August 26, 2025 • 37 mins
On today’s episode of Simply Money presented by Allworth Financial, Bob and Brian sit down with Allworth’s Chief Investment Officer, Andy Stout, to break down the Fed’s next move on rate cuts. They also dive into how retail investors are driving markets, smart strategies for unwinding concentrated stock, and which travel rewards cards actually deliver real value.
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Speaker 1 (00:00):
We do.
Speaker 2 (00:00):
The latest information on is f YI in the Russian
some Arabson trained fifty five krc V talkstation.
Speaker 3 (00:15):
Tonight.
Speaker 2 (00:16):
The fit certainly moves markets, but so do you, and
we'll explain what we mean next. You're listening to Simply
Money and presented by all Worth Financial on Bob Sponseller
along with Brian James Well. The eyes of the financial
world were definitely focused on Jackson.
Speaker 3 (00:31):
Hoole, Wyoming on Friday, and we now know why.
Speaker 2 (00:34):
Joining us tonight is all Worth Chief investment Officer Andy
Stout Andy Jerome pal spoke in the markets reacted like
crazy on Friday.
Speaker 3 (00:44):
What happened and why? From your point of view.
Speaker 1 (00:48):
I think it was really a change of narrative when
we think about how the market's been thinking about rape
cuts in general.
Speaker 4 (00:56):
If you go back a couple of weeks ago, I
think you could.
Speaker 1 (00:59):
Probably say that we would see a rate cut if
the data supported it. But after Palell's comments on Friday,
a rate cut appears likely as long as the data
doesn't prevent it. So it's a completely different way to
think about things. So basically, the door is open for
a rate cut in September as long as things don't
go off the rails.
Speaker 3 (01:21):
So that's good to hear. So what do we Why
isn't Powell moving faster on this? Do you think there's
any political stuff going on here in terms of Trump
wants him to do a certain you know, obviously cut rates.
He's one of that really all his entire two terms
in office. But Powell isn't moving as fast as Trump
wants him to do. You feel like there's a little struggle,
a little turf battle here going on where Pawella can't
(01:44):
doesn't feels like he cannot allow his office to be
dominated and dictated.
Speaker 1 (01:48):
To you know, I don't think Palell is taking it
from that perspective. I mean, it's natural for you know,
a lot of people to do that. Butchre Powells been
pretty consistent in his rhetoric in terms of fighting inflation
and what he's worried about, and you've heard it from
similar members on the FED. It just seemed that the
(02:09):
Federal Reserve, you know, collectively, is starting to come around.
Speaker 4 (02:14):
To the belief that with.
Speaker 1 (02:17):
The recent labor market data, you know, job cuts are
probably warranted. But when you look at why the Fed
hasn't moved so far, it's been because of inflation. I mean,
inflation is really really challenging to get rid of. I
mean we saw that.
Speaker 4 (02:31):
I mean, if you go back, you know, forty.
Speaker 1 (02:34):
Five years into the early nineteen eighties when Cherry Volker
had such a tough tough time getting rid of inflation,
and then this is kind of our second time. We
are the first time really since then when we see
some real inflation, and the Fed's had a really difficult time.
Speaker 4 (02:49):
I mean they thought it was you know.
Speaker 1 (02:51):
Their word of the day was transitory at that time,
following the COVID supply chain issues, and they thought that
was all these one off effects and transitory, which is
a fancy word for temporary. It turned out to be
not so transitory. And the Fed's still dealing with inflation.
And when you look at what's going on in the
trade world with the terroriffs, it certainly appears that the
(03:14):
risks have not gone away. I know, economists are divided,
and certainly the White House believes differently in terms of
what terrifts may or may not do for inflation, but
that doesn't mean that their risks aren't there. And that's
what the FED is really worried about. And cheir Pal
did say on Friday that there are some terif effacts
making their way through the system. What they don't know
(03:36):
is if it's like a one time level reset or
if it's more something that's ongoing and could keep pressuring
prices higher. And that's why when you look at what
Chair Pal said on Friday, it's not that he guaranteed
rate cuts, but he certainly opened the door. And as
long as you know things don't go to haywire on
the inflation side, you're probably going to see a cut
(03:58):
here in September.
Speaker 2 (04:00):
Andy's sticking with that tariff topic here for a moment.
I'm interested in your thoughts on this. I mean, I heard,
you know, Treasury Secretary Scott Bessett came out over the
weekend and said, you know, because I know the President
and talked about taking some of this tariff revenue and
actually writing checks to the American people, you know, like
they did a stimulus check back during covid UH. Now
(04:23):
Treasury Secretary Beston is saying, nope, we're going to use
these this tariff income to the government to reduce the
deficit and the debt. And the estimates for twenty twenty
five is about three hundred billion dollars in tariff revenue.
This seems like a permanent strategy, you know, by this
administration to attack the debt and deficit in some way.
(04:45):
I've got to think Chair Pal is factoring that in.
And my question is if these tariffs are this tariff
stuff is going to be permanent. And let's face it,
this is this is a sales tax, you know, however
you want.
Speaker 3 (04:58):
To slice it on bi businesses and consumers.
Speaker 2 (05:01):
Is that going to make it very difficult to ever
get back to this two percent you know, Fed mandated
inflation target.
Speaker 1 (05:10):
That's a really good way to put that, Bob. So
when you're thinking about the tariffs out there and might
be a sales tax and what Powell has to think
about things, Yeah, you're absolutely right. It's not that he's
really thinking about, you know, what the Treasury is doing,
but it's really the secondary effects is what that Treasury
is proposing. Is that going to result in ongoing inflation?
(05:32):
And if so, how is the Fed actually going to
get to that two percent rate? Now, one thing that
you know, we've been hearing a lot from different feder
members over the past a couple of weeks and from
Powell on Friday is how they're thinking about inflation. And
it wasn't just the near term impacts on inflation that
Powell was really talking about.
Speaker 4 (05:52):
They were talking about.
Speaker 1 (05:53):
Reviewing their longer term framework. Think back to COVID. The
Feds started talking about not just about inflation at a
two percent level, but more about an inflation averaging two percent,
meaning they're going to allow to overshoot that two percent
level because it's been below two percent for so long.
And now you know what we have is the Fed
(06:14):
essentially scrapping that and saying, yeah, we're at two percent.
Question is how are they actually going to get to
that two percent level? If you look at the data
right now, I don't really see us getting to a
two percent level really anytime in the next year or two.
So when I think about why the FED might cut
if inflation is not at their target, I think it's
more about cutting because of the other part of their
(06:35):
dual minting.
Speaker 4 (06:36):
It's not just price stability, which is one of the two.
The other one's full employment.
Speaker 1 (06:39):
So it's this job mark of weakness that I think
the fuel rate cuts andy.
Speaker 3 (06:44):
So there's there's obviously a lot of data a lot
of things you got to pay attention to, and you
just kind of reference some of those data points. So
tell me, I want to I want to get inside
the mind of Andy Stout, which sounds terrifying, But anyway,
when you pour your coffee in the morning, what is
the very first thing you're looking at at a time
like this, What are those two couple, you know, couple
data points that really seemed to be most important that
you want to you want to keep tabs on the
(07:05):
most right now.
Speaker 1 (07:06):
Well besides making sure you hit the right button on
the coffee machine, so it actually forors coffee.
Speaker 3 (07:12):
But yeah, let's prioritize first things first, right, Yeah.
Speaker 1 (07:16):
So after that, I mean it varies from day to
day because I mean certain economic releases come out at
certain days or months points in the month. So you know,
every Thursday, I'm really watching these weekly jobless claims are
really important right now. We actually saw a little bit
of a tick up last week that appears to be
a little bit more of a seasonality issue than anything else.
Speaker 4 (07:37):
But that's where you're going to see some of the
first weakness.
Speaker 1 (07:39):
So within this report on Thursday, you get these initial
jobless claims, which are people filing for unemployment benefits for
the first time, you also get continuing claims, so that's
people who've been laid off and are still collecting. These
initial claims have been pretty low really for the past
few years, in the low two hundred thousands. However, continuing
claims have been rising and they're about one point nine
(08:00):
five million, meaning that once someone's lost their job.
Speaker 4 (08:04):
They're having a harder time finding work.
Speaker 1 (08:07):
So what I'm really looking at, and by most concerned,
I'm thinking about the job market. That's one of the
main ones is the initial ones, because if that starts
to tick up higher, that's going to be a sign
of even more weakness in the labor market. And the
other one is obviously going to be the monthly jobs report.
So we saw last month a massive revision lower two
hundred and fifty eight thousand, showing that over the past
(08:31):
three months we've essentially only had thirty five thousand jobs
on average. That's not a sign of strength at all.
We see continued weakness like that. You know, you might
even see these rate cuts pick up.
Speaker 2 (08:43):
You're listening to simply Money presented by all Worth Financial
lumbob spondseller along with Brian James, joined tonight by all
Worth Chief investment Officer Andy Stout. Andy, I want you
to take a minute and hit on your recession scorecard.
It's one of my favorite things that you and your
team put together for all of us here at all Worth.
