Let's Talk Money

September 2nd, 2023

Episode Transcript

(00:00):
Good morning, folks. My nameis Martin Shields. I'm the chief Wealth
Advisor at Bruchet Fumach Group and it'sgreat to be here with you to host
Let's Talk Money and take your questions. You can reach me at eight hundred
Talk Wy. That's eight hundred eighttwo five five nine four nine. Again
that's eight hundred eight two five fivenine four nine. So whatever's on your

(00:25):
mind, folks. As we alwayssay, there's no dumber silly question except
for the one you don't ask.And you may be doing your fellow listener
a favor by asking them asking aquestion that they have as well. So
give me a call and we canchat. I hope that you're doing well
on this gorgeous Saturday morning. It'sinteresting that now we're going in September and

(00:46):
we're going to have highs of ninetiesthis week. I think August we went
through all of August and we didnot reach eighty five degrees. So it's
about the entire month of August rollsto speaking fairly rainy and cool. I
know July was actually I think oneof the rainiest months of July ever.

(01:07):
So we had a May that wasscorching hot, dry grass, wet monsoon
summer, and maybe we'll be goinginto a sunny, dry September. I
always say, I think September inupstate New York is probably one of the
best months. It really seems tobe just a month we have great,
gorgeous weather and you kind of getto still enjoy being outdoors and doing everything.

(01:32):
And you know, you go outand it's kind of cool in the
shade, but you get in thesun, it's nice and warm. Just
an absolutely gorgeous morning. And beforeI came into the show, I had
a little walk with my wife andour dog, Charlie, and just really
appreciated where we are. And hopefullyyou're gonna do something exciting for the weekend,
or maybe you're just going to stayaround the house, which is good

(01:53):
too. But again, folks,if you have any questions on the economics
or finance or financial planning, whateverit may be, feel free to give
me a call again. You couldreach me at eight hundred eight two five
five nine four nine. So agreat week in the markets, you know,
really came through strong. You'll lookat the month of August and it's

(02:15):
a big u right. We startedat pretty much all time highs for the
year. We haven't gone back tothe all time highs that we saw in
twenty twenty one, but highs forthe year a market up eighteen percent plus,
and then we dropped down through themiddle of the month and then but
we've rallied back. We're close towhere we were at the beginning of August.

(02:40):
And you know, we're really inthis environment that's interesting that we're kind
of like bad news is good news, right, So what really was the
catalyst behind the market doing well thisweek? Well, there are a couple
of things. One, the Joltsnumbers, which is the job openings numbers,
came in lower than expected. Sowhat that means is this is the
number of jobs that are available andthat gets reported on a monthly basis.

(03:06):
It came in around eighty's the eightpoint seven million, so it was lower.
It keeps declining from its highs.And the idea behind this is if
we're going to go into the softlanding perspective that we've talked about, or
even this term of what's called nolanding, which means things continue to do
well from an economic perspective, inflationmoves to the two percent target that the

(03:30):
Federal Reserve has and with this situationwhere you have some good economic data but
some bad economic data, this couldallow the Federal Reserve in their September twentieth
meeting to pause and not raise interestrates. So as we started the month
and more into the middle of themonth, the expectations of the Fed raising

(03:53):
rates the Federal funds rates another quarterpercentage point was around fifty percent. Now
that is down to below ten percent. So with some of this weak economic
data, this is what the FederalReserves looking at. And Jay Powell,
who's the chair, they're looking atboth the inflation data and seeing where that

(04:14):
is trending, but they're also lookingat the broader economic data, right because
they have to be aware that inflationdata can vary from month to month and
that it could be trending lower,but it can spike higher quite quickly.
But if you had the economy showingsome elements of weakness, and in particular
on the labor markets which have beenvery strong, then that is maybe going

(04:35):
to give them the leeway to beable to pause in September. The next
meeting they'll have is in November,and you know I've talked about this before
the show, you could get intothis environment that we saw in nineteen ninety
five and ninety six. So ifyou remember that that environment, the Federals
have had raised rates quite a bitup coming up until ninety five and ninety

(04:57):
six, and then it paused onraising rates for a while. And if
you remember the nineties, that wasa great economic time. It was the
start of the Internet, with companieslike Yahoo really taking off and a number
of other dot com companies, andit was also a situation where telecom really

(05:17):
started to change US. I wasworked in corporate finance and telecom for the
nineties and it was when all thefiber was starting to put in to the
cities and everything, and the broadbanddata started to expand, and you had
this situation where you had a lotof economic growth that was occurring along with

(05:39):
this really transformational change with the Internetand telecom. Well, we could be
going into something like that where ifyou can get inflation under control, and
certainly from a global perspective, asI've talked about, if you have a
weak China, who's not it doesn'thave an extremely strong economy, so that
commodity prices can remain a little bitlower and then if you have a robust

(06:02):
US economy along with a few areaslike artificial intelligence and electric vehicles and alternative
energy sources and also infrastructure, allthese areas where you have a lot of
money being put into that could propelthis market and economy forward, and you
could have a situation. You thinkabout it. In ninety five to ninety

