Money Monday with Brian James

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Episode Transcript

Speaker 1 (00:01):
At six if if you about Keroseed talk station. Brian
Thomas here wishing everyone a very very happy Monday as
we fast approach Christmas. But no difference for this Monday.
It's as scheduled, regularly scheduled appointment and appointment listening at
least for some people. Write Brian James doing a money
Monday thing. Thanks to all Worth Financial for learning you
out for a few segments talk about what's going on

(00:21):
in the financial world. Good to hear from you.

Speaker 2 (00:23):
Ho ho ho, Merry Christmas. Happy Holidays to you and yours.
Get your you gotta your Christmas shopping done? We do,
we do. Santa is ready, he's got to sleigh loaded
up and he will be here in just a few days.
So yeah, yeah, we are good to go.

Speaker 1 (00:36):
Love be glad to hear that the last Christmas gift
we had to buy about over the weekend. And yeah,
I did use Amazon much of the ctagre in a
lot of people who don't think I should schop on Amazon,
but to get my daughter's fiance something. So I got
a care package put together for Eric and that was it.
We're done. So I was glad to see that. I
know a lot of people wait till last minute, almost intentionally.
It's almost like it's like a sport for some reason.

(00:59):
I'll be damned. I fun running out on the Christmas
Eve going to the ball or.

Speaker 2 (01:02):
See if I find that greatest idea ever or the
greatest deal ever, yeah, or the most ridiculous g to
see it in the impulse by last minute shopping with
no foresight or thought into that gift you have to
get for a loved one.

Speaker 1 (01:15):
They're supposed to be a loved one. So anyway, I
get a kick out of this time of year, and
I hope you have a wonderful Christmas holiday, Brian in
the great New Year as well.

Speaker 2 (01:23):
All Right, question for you first.

Speaker 1 (01:25):
Now we're going to talk about the latest CPI report
showing that the inflation jump two point seven percent over
the past year. We think that's the figure, and correct
me if I'm wrong.

Speaker 2 (01:37):
I as some of the database. Okay, that's okay.

Speaker 1 (01:39):
Now that sort of stumbles upon the issue I had
to ask you sort of as a setup for this discussion,
I just read excerpts from an article by Elyssa Finley
why the affordability crisis is more severe in California, and
she pointed out, you know of Milton Friedman saying, listen,
inflation is always in everywhere a monetary a phenomenon. Okay,
that's inflation, but affordability, that is, the price for particular

(02:04):
things can vary depending upon locale. California's paying north of
five dollars heading towards maybe eight to twelve dollars gasoline
because they shut down the refineries. So the price of
gas way out of whack compared to here where just
over the weekend, I pay two thirty a gallon to
fill my tank. Now, energy is part of the consumer
price calculations, right, yeah, if we report it, if we

(02:28):
report it, Oh okay, these are leading comments that make
they are I understand. So I guess I just kind
of want to know, listen to the difference in just
the regulatory environment in any given state could be wildly different,
impacting the price and throwing you know, the whole idea
of well, what is inflation, you know, like as a

(02:50):
monetary phenomenon versus what is inflation by based upon what
you in your area are paying for any particular good
and service. They maybe pulling their hair out screaming about
the price of gasoline, price of Bee for the fact
that fast foods so much more expensive in California because
the mandatory twenty dollars minimum age law. But it's not
that way when you go out into the world elsewhere.
So some people are feeling it a lot harder than others.

Speaker 2 (03:11):
Oh absolutely. So I have a little bit of a
personal experience with us. Very recently. I'm helping a friend
who's trying to navigate a new world, new living situation
out in California and just kind of helping her understand
what is the difference. And one of the little things
she went through as a person who went through a
divorce unfortunately and wound up buying a car from her

(03:32):
spouse as just part of the divorce settlement, right, and
she had to pay a bunch of taxes on that,
And I knew that was going to happen, but the
percentage that she had to pay really caught my eye.
I think it wound up being like nine percent just
to buy a used car from her spouse. She paid
nine percent including all the fees and all the crazy
stuff you got to go through, whereas here it's just
sales tax of you know, a normal sales tax more

(03:52):
like six percent. So it's a little things like that
that you know that all add up. Yeah, we hear
all the headline things of gas in just the overall
taxation out in California, for example, but there's all kinds
of little extra fees and all these other things. Yeah,
to live in a beautiful place, don't get me wrong,
but that state tries to eat people, no question about it. All. Right.

