fifteen

(18:47):
or if you're in the highest taxbracket, twenty percent still is going to
be under what you'd be getting isyour ordinary income rate, So that's a
good thing, and you're only payingtaxes on the gains versus if you start
pulling money from a four own kor IRA, that full distributions taxable in
its tax at ordinary income rates.So even though you could have massive gains

(19:08):
in that brokerge account, could stillbe more tax efficient. When we work
with clients, we're looking at youall the different types of accounts and we're
really being so strategic in terms ofhow we're pulling distributions. The one thing
I will say is now that weare in a very i would say more
lucrative interest rate environment than we've beenaccustomed to over the last fifteen twenty years.

(19:29):
There's great opportunities in the fixed incomemarket. And what we do for
our clients is those clients that aretaking distributions, we're setting aside two years
worth or so into a much moreconservative allocation, knowing that if we get
stock market volatility, we have areasof the market where we can pull those
distributions from and not have to worryabout that volatility. Because the biggest concern

(19:53):
in retirement is having to and it'scalled sequence of return risk, and it
could be a bad timing of yourretirement. But you know, we call
it sequence of return risk, andhow we mitigate that risk is by having
those two years worth of distributions ina conservative holding, because where a sequence
of return risk comes into play is, you know, you get a twenty

(20:15):
twenty five thirty percent draw down inthe market. Yeah, on paper,
that could hurt, but as longas you're not selling, you have time
for those positions to recover. However, if you're forced to liquidate those positions
when they're down twenty five thirty thirtyfive percent in some cases last year even
more in some holdings, if you'reselling out at those lows, you have

(20:38):
less money there and it has lessopportunity to recover as the market goes up
and down and hopefully over time isgoing more up than down. And so
that's where you can run into somerisk from a longevity in retirement planning perspective.
So that's why we put two yearsworth in a more ultra conservative holding,
and so that you know, maybethink about how much you need to

(21:02):
live off of and if you're onehundred percent equity, maybe you'd feel more
comfortable having two to three years worthin some areas, and you know,
looking at you know, potential twoin three year. You know, even
if it's just treasuries right now rightwhere we've seen how that interest rate of
environment has just you know, youcould get two years over five percent today,

(21:22):
three year at over four point seven. And we've been we've been feathering
into these areas of the market forour clients over the last few weeks and
months, taking advantage of it.So that may be a way, you
know, to do a you know, six months to three year treasury ladder
that you know that those funds becomeavailable to you in whatever accounts you need

(21:42):
them from and you can start youknow, pulling those distributions as they you
know, start maturing, and thatmay be an area to look at.
And you know, right now we'relooking with markets up, hey, not
a bad time to raise some ofthat short term funds that you need.
So that's that's how I'd be lookingat it, Jim, And hopefully that
helps answer your question a bit.You know, if you ever have any

(22:06):
follow ups or you can always callback into the show or call us at
our office, we'd be happy todiscuss in more details. So I'm coming
up to one minute until our newsbreak I know I have Brian on the
line. Brian, I'm going tohold off going to you. If you
would stay on, we can startour conversation after the news break. It's
just going to be a few minutesand we've stay on, we can answer

(22:30):
your questions and hopefully get into agreat discussion. So again, Jim,
thank you for the call. Thosewere two really great questions and hopefully I
was able to get into him andanswer them in a way that that was
helpful today. So when we comeback, we'll hopefully get to Brian and
Oneana and we'll talk a little bitmore about kind of where the interest rate

(22:52):
environment is today, how we're thinkingabout fixed income shared a little bit about
what we're doing, but we canget into that in a little bit more
detail. So stick with us throughthe news. We'll be back. You're
listening to Let's Talk Money here oneight ten and one OHO three one w
G Y And welcome back to Let'sTalk Money here in eight ten and one
OHO three one WGY. Thank youto all the listeners out there who joining

(23:17):
us today. Appreciate you tuning in. I'm Ryan Bouche. I am going
to be with us for I don'tknow the next twenty five thirty minutes.
So if you do have any questions, want to jump in, give me
a call one eight hundred talk WGY. That's one eight hundred eight two five
five nine four nine. I'm goingto go back to the phone lines.

