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Stocks Keep Climbing as Oil Risks Linger and the Fed Stays Cautious · The Financial Exchange Show

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  Speaker 1: a donation today. This is the Financial Exchange with Chuck
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  Speaker 1: Zada and Mark Fandetti.
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  Speaker 2: Chuck, Mark and Tucker with the and we kick things
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  Speaker 2: off today with not really.
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  Speaker 3: Much of anything.
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  Speaker 2: Quite honestly, everyone wants to know what's happening with the
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  Speaker 2: situation in the Middle East, and the honest answer is
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  Speaker 2: no one knows anything. You've got, you know, continued differing
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  Speaker 2: reports from not just you know, the US Iranian sides,
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  Speaker 2: but from Pakistani mediators, from other parties in the region.
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  Speaker 2: And so I think, as I've said since this started,
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  Speaker 2: if you want to save yourself an awful lot of headache,
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  Speaker 2: the best thing to do is not pay attention to
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  Speaker 2: any of that noise and instead focus on what is
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  Speaker 2: actually happening as far as transits through the strait of hormones,
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  Speaker 2: because that's ultimately what's going to determine when oil can
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  Speaker 2: start being pumped again and will determine the economic impact. Now,
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  Speaker 2: the interesting thing, if you want to look at, you know,
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  Speaker 2: kind of a tale of you know, kind of two
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  Speaker 2: narratives within this market. For the first four weeks of
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  Speaker 2: the conflict, you had a consistent, steady message conveyed by
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  Speaker 2: markets which was as long as oil prices go up,
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  Speaker 2: stocks are going to move down. That was pretty darn
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  Speaker 2: consistent through end of March March twenty seventh March thirtieth,
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  Speaker 2: like in that range. And the other consistent thing was
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  Speaker 2: as long as the strait of hormones remains closed, oil
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  Speaker 2: prices are going to move up. So the simple math
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  Speaker 2: for that first four weeks was horrmuz closed, stocks down.
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  Speaker 2: The interesting thing that has changed since March thirtieth, uh
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  Speaker 2: is hormones remains closed, but markets have moved up and
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  Speaker 2: oil has moved sideways to slightly down.
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  Speaker 3: And I think the you know, the.
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  Speaker 2: Question that's worth asking is not hey, like, is a
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  Speaker 2: deal going to be signed like Thursday? None of us
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  Speaker 2: have any idea, like unless you're actually plugged into negotiations, which, Tucker,
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  Speaker 2: are you involved in the US Iranian negotiations?
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  Speaker 3: No, you didn't get the call, not yet? Okay, Mark,
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  Speaker 3: what about you?
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  Speaker 4: You surprised neither one of us have Ben because he's
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  Speaker 4: at this point you're big in his Lama Bad. I
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  Speaker 4: think we're quite I think we're I'd certainly fit in
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  Speaker 4: uh physically, you.
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  Speaker 3: Were the mayor back in the day, right, I think I.
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  Speaker 4: Do a decent jobs as a Far east Man mayor
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  Speaker 4: of Islamabad. But your your Your bigger point is that
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  Speaker 4: if unless you're an insiety, you don't know, right.
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  Speaker 3: You don't.
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  Speaker 2: But I do think it's interesting that what worked for
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  Speaker 2: the first four months or for four weeks was Hormuz
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  Speaker 2: closed oil upstocks down, and for the last two weeks
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  Speaker 2: now it's Hormuz closed oil sideways to slightly down, stocks
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  Speaker 2: way up. And so the question is, well, what does
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  Speaker 2: this mean? And I think there's a very simple way
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  Speaker 2: to read this and read through it in that everyone
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  Speaker 2: in their grandmother knows at this point that the energy
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  Speaker 2: disruption is going to get worse over the next two months.
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  Speaker 2: We know that May and June are going to be
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  Speaker 2: a train wreck for energy markets around the world. We can,
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  Speaker 2: you know, debate like, oh, because the US can to
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  Speaker 2: be better off. Of course we will be because of
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  Speaker 2: you know, a number of different factors. But the simple
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  Speaker 2: fact is that everyone knows that energy markets are going
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  Speaker 2: to be a mess through memorial at this point, what people,
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  Speaker 2: I think, what the market is saying, what the market
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  Speaker 2: is telling you is as long as that is pretty
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  Speaker 2: close to the you know, the resolution of this and
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  Speaker 2: the resumption of flows can can resume sometime, you know,
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  Speaker 2: in the next several weeks. That makes that air pocket
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  Speaker 2: sixty days instead of you know, one hundred and sixty days.
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  Speaker 3: Okay, we can get through this.
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  Speaker 2: We because mar markets aren't pricing themselves based on what
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  Speaker 2: economic activity is going to be in June. Markets are pricing, okay,
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  Speaker 2: what's your earnings growth going to be eight, twelve, twenty
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  Speaker 2: four months out like that. That's how markets price things in.
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  Speaker 2: And so what the stock market is attempting to do
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  Speaker 2: right now, and it might be right, it might be wrong,
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  Speaker 2: like this is the thing with these you don't know
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  Speaker 2: until after the fact, But the market is attempting to say, hey,
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  Speaker 2: the sides have gotten closer in negotiations from what we
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  Speaker 2: can understand, and so there's a higher chance of a
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  Speaker 2: resolution in the next thirty days.
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  Speaker 3: That would make this.
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  Speaker 2: Really a short term, really uncomfortable situation, but still a
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  Speaker 2: short term one. And as such, we're going to look
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  Speaker 2: through that. And that's a reasonable case for markets to
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  Speaker 2: make absolute. It's also a reasonable case if you disagree.
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  Speaker 2: The great thing about markets is that you can put
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  Speaker 2: your money where your mouth is and say I disagree,
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  Speaker 2: and here's how I'm going to express that. And I
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  Speaker 2: don't know who's going to end up being right on
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  Speaker 2: this like. It could be something where there is a
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  Speaker 2: resolution that comes through in the next couple of weeks.
