Beyond the Headlines: What the New Tax Law Means for Your Portfolio

Episode Transcript

Speaker 1 (00:04):
Thirteen ten WIBA and Ask the Experts joined this week
by Tom Plumb with Wisconsin Capital Management. Tom is a
chartered financial analyst. You can learn more about Tom online
wiscap dot com. That's wis cap dot com. Tom. How
you doing this morning?

Speaker 2 (00:21):
Oh, we're doing great, Sean beautiful day in Wisconsin. Right.

Speaker 1 (00:25):
Yeah, it is a darn great day and it's a
beautiful day, and we've got a really important conversation ahead.
We've also got a special guest joining us this morning.
We'll get to get to our special guests in just
a moment, real quick, Tom, a quick review of some
of the things we've covered the past few weeks. It's
really been a whirlwind of just great topics and great conversation.
Let's talk a little bit about what we've covered the

(00:46):
past few weeks for people who may have missed.

Speaker 2 (00:49):
Well, Ra Sean. We've talked about asset allocation, how people
should structure their portfolios, including their cash needs. We've talked
about the purchasing power of protection that you need and
the power of compounding, which we still call the eighth
wonder of the world. And then last week we had

(01:10):
a moment that we talked about the myths of portfolio
construction and how they can prevent people from meeting their
financial goals. You know, stocks, bonds, real estate, insurance products,
all of them have distinct characteristics, but they must address
individual circumstances.

Speaker 1 (01:28):
And for folks that may have missed any of those
previous programs, they can of course listen back on line
over at the website wizcap dot com. It's wiscap dot com,
or of course available to you as well on IR
radio and WIBA dot com. And today the notes say
we're going to be talking economic environment and how a
new taxaw might affect expectations. And we brought along a

(01:49):
special guest this week. You've heard his name mentioned on
the show several times. Really excited to welcome Nathan Plumb
to the program. Nathan, how you doing this week?

Speaker 3 (01:57):
Oh wonderful, Thanks for having me on. I'm happy to
be on the program here with my dad.

Speaker 1 (02:02):
It's really exciting to have you along. Before we get rolling, then,
on this week's conversation, let's learn a little bit about you, Nathan.
What brought you into Wisconsin Capitol Management? What do you
do for fun? Let's talk, Let's get to know you
a little bit Nathan.

Speaker 3 (02:14):
I went to undergrad and then I decided to work
in Asia for a little over three and a half years.
So I spent one year teaching American history out of
a British textbook in northeastern China for a year, and
then I moved to northern Tokyo. Spent two years at
a consulting company there, and then I finished up at

(02:34):
the university there called Waseda University, and then I moved
back into Madison, which is now been a few years back.
Came back to Madison, and then I was trying to
find other work to do, but everyone told me that
why you're not working with your dad. So actually that
started happening, and then I kind of rose through the ranks.
And I'm really happy to be a portfolio manager at

(02:58):
Wisconsin Capitla with my dad.

Speaker 1 (03:00):
It's great to have you along and great to get
to know you. I had a chance a couple of
years ago, I had a friend of mine living in Tokyo,
and that's that is a fun part of the world.
And I for a lot of folks, you know, we
talked to about you know, about financial planning and achieving
dreams and reaching goals. I think for a lot of
people travel and I would hope that folks, and I think, Nathan,
I don't want to speak for y'all at you, but
that is one of those places that if anyone gets

(03:22):
a chance, they should definitely definitely visit.

Speaker 2 (03:24):
For sure, I definitely agree.

Speaker 3 (03:25):
And the yen is cheap right now, So you got
to book that, teckn now perfect well.

Speaker 1 (03:29):
I did not know that I may have to do
that right after the show this morning. We're talking this
week with Tom and Nathan Plumb. They are with Wisconsin
Capital Management here on thirteen ten WIBA. The website whizcap
dot com. That's wiscap dot com. So Nathan, let's kind
of break down and get god of down to businesses
when it comes to working with clients are some of

(03:50):
the big concerns. Actually, let's just go even further. What
is the biggest concern you hear, Nathan from clients, So it.

Speaker 3 (03:55):
Gets a wide arn issues and each kind of person
is a little bit personalized, and the way they candunicates
so what they have to kind of respond to each
individual client and their needs at one time. So they
might come from, you know, from financial questions to just
things out of left field that are bothering them, that
is affecting their financials. So it's always kind of a
unique discovery. So you can't really go with a lot

(04:17):
of preconceived notions in it, So just a lot of
asking questions, love to client, kind of steer where it goes,
and then you can kind of adapt and then seeing
that way the best way you can help them. So
you can't really predetermine how a meeting is going to
go sometimes, so you just got to keep it open.
That's how you keep it personalized, and that's how you
best serve your clients because you just can't cookie cut
everybody and just run through the mill.

