The Fagan Financial Report

October 20th, 2024

Episode Transcript

Speaker 1 (00:00):
Good morning, and welcome to the Capital District's Money and
Investment Program. You're listening to the Fagan Financial Report. I'm
Dennis Fagan, sitting here with my son Aaron, as we
do every Sunday right here in newsk ten and one
o three one w g Y. We're recording this at
about noon o'clock on Friday, so please don't call in.
We're trying to, you know, give you the vast majority

(00:20):
of the week in the market, and all the economic
data is out and all the you know, the earnings
releases are out, so we're pretty good shape to provide
you with a full show. And uh now, uh Mets
are down three to one, who knows right now? Tonight
game tonight and then back to la la.

Speaker 2 (00:41):
Back just not let's just not close the series out
tonight at the Met stage, you know, at.

Speaker 1 (00:46):
The City field for sure. So we got a lot
to So, so what are we gonna talk about today?
First first half hour we would just stay pretty close
to the weekly news. I want to talk about some
earnings reports from from the banks, Bank of America, City Group,
Wells Fargo, Goldman, Sachs, ASML, Big Dutch chip equipment company
came out with some negative earnings. Their stock was down

(01:07):
about fifteen or twenty percent. Time once Semi came out
with positive earnings and the chip sector really stabilized. Wish
we'll talk a little bit about that UK inflation down
below the target ECB European Central Bank cut rates. Talk
a little bit about.

Speaker 2 (01:22):
That UK inflation was a little bit weaker than expected.
You know, Europe is just going to continuously be a dog.

Speaker 1 (01:31):
Really. You know, stocks have done well, but the economy
kind of has lagged a little bit. And there I
forget who said it, but at one point in time
it was said that it's going to become really a
place of museums and fine restaurants rather than you know, innovation,
and I think it's it's already there. But anyways, market sitting,
so I kind of kind of wanted to talk about

(01:52):
a couple of things, all right, off trip, markets sitting
at or near all time highs. That's one thing that
you know, and I'm sure every o the listeners to
our showing you know that. The second thing I would
say about that is that if you look at the
market from two years ago, the stock market's up about
sixty percent over that two year period, and there was

(02:14):
a study done by being the bottom.

Speaker 3 (02:16):
Of the bear market, though it is the bottom.

Speaker 1 (02:18):
Of the bear market when you look at rolling returns right,
when you look at rolling returns over a two year basis, Okay,
there has been eleven times when twelve times. This is
the twelfth time when the S and p's two year
performance moved above the ninety fifth percentile without being in
that range for at least the prior six months. So basically,

(02:39):
for those of you out there, means of the market
is at an all time high and well well well
above it's low set two years ago, okay, And what
that means is a couple things. So bea spoke did
a study and showed that for the following three months,

(03:00):
slater the other eleven times, the average return of the
S and P five hundred has been three point five percent.
Two times it's been lower over those eleven periods, down
seven percent and down two point five to eight percent,
once in February of eighty seven and once in November
or excuse me, March of twenty two, six months later.

(03:20):
Eight out of eleven it's up the weakest return down
two point seven five percent, and a year later it's
kind of the one what I want to focus on.
I think when you look at risk and return, we
hear a lot of our clients call and say, hey,
the market's high in this and that, and it is high,
but it's also high. It's justifiably high, and is much

(03:42):
that corporate earnings are good, inflation's coming down. Indust rates
are are coming down as well, obviously because it FEDS
in an easy policy, and in the worst case scenario,
back in nineteen forty five, year over year, the S
and P five hundred twelve fell twelve So out of
the eleven times that we've been in that ninety fifth percentile.

(04:07):
I know there are a lot of numbers, so abroaden it.
It'll give you a summary or whatever. Out of the
eleven times that the market has been in this situation, right,
only only six times it's been up, five times it's
been down. The average return is about six percent, So
the market doesn't make a lot of headway from this point.
But the worst downside was in nineteen forty five, the

(04:29):
S and P fel twelve percent. In nineteen eighty seven
nine percent. You can see why, because we had that
big drop in the fall of eighty seven. So my
point is is that I think we're in what we've
been saying there. I think we're okay at these levels.
I don't think we're going to make any substantial moves up.
You got a presidential election coming up, but subsequent to
the presidential election there is an upward bias. But generally speaking,

(04:50):
the you know, you get a little bit of a
honeymoon period in them that president he or she will
then do the things that they feel they have to
done and generally speak in if you do it in
the first year.

Speaker 3 (05:01):
Of your first term, you will forget about.

Speaker 1 (05:03):
People forget it. But you've got a chance to kind
of see how that goes. And it's also you know, uh,
you know, you just have some time. So I think
we're okay here. I mean, how do you know, you know,
how do you feel mean about where we sit with
with the with the stock market at these levels?

Speaker 2 (05:19):
You know, I said it a couple weeks ago on
the show, and if you take where the stock market
is now completely out of the equation, you don't know that,
you know, I think you have to be on the
cautiously optimistic side in that you know, you have tors
and side came out with something this year that US
households are in great shape, you know, and you have

(05:40):
to you have to.

Speaker 3 (05:41):
You know, you have strong.

Speaker 2 (05:42):
Job growth, you have solid wage growth. You know, you
have rising asset prices, and you have the FED cutting.
So you know, barring any you know, major political changes
to you know, I guess our our tax code or
you know, tariffs, I don't think that I think that
the stock market should.

Speaker 3 (06:03):
Do fairly well in around here.

