December 30, 2025 • 39 mins
Paul Lane and Marc Fandetti discuss how Fed minutes could show how high the bar is for more rate cuts. Bessent sees room for a future revamp of the Fed's 2% target. 2025 US Economy: rising prices, hiring slowdown, and rollercoaster growth. Todd Lutsky joins the show to share his thoughts on balancing asset protection and avoiding estate taxes. Los Angeles tightens rent controls for first time in four decades.
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Episode Transcript
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Speaker 1 (00:00):
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(00:43):
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(01:07):
and Mark Fandetti.
Speaker 2 (01:11):
Welcome to this Tuesday edition of the Financial Exchange. As
we head into the end of the year, we will
have today's trading session followed by tomorrow's training session, and
that will wrap up twenty twenty five and what's been
a surprisingly very strong stock market year. It feels like
this year has been two years in terms of the
(01:31):
economic discourse. We have had all sorts of ups and downs.
But over the course of today's show and probably tomorrow's
show as well, we'll sort of do a recap on
how this year has fared in terms of economic growth, inflation,
and many other economic topics. We start the show with
a little bit of a discussion on the Federal Reserve
(01:51):
and the interest rate front. Back on December ninth and tenth,
the Federal Reserve got together for their most recent meeting,
in which they cut interest rates by a quarter of
a percent. The next meeting for the Federal Reserve is
a month out, so we have a lot of time
to digest what their next steps are going to be
and ultimately mark really where we sit at this point
(02:12):
in time is it is extremely unclear what interest rate
policy is going to look like heading into twenty twenty six.
I think anyone who says that they know where the
Fed is going to go next year is fooling themselves
because there is all sort of dissent and economic discourse
that needs to.
Speaker 3 (02:29):
Be sorted out.
Speaker 2 (02:30):
We will likely get a little bit more clarity as
we get some more economic reports coming out and sort
of emerge from that blackout period that clouded the end
of this year, where we'll get a jobs report on
January ninth, as well as a CPI inflation report on
January thirteenth. But today, what we'll get is the FED
meeting meeting. It's from December ninth and tenth, that will
(02:53):
be released at two o'clock today. I don't anticipate we're
going to get a tremendous amount of commentary that's going
to be any u full and any useful pieces of
information for us, but certainly it is an interesting time
for the Federal Reserve, and I just have no idea
what interest rates they're going to do heading into next year.
Speaker 4 (03:11):
So we're at three point five percent today for federal funds.
They target a band because they don't technically control that
very short term interest rate policy instrument, but they can
print money so they effectively exert control over short term
interest rates, but not longer term interest rates. We've seen
longer term interest rates, though they've come down over the
(03:32):
course of twenty twenty five. And when I say longer
term interest rates, for practical purposes, that means mortgages and
car loans and certain types of business loans. But for
most of us that means a mortgage or say a
car loan. So the controls short term interest rates effectively.
They can print enough money to get the Federal Funds rate,
(03:54):
which is a rate that banks use when they lend
to one another overnight when they're short runners nerves they
borrow banks do from other banks, and that's the rate
they they borrow at. So that's why FED Funds is important.
And that does affect lending rates to consumers non revolving
credit stuff like unsecured loans, stuff like that. But mostly
(04:15):
we're concerned with mortgages and car loans and stuff I think,
and FED can't control that. That depends on inflation and
how risky investors perceive holding long term bonds to be right.
Speaker 2 (04:26):
And so when Mark speaking on the shore side of things,
he mentioned some of the unscared loans piece. You know,
others are he locks home, nechro, lines of credit or
another one that are impacted by these federals exactly, crime rates,
prime rate exactly. Those are the areas that are impacted
by these decisions made by the Federal Reserve. One thing
that has been clear from the most recent meeting is
(04:49):
that the bar is now going to be raised in
terms of what the Fed needs to see for another cut.
That was the one change in language and sentiment that
you saw on the most recent meeting. I believe the
two words that they added in were extent and timing
as to what they're going to be looking for for
additional adjustments to their target range. Here now looking at
(05:13):
the CME futures, which does a probability projection as to
what the Federal Reserve is going to do in their
next meeting. And again I would take these with a
major grain of solid as we are a full month
away and a lot can happen between this point and
the next meeting. We're at about an eighty four percent
probability that they stay the course. There's another subject that
came up in some of these pieces this morning, Mark
(05:33):
that I wanted to get your two cents on. The
Federal Reserve has had a dual mandate to control both inflation,
and we've talked about that ad nauseum, the decisions that
they've made there to get it out of the depths
that we were in in twenty twenty two, to bring
it down to the level that we sit at today
about two point seven percent. But also the second part
(05:54):
of that dual mandate is the labor market. And in
some pieces today there was cometary or reference to critics
who say that the only focus of the Federal Reserve
should actually just be inflation and not this idea of
focus on the labor market. This isn't a unique idea
if you look at some of the other central banks
out there in Canada, so eas be all their focus
(06:18):
is on inflation. And just curious, as someone who follows
this for a long period of time, your thoughts on
the idea of this dual mandy and whether or not
the way the ECB does it makes makes more sense
to just focus on just one piece, because if you
were going to just focus on one piece on the
inflation side, then you could make the argument that they
should not have lowered rates, or perhaps they should have
(06:40):
raised them.
Speaker 4 (06:41):
So let's think step back, think about what the FED does.
It controls the supply of money, and in the long term,
the only thing that matters for inflation is the supply
of money. There are other things that in theory could matter,
the rate of economic growth, the demand for money. Sometimes
you hear the term velocity thrown around, which is the flip,
the flip side of the reciprocal more technically of demand.
But in the long run, the FED controls inflation. So
(07:03):
start with that principle. So what should the rate of
inflation be? Humphrey Hawkins says it should be low and stable.
It doesn't quite put it that way, but and the
FED has interpreted that to mean two percent in the
modern era since Bernanki set the target in twenty twelve.
Though the FOMC, the policy making body of the FED,
has always targeted inflation since the Green Spin era of
(07:25):
something in that range, though they never articulated at target.
So FED wants two percent inflation hasn't been there since
twenty nineteen. By that standard, they haven't done their job
in almost ten years. Any of us would be fired
under those circumstances. So the FED is doing I'm going
to answer your question, but I want to put in context.
The FED arguably is doing a terrible job of keeping
inflation low and stable. If you define low and stable,
(07:46):
inflation is one to two percent, which I personally you
asked about my sort of personal feelings, and this is
just for what it's worth. I'm in the zero to
two percent inflation camp. There are plenty of monetary economists,
of which I am not one, like academics PhD to
do this for a living, who think inflation could be
as high as five and there were reasons for that.
It helps, it helps the labor market adjust faster, is
(08:08):
the simplest reason. We can get into that, but don't
have to right now. So if you're sort of a
hawk like me, and that's ideological, that's just me as
a fiscal conservative, someone who thinks if you give government
too much leeway, they're going to screw it up. So
that's just ideological. I prefer lower inflation to hire. Other
people might prefer slightly higher inflation. Has the FED done
(08:30):
a good job controlling that?
Speaker 1 (08:31):
No?
Speaker 4 (08:31):
Should They maybe be more focused on that perhaps, And
that's the argument for removing the employment mandate from the
Fed's roster. Of things it has to do. There are
also good theoretical arguments. According to some economic models, if
you stabilize inflation, unemployment will settle at the natural rate
of unemployment, which the FED can't change anyway. By the way, sure,
(08:54):
if FED can't do anything about the structure of the economy,
the FED can goose demand. Can't do much about supply.
Speaker 2 (09:02):
Yeah, they're not going to impact infrastructure investments in AI
data centers theory.
Speaker 4 (09:07):
Not not on the long run and the short run.
By lowering interest rates, they could stimulate activity.
Speaker 3 (09:11):
For borrowing and construction and the.
Speaker 4 (09:13):
Potential growth rate of the economy, which is really what
drives inflation, because when the economy grows too fast, it
exceeds its potential growth rate, and that's when inflation starts
to rise. I'm rulling out shocks and some other things
that complicate that statement, but that's okay. The FED can't
do anything about supply. It can, in the short term,
control demand by printing money, lowering interest rates and getting
(09:34):
people to spend again over simplifying a little, but I
think that's okay. So if the FED can't do anything
about supply and unemployment is a is an aggregate supply
issue in the long run, why should they be targeting it.
