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Is a trade war with China not sustainable? · The Financial Exchange Show

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Speaker 2: Wednesday here on the Financial Exchange, and top story for
1:13
Speaker 2: the day is going.
1:14
Speaker 3: To be the continued, continued situation.
1:19
Speaker 2: That's developing between the United States and China. So just
1:23
Speaker 2: to bring up to speed on what happened over the
1:26
Speaker 2: last twenty four hours here yesterday. I forget exactly what
1:31
Speaker 2: time I think it was. Maybe actually I can just
1:34
Speaker 2: pull up the chart of the S and P from
1:36
Speaker 2: yesterday and I'll tell you it looks like it was
1:39
Speaker 2: right around noon yesterday. A story broke from I don't
1:46
Speaker 2: know who broke it initially, actually that Scott Bessen, in
1:49
Speaker 2: a private meeting that JP Morgan was putting on, gave
1:56
Speaker 2: a message that I think by many was interpreted as
2:01
Speaker 2: positive for the situation between China and the United States
2:07
Speaker 2: to have some kind of step down in the future.
2:09
Speaker 2: I'm gonna quote here from CNBC's emon Javers, who is
2:16
Speaker 2: again his official title is Senior Washington correspondent for CNBC.
2:21
Speaker 2: I don't believe he broke this, but a little bit
2:24
Speaker 2: afterwards he was, you know, giving some some quotes on this,
2:28
Speaker 2: and I'll quote from his tweet about it. Source in
2:32
Speaker 2: the room tells me this is a rough transcript of
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Speaker 2: the comments Treasury Secretary Besset made yesterday at a closed
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Speaker 2: door event that are moving markets today? Quote, the next
2:41
Speaker 2: steps with China are No one thinks the current status
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Speaker 2: quot sustainable at one hundred and forty five and one
2:45
Speaker 2: hundred and twenty five percent. So I would posit that
2:47
Speaker 2: over the very near future there will be a de escalation,
2:50
Speaker 2: and I should think that that should give the world,
2:52
Speaker 2: the markets a sigh of relief. We have an embargo
2:54
Speaker 2: now on both sides right. Besson also said, if you look,
2:59
Speaker 2: I think I saw number that the container bookings between
3:01
Speaker 2: China and the US, and this is from two weeks ago,
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Speaker 2: is down sixty four percent. So the goal isn't to decouple.
3:07
Speaker 2: The goal isn't to decouple. I'll interject here and just
3:10
Speaker 2: state we talked about that on our very show before
3:14
Speaker 2: this happened. So I just want to point out that
3:17
Speaker 2: the Secretary of the Treasury is referencing numbers that we
3:20
Speaker 2: are speaking about.
3:21
Speaker 3: On our show.
3:22
Speaker 2: So Gollag Wilkers makes me feel kind of good that
3:26
Speaker 2: we're on the right track on this. And so the
3:31
Speaker 2: market looked at that and interpreted it positively. Is saying, hey,
3:35
Speaker 2: there's going to be a de escalation, which means things
3:37
Speaker 2: won't be as bad as they are. Lost in this
3:40
Speaker 2: a little bit is the very next sentence, which is,
3:43
Speaker 2: and I do say that China is going to be
3:45
Speaker 2: a slog in terms of negotiations because that engagement is
3:48
Speaker 2: not started yet. But I think again, neither side thinks
3:51
Speaker 2: the status quo is sustainable, and I've said it quite
3:53
Speaker 2: a bit. So the market rallied on that after the
3:57
Speaker 2: close yesterday. And I watched this this morning just because
4:01
Speaker 2: I wanted to see the full video of it. So
4:04
Speaker 2: I watched the twenty minute Q and A from the
4:08
Speaker 2: Oval Office, which originally started, by the way, it was
4:10
Speaker 2: President Trump introducing the new head of the SEC during this,
4:14
Speaker 2: and then he took a Q and A afterwards, and
4:17
Speaker 2: a couple of questions that he was asked, one of
4:19
Speaker 2: which was, Hey, are you planning on firing Jerome Powell,
4:23
Speaker 2: to which he said, no, never thought about it, never have,
4:26
Speaker 2: like not not gonna happen. And this is something where
4:30
Speaker 2: on Friday, the head of the National Economic Council, Kevin Hassett, said,
4:35
Speaker 2: and again National Economic Council is directly appointed by the President,
4:39
Speaker 2: like Kevin Hassett you've seen them all over TV directly
4:42
Speaker 2: said we're actively exploring options for how to fire Powell,
4:47
Speaker 2: so like like quite literally from I'm not done Mark.
4:54
Speaker 2: So that obviously then got markets all excited about, Okay,
4:58
Speaker 2: he's not going to fire Powell. So you see bonds
5:00
Speaker 2: being bought today and equity is you know, being bought
5:03
Speaker 2: after that comment, and immediately after that, the President also said, yeah,
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Speaker 2: you know, we're we're gonna have to, you know, do
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Speaker 2: something about the tariff right in China. We're probably not
5:12
Speaker 2: gonna keep it, you know, where it is right now.
5:14
Speaker 2: It's probably gonna have to be lower. We'll figure out
5:16
Speaker 2: how to make the deal. If China will come to
5:18
Speaker 2: the table, you know, we'll set the deal. YadA YadA.
5:20
Speaker 2: Markets interpreted that positively as well. So I think there's
5:24
Speaker 2: a few things here to unpack. By the way, it's Chuck,
5:26
Speaker 2: Mark and Tucker with you. A few things here to unpack.
5:30
Speaker 2: The first is and now, by the way, sorry, This
5:33
Speaker 2: continued to this morning. Wall Street Journal with an exclusive
5:38
Speaker 2: headline is White House considers slashing slashing China tariffs to.