Speaker 1 (06:05):
But if President Trump was is elected, he did say
the two things that you're struck barring any two of
them will be one of them will probably be a possibility.
President Trump's elected, You're probably going to get tariffs, and
then questions from tariffs, Harris is elected, You're going to
get higher higher corporate taxes and higher So so are
you saying then that that that is an unforeseen it's

(06:28):
not an unforeseen circumstance, said that's going to weigh on
the market or just not yet?

Speaker 3 (06:32):
Well, I think we have to fit not we have to.

Speaker 2 (06:34):
But I think we'll see after the election how much
of this was rhetoric, and you know what percentage of
this is rhetoric? You know, you know, I can we'll
see tariffs to what extent. We could say a change
in tax policy to what extent. Also, you know what
happens with Congress? Is it a split Congress? What the
what is the likelihood of these things actually coming to fruition?

(06:56):
So I think we're kind of in the way and
see mode uh. I think the stock market can continue
to do well in a higher tax uh, corporate tax
with higher corporate tax rate environment. You know when we've
seen a higher corporate tax rate in the environment in
the forties, fifties, and sixties and the stock market did
really well. I'm personally more nervous on the repercussions of tariffs.

(07:19):
Tariffs are usually passed on to the consumer. They are
passed on to the consumer. And what would happen if
there was some retaliation with tariffs from you know, maybe
maybe Europe, maybe China, maybe Latin America.

Speaker 3 (07:33):
So what happens if we do raise tariffs?

Speaker 2 (07:36):
You know what that happens with global trade, which could
which could really hurt our US companies as well as
the consumers. So I'm personally more scared about tariffs and
the repercussions from that than I am about maybe a
change in the corporate tax policy.

Speaker 1 (07:52):
Yeah, yeah, and I would agree with that, you know,
Kamala Harris, you know, it talked about the the corporate
tax rate going to twenty eight percent, and you got
to keep in mind that the average corporate tax, the
average rate that the corp corporation's big corporations pay, is
nowhere near that that rate. So it might be a

(08:14):
maximum rate, but there's very few large corporations that actually pay,
you know, the current rate. So is it a move
And even so, there is if corporations pay more tax,
is that going to impact their bottom line? It could,
But there's also the chance and his if history as

(08:36):
a guide, that they will pass some of that gain
along to the consumer as well. So either way, be
it higher corporate taxes or higher tariffs, I think both
are probably negative. President Trump brought the corporate tax rate down.
I think that was I think that was very very

(08:58):
It was a good move, you know, because of the
fact that you want your corporations to be competitive around
the world, and there's been studies to show that it
has improved the US competitiveness around the globe. You know.
I just I was listening to you and Doug talk
in your office the other this morning and talk about

(09:21):
you know, sometimes it's it's a matter of spending rather
than you know, rather than income. You know, if you
think of yourself as a family, one big family, the
US is, you've got income and outgo. Sometimes it's the outgo.
And then we can discuss all day what the appropriate
tax rate is for the income or you know, the
appropriate spending policy. But that's not what we're really here

(09:42):
to do. I think we are here to say, Okay,
what do these changes, How do these changes impact the
future potential of equities and fixed income e stocks and bonds,
and how does it you know, because as a result
of our competitiveness around the globe, and I think when
when you when you raise raise taxes or raised tariffs,

(10:04):
you know, it's a net negative. We also have to
see when that's going to take it, when when that
would take effect. But I think the biggest issue, the
or the biggest uh item that you brought up was
really you know, we'll have to see how Congress plays
out really and see what happens there, you know. So
but then you were talking about the economy, you know,
coming in, you know, we saw the producer and consumer

(10:25):
price in disease at they're okay, one was a little
higher than anticipated, but there there is that there is
that sense really that in the economic data would indicate
that this past week, US export prices down seven tenths
of a percent, impoor prices down four tenths of a percent,
export prices down year over year, impoor prices down or

(10:48):
basically unchanged year over year. Agricultural export prices up six
tens of a percent, but down five point three percent.
Year of your agricultural export prices can be volatile. Non
ag export prices down nine tens of percent, down two
percent year over year. So if you get import export prices,
they're they're basically you know, flat to down. Business inventories
up two point four percent year over year, business sales

(11:10):
up one point three percent.

Speaker 2 (11:12):
UH.

Speaker 1 (11:13):
The inventory to sales ratio, which measures how much inventory
is in stock on a on a time basis, it's
at one point three eight months manufacturing inventory, one point
four six months retail sales, and then it's I was
talking to Doug Goody this morning on Gey just talking
about that retail sales up four tenths of a percent.

(11:33):
But if you look under the hood a little bit
retail sales, you know, really for uh the bigger ticket
items were flat to down a little bit. So it
seems like Americans are spending more on what they need
rather than you know, on some of the big ticket items.
And and that's not surprising given given the uh, right,

(11:55):
really the level of inflation over the past three or
four years. And I just pulled that out. Let's see here,
Electronic and appliance store sales down three point three percent
in September. Furniture and home furnishing sales down one point
four percent in September. So those are two of the
bigger numbers there. You were kind of boom, you know,

(12:16):
although Americans are still going out. Restaurant drinking place sales up.
So this is one of those shows where like there's
not a lot of news out this week that would
kind of if you look at it on a scale,
kind of move us one way or the other. Industrial
production and capacitization slipped a little bit, so we're moving
at a little, little little slower pace.

Speaker 3 (12:38):
You know. Just I guess to go on to the
I guess next topic.

Speaker 2 (12:44):
You know, as of you know, eleven fifteen, twelve o'clock
on Friday, the five day return on the market.

Speaker 3 (12:51):
It is about flat.