What data points are you looking at right now on
(09:04):
the recession scorecard and how are things looking, you know,
after this most recent FED announcement.
Speaker 1 (09:11):
Well, the FED announcement doesn't have an effect on the
data itself, but we have seen an improvement in the
data when we look at these leading economic indicators, which
are data points that move before the broad economy moves.
And to be clear, Bob, this is not a crystal ball,
but it tells us the level of Oh, come on, Andy,
(09:33):
But when we look at it, we're looking at many
different individual indicators that move before the broad economy moves.
And if you go back a few months ago, you know,
maybe half of our indicators where you're looking at suggested
recession at risk was high.
Speaker 4 (09:49):
You know, right now we're down to about thirty percent.
Speaker 1 (09:51):
So I would still call this a medium level of
risk out there, but not necessarily something that means recession
is right around the corner. And specifically, what jumps out
is that consumer confidence has been weakening, so that's been
one of the major areas. I mean the yield curve,
(10:11):
which is the relationship of short term and long term rates.
Speaker 4 (10:14):
Well, it's not.
Speaker 1 (10:14):
Inverted right now, meaning that short term rates are currently
less than long term rates, which is generally a good thing.
It has been inverted over the past year, and that
can sometimes have a lagged effect as to when it
actually results in an economic slowdown or not results. But
when one does follow, I don't want to say it's causational,
(10:35):
but there is definitely a correlation.
Speaker 4 (10:37):
So we're still looking at that.
Speaker 1 (10:39):
But when you look at it in general, the picture
isn't as dire in all honesty as it was a
couple of months ago.
Speaker 3 (10:45):
Here's the all Worth advice.
Speaker 2 (10:46):
There will always be reasons to worry, but the smartest
investors stick to a plan, not just headline news. People
like you are currently steering the stock market ship. We'll
explain how and what it means means for your portfolio
coming up next. You're listening to Simply Money, presented by
all Worth Financial on fifty five KRC, the talk station.
Speaker 4 (11:09):
We're ending it in DC.
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If you one year in jail.
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Breago Versia turned himself into his day's news.
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First is Off Now Chicago, Illinois a disaster fifty five
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Speaker 5 (11:22):
All Worth Financial a registered investment advisory firm. Any ideas
presented during this program are not intended to provide specific
financial advice. You should consult your own financial advisor, tax consultant,
or a state planning attorney to conduct your own due diligence.
Speaker 2 (11:41):
You're listening to Simply Money, presented by all Worth Financial
on Bob's fond Seller.
Speaker 3 (11:45):
Along with Brian James.
Speaker 2 (11:47):
If you can't listen to Simply Money every night, subscribe
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as well. Just search Simply Money on the iHeart app
or wherever you find your podcast. Straight ahead, real questions
from real listeners, and maybe the exact issue you've been
(12:09):
wondering about too, that's coming up in our Ask the
Advisor segment at six forty three. Well, right now, retail investors,
every day individuals are somewhat steering the ship of the
US stock market. They're not just playing ketchup anymore. They're
leading the charge in a lot of cases, but as
sentiment surges, so do questions. Is this momentum sustainable and
(12:33):
does it help or hurt your long term planning? Ryan,
Let's talk about what everyday individuals are doing out there
right now and how retail investors are impacting you know
where we're staying with the stock market.
Speaker 3 (12:46):
Hey, what we're what we're talking about is the phenomenon
we see every now and then, usually in the later
stages of a bull market. We never get to know,
of course, when these things begin and end. We figured
it out after the fact that in any case, eventually
retail investors will get very confident and that's that that
is the money that will be flowing into the market
versus the institutional side. They tend to lead the charge,
and the institutions will kind of turn the ship around,
(13:08):
retail investors will follow. So where we are right now,
as retail investors are now accounting for about thirteen percent
of the total inflows to the S and P five hundred.
That's the highest level we've seen since February, and just
in the last month alone, these folks have bored about
fifty billion dollars into global equities. Now that's a phenomenon
we hadn't seen a long time where the S and
P five hundred as we're sitting here right now, is
(13:29):
up about ten percent for the year. International stocks are
sneaking up on up twenty five percent international meeting anything
but the United States. But so for all of the
first half of twenty twenty five, these folks bought about
two hundred and seventy billion dollars in stock. JP Morgan
expects another three hundred and sixty billion by the year
of end. By the end of the year, so that
kind of volume that could push the S and P
(13:50):
five hundred up another five to ten percent. Now, we
never know what's coming, but if the inflows will continue
the way that, at least JP Morgan thinks, then we
could be looking at higher highs on the will see Yeah,
And the.
Speaker 2 (14:02):
Question crops up when we start tracking the behavior of
retail investors. Are we approaching overheated territory here? You know,
with all that activity and money piling in, there is
risk there's a surge in mean stock and call option trading,
particularly in these heavily shorted companies, and Brian this is
(14:22):
always a little bit of cause for alarm. Margin debt
has ballooned past one trillion dollars. That should catch your attention.
And look, we've seen this for decades, Brian. Retail investors
are usually late to the party, late getting out and
late getting in, and sometimes when leverage starts to creep in,
(14:43):
that's a sign that people are maybe getting out over
their skis here just a little bit.
Speaker 3 (14:49):
Yeah, And I like to look at history for these
kinds of things, So, uh, you know, just just how
has this played out in the past. Well, this is
what you just mentioned, that margin buying that played a
role in intrigguering the Great Depression. And I'm not a
all saying we're heading into that, but just so we
all know where this was. There were no rules back then.
Basically it was the Wild West. So you had people
borrowing on ninety percent of their accounts. In other words,
(15:09):
if I want to invest one hundred thousand, I have
ten thousand on my own money in it and ninety
thousand to somebody else's. So it was a house of
cards to begin with. That that brought a lot of
the rules and government departments and all that those kinds
of things we know today. So those risks aren't quite
as prevalent as they were back then. But more recent
history was the dot com bubble, and that's where online
(15:29):
trading platforms remember e trade, and there were a number
of these types of companies out there that made it
very easy for people to trade stock. Then NASDAK gained
about four hundred percent on people rushing into the market
from ninety five to March of two thousand and then
the bubble burst and had dropped about seventy eight percent,
wiping out a lot of small investors who did not
follow the advice of a diversified portfolio and all those
(15:51):
kinds of things. So this is nothing to be alarmed about.
But these are just examples of if you chase the
herd and you do not follow smart sound of financial
planning principles and diversified portfolios, then yes you could be exposed,
but that's not anything new. That risk is there every
day if you're not following things the right way exactly.
Speaker 2 (16:09):
You're listening to simply Money present up by all Worth
Financial on Bob Sponseller along with Brian James. So Brian,
get practical here for a moment when you've got folks
coming into your office and.
Speaker 3 (16:18):
Let's face it, it's good.
Speaker 2 (16:20):
To read articles, it's good to do research, it's good
to study some of this stuff. A well informed client
is usually a great client. But along with reading some
of this stuff, you can get caught up in some
of this euphoria over leveraging, chasing short term trends. What's
some of the advice that you give to your clients
(16:40):
and folks that come in to see you for the
first time on how to handle situations like this.
Speaker 3 (16:46):
Understand your own situation. That's where we spend an enormous
amount of time. You know, a lot of times I'll
have clients come in for the first time, you know,
first time initial consultation type meetings, and they really want
to start with, Okay, I got a pile of money,
and all I need is a bigger pile of money and
then all my problems will be solved. So how are
we going to make a big pile of money? And
that's really not the case. We really got to understand
what do I have to work with to begin with?
(17:08):
What's the foundation of my whole situation. I have these resources,
I'm trying to do this with them. First off, here's
how much growth I need out of my portfolio to
make this plan work. And sometimes the plan doesn't work
and we have to change some of those more fundamental requirements.
But then once we do have a situation where okay,
we can kind of make a case for this plan,
is that dog will hunt, then we need to understand
(17:29):
our market history, because that's one of the few guarantees
that we get to give people. In terms of being
a financial advisor. There aren't many guarantees in this world.
One of them is, at some point your ship is
going to have to float despite some pretty rocky seas
that's going to happen. The assumption that an advisor or
a strategy or some kind of financial project product will
sidestep all the volatility is simply mistaken. You have got
(17:51):
to know what could this look like in the bad times?
And can my portfolio handle? Does my plan still float?
Stress tests that portfolio, that plan, and before you make
any assumptions about how well it's gonna float, because there's
a lot of unpredictable things out there.
Speaker 2 (18:05):
Yeah, And the thing to keep in mind is a
lot of times these single product solutions, you know, are
just that one product. It's meant to be one part
of an overall portfolio, and you know, don't get too
caught up emotionally just doing you know, catching one little
short term tailwind.
Speaker 3 (18:23):
Here's the all Worth advice.
Speaker 2 (18:24):
Prudence is your competitive edge, especially when market's hume when
with enthusiasm. Coming up next, the smart way to unwind
a concentrated stock position without getting hammered by taxes or
messing up your long term plan. You're listening to Simply Money,
presented by all Worth Financial on fifty five KRC, the
talk station.