That's the I just gave you sort of the textbook
argument against a dual mandate.
Speaker 3 (09:50):
I'm going to put your feet to the fire. What
do you what do you have I do? Would you
just say just inflation? Yeah, I would.
Speaker 4 (09:57):
Focus laser focus on inflation, so somewhere between zero and
two percent. You can't monomaniacally focus on two percent because
you might have shocks, sure good or bad, that push
inflation below or above. And when inflation got really low
in the twenty tens, everybody was panicking. That didn't strike
me as a bad problem to have inflation that was
(10:19):
too low. High inflation screws with everything. It screws with
your retirement plans, right, it screws with your day to day.
Speaker 3 (10:25):
It'd be like.
Speaker 4 (10:26):
Lengthening or decreasing the definition of a mile every year.
Like I could adjust, but it would be really inconvenient.
That analogy is due to famous economists, not to me,
you know, So imagine if we change all acstlually.
Speaker 2 (10:39):
I think the biggest takeaway from the last three or
four years is how painful inflation has been. I mean,
if you look at the political change that was a
reflection of the idea that inflation had run out of
control and there was this sort of desire for.
Speaker 3 (10:52):
A change office. And it just still to this this day.
Speaker 2 (10:56):
Remains looming issue. So we'll continue to monitor that here
on the Financial Exchange. But interesting commentary as we head
into the Federal Reserve meeting minutes that we'll be released
at two o'clock today, We're going to take a quick
break here on the Financial Exchange, but we come back
a little bit more on inflation and the FEDS target
of two percent, as well as a recap of twenty
(11:19):
twenty twenty five's US economy with some charts and more
information right after this break.
Speaker 1 (11:24):
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Speaker 2 (12:14):
Couple last pieces here on the inflation target. Treasury Secretary
Scott Bessen went on in on the All In podcast
within the last couple of weeks last week or so
and gave some commentary about the Federal Reserve and that
target two percent that we've talked about on the show before,
(12:35):
and typically the policy that you had alluded to in
the first segment of the show came about Mark with
Ben Bernanke. Back in twenty twelve, the Federal Reserve officially
set the target for the two percent. It's been there's
always been this idea of keeping it within the range.
Speaker 3 (12:50):
This goes back way, you know.
Speaker 4 (12:52):
I mean, there's there's a reason Bernanki articulated a target,
which Greenspan, by the way, said never ever do. He said,
if it ever gets out of this room, he's talking
to the FOMC. And obviously I wasn't there, but Alan Blinder,
who was vice chair in the late nineties, wrote a
lot about this and still does. He said, don't let
this target get out of this room, no need, because
there may be Greenspan was the ultimate pragmatist. Bernanky, though
(13:14):
more of a theorist, recognizes the importance of expectations.
Speaker 3 (13:17):
Yes, and if you tell credit for inflation and there
you go.
Speaker 4 (13:20):
If you tell people it's going to be two and
you're credible, it's easier to get back to two without
economic sacrifice, the so called sacrifice ratio, which is another
big concept among monetary types. Sacrifice ratio is exactly what
it sounds like, how much GDP do I have to
give up in points? In your points? More technically, if
you're interested, do I have to give up to get inflation?
And you can translate that into an unemployment sacrifice ratio.
(13:44):
So everybody thought in eighty two Volkaer is gonna have
to raise an unemployment to twenty five percent to kill inflation.
He did it a lot more quickly. Why credibility? Maybe
people believed him and Bernanki therefore articulated a target, when
coupled with credibility, should make it easier to get inflation down.
Speaker 3 (14:00):
And maybe it did.
Speaker 4 (14:01):
By the way, in twenty twenty two to twenty twenty three,
and unemployment didn't go up. No, inflation came way now
down enough to get it back to two, but it
came down. It's gonna sound cavalier, I'm gonna say, kind
of painlessly, which surprised the hell out of everybody.
Speaker 3 (14:14):
Very true. I would agree with that pamelessness.
Speaker 4 (14:16):
Arguably because expectations were pretty well anchored. There's a group
of economists who would argue with that statement. But I'm
just giving you kind of the consensus that made the
sacrifice ratio a lot. Well, it was zero in twenty
twenty two, twenty twenty three, right, which is pretty pretty
remarkable considering the dire predictions.
Speaker 2 (14:36):
What he went to mention is that perhaps they would
switch to a range bound target from the two percent target,
but stating that that would not be done until they
got back to this sketch.
Speaker 4 (14:47):
Second, Okay, he's got a tough job. He has no
credibility on this. He's a total lightweight percent is when
it comes to monetary policy. And yes, I'm being a
little bit curt here, but he is.
Speaker 3 (14:55):
He's a lightweight.
Speaker 4 (14:56):
Treasury secretary should shut up and focus on efficient ways
to manage debt. These people have their hands full. Their
fiscal policy is not lowering the government spending levels. Deficit
came down a little bit, right, That's and I credit
Bessent for his focus on the deficit. He pays a
lot of lip service to it. Sure, but they haven't
done a lot. So get to work on that, Scott,
(15:17):
and let the FED manage monetary policy.
Speaker 3 (15:20):
But I don't think these comments here are that offensive.
Speaker 4 (15:22):
I mean, it's no, they are, though he's infringing on
the Fed's mandate. He should shut up and manage treasure
right talk, Fed should manage monetary policy. He's not. They're
not good at what they're doing right now. If your
target is keep on employment low and shrink the deficit.
Unemployment went up last year, deficit came down by like
forty billion dollars, a rounding error. Okay, so get to
work on that. Let the FED do its job. I
(15:44):
share his philosophy. I think he's a focus on inflation
only guy. But these guys all veer way outside their
laying for some reason. And when you're not good at
what you do your core responsibilities, and arguably they're not.
Speaker 3 (15:58):
Yeah, it doesn't bother, It doesn't really bother me.
Speaker 4 (16:00):
What bothers me, because it's kind of my thing.
Speaker 3 (16:02):
It doesn't really bother me as much.
Speaker 2 (16:04):
I think the idea of a range on inflation, it's
not that controversial of a topic, and the idea of
getting it back to the two percent target first is
probably He.
Speaker 4 (16:14):
Mouths off routinely about the Fed's failure to do this,
and that's okay to do behind the scenes, but the
public browbeating of the FED, which he's complicit in, is
absolutely not helpful. It undermines the institution.
Speaker 2 (16:26):
On the twenty twenty five US economy in charts, there
is a piece here that was done by Guardian where
it just sort of gives a recap on where we
sit this year.
Speaker 3 (16:36):
It looks like GDP growth, again.
Speaker 2 (16:38):
We haven't got the final numbers in here, will clock
in around two percent according to some recent projections. We
did have a Q three number that was quite strong
at four point three percent back in twenty twenty four.
For reference, the economy, its GDP growth growth domestic product
grew about two point eight percent. Some of the other
charts that are covered here, it's just been a very
(16:59):
interesting year again in terms of what we've seen inflation
has sort of stubbornly hung around that three percent number,
sitting at two point seven percent as of the most
recent report. And then we've had a labor market that
has been relatively weak. We have seen since June the
unemployment rate tick up. It's been a little hard to
figure out the job's picture as we've had that government shutdown,
(17:22):
sort of clouding some of the recent monthly jobs reports.
But by all indications, it does seem like we've seen
a loss in job growth on that front. But all
in all, I do sit back and look at this year,
and it was a year that, particularly with the announcement
of some of tariffs, that you saw a significant uptick
(17:43):
in predictions for recession, and we sit on the prespice
of the year closing out without that.
Speaker 4 (17:48):
Who was making I don't know this has been and
the Wall Street Journal says this routinely economists were wrong
about twenty twenty five predicting recession and inflation. I don't
know if any professional or you know, sort of PhD
level respected economists who were calling for a recession because
of Gold.
Speaker 2 (18:05):
And Sacks increased their percentage chance of a recession from
twenty two percent to forty five percent. I feel like
all these investments from sort of moving lockstep where they
say that they increased their problems still less than one.
Speaker 4 (18:15):
That's still less than fifty percent chance. And had tariff's
been fully implemented aggressively implemented, well then maybe. But it
was pretty clear as we went along that they were
going to be retreat that did some of the sort
of more severe tariffs were It.
