Episode Transcript
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Speaker 1 (00:00):
Thanks and good morning. Welcome to Let's Talk Money here
on eight ten in one O three one WGY. I'm
Ryan Bouchet and we'll be with you for the next
hour or so, and truly appreciate all the listeners tuning
(00:23):
in and joining us this morning and every week Saturdays
and Sundays here on eight ten and WGY or one
O three one WGY. So there is a lot to
talk about today, as I'm sure you could all imagine.
It's no shortage of headlines and market topics to get into,
(00:44):
so happy to take the conversation in that direction if
the listeners out there are anything like some of our clients,
and rightfully so to close this week, we had a
lot of questions obviously coming in, a lot of concerned,
a lot of uncertainty. I don't think that is probably
news to anyone, but we're dealing with a lot right now.
(01:07):
There is a lot for investors to handle, a lot
to consider, and a lot to deal with as we
find ourselves over the last few days with you know,
new tariff talks and implementation of that coming up this week.
So it's got a lot of our investors on edge.
(01:30):
And again as you see the close the last two
days of the market rightfully, so so we can talk
about stocks, We can talk about the market, how this
is going to impact again, maybe stocks as we move forward,
maybe how they impact the economy as we you know,
(01:50):
proceed further into this higher tariff environment. Happy to discuss that,
Happy to talk about you know, the conversations we are
having with clients. Sent out a just write up yesterday,
trying to try to make sense of all this the
best that we can. It's you know, hard to fully
(02:12):
quantify and put numbers to what we're seeing because you know,
it's impossible to tell where where things go from here,
and you know what stays, what gets rolled back, what
types of negotiations and trade deals happen, So hard to
fully again quantify what the impact will be as we
(02:33):
move forward. But you know there's a lot of you know,
I think discussion points around it and things that we
have to consider, things that we have to be aware of,
and what our approaches to the markets as we move
forward from here, because they've they've been put in place
right and news has come out. So we deal with
what we deal with and control what we can control,
(02:55):
and we'll try to make sense of what we're seeing
in the markets in what that means for the economy
as we push forward. Yeah, I think this puts the
FED in a interesting predicament as we move forward. There's
fear of, you know, what tariffs can do from an
inflationary standpoint, and inflation was one of the toughest both
(03:21):
from the consumers in terms of how do we deal
with it played I think a huge role in the election.
No one likes inflation, and you know, in terms of
maybe some of the immediate impact to the tariff rollout
is the potential for inflation, and the FED has been
(03:43):
talking about that. Jerome Powell has talked about that this week.
So how do they measure potential for inflationary pressure, whether
it's short term and more transient and we've heard that
word before, right, or if it's a little bit more
of a longer term shoot, how do they balance that
and how do they deal with that given the concerns
(04:04):
around the economy, right, because in the past, the FED
has really been dealing with sort of a you know,
one way direction in terms of what's been happening in
the economy. It was either high inflation, how do we
try to slow that down, you know, with a strong
economy or you know, inflation has been coming down. We're
(04:25):
starting to see a little bit slowing down of the economy. Hey,
what's the what's the one trigger they have for that? Well,
lowering rates to try to stimulate and keep growth strong.
Like I said on the flip side, when it came
to higher inflation, you know, their lever that they can
vote is higher rates. And now we find ourselves with
their two mandates kind of going against each other maybe
(04:48):
in this current environment. So that's going to be a
little bit more difficult to navigate. I think they're going
to have tougher decisions as we move forward. And even
Jerome Howel's statements from this week point to that he's
not necessarily saying that rape cuts are a given because
(05:09):
they do have to manage what the inflationary concerns that
are out there. So we'll talk a little bit about that.
We can get into the history of terris. I mean,
terrifs had absolutely dominated the headlines for the last two
months or so, and rightfully so. And we talk all
the time about you got to tune out the noise,
(05:31):
right you got to tune out headline risk and what
maybe the media companies are trying to sell right through
fear and playing to people's emotions. But you know, tariffs,
I think to me are more than just a headline
risk that's been out there, and we saw that right
(05:53):
the market reacted accordingly over the last two days. So
we'll talk about terrorists a little bit. We can talk
about kind of the history of terroris, you know, how
they came about and how they play in the current
market environment. If you have questions as to you know,
you know, this trade imbalance is, you know, the US
(06:15):
being taken advantage of, Well, you know, there's a reason why,
sort of our our history of Paris and how we've
gotten to this point on the global stage. And I
think there's a narrative that brings us to the current
environment that we find ourselves. And then maybe there are
some elements of this that do feel unfair, maybe some
elements where you know, we feel as though we're getting
(06:37):
taken advantage of a little bit from a trade perspective.
But now you take a step back and you look, well,
you know, the US has been a pretty good place
for certainly the last fifteen years, probably even longer. If
you go back in terms of strength of our economy,
strength of our consumer, you know, the relative piece that
we've been able to afford through the years. So we'll
(07:00):
talk a little bit about that and just kind of
the evolution of some of these countries and where there's
where they stayed and or stand in this entire sort
of trade balance in this global trade environment that we
find ourselves in. And then you know, we can talk
more about, you know, some topics that have been coming
up with clients from a planning perspective. As I said earlier,
(07:22):
the last two days have certainly been dominated by what's
going on with tariffs and in the market, how does
this play out, what's the impact to it all? And again,
many of these conversations whish we had, you know, a
little bit more clear, definitive guidance as to what's next.
(07:44):
It's really hard to pinpoint that because even with the
rollout of tariffs on Wednesday night, and I was watching
at real time and just watching the impact to the
markets and to the overnight's markets as sort of that chart,
that infamous out chart with all the intended tear reciprocal
parrot rates were announced, and watching real time how quickly
(08:10):
the markets have dropped, and so that has certainly dominated
conversations towards the end of this week. But you know,
to getting before that point and helping clients sort of
navigate these times, right, it comes down to being proactive.
It comes down to the planning work we've done over
(08:30):
the past six twelve months, over the past however many
years we've been working with clients. That's where getting through
times like this comes into play. Because no matter what
you can show, you know, history of the market, right,
we've talked about it, the market averages about a fourteen
percent draw down intra year every year over the last
(08:52):
thirty five years. This type of volatility in terms of
just price perspective is not necessarily in common. We deal
with this as investors quite often believe it or not,
but never feels good in the moment. And this is
why we do the planning work. This is why we
are proactive, whether it's from a portfolio management perspective, a
(09:17):
rebalancing perspective, right, taking advantage of when certain areas the
markets are doing well and getting back to your target
allocation times are good versus when times are bad. These
are all things we can work on. And then there's
planning opportunities through all this right whether and again can
(09:38):
feel a little scary, whether you're sitting in cash and
you know, coming up with a plan to put that
to work. You know, in some cases, and this is
an area, especially when you get market volatility, thinking about
you know, and I said earlier, control what we can control.
Maybe now is a good opportunity if roth conversions were
(09:59):
on your mind, and if that's something that's that part
of your planning approach and ways to help your overall
financial plan as you move forward. Well, you know, right
now is a great time to think about roth conversion.
So thinking about these things that we can control, and
taking advantage of these planning opportunities when we get volatility,
(10:21):
when we get times of uncertainty, or ways that we
can help sort of mitigate the risks that we're off basing.
So again, our phone lines are open. Give me a
call one eight hundred talk WGY. That's one eight hundred
eight two five, five, nine four nine. As I said,
I'm sure there's no shortage of questions or concerns as
(10:44):
we move forward in this kind of new world order
of trade agreements and trade paris that we now find
ourselves in and it was huge news on Wednesday, and
rightfully so, I think you know, we all knew it
was coming, it probably wasn't as clear in terms of
(11:05):
what these tariffs looked like, what the impact was going
to be. And you know, on the on the base case,
right the approach was going to be sort of this
ten percent across the board UH tarraff globally to to
all trade partners, to all countries that we may import from.
(11:26):
But on top of that were these reciprocal terriffs, and
you know, I think that was when you when you
kind of go back to looking at the volatility from
Thursday and Friday, that was the biggest piece of sort
of surprising news as we saw what the UH tiff
rates were going to be, and that you know, these
(11:48):
reciprocal teriffs, if you know, they're they're labeled as reciprocal,
but they're not really reciprocal terrorists. They weren't based on
what these countries are charging us to export goods to
these countries. It was really based on what the trade
deficits were. And you know, the trade deficits were calculated
purely by goods trade deficits. It didn't take into account
(12:13):
services which lowers are trade deficit. Right, we operated at
a pretty major trade deficit with the rest of the world. Then,
you know, I can make the argument that, in fact,
probably a good thing that we do. It's a sign
that we have a fully developed economy. It's a sign that,
you know, over time, there's economies that are not as
(12:36):
strong as ours, they're not doing as well as ours.