Speaker 2 (12:53):
You know, you saw a big drop down about three
days ago and the market come back up to be,
you know, basically about flat as of as of you know,
as of mid day on Friday. Some things that I
think are that were really positive about the economy, really
and I guess the stock market would be this week.
You had Schwab earnings, you had Bank Bank of America

(13:15):
would have been Friday, a Bank of America had it
was Morgan Stanley, you had Goldman Sachs, and you know,
I printed them all out, and if you look at
all of them in City Group, uh, and you know
what the thing I got from all of them is
Goldman Sacks beats on profit and revenue as stock trade
and investment banking boost results.

Speaker 3 (13:36):
City Group earnings.

Speaker 2 (13:37):
Top top estimate, boosted by investment banking. Bank of America
tops estimate estimates. I'm better than expected trading also it
mentions in here maybe not, but investment banking, Morgan Stanley
top's estimates. I'm better than expected wealth management, trading and
investment banking. So you know, although investment banking sounds like

(13:58):
kind of like a I don't know, hedge fund esque word.
What it means is mergers and acquisitions and the decline
in rates are boosting some spending from larger banks, and
I think that's good for the economy, in the stock
market overall. It means it means that as rates do

(14:19):
go down, spending will increase.

Speaker 3 (14:21):
You know. Then you could say, hey, what is the.

Speaker 2 (14:24):
What is the downside to this would be a ramping
up of inflation again, but I don't think that is
the case. I think this is a signal of a
strong economy and a strong market and I think these
are all, I guess, good signs for the stock market.

Speaker 1 (14:38):
Going forward, and it's good. It's good signs for main
street too. And I think you you often talk about,
you know, middle income America and how that has to
come back, and I think one of the things that's
hurt middle in come America over the past three or
four years has been inflation. You know, call it call
out to too much spending from President by I can

(15:00):
go a little bit back further the President Trump, do
what you want, but you know, or just really the
disruption and the supply chain, which I think is the
majority of it. But that said, that's coming down and
that should continue to at least booy the stock market.
You know, I'm less concerned about where the stock market
is going to the upside as compared to the downside.

(15:21):
I'm much more concerned with the downside of the market
than the upside of the market, just because that's what
what impects people. The market was down three days ago
or so because of that Chim company ASML ASML came out,
as I mentioned at the top of the show, where
there continue to be strong developments and upside potential in
ai Other market segments are taking longer to recover now,

(15:43):
Piers recovery is more gradual than previously expected, Christophe Fouke
said in the earnings release. And I think that hurt
the market earlier in the week, but yeah, and.

Speaker 2 (15:54):
Then I think Taiwan Semei had pretty strong earnings. I
think the stock was up significantly on Thursday, to be like,
and I think people took a step back and be like, wait,
what is going on? But I do I do think
ASML's caution is weighs more in my head than Taiwan Semi's.

(16:14):
I guess optimistic results in that I think a lot
of times in the stock market, people get overly optimistic
on you know, ideas you know, turning into revenue.

Speaker 3 (16:27):
I think I think a lot.

Speaker 2 (16:28):
I think you saw that a lot with driverless cars
five or six years ago.

Speaker 3 (16:32):
You know, Mobile Eye, which was acquired by Intel started to.

Speaker 2 (16:35):
Do really well, and it was really the beginning of
Nvidia starting to do really well with their GPUs becoming
integral in car manufacturing. And I think you know, Tesla
had their you know somewhat autopilots. So I think people
got a little bit a little bit too optimistic on
the reality of driverless cars hitting the market.

Speaker 1 (16:54):
You know.

Speaker 2 (16:55):
I think Kathy Wood said by twenty twenty four x
amount of cars would be you know, be driverless in robotaxes,
and that really hasn't come to fruition. I think Google
just hit you know, one hundred thousand rides on Weimo,
which is great progress. But I think the you know,
the wheels turn a little bit slower. Uh, then I

(17:16):
guess if you're just making you know, predictions, and I
think that is the I think that's what makes me
a little bit nervous about the semiconductor sector and artificial
intelligence in general, is the ability for artificial intelligence to
generate revenue for these larger companies, and did we pull
forward some of these you know, stock performance earnings into

(17:36):
into this year, like the way we did during COVID.

Speaker 1 (17:39):
You know, yeah, you know, I think it's quite possible.
I think it's quite possible. You know, if you look
at you know, we know we we're gonna I don't
know if we're going to have time in the second half.
But talking about if you talk about CDs and the like,
the issue is is that even if if you need
that growth in your portfolio, so you need that equity side,
and the typical might have you know, sixty or sixty

(18:02):
five percent of his or her account in portfolio in
the stock market, and the balance and bonds and cash.
I think the issue with bonds and cash is that
after taxes and inflation, you're lucky to break even. And
I think as interest rates come down and those CDs renewed,
not a not a five, but at four and then
three and then two potentially and look that the way

(18:25):
I would I would we are investing is that three
to eight year period. Generally speaking, I don't think interest
rates are going to go down a lot from here.
I think that's why you want to lock in. That's
why you want to uh not go excuse me, not
not take too much risk with your investment portfolio. But

(18:48):
I think that interest rates, if they go up, that's
why you want, you know, three or four year notes.
If they go down, that's why you want the seven
or eight year notes. So we're kind of positioned for
you know, interest rates kind of hanging around in here
rather than rather than moving up. But the risk if
you're if you're a CD investor, is that you know
I'm wrong and interest rates continue to go down and
then you're stuck renewing. So you want to ladder. You

(19:11):
want to ladder those as well, and make sure that
your position for no matter inters go. But I will
say so, but just need money in the stock work
because I think they're gonna that that area will offset
inflation and provide probably a higher rate of return than
you'd have other in another area.

