Episode Transcript
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Speaker 1 (00:00):
Good morning, Ed. How are you doing this morning?
Speaker 2 (00:02):
More than John, I'm I'm doing good, feeling good on
a hallowekend.
Speaker 1 (00:05):
Yeah, we were both out really late trick or treating
last night. No, absolutely not. We got to bed early,
prepared for the show. But Halloween, you know, it was uneventful.
I'll tell you. I moved to Saratoga year ago. We
had zero tricker treaters, and you know, I kind of
panicked during the day. Last year. I was actually in Nashville.
(00:26):
It was actually our first Halloween here in Saratoga. Was
in Nashville, so not home yesterday. I'm like, we got
to get candy, and so we went out and bought candy.
And now I've got some candy to eat over the
next week or so. Yeah.
Speaker 2 (00:38):
I can be a little problematic for the diet.
Speaker 1 (00:40):
Yeah, yeah, absolutely. And I was actually out in Austin,
Texas this week. I actually spent a lot of time
lived out in Austin for about two years in the
in the mid to late nineties and have not been
back since. And wow, what a difference that city has
boomed and has continued to boom. I couldn't didn't even
(01:00):
the skyline. It was just incredible the growth and just
a cool city. Uh you know, really kind of the
tech booming area of Texas. You got a lot of
tech jobs there. But just uh so, it's great, great
to be back. Great to walk around the city, check
out some areas that hadn't seen in a long time.
And Ed, I know you did a little travel this week, baby,
(01:22):
a little bit more pleasure traveling but down down south
and joining some sunshine.
Speaker 2 (01:27):
Yeah, it was nice over to the long weekend. I
was able to catch up with some friends down in
Fort Lauderdale.
Speaker 1 (01:32):
So awesome, awesome, good so, but it's great to be back.
And I will say this, you know, flying over Texas,
you just look at all that flat land and I'm uh,
I love the contour of our mountains and valleys and
lakes and everything we have here in the four seasons.
I definitely could not live without the four seasons. So
good to be back. Tomorrow is you know, big marathon day.
(01:57):
If you're a runner, you may know someone who's running
in the New York City Marathon. I know a few
folks running in it. And actually my flight hot Foston
was with a young woman sitting next to me who
just because a flight you know, I will tell you
traveling right now is a little intent and you know
with TSA certainly being impacted, you know, by the government shutdown,
(02:21):
but you know they're doing their best to keep things
moving and air traffic controllers as well. But you know,
sat nextually, this young woman who her flight to New
York was was canceled and they weren't gonna you know,
she couldn't get rescheduled till late Saturday night, so she
was taking the same flight. I was kind of routed
through Philadelphia and then she had to take an Amtrak
(02:41):
to New York. So she's kind of going through a
lot to get to the marathon. But also have some
other folks I know who are running in it, so
it's a big event. And if you're a runner, I'm
sure you're again following somebody. So if you know somebody,
hopefully they'll have a good outing there. And Ed, I
know you and some other colleagues Paulo La Pietra and
(03:03):
Vincenzo test have been part of a campaign. You know,
real men, we're pink raising money for a great cause.
You guys are kind of wrapping up. I think things
wrap up Monday, and you guys are done a great
job and raising us some great money. So anything you
want to share there, and just you know, again, I
know at a firm level, we appreciate all three of you,
(03:24):
you know, kind of giving back to the community. But
I think it's great to just see our young colleagues participate.
Speaker 2 (03:29):
Yeah, no, it was. It's been a great event so far.
So far. I mean the American Cancer Society team, you know,
Lizzie Hunter, they do a phenomenal job, you know, helping
us out, making sure we're on top of our stuff.
But I think we've raised almost twenty two thousand dollars
you know currently for the Capital region top ten. So
definitely proud of that. I know Steve's very proud. He's
(03:50):
put a lot of work in on his end himself.
So it's been good. We still got i think until
Monday eleven pm, so going to try and squeeze out
a few more nations and see if we can crack
top five.
Speaker 1 (04:01):
That's awesome. Great job there, great job. And again, you know, Steve,
if you've listened to this show, you know, Steve's really
built into the culture of the firms to give back,
so appreciate all you guys are doing there. So Ed
and I are here today hosting. We're going to talk
a lot about the markets and lots to talk about
this week, the FED meeting and you know, some financial
(04:21):
planning topics and whatever else you know you call it.
So definitely encourage listeners to reach out to us. You
can get us at eight hundred talk WG Y. That's
eight hundred eight two five five nine four nine. So
let's start. You know, market update, very active week in
the markets, a lot to talk about. And you know October,
(04:44):
you know, sometimes we talk about is this scary month?
And you know, from a market perspective, you know, it
was not scary at all, and so a lot to
talk about. You know, had the FED meeting this week,
and you know, highlight there is FED did cut interest
rates by another twenty five basis points to another quarter
of a point decrease, So certainly markets like that. Also,
(05:07):
he had some dialogue which we'll we'll talk a little
bit more, kind of pumping the brakes a little bit.
But you know, overall for the week, you know, SMP
was upo point seven percent. Nasdaq was clearly the leader
with tech it we'll talk about that. Certainly Apple and Amazon,
where some of the highlights on the tech side. Nasdaq
(05:28):
was up two and a quarter percent for the week,
so a solid solid week for the tech heavy Nasdaq
Dow was also up point seven five percent for the week.
Now the Russell two thousand was down actually down one
point excuse me, one point four percent for the week,
and we'll talk a little bit more about that. It'll
(05:48):
kind of get into kind of what we're seeing with
small cap, but certainly, you know, we saw the small
cap take a little bit of hit this week. So overall, great,
great week in the markets, and you know, wrapping up
the month, SMP up to and almost two point two
seven percent, S and P, the Dial and the Russo
two thousand all had six straight monthly increases, so that's
(06:11):
six months in a row of increasing for the month,
so great lift there. So, S and P up two
point twenty seven for the month and sixteen point three
year to date, so solid solid performance. Nasdaq, as I mentioned,
two and a quarter for the week and up a
solid four point seven percent for the month. So clearly
(06:33):
we're seeing uh, tech heavy you know, leading the markets,
and we'll talk about that. Certainly, the large cap tech
giants are continuing to be dominant, and we saw that
this month and for the NASDAK it was a seven
straight months of increase. So markets are delivering and no question.
(06:55):
And so year to date NASDAK almost up twenty three percent,
just shy twenty three now, as I mentioned, up three
quarters of a percent this week and for the month
up two and a half percent and eleven point eight
percent year to date, so solid, solid across all indexes.
Russell two thousand, although it was down this week, hey,
(07:16):
for the for the month it was up almost one
and three quarter percent, and again it was a six
straight month, so you know, we do. You know, we'll
talk about what we're kind of thinking about of small
cap going forward and how that space is changing a
little bit, but you know it it it did have
some recovery you know, from April through October, so nice
(07:37):
to see that again. We did see some downturn this
week for sure, but up you know again year to
date over eleven percent, So solid, solid numbers there across
the board. You know, the ten year treasury, we certainly
saw some movement there. We'll talk about that. You know,
a little counterintuitive. We had the Fed cut rates we
actually had the ten year yield go up, and you know,
(07:59):
we'll talk about that because certainly that ten year is
a really really important number. Ed, it's something that you know, mortgages,
a lot of you know, lending is based on. So
we'll certainly get into that. So solid week in the market,
we'll talk about tech, you know, Ed, I know, you know,
Apple and Amazon are our holdies that we look at
(08:21):
closely and certainly had explosive weeks. Amazon particular, really solid
day yesterday. Give some of the highlights. Kind of talk
about that a little bit what we saw.
Speaker 2 (08:33):
Yeah, I mean, so just on the Amazon side, I mean,
they crush their cloud growth. That's a that's a key
area of where we're looking, you know, that's where we
want to see some of that capital expenditure come to fruition. Right,
they're spending money. They spent a lot of money, so
we do need to see revenue coming in, and we did.
They crushed cloud growth. And now on the flip side,
(08:55):
you know, Apple posted you know, really solid iPhone and
also like their service revenue beat expectations. Now the bigger
thing for Apple is on top of that, they're forecasting
record holiday sales coming up end of this year, so
that'll be exciting to look forward to. You know, we'll
kind of see those results come out Q one twenty
twenty six. But I mean, just across the board for tech,
(09:19):
you know, we're seeing what we want to see from
you know, really all the major players, and that's you know,
continued revenue beats, earning per share beats, and then continued
cap X, which is capital expenditures. We want to make sure,
you know, we're seeing these companies continue to invest into
this AI infrastructure, and that's what we're seeing. They're they're
really gearing up for a strong end of this year
(09:40):
and then a strong twenty twenty six so far just
based on where they're spending all this money.
Speaker 1 (09:44):
Yeah, Apple was interesting because you know Apple certainly had
you know, earners per share and revenue beat, you know,
but they did have you know, they did miss on
the iPhone revenue, right and certainly you know, China actually declined,
but as you mentioned, you know, they forecasted strong Q
for sales of the iPhone and uh, you know, and
(10:04):
we've seen you know, companies get get you know, pretty
conservative with forward estimates because I will say, you know,
the market really punishes if you miss those estimates. And
you know, Apple, Tim Cook, you know, put some bold
numbers out there what they what they expect for Q four,
So you know, you have to believe they've got the
data to support that. And so really markets, uh, you know,
(10:29):
appreciated that. And I think you know, Apple, you know,
very opposite. I think from from Amazon. Apple is really
a story of steady growth and their strength and their services.
But gave great forward guidance in market appreciated that Amazon,
you know, as you mentioned, you know, crushed it, and
certainly they showed on this service revenue, you know, really growth,
(10:52):
phenomenal growth, growth they haven't seen in a number of years. So, uh,
markets really appreciated that and saw saw the uptick and
you know, you know ed here we are almost not
quite three quarters away, somewhere between and a half three
quarters away through kind of the earning season, and you know,
(11:12):
we're seeing good numbers. Let's talk about that a little bit,
you know, kind of what we're seeing, what kind of
expectations are for the for the rest of the quarter.
Speaker 2 (11:20):
Yeah, So, I mean, just so far, we've got sixty
percent of the S and P five hundred that have
reported earnings. You know, so far eighty four percent have
our beating estimates, and you know those that are beating
are beating by about five percent on the median. Now,
I think I don't have the historical averages in front
of me, John, I know we're talking a little bit
(11:41):
before the show. Is that median a little bit below
historical averages? Are you know, we are getting smaller beats, yep.