(06:25):
six, the market kept going higheruntil two thousand. Now it did get
to lofty levels in two thousand,so we're not necessarily looking for that per
se, but it can be asituation where we continue moving forward on this
track here and that the Federal Reservecan pause and not have to raise interest
rates. But I do think,like anything, there's always a term what's

(06:48):
called the two handed economists. There'syou know, these areas on one hand,
and then on the other hand,there are these challenges. I do
think it's important to appreciate that whenthe Federal Reserve raise rates as much as
they have, there can be somechallenges from an economic perspective. And the
big thing that we've talked about aswell is there can be a delay and

(07:11):
when you see those those changes,right, So you think about it if
you're a business or in your household. You know, you may have your
mortgage and it's fixed, hopefully you'rerefinanced. If you had a house a
mortgage back to three years ago,you could get a mortgage, a thirty
year mortgage, fixed mortgage for almostunder three percent, right, so you

(07:32):
think about that. Now we're lookingat thirty year fixed mortgages above seven percent.
Seven and a half percent depends alittle bit on your credit score.
So if you have that fixed,if you don't have a lot of credit
card debt where you're you're painting itoff every month. If you're doing that
so you're not being impacted by risinginterest rates. There are a lot of
situations where you wouldn't really get impactedby rates increasing. But over time that

(07:59):
starts to change. Right, asmore and more people are buying homes,
As more and more people are buyingnew cars, as businesses are refinancing their
debt, as all these things occur. Now, that low interest rate environment
where money was almost free, rightwith interest rates of two or three or
four percent, that's almost free money. And now as we start to get

(08:20):
into more expensive money, or franklyit's more normal of where we are,
then that can change people's attitude andbehaviors, and we're seeing a little bit
of that now, right, Butit's a mixed bag. As we talked
about last week, Walmart came outwith very good earnings, but another consumer

(08:41):
company like Target, was showing weakness. So it's a mixed bag is to
where consumers stand. And you know, I will say anecdotally with our clients
as we're having our conversations with them, you know, there are a few
folks that are losing their jobs indifferent situations, but in many of those
cases are coming out finding jobs prettyquickly and in many cases actually jobs that

(09:03):
are paying even more money than theyhad before. So you know, anecdotically,
we're not seeing any weakness with oursmall business owners. It's still a
challenge to hire people and in manycases they have to still put raises out
there to keep people. So there'sstill a lot of strength in the labor
markets. But we'll have to kindof wait and see how that goes.

(09:26):
You know, the unemployment rate dropI'm sorry, increased from three point five
percent for the August data that cameout on yesterday, and it went from
three point five to three point eight. The number of new jobs added was
one hundred and eighty seven thousand,which was above the forecast of one hundred

(09:46):
and seventy. But still it istrending downwards from the highs. We were
averaging over two hundred thousand jobs everymonth for almost twelve plus months that we
were in that situation, So weare trending downwards. And you can see
in the data that healthcare and hospitalityand service sector is still very strong.

(10:09):
The area of weakness really that stoodout is in transportation, and you know
we've heard that in some of thedata as well. If you saw on
the news, there's a big trucktrucking company by the name of Yellow that
has a eighty or ninety year history. They went into bankruptcy in the last
couple of weeks just because of weaknessesand also they probably didn't manage their business

(10:31):
properly. But there is weakness incertain segments, and certainly transportation is one
of them. The other area thatyou've see in some weakness is in manufacturing.
So there's something called the ISM ManufacturingData, and this exists both for
services and manufacturing, and what itdoes is it captures all this data and

(10:54):
if the score is above fifty thatindicates an area that is continue to increase
and improve. If the score isbelow fifty, that means that that area
is contracting. And the ISM manufacturingdata was forty seven, so that indicates
that manufacturing is contracting. But againanecdotally, as you talk to individuals from

(11:18):
an global perspective, I think manufacturingcontinues to move back to the States,
right, you know, I thinkglobal companies and even smaller manufacturings are realizing
that if they can make their goodshere in the US, they're really going
to be in a better spot toremove some of the unknowns that we saw
during the pandemic that we saw withRussia with the Ukrainian War, and then

(11:43):
we also saw with China with thetariffs that were placed on China. So
it doesn't mean that globalization is doneand not going to exist and we're not
going to produce things overseas. ButI do think that it means that global
companies are going to want to havemultiple locations where they can have things made
and that protects themselves. And youknow, you read about that even consumers,

(12:09):
right, consumers in general, andI put myself in this category.
I'd rather have something that's made herein the US that maybe you know,
the manufacturer pays a little bit moreto have it made in the US.
Hopefully it's of a high quality andeven sourced in the US. Right that
if they can source the material ina way that is sustainable and uh,

(12:30):
you know, use US sources andmanufacturing, I'm okay with that. There's
no reason we have to bring everythingoverseas, and certainly having multiple ways to
produce things, I think that's important. So you again, it's gonna it's
all data driven, but you know, I think again, I think there's
that opportunity where this market can continuemoving higher and the economy remains strong.

