September 23, 2025 • 22 mins
On this September 23rd edition of Ask the Experts with Wisconsin Capital Management, we dive into one of the most influential forces in the economy: interest rates. With the Federal Reserve announcing a quarter-point rate cut last week, we explore what this means for borrowers, savers, investors, and homeowners alike.From the Federal Funds Rate to the Prime Rate, and from short-term Treasuries to 30-year mortgages, we break down how different rates interact and why timing matters.
Tom and Nate also discuss the yield curve, refinancing opportunities, and how rate changes can unlock housing demand and fuel economic growth.Whether you're planning for retirement, managing a business loan, or considering a home purchase, this episode will help you understand how interest rates impact your financial decisions today and in the future.
Learn more at: WISCAP.com
Tom and Nate also discuss the yield curve, refinancing opportunities, and how rate changes can unlock housing demand and fuel economic growth.Whether you're planning for retirement, managing a business loan, or considering a home purchase, this episode will help you understand how interest rates impact your financial decisions today and in the future.
Learn more at: WISCAP.com
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Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Speaker 1 (00:03):
Thirteen ten Wi b A and Ask the Experts, brought
you by Wisconsin Capital Management online whizcap dot com. That's
wiscap dot com. You got a chance yet to check
out the website. It's a great day to do that.
A lot of great information about Wisconsin Capital Management. You
can learn about their history, learn a little bit about
what they can do for you. You can also set
up an appointment again. All those details right online at
(00:25):
whizcap dot com. Join us this morning from Wisconsin Capital Management.
Of course, we've got Tom Tom Plumb, financial planner with
Wisconsin Capital Management. Nathan Plump, Certified Trust Financial Advisor, is
executive MBA.
Speaker 2 (00:37):
Tom.
Speaker 1 (00:37):
How are you doing this week?
Speaker 2 (00:39):
Well, we're doing just great.
Speaker 3 (00:41):
It's a beautiful day in Wisconsin and it's a touch
of autumn every day, but it's a beautiful weather.
Speaker 1 (00:47):
It is a great time of the year, that is
for sure.
Speaker 4 (00:49):
Nathan, how have you been doing fantastic?
Speaker 5 (00:52):
I'm just happy to be working again and joining this
beautiful weather.
Speaker 1 (00:56):
It is a Yeah, it's a great time of year,
that is for sure. And we've got a speaking of
seasonal things, things that are important to things that kind
of change with the months, and that of course, is
interest rates, and we've got a really interesting conversation ahead
about the Federal Reserve Bank and other things. Real quick,
before we get to this week's new topic, let's take
(01:17):
a look back to some of the stuff we've covered
in the past. I mean, we've covered a lot of
ground on this program, haven't we.
Speaker 3 (01:23):
Well, yeah, we have, Sean, you know, we talked about
the interest rates, we talked about present value growth and
stock market, the economy. We've talked about how it applies
to individuals with their planning and how they plan for retirement,
what they do as the approach to retirement and after retirement.
Speaker 2 (01:44):
But today, interest.
Speaker 3 (01:45):
Rate's going to be a good subject because last week,
on today is September twenty third, twenty twenty five, and
last week the Federal Reserve Bank lowered interest rates by
a quarter percent in their appointment and their announcements.
Speaker 1 (02:04):
What is this? And Tom, let's kind of for people
that don't know, this does have as you kind of
alluded to there, it's going to have pretty significant implications
across all aspects of life markets and not just not
just interest rates in general.
Speaker 3 (02:19):
Oh yeah, the interest rates are a big thing that
affects the present value of any project that you have,
the costs of having a house, costs of doing business,
especially small companies which often rely on bank loans or
loans from some entity for their working capital or for
(02:42):
their basically the equipment manufac that they may buy and
things like that.
Speaker 1 (02:48):
And so, Nathan, we will bring you in on this
conversation as well as we talk about talk about the
fat and interest rates. People need to understand interest rates
can be quite different depending on the type of of borrowing,
the person, the borrower, their history. There's a lot of factors.
This is a really really pretty a pretty wide spread
(03:08):
part of the conversation, isn't it.
Speaker 5 (03:11):
That's true? Not all interest rates are the same. Rate
dependent whether you are a borrower or a saver, depending
on your credit rating, attendant of your length of time
that you're to take a loan, and you know, generally
there's things that have different sentiments. So if you're taking
a shorter loan usually taking rest less risk, and if
(03:33):
you're taking a longer loan, you're taking more risk. Then
the other factor is is your credit rating or essentially
your ability what they're they think you're.
Speaker 4 (03:42):
Going to be able to pay it back. You pay
your loan back.
Speaker 5 (03:45):
So for example, the UH just how the short term
treasure rates are just down one percent lower this year
and as opposed to the ten year treasury which is
actually up this year. So again, both the time and
your credit worthiness are big factors and interest rates.
Speaker 1 (04:05):
We'll talk a little bit too about about the Fed
in just a moment as well and where what that
is exactly and how that affects this stuff. And Nathan,
as we talk about to just about interest rates as well,
you mentioned some of the different factors. These are things
too as just as general consumers, we need to wear
think about business as well as Wall Street. They really
(04:26):
do watch what the what the FED says, what they signal,
what they ultimately do. They watch this stuff quite closely,
don't they.