Speaker 1 (11:49):
But it's so so important to note. You know, we're
having a higher percentage of companies be but but the
margin that they're beating is shrinking a little bit.
Speaker 2 (12:00):
Yeah, So it is interesting to see. And some of
that does have to do with expectations, especially these large
cap growth companies. You know, as valuations rise, you know,
we continue to ask more and more from these companies
to justify those valuations. But at the end of the day,
we've seen it. I think this this round earnings is
a great example of that.
Speaker 1 (12:20):
Now.
Speaker 2 (12:20):
The only one we've seen, you know, struggle a little bit,
was was Meta. They slipt pretty hard after the after
the bell, you know, down almost ten percent, just some
concerns on spending. But you know, John, we were talking
a little bit before that. That was due to some
accounting adjustments.
Speaker 1 (12:37):
Yeah, so so you know, they they had to take
right off on really on the how the new tax
legislation affected their their some of their deferred tax assets.
So you know, so not really you know, a change
to their operating results, right, really kind of more of
a one time accounting adjustment, which happens these companies do
(12:58):
that and certainly impacted their numbers, but you know, clearly
laid out you know how that was really a one
time adjustment.
Speaker 2 (13:07):
Yeah, and aside for that, on Meta, I mean, their
revenue is up twenty six percent year over year. I mean,
you think about how much money that company is making
to increase twenty six percent year over year. It's it's
it's mind boggling to think about. So to me, you know,
that' stock move, especially when we're seeing strong earnings of
the mag seven, seems like a little bit of an overreaction,
you know, maybe an opportunity there for you know, anyone
(13:29):
looking to buy some Meta.
Speaker 1 (13:31):
Absolutely, So we're going to take a quick commercial break,
so please stay tuned and we'll be right back with
Let's Talk Money on eight ten. WGY Well, thank you
for staying with us through that quick break, and as
you heard about that announcement, you know, we are having
a planning event. You can if you go to our
website Bouchet dot com, you'll see in the upper left
(13:52):
hand section of way to register for that. So it'll
be great, great information and content will be covered there,
so certainly recommend you to check it out. So, you know,
so Ed and I were, you know, just going through
the number so markets, what can we say? Great week
in the markets, certainly fueled by the FED meeting and
some of their actions, but more importantly, solid solid earnings.
(14:16):
And you know, as Ed mentioned recapping, you know, so
far from the reporting season, you know, we're seeing earnings
per share growth of ten point seven percent, so double
digit earnings growth and revenue growth of just shy of
eight percent. So so again solid solid earnings, you know,
really helping support the valuations that we're seeing. So so
(14:39):
that's good to see. You know. Let's talk a little
bit about the FED meeting. You know, so you know
they met this week and you know, as expected, reduced
the interest by interest rate by quarter of a percentage point,
so twenty five basis points, So no surprises there, I
think heading into the meeting.
Speaker 2 (14:58):
What was it, ninety nine percent as close as you
can get to certain.
Speaker 1 (15:01):
Yeah, so, uh you know, check did that did what
was expected. But as always, right, it's not just the
action they take during that meeting, it's you know, really
the dialogue afterward, and quite frankly, uh Chairman Powell's comments,
you know, wrapping up the meeting, and you know, really
you know, he made it pretty clear more cuts are
(15:23):
not guaranteed. He's kind of pumping the brakes, you know,
the markets pricing in another twenty five basis point, you know,
increase or decrease for the December meeting, and clearly, you know,
uh Chairman Powell is saying, hold on, you know, let's
pump the brakes. We're going to be data dependent and uh,
(15:44):
you know, so markets it's interesting, you know, markets first
reacted positively to the cut and then kind of you
know neutralized a little bit, and but then we had
some great earnings releases, right, which which fueled what happened
to the rest the rest of the week. For sure,
So you know, fed you know, clearly you know, trying
(16:06):
to you know, make sure that the markets are not
too exuberant, right and expecting too many you know, rate decreases.
I think we saw some impact of that in the
small cap market, and uh, you know, certainly ed as
we look at small caps, right, I think the thesis
is changing a little bit. And uh, certainly again if
(16:28):
you look at from end of April, you know to now,
hey they participated in the recovery, do you know, which
is nice some broadening there. But you know, as we
look forward, you know, there's certainly some challenges in the
small cap space.
Speaker 2 (16:42):
Yeah, I mean if we just take even a step
back and look at how much this small cap space
has has changed. I mean really over you know, the
better part of like the last two decades. But we've
got more companies staying private for longer and either staying
for private for longer and not even entering the public space.
You know, a large part of that is just due
to the growth in private equity and private credit, but
(17:06):
also the motes that these large cap companies have. They're
they're large, and they're larger than they were in the
in the two thousands. You're not going to see the
as many or if any you know, ultra small cap
companies going public and competing with an Nvidia or an Apple.
It's it's it's just too hard, it requires too much capital.
(17:30):
Just looking at the composition of small caps, I mean
a lot of them are industrials. They're now outside the
tech space, which has changed. And just looked at the
numbers JP Morgan posted, you know, their fourth quarter summary,
forty six percent of the Russell two thousand, that's a
small cap index, forty six percent of those small caps
are unprofitable. That that makes it a tough area to
(17:54):
invest in. And I don't know why you would want
to own one of those when you could, you know,
own a slice of Nvidia or you know, ace of
Meta that's increasing revenues twenty six percent year over year exactly.
Speaker 1 (18:05):
Yeah, and so certainly see some you know headwinds you know,
moving forward for the small cap space for sure, you know,
and you know, we ed and I we encourage listeners.
If you have questions, call in. You can reach us
at eight hundred talk WGY. That's eight hundred eight two
five five nine four nine. So you know, during the
(18:26):
FED meeting, you know, not only did you know the
FED reduce rates, you know they also announced that they
were going to you know, end their quantitative tightening in
December and and that's a fancy word for really all
they were doing is right, they were reducing their balance sheet.
And you know what was You think about the FEDS
(18:48):
the tools they have, and that's one of the tools
they have. And you know, as the economy was hot, right,
they were trying to reduce the balance sheet, calm things
down a little bit. The exact opposite. You know. You
might remember you're talking about quantitative easing, you know, back
in the COVID times, right, and FED was using the
balance sheet to stimulate the economies. So really they're saying, okay,
(19:10):
you know, we think we were getting inflation into the territory.
We haven't quite hit their target at two percent, right,
but we're gonna stop using that as a tool. Now.
They're not saying they're going to start injecting money, right,
They're not going to go into easing. But I think
now it's going to be more of a balanced approach. Right,
And we'll see how data plays out. See how you
know inflation, does it still continue to tick down? And
(19:33):
most importantly, you know that they've clearly limite it known
you know, jobs is where they're going to keeping their
eye on. You know, do we see any dramatic weakening
of the jobs market. You know, do we see unemployment
tick up any other data that suggests that that labor
could become an issue? And it is interesting, you know,
(19:55):
we are hearing as companies are employing now more more
AI and AI tools, we are hearing about reductions of hiring.
You know, we have not seen massive layoffs, and you
know that certainly is a good sign from the labor perspective.
You know, we are seeing you know, particularly you you
look at the data with you know, recent college graduates,
(20:17):
it's getting harder and harder for recent grads to find
a job. You know that, and that may touch some
of the listeners here. You may have children or grandchildren
who are in that situation right now. So certainly experiencing
certainly a slow down. But again fed's looking for dramatic,
you know, moves, so you know, we start to see
dramatic layoffs or a really significant uptick in unemployment. But uh,
(20:43):
you know, so FED is going to use every tool
that it has, and they don't have a lot of tools,
but they do have some tools. So you know, as
we wrap up, you know, the October meetings, so now
that's you know, after eleven straight increases in the FED
funds rate. Now, I I've seen five decreases, right, and
so with two of them this year, and we've got
(21:05):
you know, December meeting coming up. And you know, from
the tail the tape, you know, I know, we look
at you know, what expectations are currently, you know, what's
the numeric expectation of what the Fed is going to
do in December.
Speaker 2 (21:18):
Yeah, right now we're looking at a seventy percent chance
of another quarter quarter percent cut.
Speaker 1 (21:23):
Yeah, perfect, and in that that will change a lot,
you know, So it'll be interesting as we get closer
and closer to that December. I think they meet December
ninth and tenth, which will obviously be their final meeting
of the year. So you know, before we get to that,
we'll certainly, you know, we'll see that number move and
(21:44):
get more real. So, you know, and again and his Powell,
his statements, and there'll be more obviously, you know, next
week you'll hear more and more media, you know, comments
from you know, FED fun board members, FMC board is
just what their thoughts and expectations are. But certainly, you know,
he made it clear he's tapping the brakes, right, you know,
(22:06):
don't don't pencil in all these rate decreases, So you know,
Marcus is gonna be a little cautionary there.
Speaker 2 (22:13):
And it's I think it's also important to keep in
mind that you know, he is operating at a bit
of a handicap right now. We have not gotten any
labor data, you know, since September.
Speaker 1 (22:25):
Perfect. Yeah, so we'll talk about that. Because we are
halfway through today's show already, we're going to be taking
a break. I want to thank you for tuning in.
Hope you are enjoying the show. We encourage the listeners
to call in with questions. You can reach us at
eight hundred w GUI. That's eight hundred eight two five
five nine four nine. You are listening to Let's Talk Money,
brought to you by Bouchet Financial Group, where we help
(22:48):
our clients prioritize their health, but we manage their wealth
for life. Well, good morning, and thank you for staying
with us through that commercial break. I'm John Malay and
I'm your host for this morning show. I'm a CPA.
I'm the firm's chief operating officer, chief financial officer, and
a wealth advisor, and I'm joined by my colleague Ed Wilhelm.
(23:10):
Ed's a portfolio strategist and a key member of our
investment committee. Ed, how are you doing this morning? Doing good?
Speaker 2 (23:19):
All right, it's been a good show so far.
Speaker 1 (23:21):
Yeah, for the first half of the show just flew by.
It flew by. So again, encourage listeners to call in
with questions. That's why we are here, and you can
reach us at eight hundred talk w G Y and
that eight hundred eight two five five nine four nine.