Speaker 1 (04:13):
Now back to the you know, the hints thing you
were making in so far as what this actual report
does show and maybe some of the data they left
out of it when considering it was a two point
seven inflation.

Speaker 2 (04:24):
Yeah, so let's talk about that a little bit. First off,
when I'm not sounding any alarm bells here, I talked
with Andy Stoutter, chief Investment Officer, and he gave us
all an update on this, but which is that the
economists are not really thrilled with us latest CPI are
released because it just contains so little data. I'm looking
at on the BLS Bureau of Labor Statistics page, I
am looking at the CPIU report that literally has three

(04:48):
categories of data for October and November. It's got gasoline,
it has new vehicles, use cars, and trucks. Everything else
has a hyphen. There's no data for food at home,
food away from home, energy commodities like the utilities. It's
just plane not there. So that's where our two point
six percent number is coming from. And the economists are
looking at this saying, okay, it's not that good. They're

(05:10):
not thrilled with this release, but we're all the most
are kind of holding their tongues, it seems, until December,
because we feel like December will be back online. The
reason for this, of course, is the shutdown. We weren't
collecting data. We can to the head of the BLS
a while ago too, it made some major changes to it.
So you know, on one hand, again not time for alarm.
But let's not get too excited that we actually have
a two point seven percent CPI print. I don't think

(05:32):
that's the case.

Speaker 1 (05:33):
All right, But wheneverybody gets back online and they get
all the data points. Going back to here you mentioned energy,
I know the Northwest is struggling with energy. It's very,
very expensive. They haven't done pipe projects that would have
helped bring natural gas in lower and provide some relief.
They're all full on green and they're they're struggling with
really high energy prices. Of course not as bad as Germany,
who went you know, full on green and has destroyed

(05:56):
its own economy doing that. But you know, where you're
producing energy less expensively. Elsewhere in the world, the price
of energy hasn't gone up as much or shouldn't now.
And when they do calculate energy prices as a component
of the CPI, they don't take into account the regulatory reality.
It's I mean, I like to look at inflation as

(06:16):
a purely monetary thing.

Speaker 2 (06:19):
No I would agree with that, I mean, and that's
really what we should be focusing on. It doesn't matter
what the where the components of the costs are coming from.
The cost is the cost, because it's got at the
end of the day, it's coming out of our pockets.
The C and CPI stands for consumer. We are the
ones who pay for it. So yes, we absolutely should
be measuring that. Now. You can see numbers in the
same report for electricity. They do have unadjusted twelve months

(06:41):
ending November twenty to twenty five, which again this isn't perfect,
but year of a year electricity is currently showing at
six point nine percent and piped gas is nine point
one percent. Now, again that's not including October and November
because there's just no data, So those numbers are still
a lot higher than we would want them to be.
But hopefully again this December number will clear things up

(07:01):
and maybe we'll have maybe you and I be having
a different conversation in January.

Speaker 1 (07:04):
We'll see how this works out. We keep our fingers
crossed that it's even lower than two point seven. Wants
to get all the data in. But do they do
they provide going back to my point, do they provide
regional inflation numbers? Like, you know, folks in this particular
area of the country are paying ten percentage points more
for energy versus say, I don't know, pick a state
out in the Midwest here that's got some reliable, abundant

(07:25):
power resources where we're paying less. Do they show it
in that form like maybe an advertisement for states with
lower regulatory schemes and thus better affordability.

