Latest / HPK Provident Advisors: The Weekly Bull / Your Neighbor Is A Genius Until The Market Drops

Transcript

Your Neighbor Is A Genius Until The Market Drops · HPK Provident Advisors: The Weekly Bull

• 0:03
  SPEAKER_00: Welcome to Friday Live.
• 0:04
  SPEAKER_00: Every Friday, the partners of HPK Provident get together and discuss what we're seeing going on in the markets, the economy, and what we're seeing in the financial planning um area.
• 0:13
  SPEAKER_00: So with me today, Brian Pluso.
• 0:17
  SPEAKER_01: Hey everybody.
• 0:23
  SPEAKER_01: Different saddle today.
• 0:25
  SPEAKER_01: I've got a little bit of a different format.
• 0:29
  SPEAKER_01: My normal location wasn't working out for me today.
• 0:32
  SPEAKER_01: So this one's a little, eh, I don't know.
• 0:35
  SPEAKER_01: Quite candidly, don't like the lighting as much or the sound, but I'm here.
• 0:39
  SPEAKER_01: Well, glad to have you.
• 0:41
  SPEAKER_01: Well, hopefully, I make up for it in some content.
• 0:43
  SPEAKER_00: I hope so too.
• 0:46
  SPEAKER_00: So we had uh a decent amount of stuff market moving come out this week.
• 0:51
  SPEAKER_00: We had some big earnings from uh the biggest chipmaker, NVIDIA.
• 0:56
  SPEAKER_00: Another blowout quarter, guidance was strong, stock popped after earnings.
• 1:01
  SPEAKER_00: Uh software looked pretty good.
• 1:03
  SPEAKER_00: We got Salesforce and CrowdStrike, which is a cybersecurity firm.
• 1:07
  SPEAKER_00: Um, they both beat and saw big rises in stock prices.
• 1:11
  SPEAKER_00: I think both of those were up like 20% on the day, which is pretty amazing to think about given their size.
• 1:19
  SPEAKER_00: And then we had some uh economic data, um, and then the Jackson Hole symposium.
• 1:27
  SPEAKER_00: So whoa, it's always I'll I guess I'll start with the economic data.
• 1:31
  SPEAKER_00: Um, overall, you know, similar theme.
• 1:34
  SPEAKER_00: Home sales came in late.
• 1:36
  SPEAKER_00: Um, housing market continues to struggle with how high interest rates are.
• 1:41
  SPEAKER_00: Uh durable goods orders was decent on the headline number, but stripping out transportation, it was a little on the weak side.
• 1:48
  SPEAKER_00: Uh, the second reading of GDP came in line uh for the quarter at 1.5%.
• 1:55
  SPEAKER_00: That's the same as the prior reading.
• 1:57
  SPEAKER_00: Um, on an annualized basis, that's 2.1%.
• 2:00
  SPEAKER_00: Uh, also didn't change from the previous reading.
• 2:04
  SPEAKER_00: Um, that's kind of the long-term average of GDP.
• 2:07
  SPEAKER_00: So it's an economy that's growing, but not overheating, not below growth.
• 2:13
  SPEAKER_00: And then the ever important CPI data, the Fed's preferred inflation measure, the PCE deflator.
• 2:20
  SPEAKER_00: So uh core did tick up to 0.25%.
• 2:23
  SPEAKER_00: The last reading was 0.15.
• 2:26
  SPEAKER_00: Um, and that did rise on a above consensus on an annualized basis to 3.3 percent, but that was in line with the the previous read.
• 2:35
  SPEAKER_00: And then headline came in pretty benign at 0.16, and that did come in two tenths higher than consensus, but also the same as the last reading at 3.7 percent.
• 2:47
  SPEAKER_00: Um I'm not too concerned with that reading because a big component of that is uh financial services, which is directly tied to market performance.
• 2:59
  SPEAKER_00: Um, so when the market goes up, those tend to go up.
• 3:03
  SPEAKER_00: So not too alarming there.
• 3:04
  SPEAKER_00: And then something I I found uh comforting was the although personal consumption was a little on the weak side at 0.2%, the personal income component was up 0.4%, which is double last month's reading.
• 3:17
  SPEAKER_00: So um that's good to see.
• 3:19
  SPEAKER_00: Um it's I I talked about that on previous Friday Live over the last couple months, where spending has really been outpacing the income, personal income component, which obviously isn't a sustainable trend.
• 3:32
  SPEAKER_00: And then Jackson Hole.
• 3:36
  SPEAKER_00: Usually not a huge market moving impact um outside of that.
• 3:40
  SPEAKER_00: What was it, 2022 speech by Jerome Powell that was less than eight minutes long?
• 3:47
  SPEAKER_00: That pretty much said that you know we're gonna have to endure some economic pain to get down to 2% inflation.
• 3:54
  SPEAKER_01: And the market we did have some pain.
• 3:58
  SPEAKER_00: We did.