You can also submit a question through our website and
that's at ask bouchet so ask b O U C
(23:45):
h E Y dot com. You can submit a question
through that we so and we actually did have a
caller submitted question and you know this was from James,
and James, you know pose the question. I'm just going
to read it straight out. Steve mentioned in the past
at your firms assets are all in US equities, and
(24:05):
he's mentioned some large US firms are international, so you
have some small exposure to international. He said, most advisors
will recommend twenty percent in international funds. Do you see
yourself going more into international? And Jim, that's a great question,
and I will say, you know, it's it is something
that our Investment Committee is looking at looking at hard.
At this point, you know, we are still have no
(24:29):
international in our portfolio, direct international. You know, we've been
underweight international for over fifteen years and then totally out
for seven years, and you know that's benefited our portfolio
is no question. But certainly we've seen some recovery in
international this year, no question. Part of that, you know,
due to currency. But I will say our Investment Committee,
(24:53):
who you know, they meet formally weekly, but they're talking
every single day, and they're certainly looking at international. But
at this point, you know, it's our portfolios one hundred
percent of US equities at any color you want to
throw in.
Speaker 2 (25:08):
There, Yeah, I mean, I would definitely point out that
a large part of that performance this year is going
to be based on, you know, what the dollar is done.
So the d X Y the dollar index is down
almost ten percent. That's that's definitely going to value countries,
you know, other than the US when it comes to
market performance. Now, like John said, you know that it
(25:29):
is something especially this year we've been taking a much
closer look at. Now it's also been a very volatile
year just in the geopolitical space in general, but with
everything we've seen with tariffs, and you know, we have
seen some of that volatility come down as deals are made.
But I think this week was also even another good
example with you know, Trump meeting with President Xijingping from China.
(25:54):
There there's still a lot of back and forth there.
So I mean two areas you know, we have been
interested in. One is definitely China and then the other
one probably being the Eurozone. China is very tech heavy.
Now what's tough with like, you know, investing in somewhere
like Europe. This sector makeup for Europe is incredibly different
than us. You know, we're big believers and that technology
(26:17):
is driving market returns right now, both domestically, but I
think globally a lot of people would have a hard
time arguing with that. If we look at the sector
breakdown for Europe, it's you know, almost a quarter of
the indexes in financials and then the next largest sector
is industrials. You know, with tech really only making up
about fifteen percent of Europe, that's not necessarily the exposure
(26:38):
we want, especially on a diversified basis. So right now
we are more comfortable with you know, a domestic, domestic
only allocation, but as John mentioned, it is something we've
been really keeping an eye on over the last few months.
Speaker 1 (26:50):
Yeah, and that's key to point out, is you know,
we're you know, the Investment Committee is always forward looking,
and you know, I think the thesis right now is
ill where we see the performance going forward, high tech growth,
right you know, large cap growth is where we see
the performance. Now. That doesn't mean we're not diversified. We
(27:12):
are well diversified. And is you know, as Ed has
pointed out, investment comunities not putting their head in the sand.
They certainly are looking at international and you know they
will determine if there's a point to re enter for sure.
So you know, just you know, first part of the show,
Ed and I talked a lot about the market, so
you know, just in recapping great great week, great month,
(27:33):
you know, and year to day all indexes are doing great.
But now we got to worry about you know, going forward.
We had the fed meat last week and we do
is expected reduce interest rates. And you know, one of
the questions I always get right it is, you know,
we're certainly seeing home buying a little bit stalling right now.
(27:54):
Right if if you're thinking of buying a home. You're
looking at interest rates saying, well, you know that I
keep hearing the Fed's going to be cutting rates. They're
cutting rates. Hey, ed, we we have the Fed cut
rates this year. What happened to the ten year treasury
this week?
Speaker 2 (28:08):
Yeah, FED cut by a quarter percent and the ten
year treasury rose by ten basis points, right.
Speaker 1 (28:14):
And so you know something we got to remember, right,
is that you know the Fed's actions, they affect the
short term interest rate, right, and you know that, and
that doesn't mean that that doesn't have any impact on
the long end of the curve. It does, but the
ten year really more driven by you know, expectations, right,
and so when you have situations where there's optimism and
(28:37):
inflation fears, right, that pushes the ten year rate up.
When there's uncertainty, that pushes them down. So what we
saw this week is you know reaction, right is, hey,
Fed's cutting rates. We're seeing great earnings, and so quite frankly,
there's fear of you know, there's optimism of growth, and
(29:00):
so we saw the ten year treasury you know, react accordingly,
and that was go up, and which is you know,
too many counterintuitive. Again, they hear all about this rate
decrease from the Fed, and they think that's gonna you know,
be a one for one impact in their mortgage rate
or other long term borrow. And we've got to remember,
like the ten year it really is, uh, it really
(29:21):
is like the benchmarkt finance, so much is based off
of the ten year Treasury and that's mortgage rates, it's
other you know, commercial lending. A lot of it is
based off that. So you know, certainly the the rates,
the short term rates, you know, will move in lockstep
with the Fed's action. So where you may see that
(29:42):
as a consumer is if you have money, uh you know,
sitting maybe parked in short term money market funds. You know,
you'll start to see decreases there. But a ten year
is going to react to, you know, more of expectations
going forward. So I know that can be a little counterintuitive.
And and you know, really, you know, as we look
the you know, where where the housing market is right now,
(30:03):
it certainly is a bit of a bottleneck for for
a lot of reasons. And you know, interest, I'm just
gonna go back to my you know, the beginning of
the show, I mentioned I was actually down in Austin, Texas,
for a few days this week for a conference, and
I remember, uh, you know again I lived there for
a short period period of time in the nineties, and uh,
(30:25):
you know, also it is a very affordable city and
uh you know, now housing in a market like that
is so unaffordable, and you know that's that's a crisis
that's starting, you know, to really impact you know, many
young couples or young individuals who want to you know,
build wealth through home building home ownership. It's a challenge.
(30:46):
And uh, you know there is a trend too where
you know, there used to be saying you would just
buy a house no matter what, right that's how you're
going to build some of your wealth. And that's a
great financial planning move, is you know, own own a house,
and you know that that script is flipping a little
bit and sometimes renting, you know, can work out better
depending on what type of market you're in and when
(31:07):
you know, when you're really factoring all the cost of ownership.
So certainly some national trends there that we're certainly keeping
an eye on. Again, Ed and I are here to
answer any questions you have. I encourage listeners to call in.
You can reach us at eight hundred talk w G Y.
That's eight hundred eight two five, five nine four nine.
(31:29):
You know, so ed here we are, you know, first
day in November, and you know, if I'm sitting here
looking at my portfolio, I'm seeing things up nicely. And
you know I'm not too far from you know, tax time,
so you know, we're seeing it's a good time to
look at portfolios, maybe do a little tax loss harvesting,
(31:51):
you know, I know, you know, we work with clients
a lot on that, you know, any color you want
to provide, just and you know how we can assist
and just what you know, if I'm a listener and
I looking at my portfolio here, I am all time highs.
Things look rosy. You know, anything I should be doing
from a diversification or maybe tax loss harvesting perspective.
Speaker 2 (32:11):
Yeah, definitely. I mean, I know we've talked on here
about you know, just how beneficial rebalancing your account can be,
you know, kind of resetting to targets, taking some of
those gains, and redeploying in areas that have maybe underperformed,
because at the end of the day, you do want
to be buying low and selling high now in your
taxable accounts that can be a little different difficult on
(32:33):
a year like this when we do see markets are up,
you know, maybe you don't want to sell your S
and P five hundred, you don't want to sell your Nvidia,
you don't want to pay those taxes at the end
of the year. Now that's where you hate to see
red in your account. But those losses can be monetized
at least to a degree in those taxable accounts, and
that's what we call tax loss harvesting. So what you'd
(32:55):
want to do is, you know, look for positions that
are down sell them. You know, you can take those
dollars and replace with something you know as as similar
as possible. It just can't be the exact same stock.
That's called a wash sale rule. So just a little
refresher on that. If you own in video and let's
(33:16):
not use in video. If you own McDonald's and McDonald's
is down from when you bought it, you if you
sell it and you take that loss, you have to
wait thirty days before you can buy that stock back again,
or the irs just resets your your cost basis. So
that's just definitely something important to keep in mind. But
on tax loss harvesting. You want to be selling those
(33:36):
positions that are down and using those losses to offset
some gains, and that can kind of let you reset
your portfolio.
Speaker 1 (33:43):
Great, great, you know, and you know it's from a
tax perspective. You know. You again, you've got a couple
two months now to make some moves, so certainly it
is uh. You know, if you are going to rebalance
your portfolio, right, you know, one of the things you
should do is yeah, again, and if your money if
you're in a qualified account, great, you know, just rebalance, right,
(34:04):
you don't have to worry. So if you're in an
when I say it qualified, do you have money sitting
in an IRA account, you know you can obviously rebalance
and diversify if you know, maybe your texts gotten way
too heavy, right, so now it's made up you know,
forty percent. I'm just making that up of your portfolio
and maybe that's out of balance. Hey, if at sitting
in IRA, you can go ahead and do that without
(34:25):
any tax consequences if it's a taxable account, right, you
have to be strategic because you don't want to do
that just to without being conscious of you know, gains,
particularly if you're going to be facing short term gains, right,
which you're gonna get taxed at you ordinary rate versus
long term gains. And so it's a time of year
to be strategic. Look at your portfolio, look at the
(34:48):
you know, what kind of a gain position you're in?
Does it make sense? You know? Do you is you know,
as Ed mentioned, you know, do you have some losers? Right?