Speaker 4 (04:34):
Nathan, That's true.
Speaker 5 (04:37):
I guess one thing you can remember is that you know,
interest rates are the are the heartbeat of the American economy.
So if you speed it up or you can slow
it down, and then everything else will follow. So speed
it up as in lower rates, and slow it down
as in raise rates, so it sets the pulse to
(04:58):
the entire US economy. Last Wednesday, Chairman Paul the Fed
Reserve Board met and you might have heard that he
lowered the discount rate for twenty five basis points are
serve point two five percent. And then they Who's asked
a ton of questions about what he sees in the
future of the economy, and everyone on Wall Street and
(05:21):
Main Street watches every word very very carefully and with
almost an amazing reverence, and they tried to glean into
what the future the holds.
Speaker 1 (05:33):
Talking this morning with Nathan and Tom Plumb of Wisconsin
Capital Management online the website whizcap dot com. That's wiscap
dot com. A really nice website, really user friendly, a
lot of great information about Wisconsin Capital Management and you
can head on over there again, that's wizcap dot com.
Great opportunity. Also, I've been listening to this program. You'd
(05:54):
be interested not only to learn more, but actually sit
down have a conversation. You can schedule an appointment whiz
app dot com. That's wiscap dot com. And Tom, let's
talk then about the relationship between interest rates and kind
of understanding how this big machine kind of boils down
to day to day practicality, day to day life, and
(06:17):
what exactly is the quote unquote fed. What are we
talking about there.
Speaker 3 (06:22):
So, Sean, we talk about the Federal Reserve Bank, and
they are the bank of the banks basically, and they
set policy.
Speaker 2 (06:32):
As Nate said, that determines.
Speaker 3 (06:34):
Whether or not they want to be a commodative to
economic growth or they want to be restrictive. They get
restrictive when they're concerned about inflation, they get a commodative
when they're concerned about unemployment, and then often they're what
they call neutral where they are in between. So this
(06:55):
what they do is they actually set at a rate
that's called the discount rate, and that's the rate that
the Federal Reserve Bank can lend overnight to different banks,
and from that a lot of other relationships are impacted.
So the banks lend to each other and they call
(07:17):
that the Federal funds rate, and that is keyed off
of what this discount rate is, because that's the indication
of the policy and the costs and alternative that banks
have when they're.
Speaker 2 (07:30):
Borrowing money overnight.
Speaker 3 (07:32):
And then when you look at for most of us,
we recall what they call the prime rate, and that
typically is based off of the Federal funds rate, and
to spread that, the banks determine they're comfortable with in
lending the you and I when they know what their
costs of funds could be from the Federal Reserve Bank.
(07:52):
So a lot of local small businesses, their loans are
often tied to what's the prime rate, and it can
go up or down when you have loans that are
for inventory or working capital things like that. But mentioned
time is also a big factor because when you have
a short term loan, it's usually tied up with short
(08:16):
term assets. But when you start looking at lending money
to a bank, from a bank to a company, they're
going to be borrowing money not only for working capital,
but also for equipment and things, maybe even buildings. Those
are longer term and there's going to be a spread
that's going to be involved there. So you may find
(08:38):
out that banks and interest rates can be affecting each
one to be a little different. We call the difference
between the short term rates and the longer term rates
the yield curve, and that's a term that we mean
where we discuss, for example, short term rates or two
year rates from the y to the twenty year, thirty
(09:03):
year rates. That and even the ten year rate, which
often is the basis for a lot of mortgage fixed
rate mortgages being set.
Speaker 1 (09:13):
You know, Tom one of the I think one of
the things I remember years ago. It kind of I
don't know, it's kind of dawned on me. I always
was under the impression. I think a lot of folks
maybe under this impression that like when the when the
Fed adjust rates, that automatically affects like a one for
one of interest rates. And it's not that simple at like,
(09:36):
like as a consumer, as a borrower, it's not an
all it's not a one to one type thing. There
are as you just point out obviously, with the yield
curve and the terms of of of rates and other factors.
It's a it's a very complicated formula behind the scenes,
isn't it.
Speaker 3 (09:52):
Oh, And it's all based on supply and demand and confidence,
you know, So you have to have a certain confidence
in what you cast. Some money's going to be for
you next day, next week, and also in the future.
So you want, as Nate said, a higher spread if
you're committed to lending money at a fixed rate for
(10:13):
a longer period of time, because more things.
Speaker 2 (10:15):
Can happen over time, so.
Speaker 3 (10:18):
You may end up finding that typically if everything else
was the same, that rates would go up the longer
term that you locked in, So a thirty year mortgage
in most years we call that abnormal yield curve.
Speaker 2 (10:35):
Would have a higher rate than a short term rate
or a variable rate.
Speaker 3 (10:40):
Because of banks then don't have to worry about the
interest rate risk, but they are worried about the credit risk.