Speaker 1 (04:39):
And Nathan, do you ever run into folks feeling like
sometimes there's too much of a good thing, Like, you know,
we look at the stock market where we've gone and
you know, seeing these record highs and you know, and
people going, oh, my goodness, it's been going way too
good for way too long. Like folks almost feeling like
at some point maybe the bottom bottom will fall out,
and getting getting kind of uneasy about some of the
overall US economy stuff.

Speaker 3 (04:57):
Economic accept Yeah, that's absolutely topic that comes up. So
right now, the US economy is so complex. There's always
parts that are going well and there's parts that are
not going well, and so it's really hard to get
overly negative.

Speaker 2 (05:14):
At any one point.

Speaker 3 (05:15):
So even if you see some issues that go, wow,
that part of the economy is doing really really poorly,
I should really concern Maybe I should really just you know,
stuff cash and my mattress or something like that. Usually
if you have that mindset, you're almost you know, almost
ten times out of ten wrong. And so there's always
you always had to think that the American economy is special.

(05:37):
It pivots and zigs and zangs in ways that you
probably wouldn't anticipate. So what one industry is kind of
going down, another industry is coming up. So it's really
hard to be down on the uns economy. It is
so complex, so intricate, there's so many variables and that way,
it's really hard to just see the sky is falling

(05:59):
like enoughs.

Speaker 1 (06:00):
Talking this morning with Nathan Plumb and Tom Plumb. They
come to us from Wisconsin Capital Management right online at
wizcap dot com. It's wiscap dot com. And Tom, before
I ask you a little bit about I know this
new tax bill has got a lot of folks asking
and wondering a bit about it, how that can apply,
how they can benefit what they need to know real quick.
How about you kind of your take on the economy

(06:21):
right now and kind of what we've seen, number wise,
Tom what is kind of breaking out and shaking out there?

Speaker 2 (06:27):
Well, Sean, this has been what they call earning season,
and most companies report their second quarter earnings and also
give you some expectations and what they think they're going
to see for the rest of the year. And with
seventy three percent of the S and P five hundred
already reporting, basically they're up ten percent in earnings year

(06:49):
over year, exceeding a lot of people's expectations, which were
on average down to about two percent before the quarterly
reports started. So we're seeing that, as Nate was saying,
some parts of the economy are not doing that well,
but certainly the communication technology and even the healthcare area

(07:10):
looked like they're going to continue a double digit earnings growth.
And of course, the stock market is a function of
the earnings and the earnings expectations that people have, so
we're actually seeing some real positive numbers and how people
are addressing what they think the economy is going to

(07:33):
look like for the rest of the year.

Speaker 1 (07:34):
As I talked this morning with Tom Plumb and Nate Plumb,
of course they are with Wisconsin Capital Management online whiz
cap dot com at w i scap dot com, and
Tom I mentioned the new tax bill, and I know
that there's a lot of as folks dig in and
folks like you and others dig into this, these these changes,
there's some stuff there that folks really should be aware of,

(07:55):
isn't there.

Speaker 2 (07:56):
Oh yeah, you know, the Tax Foundation they estimate that
the tax bill will add one point two percent to
the long term GDP in the United States, But of course,
you know that's one group's estimates, and there's going to
be some positives and some negatives to that. They're actually
expecting that personal income because of that tax bill is

(08:19):
going to be up two point nine percent this year
and actually five point four percent of the following year.
Other srates course different. But we're looking ahead and we're
seeing that the tax bill has some provision some of
them that are in quote permanent, meaning they're permanent until

(08:40):
Congress and the presidents sign another bill. But some of
those look like they could really be positive for certain
types of investment in the United States.

Speaker 1 (08:51):
Talking this morning with Tom Plump and Nathan Plum with
Wisconsin CAPITL Management onlwiz cap dot com. That's WISCAP dot
com wisap dot com. Great website to learn more. You
can also listen back to this in previous shows podcast
there as well, and so Tom and we kind of
get into some of that. I think one of the
notes point out thousand some page bill. Obviously there's there

(09:14):
are some things there that are could be quite impactful.
What are some of those areas that we may need
to pay extra close attention to.

Speaker 2 (09:24):
Well, there's certainly, as we said, some of those provisions,
which are supposed to be permanent, could really impact people's
planning and investments and business investments. So the number one
thing that they wanted to accomplish and did is they
made the twenty seventeen tax brackets permanent, rather than reverting

(09:45):
to the pre twenty and seventeen higher brackets and higher
rates of taxes for people. The second thing they did
is that I think is pretty significant, as they raised
the stated gift tax exemption to fifteen million dollars next
year and it's going to be index for inflation thereafter.

(10:07):
And they also retained a thing called portability, meaning that
if a husband and wife don't use all of their
fifteen million dollar exclusion, the other one can use it
on the second death. And then the third thing that
I think could be really important is this one hundred

(10:27):
percent bonus depreciation on business capital and research and development investments.