Speaker 2 (07:34):
Not in the reporting that I'm looking at that they
do get pretty in depth, but they don't report that
at the national level because they're speaking to a national audience,
and I think they really normally, I think we really
want to be super quiet about this until we actually
get to a point where we've got good news to share.
I think this administration has been very willing to be
loud about the good news and very quiet about about
the more frustrating news. Yeah.

Speaker 1 (07:54):
I just kind of am harping on it, a dwelling
on it because I know Donald Trump, everybody's looking at
him to do so something about inflation. I mean that's
a big challenge. Of course, you got the Fed involved
with that, but you also have the realities, like there's
the lowest beef herd head count since the nineteen fifties.
Your price of beefin is gonna go down. And Donald
Trump can't wave a wand and produce like double the

(08:17):
heads of cattle on any given farm. So that seems
to be out of a quick fix relief. You know,
energy prices are far more expensive than in California because
they're shutting down refineries and coal plants left and right,
and I mean they're just some things that are completely
out of a president's hand. That's why I raised this
as an issue. He's got a challenge on his hands.
People want him to do something, but he can't in

(08:39):
many cases.

Speaker 2 (08:39):
Yeah, yeah, no, I did did just locate the so
it does break down into four regions. Oh and this
is again this is fuzzy numbers because it's still in.
It's including the data that we just talked about. It
doesn't exist. But then there's four regions Northeast, Midwest, and West.
Every one of them is three to three point one percent.
The South is two point two percent. So if you're
looking purely for inflation inflation to be lower, I guess

(09:01):
move north. But I would still hold off until we
get some of these blank spots filled in on this report.

Speaker 1 (09:05):
So scurity facing cuts, who's going to save it? And
some Americans don't believe it's even going to be around
when they retire. Those topics coming up with money mon
days Brian James, I hope you can stick around fifty
five KRC dot com for more and from the program
at eight forty for our hair seat care sign helping
folks out there in the senior community. Is doing a
great job every single day, doing a great job for
financial planning for his clients. Brian James, talking money matters.

(09:29):
Let's move over to socials security. The giant train wreck
that's been We have seen the light at the end
of the tunnel, and it is a train it's not
a beautiful light of relief. So security is on a
train wreck, and we've all known it. Nobody is willing
to touch it. It's the third rail of politics. And
I saw this study you have from the Cato Institute.
Shocking no one, Fifty three percent of Americans under thirty

(09:50):
say they'd rather cut benefits of those currently receiving Social Security.
By contrast, eighty nine percent of seniors age sixty five
and older say younger workers should pay higher taxes. It
benefits steady.

Speaker 2 (10:01):
Yeah, but everybody voting for them, So I vote for me,
go me, And that's exactly why they are elected. Officials
won't touch social Security. They want to be re elected,
and by touching it, it usually means having to control
the expenditures because we're running out of money. Brian James,
please unfold this for us. Yeah, So Cato Institute did
a survey to confirm what we all kind of know,
which is social Security doesn't actually work and people are

(10:23):
mad about it. So now social security in general is
highly supported. Eighty three percent of Americans do say that, Yeah,
that's probably a good idea. It's seventy percent of people
think that Social Security benefits are going to be reduced
in the future. This is a drum beat that I
hear all the time, Brian Thomas. People will always make
the comment though, well, I can't count on Social Security
because it's going away. No, it's not. It would have

(10:44):
to be voted out of existence because right now there
is an entry on the top of your pay stub,
on the top of my pay dub that says, Fika
fiica is social Security taxes. So as long as they
keep pulling taxes off the tops of our pay stubs,
that's going to fund Social Security. If they do absolutely nothing,
then benefits on retirees in the future will have to
drop by about twenty five percent, but the program will

(11:05):
be still solvent, so it's not going anywhere. However, thirty
percent believe that it won't exist at all.