• 3:59
  SPEAKER_00: He was but I mean, that was kind of I mean, I mean, that's that's the way market sentiment kind of works.
• 4:04
  SPEAKER_00: Like that was in August, and I mean, we're developing the lows at that time, so even though that was bad news to the market, um, it was kind of like the bottom point.
• 4:15
  SPEAKER_00: Now, we did revisit the June lows in October, but um didn't really make a new low.
• 4:22
  SPEAKER_00: So turning to the one today, um, it started out with I don't know if he, I mean, it was obviously intentional, but I don't know if there is a slight joke component to it.
• 4:34
  SPEAKER_00: But he referenced a couple previous Fed chairs and being in Jackson Hole, big outdoor area, a lot of hiking, hiking.
• 4:46
  SPEAKER_01: I actually didn't pick up on that.
• 4:49
  SPEAKER_00: He did uh he gave the one example of the I think Bernaki who who's doing the nice steady trail, um, nothing extreme.
• 4:58
  SPEAKER_00: And then the other Fed chair.
• 5:00
  SPEAKER_00: I I forget the name.
• 5:01
  SPEAKER_00: Do you recall the the name of that chair?
• 5:04
  SPEAKER_00: The the one he talked about going on the hike that you just hope you live, you hope you survive because it's so crazy and extreme.
• 5:14
  SPEAKER_01: Oh, who was that Volker that did that?
• 5:16
  SPEAKER_01: Or no?
• 5:17
  SPEAKER_00: I'm surprised he didn't do Volker for that one.
• 5:19
  SPEAKER_00: Green span.
• 5:20
  SPEAKER_00: I don't wasn't Green Span either.
• 5:22
  SPEAKER_00: I you know, honestly, I didn't really recognize the Fed chair, he's not one of the ones that people usually talk about.
• 5:29
  SPEAKER_00: But no, I don't I mean, I I I gained a lot of insight from this because the past couple meetings we had with him, it's just been uh, you know, inflation is a choice.
• 5:41
  SPEAKER_00: We're he got a committee for that, we're gonna figure this out.
• 5:44
  SPEAKER_00: I'm not gonna tell you anything, inflation's too high, but uh we're not gonna make any moves.
• 5:50
  SPEAKER_00: So it's just like, and then what last week or the week before, he did that um announcement that they're gonna change the treasury buybacks from 2 billion to 4 billion.
• 6:06
  SPEAKER_00: Um and so like what are you doing there?
• 6:09
  SPEAKER_00: You like I found it to be like him trying to be cute.
• 6:14
  SPEAKER_00: Um because I mean, I don't know.
• 6:18
  SPEAKER_00: I don't like Fed intervention like that.
• 6:21
  SPEAKER_00: And in the scheme of the total balance sheet, it really isn't a big thing.
• 6:26
  SPEAKER_00: Um so he did he did talk about today, gave me more clarity.
• 6:31
  SPEAKER_00: Um, change in interest rates, the Fed funds rate is the primary tool outside of extreme circumstances, like we saw in periods like 2020, where you know other intervention comes in.
• 6:42
  SPEAKER_00: Um he's he gave a little clarity on um what he's looking at.
• 6:49
  SPEAKER_00: Um earnings growth 20 over the last year, but he's also looking at the second derivative of that.
• 6:55
  SPEAKER_00: So that's the change in the earnings growth, not just the earnings growth rate.
• 7:00
  SPEAKER_00: Um, capex, he referenced being very, very strong around 9%, which is the highest level dating back to 2021.
• 7:08
  SPEAKER_00: And then he's not just looking at the whole, so this this is kind of the hawkish part of it.
• 7:14
  SPEAKER_00: Um, he's not just looking at the the headline PC deflator, he's looking at the underlying components, and he flagged that you know the areas that affect consumer spending are rising above three percent.
• 7:26
  SPEAKER_00: So although you know, energy has come down a little bit, and that a little bit, it's been volatile, but basically he's looking past that to um really look at those components that he can affect.
• 7:43
  SPEAKER_00: Um, so the rate market went from about a 35% odds of a rate increase in September to 50%, and now it's about 80% by December.
• 7:53
  SPEAKER_00: So we're likely gonna see a rate hike.
• 7:56
  SPEAKER_00: I don't know if that's the right move.
• 7:58
  SPEAKER_00: I'm a little well, I mean, we'll see what we'll we'll see what the jobs data looks like next week, but it seems like that's really decelerating and the last retail sales are pretty weak.
• 8:08
  SPEAKER_00: Um so I don't know, I guess we'll see what he wants to do.
• 8:14
  SPEAKER_00: I mean, he's he's drawing the line in the sand that two percent's the goal, and we're getting there.
• 8:21
  SPEAKER_01: Well, it's you know, it is kind of a mixed bag in the sense that maybe inflation comes down a little bit, but um, you know, with jobs numbers and whatnot, I guess that would potentially argue for not increasing.
• 8:35
  SPEAKER_00: Uh yeah, I mean it's it's a weird dynamic because the I mean, we went from a hundred plus thousand a month in non-farm payrolls to now with the last reading, which was negative, um, we're about 23,000.