You know, there's been negative impacts to the globalization that
we've experienced over the last forty or fifty years. I
don't want to diminish that aspect of this conversation, because
absolutely there has been pockets of our country that has
(12:58):
been harmed in have experienced more negative impact than positive
impacts through the globalization of trade and everything that we
saw happened, you know, really kind of posts World War Two,
I would say, is when this global economy really started
to kick into gear. We started to kind of see
(13:18):
maybe some loosening of previous tariffs and trade impacts to
make it a little bit cheaper for us to import
goods from other countries. And so this has been a
long sort of evolutionary process, and you know, we find
ourselves in the United States in a more big consumer
(13:39):
driven economy, and so for us, you know, again, globalization
hurt some job areas, hurt manufacturing, there is no doubt
about that in our country, but it also opened us
up to global trade. It opened us up to cheaper
goods and services, and you know, in some ways that's
been a positive as well. And I think it's helped
(14:00):
sort of drive our market and drive you know, our
companies in our stock market to levels that are not
you know, the same in other parts of the world.
Then you know, we have a very very strong economy.
We've been in a you know, I think we've been
pretty fortunate, a pretty you know, safe environment from kind
(14:23):
of the global uh nature of again our economy and
our trade partners. So those have all been good things.
But again it doesn't come without some issues that we've seen.
But sort of what got us to this point is,
you know, we've we've come so far from when you know,
we really needed to put more tariffs in place, right
(14:46):
when tariffs are used for a lot of these countries.
And part of the reason why we have higher rates
to export goods to some of these foreign countries versus
what they have to bring goods and services into the
US is that you know, they are in a more
we're developed, in developing stage of their economic life cycles. Right.
You think about an economic life cycle, you know you
(15:08):
kind of go from an agricultural sort of base of
your economy. You kind of then move into more of
a industrialized economy.
Speaker 2 (15:20):
Right.
Speaker 1 (15:20):
We saw that we see that kind of more play
out in something like a China today. You know, that's
what we were going through maybe post Civil war, through
our industrial revolution of the late eighteen hundreds early nineteen hundreds,
and so tariffs at that point are to protect these
new industries, is to protect these new emerging economies that
(15:42):
are coming through in you know, kind of these less
developed nations and nations that are growing and trying to
create those goods that they otherwise didn't have as they're
becoming more industrialized. You know, we've now evolved into more
of a concern sumer driven economy. And so you know
(16:03):
when you compare ourselves to maybe some of these countries
in Asia, whether it's you know, Vietnam that we have
these high high terras against all of a sudden, well,
you know there's a reason why you know, they're in
a different life cycle in their economic development. You know,
(16:23):
they're in a phase where they're trying to protect their manufacturing.
You know, maybe there is the argument to be made
that we should have been protecting more of our manufacturing
in the past, and I'm in agreement with that, but
at this point, you know, manufacturing is a much smaller
piece of our economy. It's a much smaller it makes
up a much smaller element of our overall employment and
(16:48):
you know, percentage of jobs being created. So we're just
in a different phase than some of these other countries
around the world, and that's reflected in some of these
you know, terriff rates and sort of these trade agreements
that we have, and so you know, that's one thing
that you know, I try to think about in terms
of making sense of our current situation. It's, you know,
(17:11):
how how are these you know, tarriffs, How are they
going to play out? You know, why have they been there?
Why are we in the position that we're in today
versus what we're trying to get to. And I do
think you know, raising tariffs, uh based on what was
presented this week, what was presented on Wednesday. You know, frankly,
(17:32):
it's and I think the market has reflected this it's
it's really not a probably the best approach as to
you know, strengthening our economy, right, you know, it's it's
leading to you know, in the short term expectation is
probably again higher costs of goods, higher costs to do
(17:54):
business around the world, more restrictions, you know, more hurdle
if you will to trade into our trade partners. And
you know, if inflation starts to creep up again and
we've just started to get that under control again, how
(18:14):
does the consumer react to that? How does the Fed
start reacting to that? Right again, we talked about it earlier,
all of a sudden, if we start getting you know,
pressure on inflation, if we start seeing inflation start to rise,
and we get some downward pressure on the economy, you know,
that's that's not a good thing either. So a lot
(18:36):
to consider right now. There's a lot that the market
is digesting in the market has we has reacted according
to sort of what that approach may be. Again, our
phone lines are open one eight hundred talk WGY. That's
one eight hundred eight two five, five, nine, four nine.
We're going to go to the phone lines we have.
(18:58):
Dennis in Clifton Park, Dennis good morning. Thank you for
calling in.
Speaker 3 (19:02):
Well, good morning, Ryan. My question is pretty simple. Could
you take a minute and explain this concept of direct
indexing to somebody who doesn't understand it me?
Speaker 1 (19:14):
Yeah, No, it's a great question. Thanks for the call, Dennis. Yeah,
direct indexing is a it's something that we're we've developed,
we've we're working with a partner and how so we
have a lot of clients that are using it right now.
Direct indexing is an approach and it makes the most
sense in taxable accounts. This is where you get the
(19:35):
benefit of it. So you know, we're huge fans, as
you know if you listen to the show, we're huge
fans of ETFs. Ets typically will mirror an index, right,
so you you buy an ETF, it's you know, mirroring
a particular index gives you the low cost approach. Even
holding an ETF in a taxable account, it gives you
(19:57):
a lot of tax benefits because there's a lot less
distribution on gains and you would find in mutual funds,
so they're much more tax efficient. So ETFs are a
great way to get exposure to an index. There's an
even you know, maybe better solution from a tax perspective,
and that's called direct indexing. And so what this does
(20:18):
for the accounts that we build so we can actually
mirror a particular index using individual stocks. So instead of
just having the ETF that hold the stocks within that
ETF wrapper, we're holding them directly. And the benefit of
the direct indexing is that when there's losses in those
(20:42):
individual positions, we're able to sell them create some tax losses,
so do some tax loss harvesting that will help create
a little bit higher of an after tax return over time.
It's what we consider an extra tax alpha to the portfolio.
(21:04):
So you're essentially mirroring, you know, an index or an ETF,
but you're doing so by holding these individual securities. And
you know, think about holding an ETF right you've made.
The positions that you hold in that ETF may be
going up and down, but you're not getting the benefit
of the tax lost harvesting unless that entire position comes down.
(21:25):
In a long term bowl market, sometimes you don't have
those opportunities to tax lost harvest. So by holding you know,
a number of individual securities, you get the opportunity to
tax lost harvest, take some losses throughout the year that
you can offset with gains and it just gives you
a little bit more tax flexibility. So it's a great solution.
(21:47):
Like I said, for us, you know, you have to
have a tax bill account at a certain level, at
a certain size to really be able to deploy a
strategy like this. But this is something that we've been using,
you know, with high income earners, someone who's in you know,
high tax brackets, because again that's where the benefit of
(22:08):
the direct indexing really comes into play. Does that help
answer it? Dennis? Is there anything I missed there?
Speaker 3 (22:16):
No, not at all. Ryan, Just one quick follow up.
Can you tell me when you say size of account matters,
can you give me an idea of a figure of
how much before it's of any value.
Speaker 1 (22:28):
Yeah. So for us, in terms of using a platform
like this and being able to use the direct indexing,
we need to have an account size. It's and like
I said, the benefit here is for taxable accounts. It's
not really in the higher rays because you don't get
the benefit of the tax loss harvesting there. So it's
really meant for taxable accounts. The minimum of account size
(22:49):
or something like that for US is two hundred and
fifty thousand.
Speaker 3 (22:53):
Okay, thank you very much. I appreciate your time.
Speaker 1 (22:56):
Ryan, absolutely, Dennis appreciate the call. Thank you so much.
Our phone lines are open one eight hundred talk WGY.
That's one eight hundred eight two five, five, nine four nine.
And that question goes back to what I had said earlier.
Control what you can control in markets like this and
environments like this. You know, in the volatility that we're seeing,
(23:17):
a strategy like tax loss harvesting and being able to
in a direct indexing approach is something that brings a
ton of value with a volatile market environment because when
you get these down days and you get some of
the sell off, hey, you can take advantage of capturing
some losses and booking them against your gains. And again
(23:42):
it's it's meant for an after tax, you know, review
of returns, and it can play a significant role, especially
for those high net worth, high income earner individuals where
taxes are going to have a bigger impact overall. So
we're getting closer to our news break. When we come back,
we'll talk more about the markets. In the last few days.
(24:03):
We can talk about, you know, some signs of strength
in the economy. We'll talk about the jobs number, and
we'll talk about things that we can do in this
type of market environment, controlling what we can control. So
you're listening to Let's Talk money here on eight pen
in one O three one WGY.
Speaker 4 (24:21):
With his expert colleagues.
Speaker 1 (24:27):
And welcome back to Let's Talk Money here on apen
and one O three one WGY. I'm Ryan Buche. Happy
to be with all of you today. No shortage of
things to talk about as we entered the weekend. Obviously
a lot of volatility uncertainty going on in the market,
so dominating a lot of the conversations we're having with
(24:50):
clients this week. But there's still a lot of other
things to discuss and a lot of other things that
you know, we can plan around and we can do
and in times like this, times of uncertainty and times
of market volatility, so we'll talk about that as well.