Speaker 2 (19:28):
And I think at the end of the day, the
US consumer is in good shape. Wages are rising, home
balance sheets are in good shape. Credit actually went down
last month. I think Doug was telling me that a
few days ago credit card debts, so I think, you know,
we're in a pretty healthy environment for the stock market
to do well. But I think you know, I guess,

(19:49):
as you were saying earlier, you know, we're always more
nervous about the downside than the upside and try to
protect people's portfolios from you know, I guess from downside,
from the downside.

Speaker 1 (20:01):
So so also, what part of that is priced in? Yeah,
you know, it's kind of saying, look, Bentley is a
beautiful car. Yeah, but it's three hundred grand or whatever
the cost is, you know what I mean. So it's
what is priced in. And I think the higher that
you go, especially and I think you were talking about
that in AI just a little while ago, the higher
that you go, the more is priced in generally speaking

(20:21):
to that stock price. So you've got to be careful
that you might get good earnings. Netflix had great earnings
and they're up seven.

Speaker 2 (20:28):
Video last quarter, great earnings, one hundred percent, hundred twenty
percent year of a year growth. But it was just like, ah,
maybe it's it's time to start trimming these things. And
you know, you want to be early rather than late
to things like that as well, like how much more
upside is there in this stock? If you're doing whatever
analysis to this, you know, yeah, what is the upside
potential of this? And I think a lot of people

(20:49):
are saying, you know what, the upside potential right now
isn't worth worth the risk?

Speaker 1 (20:53):
Right? But where do you go?

Speaker 2 (20:55):
I don't know, you know, I know we've been talking
about NBL on the show a lot.

Speaker 3 (21:00):
You know.

Speaker 2 (21:00):
It's the pro shares S and P five hundred dividend
aristocrat fund. It has a point three to five expense ratio.
I'm going a one point nine to six percent dividend
and it's I love how it's allocated. So so how
is it allocated for a lot of like us? I
think a lot of investors might have a somewhat over
allocation to technology. You're a large cap technology and NBL

(21:22):
is a great fund to balance that out.

Speaker 1 (21:25):
You know.

Speaker 2 (21:25):
So if you still think the stock market's going to
do well, but maybe it's getting maybe those larger companies
are a little.

Speaker 3 (21:31):
Bit fully valued, fully valued.

Speaker 2 (21:34):
You know this NBL is fifty percent mid cap, thirty
eight percent large, nine percent giant, and three percent small cyclical.
It's thirty two percent cyclicals though, ten point four to
seven percent financial services, twenty one percent, industrials twenty three
percent consumer defensive, ten percent healthcare, and only four point

(21:55):
eight percent technology. So you know, it's a really great
fund for you to end have exposure to mid cap
and be have not as much exposure to technology because
let's say you're even in the S and P five hundred,
it's thirty five forty percent in technology technology related companies.
So it's it's I think it's a really great hedge
on the market being in pretty good shape. And but

(22:17):
you know, yeah, large captech maybe being a little hedge
against here.

Speaker 1 (22:21):
It's a hedge against the current the market isn't meaning
that it's a hedge that you think the market's going
to continue to perform, be your best performer relative to
other asset classes. But we're concerned that the leadership that
we've seen over the past several years decade is not
going to continue moving forward. So that that that uh

(22:42):
and in reality, that has happened over the past three
or four months. If you have a second, can you
punch up the XLF you know, Buffett's Bank of America,
you know, ex what is that up here today? That
that's the S and P.

Speaker 2 (22:56):
Uh it's a twenty percent year to day, but a
thirteen percent of that is I think it's thirteen let
me check, twelve point ninety five percent of that is
Berkshire Hathaway in, ten percent is JP Morgan, seven percent
is Visas, six percent is master Card.

Speaker 1 (23:09):
Right, so that those are twenty those are four of
our largest holdings. Yeah, so we don't hold a lot
of the XLF, but the four that you just mentioned,
JP Morgan, Berkshire, Visa, and Mastercarter.

Speaker 3 (23:20):
What's the fifth largest holding in that Bank of America?

Speaker 1 (23:23):
The most far we have that we have, so the
top five in that we own for our clients.

Speaker 3 (23:27):
Yeah.

Speaker 1 (23:28):
Anyways, uh, after the you know, after the break, you know,
what do you do if you have the vast fast
majority of your money in a qualified account? What do
you do for kind of long term care planning? I
want to talk a little bit about that and also
filling up that twelve percent corridor. We want to talk
a little bit about that, and then the TEX has
put out five random thoughts in the market. We're going

(23:50):
to touch base on that and also the sequence of returns.
I know we talk about that e lot, but right
now it's ten thirty on the station depend upon for news,
weather and information, news talk, A ten and one o
three one w G. Y, good morning, and welcome back
to the second half hour of the Capitol District's Money
and Investment Program. You're listening to the Fagan Financial Report
Aaron and Dennis Fagan sitting here as we do every
Sunday right here in news Talk A ten on one

(24:10):
oh three one w G. I talked a little bit
about the first half that it's actually Friday, about noon.
We usually record the show at about this time every week,
and so don't don't bother calling if you want to
get ahold of us during the week five one four.

Speaker 2 (24:23):
Check us out question for the for the show, it's
investment at Faganassociates dot com. So if you have any questions,
you know, that's the one thing I really miss about
doing live is you know, we had some people that
used to call in kind of you.

Speaker 3 (24:36):
Know, regular a month or so, but you know, having our.

Speaker 2 (24:40):
Entire Sunday to ourselves and family, I guess outweighs the
individual questions sae, oh, we get to know in the week,
you know.