Speaker 2 (18:33):
Seemed as this negotiat sentiment sentiment was increasing the probability
of talks of recession not I don't recall anyone saying
that we are headed for one. Jamie Diamond was set
in here too. He's been predicting a recession for for years.
That's kind of his sticks certainly to team, you shouldn't
do it, right, shouldn't.
Speaker 4 (18:51):
Know, shouldn't predict I mean, jeez, unless it's COVID and
we're shutting the economy down for some inexplicable and stupid reason,
you shouldn't do it.
Speaker 2 (18:58):
It's like the projections for the stock market for twenty
twenty six. You know, it's anyone's guest as to really
how it's gonna fare. It's very difficult to do. Taking
a look around at markets. We're in relatively mixed territory
at the moment with the Dow Jones off just slightly here,
but we're gonna have more information for you on the
markets and how they're faring after back to back losses.
(19:21):
Come up in just a moment here where we'll have
Wall Street Watch and we'll be talking with Todd Lutsky
here as well right after this break.
Speaker 1 (19:40):
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Speaker 1 (20:21):
Time now for Wall Street Watch, a complete look at
what's moving markets so far today right here on the
Financial Exchange Radio Network.
Speaker 5 (20:29):
Well after yesterday's modest pullback, markets today are slightly in
negative territory as Wall Street awaits minutes from the fed's
December meeting do out this afternoon.
Speaker 3 (20:39):
At two pm.
Speaker 5 (20:40):
Right now, the Dow is down about a quarter percent,
or one hundred and nine points. SMP five hundred down
over a tenth of a percent or nine points lower.
NASDAC down nearly two tenths of one percent to forty
points lower. Rusted two thousand is down about a quarter percent.
Ten youre Treasure reeled up one basis point of five
four point one three percent to Incrude oil up about
(21:03):
a half a percent higher, trading a fifty eight dollars
and thirty six cents a baryl. Some acquisition news from
Meta this morning, after the Facebook parent announced it has
acquired Singapore based AI startup Manus.
Speaker 3 (21:17):
The Wall Street Journal.
Speaker 5 (21:17):
Reported that Meta is closing the deal at more than
two billion dollars. In a statement, Meta said that its
acquisition was aimed at accelerating AI innovation for businesses and
integrating advanced automation into its consumer in enterprise products, including
its Meta AI assistant. Meta shares are up over one
(21:38):
percent on that acquisition news. Meanwhile, Applied Digital said it
plans to spend out its cloud business and combined with
Exo Bionics, Applied Digital shares are dipping, while Exostock is
rallying seventy six percent. In mining stocks including Newmont and
Barrack are bouncing back today and up about one percent
(21:58):
after Metal's rebound from yesterday's tumble. I'm Tucker Silva and
that is Wall Street Watch.
Speaker 2 (22:06):
As promised, we are now joined by Todd Lutsky from
Cushion Dolan. Todd, thanks so much for joining us today.
Speaker 7 (22:13):
Well, thanks always a pleasure, Hey, Todd.
Speaker 2 (22:15):
One of the big things that I often discuss with
clients is when you're considering doing a trust, the impact
it can have on a state taxes. Could you just
tell us and the listeners just some of the changes
that have gone on with the Massachusetts the Massachusetts estate
state of state tax recently within the last few years.
Speaker 7 (22:35):
Yeah, the latest updates were taking our exemption which was
at one million for the longest time, I think back
in two thousand and six, they leveled off at about
a million dollar exemption and they raised it to two
million dollar exemption, so in essence doubling the ability to
(22:58):
shelter assets from the state taxes. So if you're married,
now you can shelter four million. If you're single, you
can shelter just the two. But again by being married,
you can't just do it because you're married. You need
the trusts in place to be able to double the
exemption and take advantage of each person's exemption. And the
(23:20):
other piece to that legislative update was they kind of
got rid of the cliff rule, so you know, if
you go over the two million, you're not taxed on
every penny. Doesn't mean you don't plan by any stretch,
but they did manage to get rid of that as well.
Speaker 2 (23:39):
One other concept that many clients aren't familiar with is
just when those of state taxes are due, whether federal
or on the state level. One concept that is probably
unknown to many out there is this idea of portability.
Can you just give a little bit of detail on
that concept and how it applies with the state taxes?
Speaker 7 (23:58):
Todd Yes, the portability applies only to the Fed, not
the state. So there's no states in the country that
I'm aware of that allow porting your unused exemptions. So,
first of all, what is portability is the ability to
capture the unused exemption of the first spouse to die.
(24:20):
So if for some reason you didn't plan, you can
take the unused exemption and give a coupon in essence
to the surviving spouse. However, it's not that easy. You
actually need to file a federal return for the dicedent
even if one is not due, meaning even if you're
under the federal exemption, you still need to file. You
(24:43):
have five years to file if you're not required to
file otherwise, you need to file within nine months with extensions,
and then by filing the federal return, you're in essence
making the election to get the portability. But without it
you just waste it. It's still wasted, so important to
(25:04):
use it. So whenever you do your planning, just keep
that in mind, folks. That's what this guide is all about,
balancing asset protection, planning and estate taxes. Right. So I
just explained some things about the federal side of it
and the state side of it. But there's also people
who say, I don't need the federal but I want
(25:26):
to protect assets from the nursing home. Can I still
save on Massachusetts the state tax. Yes, you can do both.
Get the guide. It's the end of the month. Balancing
Asset Protection and Avoiding Estate Taxes, talks about portability, talks
about the exemptions, the marital share, the remainder share, really
how they work way better than we can get into
(25:46):
it on the radio. And it also does the same
thing for irrevocable trust. So a little something for everybody
in here eight six six eight four eight five six
nine to nine or Legal Exchange dot com again Balancing
Asset Protection and Avoiding Estate Taxes eight sixty six eight
fourty eight five six ninety nine or Legal Exchange show
(26:10):
dot com.
Speaker 2 (26:11):
Thanks so much for the time, Todd, rust up that voice.
We need you for twenty twenty six.
Speaker 7 (26:16):
Thank you, Bye bye.
Speaker 1 (26:18):
The proceeding was paid for and the views expressed are
solely those of Cushing and Dolan. Cushing and Dolan and
or Armstrong Advisory may contact you offering legal or investment services.
Cushing and Armstrong did not endorse each other and are
not affiliated.
Speaker 2 (26:30):
Taking a look around at market still in a relatively
mixed territory, slightly down across the board with the Dow
Jones off over one hundred points at the moment. One
of the areas of the market that has been fascinating
to watch and something that I don't recall really talking
about in any great detail over the course of my
career is is silver and what it's done. From a
(26:53):
trading perspective, Silver is up seven percent today. It was
down as much as eight point seven percent sent on Monday.
For the metals, it is just been an extremely robust year.
Gold and silver both have significantly increased from where they
began twenty twenty five, and the trading surrounding these metals
is starting to mirror a little bit of the specuative
(27:15):
of trading it seems like we saw in twenty twenty
one with some of these meme stocks, with every single
day over the course of the last few days, of course,
just these rollercoaster rides of ups and downs. Certainly, the
gold and silver trade, particularly the gold ones started earlier
this year with concerns about the global economy and perhaps
(27:36):
investors retreating to it as a bit of a means
for a safe haven. But mark the activity that we've
seen recently, silver's set to perhaps reach its biggest yearly
gain since nineteen seventy nine. It's been incredible to fall
for someone who doesn't get really into this world, into
thenity gritty very much, but it's been fascinating to watch.
Speaker 4 (27:56):
Yeah, for some people, and I put myself in this camp.
Think precious metals have, as you said, as safe haven
character for historical reasons. They've served as as a medium
of exchange. Is a form effectively current not effectively. They've
(28:17):
been currency. So there's always nagging fear that governments are
going to screw up fiat currencies. Fiat currency is a
fancy way of saying the government can print the money,
there's nothing back in it. And as you know, we've
been off of the gold standard since nineteen thirty three
thirty four and we've stopped. We've been off anything resembling
(28:40):
goal backing since nineteen seventy one, so there's nothing backing
dollars in circulation. If you look at the dollar in
your pocket, it's as good for all death public in
private and full faith and credit to the You some
boloney about the forgive me, but ultimately it is blooney.
It can be inflated away a dollar can, and we've
seen experience a lot of that over the past several years.
