Episode Transcript
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Speaker 1 (00:00):
I gotta get Israel to calm down. Now the latest
news We're on the verge, a real piece in the Middle.
Speaker 2 (00:06):
East, and your latest to Vinions.
Speaker 3 (00:07):
I trust what President Trump is doing.
Speaker 2 (00:09):
Fifty five the talk station.
Speaker 3 (00:14):
Potato five ifif you five car CD talk station. It
being Monday, it's that time of week. Get to hear
Where'm from all Worth Financials, Brian James, financial planner. He
is talking about money matters. It is money Monday time.
Brian James, Welcome back to the Morning show. Great to
hear from you, my friend.
Speaker 1 (00:29):
Absolutely good to hear your voice too. It's a rainy
money Monday. So let's sit and tide and talk about
numbers and boring.
Speaker 3 (00:34):
Yeah, inflation, let's talk inflation. Let's show whether or not
it's gonna impact the Fed's decision to cut interest rates
or not, as the case may be. But the background
of all this is the uh, the Trump trade wars,
the the tariffs he's been levying or then taking off,
as the case may be. It seems to be like
a constantly moving target, you know, announces tariffs one day
and then he says, well, I'm gonna pause him, give
(00:55):
us time to negotiate or talk and you kind of
a you never really quite have a grip of which
directions going to go. But thus far, I think the
general consensus, at least from what I've read no economist
am I, is that thus far the tariffs really haven't
impacted you and me on a day to day basis.
Speaker 2 (01:12):
The way everyone was.
Speaker 3 (01:13):
So frightened that it would, oh my god, the prices
are going to go through the roof. Well that's not
yet necessarily been the case, has it. Yeah, things that
make Jerown Powell go hmmm. So we've seen this.
Speaker 1 (01:25):
We're now starting to see numbers coming out that were
far enough past the tariff announcements and the actual presence
of those tariffs. Remember, the announcement of the tariff and
the actual tariff are two very different things, right, as
we've learned. But June's CPI is forecasted to rise about
a third of a percent month over month for both
headline and core numbers. Remember those are the there's two
different CPI figures that we all like to look at.
(01:46):
This is the first real tangible impact we've seen from
this new round of Trump era tariffs in getting core
inflation near three percent annually. So it's kind of moving
away from the target. The FED wants to be in
the two percent range. That's what really makes Jerome Powell
happy in the morning. But we're not there. And well,
this to your point, this is not terrible. This is
not a massive spike as some had prognosticated over the
(02:09):
past few months. But at the same time, up is
not down, and we're higher than the Federal Reserve once.
So at the moment, Jerome Powell has a bit of
a dilemma in terms of which which battle does he fight?
Is he gonna fight inflation because this is also coming
alongside a slightly weakening labor market, so things do seem
to be cooling off.
Speaker 2 (02:27):
This is a tough one.
Speaker 1 (02:28):
I'm kind of glad that I don't have I don't
have his job right now, because he's really got two
forces pulling in the opposite direction on him.
Speaker 3 (02:34):
Well, I mean, are we entering like a nineteen seventies
kind of situation with stagflation?
Speaker 2 (02:39):
No, I don't.
Speaker 1 (02:40):
I don't think we're there yet. You know, my crystal
ball is as foggy as anybody else's. But I don't
think this is this yet has all the same impacts
that full stagflation did. And the reason that we one
of the reasons I believe personally, is because there are
so many catalysts Brian of ways that we make money
now compared to the seventies, And I'm just thinking of
(03:00):
things like, you know, the seventies, we didn't have a
whole lot of innovation compared to what we have now.
That's a good think of the last twenty years. We
had the Internet come up, and we've had AI, We've
had a real estate spike, we had COVID that drove,
you know, the work from home technology and all this stuff.
Everything is a catalyst that somebody makes money off of.
So that stuff, I think currently knocking on wood furiously
(03:20):
is offsetting the downsides of what we're going through.
Speaker 3 (03:23):
That's interesting. I never really looked at it that way.
A lot of job opportunities that just didn't exist, and
we've created a whole new economy since the nineteen seventies,
which was I guess more rooted in a traditional I
guess more manufacturing type economy, and thus the problems we
faced in the seventies.
Speaker 1 (03:39):
Yeah, that's right, And there was just a different environment
in terms of how we recovered from things so we
had spikes in oil prices, and of course that was
a lot of that too, was driven by the President.
Nixon wanted to drive interest rates down because he had
an election coming up and he wanted happy people putting
their votes into their ballot boxes, and so he pushed
(04:00):
hard for low interest rates, and that spiked a lot
of demand, which resulted in Paul Volker coming to the
rescue with his Superman cape in the late seventies early eighties,
forcing us into a pretty significant recession that then settled
back down into this two to three percent range that
we over the past forty years have determined as kind
of the right happy place to be, because over the
last forty years it hasn't been that crazy economically speaking
(04:22):
when you compare it to the nineteen seventies. So we've
kind of concluded that, okay, that must be the right
place to be balanced, but it takes some sacrifices to get.
Speaker 2 (04:30):
There, all right.
Speaker 3 (04:31):
So we have this point three percent predicted figure for
the consumer price that's supposed to come out today. Core
rate that strips out food and energy also predicted to
B point three, which makes it higher than the fetid
hope because that would push it past the two percent
goal and closer to three percent if it remain on
this trajectory.
Speaker 2 (04:50):
If I got that right, that's correct, if you're on
the right path.
Speaker 3 (04:54):
All right now, to lower interest rates be to add
fuel to the fire of the inflationary numbers leads. That's
what they always say.
Speaker 1 (05:06):
Correct, that's correct, exactly right, and that's what Trump wants.
Trump has been talking about rates aren't low enough. He
said that all the way through, and I honestly, I
think I'd wear a tinfoil hat sometimes, but especially when
it comes to politicians of every flavor, because everybody at
the end of the day is just out for votes.
That's all because they got to stay in their jobs. Anyway,
I think it's a sexy thing to talk about interest rates.
We've all become fixated with interest rates because we've we've
(05:28):
fallen in love with the idea of refinancing our mortgages
over and over again, and we feel entitled to these
two to three percent mortgages. Therefore, if I'm a politician,
it makes sense for me to just talk about lower rates.