Speaker 6 (18:45):
This is for your information. Everything we do we keep
you informed.
Speaker 5 (18:50):
Is f y the latest information on the Russian.
Speaker 6 (18:53):
Information about my money, on tariffs and trade, throughout the day,
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Speaker 3 (19:03):
Are you just iHeartRadio station?
Speaker 2 (19:09):
You're listening to Simply Money presented by Allworth Financial. I'm
Bob Spunseller along with Brian James, joined tonight by all
Worth Chief investment Officer Andy Stout. And Andy we talk
about this all the time on the show. You know
how to responsibly unwind concentrated stock positions in a portfolio,
managing the taxes, the risk, all of that, I'd like
(19:32):
to lead off with. I mean, you see a ton
of clients come through the door at Allworth and you've
got advisors coming to you saying, how do we solve
this puzzle?
Speaker 3 (19:40):
You know, every day of the week.
Speaker 2 (19:42):
What are some of the most common strategies you're seeing
and recommending that we use in terms of how to
properly unwind a concentrated stock position.
Speaker 1 (19:54):
You know, Bob, that's that's a really good question, and
a lot of it depends on, you know, what the clients.
So you might have inherited something from Procter and Gamble,
you know, from a parent, or maybe you worked at
a place and you you know, got a lot of
company stock, uh and maybe you want to keep it,
but you want to diversify out some of that risk also,
(20:18):
or another way you could think about things is that
you want to get out of it all together in
a minimal uh, in a way to minimize taxes. So
you know, it really depends on how you want to
actually attack this and go from there. So you know,
there's a few different ways you know that we can
you know, help people with that. We have you know,
(20:39):
simple basic solutions like donor advised fund. So if you
happen to be charitably inclined, you know, we can certainly
assist with that, you know, lower overall tax basis at
the same time and uh, you know, make some donations.
Speaker 4 (20:55):
You know. Some other ways, we have what's called an
exchange fund.
Speaker 1 (20:58):
You know, these are ways that essentially allows you to
exchange you know, I'll call it return streams of your
concentrated position for a more broad position, maybe something that
can be like a collection of large cap stocks. So
you know, we can exchange those, uh, those returns for you,
so you get that diversification. Now with that one, you know,
(21:18):
you're deferring taxes. Uh, you're not you know, you're not
getting rid of your taxes uh in pretty much any
of these situations, but you can defer them and you
can diversify.
Speaker 4 (21:28):
So exchange funds are really good.
Speaker 3 (21:30):
You know.
Speaker 4 (21:30):
Another way that.
Speaker 1 (21:31):
You can essentially defer taxes but still keep your underlying
position is by using some stock options. And there's some
really uh interesting strategies out there, and options though can
be can be complex.
Speaker 4 (21:46):
I mean, there's there's no simple way to put this.
Speaker 1 (21:49):
But what you can do is like like with an
exchange fund, where you're actually swapping a position for a
group of positions like a mutual fund, as an example,
but it's more of a private investment with stock options.
You can mimic that too by essentially zeroing out your
exposure of that underlying position and create a what's called
a synthetic position in a.
Speaker 4 (22:11):
Broad like S and P five Hunderd index.
Speaker 1 (22:13):
That's where it gets really complicated, and there's some lots
of other strategies, some more complicated. Yeah I might seem
like we're really more complicated than that, but yes, more
complicated than that, and some less complicated than that. So
one powerful strategy is what we call direct indexes. What
you can do with that, if you have a concentrated position,
(22:34):
you can sentially diversify out of that or over a
period of time of your procter and gamble or whatever
it is, and go into what's called a separately managed account, which,
because it's a direct index, looks to really generate losses
at the level of other positions, and it'll use that
to offset gains. So in theory, you could diversify out
(22:57):
of that concentrated position to something more broad while over
a period of time using losses to offset gains, so
it does become more tax neutral.
Speaker 4 (23:06):
So definitely attract a way to do it Andy.
Speaker 3 (23:10):
So one of the things that seems like it would
come up is is how do I decide all the
different strategies? And the choices I have are great, but
at some point don't I have to decide, you know,
what portion of the concentrated stock that I mean, maybe
I want to keep some of it. Is there a
good rule of thumb to decide on how much I
should not change around any of this?
Speaker 1 (23:28):
Well, I've heard many different rules of thumbs, and it
really it comes down to everybody's individual position and where
they're at in life, and you know, just in general
stage of their financial goals, because a lot of times
you know people you know even if you have that,
but maybe a ten or fifteen percent rule of thumb.
Ten percent is probably one of the more common ones
I hear as far as compared to your overall wealth.
(23:51):
I don't have any more than that, But even that
might be too much depending on your own situation.
Speaker 4 (23:55):
I mean, there's not necessarily a one size fits all.
Speaker 3 (23:58):
Yeah, you know, it occurs to me too that I
might if I'm already working for this company, if that's
where the stock came from, then I already have an
awful lot of my net worth tied up in my
financial situation of course with this company, so you know,
not only my if if things go south, I could
take my portfolio with it, plus my salary. So anyway,
that's that's a.
Speaker 4 (24:15):
Good for an example right there.
Speaker 2 (24:19):
All right, Andy, uh, talk about some of the more
simple ways we get off in the weeds here on
some of this complex stuff. What are some of the
just simple what i'll call lay up opportunities that come
across our desk again with these concentrated stock positions.
Speaker 4 (24:35):
All right, so let's not talk about some long short
solutions we have. Uh, you know, we'll be.
Speaker 3 (24:41):
That big brain working over time over there with the
big brain were we could tell he's fired up. Brian, Yeah, yeah.
Speaker 1 (24:47):
I was actually kind of hoping we would get to
talk about the long short stuff, but I guess we'll
have to come in and talk to an advisor about
that if you if you want to.
Speaker 4 (24:55):
Dive into that.
Speaker 1 (24:56):
By the way, that is probably one of the best
ways to uh again, you know, you.
Speaker 2 (25:00):
Know, if they're that important to do it, fire away
doing Andy in thirty two seconds, do it.
Speaker 4 (25:05):
In thirty two seconds?
Speaker 1 (25:07):
Are right?
Speaker 4 (25:09):
Long short?
Speaker 1 (25:10):
If you're long something that means you're you want it
to goloup in value. If you're short something, that means
you wanted to go down to value to start with that.
I think I'm down in about twenty five seconds by
the web.
Speaker 4 (25:20):
So what some of these strategies.
Speaker 1 (25:23):
Do is, uh, they'll go long positions, short positions, look
for ways to generate losses but still have a positive return.
And if you have even if you could come in
like with a stock has a zero basis, meaning all
you have are gains and long term gains in there.
Speaker 4 (25:39):
You know, some of these strategies can get.
Speaker 1 (25:40):
Out that maybe over like a two year period, diversifying
you completely, but taking the embedded taxes from that one position,
essentially spreading it out over two hundreds of different positions,
so you get diversified over a period of time. And
then there's a lot more of a discussion behind that,
but I know I'll alarguing over so I'll andy.
Speaker 2 (26:01):
Thanks, thanks as always for coming by and educating us
on a very important topic to folks out there. You're
listening to Simply Money, presented by all Worth Financial on
fifty five KRC the talk station.
Speaker 1 (26:13):
Is it just me?
Speaker 4 (26:14):
Or am I going crazy?
Speaker 3 (26:15):
Really?
Speaker 5 (26:16):
You know, the saying you're out of your mind.
Speaker 3 (26:17):
The mind is a terrible thing to waste. I don't
believe it. Around here, I'm losing my mind. Be careful,
you just might lose it.
Speaker 6 (26:29):
They're going off the deep end and they can't swim.
Speaker 3 (26:33):
Go ahead, lose your mind. Well, I've officially lost my marbles.
We'll give it back.
Speaker 4 (26:38):
God help us.
Speaker 7 (26:39):
All on fifty five KRC, the talk station on Jack Pocket,
America's number one.
Speaker 3 (26:46):
Welcome to here.
Speaker 4 (26:47):
I do think he is too old to run.
Speaker 5 (26:49):
In twenty twenty.
Speaker 7 (26:50):
Four, fifty five KRC, the talk station, you're listening to
Simply Money all Worth Financial on Bob spun Seller along
with Brian James.
Speaker 3 (27:03):
Do you have a.
Speaker 2 (27:04):
Financial question you'd like for us to answer. There is
a red button you can click while you're listening to
the show right on the iHeart app. Simply record your
question and it will come straight to us. All right, Brian,
Let's lead things off with Martin in Westchester, who says, Hey,
I've been reading something about a three point fifty one conversion.