(12:54):
But I also think it's important that, as I've talked about this, you
know, never to get too carriedaway and everything in life it's about balance.
And you know, this has beena great year, much better than
most people had expected. Uh.You know, if you look at some
of the forecast for the year froma market perspective, it was not pretty.
So to see the market up eighteenor nineteen percent, that's fantastic.

(13:16):
But you know, always making surefrom a portfolio perspective that you're balanced,
that you are not getting overly carriedaway as you know, we're big believers
in technology, and you know,we have an overweight to technology, but
that doesn't mean that, uh,you know, you want to continue to
add to that sector at the expenseof other areas. I do think the

(13:41):
video came out this week with theirearnings, and you know, that's a
name that nobody really knew about,you know, to say, two or
three or four years ago, butthey're really the lead hip player and manufacturer
for artificial intelligence, and they cameout with stunning earnings in uh for the

(14:01):
first quarter earnings and the second quarterearnings were just as amazing. They just
show tremendous profit growth and revenue growth, and that's indicative of an area that
can continue to be strong. Butagain, if I refer back to the
nineties, uh, you know,you always want to make sure that when

(14:22):
you have opportunities to rebalance and touh you know, take a little bit
off the table on these games,to and not to become too overweight in
these sectors. It can be itcan be important. Right, So you
think about that if you had donethat in the nineties while tech and the
was booming and the dot com wasbooming, you'd be okay. You would
experience some decline, if you know, with the drop in the NAS deck,

(14:46):
but you would have been okay becauseyou would have been rebalancing across to
other asset classes and sectors. Andso I would just remind you to to
do that as well now. Andyou know, with the markets not at
all time highs but close all thetime highs, if you need cash for
something, if you're moving into adifferent timeframe as far as into retirement,

(15:07):
or if your risk torrance has changed, this is not a bad time to
do that, folks. This isnot a bad time to make sure you've
got that liquidity. And you know, the difference is also where we stand
with interest rates, right, sowe've talked about this on the show quite
a bit, which is, youknow, now we have a ten year

(15:28):
US Treasury rate. It was atfour point three now is at four point
one five, so it's lower thanit was from its highs. But at
four point three percent, it wasyou know, you have to go back
to two thousands, two thousand andseven to see a rate that is that
high. And frankly, you know, to be honest with you, I
think it's more of a healthy rate. I think when interest rates were as

(15:50):
low as they were. It reallyis artificially low. It just creates access
demand and you know those environments youthink it may be good. But as
I always say, slow and steadywins the race, and that's really what
you want. So to have interestrates back up where they are, I

(16:11):
think that's a good thing. It'smore of a healthy thing for the economy.
And also now as you rebalance,as I may be described, if
it's the right time to do thatfor you, you can get yields on
bonds that can be very good.Uh. You know, as I've mentioned,
if you if you've got cash sittingin the bank, you should certainly
whether it's with that bank or youknow, moving into a brokerage account and

(16:32):
getting into a money market account ortreasuries, you should certainly be earning anywhere
from four and a half to fiveand a half percent of that cash.
That that is a no brainer,that that that should absolutely be happening.
But even you know, for moreof a long term diversified bond portfolio,
you know, for uh, youknow a number of our clients we're building
out bond ladders where you know,we can be anywhere from four and a

(16:56):
half to five and a half percent. And also now we're going to have
that for two, three, four, five, seven, ten years,
right, So that's that's the importantthing to remember, which is, you
know, with cash or short termyields looking so appealing, you know,
many people just want to pile intothat, which is great, but this

(17:17):
is also a great time to lockinto longer term rates as well, and
that's what we're doing for our clients. I want to want to move on
to another a couple of the topics. But again, folks, if you
have any questions, you can reachme add eight hundred talk w GUI.
That's eight hundred eight two five fivenine four nine. Once again, that's

(17:37):
eight hundred eight two five five ninefour nine. So whatever's on your mind,
give me a call and we canchat. One of the things I
want to highlight is we've talked aboutthe change that was going to be occurring
with high income earners. That's individualsthat earn over one hundred and fifteen thousand
dollars that's starting in twenty twenty fourfor their ketchup amounts on their following K

(18:00):
plans. That means that they're fiftyand older, they could put up to
stars into a four one K andthat amount is only available that catch amount
is fifty and older. Well,it was going to have to go into
a ROTH component of a form andK, which is a change. The

(18:22):
current rules say you can put thatketch amount either into a pretax forming K
or a raw forming K. Butnow as twenty twenty four, that was
going to change, they would haveto have put that into a ROTH allocation.
But the IRS just came out andsaid, well, we'll wait a
second, folks, we're gonna we'rehearing a lot of complaints on this.