All you need is the SoundBite. I don't need to
get into the possible downsides of having rates too low
for too long. We saw that in the seventies, and
I'm going to talk about that. I'm just going to
trigger people's memories that, hey, I really liked when I
could refinance my mortgage over and over again, so that
(05:51):
can possibly win me votes. That's going to be the
drum that I beat.
Speaker 2 (05:54):
Yeah, you know.
Speaker 3 (05:54):
And the other the sort of the side cul de
sac on that point is if interest rates were back
down to three for mortgages, I think it would probably
exacerbate the already problem shortage of housing we have. There'd
be more people out there wanting to buy, which of
course drive the limited inventory prices up.
Speaker 2 (06:10):
Yeah.
Speaker 1 (06:11):
The people who would be happiest are the ones who
bought a house anyway, knowing full well that it's not
as good of an environment as it was over the
past ten to fifteen years, but they were sort of
gambling that rates are going to come down, I can refinance.
Those people would be really, really happy. It's the people
who are furiously trying to build up a down payment
to buy their first home that are going to take
it right in the face because it's just going to
(06:31):
get slightly more, you know, more and more expensive as
it already is.
Speaker 3 (06:34):
Yeah, there's no end insight to that one now. And
back to inflation. The idea that Trump just announced over
the weekend, he's going to put a thirty percent terarify
on goods from the European Union and Mexico and that
kicks in August first, obviously giving him a couple of
week winded and negotiate, which I presume that's what he wants.
That hasn't been factored into the situation, has it yet? No,
(06:56):
not really, But at the same time, I think we're
used to this, right.
Speaker 1 (06:59):
So remember back in April, the market hit an absolute bottom,
and it hit it hard in early April, and that
was the initial panic over oh my gosh, these tariffs
are huge, one hundred and forty percent on stuff coming
out of China and we're changing them every other day.
Speaker 2 (07:12):
Panic, panic, panic.
Speaker 1 (07:13):
Well then we realized, okay, wait a minute, that maybe
we're not going to actually tear off band aids like
it felt like we were going to. We're gonna kind of,
you know, put these thirty day delays and all that
kind of stuff on it. So the market is kind
of winking at all this, it's just kind of ignoring it.
You know whatever, let me know when you're done and
you've decided, then the market will tell us what it's
going to do. So, you know, futures as we're sitting
here right now, are down a little bit for the morning,
(07:35):
but not nearly as much as they would have been
when these first tariff announcements came out months ago, when
we were first getting used to our new chaotic reality.
Speaker 3 (07:44):
Well, and maybe that's because they didn't stick around for
a long time. That was like, you know, Trump would
announce them and the market will react, and then he
would say, now I'm going to put a hold on
those and withdraw them and again for the purpose of negotiating.
Sitting in the negotiation table, it's all I guess can
be made of why they're on in, they're off, and
they're on, and they're off again. But you can't factor
(08:04):
that in. If you don't have any idea which direction
the tariffs are going to go, how do you forecast
the future?
Speaker 2 (08:08):
He just can't do it.
Speaker 1 (08:10):
You know, I picture, you know, being mugged in an alley.
If I jab my knife at you, you're probably going
to be more willing to hand me over your wallet
without me having to do any damage. That's really all
we do, over and over and over again. It's just
a negotiation. As ugly as it sounds, it truly is.
Speaker 2 (08:24):
Well.
Speaker 3 (08:24):
I know that the Wall Street journalist said the economists
economists are seeing a lower recession risk with stronger job growth.
That's Wall Street journal survey of the economists that they
talk to. So I mean it's like a mixed bag
of news and all this, Brian, I guess that's why
there's so much confusion in terms of which direction we're
going to go in terms of rate interest rates.
Speaker 1 (08:43):
Yeah, and this is very much a popcorn making time
for the rest of us who do not have to
make these decisions on that benefit or harm the rest
of the world. Again, I go back to Jerome Powell.
I don't know how the man sleeps at night. He's
he's in a world where you know, again, he's got
those two forces pulling an opposite direction, and he's the
one who has to side which lever to pull in
which button to push.
Speaker 2 (09:02):
So I do not envy that man right now.
Speaker 3 (09:03):
No, No, he's in quite a conunder. We'll talk more
about this with Brian James from all Worth Financial that
and I guess we also have some of the big
beautiful tax breaks, maybe a little bit smaller than people anticipated.
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Speaker 2 (10:29):
Fifty five krc.
Speaker 3 (10:31):
Our eight nineteen if you've got pair C detalk station.
Very happy Monday to you. Done the money Monday thing
with Brian James Smallworth Financial. Going back to the conundrum
and the problem that Jerome Powell is in such a
position you mentioned it in this article addresses it. The
one who provided me The FED is to mandates. It
(10:53):
can be at odds, and they're at odds now keep
inflation in check and supporting the labor market. So to
keep inflation in check. If it's run too hot, they
raise rates to slow demand. Okay, when the labor market
starts to drop off, they cut rates to boost barring
and spending and thus in turn hiring. But you've got
both going on at the same time. You have a
cooling labor market as has been reflected, and you have
(11:15):
a little bit warmer inflation number as you mentioned, it
was point three or is reportedly going to be point
three for the month to higher than the two percent
annual trajectory. So it suggests, I mean, the answer seems
to me to be just don't touch the rates at
all at this point, rather than lower them or increase them,
which nobody really is talking much about. Why would you
(11:36):
even do anything to them right now if you have
no clear vision of the future on this, Brian James, Yeah.
Speaker 1 (11:42):
At the moment, we're not at a point. Again, I'm
not Jerome Powell. I'm not responsible for this. So this
is really you know, me sitting off on the sidelines,
being an armchair fed chair. But so yeah, I don't
think we're at a point where we have to go
one direction or the other, you know, with the exception
of the pressure from the White House is enormous, of course,
(12:02):
because this has been, like I said, this has been
a campaign plank for President Trump for both of his
both of his terms, and when he was not in office,
he was still talking about it, right, always being that
rates need to go lower, lower, lower, We'll worry about
the rest later. So at the moment, I think it's
it's kind of it's relatively easy for fed chair pal
to not do anything about it because of those things
(12:22):
that could happen, and the benefits would not outweigh the risks.