Speaker 1 (24:46):
Yeah, Well, I think the thing about the thing that
I'm looking at is that there's quite often a lot
of people say too and a kind of paraphrase with
Jason's wig said he's been writing the same thing for
twenty years, just a little bit different, different a lot
of times. And I think as as someone who invests
for the long term for our clients, uh and and

(25:08):
someone if someone were to say to me personally, how's
it going, lots of times they'll say good or you know,
it's going okay, you know what I mean? And I
and I think, what's new? Nothing's really new? And then
I think to myself, nothing's really new. Like sometimes I
that's that's the that's the typical response, what's new. Nothing,
But if someone really important to you said that, that's

(25:29):
still your response lots of times because nothing is new,
you know. And I think that's the kind of week
we've had in the market asml we talked about it earlier,
clipped the market a little bit. Yeah, we got the
election coming up, but the bottom line is that there's
not a heck couple. There are earnings, and I think
we'll begin to see that move the market. But this
past week, you know, Netflix came out with good earnings. Uh.

(25:51):
Taiwan semi counter to a SMLS poor earnings with good
earnings and the and the and the market's in good shape.
So I think as we sit here relatively light week economically.

Speaker 3 (26:04):
Everyone's biding their time for the election.

Speaker 1 (26:06):
I think so, you know, I think so. I don't
think it's gonna have any I think you mentioned Congress
in the first half. I think that's what's going to
drive this. I'm not scared to death of either either
individual being elected. I think the you know, I think
that the history would indicate that it's not going to

(26:26):
be a game changer, so to speak. I am a
little concerned about if President Trump is not elected, you know,
what happens. I mean, he's uh and because he has
said in the past that you know, you know that
he's not going to be confident in the results. So
that's what I'm concerned about, you know. And but it's
only a short term concern. I think that like when

(26:47):
President Trump was elected in twenty sixteen, the market pulled
back about five percent the next day and then then
rallied back. So I'm not longer term concerned about that,
but I am concerned there could be some dislocation in
the market. We'd use that to you know, all things
be an e wal probably accumulate share. So and we
saw it back in two thousand with Gore versus the

(27:08):
second President Bush. You know, a little bit of the
results were pushed back because of the hanging Chad, the
whole question work of who won Florida by a couple months.
So we'll see, we'll see how we play out from there.
But I think things are okay. I did want to
talk about air. You know, I was talking to a
client this morning, and there's probably a lot of people
out there. A lot of our clients are in this

(27:29):
position where somebody has a million dollars in a rollover.
IRA will say you're sixty five, sixty six, seventy years old,
and you've saved your whole life in your four oh
one K, four three B whatever, and you might have
one hundred thousand dollars outside that IRA. So the vast
majority of your of your wealth is in qualified money.

(27:54):
And as you get older from sixty five to seventy,
and we usually call long term care planning a second
half of your sixties issue unless your health, your earlier
health issues would dictate otherwise. Uh, you know, what do
you do with that one point two million? How do
you kind of guard it from having a long term
stay in a nursing home. There's certainly from the so

(28:17):
the non qualified money, well, no, but the qualified money
the RMD, well, the RMD. But but now you're sixty five.
So let's say you have five thousand dollars of monthly
income needs. That's sixty thousand dollars. The twenty two percent
bracket doesn't kick until you're till one hundred and twenty
five thousand dollars or so, so you've got a corridor
of about sixty thousand dollars. Yeah, that you can take.

Speaker 2 (28:42):
For a significant amount of time if you're sixty five
to seventy three, and you have to take that RMD.

Speaker 1 (28:47):
Right, So if your income needs are five thousand a month,
and so let's say with taxes, let's say there's a
fifty thousand dollars window that you can take for a
five or six year period. You take it, pay the
twelve syntax, right, and begin to build up trust assets
that way, knowing that there's a five year old and.

Speaker 2 (29:05):
That's huge for multiple reasons. I guess your medic Medicare
costs might go up a little, but not really if
you stay that that low.

Speaker 3 (29:14):
So you won't get that. You know that.

Speaker 2 (29:16):
IRMA bump, IRMA bump. And let's say you're seventy three,
you have to take that rm D out your one
point two million grows to two point.

Speaker 3 (29:23):
Four or whatever.

Speaker 2 (29:26):
It'll be less gets two than that rm D that
you have at seventy three is going to be substantial.
I'm talking seventy thousand dollars.

Speaker 1 (29:34):
Maybe two million.

Speaker 3 (29:36):
Yeah, let's say you have that, you know, uh, you
know whatever.

Speaker 2 (29:40):
Let's say you have a pension or social security or
a pension, and then you have to take a giant
lump sum from a from an r m D as well,
then you know your ERMA could get affected as well.
So if you have, especially with people with lower income
needs and a lot of assets, which is a lot
of our clients, because it's you know, by the time

(30:01):
you're sixty, sixty five, seventy, you know you've kind of
developed your spending habits. It's not like you're like, Okay,
I lived on one hundred grand. Let's say me and
my wife have done one hundred and fifty thousand dollars
combined salary, two hundred thousand dollars combined. So it's not
like all of a sudden, we're like, we have three
million bucks, our expenses are going to go up to
three hundred thousand. Yeah, we might take a fifteen thousand

(30:22):
dollars trip once a year or whatever. But it's not
like your daily living expenses and needs are going to
go up substantially because you've already developed your habits and
your routines. That being creatures of nature or humans of habit,
you know, we really don't develop different spending habits upon
retirement as opposed to maybe a big purchase.