(18:42):
We're going to delay that ruling untilJanuary one, twenty twenty six. So
again, that change that you're gonnahave to put ketchup amounts if you're a
high income earner into a row fourenK is not going to start in twenty
twenty four. It's going to startin twenty twenty six, which I think

(19:03):
is a good reprieve in particular forplanned sponsors. But you know, I
always tell clients, even if you'rea high income murner, you still putting
money into a wrath component, especiallyif you're maxing out on your dollars,
that you can put into your formingK, and especially if there's an employer
match on that, which is alwayspre tax dollars. As of right now,

(19:27):
it's not a bad idea to contributeto the wrath element of your forming
K. Yes, you don't getthe tax deduction right now, and if
you're a HIR income earner, thattax deduction can be very valuable. I
can appreciate that. But you knowwhat I see is, you know many
individuals that are retiring and they havejust a tremendous amount of money in pretext.

(19:51):
So whether it's an I RARA orin their phone K, you know,
it can be a sizeable amount wayoutweighs what they have in a taxable
broke account, way out weighs whatthey have in a WRATH. And you
just have to appreciate that when youretire, all those dollars that come out
of that four on K, outof those I rays, it's going to
get taxed at ordinary income. Andyou know that's you know, it is

(20:15):
what it is. Right those dollarswere put in pre tax, it's been
growing tax deferred. So it's nota bad thing, but boy is it.
I'm telling you from a financial planningperspective, it is really nice when
you have that diversified a little bitwhere you have maybe some dollars in a
taxi account, where you have maybesome dollars in a roth ira. So

(20:36):
you know, even with this changenot going into place, I would still
recommend most people, even high incomeearners, putting some dollars into a wrath.
It's one of those things where yes, you're gonna have to pay the
price a little bit now, you'llhave to pay taxes on that now,
but I'll guarantee you when you retireand if you have a nice sizemall amount

(20:56):
into your wrath, it will bevery, very valuable. And you know,
we work with many of our clientsI'm doing wroth conversions, and my
colleague Harmony Wagoner just talk with aperspective client and gave or guidance I'm doing
that, and that's something that what'sgreat with our team is we can do
a tax projection for you and showyou what does that wrath conversion look like,

(21:18):
what is the current tax impact andis it worth it? Now,
It's not always worth it, right, so I want to be clear with
that. But doing wroth conversions,it is a situation where you know,
depends on what your income is forthat year, you've got to have cash
outside the IRA to pay for thetaxes, and it depends on what your
perspective is with those dollars. There'sit's not always a black and white situation,

(21:44):
but it can be valuable. Andagain with our team of enrolled agents
and CPAs and our tax knowledge,we can do that projection and show you
what the pros and cons are,So that can be very valuable to do
a wrath conversion where you convert thosedollars in particular before you need to have
them. And that's where quite oftenwe'll do this for clients, which is,

(22:06):
you know they may not need totake out IRA distributions, but maybe
they're in a lower income year forany given situation, and starting at age
fifteen nine and a half, withNew York State, you don't pay up
to twenty thousand dollars on distributions comingfrom your IRA, so you can do
that wrath conversion and not pay anyNew York State taxes up to twenty thousand

(22:27):
dollars and that's per person, Sothat can be a really nice strategy to
get those dollars into a roth letthem grow as long as you can,
because they're going to grow tax free. And even if it's just a safety
cushion, then if you have largemedical expenses as you get older or you
need assistic care, those dollars cancome out and they're tax free, and

(22:49):
you know, again it is agreat thing to do. So something to
consider, even though that rule hasnot changed. One of the last things
I wanted before we go to breakjust highlight my colleague Nicole goal Well just
did a great blog on what tobe aware of a financial perspective if you
are in the process of a divorce, and Nicole is an amazing colleague.

(23:12):
She's a CPA, sees a cdfaCertified Divorce Financial Analyst, and you know,
hopefully you're not in that situation,but if you are, you know
somebody who is. I would encourageyou read that blog. It's on our
website at bruche dot com under Insights, and she does a great job of
highlighting what you need to be awareof. So it would really encourage you

(23:32):
to look at that. And youknow, if you ever in that circumstances,
it's certainly to call in. AndNicole can have a conversation with you
and give you some guidance of thingsyou need to be aware of. Well,
folks, we're gonna go to commercialbreak, but come back and join
us as we continue to give yousome insight on your financial situation and we
take your questions. You're listening toLet's Talk Money, brought to you by
Bruche Financial Group. Well, wehelp our clients prioritize their health while we

(23:56):
manage their wealth for life. Welcomeback, folks. For those of you
who just join us, my nameis Martin Shields and i'm your host,
kay for Let's Talk Money. I'mgiving my colleagues Steve Bouchet a well deserved
break and it's great to be herewith you on this gorgeous Labor Day weekend.
I think it's always important during theLabor Day weekend too. I guess

(24:18):
a couple things. Appreciate all thoseindividuals that are working, and you know,
in particular, you know, there'sa lot of folks that don't get
recognition for the things they do,and they are just individuals that always come
through. And I will say thisto all my colleagues. I just we
have a team of twenty professionals andthey're just I can't think of better people