Currently we're kind of at a bit of a balance,
and that's what we're seeing in the stock and bond market.
It's fairly knock on wood quiet time right now. But
later in the year, later in September, if these if
these trends continue, in other words, if the labor market
continues to weaken and we continue to have the other
things happening on the inflationary side, then he's probably going
(12:44):
to have to make a move in one direction or
another and lay his cards on the table.
Speaker 2 (12:47):
Well, it's right now, we're we're kind of stableish.
Speaker 3 (12:49):
But if that happens, in other words, inflation continues on
its current upward trajectory and the labor market is on
the downward trajectory, the likelihood that the rates are going
to get lowered is slim and none, because that'll have
a profound impact on inflation. At least that's what they say.
Because and this is the other thing I wanted to
test and find out what your perception is. The import
taxes haven't yet crept into the consumer prices because apparently
(13:12):
companies were front loading inventory because they anticipated these tariffs
kicking in, so they've pre ordered a whole bunch of
stuff in late two thousand and four, in twenty twenty five.
But it's pointed out eventually they're gonna have to start
passing on higher prices to consumers because their inventories are
gonna run low and they're gonna have to start buying
more stuff in things that they're gonna be subject to
the tariff. So, I mean, if anybody, if this is
(13:33):
an accurate assessment of the landscape, you know, prices are
gonna go up.
Speaker 2 (13:38):
They're gonna have to. There's really no other choice.
Speaker 1 (13:40):
You're right, because because again we're as I said earlier,
we've been calm over this reletive. Once we got over
the initial shock that we're gonna start talking about tariffs
very loudly. That was back in April, and then we
realized it's not gonna it wasn't It's not as scary
as it sounds because we really haven't seen the impact yet.
Now we're riding the wave of prices that were locked in,
as you just pointed out in Q four of last
(14:00):
year and Q one of this year in anticipation. So
things are still stable, but we're not truly in a
full tariff oriented reality that's coming over the next several months.
And if we if we really want to follow what
the President says in lower rates, then that is going
to provide opportunities for businesses to make more money. And
they're going to They're definitely going to push that because
(14:21):
it's what they do. It's, you know, what they should do.
But on the other hand, they are not the ones
responsible for keeping inflation in check. That falls to That
falls to the Fed chair, and he's going to have
to make some tough decisions in terms of guiding us
through all that.
Speaker 3 (14:33):
Well, he's just got to wait and see what the
teriffs do it if they even go into effect. Again,
thirty percent announce kicked in August first for quite a
number of our trading partners, and again the logical conclusion
is that we'll raise prices ergo lowering rates when a
time of rising prices is a recipe for rapid runaway inflation,
which Donald Trump mean Donald Trump campaigned on lowering inflation.
(14:55):
It's going to do the exact opposite of what he promised,
and as we run into the you know, the next
election cycle, that's not going to be a real good
thing happened in Brian James. If you're hopefully hoping for
the best for the Republicans anyway.
Speaker 1 (15:06):
And I'll hope for the best for all of us,
which is, if you find a way to get along,
then maybe we'd be we'd be in a better spot.
But yeah, and I think the other challenging thing is
betcher Pal doesn't get to change interest rates today and
then make and then reverse.
Speaker 2 (15:18):
The change tomorrow. That's right. Trump apparently does, so that's.
Speaker 1 (15:21):
That's he's gonna Pal's gonna have to wait until the
dust truly truly settles on this, because his decisions are
much more permanent and long lasting than a day and
a half.
Speaker 2 (15:29):
Worth of tariffs.
Speaker 3 (15:29):
Well, and I suppose in the background there's always the
notion that just threatening the thirty percent teriffs will at
least bring folks to the negotiation table and maybe we'll
end up with a better deal. Before anything kicks in
and ultimately impacts inflation, one can only pray that we
get that kind of resolution. Brian James, let's continue with
you and some of the big beautiful tax breaks a
little bit smaller than some anticipated. One more with Money
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Speaker 2 (17:01):
Dot com fifty five kr.
Speaker 3 (17:05):
Take twenty nine if you if I have kseen the talxtation.
Brian Thomas was a or financials Brian James on Monday
Monday coming up with the next segment, tax fish or
state representative talk about Ohio's marijuana laws and his efforts
to protect your ability to get weed under the law
as passed and in the meantime, Brian James, I hate
the name of it, the great, big, beautiful bill blah
(17:25):
blah blah, little alliteration there anyway, promised a lot and
delivered on a whole lot, of course, making the twenty
seventeen taxes permanent, which is a tax break for all
of us. Had they increased everyone would have felt the
pain of that, but not as big a change to
you know, things like the deduction for taxpayers sixty five
and older. And I was a little distressed about the
(17:46):
salt deduction, that standard state local tax deduction that they
raised from ten thousand to forty thousand, although it comes
with some significant limitations as well. Let's talk about that
to start with Ryan.
Speaker 1 (18:01):
Yeah, so when we hear these salt, these are the
terms and things that kind of glaze people's eyes over
because it just starts to sound boring when we throw
all these acronyms out there. But salt stands for assault,
stands for state and local taxes. So state and local
tax caps are jumping from ten thousand dollars.
Speaker 2 (18:18):
To forty thousand dollars.
Speaker 1 (18:20):
This is the deduction you can get because you have to,
because you have to pay state and local taxes.
Speaker 2 (18:24):
It's not a major issue.
Speaker 1 (18:24):
I don't hear many of my clients here in the
Tri state area complaining about, you know, other than you know, people.
Speaker 2 (18:29):
Who just don't want to pay taxes in general.
Speaker 1 (18:30):
But it's not near the burden here that it is
elsewhere in your higher tax date.
Speaker 3 (18:35):
But the deduction is a benefit to those high, high
tax blue states.
Speaker 2 (18:40):
Oh absolutely, and that's where this is coming from.
Speaker 1 (18:42):
And you remember in twenty seventeen when this first went
into effect, it was a poke in the eye. It
was an attack, you know, from the red side to
the blue side because of that very reason, because basically
making the case that well, you you've chosen to make
your state a high tax state, so you've got to
live with the consequence. Well, now the going the other way,
because there's an awful lot of moneyed interests out there
(19:03):
who say, look, we're rich too, and we want to
save on taxes, so fix this. So part of this
act is increasing the deduction you get from a cap
of ten thousand dollars up to forty thousand dollars, but
it phases out for taxpayers with modified adjustic gross income
above five hundred thousand and goes away completely by six
hundred thousand dollars.