Speaker 3 (27:24):
Can you explain to me what that is? Well, Martin's
got some interesting things going on apparently, So a three
point fifty one conversion. That's shorthand for a kind of
a tax deferred corporate transaction under you guessed at section
three fifty one of the Internal Revenue Code. The whole
point of it is, if you transfer property to a
corporation in exchange for its stock, and you and any
(27:44):
of the other people transferring stuff in control at least
eighty percent immediately after the exchange, then no gain or
loss is recognized for tax purposes. So it's basically an
in kind a contribution, meaning I'm gonna give you stuff
in in exchange, you're gonna give me stock, and I
have not sold my stuff, I have just swapped it
out for stocking the company. So the whole point is
(28:04):
not triggering taxes in supporting a business. So there's a
lot of moving parts to this, and it's not too
unsimilar from a ten thirty one exchange where you're kind
of doing the same thing but with real estate. Tons
of moving parts, and I would say there's a lot
that there's a lot of benefit to it, but I
think we will maybe we'll do a future entire segment
on that because again, lots of detail to those kind
(28:26):
of transactions. So now we'll move on to Bob and
Karen and Milford. I love Milford. I'm a Westsider, so
I didn't discover Milford until late in life, but Old
Milford is one of the cool places around Cincinnati. Anyway,
Bob and Karen, I feel like they saved more than
they think they need, and so now they're trying to
switch from being squirrels putting nuts away for the winner
to going and digging those nuts up again, moving from
accumulation to decumulation. How do they not screw that up? Bob?
Speaker 2 (28:49):
Well, first, Bob and Karen, it sounds like you guys
are both very responsible and diligent savers, so I doubt
you're gonna screw it up. What I tell people all
the time is there's just we're not talking about screwing
it up. We're talking about maximizing the opportunities moving forward.
And here's what I mean. You don't need to quit saving.
Speaker 3 (29:08):
What you should do is just.
Speaker 2 (29:10):
Take a look at what your life looks like now
and what your goals are moving forward, meaning develop a
financial plan. It comes down to how much you plan
to spend in retirement with Some of your other goals
might be charitable goals. Helping kids or grandkids, you know,
travel things like that, and then taxes. Tax planning is
(29:31):
where you can really add some value here by taking
a look at income streams from various sources and how
to make sure that things are structured in such a
way to keep more dollars in your pocket and away
from the irs. And then the last thing to look
at is just your overall investment risk tolerance. Has that changed?
How does that dovetail with your financial plans? So sit
(29:54):
down with a good advisor and just put you know,
put the proverbial car up on the jack and hook
up the diagnostics and see how things look and how
we can improve.
Speaker 3 (30:03):
Things going forward.
Speaker 2 (30:04):
That would be my advice, all right, Doug and pleasant
Ridge says, we recently sold a rental house that we
owned for twenty years.
Speaker 3 (30:13):
We made a solid profit.
Speaker 2 (30:14):
Should we do a ten thirty one exchange or is
it time to just take the gain and invest the
net proceeds elsewhere?
Speaker 3 (30:22):
All right, So this earlier question kind of led into
this one, So real quick, what is a ten thirty
one exchange? Well, the whole point of that is, if
I want to, let's say I have one top type
of investment real estate property and I want to change
into something else. Maybe I've got a single family I'd
like to own a multi family or something like that. Well,
if I do a ten thirty one exchange, then I
can avoid paying capital gains tax on the sale of
(30:45):
the original one by rolling those proceeds into a like
kind property, which basically means something's pretty similar. But here's
the problem, and I think this might be an issue
for you. Here you said you already sold it, Doug,
so I want to make sure that you even have
this as an eye option. You cannot take possession of
the sales proceeds yourself. It has to go to a
qualified intermediary kind of like escrow, who sits on those
(31:08):
funds until you actually close on that replacement property. And
there's deadlines involved here, So you have forty five days
from the sale to identify that replacement property and one
hundred and eighty days to close on that replacement But
if you took that money from the sale of the
proceeds and stuck it in your checking account at ten
thirty one, unfortunately is off the table for you. So
(31:28):
I hope that still maybe works out. But if you've
got an installment sale going where the buyer's paying you
payments over time, you might still be able to benefit there.
If all of that falls off the table, you can't
do it, then you can look at qualified Opportunity Zone funds.
This is not a ten to thirty one exchange, just
something else where you can reinvest the gains into a
QOZ fund within one hundred and eighty days, continue to
(31:48):
defer those taxes, maybe stick it at a charitable remainder trust,
maybe some tax loss harvesting. There's other things you can do.
But again, if you took possession of those sale proceeds,
then ten thirty one unfortunately not a choice onto John
and Cindy and Madeira. That's a part of Cincinnati I've
never been in. I should explore that. But John and
Cindy have been working with an advisor for a long time,
pretty happy with the returns, but they're wondering, how do
(32:10):
you how do you decide if you're if you're happy
with the value of financial advisor? Bob, Well, it's.
Speaker 2 (32:15):
It's always very hard to objectively, you know, evaluate the
value that you're getting from your advisor. But you know,
the way I'd answer this question is a lot of
you know, quote unquote advisors just invest the money, they
put it in portfolios. There they all they want to
talk about is investment strategies. And there's so much more
to this. A state planning, tax planning, risk, you know, analysis,
(32:40):
things that really go into a comprehensive financial plan. And
I think the best way to look at this is
maybe get a second opinion, get an evaluation of your
current plan and an experience what a true good fiduciary
advisor does and the value they add to a client's
overall and then ask the question. You know you're in
(33:02):
a better position to answer the question, is my current
advisor already doing that?
Speaker 3 (33:08):
Or is there a whole other.
Speaker 2 (33:09):
Set of opportunities out here I haven't even been hearing
about and potentially missing out on all Right, coming up next,
how to pick the travel rewards card that gives you
the most miles, the best perks, and real value for
your lifestyle. You're listening to Simply Money, presented by all
Worth Financial on fifty five KRC, the talk station.
Speaker 3 (33:32):
I count on.
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Traffic reports to get me home to my family and
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Speaker 2 (34:19):
You're listening to, Simply Money present about all Worth Financial
on Bob Sponsorller along with Brian James. If you were
that person who loves to travel, you might have asked
which travel credit card is the best one for me? Brian,
We've got a new study or a new article that
kind of lists the pros and cons of some of this.
(34:39):
And I don't mean this in a joking way. I
know you're very good at researching this stuff, so I'm
anxious to hear your perspective on the whole reward credit
card game out there.
Speaker 3 (34:51):
Well. Yeah, as you've heard me talk about a number
of times, I'm a big fan of credit card rewards.
I think about it kind of like the way a
water mill works.
Speaker 4 (34:58):
Right.
Speaker 3 (34:58):
This river is going to flow past me no matter
what I do with it. But if I stick a
water mill in there, then I can generate power and
all that kind of thing off of something that's going
to happen anyway. So compare that to credit cards. I
got to pay my bills, that's happening anyhow. If I
simply write checks out of my checking account, I get
nothing my bank. My bank will make a little bit
of money off of that. But if I use a
(35:18):
credit card and I understand how it works, then I
can get two, three, sometimes four or five percent for
simply paying my bills, which I got to do anyway.
So what we're talking about today is what kind of
rewards would be looking for. I'm a huge fan of
somebody who has college kids in college right now. For
about twenty years, I use a credit card that put
money into a five twenty nine plan, and that was
(35:39):
one of the smartest financial decisions I ever accidentally made.
Because I'm on the back end of it. Now, pay
intuition out of that pile of money, and that's worked
out well. But we're talking about travel today. So the
questions you should ask if if you've concluded and I'm
kind of there because we're pretty much done worrying about
college now its travel will be the big expense. So
do you fly multiple times a year or just once
(35:59):
for that big big Are you loyal to any particular
airline or hotel chain domestic international? Do you care more
about the comfort of things, the perks like lounge access
or just earning free trips that kind of thing in Cincinnati, Bob,
it's a little tough because you can't really be particularly
loyal to any one airline because they're all there now.
Gone are the days of it being all Delta all
(36:19):
the time and easier flights. But now we have a
little more flexibility. It's a little cheaper, that's not a
bad thing. So but anyway, if you're an occasional traveler,
then you're gonna want to look for a card with
no annual fee, pretty simple earning structure so you can
understand it, and then flexible rewards where you're not stuck
to one airline one hotel chain. If you're a frequent flyer, however,
then figure out where do you fly most often, and
(36:40):
then you might look at that particular airline or those hotels.
Road warriors. You might think about gas stations, rental cars,
roadside assistance. There are different options for that as well.
But do the math understand and really get into this stuff.
Understand how those points transfer into dollars, because there can
be some complicated calculations there as well well.
Speaker 2 (37:01):
And there's also cards out there, Brian that just give
you a good old cash back, you know, if you
don't want to get involved in all those details, cash
is good.
Speaker 3 (37:09):
All right, Thanks for listening.
Speaker 2 (37:11):
You've been listening to Simply Money, presented by all Worth
Financial on fifty five KRC the talk station.
Speaker 3 (37:17):
Who wants to be Rich?
Speaker 6 (37:18):
We call them every day millionaires every day listen to
Dave Ramsey. They typically say one of the things that
turned their life around was when they started looking at
purchasing something rich. People ask how much broke. People and
I've been both brother okay broke. People ask how much
down and how much a month?
Speaker 7 (37:40):
Tonight at seven oh six started asking how much on
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We do.