So maybe you do. Maybe you trim some of your winners,
take some profits all the table, but maybe you also
look at some of your losers, right, so maybe you're
selling that hey, because it is hard, right Sometimes you know,
we look at a loser and we're like, boy, you know,
(35:11):
I don't want to take that loss, Like it's it's
I know, it's gonna do better next year, it's gonna
do better, it's going to recover. And you know, sometimes
you just have to bite the bullet and say, okay,
I'm going to take that loss now, particularly if it's
a year where you're taking some gains. Hey, it's serving
a good right. It is netting against that gain, so
saving you on taxes. We all wish that we always
(35:33):
picked winners. Uh, that doesn't happen, particularly if you're investing
in individual stocks. I mean, it's it's hard to pick
individual stocks, and so you know the best thing to
do is if you've got a loser that you know,
really you've just been hanging on too long and there's
not a good thesis to hold. Uh, you know, bite
(35:54):
the bullet, take the loss and uh, you know, use
it to off set some gains so you can properly
you know, rebound. That's your portfolio. Yeah. The other thing
is again depending on what your financial picture with you know,
some of the things we're looking at is if we've got
a client who maybe has a you know, position that's
run up really well. Maybe it's you know, maybe it
is a Navidia or you know, another high tech company
(36:18):
that's done well. You know. One of the things we
look at is looking at something like a donor advice fund,
right where you could move some highly appreciated stock into
that fund. You get a tax deduction for it, right,
and you know, basically you're front loading your your giving.
You know, you're gifting that you have to use that
money to go to five oh one c three organizations.
(36:41):
But this could be a strategy and you just give example,
if you're you're in a position in your life where
you know, maybe you're writing checks out to charities, maybe
you're doing ten thousand a month, right, And then you know,
using putting money into a donor advice fund, you could
basically be front loading that. And so let's say you
(37:02):
take ten years worth of that, So one hundred thousand dollars,
you take a highly appreciated stock, you move it into
that donor advice fund, right, So what happens is you
get that tax deduction in the year you do that, right,
So think about if you've got a stock that's highly appreciated,
maybe you bought it for fifty thousand, and you've now
(37:22):
it's worth one hundred thousand, right, by moving it in,
you get that right off at one hundred thousand, right,
So you avoid all that capital gains, you get that
deduction you know, based on that one hundred thousand dollars value, right,
And now that's sitting in a donor advice fund, and
you know Schwab has donor advice funds, Fidelity does, so
you can still invest that money into some vehicles. And
(37:45):
then what you do is you just you know, over
the years, you just you know, essentially you know, write
checks or quote grants out of that account to make
gifts to five oh one c three charities. So you
don't have this end it in the next year. You
could make that last ten years and quite frankly, you
can name beneficiaries where they don't get to keep the money,
(38:08):
but quite frankly they can now control that don'tor advise
fund and if you pass away, they could continue to
make gifts to five o' one c three organizations in
your name. So a great vehicle. And I will say
something you know we used we use for clients where
it makes sense. And again you have to be charitably inclined,
you know, I wouldn't do it if you're not, and
(38:28):
just have it sit there, you know, but it's certainly
something to look at. And I know another thing, you know,
a vehicle we've talked a lot about on this show,
and if you listen, you've heard many of us talk.
You know, are wroth conversions and you know market's all
time high. You know, again we have clients who are
evaluating them and maybe they're waiting for market dip. So
I would say the same if you're in a position
(38:50):
where you've been thinking about a wroth conversion. Right. You know,
maybe you know you want to hold offer right now
because if we're at all time highs. But hey, there's
there's a lot that can happen between now and the
end of December. So what you want to do is
you want to put yourself in a position where you
can act quickly. Right. You can't wait till the last
week of December, and you don't guess what, you don't
(39:10):
have a WROTH account open, you haven't really put a
strategy together, you really haven't done tax planning. Right. This
is where some forward thought and planning can pay dividends.
And you know, you may say, okay, I'm going to
open up a WROTH count. I'm going to get it ready,
and you may not execute it on it. You know,
you may not see a draw down. But again, it's
a position where if you have again i'll say a
(39:33):
highly appreciated asset, use that example, and if we saw
a significant draw down between now and the end of
the year, it could be a time to move that
into a wrath right, and then when it recovers, all
that recovery is tax free. So certainly some strategies there
and a lot of times we see a combination of
(39:53):
a WROTH with a donor advice fund. So WROTH you know,
remember that year you're converting, you creating a lot of
taxable income. But similarly, when you contribute to a donor
advice fund, you're creating a big deduction. Right, So many
times you can pair those two strategies together. So and again,
just touching on those briefly. I know we talk a
(40:14):
lot about and we certainly can spend more time in
another segment another show on that. You know we are coming,
you know, another ten minutes left of the show, and
Ed and I are here not too late for a
caller to squeak in with a question. You know, we're
we're here to answer questions for you. You can reach
us at eight hundred talk wg Y. That's eight hundred
(40:35):
eight two five five nine four nine. And I'm gonna
assume listeners were out, you know, doing some trick or
treating late in the night. Maybe they ate too much candy,
so they're just a little bit slow on the phones today,
That's what That's what I'm going with me too. Yeah, perfect,
you know, you know one of the things that you
(40:55):
know Ed touched on briefly and you know it's this
direct index. You know, we talk about tax loss harvesting
and you know, ed, I know, you know, direct indexes
is something that we're seeing, you know, more and more
clients show interest in and you know, big picture, you know,
just if you don't mind spend a few minutes, because again,
we throw buzzwords around, and I do realize that I've
(41:16):
probably you know, if somebody is listening and tallying, they
could probably say, hey, here's ten buzzwords. You said John
that you know, maybe you can do a better job explaining.
But you know, tax loss harvesting and direct index in
particular is I think is one we throw around and
others in the industry do. So if you don't mind,
just take a few minutes kind of walk through what
(41:38):
is really meant by that and why why somebody might
be interested in that.
Speaker 2 (41:42):
Yeah, so if we just think about you know, direct
indexing as a whole, you know, what we refer to
as an index in finance is going to be something
like the S and P five hundred or maybe the
NASDAC or the Russell two thousand. It's essentially a basket
of stocks with with some rule behind it. Right, So
S and P fived it's the largest five hundred companies
in the US, the NASDAK it's the largest one hundred
(42:05):
companies in the US, Russell two thousand, the largest two thousand.
So it's just different ways to kind of put together
a basket, rules based to calculate performance and kind of
track things. Now, we love indices because they're diversified. Then
they give us good access to the overall, you know,
US domestic equity market. The problem with owning it an
(42:27):
index is that you are forced to own the whole
basket and it's just one line item in your account. Now,
on any given year, we may see you know, about
twenty percent of the S and P five hundred, those
stocks may be down. You know, the broader index can
be you know, positive in performance, but some of those
individual stocks will be at a loss. Now, Unfortunately, because
(42:51):
you own the basket as a whole and it's one
line item on your sheet, you can't take advantage of
the losses in those companies. Now Versus, if you were
just to own you know, every single stock in the
S and P five hundred, all five hundred of them,
it should be a lot of work to manage in
a portfolio, but you would be able to sell some
of those stocks at a loss and offset some of
(43:12):
those stocks at a gain. You know, we talked about
that tax loss harvesting earlier in the show. So the
benefit of doing something a strategy like called direct indexing
is what it does is it's a it's a software program,
it's a you know, a piece of technology that you
add onto your account through you know, a partnership that's
going to go in and instead of owning that full basket,
(43:33):
you're going to own, you know, a selection of you know,
maybe one hundred and fifty two hundred individual stocks. The
performance of that pool of stocks is going to mirror
you know, whatever index you choose, you know'll just use
S and P five hundred. So what you're getting is
you're getting S and P five hundred like returns and exposure,
but with the ability to take advantage of those stocks
(43:56):
when they are down at a loss. So what that
us is you can add you know, about an extra
one to two percent, you know, maybe on a reoccurring
analyized basis from a tax perspective, right, You're not getting
these positions that are built up gains in your account
or you're at least slowing that down because you're taking
advantage of those losses. You know, it is a very
(44:18):
technical setup. You know, the software is really function of
modern technology, you know, being able to sell a stock
and replace it with a light kind exposure, so you're
still tracking the S and P five hundred. It's very cool.
It's something we've been implemented. It's something we've seen a
lot of success with so far this year. You know,
if we just think about someone who opened an account
(44:38):
at the start of the year, we got that volatility
in the spring, You've got all of these stocks down
at a loss, you're selling those, you're replacing them, and
then you know you're not sacrificing any market exposure. But
you know, we've got some accounts with some pretty sizable
losses and actually outperforming the S and P five hundred.
Speaker 1 (44:56):
Yeah, and it is a complicated subject. But at the
end of the day, right, you're you're getting you think
about it, you're getting market performance. Right, and then you're
adding this fancy word called some tax alpha, which is
basically just saying, hey, the way it's managing the the
underlying holdings. The goal is to harvest and generate some
(45:19):
losses that gives you some tax advantages. Right. So it's
a definitely an interesting approach, something we're using more and
more with clients and certainly something to consider. And you know,
lasting you know, I know, we've got a few more
minutes here the show. You know, again, I go back
to my flight. It's always nice, you know, when you
(45:40):
have a long flight if you have some people next
to you to talk to. And and in my flight back,
I had, you know, two individuals in their mid twenties,
and as we were just talking, I mentioned one of
them was running in the New York City Marathon on Sunday.
And you know, as we're just chit chatting about what
we each do, you know, they I mentioned, you know,
(46:01):
what I do for a living, and so of course
they said, all right, what advice do you have for us?
And you know, and I think this is a great conversation,
right and you're, you know, you're in your mid twenties,
you're a long way from retirement. You know, what are
the things that I should be you know, thinking about?
And you know, one of these I asked them both,
is hey, do you have four oh and K available?
(46:21):
You know where you work and they both said yes.
I said, okay, are you maxing out your four oh
and K And they said no. I said, okay, so
you really have to look at that right and maybe
you can't max it out, but you know, put what's
the most you can put in. And so I think
those are just some strategies you know that that you
(46:42):
know as a working young professional, maximize that put money away, uh,
because I will tell you do that when you're twenty five,
when you're fifty five and sixty, if you've been consistent,
you know you will be in a great spot. Well,
we are coming up really to the end of the show. Ed.
I want to appreciate you joining me this morning and
(47:05):
always appreciate your thoughts and insight.
Speaker 2 (47:08):
Always happy to be here. It's always a great way
to start the weekend.
Speaker 1 (47:11):
And you the listening audience, we want to thank you
for tuning in with us today. I hope you enjoyed
the show. I know that Ed and I certainly did.
Hope you enjoy the rest of your weekend and have
an amazing week ahead. Also, be sure to tune in
tomorrow morning at eight am for another great show. Also
check out our website bouchet dot com for great content
(47:32):
and information. You were listening to Let's Talk Money, brought
to you by Bouchet Financial Group,
Good morning, Ed. How are you doing this morning?