Speaker 1 (11:10):
Well, okay, you're a financial planner. You're sitting there with
your client and they're off the mindset that it's not
going to be there, and that their goal then is
to plan financially for a time when they will not
be able to get a Social Security check or maybe
even though it'll be a lot smaller. Isn't that a
healthier perspective when it comes to trying to save and
manage for retirement, thinking it's not going to be there,

(11:32):
and then magically when it shows up and you do
get that additional benefit, assuming it's still around, that that's
just gravy on your retirement.

Speaker 2 (11:39):
Well, it depends. I mean, some people just aren't going
to be able to make it period without social Security.
So if you're really going to try to plan without it,
well then you need to find a buddy to live with,
find another retired to get married sare housing with, maybe
you already are. I mean I'm referring to married couples
here too. It can just be too big of a
hurdle to get over, you know, to completely assume. Now,
now I do encourage let's run the number I always say.

(12:00):
Let's run the hunky doory scenario of your financial plan,
of your cash flow projection. You know, nothing bad ever
happens again and everything you whatever promise comes to you.
Here's how that looks. That's your baseline. Now, let's run
it again and reduce social Security by twenty five to
thirty percent. And if that doesn't work, what changes do
we need to make right now? And that's always either
going to be save more work longer, or expect less spending.

(12:22):
If you can manipulate those three things, you can make
it work. And then sometimes yeah, I'll do a third
one with if somebody is truly kind of paranoid, let's
do a third one with social security not in the
mix at all, and for some people it's not on
the table. That means you simply can't afford to retire.
So if you want to plan for that, that's fine,
but you are kind of planning for, you know, kind
of the end of the world, and the math does
not show that at this point.

Speaker 1 (12:42):
Well, and that's the beauty of having a financial planner.
You've got these programs that do all those number crunching
in scenarios. Doesn't it run like through a thousand different
scenarios of where the market could and might go from
the worst case scenario to the best case scenario.

Speaker 2 (12:55):
Yeah, that's the big variable is always what are my
investments going to do? Right, we can figure out what
spending is going to do, We can attach inflation figures
to all that. You know, we can look pretty deep
in somebody's lifestyle. Those numbers are kind of sort of
fixed they don't tend to waver too much. But we
don't know when the market is going to take chunks away.
All that we know is that it will, So we
do something called Monte Carlo analysis, which basically means, let's

(13:16):
figure out what kind of cash flow you're going to
need over the remaining you know, decades of your life,
and then let's run it literally a thousand different times.
And across those thousand times is you know, the market
takes a hit upfront, the market takes a hit later
in life, somewhere in the middle, all those kinds of things.
And then the outcome of that is a batting average.
How many times out of a thousand do I make
it all the way to the end with at least

(13:37):
a dollar in the bank. That's called Monte Carlo analysis,
and it doesn't. There's nothing has nothing to do with
guarantees or anything like that. We're not trying to bat
a thousand. We're just trying to understand how far in
our direction can we lean the odds by the tweaks
we are making.

Speaker 1 (13:49):
Now, that's good and again another value of having a
financial planner, and one that is h it was a
fiduciary obligation to you that is not trying to sell
you something in not charging you a fee for their works.
Got that in for you, Brian. Now, what about fixes
the Social Security? I mean, I've heard a million different
ones at income based eligibility maybe, I mean, I don't know.

(14:10):
There's a variety of different things extending Social Security out
to later retirement time. People are living a lot older
than they used to be. I mean when it's first
started under FDR, how many workers did they have for
every recipient? It was like fifteen or twenty or something
or down to single digits.

Speaker 2 (14:28):
Yeah, the pressures here again, we've seen this train wreck
coming in slow motion as you reference, yeah, for decades now,
and it was simply because there were so many more workers.
You know, when we had the greatest generation, the Baby Boomers,
largest generations all working at full tilt and generating money
into the system were Now we're on the back end
of that where less is being earned. There are smaller

(14:48):
generations out there and less is being earned by them
on average, just because of the way the demographics have
worked out, and so there's just less money flowing into
the system. Now, there's a million ways we can change
this we can raise workers, we can cut benefits. I mean,
it's really we we either have to put more money
into the system or take less out, and there's a
million ways that can happen. You can make people work longer.
We've already done that. The sociecurity age has moved forward.