Speaker 1 (10:35):
Oh, I know, there's a bunch of folks sitting in
a car right now. It really perked up on that
last thing. I know. We've got a number of business
owners and business leaders that listen each and every day,
and I want to get into that a little bit
more as we talk this morning with Tom and Nathan
Plumb of Wisconsin Capital Management. The website whiscap dot com.
It's wiscap dot com. Great website to learn more about Tom,

(10:57):
Nate and the whole team at Wisconsin Capital Management. Also
a great place to start that conversation to get to
know them and see if you guys are a great
fit for one another. Again, you can learn more online
wizcap dot com. That's wiscap dot com. We're going to
continue our conversation with Tom and Nathan. We'll talk about
that one hundred percent bonus appreciation, what type of impact
that may have. We will do that and so much more.

(11:17):
Next as Ask the Experts with Wisconsin Capital Management continues
right here on thirteen ten WIBA thirteen ten WI b
A and Ask the Experts talking this morning with Tom
and Nathan Plumb. Of course they come to us from

(11:39):
Wisconsin Capital Management to website wizcap dot com. That's wis
cap dot com. Great place to get to know the team,
learn more about Wisconsin Capital Management again all on their
website whizcap dot com. Talking this week about the new
tax laws and what to expect and again a very
large bill. There's a lot of details in there, some small,
some quite significant, and especially for folks that maybe maybe

(12:03):
business owners, business leaders. And just before the break, Tom
had mentioned, of course that one hundred percent bonus appreciation
on qualified business capital and R and D investment. Nathan,
let's kind of get into that. What does that mean
and let's talk a little bit about the potential impact
that could have four businesses here in the United States.

Speaker 3 (12:23):
Yeah, exactly, just a level sevary one. So usually if
you take accounting one oh one, they have something called
the matching principle and essentially, hopefully your mathematical accounting matches
your useful life whatever asse that you buy. So if
you buy a building, usually depreciate it roughly over forty years.
If you buy a piece of equipment for your factory,

(12:47):
it's usually you can depreciate over five years. So in
the past, you would, for example, by one hundred thousand
dollar piece of equipment each year, you would depreciate straight
lines each year. Over five years, you'd depreciate it over
twenty thousand dollars a year, and then the asset is
fully depreciated, if that makes sense. With this new law,

(13:10):
if you buy one hundred thousand dollars piece of equipment,
you get to deduct one hundred percent of it in
the first year. And that's kind of a lot of jargon,
but why does that make a difference. So that really
frees up the cash flow of the business, so you
can hire more workers, you can buy more product, you
can try to make your your business more profitable. And

(13:35):
so that's one way to do it. And then if
you're got your executive MBA, how are here from youw Wisconsin?
You try to you've do them better than that. So
what you would try to do is you would add
a go to your bank or credit union, you'd ask
for a loan and say that loan amount would be
the enough amount for your depreciation. So roughly, if you
in this case about twenty thousand dollars loan and net

(13:58):
after you did all that, essentially you'd pretty much have
a interestry loan from the irs for one year. So
if you're running your business correctly and not do anything
just abnormal, that is a huge boon for small businesses,
especially if you're under seventy five million dollars in assets.
So that is something she talked about your account and

(14:19):
your personal banker and probably us and if you have
any questions about that.

Speaker 1 (14:24):
And Nathan, you mentioned having that exec MBA degree. You
have a I think I know somebody with one of
those you have. That's that's uh, you you have the
executive NBA, don't you.

Speaker 3 (14:35):
Yeah. I graduated from UW prov Business Badger and yeah,
I really love serving the community and uh yeah, I
still love all my professors and I've still touch with
a lot of my classmates, which I really enjoy.

Speaker 1 (14:46):
It's an amazing school and we've got some great content
this week. As always, as we talk with Nathan Plumb
and Tom Plumb. Of course they are with Wisconsin Capital
Management online whiz cap dot com. That's wiz cap dot
com and Tom has Nathan kind of laid out some
of the uses for this, let's kind of get into
kind of how that can also help businesses manage things

(15:08):
like R and D and those expenses.

Speaker 2 (15:11):
Sure, Sean, you know, research and development is a big
part of any business that wants to grow. And when
the new bill allows you to deduct that either immediately
like before in twenty twenty two you were able to,
or you could amortize it over different time periods. And

(15:33):
why that's important is because sometimes you're expensing money for
what you hope will be future revenues and future profits,
and so you can match them up which makes the
most sense for you. That method is determined by you
talking to your tax advisor and making sure that you're

(15:55):
making the best use of that deduction, which is going
to reduce your taxes. And as Nathan said, when you
can reduce your taxes in any one given year, it's
basically an interest free loan from the irs.