Speaker 2 (00:02):
More than John, I'm I'm doing good, feeling good on
a hallowekend.
Speaker 1 (00:05):
Yeah, we were both out really late trick or treating
last night. No, absolutely not. We got to bed early,
prepared for the show. But Halloween, you know, it was uneventful.
I'll tell you. I moved to Saratoga year ago. We
had zero tricker treaters, and you know, I kind of
panicked during the day. Last year. I was actually in Nashville.
(00:26):
It was actually our first Halloween here in Saratoga. Was
in Nashville, so not home yesterday. I'm like, we got
to get candy, and so we went out and bought candy.
And now I've got some candy to eat over the
next week or so. Yeah.
Speaker 2 (00:38):
I can be a little problematic for the diet.
Speaker 1 (00:40):
Yeah, yeah, absolutely. And I was actually out in Austin,
Texas this week. I actually spent a lot of time
lived out in Austin for about two years in the
in the mid to late nineties and have not been
back since. And wow, what a difference that city has
boomed and has continued to boom. I couldn't didn't even
(01:00):
the skyline. It was just incredible the growth and just
a cool city. Uh you know, really kind of the
tech booming area of Texas. You got a lot of
tech jobs there. But just uh so, it's great, great
to be back. Great to walk around the city, check
out some areas that hadn't seen in a long time.
And Ed, I know you did a little travel this week, baby,
(01:22):
a little bit more pleasure traveling but down down south
and joining some sunshine.
Speaker 2 (01:27):
Yeah, it was nice over to the long weekend. I
was able to catch up with some friends down in
Fort Lauderdale.
Speaker 1 (01:32):
So awesome, awesome, good so, but it's great to be back.
And I will say this, you know, flying over Texas,
you just look at all that flat land and I'm uh,
I love the contour of our mountains and valleys and
lakes and everything we have here in the four seasons.
I definitely could not live without the four seasons. So
good to be back. Tomorrow is you know, big marathon day.
(01:57):
If you're a runner, you may know someone who's running
in the New York City Marathon. I know a few
folks running in it. And actually my flight hot Foston
was with a young woman sitting next to me who
just because a flight you know, I will tell you
traveling right now is a little intent and you know
with TSA certainly being impacted, you know, by the government shutdown,
(02:21):
but you know they're doing their best to keep things
moving and air traffic controllers as well. But you know,
sat nextually, this young woman who her flight to New
York was was canceled and they weren't gonna you know,
she couldn't get rescheduled till late Saturday night, so she
was taking the same flight. I was kind of routed
through Philadelphia and then she had to take an Amtrak
(02:41):
to New York. So she's kind of going through a
lot to get to the marathon. But also have some
other folks I know who are running in it, so
it's a big event. And if you're a runner, I'm
sure you're again following somebody. So if you know somebody,
hopefully they'll have a good outing there. And Ed, I
know you and some other colleagues Paulo La Pietra and
(03:03):
Vincenzo test have been part of a campaign. You know,
real men, we're pink raising money for a great cause.
You guys are kind of wrapping up. I think things
wrap up Monday, and you guys are done a great
job and raising us some great money. So anything you
want to share there, and just you know, again, I
know at a firm level, we appreciate all three of you,
(03:24):
you know, kind of giving back to the community. But
I think it's great to just see our young colleagues participate.
Speaker 2 (03:29):
Yeah, no, it was. It's been a great event so far.
So far. I mean the American Cancer Society team, you know,
Lizzie Hunter, they do a phenomenal job, you know, helping
us out, making sure we're on top of our stuff.
But I think we've raised almost twenty two thousand dollars
you know currently for the Capital region top ten. So
definitely proud of that. I know Steve's very proud. He's
(03:50):
put a lot of work in on his end himself.
So it's been good. We still got i think until
Monday eleven pm, so going to try and squeeze out
a few more nations and see if we can crack
top five.
Speaker 1 (04:01):
That's awesome. Great job there, great job. And again, you know, Steve,
if you've listened to this show, you know, Steve's really
built into the culture of the firms to give back,
so appreciate all you guys are doing there. So Ed
and I are here today hosting. We're going to talk
a lot about the markets and lots to talk about
this week, the FED meeting and you know, some financial
(04:21):
planning topics and whatever else you know you call it.
So definitely encourage listeners to reach out to us. You
can get us at eight hundred talk WG Y. That's
eight hundred eight two five five nine four nine. So
let's start. You know, market update, very active week in
the markets, a lot to talk about. And you know October,
(04:44):
you know, sometimes we talk about is this scary month?
And you know, from a market perspective, you know, it
was not scary at all, and so a lot to
talk about. You know, had the FED meeting this week,
and you know, highlight there is FED did cut interest
rates by another twenty five basis points to another quarter
of a point decrease, So certainly markets like that. Also,
(05:07):
he had some dialogue which we'll we'll talk a little
bit more, kind of pumping the brakes a little bit.
But you know, overall for the week, you know, SMP
was upo point seven percent. Nasdaq was clearly the leader
with tech it we'll talk about that. Certainly Apple and Amazon,
where some of the highlights on the tech side. Nasdaq
(05:28):
was up two and a quarter percent for the week,
so a solid solid week for the tech heavy Nasdaq
Dow was also up point seven five percent for the week.
Now the Russell two thousand was down actually down one
point excuse me, one point four percent for the week,
and we'll talk a little bit more about that. It'll
(05:48):
kind of get into kind of what we're seeing with
small cap, but certainly, you know, we saw the small
cap take a little bit of hit this week. So overall, great,
great week in the markets, and you know, wrapping up
the month, SMP up to and almost two point two
seven percent, S and P, the Dial and the Russo
two thousand all had six straight monthly increases, so that's
(06:11):
six months in a row of increasing for the month,
so great lift there. So, S and P up two
point twenty seven for the month and sixteen point three
year to date, so solid solid performance. Nasdaq, as I mentioned,
two and a quarter for the week and up a
solid four point seven percent for the month. So clearly
(06:33):
we're seeing uh, tech heavy you know, leading the markets,
and we'll talk about that. Certainly, the large cap tech
giants are continuing to be dominant, and we saw that
this month and for the NASDAK it was a seven
straight months of increase. So markets are delivering and no question.
(06:55):
And so year to date NASDAK almost up twenty three percent,
just shy twenty three now, as I mentioned, up three
quarters of a percent this week and for the month
up two and a half percent and eleven point eight
percent year to date, so solid, solid across all indexes.
Russell two thousand, although it was down this week, hey,
(07:16):
for the for the month it was up almost one
and three quarter percent, and again it was a six
straight month, so you know, we do. You know, we'll
talk about what we're kind of thinking about of small
cap going forward and how that space is changing a
little bit, but you know it it it did have
some recovery you know, from April through October, so nice
(07:37):
to see that again. We did see some downturn this
week for sure, but up you know again year to
date over eleven percent, So solid, solid numbers there across
the board. You know, the ten year treasury, we certainly
saw some movement there. We'll talk about that. You know,
a little counterintuitive. We had the Fed cut rates we
actually had the ten year yield go up, and you know,
(07:59):
we'll talk about that because certainly that ten year is
a really really important number. Ed, it's something that you know, mortgages,
a lot of you know, lending is based on. So
we'll certainly get into that. So solid week in the market,
we'll talk about tech, you know, Ed, I know, you know,
Apple and Amazon are our holdies that we look at
(08:21):
closely and certainly had explosive weeks. Amazon particular, really solid
day yesterday. Give some of the highlights. Kind of talk
about that a little bit what we saw.
Speaker 2 (08:33):
Yeah, I mean, so just on the Amazon side, I mean,
they crush their cloud growth. That's a that's a key
area of where we're looking, you know, that's where we
want to see some of that capital expenditure come to fruition. Right,
they're spending money. They spent a lot of money, so
we do need to see revenue coming in, and we did.
They crushed cloud growth. And now on the flip side,
(08:55):
you know, Apple posted you know, really solid iPhone and
also like their service revenue beat expectations. Now the bigger
thing for Apple is on top of that, they're forecasting
record holiday sales coming up end of this year, so
that'll be exciting to look forward to. You know, we'll
kind of see those results come out Q one twenty
twenty six. But I mean, just across the board for tech,
(09:19):
you know, we're seeing what we want to see from
you know, really all the major players, and that's you know,
continued revenue beats, earning per share beats, and then continued
cap X, which is capital expenditures. We want to make sure,
you know, we're seeing these companies continue to invest into
this AI infrastructure, and that's what we're seeing. They're they're
really gearing up for a strong end of this year
(09:40):
and then a strong twenty twenty six so far just
based on where they're spending all this money.
Speaker 1 (09:44):
Yeah, Apple was interesting because you know Apple certainly had
you know, earners per share and revenue beat, you know,
but they did have you know, they did miss on
the iPhone revenue, right and certainly you know, China actually declined,
but as you mentioned, you know, they forecasted strong Q
for sales of the iPhone and uh, you know, and
(10:04):
we've seen you know, companies get get you know, pretty
conservative with forward estimates because I will say, you know,
the market really punishes if you miss those estimates. And
you know, Apple, Tim Cook, you know, put some bold
numbers out there what they what they expect for Q four,
So you know, you have to believe they've got the
data to support that. And so really markets, uh, you know,
(10:29):
appreciated that. And I think you know, Apple, you know,
very opposite. I think from from Amazon. Apple is really
a story of steady growth and their strength and their services.
But gave great forward guidance in market appreciated that Amazon,
you know, as you mentioned, you know, crushed it, and
certainly they showed on this service revenue, you know, really growth,
(10:52):
phenomenal growth, growth they haven't seen in a number of years. So, uh,
markets really appreciated that and saw saw the uptick and
you know, you know ed here we are almost not
quite three quarters away, somewhere between and a half three
quarters away through kind of the earning season, and you know,
(11:12):
we're seeing good numbers. Let's talk about that a little bit,
you know, kind of what we're seeing, what kind of
expectations are for the for the rest of the quarter.
Speaker 2 (11:20):
Yeah, So, I mean, just so far, we've got sixty
percent of the S and P five hundred that have
reported earnings. You know, so far eighty four percent have
our beating estimates, and you know those that are beating
are beating by about five percent on the median. Now,
I think I don't have the historical averages in front
of me, John, I know we're talking a little bit
(11:41):
before the show. Is that median a little bit below
historical averages? Are you know, we are getting smaller beats, yep.