Speaker 3 (19:21):
Well, and anybody who's paying forty thousand dollars in state
and local taxes is probably a higher income earner anyway, exactly.
Speaker 2 (19:28):
Yeah.
Speaker 1 (19:29):
But the point is though that it's not this it's
interesting to me because it's a tax cut for people
who are probably on the wealthier side, but it does
have a cap at incomes between five hundred thousand and
six hundred. Anybody who makes over six hundred is not
going to benefit from this at all. And if you're married,
you're at a slight disadvantage compared to to a single
person in this situation.
Speaker 3 (19:48):
All right, I know the megabill contains a new deduction
senior's car loan interest and tips and overtime that those
are limited as well. I mean it's not you get
to deduct one hundred percent of your tips or you
don't have to pay taxes and one percent of your
tips or overtime. There's some caps on that one too.
Speaker 1 (20:07):
Yeah, it's getting and I think I've mentioned this before,
but yeah, so the Trump administration is just trying to
benefit people who who most need it. If you're somebody
who accepts tips, you're probably making a good amount of money,
but you're you know, people who making five, seven hundred
and fifty, you know, one hundred million dollars a year
aren't taking tips. So this is on the lower end
of income with the income side, and it is a benefit.
Speaker 2 (20:28):
Clearly for that.
Speaker 1 (20:29):
I think what's going to be really interesting is again
to see exactly what creative ways people find out find
to come up with labeling certain chunks of their income tips.
Somehow I feel like hedge fund managers are going to
start taking tips. It will be sort of that similar
to that carried interest phenomenon where they've made something up
out of the seventeen hundreds so not have to pay
taxes on things.
Speaker 2 (20:49):
Now?
Speaker 3 (20:50):
Is this a consult with your financial planner moment for
people in these various categories about how you get ahead
of it and are there ways that you can arrange
your portfolio or your payouts or however wherever you are
and your retirement stage of your life, you need to
anticipate how to deal with this and be forward thinking
about some of these deductions and changes in the law.
Speaker 1 (21:12):
I think you know what my answer is going to
be because I'm a little Buddist, having been one for
thirty years, but absolutely because these are all puzzle pieces.
Everybody has to deal with two sets of puzzle pieces.
You've got your own situation and all the facts and
figures and resources and responsibilities that you have in your
own little world. But then the other set of puzzle
pieces is whatever the outside world is going to do
(21:32):
to you. That's your employer, that's your government, your tax authorities,
and all that kind of stuff, and you have to
pay attention to really what the benefits are. Why are
these changes being made. The drum beat right now is that, yes,
we may tax cuts permanent from twenty seventeen, and that's
a wonderful benefit for people. But you have to look
under the hood and remember where these tax benefits are
(21:53):
landing for the vast majority. So, for example, tax cuts
and Job Act from twenty seventeen dropped. For people making
between fifty and seventy five thousand dollars, your taxes dropped.
Your effective rate dropped by about twenty two percent, right,
from nine percent to seven percent, down twenty two percent.
Speaker 2 (22:09):
That sounds like a big number, right.
Speaker 1 (22:11):
If you make two hundred to four hundred, then you
had your effective rate drop by about ten percent, not bad,
that's still double digits. Corporations, however, Brian Thomas at the
same time saw a forty three percent reduction and actual
taxes paid. This tax cut that we just made permanent
with the obbbbbbbbb is not for individuals, it's for corporations.
(22:31):
We gave individuals and families a reason to go vote
for it, because we got to say, hey, you're looking
at a ten percent decrease, but corporation's got about four
times that. So you have to pay attention to where
the benefits are well.
Speaker 3 (22:42):
And then there's always the argument that corporations don't really
pay taxes. Their taxes are reflected in the price of
the goods and services that they offer, So a reduction
in corporate taxes may mean well, lower prices for us exactly.
Speaker 1 (22:55):
And so the argument against this, and I've had this
discussion here in the all Worth offices with some other
folks about where the benefits came from this, and the
argument is often that, well, it's offset by economic growth
because we're saving money for companies. Therefore they're going to
reinvest in new things and all that kind of suff
we're going to make more money. That just doesn't pan
out though. In twenty eighteen twenty, shortly after twenty seventeen,
(23:17):
of course, GDP rose to two.
Speaker 2 (23:19):
Point nine percent.
Speaker 1 (23:20):
That's up two point four from twenty seventeen, so we
saw a little bit of bounce there, but it got
back to trend by twenty nineteen, abound two to two
point three percent. Even if you include the round trip
of COVID, the recession, and then the recovery, it stayed
in the range of the load to mid twos. Meanwhile,
corporate share buybacks, in other words, companies saying, hey, we
got extra money, let's buy back some of our shares.
(23:42):
If we own our shares, we don't have to pay
dividends on them. Those increased by about fifty five percent
between seventeen and eighteen. So firms use those tax wind
falls for buybacks and dividends to shareholders, not new investments.
So we did not see the capital growth that was
touted to offset the tax cuts.
Speaker 3 (23:58):
Got to look at it to multiple sides. We have
Brian James every Monday to talk money matters and make
sure you get yourself a certified financial planner person who
owes you a fiduciary obligation so you can prepare adequately
for your future. Got to take the reins yourself on
that one. Nobody's gonna do it for you. Brian James,
appreciate you opportunity to talk with you every Monday. I'll
look forward to next Monday, and I hope between now
and then you have a great week. YouTube talking a
(24:20):
week a thirty seven five K sit the talk station
Text Fish or state Representative Fisher is going to join
us in the next segment talk about marijuana laws and
some Republicans' effort to change them and tighten down on them.
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Speaker 1 (25:52):
This is fifty five KRC, an iHeartRadio station.
Speaker 2 (25:56):
Have you taken your
I gotta get Israel to calm down. Now the latest
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Speaker 2 (00:06):
East, and your latest to Vinions.
Speaker 3 (00:07):
I trust what President Trump is doing.
Speaker 2 (00:09):
Fifty five the talk station.