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  Speaker 2: It could be something where we're still sitting here at
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  Speaker 2: Memorial Day with no meaningful progress. I don't know because
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  Speaker 2: I'm not there, But ultimately, the only things that I
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  Speaker 2: think undermine this market move are, hey, can the conflict
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  Speaker 2: not be resolved, like, is there a problem that you
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  Speaker 2: can't resolve that prevents hormoz from opening? Or the corollary
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  Speaker 2: to that is, hey, do central banks freak the heck
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  Speaker 2: out about this and start hiking rates like they did
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  Speaker 2: back in twenty two.
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  Speaker 5: That's the big risk.
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  Speaker 2: The latter is tough for me to get to right
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  Speaker 2: now based on what we're seeing and hearing from most
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  Speaker 2: central banks. And furthermore, even if you did have central
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  Speaker 2: bank action, I would think it's pretty unlikely it's to
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  Speaker 2: the magnitude that you saw in twenty twenty.
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  Speaker 3: Two twenty twenty two.
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  Speaker 2: In the early part of twenty three, the FED hiked
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  Speaker 2: by five hundred basis points. Is anyone calling for the
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  Speaker 2: FED to take interest rates to seven and a half
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  Speaker 2: right now?
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  Speaker 4: Well, real rates right now are close to zero with
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  Speaker 4: inflation at a little or three if you assume that's
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  Speaker 4: what we're tracking now. Sure, and FED funds being at
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  Speaker 4: three and a half. So the question is how high
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  Speaker 4: did they feel they need to get the real rate
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  Speaker 4: of interest to say, squash inflation expectations, which I've perked up.
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  Speaker 3: But it's it's a tough putt, like.
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  Speaker 4: I don't think it's a six hundred on excuse me good.
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  Speaker 2: It's a tough putt to be h Yeah, yeah, you're
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  Speaker 2: gonna get that FED funds rate to seven and a half.
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  Speaker 3: No, like that.
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  Speaker 2: You could make a case where, hey, if the FED
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  Speaker 2: thinks and if if the data shows that the inflationary
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  Speaker 2: impact is going to be you know, longer and higher,
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  Speaker 2: and you know, all of a sudden, you've got core
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  Speaker 2: at four and headline at five for you know, nine months. Yeah, okay,
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  Speaker 2: does the FED have to move up by one hundred
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  Speaker 2: one hundred and fifty BIPs?
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  Speaker 5: Yeah?
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  Speaker 2: Right, yeah, sure, like there's a there's a there's a
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  Speaker 2: case to be made there, but that still is nowhere
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  Speaker 2: near the magnitude of impact. And this is part of
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  Speaker 2: the reason why that's crazy. If you're trying to make
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  Speaker 2: a direct comparison to twenty twenty two. No, No, it's it's
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  Speaker 2: really hard to because it's a fundamentally different set of
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  Speaker 2: inputs that you're going right there.
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  Speaker 4: Chuck, I mean, as you suggest, it's hard to get there.
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  Speaker 4: Real rates right now the problem this is a problem.
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  Speaker 4: I don't know if it'll be a problem in two months,
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  Speaker 4: but real rates have gone zero to maybe even a
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  Speaker 4: little bit negative depending on how much inflation perks up.
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  Speaker 4: That's dangerous because even if the Fed does nothing, it's
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  Speaker 4: easing policy, it's got to stay ahead of that. Ideally
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  Speaker 4: increase rates one for one. With underlying inflation, we just
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  Speaker 4: don't know because of all the factors you cited how
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  Speaker 4: much underlying inflation is going to go up here.
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  Speaker 2: The other thing that I'll say on this that I
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  Speaker 2: just think is really interesting. If you are a participant
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  Speaker 2: in markets, whether you're a trader, a long term investor,
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  Speaker 2: whatever it might be, you got to remember that ultimately
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  Speaker 2: what matters when you are investing or trading is not
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  Speaker 2: being right, it's making money. And I know that that
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  Speaker 2: sounds like, well, Chuck, aren't those the same things? When
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  Speaker 2: you're right, you make money?
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  Speaker 3: Well, not necessarily.
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  Speaker 2: We've talked about plenty of instances where you can be
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  Speaker 2: completely like dead on in terms of, oh, here's what
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  Speaker 2: the impact of this is going to be, and you
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  Speaker 2: can still lose money because market's move in a different way.
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  Speaker 2: And so it's possible to hold multiple views at the
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  Speaker 2: same time where you can say, look, I might not
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  Speaker 2: think this is going to resolve quickly, but the market's
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  Speaker 2: telling me one thing, and I can't let myself just
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  Speaker 2: get butchered in the market because it's moving against me.
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  Speaker 2: You've got to reconcile those two things and understand what
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  Speaker 2: they mean. Now, if you're a long term investor, it's
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  Speaker 2: also generally something where hey, if you're trying to trade
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  Speaker 2: one off macro economic events as a long term investor
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  Speaker 2: who doesn't usually do that, the best thing generally is
• 10:23
  Speaker 2: to not do that. Continue to not do it because
• 10:26
  Speaker 2: you don't have an edge. You might get lucky on
• 10:29
  Speaker 2: a trade, you might get lucky on two. Ultimately you're
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  Speaker 2: playing against you know, professionals that do this all day,
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  Speaker 2: every day, and you know they're usually.
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  Speaker 3: Better out of it than you are. Just take a
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  Speaker 3: quick break here. When we come back, let's talk about this.
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  Speaker 2: What we've seen in markets the last couple of weeks
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  Speaker 2: just in terms of the gains in equity markets, they've
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  Speaker 2: been really robust and can they continue?
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  Speaker 3: Does that mean I should talk now?
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  Speaker 5: Yeah?
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  Speaker 3: Oh okay, go ahead, good got it? So, uh, really
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  Speaker 3: impressive run for stocks.