Speaker 1 (11:49):
But it's so so important to note. You know, we're
having a higher percentage of companies be but but the
margin that they're beating is shrinking a little bit.
Speaker 2 (12:00):
Yeah, So it is interesting to see. And some of
that does have to do with expectations, especially these large
cap growth companies. You know, as valuations rise, you know,
we continue to ask more and more from these companies
to justify those valuations. But at the end of the day,
we've seen it. I think this this round earnings is
a great example of that.
Speaker 1 (12:20):
Now.
Speaker 2 (12:20):
The only one we've seen, you know, struggle a little bit,
was was Meta. They slipt pretty hard after the after
the bell, you know, down almost ten percent, just some
concerns on spending. But you know, John, we were talking
a little bit before that. That was due to some
accounting adjustments.
Speaker 1 (12:37):
Yeah, so so you know, they they had to take
right off on really on the how the new tax
legislation affected their their some of their deferred tax assets.
So you know, so not really you know, a change
to their operating results, right, really kind of more of
a one time accounting adjustment, which happens these companies do
(12:58):
that and certainly impacted their numbers, but you know, clearly
laid out you know how that was really a one
time adjustment.
Speaker 2 (13:07):
Yeah, and aside for that, on Meta, I mean, their
revenue is up twenty six percent year over year. I mean,
you think about how much money that company is making
to increase twenty six percent year over year. It's it's
it's mind boggling to think about. So to me, you know,
that' stock move, especially when we're seeing strong earnings of
the mag seven, seems like a little bit of an overreaction,
you know, maybe an opportunity there for you know, anyone
(13:29):
looking to buy some Meta.
Speaker 1 (13:31):
Absolutely, So we're going to take a quick commercial break,
so please stay tuned and we'll be right back with
Let's Talk Money on eight ten. WGY Well, thank you
for staying with us through that quick break, and as
you heard about that announcement, you know, we are having
a planning event. You can if you go to our
website Bouchet dot com, you'll see in the upper left
(13:52):
hand section of way to register for that. So it'll
be great, great information and content will be covered there,
so certainly recommend you to check it out. So, you know,
so Ed and I were, you know, just going through
the number so markets, what can we say? Great week
in the markets, certainly fueled by the FED meeting and
some of their actions, but more importantly, solid solid earnings.
(14:16):
And you know, as Ed mentioned recapping, you know, so
far from the reporting season, you know, we're seeing earnings
per share growth of ten point seven percent, so double
digit earnings growth and revenue growth of just shy of
eight percent. So so again solid solid earnings, you know,
really helping support the valuations that we're seeing. So so
(14:39):
that's good to see. You know. Let's talk a little
bit about the FED meeting. You know, so you know
they met this week and you know, as expected, reduced
the interest by interest rate by quarter of a percentage point,
so twenty five basis points, So no surprises there, I
think heading into the meeting.
Speaker 2 (14:58):
What was it, ninety nine percent as close as you
can get to certain.
Speaker 1 (15:01):
Yeah, so, uh you know, check did that did what
was expected. But as always, right, it's not just the
action they take during that meeting, it's you know, really
the dialogue afterward, and quite frankly, uh Chairman Powell's comments,
you know, wrapping up the meeting, and you know, really
you know, he made it pretty clear more cuts are
(15:23):
not guaranteed. He's kind of pumping the brakes, you know,
the markets pricing in another twenty five basis point, you know,
increase or decrease for the December meeting, and clearly, you know,
uh Chairman Powell is saying, hold on, you know, let's
pump the brakes. We're going to be data dependent and uh,
(15:44):
you know, so markets it's interesting, you know, markets first
reacted positively to the cut and then kind of you
know neutralized a little bit, and but then we had
some great earnings releases, right, which which fueled what happened
to the rest the rest of the week. For sure,
So you know, fed you know, clearly you know, trying
(16:06):
to you know, make sure that the markets are not
too exuberant, right and expecting too many you know, rate decreases.
I think we saw some impact of that in the
small cap market, and uh, you know, certainly ed as
we look at small caps, right, I think the thesis
is changing a little bit. And uh, certainly again if
(16:28):
you look at from end of April, you know to now,
hey they participated in the recovery, do you know, which
is nice some broadening there. But you know, as we
look forward, you know, there's certainly some challenges in the
small cap space.
Speaker 2 (16:42):
Yeah, I mean if we just take even a step
back and look at how much this small cap space
has has changed. I mean really over you know, the
better part of like the last two decades. But we've
got more companies staying private for longer and either staying
for private for longer and not even entering the public space.
You know, a large part of that is just due
to the growth in private equity and private credit, but
(17:06):
also the motes that these large cap companies have. They're
they're large, and they're larger than they were in the
in the two thousands. You're not going to see the
as many or if any you know, ultra small cap
companies going public and competing with an Nvidia or an Apple.
It's it's it's just too hard, it requires too much capital.
(17:30):
Just looking at the composition of small caps, I mean
a lot of them are industrials. They're now outside the
tech space, which has changed. And just looked at the
numbers JP Morgan posted, you know, their fourth quarter summary,
forty six percent of the Russell two thousand, that's a
small cap index, forty six percent of those small caps
are unprofitable. That that makes it a tough area to
(17:54):
invest in. And I don't know why you would want
to own one of those when you could, you know,
own a slice of Nvidia or you know, ace of
Meta that's increasing revenues twenty six percent year over year exactly.
Speaker 1 (18:05):
Yeah, and so certainly see some you know headwinds you know,
moving forward for the small cap space for sure, you know,
and you know, we ed and I we encourage listeners.
If you have questions, call in. You can reach us
at eight hundred talk WGY. That's eight hundred eight two
five five nine four nine. So you know, during the
(18:26):
FED meeting, you know, not only did you know the
FED reduce rates, you know they also announced that they
were going to you know, end their quantitative tightening in
December and and that's a fancy word for really all
they were doing is right, they were reducing their balance sheet.
And you know what was You think about the FEDS
(18:48):
the tools they have, and that's one of the tools
they have. And you know, as the economy was hot, right,
they were trying to reduce the balance sheet, calm things
down a little bit. The exact opposite. You know. You
might remember you're talking about quantitative easing, you know, back
in the COVID times, right, and FED was using the
balance sheet to stimulate the economies. So really they're saying, okay,
(19:10):
you know, we think we were getting inflation into the territory.
We haven't quite hit their target at two percent, right,
but we're gonna stop using that as a tool. Now.
They're not saying they're going to start injecting money, right,
They're not going to go into easing. But I think
now it's going to be more of a balanced approach. Right,
And we'll see how data plays out. See how you
know inflation, does it still continue to tick down? And
(19:33):
most importantly, you know that they've clearly limite it known
you know, jobs is where they're going to keeping their
eye on. You know, do we see any dramatic weakening
of the jobs market. You know, do we see unemployment
tick up any other data that suggests that that labor
could become an issue? And it is interesting, you know,
(19:55):
we are hearing as companies are employing now more more
AI and AI tools, we are hearing about reductions of hiring.
You know, we have not seen massive layoffs, and you
know that certainly is a good sign from the labor perspective.
You know, we are seeing you know, particularly you you
look at the data with you know, recent college graduates,
(20:17):
it's getting harder and harder for recent grads to find
a job. You know that, and that may touch some
of the listeners here. You may have children or grandchildren
who are in that situation right now. So certainly experiencing
certainly a slow down. But again fed's looking for dramatic,
you know, moves, so you know, we start to see
dramatic layoffs or a really significant uptick in unemployment. But uh,
(20:43):
you know, so FED is going to use every tool
that it has, and they don't have a lot of tools,
but they do have some tools. So you know, as
we wrap up, you know, the October meetings, so now
that's you know, after eleven straight increases in the FED
funds rate. Now, I I've seen five decreases, right, and
so with two of them this year, and we've got
(21:05):
you know, December meeting coming up. And you know, from
the tail the tape, you know, I know, we look
at you know, what expectations are currently, you know, what's
the numeric expectation of what the Fed is going to
do in December.
Speaker 2 (21:18):
Yeah, right now we're looking at a seventy percent chance
of another quarter quarter percent cut.
Speaker 1 (21:23):
Yeah, perfect, and in that that will change a lot,
you know, So it'll be interesting as we get closer
and closer to that December. I think they meet December
ninth and tenth, which will obviously be their final meeting
of the year. So you know, before we get to that,
we'll certainly, you know, we'll see that number move and
(21:44):
get more real. So, you know, and again and his Powell,
his statements, and there'll be more obviously, you know, next
week you'll hear more and more media, you know, comments
from you know, FED fun board members, FMC board is
just what their thoughts and expectations are. But certainly, you know,
he made it clear he's tapping the brakes, right, you know,
(22:06):
don't don't pencil in all these rate decreases, So you know,
Marcus is gonna be a little cautionary there.
Speaker 2 (22:13):
And it's I think it's also important to keep in
mind that you know, he is operating at a bit
of a handicap right now. We have not gotten any
labor data, you know, since September.
Speaker 1 (22:25):
Perfect. Yeah, so we'll talk about that. Because we are
halfway through today's show already, we're going to be taking
a break. I want to thank you for tuning in.
Hope you are enjoying the show. We encourage the listeners
to call in with questions. You can reach us at
eight hundred w GUI. That's eight hundred eight two five
five nine four nine. You are listening to Let's Talk Money,
brought to you by Bouchet Financial Group, where we help
(22:48):
our clients prioritize their health, but we manage their wealth
for life. Well, good morning, and thank you for staying
with us through that commercial break. I'm John Malay and
I'm your host for this morning show. I'm a CPA.
I'm the firm's chief operating officer, chief financial officer, and
a wealth advisor, and I'm joined by my colleague Ed Wilhelm.
(23:10):
Ed's a portfolio strategist and a key member of our
investment committee. Ed, how are you doing this morning? Doing good?
Speaker 2 (23:19):
All right, it's been a good show so far.
Speaker 1 (23:21):
Yeah, for the first half of the show just flew by.
It flew by. So again, encourage listeners to call in
with questions. That's why we are here, and you can
reach us at eight hundred talk w G Y and
that eight hundred eight two five five nine four nine.