Our phone lines are open, Give me a call one
eight hundred talk WGY. That's one eight hundred and eight
(25:11):
two five, five, nine four nine. Always glad to take
all of your calls and create some great talking points
for the show in general. We you know, finished up
the first half of the show with Dennis calling about
direct indexing, and this is something that's really caught on
(25:32):
with with some of our clients, and we've been so
thrilled to be able to offer it to our clients.
And that, like I said, we you know, for a
long time are huge and continue to be right huge
proponents of ETFs. I think ETF models are you know,
they've been one of the biggest benefits and uh, you know,
(25:53):
game changers for investors and in clients. And we like
the ability to you know, get low cost investment vehicles
that are tax efficient and you can get into pretty
much only almost every part of the market, whether it's
you know, big and broad based or a little bit
(26:17):
more specific and you know, sector sub sector, uh specific
when it comes to ETFs, and through their evolution, there's
just been a lot more opportunities and a lot more
to select from in using them to build out portfolios.
So it's been a great thing for us and for
(26:39):
our models and the way we invest in really the
philosophy behind what we believe in from an investment standpoint,
and directed dexing, you know, gives us the same ability
to a certain extent with some tax advantages, with some
tax enhancements, which is always a good thing. Right. Again,
(27:01):
it's being able to control the things you can control,
and if we can add on a layer of tax optimization,
it's always a good thing. And so the way direct
indexing works is that again you know, you can there's
different ways, and in the solution that we use in
the firm that we've partnered up with, you know, the
(27:22):
platform is called Canvas, and so it's given us a
great opportunity to partner with this awesome, awesome ouset firm
is that we can you know, either build direct indexing
models around a particular index like the SMP, but for us,
we can actually build a direct index model around our
(27:45):
equity model that we use for our client's ETF portfolio.
So it can you know, be a little bit more
tactical than just holding say the SMP, which you know,
in times like this, right, some of our tactical holdings
are more on the quality and you know, value oriented
side of the you know investment landscape. Right. S and
(28:11):
P has been hit a little bit hard with kind
of the big concentration, right, and that was the concentration
risk we've been talking about for months as the mag
seven has exploded and and really grown to the size
that it has through the last few years, and so
you know, being able to be a little bit tactical
in terms of building those underlying direct indexing out and
(28:34):
then you hold these individual positions, right, you hold these
different stocks. But when you get triggers on the downside,
when you get losses, you're able to tax loss harvest
those whilst continuing to track the benchmark or to track
the built portfolio that you're intending to track. And so
(28:55):
you know, being able to take advantage of these volatile times. Again,
it never feels good. It's never a great thing when
markets are down over ten percent in a two day interval,
but having solutions that allow you to at least take
advantage of some of this volatility can be a good thing.
And you know, the hope and the goal is that
as time goes on, as you take these losses, right,
(29:19):
your after tax rate of return gets enhanced. There's that
after tax alpha that we call it, where being able
to kind of offset your gains with some of these
losses is going to help at the end of the day. Right,
in many ways, In many times, it's not so much
how much you make, but it's how much you keep
(29:39):
and being able to implement some tax savings strategies are
things that you know, we're really focused on as a
firm and as we grow, this is an area that
continues to add so much value to our clients and
their situation is how can we plan around taxes? How
can we be pro active rather than reactive to create
(30:04):
situations that can benefit our clients. You know, if you
think about it again in a different manner, right you know,
we're we're in a you know, we're in a big
drawdown right now. You know, the NASAC is down in
bear market territory after the last two days, believe it
(30:24):
or not, their name, Friday was one of the worst
four two day stretches that we've seen since World War Two.
I mean, it goes back seventy five eighty years that
we've seen a two day pullback like we've seen these
last two days. So the market is in you know,
in some ways, you know, a ton of uncertainty, a
(30:47):
little bit of unchartered waters in terms of kind of
a policy. Whether you want to call it a mistake
yet yet to be determined, I guess, but certainly you know,
the market react in terms of it being a policy
mistake on Wednesday and has reacted accordingly. And so when
(31:07):
you get market volatility like this, what are things that
we can do to potentially take advantage of this? And
you know, tax tax planning is a big one. Again,
I'll just let leave our phone lines one eight hundred
talk w GUI one eight hundred, eight two, five, five, nine,
four nine. Phone lines are open if you do have questions.
(31:28):
And so, you know, going back to the tax planning
aspect of it, one of the things that could be
a good idea right now, and this is a planning
opportunity that we've been doing more and more of, not
just because of the volatile market, but just in general
as we work with clients and show them the tax
benefits of it. Is doing Roth conversions, right that has
(31:50):
been something that whether it's for the benefit of you
and your spouse, whether it's for the benefit of your
beneficiaries and you know, the next generation because there has
been some changes to tax laws in terms of inheriting
iras versus wroth irays in what the distribution rules require
(32:12):
that you know, there is planning opportunities and a lot
of planning opportunities around the concept of Wroth conversions. And
so this is an area that you know makes sense
within your plan, if it makes sense within the overall
pack strategy, and and it's something you're looking to deploy. Well,
a volatile market is a great great time to dow
(32:35):
all of a sudden, you know, pull the trigger on
something like that. You know, let's say maybe you have
a position that is training off twenty percent. You know,
you could still put whatever that original intended dollar amount
you know, use as your conversion, and you have a
lot more upside all of a sudden within the Wroth
(32:56):
account to take advantage of that conversion. I mean, the
biggest benefit to doing a WROTH conversion, because it does
there's an upfront cost to it, right, you're paying the
taxes upfront, But the biggest benefit is what that growth
can be within a WROTH account. What that you know,
not only tax free growth, but pax free distributions can
be from a WROTH account. So when you have times
(33:19):
of volatility, again, let's do let's put into motion things
that we can take advantage of. We know markets are
going to bounce back at some point, whether it's in
the next week, the next month, hopefully you know, not
too far down the road. But we know market's going
going to bounce back, So how can we take advantage
of these selloffs right? One of the ways would be
(33:42):
again through some Wroth conversions. Uh, it's a good time
to put that into place and to employ a strategy
like that, because again you're getting a little bit of
a discount as you're moving that money over and you know,
a lot probably much more upside than you have before.
Other question we're getting a lot of right now and
(34:03):
over the last couple of weeks. In terms of how
to manage it is you know, what about I have
cash on the sideline? What should I be doing? And
you know, questions like that I always say is uh,
you know, I don't think there's necessarily always a right
or wrong answer to getting cash to work, because every
situation is a little bit different. How much cash do
(34:26):
you have there? What is that cash coming from? Was
it invested before? Is it coming from some other circumstances
that maybe it wasn't invested? So you know, how much
of it is does it relate to your overall net worth?
Is it a bigger portion, is it a smaller portion?
And you know, lastly, kind of what is the market
(34:48):
environment at the time when you're figuring out is now
the right time to put it to work? And so
we've actually, you know, over the last few weeks, have
had had a lot of conversations revolving around getting cash
to work. And to me, right, there is so again
there's so much, so much uncertainty around the markets right now.
(35:15):
You know, I wish I had a crystal ball to
be able to say what's next. The where I play
out is I do think sort of this tariff implementation,
the way it was implemented, sort of the uncertainty around
the communication of it, in the role out of it,
and frankly just tariffs in general. I mean, I do
(35:35):
think it's more of a recessionary policy. I don't think
it's going to be a good policy. I think it's
going to hurt us more than it's going to benefit us.
But the other thing I know is, you know, President
Trump in this administration love to make deals, right, They
love to negotiate. They love to make deals. And my
hope is that you know when you when you start
(35:59):
a negotiation, and sometimes you start with a big number, right,
and you start when way one end of the spectrum
to then sort of reel it back in to get
to a number that is more attainable. And my hope
in all this is that, yes, this what we saw
on Wednesday was you know, it was a shock right
(36:21):
in the market reacted accordingly to that shock, but it
was a shock nonetheless, and that you know, cooler heads
will prevail over these next few weeks we get you know,
maybe we get some better trade agreements with some of
our trading partners around the world. You know, I don't
think we need to get perfect trade agreements are perfectly reciprocal,
(36:45):
paraff and tax agreements, because again, as I stated earlier,
I think there's a reason why tariffs into our country
is lower than you know, tariffs to other parts of
the world. We don't need necessarily need to be sending
goods to everywhere around the world. We send more services,
you know, intellectual property, other things that have made our
(37:06):
economy what it is today and successful in the way
that we've been successful through the years. That we don't
need these perfect solutions. And so my hope is that
you know, we get some sort of trade resolutions, some
sort of trade agreements, and you know, we move on
from this scare. We you know, much like what we
(37:26):
saw in COVID some sort of v recovery from a
market perspective. Uh, and that's only going to happen if
this is short lived, right. We really needed to be
short lived to you know, prevent any sort of you know,
as I've been saying, kind of rollover in our economy
because you know, the other big news, and it's almost
(37:50):
been an afterthought, and so much so that we're forty
five minutes into today's show and I have even talked
about it. But we had March jobs number come out
on Friday, and it was a strong job's number. It
was really strong, and so our economy is still on
solid ground. It is still on solid footing. We are
in a good place as an economy, and you know,
(38:13):
the biggest thing to that right now is that we
don't go too far into this uncertainty, too far into
this trade talk and trade negotiations that can disrupt what
we have right now in our economy, because we are
in a good place, still relatively strong. And I wrote
(38:34):
about it when I sent out our letter yesterday to clients.