(15:11):
There were major reforms done in the eighties. Yeah, we
also began payroll taxing or not pay well. We also
began taxing social Security benefits. For those of you don't know,
you do indeed pay taxes on Social Security benefits. And
again we can change the ages that you're eligible, all
those kinds of things. I mean, I think truthfully, the
answer is going to have to be some combination where
everybody sacrifices something otherwise we're just gonna end up with

(15:34):
a generational war.

Speaker 1 (15:35):
Well, it would be a fairness element along those lines,
if everybody had to tighten their belt a little bit,
then you could at least sell it as a package
that everyone gets impacted, not just one group or another. Complicated, absolutely,
and the of the worst part about this, Brian has
come up now for the third time that we have
seen this problem unfold, and people have been ringing alarm

(15:56):
bells about it for so long, and yet nothing really
has been done by way of, you know, a really
solid fix.

Speaker 2 (16:02):
Yeah, And I think the reason for that is because
no politician can stand up on their soapbox and promise
to give somebody something. This is all taking away by
fixing this there there's no there's no way that anybody
benefits other than the the Maybe we can maintain the
status quo if everybody sacrifices a little bit, but nobody
gains anything. So that person is going to have to
stand on their soapbox and champion fixing social security by

(16:26):
convincing three hundred million people that they all need to
sacrifice something that will make them a sitting duck for
their next election.

Speaker 1 (16:31):
Well, maybe you need a lame duck president to advance
that agenda.

Speaker 2 (16:34):
That'd be nice that we have those every few years.
Nobody brings it up. Brian James.

Speaker 1 (16:40):
Hold on, we're going to talk about the SEC You're
gonna have to explain this one to me. I admit
my ignorance on tokenized stocks and how that is a
move toward blockchain. That's what we have, Brian James, or
will continue just a minute, Hang on, fifty five KRC
the talk station Doctor with All with Financials, Brian James
doing Money Monday, and every time we start talking about

(17:00):
bitcoin blockchain, I'm just my eyes glaze over. Brian, I've
had to explain to me a million times listen how
that's how, that's how valuable a membership in mensa is.
I can't even understand blockchain, So yeah, go ahead and
make fun of somebody who's got that. All right, It's
just I know it's a security thing, blockchain, and I
understand it's it's pretty darn good when it comes to security.

(17:21):
But how does this mix in with what we're talking
about today, the idea of tokenizing stocks as it relates
to blockchains.

Speaker 2 (17:28):
I actually like this update. So so I've done a
decent amount of reading on how this works, and I'm
not an expert by an by any stretch, but I
do know a little bit. And then having thirty years
of being a financial planner, it all kind of makes sense.
That helps. Oh yeah, that does add a little bit.
So the basic core function of the blockchain, which everybody
associates with crypto, that's kind of where it came from.
It's what it's one what underlies bitcoin, the entire Bitcoin

(17:50):
network and really most of crypto nowadays. But the whole
point of it is, it's just a record keeping structure
where there is a copy of the Ledger on every
computer on the face of the earth, and if you're
going to fake it, then you have to manage to
change every single copy out there across the universe. That's
what makes it secure. Everybody sees the same information. It
has to be changed all over the place.

Speaker 1 (18:08):
So it's the ultimate transparency exactly.