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  Speaker 2: And we talked in the last segment about just you
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  Speaker 2: know what we've seen now, but in particular what you're
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  Speaker 2: seeing in the Nasdaq index is the NASDAK has not
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  Speaker 2: had a down day since March thirtieth, now, so we're getting,
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  Speaker 2: you know, up to some of the things like when
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  Speaker 2: you start seeing like hey, index X had you know,
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  Speaker 2: ten days in a row positive usually that that's where
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  Speaker 2: things start to be like, okay, like how much further
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  Speaker 2: can this really go?
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  Speaker 3: Not long term, but just you know, short term.
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  Speaker 2: It's like you just don't go up every day in perpetuity.
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  Speaker 2: But we're also at a situation where all your major
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  Speaker 2: indices right now are back to knocking on the doors
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  Speaker 2: of all time highs. The NASDAK is about one percent
• 12:39
  Speaker 2: off all time highs right now, the S and P
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  Speaker 2: five hundred is only a third of a percent off
• 12:45
  Speaker 2: all time highs, and you've got the Dow about three
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  Speaker 2: percent off all time highs. Just because this rally has
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  Speaker 2: been led more by tech and the stuff that had
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  Speaker 2: kind of gotten beaten up the last few months than
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  Speaker 2: anything else. And the natural incline is to say, well,
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  Speaker 2: with all you know, we're back to all time highs
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  Speaker 2: are pretty close to it, and there's all this other
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  Speaker 2: stuff that's wrong, that doesn't feel right, and that's possible.
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  Speaker 2: I'm not saying it's right or wrong, but I do
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  Speaker 2: just want to present a counterpoint to it in terms
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  Speaker 2: of look, we talk about how markets can correct in
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  Speaker 2: two ways. They can correct through time or through price.
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  Speaker 2: In the last three to six months, we've kind of
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  Speaker 2: gone through both markets as a whole are pretty much
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  Speaker 2: again this is kind of the wild thing. Like you
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  Speaker 2: take a look at the NASDAK just as an example,
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  Speaker 2: it's the same place it was at on October twenty seventh.
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  Speaker 2: It's been five months, I'm sorry, six months almost, and
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  Speaker 2: the Nasdaq has not gone anywhere. And yet the Nasdaq
• 13:46
  Speaker 2: has gone to a lot of different places. It actually
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  Speaker 2: fell more than ten percent at the bottom on March thirtieth,
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  Speaker 2: and so, like you had this correction through price that
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  Speaker 2: now has turned into a correction in time.
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  Speaker 3: And here's the reason why time can be a valid
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  Speaker 3: you know.
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  Speaker 2: Correction factor or way to view this during the time
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  Speaker 2: that we have, you know, during that time that has elapsed.
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  Speaker 2: When you take a look at forward earnings projections just
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  Speaker 2: as an example, like you go and you say, okay,
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  Speaker 2: where were forward earnings projections back in you know, October
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  Speaker 2: of last year, just as an example, and S and
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  Speaker 2: P five hundred forward earning projections back then, we're coming
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  Speaker 2: in somewhere in the ballpark of three hundred dollars per
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  Speaker 2: I know it's not share because you can't own a
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  Speaker 2: share of the S and P, but somewhere in the
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  Speaker 2: ballpark of like three hundred to three hundred and five
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  Speaker 2: dollars for the next twelve months. When you sit and
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  Speaker 2: look at it right now, we are you know, forward
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  Speaker 2: earnings projections are at three thirty nine, so you're in
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  Speaker 2: the same place that the SMP was in six months ago.
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  Speaker 2: But forward earnings projections are up ten percent just because
• 15:08
  Speaker 2: of the passage of time, and one old quarter falls
• 15:11
  Speaker 2: off those and a new one comes in, and so
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  Speaker 2: on a valuation basis, I'm not saying this is cheap,
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  Speaker 2: so like, don't hear that. But we spent most of
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  Speaker 2: last year with the market saying, hey, I'm cool with
• 15:26
  Speaker 2: slapping a twenty two x multiple on SMP five hundred
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  Speaker 2: forward earnings. Today because of that forward earnings growth, market's
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  Speaker 2: only slapping a twenty x multiple on a little north
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  Speaker 2: that like twenty and a half. To get back to
• 15:42
  Speaker 2: that twenty two x multiple, you're about seven percent higher
• 15:44
  Speaker 2: from here. That takes you seventy five hundred on the SMP.
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  Speaker 2: I'm not saying this is right or wrong, but what
• 15:50
  Speaker 2: I am saying is, ultimately, if you buy those forward
• 15:54
  Speaker 2: earnings projections and you were comfortable slapping a twenty two
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  Speaker 2: x multiple on stocks, last year. Again, like, there's your
• 16:03
  Speaker 2: path to further growth in the s and P.
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  Speaker 3: Five hundred.
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  Speaker 2: Now the path to further destruction from here is Hormus
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  Speaker 2: remains closed for longer than you know, the next two
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  Speaker 2: to four weeks, and markets realize that and say, oh,
• 16:15
  Speaker 2: this is not just going to be a little two
• 16:16
  Speaker 2: month blip of energy supply disruption. This is going to
• 16:20
  Speaker 2: be something longer and that has a bigger and more
• 16:22
  Speaker 2: lasting impact on the global economy. Yes, like the market
• 16:26
  Speaker 2: could wake up and realize that too, But right now
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  Speaker 2: I'm just trying to present both cases, not because I
• 16:32
  Speaker 2: think either is right. But if you wake up in
• 16:36
  Speaker 2: the morning and consistently say, man, how could the market
• 16:40
  Speaker 2: be this high? Like everything's so bad? I heard people
• 16:43
  Speaker 2: saying that all through the twenty tens and stocks did fantastically. Then,
• 16:47
  Speaker 2: because the market doesn't care whether or not you're right,
• 16:51
  Speaker 2: And that's kind of the point that I'll make. Now,
• 16:53
  Speaker 2: this may all fall apart again. There's a perfectly reasonable
• 16:56
  Speaker 2: case that hey, the market is pricing in two options
• 17:00
  Speaker 2: to mystic a scenario. Okay, if that's the case, figure
• 17:03
  Speaker 2: out how you want to express that in markets and
• 17:05
  Speaker 2: bet against it. If you really think that, Like that's
• 17:07
  Speaker 2: your thing, because that's what markets do. They let you
• 17:10
  Speaker 2: express that view of is price right or wrong?