Speaker 1 (30:43):
What do you think? I mean, I don't want to
put you on the spot, and I can answer this
question if you don't want to, But of our clients
that are sixty five and retired, what do you think
their average monthly expenses are.

Speaker 2 (30:53):
About anywhere from you know, four thousand to nine thousand
dollars a month.

Speaker 3 (30:58):
I would agree that's usually kind of what it.

Speaker 1 (31:01):
So you're talking to forty eight thousand dollars to one
hundred and eight thousand dollars.

Speaker 2 (31:05):
Yeah, you know, think of it. Forty percent of people
don't even have mortgages in America. So it's taxes, it's
you know, food and things like that. And again we
live in a great area.

Speaker 3 (31:14):
You know.

Speaker 2 (31:14):
One of the things I like most about living up
here is the people, and like we have great clients, yes,
and that's you know, that's I love working with them.
And they're people that you know, really worked hard their
entire life to to get this amount of money. And
a lot of that was by not getting into consumer debt,
by by doing things like that, by making by making
sure they lived within their means. And I think people

(31:35):
in this area really do live within their means.

Speaker 1 (31:37):
And our generations to eat all the time, yeah, you
know it, don't drive big fancies cars lots of people. Now,
look that's why I say when you retire, you know,
your vice maybe should be catered to a little bit.
So if you'd like to travel, travel, if you've been
sacrificing your whole life, buy the car of your dreams,
maybe you know, buy an RV. Stuff like that. So

(31:58):
we're not we're not anti that, but you know, generally speaking,
our clients live on fourty eight thousand bucks a month,
so and they've have they have a lot of money
that they've they've saver us they've saved a lot in
their formal care of four three b maybe they rolled
it over to an I R A and now they're
they've got way more money in qualified moneys. As a
post to noncloff, I will say, and I'll say it
again before the end, is that we can't can't forget

(32:20):
that those nice clients, and you really put it nicely,
and I could I could tell really that you had
a feeling in that or we do have great clients.
And we're having at Ryan's Wake Tuesday, our seventh annual
final fest.

Speaker 3 (32:33):
Uh.

Speaker 1 (32:33):
Sam's done a lot of work on that, uh, and
it will be toys for Tots. Bring a book, You're
to bring toys and one hundred percent of everything goes
to Toys for Tots. Is two to five of Ryan's
Wake and Troy, which is a great spot, Chris Ryan
four oh three River Street, right at the Troy side
of the collar of the Green Island Bridge. And we'll

(32:56):
be there and I will be there, as will Uh, Samantha,
Aaron and Mary Shanger will all be there. So be there,
yeah if yeah, yeah, hopefully.

Speaker 2 (33:05):
But you know, I guess getting back onto what we
were talking about, you know, we hired Doug about what
two weeks ago, two or three weeks ago, and he's
really diving into our money Guide Pro, which is our
financial planning software. You know, and if any if any
of our clients are not clients are listening to this,
we'd be happy to put something together for you. But
it's funny, like, so there's this Monte Carlo simulation, right,

(33:27):
it runs a thousand scenarios that you know, how what
will happen to your money if you know what will
happen to your money throughout these a thousand scenarios and
historical historical scenarios or you know, yeah, catastrophic things like that.
And you know, it's funny that you know, every time
we run these scenarios for clients, uh, and we've done
a bunch of them, and a bunch of what comes

(33:49):
out at ninety nine ninety nine percent, So basically, you
know without ninety nine point whatever percent of the time
that you have money. But you know, we we doug
dove into the software a little bit more and it
turns out that like ninety four to ninety seven or
ninety ninety seven is actually a better case scenario in
ninety nine actually means you should take more risk or

(34:12):
spend some more money.

Speaker 3 (34:13):
It's interesting, you know, so you know, ninety nine is
almost too good.

Speaker 2 (34:16):
Sometimes I think a lot of people, you know, clients specifically,
or almost you know, better shape than they not better
shape than they need to be, better shape than they
have to be, not taking enough risk sometimes, you know,
sometimes these financial planning software is good because you know,
it gives you a visualization of like.

Speaker 3 (34:34):
You're you're good. You know, maybe it's time to take
that trift that you wanted to take.

Speaker 2 (34:39):
And you know, remember why for forty years while you
were working, you you saved money in your four to
one K and you were you know, you were responsible
and not saying it's not responsible to spend money. It's
you know, you owe it to yourself to you know, yeah,
spend some of that money that you worked your entire
life too.

Speaker 1 (34:59):
Because where it's gonna go when you're eighty eighty five
is not as much fun as when you're sixty or
sixty five generally speaking.

Speaker 2 (35:04):
You know.

Speaker 1 (35:05):
But but that that you were talking about that Monte
Carlos simulation, and if it's ninety nine percent chance of success,
you you may want to take more risk and bring
the chance of success down the ninety four I do
liken that to being on the north Way and going
sixty nine or seventy rather than sixty five. You might

(35:25):
be one hundred percent sure you're not going to get
a ticket. If the speed limit sixty five and you're
sixty five, you might get you know, might get a
two percent chance of a ticket going sixty eight and
sixty five. And I don't know whoever has, but the
point is that you can capture more return with a
little more risk if it's appropriate, and really not do

(35:47):
any meaningful, not any that meaningfully compromise the long term
health of your portfolio. And I think that's kind of
what you're saying. And when I talked to him the
other day about that, that was an eye opener for
me as well.

Speaker 2 (36:01):
Yeah, yeah, it's stuff that I really never thought about before,
you know, thought of it directly.

Speaker 3 (36:06):
You think of it all the time, like, hey, you're
in really.