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The latest information on is f YI in the Russian
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Speaker 3 (00:15):
Tonight.
Speaker 2 (00:16):
The fit certainly moves markets, but so do you, and
we'll explain what we mean next. You're listening to Simply
Money and presented by all Worth Financial on Bob Sponseller
along with Brian James Well. The eyes of the financial
world were definitely focused on Jackson.
Speaker 3 (00:31):
Hoole, Wyoming on Friday, and we now know why.
Speaker 2 (00:34):
Joining us tonight is all Worth Chief investment Officer Andy
Stout Andy Jerome pal spoke in the markets reacted like
crazy on Friday.
Speaker 3 (00:44):
What happened and why? From your point of view.
Speaker 1 (00:48):
I think it was really a change of narrative when
we think about how the market's been thinking about rape
cuts in general.
Speaker 4 (00:56):
If you go back a couple of weeks ago, I
think you could.
Speaker 1 (00:59):
Probably say that we would see a rate cut if
the data supported it. But after Palell's comments on Friday,
a rate cut appears likely as long as the data
doesn't prevent it. So it's a completely different way to
think about things. So basically, the door is open for
a rate cut in September as long as things don't
go off the rails.
Speaker 3 (01:21):
So that's good to hear. So what do we Why
isn't Powell moving faster on this? Do you think there's
any political stuff going on here in terms of Trump
wants him to do a certain you know, obviously cut rates.
He's one of that really all his entire two terms
in office. But Powell isn't moving as fast as Trump
wants him to do. You feel like there's a little struggle,
a little turf battle here going on where Pawella can't
(01:44):
doesn't feels like he cannot allow his office to be
dominated and dictated.
Speaker 1 (01:48):
To you know, I don't think Palell is taking it
from that perspective. I mean, it's natural for you know,
a lot of people to do that. Butchre Powells been
pretty consistent in his rhetoric in terms of fighting inflation
and what he's worried about, and you've heard it from
similar members on the FED. It just seemed that the
(02:09):
Federal Reserve, you know, collectively, is starting to come around.
Speaker 4 (02:14):
To the belief that with.
Speaker 1 (02:17):
The recent labor market data, you know, job cuts are
probably warranted. But when you look at why the Fed
hasn't moved so far, it's been because of inflation. I mean,
inflation is really really challenging to get rid of. I
mean we saw that.
Speaker 4 (02:31):
I mean, if you go back, you know, forty.
Speaker 1 (02:34):
Five years into the early nineteen eighties when Cherry Volker
had such a tough tough time getting rid of inflation,
and then this is kind of our second time. We
are the first time really since then when we see
some real inflation, and the Fed's had a really difficult time.
Speaker 4 (02:49):
I mean they thought it was you know.
Speaker 1 (02:51):
Their word of the day was transitory at that time,
following the COVID supply chain issues, and they thought that
was all these one off effects and transitory, which is
a fancy word for temporary. It turned out to be
not so transitory. And the Fed's still dealing with inflation.
And when you look at what's going on in the
trade world with the terroriffs, it certainly appears that the
(03:14):
risks have not gone away. I know, economists are divided,
and certainly the White House believes differently in terms of
what terrifts may or may not do for inflation, but
that doesn't mean that their risks aren't there. And that's
what the FED is really worried about. And cheir Pal
did say on Friday that there are some terif effacts
making their way through the system. What they don't know
(03:36):
is if it's like a one time level reset or
if it's more something that's ongoing and could keep pressuring
prices higher. And that's why when you look at what
Chair Pal said on Friday, it's not that he guaranteed
rate cuts, but he certainly opened the door. And as
long as you know things don't go to haywire on
the inflation side, you're probably going to see a cut
(03:58):
here in September.
Speaker 2 (04:00):
Andy's sticking with that tariff topic here for a moment.
I'm interested in your thoughts on this. I mean, I heard,
you know, Treasury Secretary Scott Bessett came out over the
weekend and said, you know, because I know the President
and talked about taking some of this tariff revenue and
actually writing checks to the American people, you know, like
they did a stimulus check back during covid UH. Now
(04:23):
Treasury Secretary Beston is saying, nope, we're going to use
these this tariff income to the government to reduce the
deficit and the debt. And the estimates for twenty twenty
five is about three hundred billion dollars in tariff revenue.
This seems like a permanent strategy, you know, by this
administration to attack the debt and deficit in some way.
(04:45):
I've got to think Chair Pal is factoring that in.
And my question is if these tariffs are this tariff
stuff is going to be permanent. And let's face it,
this is this is a sales tax, you know, however
you want.
Speaker 3 (04:58):
To slice it on bi businesses and consumers.
Speaker 2 (05:01):
Is that going to make it very difficult to ever
get back to this two percent you know, Fed mandated
inflation target.
Speaker 1 (05:10):
That's a really good way to put that, Bob. So
when you're thinking about the tariffs out there and might
be a sales tax and what Powell has to think
about things, Yeah, you're absolutely right. It's not that he's
really thinking about, you know, what the Treasury is doing,
but it's really the secondary effects is what that Treasury
is proposing. Is that going to result in ongoing inflation?
(05:32):
And if so, how is the Fed actually going to
get to that two percent rate? Now, one thing that
you know, we've been hearing a lot from different feder
members over the past a couple of weeks and from
Powell on Friday is how they're thinking about inflation. And
it wasn't just the near term impacts on inflation that
Powell was really talking about.
Speaker 4 (05:52):
They were talking about.
Speaker 1 (05:53):
Reviewing their longer term framework. Think back to COVID. The
Feds started talking about not just about inflation at a
two percent level, but more about an inflation averaging two percent,
meaning they're going to allow to overshoot that two percent
level because it's been below two percent for so long.
And now you know what we have is the Fed
(06:14):
essentially scrapping that and saying, yeah, we're at two percent.
Question is how are they actually going to get to
that two percent level? If you look at the data
right now, I don't really see us getting to a
two percent level really anytime in the next year or two.
So when I think about why the FED might cut
if inflation is not at their target, I think it's
more about cutting because of the other part of their
(06:35):
dual minting.
Speaker 4 (06:36):
It's not just price stability, which is one of the two.
The other one's full employment.
Speaker 1 (06:39):
So it's this job mark of weakness that I think
the fuel rate cuts andy.
Speaker 3 (06:44):
So there's there's obviously a lot of data a lot
of things you got to pay attention to, and you
just kind of reference some of those data points. So
tell me, I want to I want to get inside
the mind of Andy Stout, which sounds terrifying, But anyway,
when you pour your coffee in the morning, what is
the very first thing you're looking at at a time
like this, What are those two couple, you know, couple
data points that really seemed to be most important that
you want to you want to keep tabs on the
(07:05):
most right now.
Speaker 1 (07:06):
Well besides making sure you hit the right button on
the coffee machine, so it actually forors coffee.
Speaker 3 (07:12):
But yeah, let's prioritize first things first, right, Yeah.
Speaker 1 (07:16):
So after that, I mean it varies from day to
day because I mean certain economic releases come out at
certain days or months points in the month. So you know,
every Thursday, I'm really watching these weekly jobless claims are
really important right now. We actually saw a little bit
of a tick up last week that appears to be
a little bit more of a seasonality issue than anything else.
Speaker 4 (07:37):
But that's where you're going to see some of the
first weakness.
Speaker 1 (07:39):
So within this report on Thursday, you get these initial
jobless claims, which are people filing for unemployment benefits for
the first time, you also get continuing claims, so that's
people who've been laid off and are still collecting. These
initial claims have been pretty low really for the past
few years, in the low two hundred thousands. However, continuing
claims have been rising and they're about one point nine
(08:00):
five million, meaning that once someone's lost their job.
Speaker 4 (08:04):
They're having a harder time finding work.
Speaker 1 (08:07):
So what I'm really looking at, and by most concerned,
I'm thinking about the job market. That's one of the
main ones is the initial ones, because if that starts
to tick up higher, that's going to be a sign
of even more weakness in the labor market. And the
other one is obviously going to be the monthly jobs report.
So we saw last month a massive revision lower two
hundred and fifty eight thousand, showing that over the past
(08:31):
three months we've essentially only had thirty five thousand jobs
on average. That's not a sign of strength at all.
We see continued weakness like that. You know, you might
even see these rate cuts pick up.
Speaker 2 (08:43):
You're listening to simply Money presented by all Worth Financial
lumbob spondseller along with Brian James, joined tonight by all
Worth Chief investment Officer Andy Stout. Andy, I want you
to take a minute and hit on your recession scorecard.
It's one of my favorite things that you and your
team put together for all of us here at all Worth.
What data points are you looking at right now on
(09:04):
the recession scorecard and how are things looking, you know,
after this most recent FED announcement.
Speaker 1 (09:11):
Well, the FED announcement doesn't have an effect on the
data itself, but we have seen an improvement in the
data when we look at these leading economic indicators, which
are data points that move before the broad economy moves.
And to be clear, Bob, this is not a crystal ball,
but it tells us the level of Oh, come on, Andy,
(09:33):
But when we look at it, we're looking at many
different individual indicators that move before the broad economy moves.