(23:37):
I think we still have Brian inOneana on the line. Brian, you
there today? Yes, good morning, Hey, good morning, Thank you
for calling in, thank you forhaving me. I have a question on
a life insurance policy. It's awhole life policy, okay, and I
was wondering how I can tap intothe cash surrender value without getting hammered with

(24:03):
texts. Okay, yeah, soyeah. Have you have you had any
conversations with the agent or firm whoprovided the insurance policy? No, I
have not, Okay, Okay,they're probably they're all relatively similar in terms

(24:29):
of, you know, we don'twe don't sell any insurance policies. We
do work with our clients as we'reyou know, if they come over with
the whole life policy or have one. But if there is a cash friend
er value and you're trying to tapaccess to it, there's gonna be a
few different ways that you may beable to go about that and depending on
what the value is, how longyou've had have you had the policy for

(24:51):
for long? Yes, approximately twentyfive thirty years? I'm not okay exactly
sure, okay, okay, no, that'll be good. Yeah. So
I think probably the best start is, you know, either reaching out to
the broker agent on that or reachingout to whoever the the insurance provider is

(25:12):
to just understand what the implications onyou know, tapping into that that money
is for you. I know formany that's that times can be a selling
point for these insurance policies and youknow, may be able to have access
to it. Like said, it'sthere may be some differences between these policies,

(25:33):
So I don't want to go intolike the specifics of it per se,
but you know, for the mostpart, it should be relatively straightforward
working with the insurance provider on that. Okay. At one point, I
think I listened to the show thatfollows you on Saturday Mornings, The Law

(25:55):
Show, and he said that somehowyou could borrow from the whole life account.
What what was did he mean bythat? So you you can tap
into, like I said, thosefunds you can borrow from it. Oftentimes
that's going to probably be tax favorableto you if you're able to do it,

(26:15):
depending on how much. And again, how the policy is written,
you know, some of the fineprint I would say to it in terms
of what is able to borrow fromit and kind of what those terms look
like for borrowing from it. Again, it's going to be really more specific
to how the policy was written anduh, you know kind of the features

(26:37):
and what the options are from it. Sorry hard to say without you know,
having the document in front of usand really being able to take a
look at it, but that isone of the I would say, I
guess benefits to those types of policiesis you know, not only the build
up of a cash value there,but also the ability to potentially borrow from

(27:00):
it and take a loan from thepolicy. You know, again, the
amount that you can take will probablyvary, you know, again depending on
the type of policy. And thenyou know that policy will act as collateral
to whatever the loan that you're takingout. And uh, you know that
may again given where rates are rightnow, it may be favorable or may

(27:27):
not. Now that interest rates area little bit higher in terms of what
that loan looks like from it.Okay, well, if I'm taking a
loan from it, then would Imaybe be better off just taking a lop
some and paying the tax? Itcould be again that ordinary income it would

(27:51):
be so again depending on you know, the the amount sort of what if
that has an impact on your taxbracket? Right, So that would be
part of that analysis in terms of, you know, what is that true
cost of taking it. Is itneeded for you know, more of long
term purposes, is it more neededfor kind of short term need and uh,

(28:11):
just kind of looking at where youknow, how you kind of need
that and how it fits into youroverall plan. Are you still working,
Brian, it would be just tohave a little more in savings account slash
emergency fund m H is what Iwas looking to bump up. Yep,

(28:37):
yep, yeah no. And youknow, depending on kind of what you've
you've paid into that policy. Youknow that if you were taking it as
a withdrawal, you know sometimes thatcan be that can be tax free as
well. So it really kind ofdepends on you know the nature of the
plan, uh that economics of itand kind of seeing what does you know

(28:59):
from a cost from what you needit for because sometimes too, like if
if you get to a certain pointand you know, to me, I
always I do view insurance, especiallylife insurance, as income replacement. That's
that's always how you view it,kind of looking at policies and looking at
what makes sense for clients. Youknow, to me, insurance life insurance

(29:21):
is meant to be income replacement,so you know, if you get to
a point where you don't necessarily needthat income replacement, and maybe taking some
of the money out of the planto help fund other areas, because again,
yes, it may be a goodbenefit for your beneficiaries, you know,
hopefully long long and you know,long ways down in the future should

(29:44):
you pass, but you know itmay be more beneficial to you and can
put more to a better use now. And like I said, if if
you don't necessarily need the life insurancefor the purposes of what life insurance is
there for, then you may havesome good options to take withdrawals or alan
on the policy, depending on kindof what those what those numbers look like