• 8:49
  SPEAKER_00: Next Friday it's expected to be about 65,000.
• 8:52
  SPEAKER_00: I think that's just their safety projection that they like to throw out there.
• 8:56
  SPEAKER_00: So I think there's a lot of possible variants that could come in on that number, give or take, 100,000.
• 9:04
  SPEAKER_00: Probably more take.
• 9:06
  SPEAKER_01: It's 100,000.
• 9:07
  SPEAKER_00: But I think I think it's safe to say we're more on the you know low hiring aspect of that curve.
• 9:13
  SPEAKER_00: We're probably gonna be a little closer to the zero flat line for a while, but we really haven't seen the unemployment rate rise.
• 9:20
  SPEAKER_00: Um, the last reading came in at 4.1%, which is historically very, very low.
• 9:25
  SPEAKER_00: So maybe we don't necessarily need as much job growth, but um, I don't like to see negative numbers.
• 9:33
  SPEAKER_01: Oh no, no, no, I would agree with that.
• 9:39
  SPEAKER_00: Turning in the markets, um, after the Fed meeting, the stock market rallied.
• 9:45
  SPEAKER_00: I mean, I think it was up seven tenths at one point in the hours following the speech, which I was a little uh surprised about because I like I said, I found the speech a little more on the hawkish side.
• 9:59
  SPEAKER_00: You did see a huge, so he got back his credibility.
• 10:03
  SPEAKER_00: We were all questioning that.
• 10:05
  SPEAKER_00: The two year spiked, we're almost up 10 basic points on the day, and the 10 years up a little bit.
• 10:11
  SPEAKER_00: So that that's overall a flattening of the yield curve, which I mean it is considered a bearish flattening in this case.
• 10:19
  SPEAKER_00: So the two years kind of the the gauge, according to um Gunlock's a big believer of that, of what the Fed's gonna do in the future.
• 10:27
  SPEAKER_01: So you have gunlock, yeah.
• 10:30
  SPEAKER_00: Right now, the Fed funds rate is uh three and a half to 3.75 on the upper range, and the two years at 4.33.
• 10:38
  SPEAKER_00: So it's pricing in some hikes now.
• 10:41
  SPEAKER_00: Um, outside of that, crude just continues to hover.
• 10:46
  SPEAKER_00: Um, I think we're at 81 a barrel today.
• 10:49
  SPEAKER_00: Trump says the strait is open, um, but I think the daily ships flowing through uh have been averaging about 15 uh ships per day.
• 11:01
  SPEAKER_00: Uh yesterday I think it was down to like eight.
• 11:04
  SPEAKER_00: Um so I don't know.
• 11:07
  SPEAKER_00: It's hard to get a read on that.
• 11:08
  SPEAKER_00: Goldman came out and said that um oil flowing through the Persian Gulf is now up to two-thirds of the level before the war.
• 11:19
  SPEAKER_00: So, I mean, I I don't know where if that's all coming through the strait, but that's that's promising, I guess.
• 11:27
  SPEAKER_00: A lot of it is.
• 11:28
  SPEAKER_00: But yeah, overall the stock market, you know, after this little consolidation phase um seems to be moving higher.
• 11:34
  SPEAKER_00: I'm not surprised that we're about to flip negative for the day, given that speech.
• 11:38
  SPEAKER_00: But overall, the technical picture looks pretty good.
• 11:41
  SPEAKER_00: Um not to say that a pullback isn't in the future, especially ahead of a midterm election year, but um technically technically it looks strong right now.
• 11:54
  SPEAKER_01: Well, that is good news.
• 11:58
  SPEAKER_01: I think it's surprising to some.
• 12:00
  SPEAKER_01: I mean, it's uh I say this all the time.
• 12:03
  SPEAKER_01: Sunflowers don't grow to the sun, but they keep getting closer.
• 12:07
  SPEAKER_00: Yeah.
• 12:11
  SPEAKER_00: So I mean that pretty much wraps up the the markets of the economy, unless you have any other questions or or things you've been hearing from clients that um you'd like me to answer.
• 12:20
  SPEAKER_01: Uh yeah, yeah.
• 12:22
  SPEAKER_01: Um, you know, the feedback is pretty consistent, I would say.
• 12:26
  SPEAKER_01: Wow, this is great.
• 12:27
  SPEAKER_01: Uh, when does it end?
• 12:29
  SPEAKER_01: Right.
• 12:29
  SPEAKER_01: I mean, that that's that's the sentiment, really.
• 12:32
  SPEAKER_01: Wow, this is awesome.
• 12:33
  SPEAKER_01: I love it.
• 12:33
  SPEAKER_01: Isn't this a great review?
• 12:35
  SPEAKER_01: Look at my accounts.
• 12:36
  SPEAKER_01: When does this end?
• 12:37
  SPEAKER_01: Um I don't know that it does in in the sense that we've talked about this on many Friday lives.