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  Speaker 4: It doesn't feel wrong that valuation multiples are a little
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  Speaker 4: lower because the range of outcomes is arguably a little wider,
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  Speaker 4: particularly on the downside.
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  Speaker 3: Sure, so it feels rational.
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  Speaker 2: It does, it does, but it's also reasonable where let's
• 17:28
  Speaker 2: say that you get a comprehensive resolution to this Middle
• 17:32
  Speaker 2: East situation in the next.
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  Speaker 3: Week or two.
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  Speaker 2: What's there stopping you from going back to twenty two
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  Speaker 2: x forward earnings if you.
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  Speaker 4: Think all else is equal. Sure, yeah, if you're back
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  Speaker 4: to the world as it was two months ago.
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  Speaker 3: I'm not saying you are aren't, but like there's a reasonable.
• 17:47
  Speaker 4: Way to we can always we can explain anything away.
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  Speaker 3: But yes, of course, yes.
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  Speaker 2: Yes, So I think this is again, like if you're
• 17:55
  Speaker 2: sitting here like wondering, like, hey, my gas prices are up,
• 17:59
  Speaker 2: and know I'm nervous about this and that, and like
• 18:02
  Speaker 2: how could stock still be where they are previously, I'm
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  Speaker 2: just trying to explain that. And I'm not saying it's
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  Speaker 2: right or wrong. I'm just saying it's one possible interpretation
• 18:14
  Speaker 2: of what we're seeing. In markets right now. Let's see,
• 18:18
  Speaker 2: we do have jet fuel is kind of one of
• 18:22
  Speaker 2: the major problems that we're running into worldwide as a
• 18:26
  Speaker 2: result of this. In the United States, it's the cost.
• 18:28
  Speaker 2: In Europe, we're getting to the point now where you
• 18:32
  Speaker 2: have CEOs of major you know, airlines saying, hey, like,
• 18:38
  Speaker 2: the jet fuel situation is uncertain and we're not sure
• 18:41
  Speaker 2: what operations look like, you know, in the future. This
• 18:45
  Speaker 2: was there was a quote from the Ryanair CEO a
• 18:49
  Speaker 2: little while ago to that effect. This morning, I want
• 18:52
  Speaker 2: to make sure that I get it right, just so
• 18:54
  Speaker 2: that I give you the exact quote. It's here somewhere.
• 18:58
  Speaker 2: Hang on, hang on, it's here somewhere. Okay, I can't
• 19:03
  Speaker 2: find it, but it was here somewhere. But basically it
• 19:05
  Speaker 2: was like, look, the jet fuel situation is fluid and
• 19:08
  Speaker 2: we're trying to you know, figure it out.
• 19:11
  Speaker 3: So again, I.
• 19:12
  Speaker 2: Think ultimately we're at the point now where you're starting
• 19:15
  Speaker 2: to see issues.
• 19:16
  Speaker 3: I have a buddy who lives.
• 19:18
  Speaker 2: Over in Italy and he let me know that, hey,
• 19:23
  Speaker 2: they got gas stations that are you know, running out
• 19:25
  Speaker 2: of diesel in particular right now, and it's becoming a problem.
• 19:29
  Speaker 2: Let's take a quick Break. When we return, it's Wall
• 19:32
  Speaker 2: Street Watch and Todd Letskey joins us for us.
• 19:34
  Speaker 7: Todd Like us on Facebook and follow us on Twitter
• 19:43
  Speaker 7: at TFE show. Breaking business news is always first right
• 19:47
  Speaker 7: here on the Financial Exchange Radio Network. Time out full
• 19:52
  Speaker 7: Wall Street Watch treking the stocks, the data, and the
• 19:56
  Speaker 7: headlines driving markets so far today, right here on the
• 19:59
  Speaker 7: Financial Extme Radio Network.
• 20:01
  Speaker 6: After yesterday's rally driven by potential peace steel optimism, markets
• 20:05
  Speaker 6: today are mixed as traders react to more first quarter
• 20:09
  Speaker 6: bank earnings. Right now, the Dow is down a quarter
• 20:12
  Speaker 6: of a percent. S and P five hundred up about
• 20:15
  Speaker 6: a third of a percent. NASDAC up over eight tens
• 20:18
  Speaker 6: of a percent, or one hundred and ninety two points.
• 20:21
  Speaker 6: Russell two thousand is flat ten. You're Treasure reeled up
• 20:24
  Speaker 6: one basis point at four point two seven four percent.
• 20:27
  Speaker 6: In Oil down about half a percent, trading at ninety
• 20:31
  Speaker 6: dollars a barrel. Bank of America reported better than expected
• 20:34
  Speaker 6: first quarter results, lifted by equity sales and trading. CEO
• 20:38
  Speaker 6: Brian moynihan said the bank saw a healthy client activity,
• 20:41
  Speaker 6: including solid consumer spending, indicating a resilient American economy that
• 20:46
  Speaker 6: stock up over one and a half percent. Meanwhile, Morgan
• 20:49
  Speaker 6: Stanley shares are jumping over five percent after the firm
• 20:53
  Speaker 6: posted impressive first quarter results as trading exceeding expectations elsewhere.