(30:04):
for you. Okay, very good, Thank you very much. All right,
Brian, best of luck and whateverdecision you make. Thank you.
Yeah, thanks for the call.Again, our phone lines are open one
eight hundred talk WGY that's one eighthundred eight two five, five, nine,
four nine. And again with witha lot of these, whether they're

(30:26):
insurance contracts, nuity contracts, oftentimesto be so many you know, variations
or policy riders that that you canpay for and be part of the policy.
But without knowing exact ins and outsof how those policies are working,
it's hard to make, you know, blanket its statements as to what the
best approaches. And again it oftentimescan depend on your tax situation, your

(30:51):
life situation, other factors that thatplay in. And that's why it's so
important when we're doing comprehensive financial planningfor our clients. Obviously, we do
a lot of work with the investmentportfolios and the investment management, and that's
a huge element of the work wedo with clients, but getting into more
comprehensive planning with them, you know, it uncovers a lot of these different

(31:18):
issues that may arise and give usthe ability, right you know, take
take Jim's question from earlier, he'sgot money in taxbill account in four one
k i R a type of accountsqualified accounts and so there's there's major differences
in how those accounts are going tobe treated for taxes, and how are
you accounting for that? I meanone of the things again we stress that

(31:44):
so much of our work is withmanaging our client's portfolios. That's a huge,
huge piece of the work we do. But we talk about optimizing for
our client situation. How can weoptimize how can we you know, a
year like last year where the marketsare down, we have little control over
what the overall market is doing.We can be taxical in some pieces of

(32:05):
the portfolio, but in terms ofwhat's out of our control versus what's in
our control, tax planning is verymuch in our control through the financial planning
process, and if we can uncoverand understand the different needs and circumstances for
clients, we can really optimize theirsituation from a tax efficiency standpoint, from

(32:29):
a legacy planning standpoint. Right again, take take gyms and it was a
brief conversation from earlier, but beingone hundred percent equities, you know,
sometimes you may get a situation wherefor tax planning purposes right in twofold,
right as I'm just talking through thescenario, I'm thinking of different ways to
be looking at this. On onehand, we talk to some clients and

(32:51):
they're planning, you know, notonly for their own, you know,
remainder of their life, but fortheir children's lives as well, and thinking
about estate planning topics and estate planningissues, and so, you know,
holding one hundred percent stocks, well, they may be planning for further than
the twenty twenty five years that maybewe're planning for the remainder of their life.

(33:13):
They're tacking on another twenty five thirtyyears for their beneficiaries, knowing that,
hey, I want this money towork long after I'm gone, and
so I know, you know,over a forty fifty sixty year time horizon,
that money's probably going to be betteroff growing in stocks than bonds,
And that may be part of theconversation. The other thing is is,
as I say, as I'm justtalking about the situation, is there's different

(33:37):
estate planning issues that come at passing. And maybe if you have a lot
more in taxable accounts, well,you know, maybe you've held them for
so long twenty plus years, asJim alluded to, you know, maybe
your cost basis was two hundred thousandand now it's worth close to a million,
and that could happen, right,That could happen over a twenty year

(34:00):
time horizon with the markets up betweenseven and ten percent in the equity markets,
that would not be unheard of.And if that's the case, let's
say you had you know, sevenhundred eight hundred thousand dollars of gains built
in because you just haven't done anything. You just let it sit. It
was probably your best approach to investingin the first place. You know,
like you're passing, you get astep up in cost basis, and so

(34:22):
those conversations are part of you know, maybe, yes, maybe it's a
little bit more to take distributions fromuh, you know, qualified account like
an IRA, and maybe you're payingmore taxes today. But if you're looking
at your wealth as generational wealth andyou're planning for longer than just your life

(34:42):
expectancy potentially because you want your kids, grandkids, whoever it may be,
to benefit from this, there's gonnabe different strategies. There's no there's no
one way to look at this.And if you want to maximize, you
know, it's not always how muchyou make, it's how much you keep.
And if you want to think abouthow you can keep the most possible.