Speaker 3 (00:14):
Potato five ifif you five car CD talk station. It
being Monday, it's that time of week. Get to hear
Where'm from all Worth Financials, Brian James, financial planner. He
is talking about money matters. It is money Monday time.
Brian James, Welcome back to the Morning show. Great to
hear from you, my friend.
Speaker 1 (00:29):
Absolutely good to hear your voice too. It's a rainy
money Monday. So let's sit and tide and talk about
numbers and boring.
Speaker 3 (00:34):
Yeah, inflation, let's talk inflation. Let's show whether or not
it's gonna impact the Fed's decision to cut interest rates
or not, as the case may be. But the background
of all this is the uh, the Trump trade wars,
the the tariffs he's been levying or then taking off,
as the case may be. It seems to be like
a constantly moving target, you know, announces tariffs one day
and then he says, well, I'm gonna pause him, give
(00:55):
us time to negotiate or talk and you kind of
a you never really quite have a grip of which
directions going to go. But thus far, I think the
general consensus, at least from what I've read no economist
am I, is that thus far the tariffs really haven't
impacted you and me on a day to day basis.
Speaker 2 (01:12):
The way everyone was.
Speaker 3 (01:13):
So frightened that it would, oh my god, the prices
are going to go through the roof. Well that's not
yet necessarily been the case, has it. Yeah, things that
make Jerown Powell go hmmm. So we've seen this.
Speaker 1 (01:25):
We're now starting to see numbers coming out that were
far enough past the tariff announcements and the actual presence
of those tariffs. Remember, the announcement of the tariff and
the actual tariff are two very different things, right, as
we've learned. But June's CPI is forecasted to rise about
a third of a percent month over month for both
headline and core numbers. Remember those are the there's two
different CPI figures that we all like to look at.
(01:46):
This is the first real tangible impact we've seen from
this new round of Trump era tariffs in getting core
inflation near three percent annually. So it's kind of moving
away from the target. The FED wants to be in
the two percent range. That's what really makes Jerome Powell
happy in the morning. But we're not there. And well,
this to your point, this is not terrible. This is
not a massive spike as some had prognosticated over the
(02:09):
past few months. But at the same time, up is
not down, and we're higher than the Federal Reserve once.
So at the moment, Jerome Powell has a bit of
a dilemma in terms of which which battle does he fight?
Is he gonna fight inflation because this is also coming
alongside a slightly weakening labor market, so things do seem
to be cooling off.
Speaker 2 (02:27):
This is a tough one.
Speaker 1 (02:28):
I'm kind of glad that I don't have I don't
have his job right now, because he's really got two
forces pulling in the opposite direction on him.
Speaker 3 (02:34):
Well, I mean, are we entering like a nineteen seventies
kind of situation with stagflation?
Speaker 2 (02:39):
No, I don't.
Speaker 1 (02:40):
I don't think we're there yet. You know, my crystal
ball is as foggy as anybody else's. But I don't
think this is this yet has all the same impacts
that full stagflation did. And the reason that we one
of the reasons I believe personally, is because there are
so many catalysts Brian of ways that we make money
now compared to the seventies, And I'm just thinking of
(03:00):
things like, you know, the seventies, we didn't have a
whole lot of innovation compared to what we have now.
That's a good think of the last twenty years. We
had the Internet come up, and we've had AI, We've
had a real estate spike, we had COVID that drove,
you know, the work from home technology and all this stuff.
Everything is a catalyst that somebody makes money off of.
So that stuff, I think currently knocking on wood furiously
(03:20):
is offsetting the downsides of what we're going through.
Speaker 3 (03:23):
That's interesting. I never really looked at it that way.
A lot of job opportunities that just didn't exist, and
we've created a whole new economy since the nineteen seventies,
which was I guess more rooted in a traditional I
guess more manufacturing type economy, and thus the problems we
faced in the seventies.
Speaker 1 (03:39):
Yeah, that's right, And there was just a different environment
in terms of how we recovered from things so we
had spikes in oil prices, and of course that was
a lot of that too, was driven by the President.
Nixon wanted to drive interest rates down because he had
an election coming up and he wanted happy people putting
their votes into their ballot boxes, and so he pushed
(04:00):
hard for low interest rates, and that spiked a lot
of demand, which resulted in Paul Volker coming to the
rescue with his Superman cape in the late seventies early eighties,
forcing us into a pretty significant recession that then settled
back down into this two to three percent range that
we over the past forty years have determined as kind
of the right happy place to be, because over the
last forty years it hasn't been that crazy economically speaking
(04:22):
when you compare it to the nineteen seventies. So we've
kind of concluded that, okay, that must be the right
place to be balanced, but it takes some sacrifices to get.
Speaker 2 (04:30):
There, all right.
Speaker 3 (04:31):
So we have this point three percent predicted figure for
the consumer price that's supposed to come out today. Core
rate that strips out food and energy also predicted to
B point three, which makes it higher than the fetid
hope because that would push it past the two percent
goal and closer to three percent if it remain on
this trajectory.
Speaker 2 (04:50):
If I got that right, that's correct, if you're on
the right path.
Speaker 3 (04:54):
All right now, to lower interest rates be to add
fuel to the fire of the inflationary numbers leads. That's
what they always say.
Speaker 1 (05:06):
Correct, that's correct, exactly right, and that's what Trump wants.
Trump has been talking about rates aren't low enough. He
said that all the way through, and I honestly, I
think I'd wear a tinfoil hat sometimes, but especially when
it comes to politicians of every flavor, because everybody at
the end of the day is just out for votes.
That's all because they got to stay in their jobs. Anyway,
I think it's a sexy thing to talk about interest rates.
We've all become fixated with interest rates because we've we've
(05:28):
fallen in love with the idea of refinancing our mortgages
over and over again, and we feel entitled to these
two to three percent mortgages. Therefore, if I'm a politician,
it makes sense for me to just talk about lower rates.
All you need is the SoundBite. I don't need to
get into the possible downsides of having rates too low
for too long. We saw that in the seventies, and
I'm going to talk about that. I'm just going to
trigger people's memories that, hey, I really liked when I
could refinance my mortgage over and over again, so that
(05:51):
can possibly win me votes. That's going to be the
drum that I beat.
Speaker 2 (05:54):
Yeah, you know.