(24:41):
to be working with. So Iwant to say thank you to all my
colleagues for all that you do andjust how much I appreciate working with you.
But you know that's the case,right, Just I don't know if
you're in a restaurant or you know, different situations where it's sometimes the people
behind the scenes that get stuff done, and so thank them for or all
that they do. And I guessthe other thing too is I would thank

(25:03):
those generations that came before us.I know, with myself, I'm fortunate
enough to have this job that Ilove and have gone to get an education
I love. But you know,my grandparents were One was worked in the
minds for a number of years andanother one worked on the railroads, and
you know it was because of themand their hard work that you know,

(25:23):
allowed my parents to go on tobecome teachers and then me to be in
the field that I am, andsame thing with my siblings. So uh,
you know, it was all theirhard working labor that got us to
where we are. So appreciating thegenerations before us that got us to where
we are, I think that's alwaysimportant. Well, I want to go
to the phone lines. We haveJim from Albanny. Jim are you there,

(25:45):
yes, Martin, can you hearme? Yes? How are you
doing today? Good? Good?First of all, thank you for giving
your time to give this free adviceout more or less. Yeah, no
problem, I've got yeah, I'vegot three topics. I just want three
points I wanted to ask you.I'll just list them out and then I'll

(26:07):
just listen. From the first one, is it seems like in a rising
interest rate environment that growth stocks wouldbe challenged, And yet, like so,
I'm a lifelong investor, primarily Vanguard, and I look at my Vanguard,

(26:29):
you know, I mean the Vanguardeks a growth eks VUG as a
symbol. Now, I know thatthat took last year. It was down
probably it was about about as muchas it's up. But it's up like
thirty six percent this year. Soit just seems to me that, you
know, why is that? Youknow, what? What? Why?

(26:51):
Why would in an interest rate environmentthat's rising, why are growth stocks still
seemed to be performing. That's that'sone question. The second question that I
have is this whole topic of tryingto fed, trying to get to two
percent and rising interest rates, andit's it's like, you know, it's

(27:14):
month after months. Are they done? Are they going to pause? Are
they going to raise or are theygoing to pause? Are they going to
raise? Me? To me,what happens when they pause? I mean,
like, let's say they get tothis two percent number that I don't
know if they'll ever get to that, but if they do get a point
where they get into an extended pause, what do you expect the markets to

(27:36):
do? And then the third pointI have is at mid caps and small
caps, like the Russell two thousand, I still see it down twenty percent
from where it was and it seemsto be lagging in just any comments about
the small and mid cap you know, Russell two thousand performance from that point.

(27:59):
Great? All three great questions.Yeah you're welcome, Thank you,
thank you. All right, Jimask three questions. Jim obviously smart individual
and knows this stuff here because theseare very intelligent questions. Let's let's talk
with the first one. First growthstocks. So what Jim's talking about is
is interest rates rise. Growth stocks, which are companies that are growing at
higher multiples. You know, theytend to be tech stocks, bio biotech

(28:22):
stocks higher multiples, meaning that they'retrading more on either earnings that they have
or sometimes they don't even have earningsright there, they're growing market share,
so they may actually have negative earnings. There are a number of companies in
that category. So what you haveto appreciate is as interest rates go up,
there's a couple of things. One, as analysts value these companies that

(28:47):
higher interest rate, as they lookout at future cash flows, it gets
discounted at a greater rate, sothey're worthless. That's just the way it
sets up from a valuation perspective.The other thing is if you're a growth
company and you don't have earnings,or you have limited earnings, you're probably
financing that your company through either equityand or debt, and it could be

(29:08):
more challenging in a higher in strateenvironment for banks to want to lend your
money. So Jim's point is thatusually as interest rates move higher, growth
companies tend to struggle. So whatI would say Jim is a couple of
things. One is appreciating the factthat if you're talking about VGT or you're
talking about the queues, that alarge part of those indicries are what's called

(29:32):
the Magnificent seven, Right, it'sthe Video, It's Tesla, it's Apple
and Google. Well, those companies, Yes, they're kind of in a
different category in some respects, right, because yes, they could be categorized
as growth, but many of themhave a lot of cash on hand,
many of them have great earnings.And so there are these huge megacap companies

(29:55):
that make up a large portion ofthose indices, and they have done incredibly
well this year. Now, lastyear they really struggled. But what I
would tell you is a couple ofthings. One is they may continue to
do well. In particular, asI talked about artificial intelligence AI, many
of those companies are right in thatspace, right, Microsoft and Google and
the Video are right in that space. And Tesla being in the EV space,

(30:19):
alternative energy space and really priced moreas a software company, could continue
to do well. So you haveto appreciate that you've got a different dynamic
with these major companies that have alwaysbeen categorized as growth companies, but really
in many ways they're not growth companiesanymore. The other thing to appreciate is
sometimes this just takes time to comeinto play, right, So I think