(35:04):
You have to do in depth taxplanning. You really really have to,
you know, look under every stone, really figure out what the situation
calls where, what's important to you, and how we can plan around that.
In some cases, yea hey,one hundred percent equity portfolio, especially
in a tax bill account with appropriatetax planning, estate planning, and longevity

(35:25):
planning circumstances accounted for, that maywork. You may have someone who loses
sleep every day the markets down ahalf a percent. One hundred percent equity
portfolio probably doesn't work. And ifthey're better off in a sixty forty fifty
fifty portfolio and they can accumulate thereturns they need to get through retirement doing

(35:45):
that, then that may be betteroff as well. You know, there's
no one right way cross all clients. Situations are also different, but that
in depth holistic planning is where youreally, you know, can save the
most money and really thinking through againwhat your goals are, what your objectives

(36:06):
are, and it's not just youknow, you're spending goals, right,
it's family planning goals, it's estateplanning goals, it's you know intergenerational goals
and uh, you know, someof those decisions come down to kind of
uncovering that and understanding what's important.And like I said, that's where where
I think we do our best workis when we're optimizing for those tax situations,

(36:29):
understanding where they're at. And soyou know, both with Jim and
even with Brian, right, there'sgoing to be different tax circumstances that come
into play with some of their questionsand some of the issues that they're dealing
with, and it's going to takea little bit more to fully understand what
the ramifications and impact would be onthose tax conversations. So great questions,

(36:51):
appreciate you you're both calling in today, and a lot of good uh talking
points to go over. So again, our phone lines are open one hundred
talk WGY. That's one eight hundredeight two five, five, nine,
four nine. We're going to goto one last commercial break coming up here
in another minute or so. Whenwe come back, we'll probably have another

(37:14):
ten minutes or so. We cantalk about the markets. We can talk,
you know, about where the interestrate environment is today, how that's
impacting some of the decisions we're makingfor clients. Uh, you know,
we can talk I get more stuffI probably talked about a few weeks ago,
but more data and information. Andactually this may be a good segue
for when we come back for thoselast ten minutes talking about international markets and

(37:39):
how they've correlated or differed from USmarkets, how they can potentially play into
your portfolio or maybe how they maybe holding your portfolio back in some cases,
you know, And we can justkind of do it a little bit
deeper dive on you know, someof the decisions. And there's some great

(37:59):
eting options on your own or ifyou're in a four oh one K,
but there are I don't want tocall them hidden costs per se, but
there are some disadvantages even to youknow, some nice options within a plan.
So again, it's just it's justunderstanding how they play into your you

(38:19):
know, overall portfolio, just understandingwhat you're holding and what the impact some
of those decisions may have on yourfinancial future. So with that, why
don't I take a quick commercial break, and like I said, we'll have
about ten minutes. When I comeback, you can give me a call
one eight hundred talk WGY. That'sone eight hundred and eight two five five,

(38:40):
nine four nine. You're listening toLet's Talk Money here in eight ten
in one oh three one w gY And welcome back to Let's Talk Money
here in eight ten and one ohothree one WGY. We're in the last

(39:02):
quarter. I guess, last tenminutes or so of the show. Enough
time to get in. If youdo have questions, feel free to give
me a call one eight hundred talkWGY. That's one eight hundred eight two
five five nine four nine. SoI had a lot of good conversations today,
talked about markets, talked about thisJackson Hoole summit, and some of

(39:22):
the commentary coming from Jerome Powell onFriday. How you know, it actually
sort of propelled the markets forward,maybe a little bit surprisingly given the fact
that prates could still be going up. I think when you when you look
at the volatility we've seen recently,right, you go back, and I

(39:43):
talked about this in a letter Isent up to clients yesterday. But you
go back to March or so,beginning of the year, and expectations were
for you know, the federal fundsrate was point seventy five percent lower.
It was in the high fours,about four point seven five versus five and
a half today. And you know, back then, the expectation was,

(40:07):
hey, we're going to get threeto four rate cuts before the end of
the year. Like the latter halfof twenty twenty three, expectation we're from,
you know, point seven five percentlower standpoint than we are today that
we're going to get three to fourmore cuts before the end of the year.
As it stands today, expectations inthe federal funds market is actually a

(40:30):
little bit higher than fifty fifty thatwe're going to get one more rate increase
before the end of the year,and we're going to get we won't get
a rate cut until June of twentytwenty four. Now, again, those
are just the market perceptions, rightThere's there's it's not necessarily built by you
know what the Federal Reserve. Iguess it is built based a little bit