You can also submit a question through our website and
that's at ask bouchet so ask b O U C
(23:45):
h E Y dot com. You can submit a question
through that we so and we actually did have a
caller submitted question and you know this was from James,
and James, you know pose the question. I'm just going
to read it straight out. Steve mentioned in the past
at your firms assets are all in US equities, and
(24:05):
he's mentioned some large US firms are international, so you
have some small exposure to international. He said, most advisors
will recommend twenty percent in international funds. Do you see
yourself going more into international? And Jim, that's a great question,
and I will say, you know, it's it is something
that our Investment Committee is looking at looking at hard.
At this point, you know, we are still have no
(24:29):
international in our portfolio, direct international. You know, we've been
underweight international for over fifteen years and then totally out
for seven years, and you know that's benefited our portfolio
is no question. But certainly we've seen some recovery in
international this year, no question. Part of that, you know,
due to currency. But I will say our Investment Committee,
(24:53):
who you know, they meet formally weekly, but they're talking
every single day, and they're certainly looking at international. But
at this point, you know, it's our portfolios one hundred
percent of US equities at any color you want to
throw in.
Speaker 2 (25:08):
There, Yeah, I mean, I would definitely point out that
a large part of that performance this year is going
to be based on, you know, what the dollar is done.
So the d X Y the dollar index is down
almost ten percent. That's that's definitely going to value countries,
you know, other than the US when it comes to
market performance. Now, like John said, you know that it
(25:29):
is something especially this year we've been taking a much
closer look at. Now it's also been a very volatile
year just in the geopolitical space in general, but with
everything we've seen with tariffs, and you know, we have
seen some of that volatility come down as deals are made.
But I think this week was also even another good
example with you know, Trump meeting with President Xijingping from China.
(25:54):
There there's still a lot of back and forth there.
So I mean two areas you know, we have been
interested in. One is definitely China and then the other
one probably being the Eurozone. China is very tech heavy.
Now what's tough with like, you know, investing in somewhere
like Europe. This sector makeup for Europe is incredibly different
than us. You know, we're big believers and that technology
(26:17):
is driving market returns right now, both domestically, but I
think globally a lot of people would have a hard
time arguing with that. If we look at the sector
breakdown for Europe, it's you know, almost a quarter of
the indexes in financials and then the next largest sector
is industrials. You know, with tech really only making up
about fifteen percent of Europe, that's not necessarily the exposure
(26:38):
we want, especially on a diversified basis. So right now
we are more comfortable with you know, a domestic, domestic
only allocation, but as John mentioned, it is something we've
been really keeping an eye on over the last few months.
Speaker 1 (26:50):
Yeah, and that's key to point out, is you know,
we're you know, the Investment Committee is always forward looking,
and you know, I think the thesis right now is
ill where we see the performance going forward, high tech growth,
right you know, large cap growth is where we see
the performance. Now. That doesn't mean we're not diversified. We
(27:12):
are well diversified. And is you know, as Ed has
pointed out, investment comunities not putting their head in the sand.
They certainly are looking at international and you know they
will determine if there's a point to re enter for sure.
So you know, just you know, first part of the show,
Ed and I talked a lot about the market, so
you know, just in recapping great great week, great month,
(27:33):
you know, and year to day all indexes are doing great.
But now we got to worry about you know, going forward.
We had the fed meat last week and we do
is expected reduce interest rates. And you know, one of
the questions I always get right it is, you know,
we're certainly seeing home buying a little bit stalling right now.
(27:54):
Right if if you're thinking of buying a home. You're
looking at interest rates saying, well, you know that I
keep hearing the Fed's going to be cutting rates. They're
cutting rates. Hey, ed, we we have the Fed cut
rates this year. What happened to the ten year treasury
this week?
Speaker 2 (28:08):
Yeah, FED cut by a quarter percent and the ten
year treasury rose by ten basis points, right.
Speaker 1 (28:14):
And so you know something we got to remember, right,
is that you know the Fed's actions, they affect the
short term interest rate, right, and you know that, and
that doesn't mean that that doesn't have any impact on
the long end of the curve. It does, but the
ten year really more driven by you know, expectations, right,
and so when you have situations where there's optimism and
(28:37):
inflation fears, right, that pushes the ten year rate up.
When there's uncertainty, that pushes them down. So what we
saw this week is you know reaction, right is, hey,
Fed's cutting rates. We're seeing great earnings, and so quite frankly,
there's fear of you know, there's optimism of growth, and
(29:00):
so we saw the ten year treasury you know, react accordingly,
and that was go up, and which is you know,
too many counterintuitive. Again, they hear all about this rate
decrease from the Fed, and they think that's gonna you know,
be a one for one impact in their mortgage rate
or other long term borrow. And we've got to remember,
like the ten year it really is, uh, it really
(29:21):
is like the benchmarkt finance, so much is based off
of the ten year Treasury and that's mortgage rates, it's
other you know, commercial lending. A lot of it is
based off that. So you know, certainly the the rates,
the short term rates, you know, will move in lockstep
with the Fed's action. So where you may see that
(29:42):
as a consumer is if you have money, uh you know,
sitting maybe parked in short term money market funds. You know,
you'll start to see decreases there. But a ten year
is going to react to, you know, more of expectations
going forward. So I know that can be a little counterintuitive.
And and you know, really, you know, as we look
the you know, where where the housing market is right now,
(30:03):
it certainly is a bit of a bottleneck for for
a lot of reasons. And you know, interest, I'm just
gonna go back to my you know, the beginning of
the show, I mentioned I was actually down in Austin, Texas,
for a few days this week for a conference, and
I remember, uh, you know again I lived there for
a short period period of time in the nineties, and uh,
(30:25):
you know, also it is a very affordable city and
uh you know, now housing in a market like that
is so unaffordable, and you know that's that's a crisis
that's starting, you know, to really impact you know, many
young couples or young individuals who want to you know,
build wealth through home building home ownership. It's a challenge.
(30:46):
And uh, you know there is a trend too where
you know, there used to be saying you would just
buy a house no matter what, right that's how you're
going to build some of your wealth. And that's a
great financial planning move, is you know, own own a house,
and you know that that script is flipping a little
bit and sometimes renting, you know, can work out better
depending on what type of market you're in and when
(31:07):
you know, when you're really factoring all the cost of ownership.
So certainly some national trends there that we're certainly keeping
an eye on. Again, Ed and I are here to
answer any questions you have. I encourage listeners to call in.
You can reach us at eight hundred talk w G Y.
That's eight hundred eight two five, five nine four nine.
(31:29):
You know, so ed here we are, you know, first
day in November, and you know, if I'm sitting here
looking at my portfolio, I'm seeing things up nicely. And
you know I'm not too far from you know, tax time,
so you know, we're seeing it's a good time to
look at portfolios, maybe do a little tax loss harvesting,
(31:51):
you know, I know, you know, we work with clients
a lot on that, you know, any color you want
to provide, just and you know how we can assist
and just what you know, if I'm a listener and
I looking at my portfolio here, I am all time highs.
Things look rosy. You know, anything I should be doing
from a diversification or maybe tax loss harvesting perspective.
Speaker 2 (32:11):
Yeah, definitely. I mean, I know we've talked on here
about you know, just how beneficial rebalancing your account can be,
you know, kind of resetting to targets, taking some of
those gains, and redeploying in areas that have maybe underperformed,
because at the end of the day, you do want
to be buying low and selling high now in your
taxable accounts that can be a little different difficult on
(32:33):
a year like this when we do see markets are up,
you know, maybe you don't want to sell your S
and P five hundred, you don't want to sell your Nvidia,
you don't want to pay those taxes at the end
of the year. Now that's where you hate to see
red in your account. But those losses can be monetized
at least to a degree in those taxable accounts, and
that's what we call tax loss harvesting. So what you'd
(32:55):
want to do is, you know, look for positions that
are down sell them. You know, you can take those
dollars and replace with something you know as as similar
as possible. It just can't be the exact same stock.
That's called a wash sale rule. So just a little
refresher on that. If you own in video and let's
(33:16):
not use in video. If you own McDonald's and McDonald's
is down from when you bought it, you if you
sell it and you take that loss, you have to
wait thirty days before you can buy that stock back again,
or the irs just resets your your cost basis. So
that's just definitely something important to keep in mind. But
on tax loss harvesting. You want to be selling those
(33:36):
positions that are down and using those losses to offset
some gains, and that can kind of let you reset
your portfolio.
Speaker 1 (33:43):
Great, great, you know, and you know it's from a
tax perspective. You know. You again, you've got a couple
two months now to make some moves, so certainly it
is uh. You know, if you are going to rebalance
your portfolio, right, you know, one of the things you
should do is yeah, again, and if your money if
you're in a qualified account, great, you know, just rebalance, right,
(34:04):
you don't have to worry. So if you're in an
when I say it qualified, do you have money sitting
in an IRA account, you know you can obviously rebalance
and diversify if you know, maybe your texts gotten way
too heavy, right, so now it's made up you know,
forty percent. I'm just making that up of your portfolio
and maybe that's out of balance. Hey, if at sitting
in IRA, you can go ahead and do that without
(34:25):
any tax consequences if it's a taxable account, right, you
have to be strategic because you don't want to do
that just to without being conscious of you know, gains,
particularly if you're going to be facing short term gains, right,
which you're gonna get taxed at you ordinary rate versus
long term gains. And so it's a time of year
to be strategic. Look at your portfolio, look at the
(34:48):
you know, what kind of a gain position you're in?
Does it make sense? You know? Do you is you know,
as Ed mentioned, you know, do you have some losers? Right?