(30:42):
the longer the rates are higher,you could absolutely start to see a change
from growth outperforming value and value issimply just a different style of investing where
you're looking for companies that are sellingit at discount. Now, over the
last ten years, growth has outperformedvalue, but historically speaking, value has
outperformed growth. So we've talked aboutthis. I mean, we are big

(31:06):
believers in technology. We have alarge allocation of growth has done very well
for our clients over time, butwe have moved more into value than we
have been in the past, andit's about that's where it's about just doing
the right things from a portfolio managementperspective and not getting too caught up in
hey, what's happening right now.Right, So to the extent that you

(31:26):
take some gains from your growth allocationand you put it over to the value
side, that's okay, right,You're if you're a long term investor.
That's about maintaining a good portfolio versusyou know, throwing more into growth because
it's done well year to date andyou know you could have this reversal.
This is what it means to bea good long term investor and not reacting

(31:48):
too much to what's happening on theshort term, and again I think that
you know, f interest rates remainelevated for a longer period of time,
some of these real growth stocks,I mean companies that are really rely upon
debt or different valuations could struggle.The other thing is kind of goes into
your next question, right, whichis if we get to a point where
the FED does pause. And Idon't think they need to get to two

(32:12):
percent, that's their target rate forinflation, but I think if they get
below three, if they can showthat there's some stability and inflation and that
the economy is just growing in areasonable fashion, I think they'll pause well
before then. So if you getinto this environment, it depends, right,
As I mentioned in the earlier partof the show, you could have
something like nineteen ninety five ninety sixwhere the market continuer rena rise. If

(32:37):
you remember in ninety six is whenAlan Greenspan came out, who's the chair
of the Federal Reserve, and saidthere is irrational exuberance in the markets.
Well guess what the markets continue togo for four more years. You know,
I don't think anybody's gonna say there'sirrational exuberance in the market. Now,
maybe they're a little bit highly valued, but you could have this situation

(32:59):
with AI electric vehicles, with infrastructure, you could have this situation where if
the FED pauses, that the economydoes well, but not maybe as you
know, as a high gear aswe've seen, and that allows stocks to
continue to move higher. You know, I've said all along, I think
we're more in a secular bowl marketthan anything else. And all that means

(33:21):
is that the market, I don'tknow what's going to happen short term,
but over the next five plus years, the market should be trending higher based
on a number of factors, andso that that's a possibility, right,
that's you know, what you hopeis that as they pause in this area
where they are now, that inflationkind of gets mellowed a little bit,
that labor markets remain strong, butmaybe not as strong as they've been,

(33:44):
and that companies are able to increasetheir sales and their profits and cash flow
through some of these new technologies.And again, I think in many ways
AI could be that catalyst, butwe'll have to wait and see. And
then your third question mid and smallcap, and it's the same discussion we
talked about with with value, right, which is mid and small cap.

(34:05):
If you look historically, they haveoutperformed large cap companies from a long term
perspective. Really, and you thinkabout it, it makes sense, right,
So these are companies that are youknow, uh, you know,
under let's say ten billion dollars andyou know they could be even under two
billion if it's small cap. Sosmaller companies relative to you know, the

(34:28):
either the large cap companies, whichis you know, one hundred billion,
two hundred billion, or these megacapwhich are trillions of dollars. So you
think about it, can a smallercompany even mathematically, should they be able
to grow at a higher rate thana trillion dollar company? You know,
the answer is it should be ableto grow. So you should be able
to see higher returns in small andbig cap than you do in the large

(34:50):
cap and that has not been thecase over the last number of years.
I don't even know it's six seven, eight years. So again it goes
to what I would tell you,which is do not, if anything,
make sure you're being smart with rebalancing. If you had you know, money's
in VGT, uh, you know, keep moneys in VGT. We think
that you know that space is goingto continue to do well, but don't

(35:13):
be afraid to rebalance into small AMID. Right That small AMID at some point
will do well and at some pointit could outperform the bigger companies. So
it's it's all about being disciplined inwhat you're doing and not being emotional or
react to what's going on currently.So I would not if you have small

(35:35):
AMID allocation, I would not changefrom that. Again, it's not a
bad time to rebalance and sell someof your part of what's been doing well
you're to date, and that isabout the way that you go about being
a successful long term investor. Sogreat questions, Jim. I hope that
that helps you. Let's move onto some other things that I think are

(35:57):
important. But again, if youhave any questions, feel free to give
me a call. You can reachme at eight hundred eight two five five
nine four nine. Once again,that is eight hundred eight two five five
nine four nine. One of thethings that I want to talk about is
is this concept of corporate trustees.Right, so you know, if you
have a trust there are actually fewerreasons that people need trust accounts anymore.