5:42
Speaker 3: De escalate trade war. I'll quote from them.
5:45
Speaker 2: One senior White House officials said China tariffs were likely
5:47
Speaker 2: to come down to between fifty and sixty five percent. Remember,
5:50
Speaker 2: the Trump campaign specifically discussed a sixty percent tariff on China,
5:54
Speaker 2: so this would fall right into that range. The administration
5:58
Speaker 2: is also considering a tiered top approach, similar to the
6:00
Speaker 2: one proposed by the House Committee on China late last year.
6:03
Speaker 2: Thirty five percent levees for items of the US deems
6:07
Speaker 2: not a threat to national security socks, tickle me elmos,
6:12
Speaker 2: things of that nature, and at least one hundred percent
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Speaker 2: for items deemed strategic to America's interest, probably Chinese steal
6:19
Speaker 2: things along those lines. The bill also had proposed phasing
6:22
Speaker 2: in those levees over five years, so I think that
6:28
Speaker 2: And by the way, they've subsequently updated this, I'm now
6:30
Speaker 2: reading the updated version from four minutes ago. This from
6:34
Speaker 2: White House spokesman pushed Asai. President Trump has been clear
6:38
Speaker 2: China needs to make a deal with the United States
6:39
Speaker 2: of America. When tariff decisions on tariffs are made, they
6:42
Speaker 2: will come directly from the President. Anything else is just
6:45
Speaker 2: pure speculation. So the way I was kind of pushing
6:47
Speaker 2: back and saying, hey, like you don't know what you don't.
6:50
Speaker 3: Know, so I think all of this.
6:53
Speaker 2: Look, the market is interpreting this over the last two
6:56
Speaker 2: days as hey, tariffs are going to come down and
6:59
Speaker 2: we are are going to avert that worst case scenario,
7:04
Speaker 2: which is very much possible. The counter to this, and
7:08
Speaker 2: I'm just laying this out as possibility is we still
7:10
Speaker 2: don't have any timing that's been laid out for when
7:13
Speaker 2: this change would happen. We still don't have any confirmed details.
7:17
Speaker 2: And so, as I've said kind of all along during
7:20
Speaker 2: this year, let's wait for confirmation before we, you know,
7:24
Speaker 2: go anywhere on this, and we're gonna have to see
7:28
Speaker 2: what comes of it, how long it's in place, what
7:31
Speaker 2: the specifics are. It's simply because as I said on
7:34
Speaker 2: April third, after the tariff announcement, Hey, this is not
7:38
Speaker 2: the start the end of tariff uncertainty. This is the
7:41
Speaker 2: start of it. And we're seeing that there's you know,
7:43
Speaker 2: continued evolution as we go forward here. So I think
7:48
Speaker 2: market's reacting as if, hey, the worst case scenario is
7:52
Speaker 2: off the table from a tariff perspective, and to be honest,
7:55
Speaker 2: it probably is. I think something spooped them again in
7:59
Speaker 2: the last couple of days. Otherwise you wouldn't have the
8:01
Speaker 2: Treasury Secretary and the President talking like this. But we
8:06
Speaker 2: still don't know what the outcome is going to be
8:08
Speaker 2: and how long it stays in place and how it
8:10
Speaker 2: evolves from here. So I try not to jump to
8:13
Speaker 2: too many conclusions about what the world is going to
8:16
Speaker 2: look like a week, a month, or a year from now,
8:18
Speaker 2: just because we're still seeing the situation changing.
8:23
Speaker 4: They always ask Pole what, I'm sorry for interrupting you earlier.
8:26
Speaker 4: They always ask Trump if he's going to fire poll.
8:29
Speaker 4: It's the wrong question. They're trying to get him with
8:32
Speaker 4: a gut your question, something that will allow them to
8:35
Speaker 4: lead the news with something novel. It's the wrong question.
8:39
Speaker 4: The real question is for those of us that follow
8:41
Speaker 4: the FED because we enjoy it or because we have to,
8:45
Speaker 4: is what's your view of monetary policy? Generally? Under what
8:49
Speaker 4: condition should the FED be pushing leaning against the wind
8:53
Speaker 4: as central bankers like to call it, or easing. What's
8:57
Speaker 4: your beef with the current state of monetar Harry policy?
9:01
Speaker 4: How would you do things differently? How would you have
9:03
Speaker 4: done things differently during COVID? Those to me are smarter
9:05
Speaker 4: questions that tease out his views on the FED. Because
9:09
Speaker 4: those are more likely to be relevant over the next
9:11
Speaker 4: four years. They'll be that would the response that would
9:15
Speaker 4: be more telling is to what type of chairman he's
9:18
Speaker 4: going to appoint any year from Powell's going to be
9:19
Speaker 4: gone in a year, and that's going to come in
9:21
Speaker 4: a heartbeat right.
9:22
Speaker 3: Part of this very much.
9:25
Speaker 2: I was thinking about this over the last week or so,
9:28
Speaker 2: where you know, I said, look, if you're going to
9:29
Speaker 2: see something on Palelet's, it's gonna be relatively soon, simply
9:32
Speaker 2: because otherwise you can just literally wait one year and
9:36
Speaker 2: appoint whoever you want into that position.
9:39
Speaker 4: Or name the appointment. It may name your nominee in
9:41
Speaker 4: three months, six months, get the process going. I want
9:45
Speaker 4: to hear what type of look the Fed's already compromised
9:48
Speaker 4: by the by the statements, and I was gonna say actions,
9:53
Speaker 4: not quite to this point, but his pick for the
9:56
Speaker 4: Fed's probably already compromised people view People are gonna view
9:59
Speaker 4: them as a puppet. They know based on appointments he's
10:02
Speaker 4: made elsewhere, and based on the very strong feelings he's
10:04
Speaker 4: expressed that the next FED chairman probably won't have independence.