So maybe you do. Maybe you trim some of your winners,
take some profits all the table, but maybe you also
look at some of your losers, right, so maybe you're
selling that hey, because it is hard, right Sometimes you know,
we look at a loser and we're like, boy, you know,
(35:11):
I don't want to take that loss, Like it's it's
I know, it's gonna do better next year, it's gonna
do better, it's going to recover. And you know, sometimes
you just have to bite the bullet and say, okay,
I'm going to take that loss now, particularly if it's
a year where you're taking some gains. Hey, it's serving
a good right. It is netting against that gain, so
saving you on taxes. We all wish that we always
(35:33):
picked winners. Uh, that doesn't happen, particularly if you're investing
in individual stocks. I mean, it's it's hard to pick
individual stocks, and so you know the best thing to
do is if you've got a loser that you know,
really you've just been hanging on too long and there's
not a good thesis to hold. Uh, you know, bite
(35:54):
the bullet, take the loss and uh, you know, use
it to off set some gains so you can properly
you know, rebound. That's your portfolio. Yeah. The other thing
is again depending on what your financial picture with you know,
some of the things we're looking at is if we've got
a client who maybe has a you know, position that's
run up really well. Maybe it's you know, maybe it
is a Navidia or you know, another high tech company
(36:18):
that's done well. You know. One of the things we
look at is looking at something like a donor advice fund,
right where you could move some highly appreciated stock into
that fund. You get a tax deduction for it, right,
and you know, basically you're front loading your your giving.
You know, you're gifting that you have to use that
money to go to five oh one c three organizations.
(36:41):
But this could be a strategy and you just give example,
if you're you're in a position in your life where
you know, maybe you're writing checks out to charities, maybe
you're doing ten thousand a month, right, And then you know,
using putting money into a donor advice fund, you could
basically be front loading that. And so let's say you
(37:02):
take ten years worth of that, So one hundred thousand dollars,
you take a highly appreciated stock, you move it into
that donor advice fund, right, So what happens is you
get that tax deduction in the year you do that, right,
So think about if you've got a stock that's highly appreciated,
maybe you bought it for fifty thousand, and you've now
(37:22):
it's worth one hundred thousand, right, by moving it in,
you get that right off at one hundred thousand, right,
So you avoid all that capital gains, you get that
deduction you know, based on that one hundred thousand dollars value, right,
And now that's sitting in a donor advice fund, and
you know Schwab has donor advice funds, Fidelity does, so
you can still invest that money into some vehicles. And
(37:45):
then what you do is you just you know, over
the years, you just you know, essentially you know, write
checks or quote grants out of that account to make
gifts to five oh one c three charities. So you
don't have this end it in the next year. You
could make that last ten years and quite frankly, you
can name beneficiaries where they don't get to keep the money,
(38:08):
but quite frankly they can now control that don'tor advise
fund and if you pass away, they could continue to
make gifts to five o' one c three organizations in
your name. So a great vehicle. And I will say
something you know we used we use for clients where
it makes sense. And again you have to be charitably inclined,
you know, I wouldn't do it if you're not, and
(38:28):
just have it sit there, you know, but it's certainly
something to look at. And I know another thing, you know,
a vehicle we've talked a lot about on this show,
and if you listen, you've heard many of us talk.
You know, are wroth conversions and you know market's all
time high. You know, again we have clients who are
evaluating them and maybe they're waiting for market dip. So
I would say the same if you're in a position
(38:50):
where you've been thinking about a wroth conversion. Right. You know,
maybe you know you want to hold offer right now
because if we're at all time highs. But hey, there's
there's a lot that can happen between now and the
end of December. So what you want to do is
you want to put yourself in a position where you
can act quickly. Right. You can't wait till the last
week of December, and you don't guess what, you don't
(39:10):
have a WROTH account open, you haven't really put a
strategy together, you really haven't done tax planning. Right. This
is where some forward thought and planning can pay dividends.
And you know, you may say, okay, I'm going to
open up a WROTH count. I'm going to get it ready,
and you may not execute it on it. You know,
you may not see a draw down. But again, it's
a position where if you have again i'll say a
(39:33):
highly appreciated asset, use that example, and if we saw
a significant draw down between now and the end of
the year, it could be a time to move that
into a wrath right, and then when it recovers, all
that recovery is tax free. So certainly some strategies there
and a lot of times we see a combination of
(39:53):
a WROTH with a donor advice fund. So WROTH you know,
remember that year you're converting, you creating a lot of
taxable income. But similarly, when you contribute to a donor
advice fund, you're creating a big deduction. Right, So many
times you can pair those two strategies together. So and again,
just touching on those briefly. I know we talk a
(40:14):
lot about and we certainly can spend more time in
another segment another show on that. You know we are coming,
you know, another ten minutes left of the show, and
Ed and I are here not too late for a
caller to squeak in with a question. You know, we're
we're here to answer questions for you. You can reach
us at eight hundred talk wg Y. That's eight hundred
(40:35):
eight two five five nine four nine. And I'm gonna
assume listeners were out, you know, doing some trick or
treating late in the night. Maybe they ate too much candy,
so they're just a little bit slow on the phones today,
That's what That's what I'm going with me too. Yeah, perfect,
you know, you know one of the things that you
(40:55):
know Ed touched on briefly and you know it's this
direct index. You know, we talk about tax loss harvesting
and you know, ed, I know, you know, direct indexes
is something that we're seeing, you know, more and more
clients show interest in and you know, big picture, you know,
just if you don't mind spend a few minutes, because again,
we throw buzzwords around, and I do realize that I've
(41:16):
probably you know, if somebody is listening and tallying, they
could probably say, hey, here's ten buzzwords. You said John
that you know, maybe you can do a better job explaining.
But you know, tax loss harvesting and direct index in
particular is I think is one we throw around and
others in the industry do. So if you don't mind,
just take a few minutes kind of walk through what
(41:38):
is really meant by that and why why somebody might
be interested in that.
Speaker 2 (41:42):
Yeah, so if we just think about you know, direct
indexing as a whole, you know, what we refer to
as an index in finance is going to be something
like the S and P five hundred or maybe the
NASDAC or the Russell two thousand. It's essentially a basket
of stocks with with some rule behind it. Right, So
S and P fived it's the largest five hundred companies
in the US, the NASDAK it's the largest one hundred
(42:05):
companies in the US, Russell two thousand, the largest two thousand.
So it's just different ways to kind of put together
a basket, rules based to calculate performance and kind of
track things. Now, we love indices because they're diversified. Then
they give us good access to the overall, you know,
US domestic equity market. The problem with owning it an
(42:27):
index is that you are forced to own the whole
basket and it's just one line item in your account. Now,
on any given year, we may see you know, about
twenty percent of the S and P five hundred, those
stocks may be down. You know, the broader index can
be you know, positive in performance, but some of those
individual stocks will be at a loss. Now, Unfortunately, because
(42:51):
you own the basket as a whole and it's one
line item on your sheet, you can't take advantage of
the losses in those companies. Now Versus, if you were
just to own you know, every single stock in the
S and P five hundred, all five hundred of them,
it should be a lot of work to manage in
a portfolio, but you would be able to sell some
of those stocks at a loss and offset some of
(43:12):
those stocks at a gain. You know, we talked about
that tax loss harvesting earlier in the show. So the
benefit of doing something a strategy like called direct indexing
is what it does is it's a it's a software program,
it's a you know, a piece of technology that you
add onto your account through you know, a partnership that's
going to go in and instead of owning that full basket,
(43:33):
you're going to own, you know, a selection of you know,
maybe one hundred and fifty two hundred individual stocks. The
performance of that pool of stocks is going to mirror
you know, whatever index you choose, you know'll just use
S and P five hundred. So what you're getting is
you're getting S and P five hundred like returns and exposure,
but with the ability to take advantage of those stocks
(43:56):
when they are down at a loss. So what that
us is you can add you know, about an extra
one to two percent, you know, maybe on a reoccurring
analyized basis from a tax perspective, right, You're not getting
these positions that are built up gains in your account
or you're at least slowing that down because you're taking
advantage of those losses. You know, it is a very
(44:18):
technical setup. You know, the software is really function of
modern technology, you know, being able to sell a stock
and replace it with a light kind exposure, so you're
still tracking the S and P five hundred. It's very cool.
It's something we've been implemented. It's something we've seen a
lot of success with so far this year. You know,
if we just think about someone who opened an account
(44:38):
at the start of the year, we got that volatility
in the spring, You've got all of these stocks down
at a loss, you're selling those, you're replacing them, and
then you know you're not sacrificing any market exposure. But
you know, we've got some accounts with some pretty sizable
losses and actually outperforming the S and P five hundred.
Speaker 1 (44:56):
Yeah, and it is a complicated subject. But at the
end of the day, right, you're you're getting you think
about it, you're getting market performance. Right, and then you're
adding this fancy word called some tax alpha, which is
basically just saying, hey, the way it's managing the the
underlying holdings. The goal is to harvest and generate some
(45:19):
losses that gives you some tax advantages. Right. So it's
a definitely an interesting approach, something we're using more and
more with clients and certainly something to consider. And you know,
lasting you know, I know, we've got a few more
minutes here the show. You know, again, I go back
to my flight. It's always nice, you know, when you
(45:40):
have a long flight if you have some people next
to you to talk to. And and in my flight back,
I had, you know, two individuals in their mid twenties,
and as we were just talking, I mentioned one of
them was running in the New York City Marathon on Sunday.
And you know, as we're just chit chatting about what
we each do, you know, they I mentioned, you know,
(46:01):
what I do for a living, and so of course
they said, all right, what advice do you have for us?
And you know, and I think this is a great conversation,
right and you're, you know, you're in your mid twenties,
you're a long way from retirement. You know, what are
the things that I should be you know, thinking about?
And you know, one of these I asked them both,
is hey, do you have four oh and K available?
(46:21):
You know where you work and they both said yes.
I said, okay, are you maxing out your four oh
and K And they said no. I said, okay, so
you really have to look at that right and maybe
you can't max it out, but you know, put what's
the most you can put in. And so I think
those are just some strategies you know that that you
(46:42):
know as a working young professional, maximize that put money away, uh,
because I will tell you do that when you're twenty five,
when you're fifty five and sixty, if you've been consistent,
you know you will be in a great spot. Well,
we are coming up really to the end of the show. Ed.
I want to appreciate you joining me this morning and
(47:05):
always appreciate your thoughts and insight.
Speaker 2 (47:08):
Always happy to be here. It's always a great way
to start the weekend.
Speaker 1 (47:11):
And you the listening audience, we want to thank you
for tuning in with us today. I hope you enjoyed
the show. I know that Ed and I certainly did.
Hope you enjoy the rest of your weekend and have
an amazing week ahead. Also, be sure to tune in
tomorrow morning at eight am for another great show. Also
check out our website bouchet dot com for great content
(47:32):
and information. You were listening to Let's Talk Money, brought
to you by Bouchet Financial Group,
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