Speaker 2 (18:11):
And you can see these things. You actually can look
in and see what wallet owns, how many bitcoin and
all that other stuff, because it's all publicly available. So
that's where the security comes from. Now, the reason we're
talking about it today though, the SEC has approved a
plan to tokenize US stocks. Now this has nothing to do
with cryptocurrency. Stocks are not becoming crypto or anything like that.
All it is is that the Ledger program is being

(18:33):
updated technologically speaking, to make it more efficient. Now why
this is important. When I started in this industry, a
settlement time for a stock trade was something called T
plus three, which means time of trade plus three business days.
If I sold something on a Friday, my money wasn't
going to be available until the following Wednesday, three business days.
Then it went to T plus one in about twenty seventeen,

(18:55):
and this will hopefully make it almost instantaneous because the
way the blockchain infrastructure works, so you could have access
instant access to your money. What this means is that
if you're calling me and needing a distribution from your
IRA or your investment account, I might be able to
send it out the same day, oh, versus telling you
wait until tomorrow or maybe the next day, you know,
barring holidays and all that kind of stuff. So I

(19:16):
do think this is a good thing. I just don't
want people to get worried that stocks are becoming crypto.
That's not what's happening.

Speaker 1 (19:21):
Okay, But I wrote down the word privacy when you
were talking about that. Because everybody in the world has
this blockchain, they know what's in the wallets, they can't
can they trace a particular wallet to a particular individual,
Because if that's the case, then they Tokenizing your stocks
would allow people to have a clear understanding of what
your stock portfolio.

Speaker 2 (19:41):
Yeah, this is a little different. I mean what I
was referring to there is the original, because remember bitcoin
does not exist on a network. It's just out in
the universe, right, everybody can see it. This is still
going to be behind closed doors. It's just allowing the
big custodians to move things more quickly because they're going
to be synchronizing all of their ledgers across the whole universe.
But it doesn't mean that the general but can see it.
That is definitely a Bitcoin thing. It's not as private

(20:03):
as you might. There's some great books out there about
how unprivate that actually is, really, but that is not
what's happening here. I really want to stress that this
is this is literally as big as you know in
the sixties and seventies when big brokers just went from
paper certificates to electronic and things got a heck of
a lot faster. This is another iteration like that.

Speaker 1 (20:20):
So I guess the ledger in this particular case is
everyone who has any interest in any given stock, so
they would all know what's been sold. I mean, because
there's a finite amount of shares available for any given
company that's traded, right, sure, everybody who's trading in that
particular stock on behalf of people, they would all know
real time what trades have happened and how much stock

(20:42):
is out there or how much has been withdrawn.

Speaker 2 (20:44):
Yeah, well that's true, but that that's available anyway. I mean,
that's just trading data on a daily basis, So that
doesn't change things. And there's going to be rules and
that this is they're building this out now. There will
be rules in place to say who owns what. But
remember these are publicly traded security so the information as
to who owns how much that's definitely out there. You've
always been able to find that stuff. You can see
who the you know, the major shareholders are in the

(21:04):
perspectus is you can look on websites and see who
owns what. That's what publicly traded means. So that part
is not really going to.

Speaker 1 (21:10):
Change, all right. So just the speed with which we
can get access to the money that we've put away
for sure.

Speaker 2 (21:17):
And again I do believe this is a good thing.
I know from my day to day and our operational
folks here at all worth it will be. It will
be helpful to reduce the amount of time that we
can promise somebody, Hey, your money's going to be in
your checking accounts, so you can go.

Speaker 1 (21:27):
Pay your bills, Okay, if that's ultimately what we get
out of it, and there's not any pitfalls that I
haven't created on a whole cloth in my mind for
lack of understanding on how this works, and they do
have a decent regulatory environment that actually makes sense in place.
All right, I'll go for that as a concept anyway, Brian.
We'll probably talk about it as we closer approach the
launch date of this happening.

Speaker 2 (21:47):
Right, I bet this will be a topic in twenty.

Speaker 1 (21:49):
Six big time. And in twenty six you and I'll
be talking on Mondays again. I pray we will. We will, indeed,
wonderful Brian James, for my entire listening audience, my family
to yours, wonderful Merry Christmas to you and all the
folks over at all Worth. I hope you enjoyed the
holiday season, and I wish you in advance a happy
New Year as well you as.

Speaker 2 (22:07):
Well, and merry Christmas. Do all happy belated Hanukkah and
so on and so forth. All that to all the families.

Speaker 1 (22:12):
Take care of my friend