And credit can change. As some of the companies that
we've seen and some of the people we've known have
been very very wealthy at different times and seemed like
they were golden credits.
Speaker 2 (11:00):
What time could change that.
Speaker 1 (11:02):
Do businesses have credit scores time? I've never thought about this.
I know as an individual I have a credit score.
Are they is it different or how do you know?
As far as how do they know as far as
credit worthiness of a business or institution?
Speaker 2 (11:14):
How does that do.
Speaker 1 (11:15):
They have like a score rating on that or how
does that go?
Speaker 2 (11:19):
Well?
Speaker 3 (11:19):
They do certainly the banks and the UH the regulatory
agencies all have with scoring for different types of loans
and different types of coverage on those loans. So what
we call that multiple of the coverage ratio? What's their
consistent cash flow versus what their debt expense is and
(11:42):
there's different ways they look at what they call current
show of your short term assets versus your long term assets,
because there's always been cases where companies have had a
lot of assets, but they didn't have liquidity and they
didn't weren't able to meet their short term obligations. That's
one way that some companies can really get into trouble.
Speaker 1 (12:05):
Talking this morning with chartered financial analyst Tom Plumb and
Nathan Plump, Certified Trust Financial Advisor Executive MBA with Wisconsin
Capital Management. You can learn more about them online great website,
whizcap dot com. That's wis cap dot com all one word,
wis cap dot com. From the website, you can learn
more about Tom and Nathan, the whole team at Wisconsin
(12:26):
Capital Management. You can learn a little bit about how
they operate, what they can do for you, and of
course we talked this morning about the FED and other
great information. Don't forget we've done a lot of great shows,
a lot of fantastic podcasts out there. Of course, you
can access those as well from wizcap dot com. We're
going to con do our conversation with Tom and Nathan.
We'll talk about mortgage rates, which is when it comes
(12:47):
to interest rates. Probably for most individuals, one of those
biggest questions they ever have is about mortgage rates. We'll
get some details from Nathan on this that and we'll
talk with Tom too a little bit more about Wisconsin
Capital Management. We'll do that next has asked the experts
with Wisconsin Capital Management continues right here on thirteen ten
Wi b A. Thirteen ten Wi b A and ask
(13:13):
the experts with Wisconsin Capital Management. The website whizcap dot com.
That's Wi s cap dot com. Fantastic website to learn
more about Wisconsin Capital Management. Again, that's whiz cap dot com.
Talking this morning with Tom and Nathan Plumb of Wisconsin
Capital Management. I can talk a little bit more about
the federal going to talk a little bit more about
interest rates specifically. We're going to get into mortgages with
(13:35):
Nathan in just a moment. But first Tom, real quick,
let's talk about Wisconsin Capital Management. It's a fascinating story
about how we got to where we are today and
the work that you've done to create and keep Wisconsin
Capital Management out there for folks. It's a really amazing backstory.
Let's talk a little bit about how this all got started.
(13:57):
And what you guys are doing for folks today.
Speaker 3 (14:00):
So Wiscons's Capital Management Foundation was basically a group of
us where at trust company locally in Madison, Wisconsin, running
the trust investments including stock funds and bond funds. And
one of my earliest things to do was to manage
the bond funds where people who wanted to be invested
(14:24):
in fixed income would have the bank provide investment services
to foundations, retirement accounts, and individuals. So I learned a
lot about the different things that could affect the.
Speaker 2 (14:38):
Risk and return in the fixed income area.
Speaker 3 (14:41):
I recall once looking back, the Wall Street Journal used
to do in the first business day of every year
publish a forecast of the leading economists about what they
thought was going to happen to interest rates that year.
And what we found is said, I think the first
(15:02):
twenty years that they did that eighteen years, not only
was the consensus way off and wrong, but they were
at least seventeen of those years even wrong about the
direction of interest rates through the year. So it gave
us a very healthy cynicism when we listened to economists
(15:25):
and forecasters about the direction of interest rates. The one
thing we did find is an old adage has still
remained true, which is called don't fight the Fed. So
when they've actually come out like they did last week
and indicate that their perception is that they're going to
(15:46):
be in a lowering interest rate environment for the foreseeable future,
take them as a fact until they're proven wrong. Assume
that they're going to be trying to push down in
first rate and trying to stimulate the economy for the
foreseeable future.
Speaker 1 (16:05):
Don't fight the Fed words five fantastic stuff this morning
as we talk with chartered financial analyst Tom Plumb and
Nathan Plumbs are to fight Trust Financial Advisor Executive MBA
of course with Wisconsin Capital Management the website whizcap dot com.
That's wiscap dot com. Talking with Tom and Nathan this
week about the FED and the Federal Reserve Bank and
(16:27):
what it does, what affect change as far as their
rate has on the overall economy. And I think Nathan,
for a lot of us on the personal side, mortgages
come into play here. Let's talk about about mortgage rates
and kind of understanding how they operate and really what
that means when it comes to the Federal Reserve Bank
and kind of on the both the macro and the
(16:49):
micro level here.
Speaker 4 (16:51):
Yeah, that's great.