(29:01):
So if you're worried about big deficits and the possibility
of additional def inflating a way of deficits. And it's
not just the US government that's doing this, it's governments
all over the globe. Since particularly since the particularly since COVID,
but starting with the Great Recession, governments have governments have
become increasingly fiscally reckless. They've been empowered to do that
(29:24):
because interest rates until recently have been low. So people,
I guess who buy gold and is everybody's reasons are
a little bit different. And now silver too, because it's
also historically served as a medium of exchange, are doing
so to hedge against debasement of currencies. Debasement fancy way
of saying printing, you could say coin clipping, coin shaving.
(29:49):
Historically those have been ways of debasing the currency. These days,
it's a lot easier. The king doesn't have to clip
coins or shave them, or melt them down and mix them,
or or degrade them by allin them with some inferior metal.
The sovereign, the executive in our case, just prints more money.
And I think that's people have shown that when the
(30:09):
feed is eased or spoken of easing this year metals
of sword, and it's hard to dismiss that as a coincidence, right, yes,
not if is it it's like some sort of old fashioned,
antiquated notion of gold being a safe haven and a
potential currency once developed governments screw up currency management, which
(30:32):
we appear to be well on the way of doing.
Speaker 2 (30:35):
It's not something it is something that I don't know
if I necessarily would would hang my hat on as much.
Usually the way i'd view it within a portfolio, it's, hey,
it's something that's a non correlated asset. It hasn't to
the markets, and it's a way to add some diversification
to your portfolio.
Speaker 3 (30:50):
But yeah, and to each their own.
Speaker 2 (30:52):
But never should it be a sizeable sum of a portfolio,
because if you study just the trading of metals over
a period of time, over extended periods, they've done, you know,
quite poorly relative to the growth of the stock market.
Of course, there are exceptions. This year is quite a
big exception in terms of the performance that we've seen
a year to data. I was just looking silver started
(31:14):
the year at thirty dollars and sits at seventy five
sixty today and gold simile is up over almost forty
four hundred dollars announced it owt So one way to.
Speaker 4 (31:25):
Think about metals is that they're insurance. Like insurance, it
bleeds you, it bleeds you, it bleeds you, and then
it pays.
Speaker 3 (31:32):
Off and your goals for trent pattern.
Speaker 4 (31:35):
It went dormant for three decades, right started two decades
starting in the early nineteen eighties after the big inflation episode,
and we showed, like we talked about in the last segment,
that we could get monetary policy under control. We're now
screwing all that up. And it's not just us, it's
governments all over the world, and I'm not talking about
the Trump administration. Politicians across the spectrum have been complicit
(31:56):
in this and they will continue to be sure. The
path we're on fiscally, that die was cast a long
time ago. So this may be This appears to be
one of those times when the insurance component of gold
safe haven component, if you want.
Speaker 3 (32:08):
To call it, premium, has spiked on it, it seems.
Speaker 4 (32:10):
Yeah, or the payoff, right, so you're finally not bleeding
premium like you are with any insurance that you carry.
Insurance sucks.
Speaker 3 (32:17):
We all hate to have to own it.
Speaker 2 (32:19):
But in the situations I've had with clients, and I'm
sure anyone can speak to this, you're really glad you
have it when you need it, when it comes through,
so fascinating to follow. Will continue to track the silver
and gold trade, but the volatility continues, with silver up
seven and a half percent today and gold almost up
a full percent. We're going to take a quick break
(32:39):
here on the Financial Exchange. But when we come back,
when we're talking a little bit about Los Angeles titling
rent controls for the first time in four decades, and
much more. Right after this break on the Financial Exchange.
Speaker 1 (32:52):
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Speaker 2 (34:00):
K control is something that has come up in the
news quite quite frequently recently, particularly in the Boston area,
which we're going to get into in a moment. But
this is a piece here from the Wall Street Journal
regarding Los Angeles, which tightens its rent control for the
first time in four decades. Landlords will have new limits
on what they can increase their multi family apartment rental
(34:22):
rates by now. The capping is going to be between
one to four percent. That's down from three to eight
percent that dates back forty years. And then here in
the local New England area and specific to Boston. This
was something that got brought up because it was going
to be I believe it's scheduled to be a twenty
(34:42):
twenty six ballot question. Governor Moore heally came out recently
with her commentary on rent control on gbh's Boston Public Radio.
This was recently a quote from her, rent control is
not going to be the solution to how we get
through this crisis. We need to build more homes. If
you look at studies, rent control effectively halts production. And
(35:04):
I echo her sentiments here with the whole idea of
rent control in general, it just creates more profit and
it solves There's a lot of empirical data that you
can point to that it's not effective in its ultimate goal.
Speaker 4 (35:17):
Now, there are a few things that like all economists
agree on. One of them is free trade is generally good.
Generally good. There are some exceptions, but they're really edge cases.
Another is that rent control controlling any price, prices or
signals they tell you where to invest. Their the manifestation
of people's preferences. You don't want to stifle that, like
Keeley said, and to a great credit, because it would
(35:41):
have been easy for her to take the.
Speaker 3 (35:45):
Free lunch not free lunch.
Speaker 4 (35:48):
She could applicated her progressive base part of right. She
is an important part of the Democrat party as I
understand it.
Speaker 7 (35:54):
I don't know.
Speaker 4 (35:54):
I don't I'm not one. I don't go to the meetings.
But you know, you get a walk a fine line
as any politician to either party. I guess she could
have taken the easy way out here. She didn't. She
took a sensible stand. And as you said, anybody who's
ever looked at rent control has concluded it results in
deteriorating apartments because landlords have no incentive to make upgrades.
Why should I? I can't get more money for them,
(36:15):
and it does reduce supply. Why should I building Perman's plummet?
Why would I do that? If my profits are like
caright is going to be EA.
Speaker 3 (36:23):
This is true.
Speaker 4 (36:24):
If any price control, you could more generally any price
control on pharmaceuticals. I know it's a hot button topic,
but if you if you limit profits, you will limit.
Speaker 2 (36:34):
The research and development choice that go into trying to
develop new drugs.
Speaker 4 (36:38):
This is twenty twenty five has been a really bad
year for the free market. We've got an administration. You
may think this is great, you may think it's bad.
I think it's bad. But to each his own buying
up publicly traded companies, are taking shares in publicly traded companies.
Trump administration is doing that left and right. This is
not good for the free market. Tariffs are generally not good.
They restrict consumer choice, and then any number of policies
(36:59):
at the state level. It's like we're regressing in In
the eighties and nineties, we were moving toward liberalization. Consumer
is king, let markets decide outcomes, and that's all been reversed,
probably because growth is slowed. People are agitating for something different.
Young people respond in huge numbers and polls that they
(37:20):
like socialism and communism. We've really regressed in terms of
the notion that markets can best determine should best determine outcomes.
Speaker 3 (37:33):
To me, that's sad.
Speaker 4 (37:34):
But if growth is slower as a result, I don't
suppose people will have people will even know the difference.
Speaker 2 (37:40):
One lass piece on the real estate side of things.
This was from the Wall Street Journal. Saint Paul, Minnesota
had enacted a three percent cap on rent increases in
twenty twenty two. And new apartment permits fell by seventy
nine percent, according to The Wall Street Journal.
Speaker 3 (37:55):
On the other side of.
Speaker 2 (37:56):
The river, Minneapolis said they're going to do a different
approach and target supply side reforms, and as a result,
if you compare the rents between the two twenty twenty
two to twenty twenty four, Saint Paul saw an average
increase of three point three percent in rent compared to
zero point seven percent in Minneapolis. So a true case
study kind of apples to Apple's comparison, where you saw
(38:17):
that rent control actually not having it's a intended effect
on pricing because that supply and demand side is so critical,
it's really a significant thing. Head into the bottom of
the hour here, we still have markets in slightly negative territory,
but not a whole lot moving today. We've got the
US ten year treasury sitting relatively flat at four point
(38:38):
one three percent, and oil is up about a half
percent at fifty eight dollars. That's all the time we
have for the first hour of the show here, but
stick with us. We've got a lot more to cover
on the second hour of the financial exchange right after
this break
The Financial Exchange is produced by Money Matters Radio and
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(01:07):
and Mark Fandetti.