Speaker 3 (05:54):
And the other the sort of the side cul de
sac on that point is if interest rates were back
down to three for mortgages, I think it would probably
exacerbate the already problem shortage of housing we have. There'd
be more people out there wanting to buy, which of
course drive the limited inventory prices up.
Speaker 2 (06:10):
Yeah.
Speaker 1 (06:11):
The people who would be happiest are the ones who
bought a house anyway, knowing full well that it's not
as good of an environment as it was over the
past ten to fifteen years, but they were sort of
gambling that rates are going to come down, I can refinance.
Those people would be really, really happy. It's the people
who are furiously trying to build up a down payment
to buy their first home that are going to take
it right in the face because it's just going to
(06:31):
get slightly more, you know, more and more expensive as
it already is.
Speaker 3 (06:34):
Yeah, there's no end insight to that one now. And
back to inflation. The idea that Trump just announced over
the weekend, he's going to put a thirty percent terarify
on goods from the European Union and Mexico and that
kicks in August first, obviously giving him a couple of
week winded and negotiate, which I presume that's what he wants.
That hasn't been factored into the situation, has it yet? No,
(06:56):
not really, But at the same time, I think we're
used to this, right.
Speaker 1 (06:59):
So remember back in April, the market hit an absolute bottom,
and it hit it hard in early April, and that
was the initial panic over oh my gosh, these tariffs
are huge, one hundred and forty percent on stuff coming
out of China and we're changing them every other day.
Speaker 2 (07:12):
Panic, panic, panic.
Speaker 1 (07:13):
Well then we realized, okay, wait a minute, that maybe
we're not going to actually tear off band aids like
it felt like we were going to. We're gonna kind of,
you know, put these thirty day delays and all that
kind of stuff on it. So the market is kind
of winking at all this, it's just kind of ignoring it.
You know whatever, let me know when you're done and
you've decided, then the market will tell us what it's
going to do. So, you know, futures as we're sitting
here right now, are down a little bit for the morning,
(07:35):
but not nearly as much as they would have been
when these first tariff announcements came out months ago, when
we were first getting used to our new chaotic reality.
Speaker 3 (07:44):
Well, and maybe that's because they didn't stick around for
a long time. That was like, you know, Trump would
announce them and the market will react, and then he
would say, now I'm going to put a hold on
those and withdraw them and again for the purpose of negotiating.
Sitting in the negotiation table, it's all I guess can
be made of why they're on in, they're off, and
they're on, and they're off again. But you can't factor
(08:04):
that in. If you don't have any idea which direction
the tariffs are going to go, how do you forecast
the future?
Speaker 2 (08:08):
He just can't do it.
Speaker 1 (08:10):
You know, I picture, you know, being mugged in an alley.
If I jab my knife at you, you're probably going
to be more willing to hand me over your wallet
without me having to do any damage. That's really all
we do, over and over and over again. It's just
a negotiation. As ugly as it sounds, it truly is.
Speaker 2 (08:24):
Well.
Speaker 3 (08:24):
I know that the Wall Street journalist said the economists
economists are seeing a lower recession risk with stronger job growth.
That's Wall Street journal survey of the economists that they
talk to. So I mean it's like a mixed bag
of news and all this, Brian, I guess that's why
there's so much confusion in terms of which direction we're
going to go in terms of rate interest rates.
Speaker 1 (08:43):
Yeah, and this is very much a popcorn making time
for the rest of us who do not have to
make these decisions on that benefit or harm the rest
of the world. Again, I go back to Jerome Powell.
I don't know how the man sleeps at night. He's
he's in a world where you know, again, he's got
those two forces pulling an opposite direction, and he's the
one who has to side which lever to pull in
which button to push.
Speaker 2 (09:02):
So I do not envy that man right now.
Speaker 3 (09:03):
No, No, he's in quite a conunder. We'll talk more
about this with Brian James from all Worth Financial that
and I guess we also have some of the big
beautiful tax breaks, maybe a little bit smaller than people anticipated.
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Speaker 2 (10:29):
Fifty five krc.
Speaker 3 (10:31):
Our eight nineteen if you've got pair C detalk station.
Very happy Monday to you. Done the money Monday thing
with Brian James Smallworth Financial. Going back to the conundrum
and the problem that Jerome Powell is in such a
position you mentioned it in this article addresses it. The
one who provided me The FED is to mandates. It
(10:53):
can be at odds, and they're at odds now keep
inflation in check and supporting the labor market. So to
keep inflation in check. If it's run too hot, they
raise rates to slow demand. Okay, when the labor market
starts to drop off, they cut rates to boost barring
and spending and thus in turn hiring. But you've got
both going on at the same time. You have a
cooling labor market as has been reflected, and you have
(11:15):
a little bit warmer inflation number as you mentioned, it
was point three or is reportedly going to be point
three for the month to higher than the two percent
annual trajectory. So it suggests, I mean, the answer seems
to me to be just don't touch the rates at
all at this point, rather than lower them or increase them,
which nobody really is talking much about. Why would you
(11:36):
even do anything to them right now if you have
no clear vision of the future on this, Brian James, Yeah.
Speaker 1 (11:42):
At the moment, we're not at a point. Again, I'm
not Jerome Powell. I'm not responsible for this. So this
is really you know, me sitting off on the sidelines,
being an armchair fed chair. But so yeah, I don't
think we're at a point where we have to go
one direction or the other, you know, with the exception
of the pressure from the White House is enormous, of course,
(12:02):
because this has been, like I said, this has been
a campaign plank for President Trump for both of his
both of his terms, and when he was not in office,
he was still talking about it, right, always being that
rates need to go lower, lower, lower, We'll worry about
the rest later. So at the moment, I think it's
it's kind of it's relatively easy for fed chair pal
to not do anything about it because of those things
(12:22):
that could happen, and the benefits would not outweigh the risks.
Currently we're kind of at a bit of a balance,
and that's what we're seeing in the stock and bond market.
It's fairly knock on wood quiet time right now. But
later in the year, later in September, if these if
these trends continue, in other words, if the labor market
continues to weaken and we continue to have the other
things happening on the inflationary side, then he's probably going
(12:44):
to have to make a move in one direction or
another and lay his cards on the table.