Speaker 5 (16:52):
Let's cater to the people that are looking for houses
right now. So the thirty year fixed rate at home
mortgages is if you want to kind of track it,
the thing you should be tracking that be parallel to
it is called the ten year treasury rate. So as
the Fed does much more the short term side of
(17:12):
the cycle, mortgages last longer, right, and so the proxy
that you should use is a little bit longer than that.
Speaker 4 (17:20):
The one that you should probably use is.
Speaker 5 (17:21):
A ten year treasure rate, not the thirty year, not
the twenty year, but the ten years probably your best
bet that it's the most traded. So if you're looking
at your buying a house, you have good news for you.
The interest rates are actually down about one percent during
the year, so that was a key in past to you.
Speaker 4 (17:40):
That's some good news for you.
Speaker 5 (17:42):
And then you know the housing rates are expected to
come down a little bit more. So if you have
a variable rate, you should be happy with that. And yeah,
as some interest rates go down, usually that's when people
get started fighting over houses in the demand and you
start getting those binning wars. We haven't seen that in
a while, so this might be a time to buy.
(18:04):
So even though interest rates are a little bit higher
than they were a few years.
Speaker 1 (18:08):
Ago, just some of this too is as we talked
Nathan about about the FED and uh, indicating kind of
lowering rates. It almost some of this stuff feels like
like a like an old steam engine, like an old
train where they're like they're shoveling coal and like it's
not immediate, but as the coal gets in and the
and the boiler heats up, those pistons start going, the
train starts building speed and getting going. Is that some
(18:30):
of what the Fed's trying to do is kind of
manage that speed with like shoveling the coal in or
maybe holding off and we may not see like immediate
uh you know, we're not going to see immediate acceleration,
maybe not see immediate deceleration, but really trying to manage
almost with like a like a like a ghost hand
kind of stuff from from from Afar? Is that is
(18:50):
that kind of a way to think of some of
this stuff as well?
Speaker 5 (18:54):
Yeah, you're definitely true. So you're going to start an
immedia effect what the FED is doing. So we're when
you're hearing FED this FED speak or you know, Congress
put in a new plan or something like that for
the economy, it's going to take probably at least nine
months before you start to see anything that's going to happen. So,
as you said, loading the coal into the steam engine,
(19:16):
it takes a while to get red of that train up.
So yeah, so anything that someone does now in the economy,
at the earliest we'll see it.
Speaker 4 (19:25):
Probably nine months from now.
Speaker 5 (19:26):
So if you're a politician and want to get reelected,
it's good to try to do your your economic boosting.
Speaker 4 (19:33):
Plan or at least a year before you get re elected.
Speaker 1 (19:36):
Good advice, good guidance, And I know if anybody's looking
to run for office, no guy who might be able
to help you out. Real quick to Nathan before we
before we wrap up this week with those with those
lower interest rates and with the FED, the FED is
kind of indicating there that has an effect on things
like like the employment environment and in other areas as well.
(19:58):
Let's talk about get into that when it comes to
things like mortgages, refinancing options, and and kind of where
we are overall in that area and that in that
walk of life.
Speaker 5 (20:10):
Yeah, So when you have a mortgage, the rule of
thumb that you should kind of look for is that
at the current rate is a half percent lower than
what you're paying now, you should really go to your
either local credit union your local bank and see if
you can get refinanced because usually there's going to be
some fees involved involved, and you know that's usually kind
(20:32):
of proxy issues. So if your interest rates current interest
rates are are are lower our half percent lower than
you're paying now, yeah, you should. You should be proactive
and do it because the banker credit union is not
going to call you to let you know.
Speaker 4 (20:46):
Yeah.
Speaker 1 (20:47):
And with this too, Nathan, I was going to ask
and Tom, I'm gonna ask you the same question. Uh,
with as you guys are helping folks at Wisconsin Capital Management, obviously,
I think a lot of folks think of building nest
eggs towards retirement and of course, once you're in retirement,
making sure you preserve that as much as possible and
still being able to live the life as you like.
(21:07):
For a lot of folks, you think of things like
mortgages and other things. These are pretty these are pretty
big life decisions. And Tom, that's a really big part
of kind of the overall financial picture, isn't it.
Speaker 3 (21:19):
Well, when you look at your financial position, you do
want to make sure that you're anticipating what's logical and
how it fits.
Speaker 2 (21:28):
In with your own lifestyle.
Speaker 3 (21:30):
So when we talk about interest rates, we want to
make sure that those rates will be enough to help
us offset some inflation. That's typically why we end up
having some stocks or some equities in investments, because those
are a better hedge against inflation. But as you work
through all of your different financial issues, all the different considerations,
(21:54):
it's really good to work with someone and we hope
that Wiscon's Capital Management fits into that who could actually
talk to you a little bit about the environment we're
in and the environment we expect to see and how
it might affect you in the future.
Speaker 1 (22:11):
Great stuff this week, as always, Nathan, Tom, great talking
with both of you guys. Have a fantastic day, and
I hope folks got a lot of great information. I
hope folks that on over to Wisconsin wizcap dot com
at wiscap dot com. Tom, thank you so much for
joining us this morning.