Speaker 2 (01:11):
Welcome to this Tuesday edition of the Financial Exchange. As
we head into the end of the year, we will
have today's trading session followed by tomorrow's training session, and
that will wrap up twenty twenty five and what's been
a surprisingly very strong stock market year. It feels like
this year has been two years in terms of the
(01:31):
economic discourse. We have had all sorts of ups and downs.
But over the course of today's show and probably tomorrow's
show as well, we'll sort of do a recap on
how this year has fared in terms of economic growth, inflation,
and many other economic topics. We start the show with
a little bit of a discussion on the Federal Reserve
(01:51):
and the interest rate front. Back on December ninth and tenth,
the Federal Reserve got together for their most recent meeting,
in which they cut interest rates by a quarter of
a percent. The next meeting for the Federal Reserve is
a month out, so we have a lot of time
to digest what their next steps are going to be
and ultimately mark really where we sit at this point
(02:12):
in time is it is extremely unclear what interest rate
policy is going to look like heading into twenty twenty six.
I think anyone who says that they know where the
Fed is going to go next year is fooling themselves
because there is all sort of dissent and economic discourse
that needs to.
Speaker 3 (02:29):
Be sorted out.
Speaker 2 (02:30):
We will likely get a little bit more clarity as
we get some more economic reports coming out and sort
of emerge from that blackout period that clouded the end
of this year, where we'll get a jobs report on
January ninth, as well as a CPI inflation report on
January thirteenth. But today, what we'll get is the FED
meeting meeting. It's from December ninth and tenth, that will
(02:53):
be released at two o'clock today. I don't anticipate we're
going to get a tremendous amount of commentary that's going
to be any u full and any useful pieces of
information for us, but certainly it is an interesting time
for the Federal Reserve, and I just have no idea
what interest rates they're going to do heading into next year.
Speaker 4 (03:11):
So we're at three point five percent today for federal funds.
They target a band because they don't technically control that
very short term interest rate policy instrument, but they can
print money so they effectively exert control over short term
interest rates, but not longer term interest rates. We've seen
longer term interest rates, though they've come down over the
(03:32):
course of twenty twenty five. And when I say longer
term interest rates, for practical purposes, that means mortgages and
car loans and certain types of business loans. But for
most of us that means a mortgage or say a
car loan. So the controls short term interest rates effectively.
They can print enough money to get the Federal Funds rate,
(03:54):
which is a rate that banks use when they lend
to one another overnight when they're short runners nerves they
borrow banks do from other banks, and that's the rate
they they borrow at. So that's why FED Funds is important.
And that does affect lending rates to consumers non revolving
credit stuff like unsecured loans, stuff like that. But mostly
(04:15):
we're concerned with mortgages and car loans and stuff I think,
and FED can't control that. That depends on inflation and
how risky investors perceive holding long term bonds to be right.
Speaker 2 (04:26):
And so when Mark speaking on the shore side of things,
he mentioned some of the unscared loans piece. You know,
others are he locks home, nechro, lines of credit or
another one that are impacted by these federals exactly, crime rates,
prime rate exactly. Those are the areas that are impacted
by these decisions made by the Federal Reserve. One thing
that has been clear from the most recent meeting is
(04:49):
that the bar is now going to be raised in
terms of what the Fed needs to see for another cut.
That was the one change in language and sentiment that
you saw on the most recent meeting. I believe the
two words that they added in were extent and timing
as to what they're going to be looking for for
additional adjustments to their target range. Here now looking at
(05:13):
the CME futures, which does a probability projection as to
what the Federal Reserve is going to do in their
next meeting. And again I would take these with a
major grain of solid as we are a full month
away and a lot can happen between this point and
the next meeting. We're at about an eighty four percent
probability that they stay the course. There's another subject that
came up in some of these pieces this morning, Mark
(05:33):
that I wanted to get your two cents on. The
Federal Reserve has had a dual mandate to control both inflation,
and we've talked about that ad nauseum, the decisions that
they've made there to get it out of the depths
that we were in in twenty twenty two, to bring
it down to the level that we sit at today
about two point seven percent. But also the second part
(05:54):
of that dual mandate is the labor market. And in
some pieces today there was cometary or reference to critics
who say that the only focus of the Federal Reserve
should actually just be inflation and not this idea of
focus on the labor market. This isn't a unique idea
if you look at some of the other central banks
out there in Canada, so eas be all their focus
(06:18):
is on inflation. And just curious, as someone who follows
this for a long period of time, your thoughts on
the idea of this dual mandy and whether or not
the way the ECB does it makes makes more sense
to just focus on just one piece, because if you
were going to just focus on one piece on the
inflation side, then you could make the argument that they
should not have lowered rates, or perhaps they should have
(06:40):
raised them.
Speaker 4 (06:41):
So let's think step back, think about what the FED does.
It controls the supply of money, and in the long term,
the only thing that matters for inflation is the supply
of money. There are other things that in theory could matter,
the rate of economic growth, the demand for money. Sometimes
you hear the term velocity thrown around, which is the flip,
the flip side of the reciprocal more technically of demand.
But in the long run, the FED controls inflation. So
(07:03):
start with that principle. So what should the rate of
inflation be? Humphrey Hawkins says it should be low and stable.
It doesn't quite put it that way, but and the
FED has interpreted that to mean two percent in the
modern era since Bernanki set the target in twenty twelve.
Though the FOMC, the policy making body of the FED,
has always targeted inflation since the Green Spin era of
(07:25):
something in that range, though they never articulated at target.
So FED wants two percent inflation hasn't been there since
twenty nineteen. By that standard, they haven't done their job
in almost ten years. Any of us would be fired
under those circumstances. So the FED is doing I'm going
to answer your question, but I want to put in context.
The FED arguably is doing a terrible job of keeping
inflation low and stable. If you define low and stable,
(07:46):
inflation is one to two percent, which I personally you
asked about my sort of personal feelings, and this is
just for what it's worth. I'm in the zero to
two percent inflation camp. There are plenty of monetary economists,
of which I am not one, like academics PhD to
do this for a living, who think inflation could be
as high as five and there were reasons for that.
It helps, it helps the labor market adjust faster, is
(08:08):
the simplest reason. We can get into that, but don't
have to right now. So if you're sort of a
hawk like me, and that's ideological, that's just me as
a fiscal conservative, someone who thinks if you give government
too much leeway, they're going to screw it up. So
that's just ideological. I prefer lower inflation to hire. Other
people might prefer slightly higher inflation. Has the FED done
(08:30):
a good job controlling that?
Speaker 1 (08:31):
No?
Speaker 4 (08:31):
Should They maybe be more focused on that perhaps, And
that's the argument for removing the employment mandate from the
Fed's roster. Of things it has to do. There are
also good theoretical arguments. According to some economic models, if
you stabilize inflation, unemployment will settle at the natural rate
of unemployment, which the FED can't change anyway. By the way, sure,
(08:54):
if FED can't do anything about the structure of the economy,
the FED can goose demand. Can't do much about supply.
Speaker 2 (09:02):
Yeah, they're not going to impact infrastructure investments in AI
data centers theory.
Speaker 4 (09:07):
Not not on the long run and the short run.
By lowering interest rates, they could stimulate activity.
Speaker 3 (09:11):
For borrowing and construction and the.
Speaker 4 (09:13):
Potential growth rate of the economy, which is really what
drives inflation, because when the economy grows too fast, it
exceeds its potential growth rate, and that's when inflation starts
to rise. I'm rulling out shocks and some other things
that complicate that statement, but that's okay. The FED can't
do anything about supply. It can, in the short term,
control demand by printing money, lowering interest rates and getting
(09:34):
people to spend again over simplifying a little, but I
think that's okay. So if the FED can't do anything
about supply and unemployment is a is an aggregate supply
issue in the long run, why should they be targeting it.
That's the I just gave you sort of the textbook
argument against a dual mandate.
Speaker 3 (09:50):
I'm going to put your feet to the fire. What
do you what do you have I do? Would you
just say just inflation? Yeah, I would.
Speaker 4 (09:57):
Focus laser focus on inflation, so somewhere between zero and
two percent. You can't monomaniacally focus on two percent because
you might have shocks, sure good or bad, that push
inflation below or above. And when inflation got really low
in the twenty tens, everybody was panicking. That didn't strike
me as a bad problem to have inflation that was
(10:19):
too low. High inflation screws with everything. It screws with
your retirement plans, right, it screws with your day to day.