And if you go back a few months ago, you know,
maybe half of our indicators where you're looking at suggested
recession at risk was high.
Speaker 4 (09:49):
You know, right now we're down to about thirty percent.
Speaker 1 (09:51):
So I would still call this a medium level of
risk out there, but not necessarily something that means recession
is right around the corner. And specifically, what jumps out
is that consumer confidence has been weakening, so that's been
one of the major areas. I mean the yield curve,
(10:11):
which is the relationship of short term and long term rates.
Speaker 4 (10:14):
Well, it's not.
Speaker 1 (10:14):
Inverted right now, meaning that short term rates are currently
less than long term rates, which is generally a good thing.
It has been inverted over the past year, and that
can sometimes have a lagged effect as to when it
actually results in an economic slowdown or not results. But
when one does follow, I don't want to say it's causational,
(10:35):
but there is definitely a correlation.
Speaker 4 (10:37):
So we're still looking at that.
Speaker 1 (10:39):
But when you look at it in general, the picture
isn't as dire in all honesty as it was a
couple of months ago.
Speaker 3 (10:45):
Here's the all Worth advice.
Speaker 2 (10:46):
There will always be reasons to worry, but the smartest
investors stick to a plan, not just headline news. People
like you are currently steering the stock market ship. We'll
explain how and what it means means for your portfolio
coming up next. You're listening to Simply Money, presented by
all Worth Financial on fifty five KRC, the talk station.
Speaker 4 (11:09):
We're ending it in DC.
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Breago Versia turned himself into his day's news.
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First is Off Now Chicago, Illinois a disaster fifty five
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Speaker 5 (11:22):
All Worth Financial a registered investment advisory firm. Any ideas
presented during this program are not intended to provide specific
financial advice. You should consult your own financial advisor, tax consultant,
or a state planning attorney to conduct your own due diligence.
Speaker 2 (11:41):
You're listening to Simply Money, presented by all Worth Financial
on Bob's fond Seller.
Speaker 3 (11:45):
Along with Brian James.
Speaker 2 (11:47):
If you can't listen to Simply Money every night, subscribe
and get our daily podcasts. And if you think your
friends could use some financial advice, tell them about us
as well. Just search Simply Money on the iHeart app
or wherever you find your podcast. Straight ahead, real questions
from real listeners, and maybe the exact issue you've been
(12:09):
wondering about too, that's coming up in our Ask the
Advisor segment at six forty three. Well, right now, retail investors,
every day individuals are somewhat steering the ship of the
US stock market. They're not just playing ketchup anymore. They're
leading the charge in a lot of cases, but as
sentiment surges, so do questions. Is this momentum sustainable and
(12:33):
does it help or hurt your long term planning? Ryan,
Let's talk about what everyday individuals are doing out there
right now and how retail investors are impacting you know
where we're staying with the stock market.
Speaker 3 (12:46):
Hey, what we're what we're talking about is the phenomenon
we see every now and then, usually in the later
stages of a bull market. We never get to know,
of course, when these things begin and end. We figured
it out after the fact that in any case, eventually
retail investors will get very confident and that's that that
is the money that will be flowing into the market
versus the institutional side. They tend to lead the charge,
and the institutions will kind of turn the ship around,
(13:08):
retail investors will follow. So where we are right now,
as retail investors are now accounting for about thirteen percent
of the total inflows to the S and P five hundred.
That's the highest level we've seen since February, and just
in the last month alone, these folks have bored about
fifty billion dollars into global equities. Now that's a phenomenon
we hadn't seen a long time where the S and
P five hundred as we're sitting here right now, is
(13:29):
up about ten percent for the year. International stocks are
sneaking up on up twenty five percent international meeting anything
but the United States. But so for all of the
first half of twenty twenty five, these folks bought about
two hundred and seventy billion dollars in stock. JP Morgan
expects another three hundred and sixty billion by the year
of end. By the end of the year, so that
kind of volume that could push the S and P
(13:50):
five hundred up another five to ten percent. Now, we
never know what's coming, but if the inflows will continue
the way that, at least JP Morgan thinks, then we
could be looking at higher highs on the will see Yeah,
And the.
Speaker 2 (14:02):
Question crops up when we start tracking the behavior of
retail investors. Are we approaching overheated territory here? You know,
with all that activity and money piling in, there is
risk there's a surge in mean stock and call option trading,
particularly in these heavily shorted companies, and Brian this is
(14:22):
always a little bit of cause for alarm. Margin debt
has ballooned past one trillion dollars. That should catch your attention.
And look, we've seen this for decades, Brian. Retail investors
are usually late to the party, late getting out and
late getting in, and sometimes when leverage starts to creep in,
(14:43):
that's a sign that people are maybe getting out over
their skis here just a little bit.
Speaker 3 (14:49):
Yeah, And I like to look at history for these
kinds of things, So, uh, you know, just just how
has this played out in the past. Well, this is
what you just mentioned, that margin buying that played a
role in intrigguering the Great Depression. And I'm not a
all saying we're heading into that, but just so we
all know where this was. There were no rules back then.
Basically it was the Wild West. So you had people
borrowing on ninety percent of their accounts. In other words,
(15:09):
if I want to invest one hundred thousand, I have
ten thousand on my own money in it and ninety
thousand to somebody else's. So it was a house of
cards to begin with. That that brought a lot of
the rules and government departments and all that those kinds
of things we know today. So those risks aren't quite
as prevalent as they were back then. But more recent
history was the dot com bubble, and that's where online
(15:29):
trading platforms remember e trade, and there were a number
of these types of companies out there that made it
very easy for people to trade stock. Then NASDAK gained
about four hundred percent on people rushing into the market
from ninety five to March of two thousand and then
the bubble burst and had dropped about seventy eight percent,
wiping out a lot of small investors who did not
follow the advice of a diversified portfolio and all those
(15:51):
kinds of things. So this is nothing to be alarmed about.
But these are just examples of if you chase the
herd and you do not follow smart sound of financial
planning principles and diversified portfolios, then yes you could be exposed,
but that's not anything new. That risk is there every
day if you're not following things the right way exactly.
Speaker 2 (16:09):
You're listening to simply Money present up by all Worth
Financial on Bob Sponseller along with Brian James. So Brian,
get practical here for a moment when you've got folks
coming into your office and.
Speaker 3 (16:18):
Let's face it, it's good.
Speaker 2 (16:20):
To read articles, it's good to do research, it's good
to study some of this stuff. A well informed client
is usually a great client. But along with reading some
of this stuff, you can get caught up in some
of this euphoria over leveraging, chasing short term trends. What's
some of the advice that you give to your clients
(16:40):
and folks that come in to see you for the
first time on how to handle situations like this.
Speaker 3 (16:46):
Understand your own situation. That's where we spend an enormous
amount of time. You know, a lot of times I'll
have clients come in for the first time, you know,
first time initial consultation type meetings, and they really want
to start with, Okay, I got a pile of money,
and all I need is a bigger pile of money and
then all my problems will be solved. So how are
we going to make a big pile of money? And
that's really not the case. We really got to understand
what do I have to work with to begin with?
(17:08):
What's the foundation of my whole situation. I have these resources,
I'm trying to do this with them. First off, here's
how much growth I need out of my portfolio to
make this plan work. And sometimes the plan doesn't work
and we have to change some of those more fundamental requirements.
But then once we do have a situation where okay,
we can kind of make a case for this plan,
is that dog will hunt, then we need to understand
(17:29):
our market history, because that's one of the few guarantees
that we get to give people. In terms of being
a financial advisor. There aren't many guarantees in this world.
One of them is, at some point your ship is
going to have to float despite some pretty rocky seas
that's going to happen. The assumption that an advisor or
a strategy or some kind of financial project product will
sidestep all the volatility is simply mistaken. You have got
(17:51):
to know what could this look like in the bad times?
And can my portfolio handle? Does my plan still float?
Stress tests that portfolio, that plan, and before you make
any assumptions about how well it's gonna float, because there's
a lot of unpredictable things out there.
Speaker 2 (18:05):
Yeah, And the thing to keep in mind is a
lot of times these single product solutions, you know, are
just that one product. It's meant to be one part
of an overall portfolio, and you know, don't get too
caught up emotionally just doing you know, catching one little
short term tailwind.
Speaker 3 (18:23):
Here's the all Worth advice.
Speaker 2 (18:24):
Prudence is your competitive edge, especially when market's hume when
with enthusiasm. Coming up next, the smart way to unwind
a concentrated stock position without getting hammered by taxes or
messing up your long term plan. You're listening to Simply Money,
presented by all Worth Financial on fifty five KRC, the
talk station.
Speaker 6 (18:45):
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you informed.
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Is f y the latest information on the Russian.
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Information about my money, on tariffs and trade, throughout the day,
information for you the talk station.
Speaker 3 (19:03):
Are you just iHeartRadio station?