There's been a big difference between what you would consider
soft data, right, that's something like consumer sentiment, you know expectations, right,
things like that which are more rooted in emotion versus
what we're seeing in the hard data numbers, the actual
sort of output or activity of our economy, like a
(38:59):
job's number for March, which again was relatively strong when
you look at it, versus what the expectations were. So
those are all you know, positives as we're seeing right now. Again,
our phone lines are open. Give me a call one
eight hundred talk WGY. That's one eight hundred eight two
five five nine four nine. I'm going to go to
(39:22):
a quick commercial break and when we come back, we'll
have about ten minutes left. Again, If you have any
questions as it relates to some of this trade policy,
what the tariffs mean, how the market is reacting, give
me a call. If you have questions on any sort
of planning opportunities or questions you may have, again, give
me a call one eight hundred Talk WGY one eight
(39:44):
hundred eight two five five nine four nine. You're listening
to Let's Talk money here on eight ten in one
oh three one WGY.
Speaker 4 (39:53):
If you want to learn more about Bouchet Financial Group,
visit their website Bouche dot com. That's b O u
ce ey dot com. Sign up for their blog, which
is updated every week stephenboucha dot com. Follow them on
Twitter at Bouchet Group. Like them on Facebook. The phone
lines are open. Eight hundred talk WGY. That's eight hundred
(40:14):
eight two five five nine four nine. Here is Stephen Bouche.
Speaker 1 (40:25):
And welcome back to Let's Talk Money. Here on eight
ten and one O three one WGY. I'm Ryan Bouchet.
Our phone lines are open. We have probably just under
ten minutes left of the show. We're in the home stretch.
Appreciate all the listeners that have tuned in and been
part of the show this week, in each and every week,
we have a great listening audience and means a lot
(40:48):
to us. I know it means a lot to the
other colleagues that are firmed that hosts a show. And
it's always great to interact, whether it's on the radio show,
whether it's when you know some longtime listeners come into
our office and meet with us to engage our firm
and engage our services. So always love interacting with the
(41:09):
folks that give us a listen in tune in each
and every week, So we appreciate it and thank you.
So get our phone lines are open one eight hundred
talk WGY. That's one eight hundred and eight, two five, five, nine,
four nine. It has been no shortage of I guess
topics to discuss the impact of these tariffs. As we
(41:30):
discussed earlier, markets had, you know, pretty pretty rough weeks
we had the the SMP was down nine percent for
the week, down over ten percent in just the last
two days. Like I said, it's only been the fourth
time in the last eighty years or so, the fourth
time since World War Two where we had a two
(41:52):
day sell off like the one we just experienced. And
so you know, it's hard. You know, you try to
find the right balance in times like this, right you
you know, you need to have a positive outlook in
terms of what's ahead. You know, it's it is important,
especially at this stage in the game. You know, there
(42:14):
is an element of you know, needing to stay the course.
Right We've we've planned for market volability. We know it's
always a you know, it could be out there. We
know that volatility happens in the market from time to time.
It's the I always say it's the cost to being
a good long term investor because you know, we've been
(42:37):
rewarded through the years, but you know, that sort of
reward doesn't come There's no such thing as a free lunch, right,
doesn't come without its costs. And part of that cost
of being a good long term investor and benefiting from
these markets over long periods of time and in strong
bow markets, are you know, dealing with some of this
uncertainty and dealing with some of this volability. You know,
(43:00):
I think for many people we don't expect it to
be a direct result of you know, of policy initiative,
but that's the situation we find ourselves in today. So again,
if you have any questions to before we close out
the show, give me a call one eight hundred talk WGY.
That's twenty eight hundred eight two five five nine four nine.
(43:23):
And you know it's been quick. But the NASDAC has
now finds itself in bear market territory, you know, the
mag seven I don't know what they were in bear
market territory before the rest of the market earlier in
the week. I actually don't know what you know, if
you took all of them and equal weighted it, what
they would be down. But I know some of the
big names and Nvidia's the apples of the world down
(43:46):
twenty five thirty thirty plus percent through this downturn, and
you know, that was part of the risks of some
of the market concentration. It was something that we talked
about a few weeks ago with clients at our State
of the Economy presentation, and it's something that you know
has been on the forefront, right is how we've never
seen a market as concentrated as we're seeing it today,
(44:08):
where you have seven companies make up more than thirty
five percent of the overall market. How does that play
out if we do get you know, some uncertainty, if
we get some volatility, if we get a black Swan
type of event, which I thought was interesting. I saw
this this was an intentional black Saon event, which again
because of the intention of you know, the rollout of tariffs,
(44:32):
you can make that argument and it is interesting to
kind of see how how that plays out in it
plays into the added benefit right of having diversification. Sometimes
it feels diversification can feel like a drag on your portfolio.
It can feel like a bad thing. But you know,
in times when you need it, when the times when
(44:53):
you least expect it. It can be a huge, huge
benefit to your portfolio, and we're seeing that over these
last few weeks. I'm going to go back to the
phone lines we have, Uh John in Albany, Good morning, John,
thank you for calling in.
Speaker 2 (45:08):
Thank you good.
Speaker 1 (45:10):
How are you doing?
Speaker 2 (45:12):
Thank you bad? Hey? It is the market like a
bunch of scarity cats. Well, every time something happens that
it's going to react and we be shoved. I don't
always getting on in the United States with the big
you know, or you're saying that we're coming down. Okay,
(45:36):
you're gonna go off some days and so on. I understand. Then, awesome, exactly.
Speaker 1 (45:41):
Time right, Yeah, it's a good question. And John, you're
you're breaking up a little bit, so I didn't fully
hear you. But I think the point of the call was,
you know, the why is the market panicking? You're you,
you believe in the United States, you believe in our economy,
I think, and and the good kid that can come
out of it. So why is the market keet panicking
as much as as it is? And you know, I
(46:03):
think the big reason for it is when you take
a step back, right, you know again, and we've said
it before. The market doesn't like uncertainty, and I think
what happens in a situation like this is high tariffs, right,
they create a different landscape than what we've been accustomed to.
Our corporations have been operating in a system that they
(46:24):
operate in for years, and so they're accustomed to that. So,
you know, even think about some of our larger corporations, Microsoft, Apples,
Navideas of the world. I mean these companies, even our
s and P five hundred as a whole, close to
fifty percent of their revenue comes from overseas trading. It
comes from sales in other parts of the world. And
(46:49):
so we we just live in a global economy. And
when you disrupt that equilibrium that we've you know, gotten
to over the last fifty sixty years, especially post World
War Two, it creates it's a dynamic that there is
a lot of uncertainty. And you know, not only is
there uncertainty with consumers, right, our economy is made up
of two thirds by the consumer spending on goods. You know,
(47:12):
if prices go up, if prices get disrupted, that creates uncertainty.
I think for corporate America, right, the uncertainty is how
does this play out. How do these costs impact me? Well, sure,
it may make sense to reshore some of what we're
doing overseas back to the US, but that's going to
come at a huge cost. And if we start implementing
(47:34):
those policies, does you know, do tariffs get rolled off?
Does the policy from the administration change? So again, so
what happens there is that, Yes, these corporations are still
in good situations, they're still healthy, But do they stop investing?
Do they not make a new you know, trade deal
with a large supply or large customer because of these
(47:59):
uncertainty So it's more the ripple effect. I agree with you.
I mean, I think the US is in is primed
to make any situation work. But when you get this
type of global uncertainty and companies just say I'm going
to sit back. You know, that lack of investment, that
lack of hiring, it makes a huge huge impact. You
(48:21):
think about, you know, a thirty four percent tariff on Vietnam. Well,
you know, you think about a company like Nike where
most of those shoes are being manufactured or clothing. You know,
that changes the landscape of what they can charge. You know,
do they eat the cost do they push it onto
the consumer. So there's just a lot of uncertainty. And
I don't disagree with you that you know we should
(48:42):
be able to get through it, but I think you
know in this case the panic is justified because there
is a delicate balance here and when you throw up
that equilibrium, it can have a huge impact across the board.
So John, I appreciate the call. It was a really,
really good question, and I think it's one that a
lot of people are asking and wondering about. So we're
(49:04):
in the home stretch here, last few seconds of the show.
Please be sure to tune in tomorrow morning. We'll be
back at eight am here on eight ten and one
O three one WGY. Thank you so much for listening today.
I know it's been a crazy week and I hope
to have you tune in again. Thank you for listening
to Let's Talk Money on eight ten, one O three
(49:24):
one WGY.