Speaker 3 (10:25):
It'd be like.
Speaker 4 (10:26):
Lengthening or decreasing the definition of a mile every year.
Like I could adjust, but it would be really inconvenient.
That analogy is due to famous economists, not to me,
you know, So imagine if we change all acstlually.
Speaker 2 (10:39):
I think the biggest takeaway from the last three or
four years is how painful inflation has been. I mean,
if you look at the political change that was a
reflection of the idea that inflation had run out of
control and there was this sort of desire for.
Speaker 3 (10:52):
A change office. And it just still to this this day.
Speaker 2 (10:56):
Remains looming issue. So we'll continue to monitor that here
on the Financial Exchange. But interesting commentary as we head
into the Federal Reserve meeting minutes that we'll be released
at two o'clock today, We're going to take a quick
break here on the Financial Exchange, but we come back
a little bit more on inflation and the FEDS target
of two percent, as well as a recap of twenty
(11:19):
twenty twenty five's US economy with some charts and more
information right after this break.
Speaker 1 (11:24):
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Speaker 5 (11:51):
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(12:11):
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Speaker 2 (12:14):
Couple last pieces here on the inflation target. Treasury Secretary
Scott Bessen went on in on the All In podcast
within the last couple of weeks last week or so
and gave some commentary about the Federal Reserve and that
target two percent that we've talked about on the show before,
(12:35):
and typically the policy that you had alluded to in
the first segment of the show came about Mark with
Ben Bernanke. Back in twenty twelve, the Federal Reserve officially
set the target for the two percent. It's been there's
always been this idea of keeping it within the range.
Speaker 3 (12:50):
This goes back way, you know.
Speaker 4 (12:52):
I mean, there's there's a reason Bernanki articulated a target,
which Greenspan, by the way, said never ever do. He said,
if it ever gets out of this room, he's talking
to the FOMC. And obviously I wasn't there, but Alan Blinder,
who was vice chair in the late nineties, wrote a
lot about this and still does. He said, don't let
this target get out of this room, no need, because
there may be Greenspan was the ultimate pragmatist. Bernanky, though
(13:14):
more of a theorist, recognizes the importance of expectations.
Speaker 3 (13:17):
Yes, and if you tell credit for inflation and there
you go.
Speaker 4 (13:20):
If you tell people it's going to be two and
you're credible, it's easier to get back to two without
economic sacrifice, the so called sacrifice ratio, which is another
big concept among monetary types. Sacrifice ratio is exactly what
it sounds like, how much GDP do I have to
give up in points? In your points? More technically, if
you're interested, do I have to give up to get inflation?
And you can translate that into an unemployment sacrifice ratio.
(13:44):
So everybody thought in eighty two Volkaer is gonna have
to raise an unemployment to twenty five percent to kill inflation.
He did it a lot more quickly. Why credibility? Maybe
people believed him and Bernanki therefore articulated a target, when
coupled with credibility, should make it easier to get inflation down.
Speaker 3 (14:00):
And maybe it did.
Speaker 4 (14:01):
By the way, in twenty twenty two to twenty twenty three,
and unemployment didn't go up. No, inflation came way now
down enough to get it back to two, but it
came down. It's gonna sound cavalier, I'm gonna say, kind
of painlessly, which surprised the hell out of everybody.
Speaker 3 (14:14):
Very true. I would agree with that pamelessness.
Speaker 4 (14:16):
Arguably because expectations were pretty well anchored. There's a group
of economists who would argue with that statement. But I'm
just giving you kind of the consensus that made the
sacrifice ratio a lot. Well, it was zero in twenty
twenty two, twenty twenty three, right, which is pretty pretty
remarkable considering the dire predictions.
Speaker 2 (14:36):
What he went to mention is that perhaps they would
switch to a range bound target from the two percent target,
but stating that that would not be done until they
got back to this sketch.
Speaker 4 (14:47):
Second, Okay, he's got a tough job. He has no
credibility on this. He's a total lightweight percent is when
it comes to monetary policy. And yes, I'm being a
little bit curt here, but he is.
Speaker 3 (14:55):
He's a lightweight.
Speaker 4 (14:56):
Treasury secretary should shut up and focus on efficient ways
to manage debt. These people have their hands full. Their
fiscal policy is not lowering the government spending levels. Deficit
came down a little bit, right, That's and I credit
Bessent for his focus on the deficit. He pays a
lot of lip service to it. Sure, but they haven't
done a lot. So get to work on that, Scott,
(15:17):
and let the FED manage monetary policy.
Speaker 3 (15:20):
But I don't think these comments here are that offensive.
Speaker 4 (15:22):
I mean, it's no, they are, though he's infringing on
the Fed's mandate. He should shut up and manage treasure
right talk, Fed should manage monetary policy. He's not. They're
not good at what they're doing right now. If your
target is keep on employment low and shrink the deficit.
Unemployment went up last year, deficit came down by like
forty billion dollars, a rounding error. Okay, so get to
work on that. Let the FED do its job. I
(15:44):
share his philosophy. I think he's a focus on inflation
only guy. But these guys all veer way outside their
laying for some reason. And when you're not good at
what you do your core responsibilities, and arguably they're not.
Speaker 3 (15:58):
Yeah, it doesn't bother, It doesn't really bother me.
Speaker 4 (16:00):
What bothers me, because it's kind of my thing.
Speaker 3 (16:02):
It doesn't really bother me as much.
Speaker 2 (16:04):
I think the idea of a range on inflation, it's
not that controversial of a topic, and the idea of
getting it back to the two percent target first is
probably He.
Speaker 4 (16:14):
Mouths off routinely about the Fed's failure to do this,
and that's okay to do behind the scenes, but the
public browbeating of the FED, which he's complicit in, is
absolutely not helpful. It undermines the institution.
Speaker 2 (16:26):
On the twenty twenty five US economy in charts, there
is a piece here that was done by Guardian where
it just sort of gives a recap on where we
sit this year.
Speaker 3 (16:36):
It looks like GDP growth, again.
Speaker 2 (16:38):
We haven't got the final numbers in here, will clock
in around two percent according to some recent projections. We
did have a Q three number that was quite strong
at four point three percent back in twenty twenty four.
For reference, the economy, its GDP growth growth domestic product
grew about two point eight percent. Some of the other
charts that are covered here, it's just been a very
(16:59):
interesting year again in terms of what we've seen inflation
has sort of stubbornly hung around that three percent number,
sitting at two point seven percent as of the most
recent report. And then we've had a labor market that
has been relatively weak. We have seen since June the
unemployment rate tick up. It's been a little hard to
figure out the job's picture as we've had that government shutdown,
(17:22):
sort of clouding some of the recent monthly jobs reports.
But by all indications, it does seem like we've seen
a loss in job growth on that front. But all
in all, I do sit back and look at this year,
and it was a year that, particularly with the announcement
of some of tariffs, that you saw a significant uptick
(17:43):
in predictions for recession, and we sit on the prespice
of the year closing out without that.
Speaker 4 (17:48):
Who was making I don't know this has been and
the Wall Street Journal says this routinely economists were wrong
about twenty twenty five predicting recession and inflation. I don't
know if any professional or you know, sort of PhD
level respected economists who were calling for a recession because
of Gold.
Speaker 2 (18:05):
And Sacks increased their percentage chance of a recession from
twenty two percent to forty five percent. I feel like
all these investments from sort of moving lockstep where they
say that they increased their problems still less than one.
Speaker 4 (18:15):
That's still less than fifty percent chance. And had tariff's
been fully implemented aggressively implemented, well then maybe. But it
was pretty clear as we went along that they were
going to be retreat that did some of the sort
of more severe tariffs were It.
Speaker 2 (18:33):
Seemed as this negotiat sentiment sentiment was increasing the probability
of talks of recession not I don't recall anyone saying
that we are headed for one. Jamie Diamond was set
in here too. He's been predicting a recession for for years.
That's kind of his sticks certainly to team, you shouldn't
do it, right, shouldn't.
Speaker 4 (18:51):
Know, shouldn't predict I mean, jeez, unless it's COVID and
we're shutting the economy down for some inexplicable and stupid reason,
you shouldn't do it.