10:08
Speaker 4: That's what warriors man, I wish they'd ask him that question,
10:11
Speaker 4: do you view FED independence is sacriss.
10:13
Speaker 3: Do you think that's true?
10:14
Speaker 4: Yes, I do.
10:15
Speaker 2: I guess what I'll say is a counter to it is, Look,
10:20
Speaker 2: once any FED chairs in that seat, they have that
10:26
Speaker 2: protection that the seat affords them of being not able
10:29
Speaker 2: to be fired by the president based on the historical precedents.
10:33
Speaker 4: But that's not what the President said yesterday. The President
10:35
Speaker 4: said I have no intention of firing him. The President
10:37
Speaker 4: did not admit that he could or could not fire him.
10:40
Speaker 3: That's more to me than anything.
10:43
Speaker 2: So okay, So the read through on that could be
10:45
Speaker 2: like when you are hearing the owner of an NFL team,
10:48
Speaker 2: you know, in the last week of a season, saying, yes,
10:51
Speaker 2: so and so is our head coach right now, and
10:53
Speaker 2: then the head coach gets fired a week later. That's
10:55
Speaker 2: kind of how you're seeing that is Sure, I have
10:57
Speaker 2: no intention of firing him, but I still may.
11:00
Speaker 4: The more interesting question to me would be do you
11:03
Speaker 4: have the power to? Because that gets to the heart
11:06
Speaker 4: of the matter. Sure, his response, you could infer from
11:09
Speaker 4: his response that he believes he does have the power.
11:11
Speaker 4: That is inherently destabilizing. So more interesting to me is
11:16
Speaker 4: how this plays out over the next three years, not
11:18
Speaker 4: the fact that Trump uncocked the hammer on the trigger.
11:23
Speaker 4: I'm not using the right metaphora, but you know what
11:26
Speaker 4: I mean. Trump may have stood down a little bit,
11:28
Speaker 4: but he hasn't conceded, and he typically doesn't. This is
11:31
Speaker 4: pretty effective. I think this is one of his more
11:33
Speaker 4: effective negotiating techniques. He didn't concede a thing, but he
11:36
Speaker 4: got the markets to think that he did.
11:39
Speaker 3: Let's take a quick break here.
11:40
Speaker 2: When we come back, I want to talk about the
11:41
Speaker 2: Chinese response to the last twenty four hours and kind
11:46
Speaker 2: of what they've heard from the US. We'll discuss that
11:49
Speaker 2: when we return.
11:51
Speaker 5: Market volatility is at its highest point since the pandemic.
11:55
Speaker 5: Keep it here for the most comprehensive coverage of the
11:57
Speaker 5: global trade war. This is the Financial Exchange Radio Network,
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12:45
Speaker 2: So we've been talking about the last twenty four hours
12:48
Speaker 2: of basically what's been going on with the US and
12:54
Speaker 2: China from a tariff perspective. This morning, we noted in
12:59
Speaker 2: the first segment, the Wall Street Journal has a piece
13:03
Speaker 2: noting that the Trump administration could end up with an
13:08
Speaker 2: effective tariff rate on China somewhere between fifty and sixty
13:11
Speaker 2: five percent, and a few.
13:13
Speaker 3: Different ways that you can view this.
13:14
Speaker 2: I don't really want to get into like, you know,
13:17
Speaker 2: who wins or who loses, because quite honestly, like that's
13:20
Speaker 2: not what matters to us and our show. What really
13:24
Speaker 2: matters is, Hey, how does this impact the broader economy?
13:29
Speaker 2: And I think that when you look at this, the
13:32
Speaker 2: questions that we need to answer in order to determine
13:36
Speaker 2: that there are a few of them. The first is
13:39
Speaker 2: when does let's assume that we end up in that spot,
13:44
Speaker 2: when does it get announced is question number one. Not
13:48
Speaker 2: even let's assume we end up in that spot, because
13:49
Speaker 2: we have no idea. I'm not going to speculate on
13:51
Speaker 2: what happens. But there are three questions that matter. When
13:54
Speaker 2: is the announcement and implementation of whatever the new tariff
13:57
Speaker 2: rate is. Obviously, the sooner, the less damage that is
14:02
Speaker 2: done to the broader economy. Two, what is the new
14:06
Speaker 2: tariff rate going to be? There's obviously a world of
14:10
Speaker 2: difference between one hundred and forty five percent and sixty
14:13
Speaker 2: percent and thirty five percent?
14:15
Speaker 3: Uh. And Three.
14:18
Speaker 2: How convinced are companies, countries and everyone else that these
14:24
Speaker 2: tariff rates are going to be there for an extended
14:27
Speaker 2: period of time? And you know, walking through these three questions,
14:31
Speaker 2: So the first one is, hey, look, if you still
14:33
Speaker 2: don't get an announcement on any change in the China
14:35
Speaker 2: tarif rate over the next you know, a few weeks
14:37
Speaker 2: if it's if it's Memorial Day before we get something,
14:40
Speaker 2: which given the Wall Street Journal reporting now you would
14:43
Speaker 2: see what it would be sooner. But if let's play
14:45
Speaker 2: worst case scenario, if it's like six weeks before we
14:47
Speaker 2: get something, you get all kinds of problems because supply
14:50
Speaker 2: chain snarl in that time. If it is today, you
14:55
Speaker 2: have minimal you know, overall time that the forty five
15:00
Speaker 2: rate's been in effect. It's been for you know, fourteen
15:02
Speaker 2: days now, because they went into effect on April ninth. Okay, yeah,
15:06
Speaker 2: it's two weeks of discomfort, but you can manage through
15:09
Speaker 2: that and kind of go from there. The next is
15:12
Speaker 2: where do these tariff rates end up if they are
15:16
Speaker 2: at sixty percent, which, by the way, is right in
15:18
Speaker 2: the middle of that fifty to sixty five percent range.