• 12:45
  SPEAKER_01: You know, you kind of deal with what is, right?
• 12:47
  SPEAKER_01: I mean, if the interest rates go up, you figure it out.
• 12:49
  SPEAKER_01: Interest rates go down, you figure it out.
• 12:52
  SPEAKER_01: Um Nvidia keeps going straight up, you figure it out.
• 12:56
  SPEAKER_01: Um, you know, how do you figure it out?
• 12:59
  SPEAKER_01: Well, uh, we believe in diversification, you know.
• 13:03
  SPEAKER_01: Diversification being you know, have a basket of many different things.
• 13:07
  SPEAKER_01: So some of those things are doing well.
• 13:09
  SPEAKER_01: Unfortunately, some of those things might not be doing great.
• 13:12
  SPEAKER_01: Uh, but you don't have to be exactly right twice.
• 13:16
  SPEAKER_01: You know, if you're very narrow in your investments, then you have to be right on the way in, you have to be right on the way out as well.
• 13:24
  SPEAKER_01: Uh that's very, very difficult.
• 13:26
  SPEAKER_01: Uh now, everybody's neighbors talks about how they got into XYZ exactly at the right time, and it went up 200% and they got out, and now they're retired.
• 13:35
  SPEAKER_01: Um, it's amazing how many neighbors are brilliant.
• 13:39
  SPEAKER_01: Um, but you know, we uh we just kind of figure it out.
• 13:43
  SPEAKER_01: But that's the sentiment, I Mike, I would say.
• 13:45
  SPEAKER_01: And you know, the planning conversations wow, that's awesome.
• 13:49
  SPEAKER_01: Okay.
• 13:50
  SPEAKER_01: But uh, you know, does this end?
• 13:52
  SPEAKER_01: When does it end?
• 13:54
  SPEAKER_01: Um you know, maybe it doesn't.
• 13:56
  SPEAKER_01: Maybe it doesn't, it just takes a different form, possibly.
• 13:59
  SPEAKER_00: Well, everything will end eventually.
• 14:01
  SPEAKER_00: I mean, recessions are inevitable, although we haven't had a real one since 08.
• 14:06
  SPEAKER_00: I don't know if you really count the the COVID um recession as a real one, though so short.
• 14:13
  SPEAKER_01: Yeah, I don't know.
• 14:14
  SPEAKER_01: It was very short.
• 14:16
  SPEAKER_00: 2022 certainly felt like a recession, and we did get two consecutive negative GDP prints, but um, it wasn't an official recession.
• 14:26
  SPEAKER_00: Um, but you know, it's that's the business cycle.
• 14:29
  SPEAKER_00: It'll happen again sometime in the future.
• 14:31
  SPEAKER_00: Um I'm sure at some point that we're gonna get a little carried away with this capex spending and overinvest and then not have it translates to profits, and then you see, I don't know, maybe get a liquidity crunch and market sells off, and hopefully we raise cash by then and we're buyers.
• 14:52
  SPEAKER_01: Yeah, you know, it's uh I I would say for everybody listening, and and I encourage folks uh in my conversations, this is not a prediction, we don't think this is gonna happen.
• 15:03
  SPEAKER_01: This was, you know, this was my caveat on this.
• 15:06
  SPEAKER_01: Uh, it's not just this time period, but you should always think in these terms.
• 15:12
  SPEAKER_01: Um, what if on uh Monday morning we find out who knows what the news is and the market goes down 20% on Monday?
• 15:21
  SPEAKER_01: It could be next Monday, it could be any Monday.
• 15:23
  SPEAKER_01: This is a uh this is kind of a planning exercise more than it is anything we're talking about that's going to go on this week or next or and that sounds crazy, but that did happen in 1987.
• 15:36
  SPEAKER_01: Yes, it did.
• 15:37
  SPEAKER_01: So think about that.
• 15:39
  SPEAKER_01: I I encourage people in our financial planning uh discussions to really dig deep within themselves and say, and think, if the market goes down 20% on Monday or any day, what are you gonna do?
• 15:55
  SPEAKER_01: Now, when I ask that question, everybody says, Well, the question really is, Brian, what are you gonna do?
• 16:00
  SPEAKER_01: Well, you know, there are certainly things that we can do, but the reality is, you know, the market goes down 20%.
• 16:06
  SPEAKER_01: You only got so many options.
• 16:07
  SPEAKER_01: One, you hold on and say, Boy, this is terrible.
• 16:10
  SPEAKER_01: Interesting, but terrible.
• 16:12
  SPEAKER_01: Uh, you could be proactive and say, you know what, I had some money come due.
• 16:16
  SPEAKER_01: Maybe it was a CD or I had some cash sitting around.
• 16:18
  SPEAKER_01: Boy, now's a great time.
• 16:20
  SPEAKER_01: Uh you could be uh reactive on the negative side and say, Oh my goodness, get everything out of the out of the market.
• 16:29
  SPEAKER_01: This terrible, I'm gonna put it in two jars in the jar is.