Thanks and good morning. Welcome to Let's Talk Money here
on eight ten in one O three one WGY. I'm
Ryan Bouchet and we'll be with you for the next
hour or so, and truly appreciate all the listeners tuning
(00:23):
in and joining us this morning and every week Saturdays
and Sundays here on eight ten and WGY or one
O three one WGY. So there is a lot to
talk about today, as I'm sure you could all imagine.
It's no shortage of headlines and market topics to get into,
(00:44):
so happy to take the conversation in that direction if
the listeners out there are anything like some of our clients,
and rightfully so to close this week, we had a
lot of questions obviously coming in, a lot of concerned,
a lot of uncertainty. I don't think that is probably
news to anyone, but we're dealing with a lot right now.
(01:07):
There is a lot for investors to handle, a lot
to consider, and a lot to deal with as we
find ourselves over the last few days with you know,
new tariff talks and implementation of that coming up this week.
So it's got a lot of our investors on edge.
(01:30):
And again as you see the close the last two
days of the market rightfully, so so we can talk
about stocks, We can talk about the market, how this
is going to impact again, maybe stocks as we move forward,
maybe how they impact the economy as we you know,
(01:50):
proceed further into this higher tariff environment. Happy to discuss that,
Happy to talk about you know, the conversations we are
having with clients. Sent out a just write up yesterday,
trying to try to make sense of all this the
best that we can. It's you know, hard to fully
(02:12):
quantify and put numbers to what we're seeing because you know,
it's impossible to tell where where things go from here,
and you know what stays, what gets rolled back, what
types of negotiations and trade deals happen, So hard to
fully again quantify what the impact will be as we
(02:33):
move forward. But you know there's a lot of you know,
I think discussion points around it and things that we
have to consider, things that we have to be aware of,
and what our approaches to the markets as we move
forward from here, because they've they've been put in place
right and news has come out. So we deal with
what we deal with and control what we can control,
(02:55):
and we'll try to make sense of what we're seeing
in the markets in what that means for the economy
as we push forward. Yeah, I think this puts the
FED in a interesting predicament as we move forward. There's
fear of, you know, what tariffs can do from an
inflationary standpoint, and inflation was one of the toughest both
(03:21):
from the consumers in terms of how do we deal
with it played I think a huge role in the election.
No one likes inflation, and you know, in terms of
maybe some of the immediate impact to the tariff rollout
is the potential for inflation, and the FED has been
(03:43):
talking about that. Jerome Powell has talked about that this week.
So how do they measure potential for inflationary pressure, whether
it's short term and more transient and we've heard that
word before, right, or if it's a little bit more
of a longer term shoot, how do they balance that
and how do they deal with that given the concerns
(04:04):
around the economy, right, because in the past, the FED
has really been dealing with sort of a you know,
one way direction in terms of what's been happening in
the economy. It was either high inflation, how do we
try to slow that down, you know, with a strong
economy or you know, inflation has been coming down. We're
(04:25):
starting to see a little bit slowing down of the economy. Hey,
what's the what's the one trigger they have for that? Well,
lowering rates to try to stimulate and keep growth strong.
Like I said on the flip side, when it came
to higher inflation, you know, their lever that they can
vote is higher rates. And now we find ourselves with
their two mandates kind of going against each other maybe
(04:48):
in this current environment. So that's going to be a
little bit more difficult to navigate. I think they're going
to have tougher decisions as we move forward. And even
Jerome Howel's statements from this week point to that he's
not necessarily saying that rape cuts are a given because
(05:09):
they do have to manage what the inflationary concerns that
are out there. So we'll talk a little bit about that.
We can get into the history of terris. I mean,
terrifs had absolutely dominated the headlines for the last two
months or so, and rightfully so. And we talk all
the time about you got to tune out the noise,
(05:31):
right you got to tune out headline risk and what
maybe the media companies are trying to sell right through
fear and playing to people's emotions. But you know, tariffs,
I think to me are more than just a headline
risk that's been out there, and we saw that right
(05:53):
the market reacted accordingly over the last two days. So
we'll talk about terrorists a little bit. We can talk
about kind of the history of terroris, you know, how
they came about and how they play in the current
market environment. If you have questions as to you know,
you know, this trade imbalance is, you know, the US
(06:15):
being taken advantage of, Well, you know, there's a reason why,
sort of our our history of Paris and how we've
gotten to this point on the global stage. And I
think there's a narrative that brings us to the current
environment that we find ourselves. And then maybe there are
some elements of this that do feel unfair, maybe some
elements where you know, we feel as though we're getting
(06:37):
taken advantage of a little bit from a trade perspective.
But now you take a step back and you look, well,
you know, the US has been a pretty good place
for certainly the last fifteen years, probably even longer. If
you go back in terms of strength of our economy,
strength of our consumer, you know, the relative piece that
we've been able to afford through the years. So we'll
(07:00):
talk a little bit about that and just kind of
the evolution of some of these countries and where there's
where they stayed and or stand in this entire sort
of trade balance in this global trade environment that we
find ourselves in. And then you know, we can talk
more about, you know, some topics that have been coming
up with clients from a planning perspective. As I said earlier,
(07:22):
the last two days have certainly been dominated by what's
going on with tariffs and in the market, how does
this play out, what's the impact to it all? And again,
many of these conversations whish we had, you know, a
little bit more clear, definitive guidance as to what's next.
(07:44):
It's really hard to pinpoint that because even with the
rollout of tariffs on Wednesday night, and I was watching
at real time and just watching the impact to the
markets and to the overnight's markets as sort of that chart,
that infamous out chart with all the intended tear reciprocal
parrot rates were announced, and watching real time how quickly
(08:10):
the markets have dropped, and so that has certainly dominated
conversations towards the end of this week. But you know,
to getting before that point and helping clients sort of
navigate these times, right, it comes down to being proactive.
It comes down to the planning work we've done over
(08:30):
the past six twelve months, over the past however many
years we've been working with clients. That's where getting through
times like this comes into play. Because no matter what
you can show, you know, history of the market, right,
we've talked about it, the market averages about a fourteen
percent draw down intra year every year over the last
(08:52):
thirty five years. This type of volatility in terms of
just price perspective is not necessarily in common. We deal
with this as investors quite often believe it or not,
but never feels good in the moment. And this is
why we do the planning work. This is why we
are proactive, whether it's from a portfolio management perspective, a
(09:17):
rebalancing perspective, right, taking advantage of when certain areas the
markets are doing well and getting back to your target
allocation times are good versus when times are bad. These
are all things we can work on. And then there's
planning opportunities through all this right whether and again can
(09:38):
feel a little scary, whether you're sitting in cash and
you know, coming up with a plan to put that
to work. You know, in some cases, and this is
an area, especially when you get market volatility, thinking about
you know, and I said earlier, control what we can control.
Maybe now is a good opportunity if roth conversions were
(09:59):
on your mind, and if that's something that's that part
of your planning approach and ways to help your overall
financial plan as you move forward. Well, you know, right
now is a great time to think about roth conversion.
So thinking about these things that we can control, and
taking advantage of these planning opportunities when we get volatility,
(10:21):
when we get times of uncertainty, or ways that we
can help sort of mitigate the risks that we're off basing.
So again, our phone lines are open. Give me a
call one eight hundred talk WGY. That's one eight hundred
eight two five, five, nine four nine. As I said,
I'm sure there's no shortage of questions or concerns as
(10:44):
we move forward in this kind of new world order
of trade agreements and trade paris that we now find
ourselves in and it was huge news on Wednesday, and
rightfully so, I think you know, we all knew it
was coming, it probably wasn't as clear in terms of
(11:05):
what these tariffs looked like, what the impact was going
to be. And you know, on the on the base case,
right the approach was going to be sort of this
ten percent across the board UH tarraff globally to to
all trade partners, to all countries that we may import from.
(11:26):
But on top of that were these reciprocal terriffs, and
you know, I think that was when you when you
kind of go back to looking at the volatility from
Thursday and Friday, that was the biggest piece of sort
of surprising news as we saw what the UH tiff
rates were going to be, and that you know, these
(11:48):
reciprocal teriffs, if you know, they're they're labeled as reciprocal,
but they're not really reciprocal terrorists. They weren't based on
what these countries are charging us to export goods to
these countries. It was really based on what the trade
deficits were. And you know, the trade deficits were calculated
purely by goods trade deficits. It didn't take into account
(12:13):
services which lowers are trade deficit. Right, we operated at
a pretty major trade deficit with the rest of the world. Then,
you know, I can make the argument that, in fact,
probably a good thing that we do. It's a sign
that we have a fully developed economy. It's a sign that,
you know, over time, there's economies that are not as
(12:36):
strong as ours, they're not doing as well as ours.