(36:23):
You know, trust account was usedquite a bit when estate taxes were much
lower as far as we're that youcan get hit with them. Now for
a couple, the current levels areat twenty six million dollars combined, it's
just about thirteen million per person.Now that again, the only thing you
remember is in twenty twenty six thatis slated to change and go back much

(36:46):
lower. So with our clients thathave significant assets, obviously you know if
you're at that level, you havesignificant assets, we have been given them
guidance on how to plan for thatchange that's going to occur in twenty twenty
six. But you know, itused to be the what's called the estate
applicable exclusion amount was closer not tothirteen million, but half a million or

(37:08):
a million dollars or two million dollars. So you know, even back ten
years or sixty years ago or whateverthat time, back where it was that
much lower, having a trust couldbe very valuable because what you would do
is you would use one spouse's exclusionamount and it's called a bypass trust and

(37:28):
make those funds available for the remainingspouse. But now that reason has kind
of got away, and in manyways you know, beyond let's say and
medicate trust that you use to planfor long term care and move assets out
of your state, there's fewer reasonsthat you need a trust. They just

(37:49):
not as relevant, and there's youcould do many things in a way that's
functional with what's called the cod ortransfer on death that moves those assets to
a beneficiary, just like a trustwould. So really the main reasons you
need to trust now is again ifyou do a medicated planning, but if
you're concerned about how your heirs aregoing to utilize the assets if something were

(38:12):
to happen to you, right,so you want to trust in place that
controls how they have access to thoseassets. And that is certainly it's still
a very good way to utilize atrust. You know, Let's say you
know you have a large amount inassets, and you want to make sure
that your kids, if they're youngeror you know, even in their twenties

(38:34):
or even early thirties, they don'tspend through those assets. So you can
put restrictions as to how they canaccess those assets. But the other approach
as well is what's called a corporatetrustee, and that's where for us,
let's say we have a trust forour clients, and there are a number
of different avenues we use, includingusing Charles Schwab as a corporate trustee,

(38:55):
and there's a few other corporate trusteesthat we utilize where that trustee makes all
the decisions based on some parameters thatare establishing the trust as to how those
dollars are used, and that willcan go on for multiple generations, so
you know, you don't have toworry that if you're not around anymore,

(39:15):
that you know, how are thosedollars going to be utilized. You can
have a corporate trustee that is responsiblefor managing the trust and the distributions according
to those guidelines, and that canagain happen for multiple generations, so even
in future generations, it's the corporatetrustee that's responsible and you know that they're

(39:36):
going to do the right thing.We see more and more situations where people
are utilizing these type of corporate trustfor children with special needs or grand children
with special needs, because it's agreat way to make sure that these individuals
have access to money in a waythat they need it to live and that

(39:57):
you know you have this corporate trusteethat will be there for multiple generations right,
and you know, I would justencourage you that you know, in
many ways you don't need to trustand as much anymore, but in those
circumstances, corporate trustee can be veryvaluable. And that's where we work with
our clients on the different options wehave available for them. Depends on what

(40:17):
they're really looking to do, butit could be a great thing. As
you know, if you've listened tothe show, you know Steve has a
brother with special needs and you knowspends a lot of time. We spend
a lot of time and dollars helpingthat community out in different ways. And
you know, if you've got achild with special needs or a grandchild,
it could be challenging and you wantto make sure that they're well taken care

(40:39):
of, and that's a great wayto do it with a corporate trustee,
that those guidelines will be established toprotect them. Well, I want to
go onto a few more things beforewe wrap up the hour, and again,
if you have any other questions,you can reach me at eight hundred
eight two five five nine four nine. Again, that's eight hundred eight two

(40:59):
five nine four nine. One ofthe things I want to talk about is
you know, many times when we'remeeting with prospective clients, you know,
they want to know a little bitabout how we manage portfolios and what we
do, but they also want tounderstand, you know, kind of how
our portfolio compares with their existing portfolios. So we'll do what's called the portfolio
review for them. And you know, to me, it's always very enlightening

(41:22):
doing that because I feel very proudof our firm and how we manage portfolios
and our performance. But you know, I would encourage you that if you
haven't had your portfolio looked at awhile, that you know, if you
want to reach out to us,we'll be more than happy to to give
you some thoughts as to you know, what is going on with your portfolio
and do a review with you.Because it's amazing how often that we do

(41:44):
this. You know, when westart looking at fees and performance and allocation
and transparency and liquidity, all thesethings that are important to UH and a
portfolio and investment performance. You know, just how some of these portfolios are
just now well constructed. And sometimesyou know it's an individual that's managing on
their own, so maybe they're thatpoint in the time they need into doing

(42:07):
that. But many times it's anotherfinancial advisor who, you know, I
don't know what the situation is.They just don't have the right process in
place to be successful with it.Maybe they're not spending the time managing it,
and it's you know, it's dishearteningto me because you know, to
the extent that these individuals are payingfor their service and they're not getting the
benefit. But you know, Ithink it's so important that you understand,

(42:30):
Hey, what are the fees associatedwith my portfolio? And as we've talked
about, you know, we uselow cost ETFs where our biggest position are.
The fee is point zero three percent, so very inexpensive for us to
manage a portfolio of ets, butit gives us a client's exposure to a
lot of different approaches, including thealternative investment sieve that we've talked about in