• 20:58
  Speaker 6: Broadcom announced and expanded partner ship with Meta to provide
• 21:01
  Speaker 6: the Facebook parent company with more custom AI chips. Broadcom
• 21:06
  Speaker 6: up by three percent. Snap shares are up seven percent
• 21:09
  Speaker 6: after the company announced plans to lay off up to
• 21:11
  Speaker 6: sixteen percent of its workforce. And in a wild move,
• 21:15
  Speaker 6: struggling footwear company All Birds announced this morning it is
• 21:18
  Speaker 6: pivoting two artificial intelligence. The new company expects to be
• 21:24
  Speaker 6: called New Bird AI. That stock surging by three hundred
• 21:30
  Speaker 6: and thirty six percent.
• 21:32
  Speaker 3: More on All Birds.
• 21:34
  Speaker 6: In the second hour of today's show, I'm Tucker Silva
• 21:38
  Speaker 6: and that is Wall Street Watch.
• 21:40
  Speaker 1: This is Asked Todd on the Financial Exchange Radio Network.
• 21:44
  Speaker 1: If you have an existing estate plan or in the
• 21:46
  Speaker 1: market for one, Todd Letsky is here to answer your
• 21:49
  Speaker 1: questions and help you plan for a later life. Ask
• 21:51
  Speaker 1: Todd is presented by Cushing and Dolan, serving Massachusetts and
• 21:55
  Speaker 1: New England for more than thirty five years, helping families
• 21:58
  Speaker 1: with a state and tax planning. Medicare Planning and probate law.
• 22:01
  Speaker 1: Visit Cushingdolan dot com. Now here's Todd Lutsky.
• 22:06
  Speaker 2: As promised, we are joined by the one and only
• 22:09
  Speaker 2: Todd Lutsky from the law firm of Cushing and Dolan.
• 22:14
  Speaker 2: We got the phone lines open because ask Todd is
• 22:17
  Speaker 2: your chance to ask Todd your estate planning questions live
• 22:21
  Speaker 2: on air right now. Eight eight eight two zero five
• 22:25
  Speaker 2: two two sixty three is the number again, that is
• 22:27
  Speaker 2: eight eight eight two zero five two two six three.
• 22:30
  Speaker 2: We can usually get through two maybe three your calls
• 22:34
  Speaker 2: if we're lucky, so get calling early to make sure
• 22:37
  Speaker 2: you get in line to ask Todd your state planning questions.
• 22:40
  Speaker 2: Eight eight eight two zero five two two six three.
• 22:44
  Speaker 2: Again it is eight eight eight to zero five two
• 22:49
  Speaker 2: two six three.
• 22:50
  Speaker 3: Mister Lutsky. How you doing today?
• 22:52
  Speaker 5: I am never better? How are you?
• 22:54
  Speaker 3: I'm good? Do you have holes near underwear?
• 22:59
  Speaker 8: I don't know where to go with that, but I'm
• 23:00
  Speaker 8: gonna I'm gonna say, but no, not other than in
• 23:03
  Speaker 8: the right places.
• 23:04
  Speaker 3: Well, how do you get your legs through?
• 23:05
  Speaker 5: Then?
• 23:07
  Speaker 2: Todd, I want to talk to you a little bit
• 23:08
  Speaker 2: about beneficiary mishaps. When you're talking about estate planning what
• 23:14
  Speaker 2: are the biggest mistakes that you've seen with someone naming
• 23:18
  Speaker 2: beneficiaries for assets.
• 23:22
  Speaker 8: I'd say that the biggest mistake is so many people
• 23:25
  Speaker 8: know that in their own mind right, one of the
• 23:28
  Speaker 8: things we want to accomplish is avoiding probate, and so
• 23:30
  Speaker 8: they say, well, we can do that simply by just
• 23:32
  Speaker 8: naming beneficiaries.
• 23:33
  Speaker 5: As you said, Chuck, it's very.
• 23:34
  Speaker 8: Simple, right, and just yeah, what I'll do is I'll
• 23:37
  Speaker 8: either I'll either I'll either do one of two things.
• 23:39
  Speaker 8: I'll make it joint with my spouse or more importantly
• 23:45
  Speaker 8: joint with a child. Right, you could do that, or
• 23:49
  Speaker 8: as you said, you could put a beneficiary on. Now
• 23:53
  Speaker 8: here's the problems if you do it joint with a
• 23:57
  Speaker 8: married couple. So husband and wife put together their assets
• 24:00
  Speaker 8: and they said, I don't need to stay planning on
• 24:01
  Speaker 8: avoid probate, make a joint.
• 24:03
  Speaker 5: Well, they're right.
• 24:03
  Speaker 8: On the first death, everything would go to the spouse
• 24:06
  Speaker 8: if it's all joint, and guess what, it would avoid probate.
• 24:09
  Speaker 5: You're absolutely right.
• 24:11
  Speaker 8: However, you've completely wasted your estate tax planning exemptions on
• 24:15
  Speaker 8: the first death because everything passed under the unlimited marital
• 24:19
  Speaker 8: deduction to the spouse, and so you've not helped reduce
• 24:23
  Speaker 8: your estate tax and likely with no planning done or
• 24:27
  Speaker 8: that kind of a of a fix to the planning world,
• 24:31
  Speaker 8: you would now be faced with potentially all probate assets
• 24:35
  Speaker 8: on the second death.
• 24:36
  Speaker 5: All right, So that that's not necessarily the best way.
• 24:40
  Speaker 8: What about if I went around and just named you know,
• 24:42
  Speaker 8: I put my I got like three children, right, and
• 24:44
  Speaker 8: I have one child that lives nearby, So I throw
• 24:47
  Speaker 8: this child on a joint account, on a bunch of
• 24:50
  Speaker 8: my asset, on a bunch of my accounts. Well you
• 24:54
  Speaker 8: do that, and I know why they do it. They
• 24:56
  Speaker 8: do it because, yeah, I guess it would avoid probate.