Speaker 2 (12:47):
Well, it's right now, we're we're kind of stableish.
Speaker 3 (12:49):
But if that happens, in other words, inflation continues on
its current upward trajectory and the labor market is on
the downward trajectory, the likelihood that the rates are going
to get lowered is slim and none, because that'll have
a profound impact on inflation. At least that's what they say.
Because and this is the other thing I wanted to
test and find out what your perception is. The import
taxes haven't yet crept into the consumer prices because apparently
(13:12):
companies were front loading inventory because they anticipated these tariffs
kicking in, so they've pre ordered a whole bunch of
stuff in late two thousand and four, in twenty twenty five.
But it's pointed out eventually they're gonna have to start
passing on higher prices to consumers because their inventories are
gonna run low and they're gonna have to start buying
more stuff in things that they're gonna be subject to
the tariff. So, I mean, if anybody, if this is
(13:33):
an accurate assessment of the landscape, you know, prices are
gonna go up.
Speaker 2 (13:38):
They're gonna have to. There's really no other choice.
Speaker 1 (13:40):
You're right, because because again we're as I said earlier,
we've been calm over this reletive. Once we got over
the initial shock that we're gonna start talking about tariffs
very loudly. That was back in April, and then we
realized it's not gonna it wasn't It's not as scary
as it sounds because we really haven't seen the impact yet.
Now we're riding the wave of prices that were locked in,
as you just pointed out in Q four of last
(14:00):
year and Q one of this year in anticipation. So
things are still stable, but we're not truly in a
full tariff oriented reality that's coming over the next several months.
And if we if we really want to follow what
the President says in lower rates, then that is going
to provide opportunities for businesses to make more money. And
they're going to They're definitely going to push that because
(14:21):
it's what they do. It's, you know, what they should do.
But on the other hand, they are not the ones
responsible for keeping inflation in check. That falls to That
falls to the Fed chair, and he's going to have
to make some tough decisions in terms of guiding us
through all that.
Speaker 3 (14:33):
Well, he's just got to wait and see what the
teriffs do it if they even go into effect. Again,
thirty percent announce kicked in August first for quite a
number of our trading partners, and again the logical conclusion
is that we'll raise prices ergo lowering rates when a
time of rising prices is a recipe for rapid runaway inflation,
which Donald Trump mean Donald Trump campaigned on lowering inflation.
(14:55):
It's going to do the exact opposite of what he promised,
and as we run into the you know, the next
election cycle, that's not going to be a real good
thing happened in Brian James. If you're hopefully hoping for
the best for the Republicans anyway.
Speaker 1 (15:06):
And I'll hope for the best for all of us,
which is, if you find a way to get along,
then maybe we'd be we'd be in a better spot.
But yeah, and I think the other challenging thing is
betcher Pal doesn't get to change interest rates today and
then make and then reverse.
Speaker 2 (15:18):
The change tomorrow. That's right. Trump apparently does, so that's.
Speaker 1 (15:21):
That's he's gonna Pal's gonna have to wait until the
dust truly truly settles on this, because his decisions are
much more permanent and long lasting than a day and
a half.
Speaker 2 (15:29):
Worth of tariffs.
Speaker 3 (15:29):
Well, and I suppose in the background there's always the
notion that just threatening the thirty percent teriffs will at
least bring folks to the negotiation table and maybe we'll
end up with a better deal. Before anything kicks in
and ultimately impacts inflation, one can only pray that we
get that kind of resolution. Brian James, let's continue with
you and some of the big beautiful tax breaks a
little bit smaller than some anticipated. One more with Money
(15:50):
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Speaker 2 (17:01):
Dot com fifty five kr.
Speaker 3 (17:05):
Take twenty nine if you if I have kseen the talxtation.
Brian Thomas was a or financials Brian James on Monday
Monday coming up with the next segment, tax fish or
state representative talk about Ohio's marijuana laws and his efforts
to protect your ability to get weed under the law
as passed and in the meantime, Brian James, I hate
the name of it, the great, big, beautiful bill blah
(17:25):
blah blah, little alliteration there anyway, promised a lot and
delivered on a whole lot, of course, making the twenty
seventeen taxes permanent, which is a tax break for all
of us. Had they increased everyone would have felt the
pain of that, but not as big a change to
you know, things like the deduction for taxpayers sixty five
and older. And I was a little distressed about the
(17:46):
salt deduction, that standard state local tax deduction that they
raised from ten thousand to forty thousand, although it comes
with some significant limitations as well. Let's talk about that
to start with Ryan.
Speaker 1 (18:01):
Yeah, so when we hear these salt, these are the
terms and things that kind of glaze people's eyes over
because it just starts to sound boring when we throw
all these acronyms out there. But salt stands for assault,
stands for state and local taxes. So state and local
tax caps are jumping from ten thousand dollars.
Speaker 2 (18:18):
To forty thousand dollars.
Speaker 1 (18:20):
This is the deduction you can get because you have to,
because you have to pay state and local taxes.
Speaker 2 (18:24):
It's not a major issue.
Speaker 1 (18:24):
I don't hear many of my clients here in the
Tri state area complaining about, you know, other than you know, people.
Speaker 2 (18:29):
Who just don't want to pay taxes in general.
Speaker 1 (18:30):
But it's not near the burden here that it is
elsewhere in your higher tax date.
Speaker 3 (18:35):
But the deduction is a benefit to those high, high
tax blue states.
Speaker 2 (18:40):
Oh absolutely, and that's where this is coming from.
Speaker 1 (18:42):
And you remember in twenty seventeen when this first went
into effect, it was a poke in the eye. It
was an attack, you know, from the red side to
the blue side because of that very reason, because basically
making the case that well, you you've chosen to make
your state a high tax state, so you've got to
live with the consequence. Well, now the going the other way,
because there's an awful lot of moneyed interests out there
(19:03):
who say, look, we're rich too, and we want to
save on taxes, so fix this. So part of this
act is increasing the deduction you get from a cap
of ten thousand dollars up to forty thousand dollars, but
it phases out for taxpayers with modified adjustic gross income
above five hundred thousand and goes away completely by six
hundred thousand dollars.
Speaker 3 (19:21):
Well, and anybody who's paying forty thousand dollars in state
and local taxes is probably a higher income earner anyway, exactly.