15:20
Speaker 2: At the Wall Street Journal piece notes, Hey, that's right
15:23
Speaker 2: where the Trump administration proposed tariffing China during the campaign.
15:30
Speaker 2: So you kind of end up, you know, right back
15:32
Speaker 2: in that that area where people were not expecting, but
15:35
Speaker 2: where it was at least being discussed. What does that
15:39
Speaker 2: do to overall levels of trade? Well, it's not a
15:43
Speaker 2: straight trade embargo in that case, because there are ways
15:46
Speaker 2: that you know, combinations of shippers and producers and things
15:49
Speaker 2: can figure it out where basically it's a combination of
15:53
Speaker 2: margins do get shredded somewhat, consumers have to pay somewhat
15:57
Speaker 2: higher prices. No one really comes out happy, but you
16:01
Speaker 2: can still sell a lot of the goods just at
16:03
Speaker 2: higher prices and lower margins than you used to. If
16:07
Speaker 2: you go back to kind of what the deal is
16:09
Speaker 2: with everyone else where, Hey, you know we went back
16:12
Speaker 2: to the ten percent rate that the baseline rate that
16:14
Speaker 2: was proposed at during the ninety day pause. Okay, China
16:17
Speaker 2: was already at twenty percent before the October, before the
16:22
Speaker 2: April second announcement. Maybe you say, hey, China is going
16:26
Speaker 2: back to twenty percent. That's kind of your best case
16:28
Speaker 2: scenario in terms of minimizing disruption. The third one is
16:33
Speaker 2: the one that's going to complicate everything, which is how
16:37
Speaker 2: much do businesses and or people trust that this is
16:43
Speaker 2: going to be where the rate stays and it it
16:45
Speaker 2: gets dodgy for two different reasons. Because remember if you
16:48
Speaker 2: move the rate down to sixty as an example, it
16:52
Speaker 2: could in theory, move in either direction depending on how
16:54
Speaker 2: the relationship between the US and China develops. So on
16:57
Speaker 2: one hand, you might have some people who say, hey,
17:00
Speaker 2: the tariff freight is moving down, it could move back up.
17:03
Speaker 2: This is a great time for me to like buy
17:05
Speaker 2: something that I've been waiting on because you know, I
17:09
Speaker 2: need to do it, because the ray could go back up.
17:12
Speaker 2: The counter to that is, other people could say, hey,
17:14
Speaker 2: the tariffright already went down from one forty five to sixty.
17:17
Speaker 2: If this happens, I'm gonna wait it out longer because
17:21
Speaker 2: maybe it'll come down to thirty and things will get
17:22
Speaker 2: even cheaper. And you could have both households and businesses
17:28
Speaker 2: saying that, And so there's gonna be further distortion of
17:31
Speaker 2: the economic data because of how different individuals and companies
17:36
Speaker 2: make these decisions, which again gets to I don't think
17:40
Speaker 2: we're going to have any great idea of how the
17:43
Speaker 2: economy is doing over the next few months because the
17:45
Speaker 2: data is going to be all over the place and inconsistent.
17:49
Speaker 2: The one caveat being, hey if they if they really
17:51
Speaker 2: did do nothing on this tariff rate until you know,
17:54
Speaker 2: Memorial Day. Yeah, the economic data is going to get
17:57
Speaker 2: pretty bad pretty quickly as we head into the summer.
17:59
Speaker 3: But I don't know.
18:02
Speaker 2: It still points towards the economy likely slowing down because
18:06
Speaker 2: this is still a significant hindrance in economic activity. But
18:10
Speaker 2: the data is going to be all over the place.
18:11
Speaker 2: You could have some businesses and people stocking up left
18:13
Speaker 2: and right. You could have others that are pausing like
18:15
Speaker 2: it's it's gonna get really messy.
18:18
Speaker 4: Yeah, high volatility is inherently bad for growth, or I
18:22
Speaker 4: should say, is associated with lower levels of growth. We're
18:26
Speaker 4: in a low growth regime anyway, we have been for
18:30
Speaker 4: this entire century. So more volatility means more dips into
18:34
Speaker 4: negative territory. It's very, very unhelpful. If the tariffs are
18:39
Speaker 4: less severe, that should result in less of a drag,
18:43
Speaker 4: less of a stagflationary shocked if you will, But there
18:46
Speaker 4: will still be adverse supply consequences, as you've talked about
18:50
Speaker 4: at length, and adverse inflation consequences. How persistent those inflation
18:54
Speaker 4: consequences are depends in part on how the FED response.
18:57
Speaker 2: So I think the big thing in all this is
19:00
Speaker 2: is continue to try to not get too excited about
19:04
Speaker 2: things in either direction on any one particular day. I
19:08
Speaker 2: think that when you're talking about imposing tariffs at any level,
19:12
Speaker 2: it's likely going to create some additional drag in the economy,
19:14
Speaker 2: and we're gonna have to see how that plays out.
19:17
Speaker 2: But try not to get too hyped up about you know, Hey,
19:21
Speaker 2: Monday stocks were down three percent. Tuesday they're up, you know,
19:24
Speaker 2: to today they're back up another three Like things are
19:27
Speaker 2: still very volatile, and no one has a great idea
19:30
Speaker 2: of exactly what all this means.
19:32
Speaker 3: Let just take a quick break here.
19:34
Speaker 2: When we come back, we got Wall Street Watch and
19:35
Speaker 2: we're joined by Todd Lutsky for Ask Todd.