Speaker 2 (22:26):
All right, Thomas, great to talk to you. Sean, Thank
you very much.
Speaker 1 (22:30):
Nathan It's always great to talk with you as well.
You enjoy this beautiful day.
Speaker 5 (22:33):
All right, have a great afternoon everyone, And of.
Speaker 1 (22:35):
Course Tom and Nate come to us from Wisconsin Capital
Management again. That website whizcap dot com, that's wi scap
dot com News comes your way next right here on
thirteen ten wib A
Thirteen ten Wi b A and Ask the Experts, brought
you by Wisconsin Capital Management online whizcap dot com. That's
wiscap dot com. You got a chance yet to check
out the website. It's a great day to do that.
A lot of great information about Wisconsin Capital Management. You
can learn about their history, learn a little bit about
what they can do for you. You can also set
up an appointment again. All those details right online at
(00:25):
whizcap dot com. Join us this morning from Wisconsin Capital Management.
Of course, we've got Tom Tom Plumb, financial planner with
Wisconsin Capital Management. Nathan Plump, Certified Trust Financial Advisor, is
executive MBA.
Speaker 2 (00:37):
Tom.
Speaker 1 (00:37):
How are you doing this week?
Speaker 2 (00:39):
Well, we're doing just great.
Speaker 3 (00:41):
It's a beautiful day in Wisconsin and it's a touch
of autumn every day, but it's a beautiful weather.
Speaker 1 (00:47):
It is a great time of the year, that is
for sure.
Speaker 4 (00:49):
Nathan, how have you been doing fantastic?
Speaker 5 (00:52):
I'm just happy to be working again and joining this
beautiful weather.
Speaker 1 (00:56):
It is a Yeah, it's a great time of year,
that is for sure. And we've got a speaking of
seasonal things, things that are important to things that kind
of change with the months, and that of course, is
interest rates, and we've got a really interesting conversation ahead
about the Federal Reserve Bank and other things. Real quick,
before we get to this week's new topic, let's take
(01:17):
a look back to some of the stuff we've covered
in the past. I mean, we've covered a lot of
ground on this program, haven't we.
Speaker 3 (01:23):
Well, yeah, we have, Sean, you know, we talked about
the interest rates, we talked about present value growth and
stock market, the economy. We've talked about how it applies
to individuals with their planning and how they plan for retirement,
what they do as the approach to retirement and after retirement.
Speaker 2 (01:44):
But today, interest.
Speaker 3 (01:45):
Rate's going to be a good subject because last week,
on today is September twenty third, twenty twenty five, and
last week the Federal Reserve Bank lowered interest rates by
a quarter percent in their appointment and their announcements.
Speaker 1 (02:04):
What is this? And Tom, let's kind of for people
that don't know, this does have as you kind of
alluded to there, it's going to have pretty significant implications
across all aspects of life markets and not just not
just interest rates in general.
Speaker 3 (02:19):
Oh yeah, the interest rates are a big thing that
affects the present value of any project that you have,
the costs of having a house, costs of doing business,
especially small companies which often rely on bank loans or
loans from some entity for their working capital or for
(02:42):
their basically the equipment manufac that they may buy and
things like that.
Speaker 1 (02:48):
And so, Nathan, we will bring you in on this
conversation as well as we talk about talk about the
fat and interest rates. People need to understand interest rates
can be quite different depending on the type of of borrowing,
the person, the borrower, their history. There's a lot of factors.
This is a really really pretty a pretty wide spread
(03:08):
part of the conversation, isn't it.
Speaker 5 (03:11):
That's true? Not all interest rates are the same. Rate
dependent whether you are a borrower or a saver, depending
on your credit rating, attendant of your length of time
that you're to take a loan, and you know, generally
there's things that have different sentiments. So if you're taking
a shorter loan usually taking rest less risk, and if
(03:33):
you're taking a longer loan, you're taking more risk. Then
the other factor is is your credit rating or essentially
your ability what they're they think you're.
Speaker 4 (03:42):
Going to be able to pay it back. You pay
your loan back.
Speaker 5 (03:45):
So for example, the UH just how the short term
treasure rates are just down one percent lower this year
and as opposed to the ten year treasury which is
actually up this year. So again, both the time and
your credit worthiness are big factors and interest rates.
Speaker 1 (04:05):
We'll talk a little bit too about about the Fed
in just a moment as well and where what that
is exactly and how that affects this stuff. And Nathan,
as we talk about to just about interest rates as well,
you mentioned some of the different factors. These are things
too as just as general consumers, we need to wear
think about business as well as Wall Street. They really
(04:26):
do watch what the what the FED says, what they signal,
what they ultimately do. They watch this stuff quite closely,
don't they.
Speaker 4 (04:34):
Nathan, That's true.
Speaker 5 (04:37):
I guess one thing you can remember is that you know,
interest rates are the are the heartbeat of the American economy.