• 24:58
  Speaker 8: It would automatically go to that surve iving joint owner
• 25:01
  Speaker 8: when you die, and that that's I guess it accomplished that.
• 25:04
  Speaker 8: But it's not helpful. Why because you put it on
• 25:09
  Speaker 8: there because you wanted that child to be able to
• 25:12
  Speaker 8: have access to the account, to pay a bill, to
• 25:14
  Speaker 8: make it convenient for you and for the child to
• 25:17
  Speaker 8: help you. But you could be accidentally disinheriting your other children.
• 25:24
  Speaker 8: So if you have three other children or two other
• 25:27
  Speaker 8: children and they're not listed on the account, then all
• 25:32
  Speaker 8: those assets go to that spot that child, and that
• 25:35
  Speaker 8: child has no obligation to leave you or to spread
• 25:40
  Speaker 8: out that money to the child's siblings. You just you
• 25:43
  Speaker 8: don't get to do that. Well, they don't have to,
• 25:46
  Speaker 8: let's put it that way. Sure, so you've accidentally disinherited children.
• 25:52
  Speaker 8: And lastly, with beneficiary designations, yes you could put beneficiary
• 25:57
  Speaker 8: designations on. But again, if you're not putting you know,
• 26:01
  Speaker 8: every child on as the designated beneficiary, then you're gonna
• 26:04
  Speaker 8: have a problem with disinheriting again. And you know so
• 26:08
  Speaker 8: I think those are are inherently you know, big problems
• 26:12
  Speaker 8: with with just trying to do what I like to
• 26:14
  Speaker 8: call a quick fix to the estate planning or to
• 26:17
  Speaker 8: avoiding probate.
• 26:19
  Speaker 2: Talk with Todd Lutsky from Cushing and Dolan. This is
• 26:22
  Speaker 2: your chance to ask Todd your estate planning questions live
• 26:26
  Speaker 2: on air phone number eight eight eight two zero five
• 26:31
  Speaker 2: two two six three. We do still have room on
• 26:33
  Speaker 2: those phone lines, so get calling so you can ask
• 26:36
  Speaker 2: Todd your estate planning questions again.
• 26:39
  Speaker 3: Eight eight eight to zero five two two sixty three
• 26:44
  Speaker 3: is the number.
• 26:46
  Speaker 2: We're gonna take a quick break, but when we come back,
• 26:48
  Speaker 2: your questions with Todd again. Eight eight eight to zero
• 26:52
  Speaker 2: five two two sixty three is the number. Eight eight
• 26:56
  Speaker 2: eight to zero five two two six three.
• 27:00
  Speaker 1: Ask Todd with Todd Lutsky every Wednesday at ten thirty
• 27:03
  Speaker 1: only here on the Financial Exchange Radio Network. You're listening
• 27:09
  Speaker 1: to Ask Todd with Todd Lutsky on the Financial Exchange
• 27:13
  Speaker 1: Radio Network.
• 27:26
  Speaker 2: Talking with Todd Lutsky from Cushing and Dolan got Room
• 27:30
  Speaker 2: on the phone lines eight eight eight to zero five
• 27:33
  Speaker 2: two two six three. That's the number to call to
• 27:36
  Speaker 2: ask Todd your estate planning questions live right now, Todd,
• 27:39
  Speaker 2: what'd you just?
• 27:40
  Speaker 1: What?
• 27:40
  Speaker 5: You?
• 27:40
  Speaker 3: Would you break?
• 27:42
  Speaker 5: I saw this?
• 27:42
  Speaker 6: No, that's fine, that's the light okay, yeah, that hasn't
• 27:45
  Speaker 6: worked for months.
• 27:46
  Speaker 3: Okay, fine, I saw I saw. Why do you start
• 27:49
  Speaker 3: pulling wires? Tied? Like?
• 27:51
  Speaker 5: What are you?
• 27:51
  Speaker 3: What he's doing?
• 27:52
  Speaker 5: Talcket to the bike. I don't know.
• 27:53
  Speaker 3: I just don't touch anything.
• 27:55
  Speaker 8: Just just ask me a question, So talk intelligently about something.
• 28:00
  Speaker 2: Eight eight two zero five two two sixty three is
• 28:02
  Speaker 2: the number to call to save us from Todd unplugging
• 28:04
  Speaker 2: the studio again. Eight eight eight two zero five two
• 28:07
  Speaker 2: two six three. Todd, when you're talking about leaving assets
• 28:11
  Speaker 2: to beneficiaries. What are the biggest advantages that trusts have
• 28:15
  Speaker 2: in terms of the actual like post like, what what
• 28:19
  Speaker 2: does it look like after someone dies? How do they
• 28:22
  Speaker 2: actually facilitate that process?
• 28:25
  Speaker 8: Yeah, And I think I can't tell you enough that
• 28:29
  Speaker 8: it's really not just the probate in tax part of
• 28:35
  Speaker 8: estate planning that we spend so much time on, but
• 28:38
  Speaker 8: it's the family behind the estate plan. That's really what
• 28:40
  Speaker 8: you're driving at here, Chuck, is you know, look, when
• 28:43
  Speaker 8: someone dies, you know, now there's these assets sitting there.
• 28:46
  Speaker 5: What do we do. Well, that's the great.
• 28:48
  Speaker 8: Thing about a trust is it can live on after
• 28:51
  Speaker 8: you pass away. It doesn't have to remember, it's no
• 28:54
  Speaker 8: right or wrong answer here. You folks can can wrap
• 28:56
  Speaker 8: it up and have everything pay out right away to children.