19:41
Speaker 5: Like us on Facebook and follow us on Twitter. Act
19:44
Speaker 5: TFE show. Breaking business news is always first right here
19:48
Speaker 5: on the Financial Exchange Radio Network.
19:52
Speaker 1: Time now for Wall Street Watch.
19:54
Speaker 5: A complete look at what's moving markets so far today
19:58
Speaker 5: right here on the Financial Exchange Radio Network.
20:01
Speaker 6: Markets are in rally mode again today. Market sentiment received
20:06
Speaker 6: a boost this morning surrounding the trade war with China
20:09
Speaker 6: after The Wall Street Journal reported about an hour ago
20:12
Speaker 6: that the Trump administration is considering slashing its steep tariffs
20:16
Speaker 6: on Chinese imports, in some cases by more than half,
20:20
Speaker 6: in a bid to de escalate tensions with Beijing. However,
20:24
Speaker 6: Trump has not made a final determination at the moment.
20:27
Speaker 6: The Dow is up by two point seven percent, over
20:31
Speaker 6: one thousand points higher. S and P five hundred is
20:34
Speaker 6: up three point three percent or one hundred and seventy
20:37
Speaker 6: six points in the tech heavy Nasdaq up over four
20:41
Speaker 6: percent or seven hundred points higher. Russell two thousand, also
20:45
Speaker 6: in rally Mode up three point four percent, Tenure Treasure
20:48
Speaker 6: reiled down by five basis points at four point three
20:51
Speaker 6: three percent, and crude oil is down about two percent today,
20:55
Speaker 6: trading at sixty two dollars in forty one cents a barrel.
20:59
Speaker 6: Tesla jumping by seven percent after the ev maker posted
21:02
Speaker 6: disappointing first quarter results. However, optimism is up after CEO
21:07
Speaker 6: Elon Musk said he would devote less time to his
21:10
Speaker 6: work with the Trump administration beginning in May. Meanwhile, Boeing
21:14
Speaker 6: reported first quarter results, posting a narrower than expected loss
21:18
Speaker 6: for the first quarter. CEO Kelly Ortberg also said the
21:21
Speaker 6: aircraft maker will ask the FAA to approve increased production
21:25
Speaker 6: of its seven thirty seven Max jets. Boeing up by
21:28
Speaker 6: six percent. Elsewhere, in Phase Energy misstreet earnings and revenue expectations,
21:34
Speaker 6: where as CEO said Terris will hurt the company's battery business,
21:38
Speaker 6: which sources from China, that stock pulling back by eight percent.
21:42
Speaker 6: Fast Casual Mediterranean chain CAVA upgraded to outperform from market
21:47
Speaker 6: perform at Bernstein, where the analyst believes the company can
21:50
Speaker 6: be shielded from a downturn in the economy Kava up
21:54
Speaker 6: by ten percent. Capital One up by six percent after
21:57
Speaker 6: its first quarter earnings beat expectation, while multiple Wall Street
22:01
Speaker 6: firms up their price target of the stock. Bloomberg reported
22:05
Speaker 6: that Intel is readying to announce plans to cut more
22:07
Speaker 6: than twenty percent of its staff. Intel up by seven
22:10
Speaker 6: percent on that news. And after today's close, we'll see
22:14
Speaker 6: earnings from IBM Service Now in Texas Instruments on Tucker Silvan.
22:19
Speaker 6: That's Wall Street Watch.
22:22
Speaker 5: This is Ask Todd on the Financial Exchange Radio Network.
22:25
Speaker 5: If you have an existing estate plan or in the
22:28
Speaker 5: market for one, Todd Lutsky is here to answer your
22:30
Speaker 5: questions and help you plan for a later life. Ask
22:33
Speaker 5: Todd is presented by Cushing and Dolan, serving Massachusetts and
22:36
Speaker 5: New England for more than thirty five years, helping families
22:39
Speaker 5: with the state and tax planning, Medicaid planning, and probate law.
22:43
Speaker 5: Visit Cushingdolan dot com. Now here's Todd Lutsky.
22:48
Speaker 2: We are now joined by the one and only Todd
22:50
Speaker 2: Lutsky from the law firm of Cushing and Dolan. We
22:54
Speaker 2: got the phone lines open because we call the segment
22:56
Speaker 2: Ask Todd. You get to Ask Todd your estate planning questions.
23:00
Speaker 3: Live on air right now.
23:02
Speaker 2: As I mentioned, phone lines are open at eight eight
23:05
Speaker 2: eight to zero five two two sixty three. That is
23:09
Speaker 2: the number to call again. Eight eight eight to zero
23:12
Speaker 2: five two two six three is the number to call
23:16
Speaker 2: to ask Todd your estate planning questions. Reminder, we usually
23:19
Speaker 2: get through maybe two, occasionally three of these, so do
23:23
Speaker 2: get calling early and often to make sure we get
23:26
Speaker 2: to you. That number again is eight eight eight to
23:30
Speaker 2: zero five two two six three. Mister Lutsky, how are
23:36
Speaker 2: you doing today?
23:37
Speaker 7: I am doing just fine, Hugh, I'm good.
23:39
Speaker 8: I'm uh.
23:40
Speaker 2: I'm looking actually for someone to brush their teeth with
23:43
Speaker 2: me every morning.
23:44
Speaker 7: You don't like doing it alone.
23:45
Speaker 2: Well, my dentist says that brushing alone won't prevent cavities.
23:49
Speaker 3: Well, that's that's true.
23:51
Speaker 2: I'm looking for someone, you know, to kind of help
23:53
Speaker 2: out a little bit, Todd. I want to talk a
23:55
Speaker 2: little bit about concerns about leaving money to the next generation. Yes,
24:01
Speaker 2: if someone is nervous about leaving a large sum of
24:05
Speaker 2: money to a child or grandchild because they don't want
24:08
Speaker 2: them to blow all that money at once, what tools
24:12
Speaker 2: are available to spread out when someone receives an inheritance.