You know, there's been negative impacts to the globalization that
we've experienced over the last forty or fifty years. I
don't want to diminish that aspect of this conversation, because
absolutely there has been pockets of our country that has
(12:58):
been harmed in have experienced more negative impact than positive
impacts through the globalization of trade and everything that we
saw happened, you know, really kind of posts World War Two,
I would say, is when this global economy really started
to kick into gear. We started to kind of see
(13:18):
maybe some loosening of previous tariffs and trade impacts to
make it a little bit cheaper for us to import
goods from other countries. And so this has been a
long sort of evolutionary process, and you know, we find
ourselves in the United States in a more big consumer
(13:39):
driven economy, and so for us, you know, again, globalization
hurt some job areas, hurt manufacturing, there is no doubt
about that in our country, but it also opened us
up to global trade. It opened us up to cheaper
goods and services, and you know, in some ways that's
been a positive as well. And I think it's helped
(14:00):
sort of drive our market and drive you know, our
companies in our stock market to levels that are not
you know, the same in other parts of the world.
Then you know, we have a very very strong economy.
We've been in a you know, I think we've been
pretty fortunate, a pretty you know, safe environment from kind
(14:23):
of the global uh nature of again our economy and
our trade partners. So those have all been good things.
But again it doesn't come without some issues that we've seen.
But sort of what got us to this point is,
you know, we've we've come so far from when you know,
we really needed to put more tariffs in place, right
(14:46):
when tariffs are used for a lot of these countries.
And part of the reason why we have higher rates
to export goods to some of these foreign countries versus
what they have to bring goods and services into the
US is that you know, they are in a more
we're developed, in developing stage of their economic life cycles. Right.
You think about an economic life cycle, you know you
(15:08):
kind of go from an agricultural sort of base of
your economy. You kind of then move into more of
a industrialized economy.
Speaker 2 (15:20):
Right.
Speaker 1 (15:20):
We saw that we see that kind of more play
out in something like a China today. You know, that's
what we were going through maybe post Civil war, through
our industrial revolution of the late eighteen hundreds early nineteen hundreds,
and so tariffs at that point are to protect these
new industries, is to protect these new emerging economies that
(15:42):
are coming through in you know, kind of these less
developed nations and nations that are growing and trying to
create those goods that they otherwise didn't have as they're
becoming more industrialized. You know, we've now evolved into more
of a concern sumer driven economy. And so you know
(16:03):
when you compare ourselves to maybe some of these countries
in Asia, whether it's you know, Vietnam that we have
these high high terras against all of a sudden, well,
you know there's a reason why you know, they're in
a different life cycle in their economic development. You know,
(16:23):
they're in a phase where they're trying to protect their manufacturing.
You know, maybe there is the argument to be made
that we should have been protecting more of our manufacturing
in the past, and I'm in agreement with that, but
at this point, you know, manufacturing is a much smaller
piece of our economy. It's a much smaller it makes
up a much smaller element of our overall employment and
(16:48):
you know, percentage of jobs being created. So we're just
in a different phase than some of these other countries
around the world, and that's reflected in some of these
you know, terriff rates and sort of these trade agreements
that we have, and so you know, that's one thing
that you know, I try to think about in terms
of making sense of our current situation. It's, you know,
(17:11):
how how are these you know, tarriffs, How are they
going to play out? You know, why have they been there?
Why are we in the position that we're in today
versus what we're trying to get to. And I do
think you know, raising tariffs, uh based on what was
presented this week, what was presented on Wednesday. You know, frankly,
(17:32):
it's and I think the market has reflected this it's
it's really not a probably the best approach as to
you know, strengthening our economy, right, you know, it's it's
leading to you know, in the short term expectation is
probably again higher costs of goods, higher costs to do
(17:54):
business around the world, more restrictions, you know, more hurdle
if you will to trade into our trade partners. And
you know, if inflation starts to creep up again and
we've just started to get that under control again, how
(18:14):
does the consumer react to that? How does the Fed
start reacting to that? Right again, we talked about it earlier,
all of a sudden, if we start getting you know,
pressure on inflation, if we start seeing inflation start to rise,
and we get some downward pressure on the economy, you know,
that's that's not a good thing either. So a lot
(18:36):
to consider right now. There's a lot that the market
is digesting in the market has we has reacted according
to sort of what that approach may be. Again, our
phone lines are open one eight hundred talk WGY. That's
one eight hundred eight two five, five, nine, four nine.
We're going to go to the phone lines we have.
(18:58):
Dennis in Clifton Park, Dennis good morning. Thank you for
calling in.
Speaker 3 (19:02):
Well, good morning, Ryan. My question is pretty simple. Could
you take a minute and explain this concept of direct
indexing to somebody who doesn't understand it me?
Speaker 1 (19:14):
Yeah, No, it's a great question. Thanks for the call, Dennis. Yeah,
direct indexing is a it's something that we're we've developed,
we've we're working with a partner and how so we
have a lot of clients that are using it right now.
Direct indexing is an approach and it makes the most
sense in taxable accounts. This is where you get the
(19:35):
benefit of it. So you know, we're huge fans, as
you know if you listen to the show, we're huge
fans of ETFs. Ets typically will mirror an index, right,
so you you buy an ETF, it's you know, mirroring
a particular index gives you the low cost approach. Even
holding an ETF in a taxable account, it gives you
(19:57):
a lot of tax benefits because there's a lot less
distribution on gains and you would find in mutual funds,
so they're much more tax efficient. So ETFs are a
great way to get exposure to an index. There's an
even you know, maybe better solution from a tax perspective,
and that's called direct indexing. And so what this does
(20:18):
for the accounts that we build so we can actually
mirror a particular index using individual stocks. So instead of
just having the ETF that hold the stocks within that
ETF wrapper, we're holding them directly. And the benefit of
the direct indexing is that when there's losses in those
(20:42):
individual positions, we're able to sell them create some tax losses,
so do some tax loss harvesting that will help create
a little bit higher of an after tax return over time.
It's what we consider an extra tax alpha to the portfolio.
(21:04):
So you're essentially mirroring, you know, an index or an ETF,
but you're doing so by holding these individual securities. And
you know, think about holding an ETF right you've made.
The positions that you hold in that ETF may be
going up and down, but you're not getting the benefit
of the tax lost harvesting unless that entire position comes down.
(21:25):
In a long term bowl market, sometimes you don't have
those opportunities to tax lost harvest. So by holding you know,
a number of individual securities, you get the opportunity to
tax lost harvest, take some losses throughout the year that
you can offset with gains and it just gives you
a little bit more tax flexibility. So it's a great solution.
(21:47):
Like I said, for us, you know, you have to
have a tax bill account at a certain level, at
a certain size to really be able to deploy a
strategy like this. But this is something that we've been using,
you know, with high income earners, someone who's in you know,
high tax brackets, because again that's where the benefit of
(22:08):
the direct indexing really comes into play. Does that help
answer it? Dennis? Is there anything I missed there?
Speaker 3 (22:16):
No, not at all. Ryan, Just one quick follow up.
Can you tell me when you say size of account matters,
can you give me an idea of a figure of
how much before it's of any value.
Speaker 1 (22:28):
Yeah. So for us, in terms of using a platform
like this and being able to use the direct indexing,
we need to have an account size. It's and like
I said, the benefit here is for taxable accounts. It's
not really in the higher rays because you don't get
the benefit of the tax loss harvesting there. So it's
really meant for taxable accounts. The minimum of account size
(22:49):
or something like that for US is two hundred and
fifty thousand.
Speaker 3 (22:53):
Okay, thank you very much. I appreciate your time.
Speaker 1 (22:56):
Ryan, absolutely, Dennis appreciate the call. Thank you so much.
Our phone lines are open one eight hundred talk WGY.
That's one eight hundred eight two five, five, nine four nine.
And that question goes back to what I had said earlier.
Control what you can control in markets like this and
environments like this. You know, in the volatility that we're seeing,
(23:17):
a strategy like tax loss harvesting and being able to
in a direct indexing approach is something that brings a
ton of value with a volatile market environment because when
you get these down days and you get some of
the sell off, hey, you can take advantage of capturing
some losses and booking them against your gains. And again
(23:42):
it's it's meant for an after tax, you know, review
of returns, and it can play a significant role, especially
for those high net worth, high income earner individuals where
taxes are going to have a bigger impact overall. So
we're getting closer to our news break. When we come back,
we'll talk more about the markets. In the last few days.
(24:03):
We can talk about, you know, some signs of strength
in the economy. We'll talk about the jobs number, and
we'll talk about things that we can do in this
type of market environment, controlling what we can control. So
you're listening to Let's Talk money here on eight pen
in one O three one WGY.
Speaker 4 (24:21):
With his expert colleagues.
Speaker 1 (24:27):
And welcome back to Let's Talk Money here on apen
and one O three one WGY. I'm Ryan Buche. Happy
to be with all of you today. No shortage of
things to talk about as we entered the weekend. Obviously
a lot of volatility uncertainty going on in the market,
so dominating a lot of the conversations we're having with
(24:50):
clients this week. But there's still a lot of other
things to discuss and a lot of other things that
you know, we can plan around and we can do
and in times like this, times of uncertainty and times
of market volatility, so we'll talk about that as well.