• 28:59
  Speaker 8: And if that's the case, it's it's really simple. You
• 29:01
  Speaker 8: look in there, you read it, and you're the trustee
• 29:03
  Speaker 8: and you just go to your financial institution. If there's
• 29:05
  Speaker 8: money in there and cut checks to the people that
• 29:08
  Speaker 8: are listed, it could be that easy. Or if there's
• 29:11
  Speaker 8: a piece of property in there, the trustee just prepares
• 29:14
  Speaker 8: a deed transferring the property out to the people that
• 29:17
  Speaker 8: are supposed to get it, I mean, so it can
• 29:19
  Speaker 8: be very easy and of course no probate, or you
• 29:23
  Speaker 8: could have the trust live on and now you have
• 29:26
  Speaker 8: a trustee who's going to manage and invest the money.
• 29:28
  Speaker 8: But again it's very simple. Sit with your financial advisor
• 29:31
  Speaker 8: if there's money in there and say and usually just
• 29:34
  Speaker 8: go to the same advisor your parents were using and
• 29:37
  Speaker 8: just walk in and say, look, I'm taking over the account.
• 29:40
  Speaker 8: Let's just keep it going, right, It's that simple. You
• 29:44
  Speaker 8: get to manage and invest the money that's in there,
• 29:47
  Speaker 8: just like you would if you had actually received it
• 29:50
  Speaker 8: as the beneficiary.
• 29:52
  Speaker 5: So that could be easy.
• 29:54
  Speaker 2: Do different types of trusts have different processes that need
• 29:58
  Speaker 2: to be followed after a passing.
• 30:00
  Speaker 8: So so when someone dies, these buckets. If if we're going
• 30:04
  Speaker 8: to have the trust continue on, let's let's go with that.
• 30:06
  Speaker 8: The pulling it out is pretty easy. But if we're
• 30:09
  Speaker 8: going to have the trust continue on, then the trust
• 30:13
  Speaker 8: is going to need to get an ID number. So
• 30:14
  Speaker 8: that's part of the process. You got to get a
• 30:16
  Speaker 8: tax ID number. Now, if there's like three shares, one
• 30:19
  Speaker 8: for each kid, well guess what, We're going to have
• 30:22
  Speaker 8: three separate tax ID numbers, one one for each each
• 30:25
  Speaker 8: kid and then yes, as life goes on, these dollars
• 30:29
  Speaker 8: are in there, and yes they can be distributed out
• 30:31
  Speaker 8: to the child. Generally it can be for health, education,
• 30:35
  Speaker 8: maintenance and support. It could be for you know, sole
• 30:39
  Speaker 8: discretionary distributions by the trustee to provide divorce protection and
• 30:44
  Speaker 8: other creditor protection. And as those distributions come out, they
• 30:48
  Speaker 8: can be taxed on the individual's tax return, or if not,
• 30:52
  Speaker 8: you simply file an income tax return for the trust
• 30:55
  Speaker 8: at the end of the year and life goes on.
• 30:58
  Speaker 5: Kind of kind of the same way.
• 31:00
  Speaker 2: Ton I get Chris from Falmouth all queued up on
• 31:04
  Speaker 2: the phone for you. Chris, what's your question for Tom Lutsky's.
• 31:09
  Speaker 9: Mister thought to you. I appreciate it. Welcome, Okay. My
• 31:13
  Speaker 9: question is I used to be pretty good at keeping
• 31:16
  Speaker 9: all my accounting work and my bookkeeping them for my
• 31:19
  Speaker 9: small business. I was really good at it. I think
• 31:21
  Speaker 9: I was real good at it. I'm thinking I don't know,
• 31:24
  Speaker 9: nobody really judged me, so I judging myself anyway.
• 31:27
  Speaker 4: I have a house.
• 31:28
  Speaker 9: My father left me in nineteen eighty nine, put everything
• 31:31
  Speaker 9: in my name. I took her of my mother. She
• 31:33
  Speaker 9: has since passed away. My brother was up here with
• 31:36
  Speaker 9: he had monetary problems, but he he has passed away. Well,
• 31:41
  Speaker 9: I took care of the funerals, and it's expensive funerals,
• 31:45
  Speaker 9: we know, and I would like to know where to
• 31:48
  Speaker 9: start to stop planning, where I can give money out
• 31:54
  Speaker 9: if I sell the house or whatever.
• 31:58
  Speaker 8: So the first problem I have is I don't know
• 32:00
  Speaker 8: any I assume all these people that passed, your family
• 32:02
  Speaker 8: members that have passed left you everything.
• 32:05
  Speaker 9: Correct, Well, my father left everything. My mom was the
• 32:10
  Speaker 9: one that had I was taking care of her.
• 32:12
  Speaker 5: Did your mom leave you assets?
• 32:15
  Speaker 9: She didn't do anything because my father left everything my name,
• 32:18
  Speaker 9: all right, So your.
• 32:18
  Speaker 8: Mom didn't leave you anything. Your dad has assets, So
• 32:21
  Speaker 8: they're your assets now, so you're allowed to do your
• 32:23
  Speaker 8: own planning, and you should do your own planning. But
• 32:27
  Speaker 8: if they're your assets, you're allowed to do whatever you
• 32:29
  Speaker 8: want with them. I'm just trying to get to the question.
• 32:31
  Speaker 8: I'm trying to understand what your question is. If they're
• 32:33
  Speaker 8: your assets, then you're allowed to do whatever you want
• 32:37
  Speaker 8: with them. They're not tied in any trust, they're not
• 32:39
  Speaker 8: held up anyway. They're not restricted, right, they're yours.
• 32:42
  Speaker 9: Right, right? So something one thing I didn't mention she
• 32:46
  Speaker 9: does have money in a bank with social Security money
• 32:51
  Speaker 9: from my.
• 32:51
  Speaker 5: Father that built up whose name's on the account.
• 32:56
  Speaker 9: Well, it is a joint account, but she has her
• 33:00
  Speaker 9: count by that change. While she was in the nursing home,
• 33:01
  Speaker 9: I had a uh no republic come in and make
• 33:06
  Speaker 9: a joint account.