• 16:34
  SPEAKER_01: But I certainly encourage people that to think about that and to because it could happen, it has happened.
• 16:41
  SPEAKER_01: Um it's certainly not our prediction.
• 16:43
  SPEAKER_01: Uh, but when people say to me, well, when does this end?
• 16:46
  SPEAKER_01: That is my question.
• 16:47
  SPEAKER_01: And it's really around.
• 16:49
  SPEAKER_01: Do you feel that you are prepared mentally?
• 16:52
  SPEAKER_01: Do you feel that you are prepared financially either to um react on the positive side, say, boy, now's the time.
• 17:02
  SPEAKER_01: Yeah, everything is on sale, if you will.
• 17:04
  SPEAKER_01: Um, are you truly one of those people that's gonna say, I feel like I'm in the right spot?
• 17:10
  SPEAKER_01: It doesn't feel good right now, but over time I feel like I'm in a good place with my allocation, my cash to investments, uh, you know, my income flows, all those other things.
• 17:22
  SPEAKER_01: Uh, or do you have it in you that you might be one of those people that says, I can't take it, you know, three o'clock in the afternoon, I can't take it anymore.
• 17:29
  SPEAKER_01: The world's truly ending.
• 17:31
  SPEAKER_01: Uh, I don't there there is no one answer, uh, you know, from many, many years of experience.
• 17:38
  SPEAKER_01: Uh what historically has worked out best is to invest in those times.
• 17:45
  SPEAKER_01: Uh, second best would be hold on if you've got a great allocation.
• 17:50
  SPEAKER_01: Historically speaking, the worst option had been to pull everything out of the market.
• 17:55
  SPEAKER_01: Those folks very rarely got back into the market.
• 17:58
  SPEAKER_01: But it's a nice, it's a good exercise.
• 18:01
  SPEAKER_01: Well, yeah, I can't take it anymore.
• 18:04
  SPEAKER_01: My neighbor's right.
• 18:04
  SPEAKER_01: He the my neighbor's killing it.
• 18:06
  SPEAKER_01: I gotta get I gotta get in on that action.
• 18:08
  SPEAKER_01: By that time, you know, the the bus has already gone on by.
• 18:11
  SPEAKER_00: And that's why it's so important to think about your liquidity needs in the future.
• 18:15
  SPEAKER_00: I mean, do you have if if you need to get a new roof next week, do you have something in safe assets if the market is down 20% that you can dish out 40,000 for a new roof?
• 18:26
  SPEAKER_00: So having ample liquidity to be able to cover those expenses in the event of a downturn.
• 18:34
  SPEAKER_00: Um, I was talking to a client the other day that they're thinking about doing a land purchase in the next year and they have a large money market position.
• 18:41
  SPEAKER_00: And they said, Oh, should we invest that?
• 18:43
  SPEAKER_00: And I said, Yeah, you know, if you're planning to do this in the next year, um, it's probably better to just leave it in the money market, get your 4%.
• 18:51
  SPEAKER_00: Certainly within six months, you definitely want that to be liquid and in something safe that's not gonna go down with the market.
• 18:59
  SPEAKER_00: Um, because you know, it hurts to sell things at a loss.
• 19:04
  SPEAKER_01: Well, you know, I had a uh very similar uh situation this week.
• 19:08
  SPEAKER_01: Some folks had been in the money market and said at some point in time we're gonna buy uh some real estate, and um they kind of projected it out into the future a little bit.
• 19:20
  SPEAKER_01: Some circumstances came together and they were effectively um really uh, you know, the time was now.
• 19:30
  SPEAKER_01: They were thinking about next year, year after, maybe real estate prices come down, so on and so forth.
• 19:35
  SPEAKER_01: And their circumstances dictated we got to do this now, it's time to move.
• 19:38
  SPEAKER_01: And in that discussion, we were talking about their money market position and using some of that for the down payment and so on and so forth.
• 19:46
  SPEAKER_01: Uh, but there was going to be some left over, and the discussion was well, with what's left over, we can maybe generate some higher income, potentially introduce a little bit of volatility, some higher income.
• 19:58
  SPEAKER_01: And the observation was, well, geez, why haven't we been doing that for the last two years?
• 20:02
  SPEAKER_01: Well, and the answer was, Mike, exactly what you had mentioned, because um we couldn't perfectly predict when that money was going to be needed.
• 20:10
  SPEAKER_01: Let's say we had stretched that money a little bit and got some of the returns that we're seeing in the market.
• 20:15
  SPEAKER_01: Well, what if the moment and their moment was unpredicted and it was kind of um uh imposed upon them, it wasn't their choice.
• 20:25
  SPEAKER_01: What if that moment was in the first quarter of this year when the market was way down?
• 20:29
  SPEAKER_01: Then the anxiety would have been, well, wait, oh my gosh, I got to dip into this money, it's our it's way down.
• 20:35
  SPEAKER_01: So, to your point, uh, yes, the cash position was absolutely the right place.