Speaker 2 (18:58):
It's like the projections for the stock market for twenty
twenty six. You know, it's anyone's guest as to really
how it's gonna fare. It's very difficult to do. Taking
a look around at markets. We're in relatively mixed territory
at the moment with the Dow Jones off just slightly here,
but we're gonna have more information for you on the
markets and how they're faring after back to back losses.
(19:21):
Come up in just a moment here where we'll have
Wall Street Watch and we'll be talking with Todd Lutsky
here as well right after this break.
Speaker 1 (19:40):
Like us on Facebook and follow us on Twitter at
TFE show. Breaking business news is always first right here
on the Financial Exchange Radio Network.
Speaker 6 (19:51):
We're proud to announce that circle K is now the
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circle K. Supporting those who bravely served our country isn't
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If you'd like to do your part, please visit DAVMA
(20:13):
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Speaker 1 (20:21):
Time now for Wall Street Watch, a complete look at
what's moving markets so far today right here on the
Financial Exchange Radio Network.
Speaker 5 (20:29):
Well after yesterday's modest pullback, markets today are slightly in
negative territory as Wall Street awaits minutes from the fed's
December meeting do out this afternoon.
Speaker 3 (20:39):
At two pm.
Speaker 5 (20:40):
Right now, the Dow is down about a quarter percent,
or one hundred and nine points. SMP five hundred down
over a tenth of a percent or nine points lower.
NASDAC down nearly two tenths of one percent to forty
points lower. Rusted two thousand is down about a quarter percent.
Ten youre Treasure reeled up one basis point of five
four point one three percent to Incrude oil up about
(21:03):
a half a percent higher, trading a fifty eight dollars
and thirty six cents a baryl. Some acquisition news from
Meta this morning, after the Facebook parent announced it has
acquired Singapore based AI startup Manus.
Speaker 3 (21:17):
The Wall Street Journal.
Speaker 5 (21:17):
Reported that Meta is closing the deal at more than
two billion dollars. In a statement, Meta said that its
acquisition was aimed at accelerating AI innovation for businesses and
integrating advanced automation into its consumer in enterprise products, including
its Meta AI assistant. Meta shares are up over one
(21:38):
percent on that acquisition news. Meanwhile, Applied Digital said it
plans to spend out its cloud business and combined with
Exo Bionics, Applied Digital shares are dipping, while Exostock is
rallying seventy six percent. In mining stocks including Newmont and
Barrack are bouncing back today and up about one percent
(21:58):
after Metal's rebound from yesterday's tumble. I'm Tucker Silva and
that is Wall Street Watch.
Speaker 2 (22:06):
As promised, we are now joined by Todd Lutsky from
Cushion Dolan. Todd, thanks so much for joining us today.
Speaker 7 (22:13):
Well, thanks always a pleasure, Hey, Todd.
Speaker 2 (22:15):
One of the big things that I often discuss with
clients is when you're considering doing a trust, the impact
it can have on a state taxes. Could you just
tell us and the listeners just some of the changes
that have gone on with the Massachusetts the Massachusetts estate
state of state tax recently within the last few years.
Speaker 7 (22:35):
Yeah, the latest updates were taking our exemption which was
at one million for the longest time, I think back
in two thousand and six, they leveled off at about
a million dollar exemption and they raised it to two
million dollar exemption, so in essence doubling the ability to
(22:58):
shelter assets from the state taxes. So if you're married,
now you can shelter four million. If you're single, you
can shelter just the two. But again by being married,
you can't just do it because you're married. You need
the trusts in place to be able to double the
exemption and take advantage of each person's exemption. And the
(23:20):
other piece to that legislative update was they kind of
got rid of the cliff rule, so you know, if
you go over the two million, you're not taxed on
every penny. Doesn't mean you don't plan by any stretch,
but they did manage to get rid of that as well.
Speaker 2 (23:39):
One other concept that many clients aren't familiar with is
just when those of state taxes are due, whether federal
or on the state level. One concept that is probably
unknown to many out there is this idea of portability.
Can you just give a little bit of detail on
that concept and how it applies with the state taxes?
Speaker 7 (23:58):
Todd Yes, the portability applies only to the Fed, not
the state. So there's no states in the country that
I'm aware of that allow porting your unused exemptions. So,
first of all, what is portability is the ability to
capture the unused exemption of the first spouse to die.
(24:20):
So if for some reason you didn't plan, you can
take the unused exemption and give a coupon in essence
to the surviving spouse. However, it's not that easy. You
actually need to file a federal return for the dicedent
even if one is not due, meaning even if you're
under the federal exemption, you still need to file. You
(24:43):
have five years to file if you're not required to
file otherwise, you need to file within nine months with extensions,
and then by filing the federal return, you're in essence
making the election to get the portability. But without it
you just waste it. It's still wasted, so important to
(25:04):
use it. So whenever you do your planning, just keep
that in mind, folks. That's what this guide is all about,
balancing asset protection, planning and estate taxes. Right. So I
just explained some things about the federal side of it
and the state side of it. But there's also people
who say, I don't need the federal but I want
(25:26):
to protect assets from the nursing home. Can I still
save on Massachusetts the state tax. Yes, you can do both.
Get the guide. It's the end of the month. Balancing
Asset Protection and Avoiding Estate Taxes, talks about portability, talks
about the exemptions, the marital share, the remainder share, really
how they work way better than we can get into
(25:46):
it on the radio. And it also does the same
thing for irrevocable trust. So a little something for everybody
in here eight six six eight four eight five six
nine to nine or Legal Exchange dot com again Balancing
Asset Protection and Avoiding Estate Taxes eight sixty six eight
fourty eight five six ninety nine or Legal Exchange show
(26:10):
dot com.
Speaker 2 (26:11):
Thanks so much for the time, Todd, rust up that voice.
We need you for twenty twenty six.
Speaker 7 (26:16):
Thank you, Bye bye.
Speaker 1 (26:18):
The proceeding was paid for and the views expressed are
solely those of Cushing and Dolan. Cushing and Dolan and
or Armstrong Advisory may contact you offering legal or investment services.
Cushing and Armstrong did not endorse each other and are
not affiliated.
Speaker 2 (26:30):
Taking a look around at market still in a relatively
mixed territory, slightly down across the board with the Dow
Jones off over one hundred points at the moment. One
of the areas of the market that has been fascinating
to watch and something that I don't recall really talking
about in any great detail over the course of my
career is is silver and what it's done. From a
(26:53):
trading perspective, Silver is up seven percent today. It was
down as much as eight point seven percent sent on Monday.
For the metals, it is just been an extremely robust year.
Gold and silver both have significantly increased from where they
began twenty twenty five, and the trading surrounding these metals
is starting to mirror a little bit of the specuative
(27:15):
of trading it seems like we saw in twenty twenty
one with some of these meme stocks, with every single
day over the course of the last few days, of course,
just these rollercoaster rides of ups and downs. Certainly, the
gold and silver trade, particularly the gold ones started earlier
this year with concerns about the global economy and perhaps
(27:36):
investors retreating to it as a bit of a means
for a safe haven. But mark the activity that we've
seen recently, silver's set to perhaps reach its biggest yearly
gain since nineteen seventy nine. It's been incredible to fall
for someone who doesn't get really into this world, into
thenity gritty very much, but it's been fascinating to watch.
Speaker 4 (27:56):
Yeah, for some people, and I put myself in this camp.
Think precious metals have, as you said, as safe haven
character for historical reasons. They've served as as a medium
of exchange. Is a form effectively current not effectively. They've
(28:17):
been currency. So there's always nagging fear that governments are
going to screw up fiat currencies. Fiat currency is a
fancy way of saying the government can print the money,
there's nothing back in it. And as you know, we've
been off of the gold standard since nineteen thirty three
thirty four and we've stopped. We've been off anything resembling
(28:40):
goal backing since nineteen seventy one, so there's nothing backing
dollars in circulation. If you look at the dollar in
your pocket, it's as good for all death public in
private and full faith and credit to the You some
boloney about the forgive me, but ultimately it is blooney.
It can be inflated away a dollar can, and we've
seen experience a lot of that over the past several years.
(29:01):
So if you're worried about big deficits and the possibility
of additional def inflating a way of deficits. And it's
not just the US government that's doing this, it's governments
all over the globe. Since particularly since the particularly since COVID,
but starting with the Great Recession, governments have governments have
become increasingly fiscally reckless. They've been empowered to do that
(29:24):
because interest rates until recently have been low. So people,
I guess who buy gold and is everybody's reasons are
a little bit different. And now silver too, because it's
also historically served as a medium of exchange, are doing
so to hedge against debasement of currencies. Debasement fancy way
of saying printing, you could say coin clipping, coin shaving.