Speaker 1 (16:09):
That's very nice and it's also great to have those
options as well, and Nathan, what about for you know,
when it comes to some of the provisions when it
comes to business interest deductions, and I know that you know,
is when it comes to trying to manage a business.
We were talking earlier about how this tax bill is
kind of used air quotes permanent, but as we know, Congress, Washington,

(16:30):
d C. And they like to change things, and it's
there for now, and they may call it permanent, but
we just never know. Having some flexibility here is important,
especially as we see certain provisions, you know, like for example,
green energy credits things being being eliminated. Having this as
an option has got to be got to be a really,
really great benefit for businesses.

Speaker 3 (16:52):
Yeah, and that was the intent of the rule. Of course,
no rules are perfect or a pantasias. So if you're
in economics, they would say that you're pulling forward demand,
so instead of buying your machine next year, you would
buy it this year. So that's always the kind of
fear when you have these kind of big stimulation plans.

(17:13):
They're like, so are you just pull pointing at demanded
and waiting for the you know, the uh, the level
set or equilibrium coming later. But yeah, for now, it's
a great opportunity. And if you're you know, running your
business in a you know, in a prudent manner, and
you see real growth and and you see real opportunity,

(17:34):
like this really enhances you.

Speaker 1 (17:36):
I want to talk a little bit more and tumble
point in in just a moment about about some of
the tax stuff. But but Nathan, when you when you're
talking with with folks as well on this are I
mean the businesses you work with and the folks you
work with, I've got to guess this is a pretty exciting,
exciting time for them. As you know, obviously there's a
lot to digest, but as as we as we've been
talking this morning, it sounds like like more options it

(17:57):
always seems to be a better situation, whether it's whether
it's for your personal finances or for for trying to
manage a business. Having different different avenues and different tools
uh to benefit in different timelines has got to be
a great benefit for folks you're working with.

Speaker 3 (18:13):
Yeah, it's true. And then there's another act that's kind
of kind of got you know, politically, I guess Permanent
is a secure act and under that one, there's great
things for for employees as well. So if your small businesses,
they really incent advise you to start a retirement plan
for your small business. So if you're working at a

(18:33):
company that's a small business and doesn't have a retirement plan,
there essentially there's under that rule if they set up
a retirement plan, it kind of like it's almost like
almost fully deductible within the first couple of years. So
it's a real advantage they want they want try to
incentivize small businesses to start retirement plans to really help
their employees. And so if you're if your business owner

(18:58):
hasn't you know, realized that, I'm happy to talk to
them for as well. So not only are some of
these things really help business owners, but some people that
really help employees. And then the key thing about being.

Speaker 2 (19:11):
You know, uh.

Speaker 3 (19:13):
An employee is that you just have to really you know,
manage your money well, know where your money is and
uh and how it's working for you and kind of
where your risks are. So a lot of these like
financial products that kind of mask, as my dad said before,
they mask volatility, but not the risk like and yeah,
and that's we're happy to educate people on that. So

(19:36):
we'll just kind of tell you what you have, and
if we're the best fit for you, that's great. If not,
there's there's a lot of people out there, and and
there's a lot of people that they need education, financial
education out.

Speaker 1 (19:47):
There, and and it's really well stated meate because I
know a couple of weeks ago, Tom and I talked
a little bit about, you know, finding that finding that
right relationship and finding that you know, a lot of
this is obviously the expertise, the knowledge that tools. You
know that that is really obviously ultimately the most important.
But having a good relationship when it comes to financial planning,
when it comes to managing money, making sure that that

(20:10):
goals and ideals and risk and other things, tolerance is
those all line up. And I know, I know Tom.
Also one of the things, you know, we talked earlier
a little bit about some of these special enhancements. I
know that for businesses, smaller businesses, there are some exciting
options as well for them, and this aren't there, Tom, Oh.

Speaker 2 (20:31):
There definitely are, sean and in fact, we called the
what they called the qualified small businesses, those businesses with
plus and seventy five million dollars in assets, and of
course that covers a lot of people in our viewing area.
But those enhancements are very special on when you start

(20:53):
to look at liquidating your business or moving on selling
your business, and that's the time when you really need
to have your advisors lined up and coordinated. You want
to talk to your tax advisor, your legal advisor, and
your portfolio manager financial advisor. So again, we're very happy

(21:14):
and excited when we're a part of those teams and
working with qualified professionals to help our clients.

Speaker 1 (21:20):
It's really an exciting day to start that conversation again.
Today is the day to do that. Get to know
the folks at Wisconsin Capital Management, Tom Nathan and the
whole team all on their website whizcap dot com. That's
wiscap dot com. That's wizcap dot com, Tom Nathan. It's
great chatting with both of you, guys. Have a great
day and we'll talk again real soon.

Speaker 2 (21:39):
Thank you.

Speaker 1 (21:39):
Of course, news comes your way next right here on
thirteen ten WIBA