So if you speed it up or you can slow
it down, and then everything else will follow. So speed
it up as in lower rates, and slow it down
as in raise rates, so it sets the pulse to
(04:58):
the entire US economy. Last Wednesday, Chairman Paul the Fed
Reserve Board met and you might have heard that he
lowered the discount rate for twenty five basis points are
serve point two five percent. And then they Who's asked
a ton of questions about what he sees in the
future of the economy, and everyone on Wall Street and
(05:21):
Main Street watches every word very very carefully and with
almost an amazing reverence, and they tried to glean into
what the future the holds.
Speaker 1 (05:33):
Talking this morning with Nathan and Tom Plumb of Wisconsin
Capital Management online the website whizcap dot com. That's wiscap
dot com. A really nice website, really user friendly, a
lot of great information about Wisconsin Capital Management and you
can head on over there again, that's wizcap dot com.
Great opportunity. Also, I've been listening to this program. You'd
(05:54):
be interested not only to learn more, but actually sit
down have a conversation. You can schedule an appointment whiz
app dot com. That's wiscap dot com. And Tom, let's
talk then about the relationship between interest rates and kind
of understanding how this big machine kind of boils down
to day to day practicality, day to day life, and
(06:17):
what exactly is the quote unquote fed. What are we
talking about there.
Speaker 3 (06:22):
So, Sean, we talk about the Federal Reserve Bank, and
they are the bank of the banks basically, and they
set policy.
Speaker 2 (06:32):
As Nate said, that determines.
Speaker 3 (06:34):
Whether or not they want to be a commodative to
economic growth or they want to be restrictive. They get
restrictive when they're concerned about inflation, they get a commodative
when they're concerned about unemployment, and then often they're what
they call neutral where they are in between. So this
(06:55):
what they do is they actually set at a rate
that's called the discount rate, and that's the rate that
the Federal Reserve Bank can lend overnight to different banks,
and from that a lot of other relationships are impacted.
So the banks lend to each other and they call
(07:17):
that the Federal funds rate, and that is keyed off
of what this discount rate is, because that's the indication
of the policy and the costs and alternative that banks
have when they're.
Speaker 2 (07:30):
Borrowing money overnight.
Speaker 3 (07:32):
And then when you look at for most of us,
we recall what they call the prime rate, and that
typically is based off of the Federal funds rate, and
to spread that, the banks determine they're comfortable with in
lending the you and I when they know what their
costs of funds could be from the Federal Reserve Bank.
(07:52):
So a lot of local small businesses, their loans are
often tied to what's the prime rate, and it can
go up or down when you have loans that are
for inventory or working capital things like that. But mentioned
time is also a big factor because when you have
a short term loan, it's usually tied up with short
(08:16):
term assets. But when you start looking at lending money
to a bank, from a bank to a company, they're
going to be borrowing money not only for working capital,
but also for equipment and things, maybe even buildings. Those
are longer term and there's going to be a spread
that's going to be involved there. So you may find
(08:38):
out that banks and interest rates can be affecting each
one to be a little different. We call the difference
between the short term rates and the longer term rates
the yield curve, and that's a term that we mean
where we discuss, for example, short term rates or two
year rates from the y to the twenty year, thirty
(09:03):
year rates. That and even the ten year rate, which
often is the basis for a lot of mortgage fixed
rate mortgages being set.
Speaker 1 (09:13):
You know, Tom one of the I think one of
the things I remember years ago. It kind of I
don't know, it's kind of dawned on me. I always
was under the impression. I think a lot of folks
maybe under this impression that like when the when the
Fed adjust rates, that automatically affects like a one for
one of interest rates. And it's not that simple at like,
(09:36):
like as a consumer, as a borrower, it's not an
all it's not a one to one type thing. There
are as you just point out obviously, with the yield
curve and the terms of of of rates and other factors.
It's a it's a very complicated formula behind the scenes,
isn't it.
Speaker 3 (09:52):
Oh, And it's all based on supply and demand and confidence,
you know, So you have to have a certain confidence
in what you cast. Some money's going to be for
you next day, next week, and also in the future.
So you want, as Nate said, a higher spread if
you're committed to lending money at a fixed rate for
(10:13):
a longer period of time, because more things.
Speaker 2 (10:15):
Can happen over time, so.
Speaker 3 (10:18):
You may end up finding that typically if everything else
was the same, that rates would go up the longer
term that you locked in, So a thirty year mortgage
in most years we call that abnormal yield curve.
Speaker 2 (10:35):
Would have a higher rate than a short term rate
or a variable rate.
Speaker 3 (10:40):
Because of banks then don't have to worry about the
interest rate risk, but they are worried about the credit risk.
And credit can change. As some of the companies that
we've seen and some of the people we've known have
been very very wealthy at different times and seemed like
they were golden credits.
Speaker 2 (11:00):
What time could change that.
Speaker 1 (11:02):
Do businesses have credit scores time? I've never thought about this.
I know as an individual I have a credit score.
Are they is it different or how do you know?
As far as how do they know as far as
credit worthiness of a business or institution?
Speaker 2 (11:14):
How does that do.
Speaker 1 (11:15):
They have like a score rating on that or how
does that go?
Speaker 2 (11:19):
Well?