(40:52):
on what their commentary is. Butyou know, this is just an open
markets kind of probability of what themarket is dictating right now. The markets
are pretty good at times at estimatingkind of with current data and information,
and so we are a long waysfrom where we were in the first quarter
of this year. And you know, part of probably that growth trade to

(41:15):
start the year where growth was reallyin favor, is that, hey,
lower interest rates are much much betterfor those growth type of companies. Those
growth companies, a lot of theircurrent valuations are based and built upon future
expectations. The higher the interest rateenvironment, the lower the valuation would be

(41:37):
on future earnings. A lower interestrate environment and those valuations go higher.
So if the market was expecting ratesto start coming down towards the end of
the year, that's a catalyst,that's a good environment for growth year.
You know, those nastac type companystocks, And it wouldn't shocked me that

(41:57):
that is part of really what drovethe returns earlier in the year. Another
part of it was that, youknow, those markets were down over thirty
percent last year, and we typicallyget a reversion to the mean at some
point. And as that market inthat area of the market started to take
off, more and more investors wantedto pile in and ride the momentum.

(42:20):
But as we've gotten kind of laterinto the middle of the year, we
are seeing a little bit of acool down there right. We're seeing a
little bit more volatility, we're seeinga little bit more price pressure because again
it feels like we're going to meanthis higher for longer interest rate environment,
and that's that's not as great forthose types of stocks. It doesn't mean
they can't do well, but youdo tend to see them, especially in

(42:43):
the last you know, six tonine months, really really excel and do
well when the expectation was that wewere going to get a rate cut and
now that we're in this you know, potentially higher for longer environment, which
was part of our expectations from thebeginning of the year. I think the
two areas of CPI the consumer priceindex that is so so sticky right now

(43:07):
is wages driven by our really tightlabor market strength strength in the labor market
today as well as housing and againyou mean we're at we're at twenty five
year low. I think of supplyfor homes, over thirty percent of new
home or of homes being sold arecoming from new home construction. That's much

(43:31):
higher than what we typically see.And the reason is because there's so little
inventory on the market. And whatdoes that also do, It drives up
prices. So we have these reallyreally sticky areas of the market right now
that are keeping inflation higher than theFed wants, and we think that's gonna,
you know, continue to keep theserates at unless there's unless there's a

(43:53):
significant event like we saw in Marchwith Silicon Valley Bank. Although rates have
recovered from that, but that sentthe quick drop in rates. But given
this environment, you know, it'salmost like what the Feed is trying to
do to help ease inflation with higherrates in a big pocket. At this
market, it's hurting the inflation numberbecause those higher rates are keeping homeowners where

(44:17):
they are. They're not putting,they're not looking to move, because why
would you want to go from athree percent mortgage to a seven percent mortgage,
especially at the levels that the mediumhouse prices are selling for today.
Those are real, real dollars.And so this higher interest rate environment,
in one piece of the inflation measurement, is actually keeping inflation much higher.

(44:43):
With these lower inventory and higher pricesfor homes right now, I think,
you know, there was an elementof folks waiting for potential housing crash.
Well we certainly haven't seen that yet, and you know, with as little
inventory as they're on as there isright now, it's going to take a
lot to bring prices down. Soso that's hurting inflation. So we're seeing

(45:04):
this higher for longer environment. Andyeah, I think to a certain extent
that the markets have somewhat accepted it, right. We kind of got that
feedback on Friday and the way themarkets traded, and you know, we
have to be aware of that movingforward and making sure that both on the
fixed income side of your portfolio aswell as the equity side of the portfolio,

(45:25):
you understand what that environment does,how it could impact your holdings and
your investments, and you know,hopefully help have that help you make the
most, you know, the bestdecisions and the right decisions for your own
situation and portfolio. So I'm runningout of time here today. It's been

(45:47):
so good being with each and everyoneof you. Really appreciate you tuning in.
This morning. We had some greatcall in, some great questions that
we were able to go over andand help kind of paint a picture of
larger themes and conversations that we're havingwith clients each and every day. And

(46:07):
so again, thank you for thecallers, thank you for all the listeners
tuning in. I hope you havean amazing rest of your weekend. I
hope you enjoy the your Sunday andsummer comes to a close, enjoy what's
left. So again, thank youfor tuning in. You were listening to
Let's Talk Money on eight ten oneto three one w gu I have great

(46:29):
West of your weekend. Take care,