Speaker 2 (19:28):
Yeah.
Speaker 1 (19:29):
But the point is though that it's not this it's
interesting to me because it's a tax cut for people
who are probably on the wealthier side, but it does
have a cap at incomes between five hundred thousand and
six hundred. Anybody who makes over six hundred is not
going to benefit from this at all. And if you're married,
you're at a slight disadvantage compared to to a single
person in this situation.
Speaker 3 (19:48):
All right, I know the megabill contains a new deduction
senior's car loan interest and tips and overtime that those
are limited as well. I mean it's not you get
to deduct one hundred percent of your tips or you
don't have to pay taxes and one percent of your
tips or overtime. There's some caps on that one too.
Speaker 1 (20:07):
Yeah, it's getting and I think I've mentioned this before,
but yeah, so the Trump administration is just trying to
benefit people who who most need it. If you're somebody
who accepts tips, you're probably making a good amount of money,
but you're you know, people who making five, seven hundred
and fifty, you know, one hundred million dollars a year
aren't taking tips. So this is on the lower end
of income with the income side, and it is a benefit.
Speaker 2 (20:28):
Clearly for that.
Speaker 1 (20:29):
I think what's going to be really interesting is again
to see exactly what creative ways people find out find
to come up with labeling certain chunks of their income tips.
Somehow I feel like hedge fund managers are going to
start taking tips. It will be sort of that similar
to that carried interest phenomenon where they've made something up
out of the seventeen hundreds so not have to pay
taxes on things.
Speaker 2 (20:49):
Now?
Speaker 3 (20:50):
Is this a consult with your financial planner moment for
people in these various categories about how you get ahead
of it and are there ways that you can arrange
your portfolio or your payouts or however wherever you are
and your retirement stage of your life, you need to
anticipate how to deal with this and be forward thinking
about some of these deductions and changes in the law.
Speaker 1 (21:12):
I think you know what my answer is going to
be because I'm a little Buddist, having been one for
thirty years, but absolutely because these are all puzzle pieces.
Everybody has to deal with two sets of puzzle pieces.
You've got your own situation and all the facts and
figures and resources and responsibilities that you have in your
own little world. But then the other set of puzzle
pieces is whatever the outside world is going to do
(21:32):
to you. That's your employer, that's your government, your tax authorities,
and all that kind of stuff, and you have to
pay attention to really what the benefits are. Why are
these changes being made. The drum beat right now is that, yes,
we may tax cuts permanent from twenty seventeen, and that's
a wonderful benefit for people. But you have to look
under the hood and remember where these tax benefits are
(21:53):
landing for the vast majority. So, for example, tax cuts
and Job Act from twenty seventeen dropped. For people making
between fifty and seventy five thousand dollars, your taxes dropped.
Your effective rate dropped by about twenty two percent, right,
from nine percent to seven percent, down twenty two percent.
Speaker 2 (22:09):
That sounds like a big number, right.
Speaker 1 (22:11):
If you make two hundred to four hundred, then you
had your effective rate drop by about ten percent, not bad,
that's still double digits. Corporations, however, Brian Thomas at the
same time saw a forty three percent reduction and actual
taxes paid. This tax cut that we just made permanent
with the obbbbbbbbb is not for individuals, it's for corporations.
(22:31):
We gave individuals and families a reason to go vote
for it, because we got to say, hey, you're looking
at a ten percent decrease, but corporation's got about four
times that. So you have to pay attention to where
the benefits are well.
Speaker 3 (22:42):
And then there's always the argument that corporations don't really
pay taxes. Their taxes are reflected in the price of
the goods and services that they offer, So a reduction
in corporate taxes may mean well, lower prices for us exactly.
Speaker 1 (22:55):
And so the argument against this, and I've had this
discussion here in the all Worth offices with some other
folks about where the benefits came from this, and the
argument is often that, well, it's offset by economic growth
because we're saving money for companies. Therefore they're going to
reinvest in new things and all that kind of suff
we're going to make more money. That just doesn't pan
out though. In twenty eighteen twenty, shortly after twenty seventeen,
(23:17):
of course, GDP rose to two.
Speaker 2 (23:19):
Point nine percent.
Speaker 1 (23:20):
That's up two point four from twenty seventeen, so we
saw a little bit of bounce there, but it got
back to trend by twenty nineteen, abound two to two
point three percent. Even if you include the round trip
of COVID, the recession, and then the recovery, it stayed
in the range of the load to mid twos. Meanwhile,
corporate share buybacks, in other words, companies saying, hey, we
got extra money, let's buy back some of our shares.
(23:42):
If we own our shares, we don't have to pay
dividends on them. Those increased by about fifty five percent
between seventeen and eighteen. So firms use those tax wind
falls for buybacks and dividends to shareholders, not new investments.
So we did not see the capital growth that was
touted to offset the tax cuts.
Speaker 3 (23:58):
Got to look at it to multiple sides. We have
Brian James every Monday to talk money matters and make
sure you get yourself a certified financial planner person who
owes you a fiduciary obligation so you can prepare adequately
for your future. Got to take the reins yourself on
that one. Nobody's gonna do it for you. Brian James,
appreciate you opportunity to talk with you every Monday. I'll
look forward to next Monday, and I hope between now
and then you have a great week. YouTube talking a
(24:20):
week a thirty seven five K sit the talk station
Text Fish or state Representative Fisher is going to join
us in the next segment talk about marijuana laws and
some Republicans' effort to change them and tighten down on them.
First though, Cover, since you speaking of money matters, it
a great idea to call COVER, since you get in
touch with John Rowman and the team at Cover, SINCEY
to have them do an analysis of your medical insurance
(24:40):
and find a better way, better insurance coverage, dollar one coverage,
lower premiums. It's hard to believe, but it can be done.
They are on your side speaking of things like financial planners.
They are working for you. It's like a fiduciary obligation
they have. They're on your side of the table talking
with one hundred couple, one hundred different insurance companies, access
to thousands of policies, but they look at you individually
(25:03):
where you are in life. You know, if you have
family and that kind of thing, who needs to be
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(25:24):
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the insurance company. John and the team will well are
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Speaker 1 (25:52):
This is fifty five KRC, an iHeartRadio station.
Speaker 2 (25:56):
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