Speaker 3 (11:19):
They do certainly the banks and the UH the regulatory
agencies all have with scoring for different types of loans
and different types of coverage on those loans. So what
we call that multiple of the coverage ratio? What's their
consistent cash flow versus what their debt expense is and
(11:42):
there's different ways they look at what they call current
show of your short term assets versus your long term assets,
because there's always been cases where companies have had a
lot of assets, but they didn't have liquidity and they
didn't weren't able to meet their short term obligations. That's
one way that some companies can really get into trouble.
Speaker 1 (12:05):
Talking this morning with chartered financial analyst Tom Plumb and
Nathan Plump, Certified Trust Financial Advisor Executive MBA with Wisconsin
Capital Management. You can learn more about them online great website,
whizcap dot com. That's wis cap dot com all one word,
wis cap dot com. From the website, you can learn
more about Tom and Nathan, the whole team at Wisconsin
(12:26):
Capital Management. You can learn a little bit about how
they operate, what they can do for you, and of
course we talked this morning about the FED and other
great information. Don't forget we've done a lot of great shows,
a lot of fantastic podcasts out there. Of course, you
can access those as well from wizcap dot com. We're
going to con do our conversation with Tom and Nathan.
We'll talk about mortgage rates, which is when it comes
(12:47):
to interest rates. Probably for most individuals, one of those
biggest questions they ever have is about mortgage rates. We'll
get some details from Nathan on this that and we'll
talk with Tom too a little bit more about Wisconsin
Capital Management. We'll do that next has asked the experts
with Wisconsin Capital Management continues right here on thirteen ten
Wi b A. Thirteen ten Wi b A and ask
(13:13):
the experts with Wisconsin Capital Management. The website whizcap dot com.
That's Wi s cap dot com. Fantastic website to learn
more about Wisconsin Capital Management. Again, that's whiz cap dot com.
Talking this morning with Tom and Nathan Plumb of Wisconsin
Capital Management. I can talk a little bit more about
the federal going to talk a little bit more about
interest rates specifically. We're going to get into mortgages with
(13:35):
Nathan in just a moment. But first Tom, real quick,
let's talk about Wisconsin Capital Management. It's a fascinating story
about how we got to where we are today and
the work that you've done to create and keep Wisconsin
Capital Management out there for folks. It's a really amazing backstory.
Let's talk a little bit about how this all got started.
(13:57):
And what you guys are doing for folks today.
Speaker 3 (14:00):
So Wiscons's Capital Management Foundation was basically a group of
us where at trust company locally in Madison, Wisconsin, running
the trust investments including stock funds and bond funds. And
one of my earliest things to do was to manage
the bond funds where people who wanted to be invested
(14:24):
in fixed income would have the bank provide investment services
to foundations, retirement accounts, and individuals. So I learned a
lot about the different things that could affect the.
Speaker 2 (14:38):
Risk and return in the fixed income area.
Speaker 3 (14:41):
I recall once looking back, the Wall Street Journal used
to do in the first business day of every year
publish a forecast of the leading economists about what they
thought was going to happen to interest rates that year.
And what we found is said, I think the first
(15:02):
twenty years that they did that eighteen years, not only
was the consensus way off and wrong, but they were
at least seventeen of those years even wrong about the
direction of interest rates through the year. So it gave
us a very healthy cynicism when we listened to economists
(15:25):
and forecasters about the direction of interest rates. The one
thing we did find is an old adage has still
remained true, which is called don't fight the Fed. So
when they've actually come out like they did last week
and indicate that their perception is that they're going to
(15:46):
be in a lowering interest rate environment for the foreseeable future,
take them as a fact until they're proven wrong. Assume
that they're going to be trying to push down in
first rate and trying to stimulate the economy for the
foreseeable future.
Speaker 1 (16:05):
Don't fight the Fed words five fantastic stuff this morning
as we talk with chartered financial analyst Tom Plumb and
Nathan Plumbs are to fight Trust Financial Advisor Executive MBA
of course with Wisconsin Capital Management the website whizcap dot com.
That's wiscap dot com. Talking with Tom and Nathan this
week about the FED and the Federal Reserve Bank and
(16:27):
what it does, what affect change as far as their
rate has on the overall economy. And I think Nathan,
for a lot of us on the personal side, mortgages
come into play here. Let's talk about about mortgage rates
and kind of understanding how they operate and really what
that means when it comes to the Federal Reserve Bank
and kind of on the both the macro and the
(16:49):
micro level here.
Speaker 4 (16:51):
Yeah, that's great.
Speaker 5 (16:52):
Let's cater to the people that are looking for houses
right now. So the thirty year fixed rate at home
mortgages is if you want to kind of track it,
the thing you should be tracking that be parallel to
it is called the ten year treasury rate. So as
the Fed does much more the short term side of
(17:12):
the cycle, mortgages last longer, right, and so the proxy
that you should use is a little bit longer than that.
Speaker 4 (17:20):
The one that you should probably use is.
Speaker 5 (17:21):
A ten year treasure rate, not the thirty year, not
the twenty year, but the ten years probably your best
bet that it's the most traded. So if you're looking
at your buying a house, you have good news for you.