24:17
Speaker 7: And so when you use a trust, and we use
24:20
Speaker 7: them for many things, and we focus lots of times
24:23
Speaker 7: on using trusts for things like probate and taxes. But
24:27
Speaker 7: I think, and what you're asking me, Chuck, is also
24:30
Speaker 7: true that the family behind the estate plan is even
24:33
Speaker 7: better and that's where the trust lives on after you're dead.
24:37
Speaker 3: To control things.
24:38
Speaker 7: Just like you mentioned, how and when people get assets
24:44
Speaker 7: to me can be more important than the other stuff.
24:46
Speaker 7: Although you need to protect the asset to make sure
24:48
Speaker 7: it's there to provide for the family, so you need
24:51
Speaker 7: the trust for that part. But if you're going to
24:53
Speaker 7: leave assets for children or any beneficiary of your choosing,
24:57
Speaker 7: one way to do it is, you know, stagger distributions.
25:01
Speaker 7: It's pretty simple. You could say, you know what, my
25:03
Speaker 7: kids are pretty level headed. I think they're pretty good
25:05
Speaker 7: with money. We don't have a big drug problem, we
25:07
Speaker 7: don't have an alcohol problem, they're not spend thrifts. So
25:12
Speaker 7: what I'll do is just because they're young. And this
25:15
Speaker 7: would depend on how old you are. Of course, when
25:17
Speaker 7: when you're doing your planning, you know I've got younger
25:20
Speaker 7: kids and so if we die today, I would want
25:24
Speaker 7: my kids to get it at certain ages twenty five, thirty,
25:27
Speaker 7: thirty five years of age, you know, And that way,
25:30
Speaker 7: as they reach those ages, the trustee would have to
25:35
Speaker 7: make a distribution. So at twenty five, the trustee or
25:39
Speaker 7: I should say, the kid could pound the table and
25:42
Speaker 7: say I want one third of my bucket and the
25:47
Speaker 7: trustee would have to comply. Now at thirty, I want,
25:51
Speaker 7: you know, half the balance, which is another third, and
25:54
Speaker 7: the trustee would have to comply. And so prior to
25:57
Speaker 7: those ages, however, the true trusty will have discretionary power
26:03
Speaker 7: for distributions such as you know, the kids going Usually
26:07
Speaker 7: we tie it to certain standards like health, education, welfare,
26:12
Speaker 7: and support. We call it maintenance and support the hem's standards.
26:16
Speaker 7: And so that way, if the kid is going to
26:18
Speaker 7: college and needs money for college, the trustee would not
26:21
Speaker 7: be able to say no. But if the trustee is
26:24
Speaker 7: if the kid is going to say, you know, I'm
26:26
Speaker 7: taking a weekend in Vegas, well maybe that's not a
26:29
Speaker 7: good distribution time. And so the trustee would have some
26:33
Speaker 7: discretionary play over distributions during those ages. But again, as
26:39
Speaker 7: they reach those predetermined ages, mandatorily, the trustee couldn't say no.
26:44
Speaker 7: If the kid wants.
26:45
Speaker 2: It with Toddletski from the law firm of Cushing and Dolan.
26:49
Speaker 2: Phone lines still have space on them. If you've got
26:51
Speaker 2: estate planning questions that you want answered, eight eight eight
26:55
Speaker 2: two zero five two two six three is the number again.
26:59
Speaker 2: That number is eight eight eight to zero five two
27:02
Speaker 2: two six three. Maybe you've got a question about in
27:04
Speaker 2: a state plan you've already done. Maybe you got in
27:06
Speaker 2: a question. Maybe you got a question about, Hey, should
27:09
Speaker 2: I be doing something? Or am I taking the right
27:11
Speaker 2: approach within the state plan that I'm working on? Either way,
27:15
Speaker 2: Todd's available right now to answer your questions live on
27:18
Speaker 2: air eight eight eight to zero five two two six three.
27:23
Speaker 2: We're gonna take a quick break here, but when we
27:25
Speaker 2: come back, it's right to your questions with Todd. That
27:28
Speaker 2: number again is eight eight eight to zero five two
27:33
Speaker 2: two six three.
27:35
Speaker 5: Ask Todd with Todd Lutsky every Wednesday at ten thirty
27:38
Speaker 5: only here on the Financial Exchange Radio Network. You're listening
27:44
Speaker 5: to Ask Todd with Todd Lutsky on the Financial Exchange
27:48
Speaker 5: Radio Network.
27:55
Speaker 2: Alright, let's get right to your questions with Todd Lutsky.
27:58
Speaker 2: First up, we got Nancy in Norwell Nancy, what's your
28:01
Speaker 2: question for Todd?
28:03
Speaker 8: Hi, I happen to be a beneficiary the tuna state
28:06
Speaker 8: that my father set up. And he set it up
28:09
Speaker 8: and he had my older brother and sister as the executors. Okay,
28:14
Speaker 8: but unbeknownst to him, the executors met with the attorney
28:20
Speaker 8: that originally set up the irrevocable trust and then decided
28:24
Speaker 8: to rearrange it and change it without my parents wishing
28:30
Speaker 8: for that to be done. Okay, that allowed, So.