(29:49):
Historically those have been ways of debasing the currency. These days,
it's a lot easier. The king doesn't have to clip
coins or shave them, or melt them down and mix them,
or or degrade them by allin them with some inferior metal.
The sovereign, the executive in our case, just prints more money.
And I think that's people have shown that when the
(30:09):
feed is eased or spoken of easing this year metals
of sword, and it's hard to dismiss that as a coincidence, right, yes,
not if is it it's like some sort of old fashioned,
antiquated notion of gold being a safe haven and a
potential currency once developed governments screw up currency management, which
(30:32):
we appear to be well on the way of doing.
Speaker 2 (30:35):
It's not something it is something that I don't know
if I necessarily would would hang my hat on as much.
Usually the way i'd view it within a portfolio, it's, hey,
it's something that's a non correlated asset. It hasn't to
the markets, and it's a way to add some diversification
to your portfolio.
Speaker 3 (30:50):
But yeah, and to each their own.
Speaker 2 (30:52):
But never should it be a sizeable sum of a portfolio,
because if you study just the trading of metals over
a period of time, over extended periods, they've done, you know,
quite poorly relative to the growth of the stock market.
Of course, there are exceptions. This year is quite a
big exception in terms of the performance that we've seen
a year to data. I was just looking silver started
(31:14):
the year at thirty dollars and sits at seventy five
sixty today and gold simile is up over almost forty
four hundred dollars announced it owt So one way to.
Speaker 4 (31:25):
Think about metals is that they're insurance. Like insurance, it
bleeds you, it bleeds you, it bleeds you, and then
it pays.
Speaker 3 (31:32):
Off and your goals for trent pattern.
Speaker 4 (31:35):
It went dormant for three decades, right started two decades
starting in the early nineteen eighties after the big inflation episode,
and we showed, like we talked about in the last segment,
that we could get monetary policy under control. We're now
screwing all that up. And it's not just us, it's
governments all over the world, and I'm not talking about
the Trump administration. Politicians across the spectrum have been complicit
(31:56):
in this and they will continue to be sure. The
path we're on fiscally, that die was cast a long
time ago. So this may be This appears to be
one of those times when the insurance component of gold
safe haven component, if you want.
Speaker 3 (32:08):
To call it, premium, has spiked on it, it seems.
Speaker 4 (32:10):
Yeah, or the payoff, right, so you're finally not bleeding
premium like you are with any insurance that you carry.
Insurance sucks.
Speaker 3 (32:17):
We all hate to have to own it.
Speaker 2 (32:19):
But in the situations I've had with clients, and I'm
sure anyone can speak to this, you're really glad you
have it when you need it, when it comes through,
so fascinating to follow. Will continue to track the silver
and gold trade, but the volatility continues, with silver up
seven and a half percent today and gold almost up
a full percent. We're going to take a quick break
(32:39):
here on the Financial Exchange. But when we come back,
when we're talking a little bit about Los Angeles titling
rent controls for the first time in four decades, and
much more. Right after this break on the Financial Exchange.
Speaker 1 (32:52):
Find daily interviews in full shows of the Financial Exchange
on o our YouTube page. Subscribe to our page and
get caught up on anything and every thing you might
have missed. This is the Financial Exchange Radio Network. This
is your home for the most comprehensive coverage of the
economy and the trends on Wall Street. This is the
Financial Exchange Radio Network.
Speaker 5 (33:19):
This segment of The Financial Exchange is brought to you
by the US Virgin Islands Department of Tourism. There's still
time to book your holiday vacation to San Croix, Saint Thomas,
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(33:41):
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Speaker 2 (34:00):
K control is something that has come up in the
news quite quite frequently recently, particularly in the Boston area,
which we're going to get into in a moment. But
this is a piece here from the Wall Street Journal
regarding Los Angeles, which tightens its rent control for the
first time in four decades. Landlords will have new limits
on what they can increase their multi family apartment rental
(34:22):
rates by now. The capping is going to be between
one to four percent. That's down from three to eight
percent that dates back forty years. And then here in
the local New England area and specific to Boston. This
was something that got brought up because it was going
to be I believe it's scheduled to be a twenty
(34:42):
twenty six ballot question. Governor Moore heally came out recently
with her commentary on rent control on gbh's Boston Public Radio.
This was recently a quote from her, rent control is
not going to be the solution to how we get
through this crisis. We need to build more homes. If
you look at studies, rent control effectively halts production. And
(35:04):
I echo her sentiments here with the whole idea of
rent control in general, it just creates more profit and
it solves There's a lot of empirical data that you
can point to that it's not effective in its ultimate goal.
Speaker 4 (35:17):
Now, there are a few things that like all economists
agree on. One of them is free trade is generally good.
Generally good. There are some exceptions, but they're really edge cases.
Another is that rent control controlling any price, prices or
signals they tell you where to invest. Their the manifestation
of people's preferences. You don't want to stifle that, like
Keeley said, and to a great credit, because it would
(35:41):
have been easy for her to take the.
Speaker 3 (35:45):
Free lunch not free lunch.
Speaker 4 (35:48):
She could applicated her progressive base part of right. She
is an important part of the Democrat party as I
understand it.
Speaker 7 (35:54):
I don't know.
Speaker 4 (35:54):
I don't I'm not one. I don't go to the meetings.
But you know, you get a walk a fine line
as any politician to either party. I guess she could
have taken the easy way out here. She didn't. She
took a sensible stand. And as you said, anybody who's
ever looked at rent control has concluded it results in
deteriorating apartments because landlords have no incentive to make upgrades.
Why should I? I can't get more money for them,
(36:15):
and it does reduce supply. Why should I building Perman's plummet?
Why would I do that? If my profits are like
caright is going to be EA.
Speaker 3 (36:23):
This is true.
Speaker 4 (36:24):
If any price control, you could more generally any price
control on pharmaceuticals. I know it's a hot button topic,
but if you if you limit profits, you will limit.
Speaker 2 (36:34):
The research and development choice that go into trying to
develop new drugs.
Speaker 4 (36:38):
This is twenty twenty five has been a really bad
year for the free market. We've got an administration. You
may think this is great, you may think it's bad.
I think it's bad. But to each his own buying
up publicly traded companies, are taking shares in publicly traded companies.
Trump administration is doing that left and right. This is
not good for the free market. Tariffs are generally not good.
They restrict consumer choice, and then any number of policies
(36:59):
at the state level. It's like we're regressing in In
the eighties and nineties, we were moving toward liberalization. Consumer
is king, let markets decide outcomes, and that's all been reversed,
probably because growth is slowed. People are agitating for something different.
Young people respond in huge numbers and polls that they
(37:20):
like socialism and communism. We've really regressed in terms of
the notion that markets can best determine should best determine outcomes.
Speaker 3 (37:33):
To me, that's sad.
Speaker 4 (37:34):
But if growth is slower as a result, I don't
suppose people will have people will even know the difference.
Speaker 2 (37:40):
One lass piece on the real estate side of things.
This was from the Wall Street Journal. Saint Paul, Minnesota
had enacted a three percent cap on rent increases in
twenty twenty two. And new apartment permits fell by seventy
nine percent, according to The Wall Street Journal.
Speaker 3 (37:55):
On the other side of.
Speaker 2 (37:56):
The river, Minneapolis said they're going to do a different
approach and target supply side reforms, and as a result,
if you compare the rents between the two twenty twenty
two to twenty twenty four, Saint Paul saw an average
increase of three point three percent in rent compared to
zero point seven percent in Minneapolis. So a true case
study kind of apples to Apple's comparison, where you saw
(38:17):
that rent control actually not having it's a intended effect
on pricing because that supply and demand side is so critical,
it's really a significant thing. Head into the bottom of
the hour here, we still have markets in slightly negative territory,
but not a whole lot moving today. We've got the
US ten year treasury sitting relatively flat at four point
(38:38):
one three percent, and oil is up about a half
percent at fifty eight dollars. That's all the time we
have for the first hour of the show here, but
stick with us. We've got a lot more to cover
on the second hour of the financial exchange right after
this break
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