Speaker 2 (19:09):
You're listening to Simply Money presented by Allworth Financial. I'm
Bob Spunseller along with Brian James, joined tonight by all
Worth Chief investment Officer Andy Stout. And Andy we talk
about this all the time on the show. You know
how to responsibly unwind concentrated stock positions in a portfolio,
managing the taxes, the risk, all of that, I'd like
(19:32):
to lead off with. I mean, you see a ton
of clients come through the door at Allworth and you've
got advisors coming to you saying, how do we solve
this puzzle?
Speaker 3 (19:40):
You know, every day of the week.
Speaker 2 (19:42):
What are some of the most common strategies you're seeing
and recommending that we use in terms of how to
properly unwind a concentrated stock position.
Speaker 1 (19:54):
You know, Bob, that's that's a really good question, and
a lot of it depends on, you know, what the clients.
So you might have inherited something from Procter and Gamble,
you know, from a parent, or maybe you worked at
a place and you you know, got a lot of
company stock, uh and maybe you want to keep it,
but you want to diversify out some of that risk also,
(20:18):
or another way you could think about things is that
you want to get out of it all together in
a minimal uh, in a way to minimize taxes. So
you know, it really depends on how you want to
actually attack this and go from there. So you know,
there's a few different ways you know that we can
you know, help people with that. We have you know,
(20:39):
simple basic solutions like donor advised fund. So if you
happen to be charitably inclined, you know, we can certainly
assist with that, you know, lower overall tax basis at
the same time and uh, you know, make some donations.
Speaker 4 (20:55):
You know. Some other ways, we have what's called an
exchange fund.
Speaker 1 (20:58):
You know, these are ways that essentially allows you to
exchange you know, I'll call it return streams of your
concentrated position for a more broad position, maybe something that
can be like a collection of large cap stocks. So
you know, we can exchange those, uh, those returns for you,
so you get that diversification. Now with that one, you know,
(21:18):
you're deferring taxes. Uh, you're not you know, you're not
getting rid of your taxes uh in pretty much any
of these situations, but you can defer them and you
can diversify.
Speaker 4 (21:28):
So exchange funds are really good.
Speaker 3 (21:30):
You know.
Speaker 4 (21:30):
Another way that.
Speaker 1 (21:31):
You can essentially defer taxes but still keep your underlying
position is by using some stock options. And there's some
really uh interesting strategies out there, and options though can
be can be complex.
Speaker 4 (21:46):
I mean, there's there's no simple way to put this.
Speaker 1 (21:49):
But what you can do is like like with an
exchange fund, where you're actually swapping a position for a
group of positions like a mutual fund, as an example,
but it's more of a private investment with stock options.
You can mimic that too by essentially zeroing out your
exposure of that underlying position and create a what's called
a synthetic position in a.
Speaker 4 (22:11):
Broad like S and P five Hunderd index.
Speaker 1 (22:13):
That's where it gets really complicated, and there's some lots
of other strategies, some more complicated. Yeah I might seem
like we're really more complicated than that, but yes, more
complicated than that, and some less complicated than that. So
one powerful strategy is what we call direct indexes. What
you can do with that, if you have a concentrated position,
(22:34):
you can sentially diversify out of that or over a
period of time of your procter and gamble or whatever
it is, and go into what's called a separately managed account, which,
because it's a direct index, looks to really generate losses
at the level of other positions, and it'll use that
to offset gains. So in theory, you could diversify out
(22:57):
of that concentrated position to something more broad while over
a period of time using losses to offset gains, so
it does become more tax neutral.
Speaker 4 (23:06):
So definitely attract a way to do it Andy.
Speaker 3 (23:10):
So one of the things that seems like it would
come up is is how do I decide all the
different strategies? And the choices I have are great, but
at some point don't I have to decide, you know,
what portion of the concentrated stock that I mean, maybe
I want to keep some of it. Is there a
good rule of thumb to decide on how much I
should not change around any of this?
Speaker 1 (23:28):
Well, I've heard many different rules of thumbs, and it
really it comes down to everybody's individual position and where
they're at in life, and you know, just in general
stage of their financial goals, because a lot of times
you know people you know even if you have that,
but maybe a ten or fifteen percent rule of thumb.
Ten percent is probably one of the more common ones
I hear as far as compared to your overall wealth.
(23:51):
I don't have any more than that, But even that
might be too much depending on your own situation.
Speaker 4 (23:55):
I mean, there's not necessarily a one size fits all.
Speaker 3 (23:58):
Yeah, you know, it occurs to me too that I
might if I'm already working for this company, if that's
where the stock came from, then I already have an
awful lot of my net worth tied up in my
financial situation of course with this company, so you know,
not only my if if things go south, I could
take my portfolio with it, plus my salary. So anyway,
that's that's a.
Speaker 4 (24:15):
Good for an example right there.
Speaker 2 (24:19):
All right, Andy, uh, talk about some of the more
simple ways we get off in the weeds here on
some of this complex stuff. What are some of the
just simple what i'll call lay up opportunities that come
across our desk again with these concentrated stock positions.
Speaker 4 (24:35):
All right, so let's not talk about some long short
solutions we have. Uh, you know, we'll be.
Speaker 3 (24:41):
That big brain working over time over there with the
big brain were we could tell he's fired up. Brian, Yeah, yeah.
Speaker 1 (24:47):
I was actually kind of hoping we would get to
talk about the long short stuff, but I guess we'll
have to come in and talk to an advisor about
that if you if you want to.
Speaker 4 (24:55):
Dive into that.
Speaker 1 (24:56):
By the way, that is probably one of the best
ways to uh again, you know, you.
Speaker 2 (25:00):
Know, if they're that important to do it, fire away
doing Andy in thirty two seconds, do it.
Speaker 4 (25:05):
In thirty two seconds?
Speaker 1 (25:07):
Are right?
Speaker 4 (25:09):
Long short?
Speaker 1 (25:10):
If you're long something that means you're you want it
to goloup in value. If you're short something, that means
you wanted to go down to value to start with that.
I think I'm down in about twenty five seconds by
the web.
Speaker 4 (25:20):
So what some of these strategies.
Speaker 1 (25:23):
Do is, uh, they'll go long positions, short positions, look
for ways to generate losses but still have a positive return.
And if you have even if you could come in
like with a stock has a zero basis, meaning all
you have are gains and long term gains in there.
Speaker 4 (25:39):
You know, some of these strategies can get.
Speaker 1 (25:40):
Out that maybe over like a two year period, diversifying
you completely, but taking the embedded taxes from that one position,
essentially spreading it out over two hundreds of different positions,
so you get diversified over a period of time. And
then there's a lot more of a discussion behind that,
but I know I'll alarguing over so I'll andy.
Speaker 2 (26:01):
Thanks, thanks as always for coming by and educating us
on a very important topic to folks out there. You're
listening to Simply Money, presented by all Worth Financial on
fifty five KRC the talk station.
Speaker 1 (26:13):
Is it just me?
Speaker 4 (26:14):
Or am I going crazy?
Speaker 3 (26:15):
Really?
Speaker 5 (26:16):
You know, the saying you're out of your mind.
Speaker 3 (26:17):
The mind is a terrible thing to waste. I don't
believe it. Around here, I'm losing my mind. Be careful,
you just might lose it.
Speaker 6 (26:29):
They're going off the deep end and they can't swim.
Speaker 3 (26:33):
Go ahead, lose your mind. Well, I've officially lost my marbles.
We'll give it back.
Speaker 4 (26:38):
God help us.
Speaker 7 (26:39):
All on fifty five KRC, the talk station on Jack Pocket,
America's number one.
Speaker 3 (26:46):
Welcome to here.
Speaker 4 (26:47):
I do think he is too old to run.
Speaker 5 (26:49):
In twenty twenty.
Speaker 7 (26:50):
Four, fifty five KRC, the talk station, you're listening to
Simply Money all Worth Financial on Bob spun Seller along
with Brian James.
Speaker 3 (27:03):
Do you have a.
Speaker 2 (27:04):
Financial question you'd like for us to answer. There is
a red button you can click while you're listening to
the show right on the iHeart app. Simply record your
question and it will come straight to us. All right, Brian,
Let's lead things off with Martin in Westchester, who says, Hey,
I've been reading something about a three point fifty one conversion.
Speaker 3 (27:24):
Can you explain to me what that is? Well, Martin's
got some interesting things going on apparently, So a three
point fifty one conversion. That's shorthand for a kind of
a tax deferred corporate transaction under you guessed at section
three fifty one of the Internal Revenue Code. The whole
point of it is, if you transfer property to a
corporation in exchange for its stock, and you and any
(27:44):
of the other people transferring stuff in control at least
eighty percent immediately after the exchange, then no gain or
loss is recognized for tax purposes. So it's basically an
in kind a contribution, meaning I'm gonna give you stuff
in in exchange, you're gonna give me stock, and I
have not sold my stuff, I have just swapped it
out for stocking the company. So the whole point is
(28:04):
not triggering taxes in supporting a business. So there's a
lot of moving parts to this, and it's not too
unsimilar from a ten thirty one exchange where you're kind
of doing the same thing but with real estate. Tons
of moving parts, and I would say there's a lot
that there's a lot of benefit to it, but I
think we will maybe we'll do a future entire segment
on that because again, lots of detail to those kind
(28:26):
of transactions. So now we'll move on to Bob and
Karen and Milford. I love Milford. I'm a Westsider, so
I didn't discover Milford until late in life, but Old
Milford is one of the cool places around Cincinnati. Anyway,
Bob and Karen, I feel like they saved more than
they think they need, and so now they're trying to
switch from being squirrels putting nuts away for the winner
to going and digging those nuts up again, moving from
accumulation to decumulation. How do they not screw that up? Bob?