28:35
Speaker 7: I'm a little confused. Let me ask some more questions. So,
28:37
Speaker 7: first of all, you mentioned the word executor. So brother
28:40
Speaker 7: and sister are executor. That means their executor. Executor means
28:44
Speaker 7: over the will, just so you they have control. As
28:48
Speaker 7: an executor, they would only have power over a will
28:52
Speaker 7: or in other words, only controlling assets that would be
28:57
Speaker 7: in the hands of the decedent in their own name,
29:01
Speaker 7: not joint no designated beneficiary on it, just like a
29:05
Speaker 7: bank account that was in let's say dad's name when
29:07
Speaker 7: he died. So two things, One, they only have control
29:11
Speaker 7: over assets that are in the decedent's name alone on
29:15
Speaker 7: the date of death, and two, no power whatsoever until
29:19
Speaker 7: the parent dies. So when you're asking the question they're
29:23
Speaker 7: trying to change the trust, but parents are alive.
29:27
Speaker 3: At this time.
29:28
Speaker 7: Yeah, okay, are your parents still alive?
29:31
Speaker 8: No?
29:32
Speaker 7: Okay, So while your parents were alive, that irrevocable trust,
29:37
Speaker 7: which I've never read, so it's hard for me to address,
29:40
Speaker 7: it could be changed like our medicaid. Irrevocable trusts can
29:45
Speaker 7: be changed right by something known as a limited power
29:49
Speaker 7: of appointment. But that limited power of appointment is granted
29:52
Speaker 7: to the parents, the creators of the trust donors, if
29:56
Speaker 7: you will, not a trustee, and not an executor. So
30:01
Speaker 7: first of all, the executor has no power over the
30:03
Speaker 7: trust because that has nothing to do with it. It's
30:05
Speaker 7: only a will. And so then the only other person
30:08
Speaker 7: that could change the trust would be a trustee, who
30:11
Speaker 7: has no power to change beneficiaries on a trust. But
30:15
Speaker 7: your parents, while they're alive, might have that power if
30:20
Speaker 7: it's built in called a limited power of appointment. So
30:22
Speaker 7: I think what you're going to need to do is
30:24
Speaker 7: you're going to need to really find out your question
30:26
Speaker 7: is spot on. You should be asking these questions. But
30:30
Speaker 7: while your parents were alive, they very well may have
30:33
Speaker 7: had the power to change the document. Now do you
30:36
Speaker 7: know in fact that the document was changed before they died. Yeah,
30:41
Speaker 7: and did that change in the document cut out you?
30:45
Speaker 8: Uh? Not that I'm aware of.
30:47
Speaker 7: No, did it benefit the brother and sister more.
30:50
Speaker 8: Than you yep, and his children?
30:53
Speaker 7: So then what you need to do is even if
30:55
Speaker 7: the parents did make the change while they were alive,
30:59
Speaker 7: then you're only argument might be was their undue influence
31:02
Speaker 7: by the brother and sister over the parents manipulating them
31:06
Speaker 7: to make the change. And if you want, that's going
31:08
Speaker 7: to require litigation. I'm not telling you to do it.
31:11
Speaker 7: Litigation is ugly and expensive, but and you've got to
31:15
Speaker 7: find out make sure there's a not a no contest
31:17
Speaker 7: clause in there, because then you could lose everything if
31:20
Speaker 7: you challenge it and there isn't no contest clause. So
31:23
Speaker 7: you got to tap dance around and really pay attention
31:26
Speaker 7: before you just litigate. But I think a good hire
31:29
Speaker 7: a good lawyer before you do that, and they'll decide
31:32
Speaker 7: whether litigation makes sense or not. Okay, So I hope
31:35
Speaker 7: that helps a little bit. You really are gonna need
31:38
Speaker 7: to just check into this before you litigate. But it
31:40
Speaker 7: is possible mom and Dad had the power to change
31:43
Speaker 7: it and if they did and it wasn't by undue influence,
31:47
Speaker 7: then it is what it is. But if you feel
31:50
Speaker 7: really strongly that it was done by undue influence, then
31:53
Speaker 7: hire a litigator in and get it, you know, look into.
31:56
Speaker 3: It, folks.
31:57
Speaker 7: That is exactly why we're giving away. The guide this
32:01
Speaker 7: month called how to Leave Assets to Beneficiaries. Because the
32:05
Speaker 7: trusts do that, they control how the assets get to
32:09
Speaker 7: your family, how when why. They can do things from
32:13
Speaker 7: credit or protection, generation, skipping tax benefits, divorce protection. They
32:19
Speaker 7: can provide outright distributions, They can provide staggered or distributions
32:23
Speaker 7: or distributions based on you know, who gets what. Maybe
32:27
Speaker 7: that sounds like what was going on in this case
32:29
Speaker 7: with Nancy. But folks, this can be one of the
32:32
Speaker 7: most important parts of your estate plan. So if you've
32:34
Speaker 7: done your plan, call and get the guide because it
32:37
Speaker 7: might give you ideas on how to change it. If
32:40
Speaker 7: you haven't done your plan, certainly call and get it
32:42
Speaker 7: because it will give you ideas on how to leave
32:44
Speaker 7: your assets to your families eight six six eight four
32:48
Speaker 7: eight five six nine nine or Legal Exchange Show dot
32:52
Speaker 7: Com again eight six six eight four eight five six
32:57
Speaker 7: nine nine or Legal Exchange show dot Com.
33:01
Speaker 2: Todd, I get another one for you here. Let's go
33:02
Speaker 2: to Stephen in Spencer. Stephen, you are on with Todd Lutsky.
33:07
Speaker 1: Hey, Todd, how you doing?
33:08
Speaker 6: Thanks for having me?
33:10
Speaker 3: What's up?
33:11
Speaker 7: Hey?
33:12
Speaker 3: I get a question. I'm thinking about doing a trust
33:14
Speaker 3: for my kids.
33:16
Speaker 2: I'm just wondering if I put the money in the trust.
33:19
Speaker 3: Obviously I pay fees to the firm.
33:22
Speaker 2: Are there fees that they would have to pay to
33:25
Speaker 2: finalize the trust to get the money or is it
33:28
Speaker 2: a one time deal?