• 20:40
  SPEAKER_01: It was available to them.
• 20:42
  SPEAKER_01: It certainly wasn't getting any outrageous yields or the returns that we've seen in some parts of the market, but it served its purpose at the moment when they didn't know that moment was coming.
• 20:53
  SPEAKER_01: Uh, the conversation was, yeah, it's here, it's ready to go.
• 20:57
  SPEAKER_01: Um, so that you bring up a critical, critical uh observation.
• 21:04
  SPEAKER_01: And you know, we we have to recognize from a planning perspective that some pots of money aren't going to be doing the exciting things your neighbor has found.
• 21:14
  SPEAKER_01: Uh, they're gonna be doing what they are intended to do, and that might be uh availability, liquidity.
• 21:22
  SPEAKER_01: And right now it's you know not a great yield.
• 21:25
  SPEAKER_01: But uh we can't predict the future.
• 21:27
  SPEAKER_01: And when that moment comes and you you approach us and say, Wow, I mean, what I had there last year is it's still there?
• 21:34
  SPEAKER_01: Yeah, it's still there with a little bit of interest.
• 21:37
  SPEAKER_01: Um and that's absolutely critical.
• 21:39
  SPEAKER_01: It's absolutely great, especially in a in like the last few years when the market's been doing particularly well.
• 21:46
  SPEAKER_01: But hey, conversely, the client I'm talking about, they've got other pots of money that have uh have been enjoying these great returns.
• 21:52
  SPEAKER_00: And so yeah, and and with that liquidity discussion, I mean the law of relative returns, an extreme example, market drops 50 percent you.
• 22:00
  SPEAKER_00: You need 100% to get back to even.
• 22:02
  SPEAKER_00: If when the mark when you're down 50%, you also need to liquidate 20% of your portfolio to buy a house, then that makes it even harder and longer to get back to that break-even point.
• 22:15
  SPEAKER_01: Well, there's no doubt you're selling those shares that no longer have the operation.
• 22:19
  SPEAKER_01: First of all, you're selling shares that are down.
• 22:21
  SPEAKER_01: And then they uh the opportunity cost of that is they no longer have the the chance, the potential to grow in the future.
• 22:30
  SPEAKER_01: So not only are you selling shares that are down, uh, but no, you don't have those shares sitting there that if thing, if and when things go back up, those shares don't participate because you took them out.
• 22:43
  SPEAKER_00: So yeah, exactly right.
• 22:45
  SPEAKER_00: On a different topic, we've been getting a lot of questions about, you know, I've been with four different companies over the last 20 years.
• 22:54
  SPEAKER_00: I have four MKs, four or three Bs everywhere.
• 22:58
  SPEAKER_00: Uh can I do anything with those?
• 23:02
  SPEAKER_01: Yeah, so yeah, we get that quite I I'm gonna oh boy, a couple times a week, if not daily.
• 23:08
  SPEAKER_01: Um and the answer is yeah, absolutely.
• 23:13
  SPEAKER_01: And I I what I think folks should understand is that these these bigger retirement plans, the 401ks, the 403Bs, your IRAs, these are very protected assets.
• 23:24
  SPEAKER_01: And by that I mean that if you put money into these plans, there are plenty of federal protections that say this is your money.
• 23:35
  SPEAKER_01: You put the money there.
• 23:37
  SPEAKER_01: Nobody can come in a you know, if you leave a company after five years, and but put I'm gonna use a 401k example.
• 23:43
  SPEAKER_01: It's there's nuances I get it, but I'm gonna use a 401k example because it's the most common.
• 23:48
  SPEAKER_01: Put a bunch of money into a 401k over five years, then you leave.
• 23:51
  SPEAKER_01: I often get the question, well, geez, is that money going away?
• 23:55
  SPEAKER_01: Uh, or oh my gosh, uh, if I don't take, I heard in you know, around the water cooler that if I don't take it out a certain amount of time, the company's just gonna take it from me.
• 24:05
  SPEAKER_01: Uh, that is not true.
• 24:07
  SPEAKER_01: The money that you put into these retirement plans, this is understand what I'm saying, the money you put from your paycheck into that retirement plan, very, very protected.
• 24:17
  SPEAKER_01: It is your money.
• 24:19
  SPEAKER_01: Now, the nuance becomes when there is matching, right?
• 24:23
  SPEAKER_01: Oh, they match up to 4% or so on and so forth.
• 24:26
  SPEAKER_01: Sometimes companies can put a little restriction around that.
• 24:29
  SPEAKER_01: You'll get 100% of the match if you stay long enough.
• 24:32
  SPEAKER_01: But that's the company's money that they're putting in for you.
• 24:36
  SPEAKER_01: Your money that you put into these plans, it is your money to do what you want with.
• 24:41
  SPEAKER_01: Now, there are some uh larger retirement plans that have a minimum account size.
• 24:47
  SPEAKER_01: Uh, for example, the most recent one I saw was if you don't have at least$7,000 in this 401k and you leave the company, we are gonna send you a check and you figure out what to do with the check.