Our phone lines are open, Give me a call one
eight hundred talk WGY. That's one eight hundred and eight
(25:11):
two five, five, nine four nine. Always glad to take
all of your calls and create some great talking points
for the show in general. We you know, finished up
the first half of the show with Dennis calling about
direct indexing, and this is something that's really caught on
(25:32):
with with some of our clients, and we've been so
thrilled to be able to offer it to our clients.
And that, like I said, we you know, for a
long time are huge and continue to be right huge
proponents of ETFs. I think ETF models are you know,
they've been one of the biggest benefits and uh, you know,
(25:53):
game changers for investors and in clients. And we like
the ability to you know, get low cost investment vehicles
that are tax efficient and you can get into pretty
much only almost every part of the market, whether it's
you know, big and broad based or a little bit
(26:17):
more specific and you know, sector sub sector, uh specific
when it comes to ETFs, and through their evolution, there's
just been a lot more opportunities and a lot more
to select from in using them to build out portfolios.
So it's been a great thing for us and for
(26:39):
our models and the way we invest in really the
philosophy behind what we believe in from an investment standpoint,
and directed dexing, you know, gives us the same ability
to a certain extent with some tax advantages, with some
tax enhancements, which is always a good thing. Right. Again,
(27:01):
it's being able to control the things you can control,
and if we can add on a layer of tax optimization,
it's always a good thing. And so the way direct
indexing works is that again you know, you can there's
different ways, and in the solution that we use in
the firm that we've partnered up with, you know, the
(27:22):
platform is called Canvas, and so it's given us a
great opportunity to partner with this awesome, awesome ouset firm
is that we can you know, either build direct indexing
models around a particular index like the SMP, but for us,
we can actually build a direct index model around our
(27:45):
equity model that we use for our client's ETF portfolio.
So it can you know, be a little bit more
tactical than just holding say the SMP, which you know,
in times like this, right, some of our tactical holdings
are more on the quality and you know, value oriented
side of the you know investment landscape. Right. S and
(28:11):
P has been hit a little bit hard with kind
of the big concentration, right, and that was the concentration
risk we've been talking about for months as the mag
seven has exploded and and really grown to the size
that it has through the last few years, and so
you know, being able to be a little bit tactical
in terms of building those underlying direct indexing out and
(28:34):
then you hold these individual positions, right, you hold these
different stocks. But when you get triggers on the downside,
when you get losses, you're able to tax loss harvest
those whilst continuing to track the benchmark or to track
the built portfolio that you're intending to track. And so
(28:55):
you know, being able to take advantage of these volatile times. Again,
it never feels good. It's never a great thing when
markets are down over ten percent in a two day interval,
but having solutions that allow you to at least take
advantage of some of this volatility can be a good thing.
And you know, the hope and the goal is that
as time goes on, as you take these losses, right,
(29:19):
your after tax rate of return gets enhanced. There's that
after tax alpha that we call it, where being able
to kind of offset your gains with some of these
losses is going to help at the end of the day. Right,
in many ways, In many times, it's not so much
how much you make, but it's how much you keep
(29:39):
and being able to implement some tax savings strategies are
things that you know, we're really focused on as a
firm and as we grow, this is an area that
continues to add so much value to our clients and
their situation is how can we plan around taxes? How
can we be pro active rather than reactive to create
(30:04):
situations that can benefit our clients. You know, if you
think about it again in a different manner, right you know,
we're we're in a you know, we're in a big
drawdown right now. You know, the NASAC is down in
bear market territory after the last two days, believe it
(30:24):
or not, their name, Friday was one of the worst
four two day stretches that we've seen since World War Two.
I mean, it goes back seventy five eighty years that
we've seen a two day pullback like we've seen these
last two days. So the market is in you know,
in some ways, you know, a ton of uncertainty, a
(30:47):
little bit of unchartered waters in terms of kind of
a policy. Whether you want to call it a mistake
yet yet to be determined, I guess, but certainly you know,
the market react in terms of it being a policy
mistake on Wednesday and has reacted accordingly. And so when
(31:07):
you get market volatility like this, what are things that
we can do to potentially take advantage of this? And
you know, tax tax planning is a big one. Again,
I'll just let leave our phone lines one eight hundred
talk w GUI one eight hundred, eight two, five, five, nine,
four nine. Phone lines are open if you do have questions.
(31:28):
And so, you know, going back to the tax planning
aspect of it, one of the things that could be
a good idea right now, and this is a planning
opportunity that we've been doing more and more of, not
just because of the volatile market, but just in general
as we work with clients and show them the tax
benefits of it. Is doing Roth conversions, right that has
(31:50):
been something that whether it's for the benefit of you
and your spouse, whether it's for the benefit of your
beneficiaries and you know, the next generation because there has
been some changes to tax laws in terms of inheriting
iras versus wroth irays in what the distribution rules require
(32:12):
that you know, there is planning opportunities and a lot
of planning opportunities around the concept of Wroth conversions. And
so this is an area that you know makes sense
within your plan, if it makes sense within the overall
pack strategy, and and it's something you're looking to deploy. Well,
a volatile market is a great great time to dow
(32:35):
all of a sudden, you know, pull the trigger on
something like that. You know, let's say maybe you have
a position that is training off twenty percent. You know,
you could still put whatever that original intended dollar amount
you know, use as your conversion, and you have a
lot more upside all of a sudden within the Wroth
(32:56):
account to take advantage of that conversion. I mean, the
biggest benefit to doing a WROTH conversion, because it does
there's an upfront cost to it, right, you're paying the
taxes upfront, But the biggest benefit is what that growth
can be within a WROTH account. What that you know,
not only tax free growth, but pax free distributions can
be from a WROTH account. So when you have times
(33:19):
of volatility, again, let's do let's put into motion things
that we can take advantage of. We know markets are
going to bounce back at some point, whether it's in
the next week, the next month, hopefully you know, not
too far down the road. But we know market's going
going to bounce back, So how can we take advantage
of these selloffs right? One of the ways would be
(33:42):
again through some Wroth conversions. Uh, it's a good time
to put that into place and to employ a strategy
like that, because again you're getting a little bit of
a discount as you're moving that money over and you know,
a lot probably much more upside than you have before.
Other question we're getting a lot of right now and
(34:03):
over the last couple of weeks. In terms of how
to manage it is you know, what about I have
cash on the sideline? What should I be doing? And
you know, questions like that I always say is uh,
you know, I don't think there's necessarily always a right
or wrong answer to getting cash to work, because every
situation is a little bit different. How much cash do
(34:26):
you have there? What is that cash coming from? Was
it invested before? Is it coming from some other circumstances
that maybe it wasn't invested? So you know, how much
of it is does it relate to your overall net worth?
Is it a bigger portion, is it a smaller portion?
And you know, lastly, kind of what is the market
(34:48):
environment at the time when you're figuring out is now
the right time to put it to work? And so
we've actually, you know, over the last few weeks, have
had had a lot of conversations revolving around getting cash
to work. And to me, right, there is so again
there's so much, so much uncertainty around the markets right now.
(35:15):
You know, I wish I had a crystal ball to
be able to say what's next. The where I play
out is I do think sort of this tariff implementation,
the way it was implemented, sort of the uncertainty around
the communication of it, in the role out of it,
and frankly just tariffs in general. I mean, I do
(35:35):
think it's more of a recessionary policy. I don't think
it's going to be a good policy. I think it's
going to hurt us more than it's going to benefit us.
But the other thing I know is, you know, President
Trump in this administration love to make deals, right, They
love to negotiate. They love to make deals. And my
hope is that you know when you when you start
(35:59):
a negotiation, and sometimes you start with a big number, right,
and you start when way one end of the spectrum
to then sort of reel it back in to get
to a number that is more attainable. And my hope
in all this is that, yes, this what we saw
on Wednesday was you know, it was a shock right
(36:21):
in the market reacted accordingly to that shock, but it
was a shock nonetheless, and that you know, cooler heads
will prevail over these next few weeks we get you know,
maybe we get some better trade agreements with some of
our trading partners around the world. You know, I don't
think we need to get perfect trade agreements are perfectly reciprocal,
(36:45):
paraff and tax agreements, because again, as I stated earlier,
I think there's a reason why tariffs into our country
is lower than you know, tariffs to other parts of
the world. We don't need necessarily need to be sending
goods to everywhere around the world. We send more services,
you know, intellectual property, other things that have made our
(37:06):
economy what it is today and successful in the way
that we've been successful through the years. That we don't
need these perfect solutions. And so my hope is that
you know, we get some sort of trade resolutions, some
sort of trade agreements, and you know, we move on
from this scare. We you know, much like what we
(37:26):
saw in COVID some sort of v recovery from a
market perspective. Uh, and that's only going to happen if
this is short lived, right. We really needed to be
short lived to you know, prevent any sort of you know,
as I've been saying, kind of rollover in our economy
because you know, the other big news, and it's almost
(37:50):
been an afterthought, and so much so that we're forty
five minutes into today's show and I have even talked
about it. But we had March jobs number come out
on Friday, and it was a strong job's number. It
was really strong, and so our economy is still on
solid ground. It is still on solid footing. We are
in a good place as an economy, and you know,
(38:13):
the biggest thing to that right now is that we
don't go too far into this uncertainty, too far into
this trade talk and trade negotiations that can disrupt what
we have right now in our economy, because we are
in a good place, still relatively strong. And I wrote
(38:34):
about it when I sent out our letter yesterday to clients.