(42:52):
the show. The other thing isyou know performance, you know what are
those if you have mutual funds.Quite often as we look at those performance
allocations, you know those we've talkedabout the reason we use ETFs, this
is fees, but it's also performancethat those managers tend not to outperform the
benchmark which you can get in theETF. We've talked about the tax implications

(43:15):
right, how you know mutual fundsare not very tax efficient, and making
sure that you have the most taxefficient set up in place. I mean,
we've seen it so that you know, people have iras with muti bonds
in those iras, and you know, it just doesn't make any sense because
a muti bond you don't pay anytaxes on it, and it tends to
have a lower yield than a corporatetaxile evon or a treasury bond. So

(43:38):
there's no reason you'd ever want tohave a muti bond in an ira.
But yet we see that, uh, and you know we see it.
You know when you have people whoare in very high income earners and they
don't have any muni bonds that areportfolio right in general, if you're a
high income earner, that's that's somethingthat you're going to want to have in
place. So I would really encourageyou that if you you know, have

(44:01):
a portfolio that hasn't been looked atfrom you know, somebody outside your existing
advisor, or if you manage ityourself to whether it's our firm or another
fiduciary firm to get somebody just tolook at it, give you some perspective
and you know, maybe it maychange your course of action of what you
want done with it. But it'salways amazing to me, you know where

(44:21):
you know, some people have beenstruggling with us for so long, and
you know, when we're able toshow them what we're able to do.
And you know I talked about thistoo. You know, for our clients,
it's about educating them, making surethat they're educated investors, because to
us, that's the best client issomebody who's educated. And with our client
portal that they can see now theycan see all their information via SWAB,

(44:45):
whether that's online or with statements,but with our client portal UH and there
was just a webinar we did forour clients showing them how to use this
portal. You really can get agood understanding of how you are allocated,
even in total or by account,how your performance is in total or by
account or even by a position.And that's information. You know, we

(45:05):
always try to counsel our clients notto look at UH did A portfolios on
a daily basis or even weekly,you know, once a month or once
a quarter is sufficient enough, butwe do want to make sure when they
look at it, they have allthe information they have and they need to
understand what's going on. And youknow, we always talk about the importance
of communication. If they've got anyquestions, to give us a call,

(45:25):
let's talk about that, right,So so often in life, if you
if you can have that communication,things that maybe seem confusing or you're unaware
of, or that you're concerned about, maybe after our conversation may not be
that concerning. Well, a fewmore things that to highlight before we wrap
up here, but if you're havinglast minute questions, feel free to give

(45:46):
me a call. You can reachme at eight hundred eight two five five
nine four nine. That's eight hundredeight two five five nine four nine.
One of the things I just wantto highlight is, you know, when
I'm working with the client or ifI'm looking at any situation in life a
matter of fact, you know,I always try to break things down in
two steps to get you through that, and you know, I'll share with

(46:09):
you my perspective on how to approachthese things. And it really comes down
to four words, right, Sothose four words are plan, execute,
persevere, and appreciation right, andthey may not seem like they go together,
but they do. So you know, the plan piece is important.
We're financial planners, you know,anything in life. If you're if you

(46:31):
don't a plan, you're planning tofail. So you've got to have a
plan in place. It's got tobe well thought out. But just having
that plan does not cut it.You got to execute on it. And
I think that's where many people falldown. I think as I talked about,
I think that's where some firms falldown with a managing portfolios. They
don't know how to execute. Soyou got to have a plan in place.

(46:51):
You've got to execute on that plan, and then you've got to persevere.
And what I mean by that isin anything in life, I don't
care if it's a retirement plan inor if you're on a team and you're
executing your plan to win, orjust in personal situations. You're gonna have
challenges, all right. And thatchallenges could be a bear market. Uh,
you know, it could be anunexpected expense. It doesn't I don't.

(47:15):
I can't tell you what it's goingto be. But you're gonna have
challenges. So you're gonna need apersevere. That's just an important mindset that
you if you if you have that, you know, you know, we
always tell clients, you know,you say, Okay, Marty said that
we're gonna have this, We're gonnahave a bear market. It's going to
occur. So if you have thatmindset, it can be very beneficial.
And then finally appreciate and you knowwhat, folks, that is just one

(47:37):
of the most important things you cando in life is appreciate where you are.
You know that some of the challengesyou faced. Appreciate the great things
that you have in your life,because I think if you actually look through
your life, you'd say, well, I got a lot of great things
to appreciate. So having those fourthings to plan, execute, persevere,
and appreciate those things can make yousuccessful in any endeavor that you're going through

(48:01):
in life. Well, folks,has been an hour, as always has
been great. Hopefully you'll learn alittle bit. You'll listening to Let's Talk
Money brought to you by Bouchet FinancialGroup, where we help our clients prioritize
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