Speaker 2 (36:07):
Good shape, you know, but right you can assume more
risk that people can visualize that they can a little
bit more risk, or you know, let's say you're seventy five,
eighty or or what however you are, and you have
a you have a kid who's you know, I don't know,
wants to buy a house. You know, there's there's there
or or whatever. Maybe some estate planning or secession plan

(36:28):
or you know, I guess financial succession planning for yourself
to do a little bit earlier than as opposed to
when you when you when you pass away.

Speaker 1 (36:37):
I was listening to her funny the opposite side of
that corner. I was listening to a report on CNBC
within the past two or three days, and they were
talking about there's a substantial percentage of retirees that have
compromised their uh, their their lifestyle and their long the
long term longevity of their money for their children and

(37:00):
who are and they need it quote unquote. But the
sense of entitlement is what's out there. That it was
It was never like, you know, with my mom and dad,
I didn't even know how much money they had, you
know what I mean, they have something they don't have
some But it was different today. It's different today. It's

(37:23):
almost like, don't spend your money. I could use you too,
And you know, my dad would have said go pound salt,
you know what I mean. So obviously you and Sam
are great, but so there's that out there as well.
But so anyways, if you have a lot of money
in qualified moneies. Yes, you cannot move that to an
irrevocable trust without paying tax, and that would be difficult.

(37:44):
But if you address some of this issue when you're
sixty five rather than seventy three or seventy four, you
might be able to take money out of that IRA
at a relatively low twelve percent tax rate. Maybe you
maybe have a couple percent of stay tak get it
into a non qualified position, and then put it into

(38:05):
an ear build assets into an irrevocable trust at like
twenty or thirty grand a year for seven or eight years,
and go in that direction. The other thing I would say,
and we were talking a little bit about, and we're
fourteen minutes into the second half hour, if you have
an irrevocable trust, make sure how it's invested is appropriate

(38:26):
for the intermediate term and long term beneficiaries, meaning that
if you have if you have, if you have investments
into an irrevocable trust and it's six years old and
you don't need the income, and it's meant for the
benefit of your children, then it should be invested according

(38:50):
kind of a combination of your needs and their long
term need and their needs. So don't think to yourself,
I've got this iravocable trust, I'm never going to need it,
and then you deal with somebody an investment advisor that
that that that addresses the asset allocation model according to
your needs. It should look at, you know, what are
the long term benefits that this trust can provide for

(39:15):
the beneficiaries the ultimate beneficiaries of that. I hope I'm
making myself clear. So my point is that if you
have money in an irrevocable trust and you're never going
to use it and the five years of going by
or or it's not at risk for being you know,
impaired by medicaid application, then you know you should really
be looking more towards equities than perhaps you are. Yeah,

(39:38):
so that's that's the that's really the financial ass planning
aspect of of of this show today. You know, look
at maximizing your twelve percent corridor gradually add to a
trust you think about when you're retired, if you're staying
in your house, or even if you're thinking of moving,
maybe maybe I have an irrevocable trust for that you
can get the money, you can get the asset there

(40:00):
primary residence without impacting your standard of living and then uh,
and then go from there, what else we got there
in the Texas or what do you want to talk
about talking about the sequence of returns? You want to
go right to the texts.

Speaker 3 (40:10):
We've talked about sequence of returns in a while.

Speaker 1 (40:12):
Well, ry hit us with hit the world with the
Texas then and.

Speaker 3 (40:15):
Then we can go you hit the world with it? Oh,
here it is.

Speaker 1 (40:18):
Oh you couldn't find it.

Speaker 2 (40:20):
Yeah, So basically in the Texas it has you know,
commentary on five random thoughts about the market, and you know,
I think they're very good five random thoughts. The first
one is the consumer remains resilient, and I think that
is one of the more important things with the economy
right now is you know, we have a resilient consumer,
We have a very we do still have a strong

(40:41):
job market. It's hard to be like, oh, you know
it's is it weaker than before, yes, but historically still
extremely strong.

Speaker 3 (40:47):
We still we still are seeing some wage growth.

Speaker 2 (40:50):
So I think you know that that is a you know,
I think that should be always one of the top
things you think about with how you think the stock
market is going to do is how the consumer and
the consumer is in really good shape right now. So
I think that's obviously, you know, extremely important.

Speaker 1 (41:07):
Yeah, we talked earlier. Just keeping on the consumer, the Texas,
you know, they're they're random thought of. The consumer remains resilient.
We're talking about retail sales h the consumers being rational, discerning, stingy, picky,
whatever adjective you want to use. But he is, he's

(41:27):
not imploding. And more importantly, he is still spending, just
maybe not to the extent that he or she was,
And they're more discerning as to what they're spending and
on recognizing that as the economy slows, you don't want
to be prolific or spend drifty with with your with

(41:47):
your money. So very good point Number one, Why don't
you give us random random thoughts is almost like that
Saturday liveskit. You're probably too young for that random random usings.
I forget the guy I think you ended up dying.
I forget who. Uh, okay, go ahead, I'm gonna I
think I know who you were talking about. It's the
guy who's murdered by his wife. I'm not sure, but

(42:10):
go ahead.

Speaker 2 (42:11):
The FED has shifted its priority to backstopping growth in
the market believes it.

Speaker 3 (42:15):
Last Thursday was a great example.

Speaker 2 (42:17):
This CPI dropped as the jobless claims CPI printed at
plus two versus point one on a month over month basis,
and core ex food came in at plus point three
as a as expected versusn expected point two month over
month warmer than expected inflation. So I think that's that
is a that is a I guess could be a

(42:37):
headwind to the market. Is the consumer being in too
good shape and inflation kind of running away a little bit? Yeah,
any thoughts as you would say, You know, I think.