The interest rates are actually down about one percent during
the year, so that was a key in past to you.
Speaker 4 (17:40):
That's some good news for you.
Speaker 5 (17:42):
And then you know the housing rates are expected to
come down a little bit more. So if you have
a variable rate, you should be happy with that. And yeah,
as some interest rates go down, usually that's when people
get started fighting over houses in the demand and you
start getting those binning wars. We haven't seen that in
a while, so this might be a time to buy.
(18:04):
So even though interest rates are a little bit higher
than they were a few years.
Speaker 1 (18:08):
Ago, just some of this too is as we talked
Nathan about about the FED and uh, indicating kind of
lowering rates. It almost some of this stuff feels like
like a like an old steam engine, like an old
train where they're like they're shoveling coal and like it's
not immediate, but as the coal gets in and the
and the boiler heats up, those pistons start going, the
train starts building speed and getting going. Is that some
(18:30):
of what the Fed's trying to do is kind of
manage that speed with like shoveling the coal in or
maybe holding off and we may not see like immediate
uh you know, we're not going to see immediate acceleration,
maybe not see immediate deceleration, but really trying to manage
almost with like a like a like a ghost hand
kind of stuff from from from Afar? Is that is
(18:50):
that kind of a way to think of some of
this stuff as well?
Speaker 5 (18:54):
Yeah, you're definitely true. So you're going to start an
immedia effect what the FED is doing. So we're when
you're hearing FED this FED speak or you know, Congress
put in a new plan or something like that for
the economy, it's going to take probably at least nine
months before you start to see anything that's going to happen. So,
as you said, loading the coal into the steam engine,
(19:16):
it takes a while to get red of that train up.
So yeah, so anything that someone does now in the economy,
at the earliest we'll see it.
Speaker 4 (19:25):
Probably nine months from now.
Speaker 5 (19:26):
So if you're a politician and want to get reelected,
it's good to try to do your your economic boosting.
Speaker 4 (19:33):
Plan or at least a year before you get re elected.
Speaker 1 (19:36):
Good advice, good guidance, And I know if anybody's looking
to run for office, no guy who might be able
to help you out. Real quick to Nathan before we
before we wrap up this week with those with those
lower interest rates and with the FED, the FED is
kind of indicating there that has an effect on things
like like the employment environment and in other areas as well.
(19:58):
Let's talk about get into that when it comes to
things like mortgages, refinancing options, and and kind of where
we are overall in that area and that in that
walk of life.
Speaker 5 (20:10):
Yeah, So when you have a mortgage, the rule of
thumb that you should kind of look for is that
at the current rate is a half percent lower than
what you're paying now, you should really go to your
either local credit union your local bank and see if
you can get refinanced because usually there's going to be
some fees involved involved, and you know that's usually kind
(20:32):
of proxy issues. So if your interest rates current interest
rates are are are lower our half percent lower than
you're paying now, yeah, you should. You should be proactive
and do it because the banker credit union is not
going to call you to let you know.
Speaker 4 (20:46):
Yeah.
Speaker 1 (20:47):
And with this too, Nathan, I was going to ask
and Tom, I'm gonna ask you the same question. Uh,
with as you guys are helping folks at Wisconsin Capital Management, obviously,
I think a lot of folks think of building nest
eggs towards retirement and of course, once you're in retirement,
making sure you preserve that as much as possible and
still being able to live the life as you like.
(21:07):
For a lot of folks, you think of things like
mortgages and other things. These are pretty these are pretty
big life decisions. And Tom, that's a really big part
of kind of the overall financial picture, isn't it.
Speaker 3 (21:19):
Well, when you look at your financial position, you do
want to make sure that you're anticipating what's logical and
how it fits.
Speaker 2 (21:28):
In with your own lifestyle.
Speaker 3 (21:30):
So when we talk about interest rates, we want to
make sure that those rates will be enough to help
us offset some inflation. That's typically why we end up
having some stocks or some equities in investments, because those
are a better hedge against inflation. But as you work
through all of your different financial issues, all the different considerations,
(21:54):
it's really good to work with someone and we hope
that Wiscon's Capital Management fits into that who could actually
talk to you a little bit about the environment we're
in and the environment we expect to see and how
it might affect you in the future.
Speaker 1 (22:11):
Great stuff this week, as always, Nathan, Tom, great talking
with both of you guys. Have a fantastic day, and
I hope folks got a lot of great information. I
hope folks that on over to Wisconsin wizcap dot com
at wiscap dot com. Tom, thank you so much for
joining us this morning.
Speaker 2 (22:26):
All right, Thomas, great to talk to you. Sean, Thank
you very much.
Speaker 1 (22:30):
Nathan It's always great to talk with you as well.
You enjoy this beautiful day.
Speaker 5 (22:33):
All right, have a great afternoon everyone, And of.
Speaker 1 (22:35):
Course Tom and Nate come to us from Wisconsin Capital
Management again. That website whizcap dot com, that's wi scap
dot com News comes your way next right here on
thirteen ten wib A
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