There's been a big difference between what you would consider
soft data, right, that's something like consumer sentiment, you know expectations, right,
things like that which are more rooted in emotion versus
what we're seeing in the hard data numbers, the actual
sort of output or activity of our economy, like a
(38:59):
job's number for March, which again was relatively strong when
you look at it, versus what the expectations were. So
those are all you know, positives as we're seeing right now. Again,
our phone lines are open. Give me a call one
eight hundred talk WGY. That's one eight hundred eight two
five five nine four nine. I'm going to go to
(39:22):
a quick commercial break and when we come back, we'll
have about ten minutes left. Again, If you have any
questions as it relates to some of this trade policy,
what the tariffs mean, how the market is reacting, give
me a call. If you have questions on any sort
of planning opportunities or questions you may have, again, give
me a call one eight hundred Talk WGY one eight
(39:44):
hundred eight two five five nine four nine. You're listening
to Let's Talk money here on eight ten in one
oh three one WGY.
Speaker 4 (39:53):
If you want to learn more about Bouchet Financial Group,
visit their website Bouche dot com. That's b O u
ce ey dot com. Sign up for their blog, which
is updated every week stephenboucha dot com. Follow them on
Twitter at Bouchet Group. Like them on Facebook. The phone
lines are open. Eight hundred talk WGY. That's eight hundred
(40:14):
eight two five five nine four nine. Here is Stephen Bouche.
Speaker 1 (40:25):
And welcome back to Let's Talk Money. Here on eight
ten and one O three one WGY. I'm Ryan Bouchet.
Our phone lines are open. We have probably just under
ten minutes left of the show. We're in the home stretch.
Appreciate all the listeners that have tuned in and been
part of the show this week, in each and every week,
we have a great listening audience and means a lot
(40:48):
to us. I know it means a lot to the
other colleagues that are firmed that hosts a show. And
it's always great to interact, whether it's on the radio show,
whether it's when you know some longtime listeners come into
our office and meet with us to engage our firm
and engage our services. So always love interacting with the
(41:09):
folks that give us a listen in tune in each
and every week, So we appreciate it and thank you.
So get our phone lines are open one eight hundred
talk WGY. That's one eight hundred and eight, two five, five, nine,
four nine. It has been no shortage of I guess
topics to discuss the impact of these tariffs. As we
(41:30):
discussed earlier, markets had, you know, pretty pretty rough weeks
we had the the SMP was down nine percent for
the week, down over ten percent in just the last
two days. Like I said, it's only been the fourth
time in the last eighty years or so, the fourth
time since World War Two where we had a two
(41:52):
day sell off like the one we just experienced. And
so you know, it's hard. You know, you try to
find the right balance in times like this, right you
you know, you need to have a positive outlook in
terms of what's ahead. You know, it's it is important,
especially at this stage in the game. You know, there
(42:14):
is an element of you know, needing to stay the course.
Right We've we've planned for market volability. We know it's
always a you know, it could be out there. We
know that volatility happens in the market from time to time.
It's the I always say it's the cost to being
a good long term investor because you know, we've been
(42:37):
rewarded through the years, but you know, that sort of
reward doesn't come There's no such thing as a free lunch, right,
doesn't come without its costs. And part of that cost
of being a good long term investor and benefiting from
these markets over long periods of time and in strong
bow markets, are you know, dealing with some of this
uncertainty and dealing with some of this volability. You know,
(43:00):
I think for many people we don't expect it to
be a direct result of you know, of policy initiative,
but that's the situation we find ourselves in today. So again,
if you have any questions to before we close out
the show, give me a call one eight hundred talk WGY.
That's twenty eight hundred eight two five five nine four nine.
(43:23):
And you know it's been quick. But the NASDAC has
now finds itself in bear market territory, you know, the
mag seven I don't know what they were in bear
market territory before the rest of the market earlier in
the week. I actually don't know what you know, if
you took all of them and equal weighted it, what
they would be down. But I know some of the
big names and Nvidia's the apples of the world down
(43:46):
twenty five thirty thirty plus percent through this downturn, and
you know, that was part of the risks of some
of the market concentration. It was something that we talked
about a few weeks ago with clients at our State
of the Economy presentation, and it's something that you know
has been on the forefront, right is how we've never
seen a market as concentrated as we're seeing it today,
(44:08):
where you have seven companies make up more than thirty
five percent of the overall market. How does that play
out if we do get you know, some uncertainty, if
we get some volatility, if we get a black Swan
type of event, which I thought was interesting. I saw
this this was an intentional black Saon event, which again
because of the intention of you know, the rollout of tariffs,
(44:32):
you can make that argument and it is interesting to
kind of see how how that plays out in it
plays into the added benefit right of having diversification. Sometimes
it feels diversification can feel like a drag on your portfolio.
It can feel like a bad thing. But you know,
in times when you need it, when the times when
(44:53):
you least expect it. It can be a huge, huge
benefit to your portfolio, and we're seeing that over these
last few weeks. I'm going to go back to the
phone lines we have, Uh John in Albany, Good morning, John,
thank you for calling in.
Speaker 2 (45:08):
Thank you good.
Speaker 1 (45:10):
How are you doing?
Speaker 2 (45:12):
Thank you bad? Hey? It is the market like a
bunch of scarity cats. Well, every time something happens that
it's going to react and we be shoved. I don't
always getting on in the United States with the big
you know, or you're saying that we're coming down. Okay,
(45:36):
you're gonna go off some days and so on. I understand. Then, awesome, exactly.
Speaker 1 (45:41):
Time right, Yeah, it's a good question. And John, you're
you're breaking up a little bit, so I didn't fully
hear you. But I think the point of the call was,
you know, the why is the market panicking? You're you,
you believe in the United States, you believe in our economy,
I think, and and the good kid that can come
out of it. So why is the market keet panicking
as much as as it is? And you know, I
(46:03):
think the big reason for it is when you take
a step back, right, you know again, and we've said
it before. The market doesn't like uncertainty, and I think
what happens in a situation like this is high tariffs, right,
they create a different landscape than what we've been accustomed to.
Our corporations have been operating in a system that they
(46:24):
operate in for years, and so they're accustomed to that. So,
you know, even think about some of our larger corporations, Microsoft, Apples,
Navideas of the world. I mean these companies, even our
s and P five hundred as a whole, close to
fifty percent of their revenue comes from overseas trading. It
comes from sales in other parts of the world. And
(46:49):
so we we just live in a global economy. And
when you disrupt that equilibrium that we've you know, gotten
to over the last fifty sixty years, especially post World
War Two, it creates it's a dynamic that there is
a lot of uncertainty. And you know, not only is
there uncertainty with consumers, right, our economy is made up
of two thirds by the consumer spending on goods. You know,
(47:12):
if prices go up, if prices get disrupted, that creates uncertainty.
I think for corporate America, right, the uncertainty is how
does this play out. How do these costs impact me? Well, sure,
it may make sense to reshore some of what we're
doing overseas back to the US, but that's going to
come at a huge cost. And if we start implementing
(47:34):
those policies, does you know, do tariffs get rolled off?
Does the policy from the administration change? So again, so
what happens there is that, Yes, these corporations are still
in good situations, they're still healthy, But do they stop investing?
Do they not make a new you know, trade deal
with a large supply or large customer because of these
(47:59):
uncertainty So it's more the ripple effect. I agree with you.
I mean, I think the US is in is primed
to make any situation work. But when you get this
type of global uncertainty and companies just say I'm going
to sit back. You know, that lack of investment, that
lack of hiring, it makes a huge huge impact. You
(48:21):
think about, you know, a thirty four percent tariff on Vietnam. Well,
you know, you think about a company like Nike where
most of those shoes are being manufactured or clothing. You know,
that changes the landscape of what they can charge. You know,
do they eat the cost do they push it onto
the consumer. So there's just a lot of uncertainty. And
I don't disagree with you that you know we should
(48:42):
be able to get through it, but I think you
know in this case the panic is justified because there
is a delicate balance here and when you throw up
that equilibrium, it can have a huge impact across the board.
So John, I appreciate the call. It was a really,
really good question, and I think it's one that a
lot of people are asking and wondering about. So we're
(49:04):
in the home stretch here, last few seconds of the show.
Please be sure to tune in tomorrow morning. We'll be
back at eight am here on eight ten and one
O three one WGY. Thank you so much for listening today.
I know it's been a crazy week and I hope
to have you tune in again. Thank you for listening
to Let's Talk Money on eight ten, one O three
(49:24):
one WGY.
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