• 33:08
  Speaker 8: But but my question is if she's passed away, that
• 33:10
  Speaker 8: joint account should belong to you. Now because it's a
• 33:12
  Speaker 8: joint ownership situation, you can go and take the money
• 33:16
  Speaker 8: and put it into your name because you're the joint owner.
• 33:18
  Speaker 9: Well, it has to be. Can it be transferred easily
• 33:20
  Speaker 9: from her account to the joint account.
• 33:23
  Speaker 8: No, you said it's already in a joint account. You
• 33:25
  Speaker 8: go to the bank and take the money from the
• 33:27
  Speaker 8: joint account and put it into your name. So that's
• 33:31
  Speaker 8: what you need to do. I think you just need
• 33:32
  Speaker 8: to get a better handle on your questions and so
• 33:36
  Speaker 8: that I can help you. But I I at this point,
• 33:37
  Speaker 8: I don't feel like you're able to sort of tell
• 33:40
  Speaker 8: me exactly what you want to do. But I would say,
• 33:42
  Speaker 8: go get the money from the joint account. And if
• 33:44
  Speaker 8: you've got other assets that your dad already left you,
• 33:47
  Speaker 8: those are your assets, and I think you need to
• 33:48
  Speaker 8: kind of do your own planning.
• 33:50
  Speaker 5: But I hope that helped a little.
• 33:52
  Speaker 8: But folks, you know, this is a really good example
• 33:57
  Speaker 8: that Chris had is that you know there was no
• 33:59
  Speaker 8: planning done, you know, real planning done, So how assets
• 34:03
  Speaker 8: got left to Chris kind of caused a problem. And
• 34:07
  Speaker 8: that's exactly what we're trying to prevent here is this
• 34:10
  Speaker 8: new guide for the month is called how to Leave
• 34:12
  Speaker 8: Assets to your Beneficiaries. It talks about whether you've got
• 34:16
  Speaker 8: a second marriage, how do you deal with that, What
• 34:18
  Speaker 8: if you've got, you know, a special needs child, what
• 34:22
  Speaker 8: if you have you know, generation skipping tax concerns, or
• 34:25
  Speaker 8: you want to protect assets from future divorces of your children. Folks,
• 34:30
  Speaker 8: there's so many ways to think about how you want
• 34:32
  Speaker 8: to leave your assets. Yes, as Chuck engined earlier, it
• 34:36
  Speaker 8: also goes through jointly owned assets and beneficiary designations and
• 34:41
  Speaker 8: tells you about the pros and cons of those. But folks,
• 34:44
  Speaker 8: quite frankly, how you leave assets to your family can
• 34:47
  Speaker 8: be more important than saving taxes and probate. So call
• 34:51
  Speaker 8: and get the guide and learn how best to leave
• 34:53
  Speaker 8: assets to your family? Eight six six eight four eight
• 34:58
  Speaker 8: five six nine nine or Legal Exchange Show dot com
• 35:02
  Speaker 8: again eight six six eight four eight five six nine
• 35:06
  Speaker 8: nine or Legal Exchange Show dot com. And if you
• 35:09
  Speaker 8: want more information go to our Instagram page. Cushing dole
• 35:12
  Speaker 8: in PC.
• 35:13
  Speaker 2: Todd is using trusts for passing assets to the next
• 35:17
  Speaker 2: generation or whoever you choose to do trust have any
• 35:21
  Speaker 2: impact on the step up in cost basis that in
• 35:25
  Speaker 2: air would receive.
• 35:27
  Speaker 8: Yeah, so they absolutely can have a step up. So
• 35:30
  Speaker 8: be very careful when you're thinking about doing your planning
• 35:33
  Speaker 8: what kind of trust you're putting together. You know, if
• 35:36
  Speaker 8: you're putting together if you have like a large estate
• 35:40
  Speaker 8: and you're trying to put together a gifting trust where
• 35:43
  Speaker 8: you want to get assets out of your estate so
• 35:46
  Speaker 8: that you can save estate taxes, well that's important, but
• 35:50
  Speaker 8: make sure you're saving both federal and state estate taxes.
• 35:53
  Speaker 8: That combines about fifty percent, because when you give it
• 35:57
  Speaker 8: away to your point chuck you, you don't get a
• 36:00
  Speaker 8: step up in basis on assets that you put in
• 36:04
  Speaker 8: an irrevocable gifting trust where you completed the gift. So
• 36:08
  Speaker 8: it's okay if I'm saving fifty percent. In the estate
• 36:10
  Speaker 8: planning world, even though I'm trapping twenty eight percent capital gains.
• 36:15
  Speaker 5: I get it.
• 36:15
  Speaker 8: It's still better. But if not, then don't necessarily make
• 36:20
  Speaker 8: the gift. But for most trusts, even Medicaid income only
• 36:24
  Speaker 8: trust that we talk about, even though they're irrevocable. So
• 36:27
  Speaker 8: some irrevocable trusts and all revocable trusts, when you die
• 36:32
  Speaker 8: with those assets that are still left in your trust,
• 36:37
  Speaker 8: then it's as if you died owning them because they're
• 36:39
  Speaker 8: included in your estate for estate tax purposes. Even the
• 36:43
  Speaker 8: Medicaid trust, it's an incomplete gift for gift tax purposes,
• 36:47
  Speaker 8: so it's included. Then when you die, you get that
• 36:50
  Speaker 8: all important step up in basis eliminating all the built
• 36:55
  Speaker 8: in gain on real estate and investment portfolios when you die.
• 37:00
  Speaker 3: Mister Watsky, thank you so much for joining us today.
• 37:03
  Speaker 5: Always a pleasure. Thank you.
• 37:05
  Speaker 1: This has been Asked Todd on the Financial Exchange Radio Network.
• 37:09
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• 37:11
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• 37:14
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• 37:17
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• 37:20
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• 37:23
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• 37:25
  Speaker 1: Cushing and Dolan. Armstrong Advisory does not provide any legal
• 37:28
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• 37:30
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