Speaker 1 (42:52):
That we have and I couldn't find that Saturday Live,
so email said, Thanksgan dot com, you know the person.
So no, I think that the Fed has shifted its
palace priority to backstopping growth by easing monetary policy. Is
it possible that inflation's bottom tire? We talked about that.

(43:13):
We've talked about that significantly over the past month. I
know we addressed it last week. Yeah, you know, I
think that. I think that if you look at it
as a soft landing. And I know we talked about
this last week, and I apologize for those that were listening,
but I'm thankful for those that We're listening that I'll
have to repeat this, that I'm going to repeat this
soft landing. My opinion implies GDP growth north of zero,

(43:40):
So zero is the landing strip a soft landing. If
GDP of one percent means that the plane never touches down,
the FED runs the risk by trying to make sure
the plane has has a soft landing of actually, you know,
not getting that inflation as low as they want. Now.
We saw the UK inflation rate and and we saw

(44:03):
imported export prices down, but with with the unemployment rate
at four point two or four point three percent, with
the consumer resilient consumer, as the Texas mentions, you know,
I think they run the risk, and I don't. I don't.
I don't think it what I said just said, run
the risk, but I don't think it is a great risk.
I think the FED is in a great position now
to have a pre COVID, pre Great Recession eight oh

(44:26):
nine type of an economy where you know, the mortgage market,
mortgage rates stay around five or six or six and
a half, unemployment stays around four to four and a half,
consumer hangs in there. And when we get that for
a period of time, as the as the economy restrengthens again.
So that's what I think.

Speaker 3 (44:48):
And you know, I guess three is the market is
priced to PF.

Speaker 1 (44:52):
Let's try to get through all five. We rarely get
through all five of anything, And you know that's.

Speaker 2 (44:55):
Good and bad in my opinion for the market megacap
tech mega cap so largely companies. Ford P's twenty eight
point seven x megacap eight ford P is nineteen, So
I think that is good. I think the historic SMP
five hundred, what is the historic I thought it was
twenty one, but I think I think it's actually seventeen.

(45:16):
So it's a little bit expensive, but you know, it's
expensive in a time where we're more service based economy,
especially in the ten high ten, fifteen twenty years, where
so you know, people are willing to pay a little
bit more for these companies because their revenue growth is
way more than you know, revenue growth would be for
companies in the sixties, seventies and eighties that might have

(45:36):
been more industrial financials and things like that. So people
are willing to pay a little bit more for more
revenue growth. So I think we're right in fair market
territory for the s and P five hundred and you know,
I would say, I guess cautiously that we're could be
a little bit undervalued X large cap tech specifically.

Speaker 1 (45:59):
I think, you know, we'll got to move to the rest.
I do want to get through these five I think
you know it'll be quick. I think there's still a
lot of skepticism about the market. The market climbs of
Walla Werry. Number four. Election uncertainty is creating demand that
is delayed but not destroyed. So economic demand and also
demand for stocks could be put on hold until the election.
When UH investors see how that plays out, then they'll

(46:23):
then they'll go from their random thought number five air
And if you want to do that, or you want
me to do it that I think on the ground,
all time highs are not things that you see in
bear markets.

Speaker 3 (46:33):
That's obvious.

Speaker 1 (46:34):
Well, all time highs you don't. You don't get a
bear market from an all time high. You get pullbacks,
you get corrections, but you rarely get a bear market.
And I think that's that's what we UH. If we
do get a pullback, and we've seen it over the
past year or so, I think investors are buying into
those pullbacks rather than selling them. Yeah, I think that's
you know, kind of what we'll see this time as well.

(46:56):
We still got a minute a half I.

Speaker 2 (46:57):
Think again, you know, if if you were missing out earlier,
it is flannel Fest today from two to five at
Ryan's Wake. It's for toys for tots, Bring a toy,
bring a book, I think, I think for your first drink.

Speaker 3 (47:11):
Yes, I mean it's a great time. I'll see a
lot of clients there.

Speaker 1 (47:14):
Yeah.

Speaker 3 (47:15):
And uh, it's it's our seventh year.

Speaker 1 (47:19):
It's crazy, isn't it It is? It's crazy as time
goes by like that. Seven years ago was twenty seventeen.
Good math, Yeah, solid maths, solid math. Yeah. So so
we so.

Speaker 2 (47:32):
We still have like a minute and twenty seconds left.
Any other random deep thoughts with Jack Handy?

Speaker 1 (47:38):
Yes, what did happen to him?

Speaker 3 (47:40):
He's alive?

Speaker 1 (47:41):
Is he alive? Yeah? Deep thoughts. That was a little
too mushy for me to be honest with you.

Speaker 2 (47:47):
Let's see, Netflix had earnings. Netflix had good, strong, five
point one million more subscribers. It keeps on defying the
odds while all these little, you know, smaller trying to
be Netflix companies are losing money handover fist. Netflix just
continues to power on with subpar quality shows that I e.

Speaker 1 (48:07):
Tulsa. Can I love something on Netflix? No, No, it's
on Paramount.

Speaker 3 (48:11):
I think it's Paramount.

Speaker 2 (48:12):
Taylor Sheridan is Paramount with Yeah, I'm sure it's the
same for sure.

Speaker 1 (48:17):
All right, So maybe we'll see you this afternoon two
to five at Ryan's Wake right at the eastern side
of the Green Island Bridge. If not, thank you for listening.
Give us a call during the week five one, eight, two,
seven ninety four. Check us out on the web at
Faganasset dot com, Like us on Facebook, and thanks for
everything to mapp. Sure to take care, take care of