33:30
Speaker 7: So, Stephen, a couple of questions. First one, just so
33:33
Speaker 7: I can help you with the kind of trust.
33:35
Speaker 3: How old are you I'm fifty eight.
33:39
Speaker 7: And how many kids there'll be three?
33:43
Speaker 5: Three?
33:44
Speaker 3: Are you married, divorced? Single?
33:46
Speaker 8: Married?
33:47
Speaker 7: Married? Okay? Good, so you know again the size of
33:51
Speaker 7: your estate will matter, right if you want revocable trusts.
33:55
Speaker 7: But let's just focus on your trust question. In general,
34:00
Speaker 7: when you create a trust, you should pay a fee
34:03
Speaker 7: to the firm to create the trust. Generally it's a
34:06
Speaker 7: one time flat fee.
34:09
Speaker 3: Pay it so.
34:10
Speaker 7: And in fact, I recommend that when clients are going
34:12
Speaker 7: to get their firm get their estate planning done, they
34:14
Speaker 7: should ask and it should probably be a fat flat
34:16
Speaker 7: fee hourly. You kind of get a little nervous, so
34:20
Speaker 7: flat fee one time to the firm. Ongoing. No, you've
34:23
Speaker 7: signed everything, you executed, everything you pay. Your flat fee
34:27
Speaker 7: trust lives on during your life. There is no annual
34:31
Speaker 7: fee to the firm. At least, we don't charge an
34:35
Speaker 7: annual fee just because you have a trust. No, maybe
34:40
Speaker 7: you've got to pay an annual fee to have an
34:42
Speaker 7: income tax return done for the trust, you know, if
34:44
Speaker 7: it's an irrevocable trust. A revocable trust does not even
34:48
Speaker 7: require the filing of tax return, So no fee there.
34:54
Speaker 7: Short of that, I don't see any fees, and even operationally,
34:58
Speaker 7: you know, kids taking money out of the trust is
35:00
Speaker 7: not a fee. In fact, they might be trustees when
35:02
Speaker 7: you pass away, So hopefully that helps a little. I
35:05
Speaker 7: don't think there's any big ongoing fee for you. There
35:10
Speaker 7: you go, Todd, Let's do one more here. We've got
35:14
Speaker 7: Dave on the cape. Dave, you only got a couple
35:16
Speaker 7: of minutes here, so you've got to be quick. But
35:18
Speaker 7: what's your question for Todd?
35:20
Speaker 9: Okay, my father in lost houses in an irrevocable trust. Okay,
35:24
Speaker 9: if he sells the house and moves into an assisted
35:26
Speaker 9: living facility, can he use that to pay rent there?
35:30
Speaker 9: The money could pay the rent at the assistant living
35:33
Speaker 9: So one.
35:34
Speaker 7: You're gonna I'm gonna have to know more about the trust.
35:36
Speaker 7: But let me give you my thoughts. So, if it's
35:39
Speaker 7: a medicaid irrevocable trust and was designed ultimately to protect
35:42
Speaker 7: assets from the cost of nursing home care, I understand
35:45
Speaker 7: he's going into assisted living and not a nursing home
35:48
Speaker 7: at the moment. That doesn't mean that he might not
35:50
Speaker 7: end up there, but at this point he's not there.
35:54
Speaker 7: And so what will happen is you sell the house,
35:57
Speaker 7: the money will go into the trust, remained protected. If
36:00
Speaker 7: it was designed to be protected, there should be no
36:03
Speaker 7: adverse capital gains tax. In the event that it's a
36:05
Speaker 7: grant or trust, taxes will be paid. Money will sit there.
36:09
Speaker 7: There might be language in the trust that says he's
36:11
Speaker 7: entitled to the income from the trust. So if there's
36:14
Speaker 7: a million dollars in the trust because he sold a
36:16
Speaker 7: house and it's generating fifty thousand a year in income, yeah,
36:20
Speaker 7: he's entitled to that income and he can certainly use
36:22
Speaker 7: that money to pay the assisted living facility. So I
36:26
Speaker 7: just don't know how much income is going to be
36:29
Speaker 7: generated by the trust, and then you would really have
36:33
Speaker 7: to read the document pretty closely to find out what
36:37
Speaker 7: his access to principle is in the trust.
36:41
Speaker 3: So, in my example, if it was a.
36:43
Speaker 7: Million dollar home, that million dollars less taxes is principal
36:47
Speaker 7: and not sure what his access to principle is, so
36:50
Speaker 7: you have to read it to see if there's any
36:52
Speaker 7: way for him to access to principle to pay for
36:55
Speaker 7: the assisted living. But at least I hope that was
36:58
Speaker 7: a little helpful and best I could do with that
37:00
Speaker 7: reading the document.
37:01
Speaker 2: Mister Lutsky, thank you so much for joining us today.
37:03
Speaker 2: We appreciate the time. Always pleasure.
37:06
Speaker 5: This has been Aske Todd on the Financial Exchange Radio network.
37:10
Speaker 5: Ask Todd with Todd Lutsky has been presented by Cushing
37:13
Speaker 5: and Dolan, serving Massachusetts and New England for more than
37:15
Speaker 5: thirty years, helping families with the state and tax planning,
37:18
Speaker 5: Medicaid planning, and probate law. Call eight hundred three nine
37:21
Speaker 5: three four thousand and one or visit Cushingdolan dot com.
37:25
Speaker 5: The views expressed in this segment are solely those of
37:27
Speaker 5: Cushing and Dolan. Armstrong Advisory does not provide any legal
37:29
Speaker 5: or tax advice. Please consult with your illegal or tax
37:31
Speaker 5: advisor on such matters. Cushing and Armstrong do not endorse
37:34
Speaker 5: each other and are not affiliated.