Speaker 2 (28:49):
Well, first, Bob and Karen, it sounds like you guys
are both very responsible and diligent savers, so I doubt
you're gonna screw it up. What I tell people all
the time is there's just we're not talking about screwing
it up. We're talking about maximizing the opportunities moving forward.
And here's what I mean. You don't need to quit saving.
Speaker 3 (29:08):
What you should do is just.
Speaker 2 (29:10):
Take a look at what your life looks like now
and what your goals are moving forward, meaning develop a
financial plan. It comes down to how much you plan
to spend in retirement with Some of your other goals
might be charitable goals. Helping kids or grandkids, you know,
travel things like that, and then taxes. Tax planning is
(29:31):
where you can really add some value here by taking
a look at income streams from various sources and how
to make sure that things are structured in such a
way to keep more dollars in your pocket and away
from the irs. And then the last thing to look
at is just your overall investment risk tolerance. Has that changed?
How does that dovetail with your financial plans? So sit
(29:54):
down with a good advisor and just put you know,
put the proverbial car up on the jack and hook
up the diagnostics and see how things look and how
we can improve.
Speaker 3 (30:03):
Things going forward.
Speaker 2 (30:04):
That would be my advice, all right, Doug and pleasant
Ridge says, we recently sold a rental house that we
owned for twenty years.
Speaker 3 (30:13):
We made a solid profit.
Speaker 2 (30:14):
Should we do a ten thirty one exchange or is
it time to just take the gain and invest the
net proceeds elsewhere?
Speaker 3 (30:22):
All right, So this earlier question kind of led into
this one, So real quick, what is a ten thirty
one exchange? Well, the whole point of that is, if
I want to, let's say I have one top type
of investment real estate property and I want to change
into something else. Maybe I've got a single family I'd
like to own a multi family or something like that. Well,
if I do a ten thirty one exchange, then I
can avoid paying capital gains tax on the sale of
(30:45):
the original one by rolling those proceeds into a like
kind property, which basically means something's pretty similar. But here's
the problem, and I think this might be an issue
for you. Here you said you already sold it, Doug,
so I want to make sure that you even have
this as an eye option. You cannot take possession of
the sales proceeds yourself. It has to go to a
qualified intermediary kind of like escrow, who sits on those
(31:08):
funds until you actually close on that replacement property. And
there's deadlines involved here, So you have forty five days
from the sale to identify that replacement property and one
hundred and eighty days to close on that replacement But
if you took that money from the sale of the
proceeds and stuck it in your checking account at ten
thirty one, unfortunately is off the table for you. So
(31:28):
I hope that still maybe works out. But if you've
got an installment sale going where the buyer's paying you
payments over time, you might still be able to benefit there.
If all of that falls off the table, you can't
do it, then you can look at qualified Opportunity Zone funds.
This is not a ten to thirty one exchange, just
something else where you can reinvest the gains into a
QOZ fund within one hundred and eighty days, continue to
(31:48):
defer those taxes, maybe stick it at a charitable remainder trust,
maybe some tax loss harvesting. There's other things you can do.
But again, if you took possession of those sale proceeds,
then ten thirty one unfortunately not a choice onto John
and Cindy and Madeira. That's a part of Cincinnati I've
never been in. I should explore that. But John and
Cindy have been working with an advisor for a long time,
pretty happy with the returns, but they're wondering, how do
(32:10):
you how do you decide if you're if you're happy
with the value of financial advisor? Bob, Well, it's.
Speaker 2 (32:15):
It's always very hard to objectively, you know, evaluate the
value that you're getting from your advisor. But you know,
the way I'd answer this question is a lot of
you know, quote unquote advisors just invest the money, they
put it in portfolios. There they all they want to
talk about is investment strategies. And there's so much more
to this. A state planning, tax planning, risk, you know, analysis,
(32:40):
things that really go into a comprehensive financial plan. And
I think the best way to look at this is
maybe get a second opinion, get an evaluation of your
current plan and an experience what a true good fiduciary
advisor does and the value they add to a client's
overall and then ask the question. You know you're in
(33:02):
a better position to answer the question, is my current
advisor already doing that?
Speaker 3 (33:08):
Or is there a whole other.
Speaker 2 (33:09):
Set of opportunities out here I haven't even been hearing
about and potentially missing out on all Right, coming up next,
how to pick the travel rewards card that gives you
the most miles, the best perks, and real value for
your lifestyle. You're listening to Simply Money, presented by all
Worth Financial on fifty five KRC, the talk station.
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I count on.
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Speaker 2 (34:19):
You're listening to, Simply Money present about all Worth Financial
on Bob Sponsorller along with Brian James. If you were
that person who loves to travel, you might have asked
which travel credit card is the best one for me? Brian,
We've got a new study or a new article that
kind of lists the pros and cons of some of this.
(34:39):
And I don't mean this in a joking way. I
know you're very good at researching this stuff, so I'm
anxious to hear your perspective on the whole reward credit
card game out there.
Speaker 3 (34:51):
Well. Yeah, as you've heard me talk about a number
of times, I'm a big fan of credit card rewards.
I think about it kind of like the way a
water mill works.
Speaker 4 (34:58):
Right.
Speaker 3 (34:58):
This river is going to flow past me no matter
what I do with it. But if I stick a
water mill in there, then I can generate power and
all that kind of thing off of something that's going
to happen anyway. So compare that to credit cards. I
got to pay my bills, that's happening anyhow. If I
simply write checks out of my checking account, I get
nothing my bank. My bank will make a little bit
of money off of that. But if I use a
(35:18):
credit card and I understand how it works, then I
can get two, three, sometimes four or five percent for
simply paying my bills, which I got to do anyway.
So what we're talking about today is what kind of
rewards would be looking for. I'm a huge fan of
somebody who has college kids in college right now. For
about twenty years, I use a credit card that put
money into a five twenty nine plan, and that was
(35:39):
one of the smartest financial decisions I ever accidentally made.
Because I'm on the back end of it. Now, pay
intuition out of that pile of money, and that's worked
out well. But we're talking about travel today. So the
questions you should ask if if you've concluded and I'm
kind of there because we're pretty much done worrying about
college now its travel will be the big expense. So
do you fly multiple times a year or just once
(35:59):
for that big big Are you loyal to any particular
airline or hotel chain domestic international? Do you care more
about the comfort of things, the perks like lounge access
or just earning free trips that kind of thing in Cincinnati, Bob,
it's a little tough because you can't really be particularly
loyal to any one airline because they're all there now.
Gone are the days of it being all Delta all
(36:19):
the time and easier flights. But now we have a
little more flexibility. It's a little cheaper, that's not a
bad thing. So but anyway, if you're an occasional traveler,
then you're gonna want to look for a card with
no annual fee, pretty simple earning structure so you can
understand it, and then flexible rewards where you're not stuck
to one airline one hotel chain. If you're a frequent flyer, however,
then figure out where do you fly most often, and
(36:40):
then you might look at that particular airline or those hotels.
Road warriors. You might think about gas stations, rental cars,
roadside assistance. There are different options for that as well.
But do the math understand and really get into this stuff.
Understand how those points transfer into dollars, because there can
be some complicated calculations there as well well.
Speaker 2 (37:01):
And there's also cards out there, Brian that just give
you a good old cash back, you know, if you
don't want to get involved in all those details, cash
is good.
Speaker 3 (37:09):
All right, Thanks for listening.
Speaker 2 (37:11):
You've been listening to Simply Money, presented by all Worth
Financial on fifty five KRC the talk station.
Speaker 3 (37:17):
Who wants to be Rich?
Speaker 6 (37:18):
We call them every day millionaires every day listen to
Dave Ramsey. They typically say one of the things that
turned their life around was when they started looking at
purchasing something rich. People ask how much broke. People and
I've been both brother okay broke. People ask how much
down and how much a month?
Speaker 7 (37:40):
Tonight at seven oh six started asking how much on
fifty five KRZ the talk station
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Current and classic episodes, featuring compelling true-crime mysteries, powerful documentaries and in-depth investigations. Follow now to get the latest episodes of Dateline NBC completely free, or subscribe to Dateline Premium for ad-free listening and exclusive bonus content: DatelinePremium.com
NFL Daily with Gregg Rosenthal
Gregg Rosenthal and a rotating crew of elite NFL Media co-hosts, including Patrick Claybon, Colleen Wolfe, Steve Wyche, Nick Shook and Jourdan Rodrigue of The Athletic get you caught up daily on all the NFL news and analysis you need to be smarter and funnier than your friends.