• 25:00
  SPEAKER_01: Well, a couple things on that.
• 25:01
  SPEAKER_01: One, it's your money, it's still your money.
• 25:05
  SPEAKER_01: Now, because there was this quote on, you know, minimum account size, it's this happens in these bigger retirement plans.
• 25:11
  SPEAKER_01: Because in this example, they said if your account's not at least$7,000, we're gonna send you a check.
• 25:16
  SPEAKER_01: It's still your money.
• 25:17
  SPEAKER_01: Um, so that's that's a very important thing to understand is one, it's your money.
• 25:23
  SPEAKER_01: The matching portions of it could be yours.
• 25:26
  SPEAKER_01: There could be kind of a vesting idea, you gotta stay for so long to get to till the match, all the matches yours, truly.
• 25:34
  SPEAKER_01: Um, one, it's yours.
• 25:37
  SPEAKER_01: Uh, two, um, you know, they can't abscond with it or anything along those lines.
• 25:43
  SPEAKER_01: And often you have more time and flexibility to think about what you want to do.
• 25:48
  SPEAKER_01: I have very rarely seen, especially on the larger size, these companies say, well, if you don't take the money in the 30 days after you leave, that we're gonna take it all from you and we're gonna give it to the owners so they can buy a new boat.
• 25:59
  SPEAKER_01: That doesn't happen.
• 26:01
  SPEAKER_01: Um, so then the the the question becomes, what are your choices?
• 26:07
  SPEAKER_01: Um, and I I will make this very, very, very basic.
• 26:12
  SPEAKER_01: Uh, this isn't all retirement plans.
• 26:15
  SPEAKER_01: Umployee stock ownership plans.
• 26:18
  SPEAKER_01: If you have one of those, they do have some nuances.
• 26:21
  SPEAKER_01: Well, let's talk about 401ks, 403bs, sep simple things along those lines.
• 26:25
  SPEAKER_01: What are your choices?
• 26:27
  SPEAKER_01: And this is uh in the most general terms, here are your choices.
• 26:33
  SPEAKER_01: Leave the money there.
• 26:35
  SPEAKER_01: If the account is big enough that they don't have one of these small account force liquidations, you can leave the money there.
• 26:40
  SPEAKER_01: It's your money.
• 26:42
  SPEAKER_01: There is some uh outside, some party outside of your company that is actually managing that uh retirement plan, and you can leave it there.
• 26:53
  SPEAKER_01: Um, so that's one choice.
• 26:55
  SPEAKER_01: Uh the second choice is to take all of the money out.
• 27:00
  SPEAKER_01: Well, if you take all the money out and you're under 59 and a half, you're gonna get taxed on it, assuming it's a traditional, traditional meaning you get a tax break on the way in, it grows tax protected.
• 27:11
  SPEAKER_01: And then at some point when you take it out, it's taxable.
• 27:13
  SPEAKER_01: But let's assume that this is the traditional concept, right?
• 27:16
  SPEAKER_01: You got a tax break on the way in, it's growing tax protected.
• 27:20
  SPEAKER_01: Uh, if you're under 59 and a half and you take the money out, just say I'm gonna go spend it.
• 27:24
  SPEAKER_01: I'm gonna go buy the boat myself.
• 27:25
  SPEAKER_01: Why should the owner get the boat?
• 27:27
  SPEAKER_01: I'm gonna go buy if you're under 59 and a half.
• 27:29
  SPEAKER_01: There's a nuance in this, I'm gonna get to it.
• 27:31
  SPEAKER_01: If you're under 59 and a half, you're gonna get a uh 10% penalty and it's gonna be taxable.
• 27:36
  SPEAKER_01: But that's certainly one of your choices.
• 27:38
  SPEAKER_01: Take it all out and spend it.
• 27:40
  SPEAKER_01: I I happen to think in many most cases, it's a really bad choice.
• 27:44
  SPEAKER_01: So you can leave it there and just kind of park it and say, I'll get to it eventually.
• 27:48
  SPEAKER_01: You could take it all out.
• 27:50
  SPEAKER_01: Often a horrible, horrible choice.
• 27:53
  SPEAKER_01: Uh you know, a really interesting choice that I'm gonna say is relatively new is you could pick that plan up and move it to your new employer.
• 28:02
  SPEAKER_01: So let's say you're at this employer for five years, suck away a bunch of money.
• 28:05
  SPEAKER_01: We know it's your money.
• 28:07
  SPEAKER_01: Um, you go to a new employer, they have another 401k.
• 28:11
  SPEAKER_01: Most of those new most, not all, there's always exceptions.
• 28:15
  SPEAKER_01: Most of those will allow you to take an old retirement plan from one company and roll it into the new retirement plan from to the new company.
• 28:23
  SPEAKER_01: Not a bad idea, right?
• 28:24
  SPEAKER_01: I mean, you're a second week on the job, you have any, maybe, you know, maybe there's a waiting period.
• 28:29
  SPEAKER_01: You haven't even started jumping put into the new company's 401k, move the old company's 401k into the new 401k.
• 28:35
  SPEAKER_01: You may, you know, you kind of got a starter plan there.
• 28:37
  SPEAKER_01: It's already, it's already um got some money in it.
• 28:41
  SPEAKER_01: Um really interesting choice.
• 28:43
  SPEAKER_01: And there's a lot of merit to that one.
• 28:46
  SPEAKER_01: And and then finally, you can take that money out of a retirement plan and out of the company retirement plan and put it into an individual retirement uh account, IRA, which by the way, the technical name is individual retirement arrangement, but everybody calls them individual retirement accounts.
• 29:04
  SPEAKER_01: So you can take that money, it's your money, remember, and put it into your own account.
• 29:09
  SPEAKER_01: Um, you know, where did the tax hangups come in?
• 29:12
  SPEAKER_01: Well, if you leave it there, you know, this is on the traditional side.
• 29:15
  SPEAKER_01: Well, they're not going to tax it to leave it there.
• 29:17
  SPEAKER_01: If you take it all out, you're under 59 and a half, you get a 10% penalty and taxation.
• 29:22
  SPEAKER_01: If you're over 59 and a half, you tax no 10% penalty.
• 29:26
  SPEAKER_01: If you do a trustee to trustee transfer, this is very important.
• 29:31
  SPEAKER_01: Have the company that's managing the old plan send it to the new plan.
• 29:36
  SPEAKER_01: That's very important to do it that way.
• 29:38
  SPEAKER_01: Uh, that's not taxable.
• 29:40
  SPEAKER_01: If you do a trustee to trustee uh rollover from your old plan into an IRA, also not a taxable event.
• 29:51
  SPEAKER_01: Uh, oftentimes you, you know, you got to be, there's a difference between a trustee trustee and a direct trustee to trustee is back of office talks of back office, and the money just flows and appears in an account one day.
• 30:03
  SPEAKER_01: I would be I caution folks to get uh any of these retirement accounts into your name directly.
• 30:09
  SPEAKER_01: If you just say, hey, send me the check, put it in my name, uh, then you do have a limited amount of time to get it into another retirement plan uh before it might be taxed.
• 30:20
  SPEAKER_01: So I strongly suggest these trustee to trustee uh transfers where one company sends it to the other company on your behalf and populates your account, as opposed to getting a retirement check in my name.
• 30:32
  SPEAKER_01: If I get a retirement check where the payable two says my name on it, Brian F.
• 30:36
  SPEAKER_01: Beluso, it doesn't say LPL for the benefit of Brian, it says Brian F.
• 30:41
  SPEAKER_01: Beluso.
• 30:42
  SPEAKER_01: Now I'm on the clock.
• 30:43
  SPEAKER_01: When I get that, I either get it into a proper retirement plan without being taxed, or I'm gonna get taxed on it.
• 30:50
  SPEAKER_01: Uh final nuance to that is uh this is one of the important retirement dates.
• 30:55
  SPEAKER_01: Uh, if you leave a company and a company plan, you leave a company at the age of 55 and 55 or older, and you leave that money in that retirement plan, there is the potential, not all cases, there are always caveats, that you might be able to tap into that money without the 10% penalty.
• 31:18
  SPEAKER_01: So you've got to leave the prior employer uh when you reach the age of 50 55 or older, you have to leave it in that company's plan.
• 31:28
  SPEAKER_01: And there is the potential that you could tap into that if you need it without the 10% penalty.
• 31:34
  SPEAKER_01: If it's traditional, still taxable.
• 31:36
  SPEAKER_01: Uh, but that's one of those important retirement dates.
• 31:40
  SPEAKER_01: You know, 55, you leave a company, might make sense for your situation to leave it in that old plan in case you need to tap into it.
• 31:48
  SPEAKER_01: We got 59 and a half, that's the 10% penalty.
• 31:51
  SPEAKER_01: Uh, they're fun retirement dates are 62, first year of Social Security, 65, first year of Medicare, always exceptions.
• 31:59
  SPEAKER_01: I get it.
• 32:00
  SPEAKER_01: Uh, your Social Security full retirement age, usually 67 for most of us.
• 32:05
  SPEAKER_01: Uh, the age of 70, that's full retirement or full uh Social Security, then 73 or 75 your RMDs.
• 32:12
  SPEAKER_01: So I just covered all their full retirement retirement ages.
• 32:16
  SPEAKER_01: Anyway, so hey, what are the choices?
• 32:17
  SPEAKER_01: Leave it there, take it out, take the tax, you know, do the tax consequences, roll it to the new employer's plan if you have a new employer, or put it into an individual retirement account in your own name.
• 32:29
  SPEAKER_00: And most people we work with tend to go with option three or four, either move it into their existing plan or roll it into an IRA because they don't want to have accounts here, here, and here.
• 32:40
  SPEAKER_00: They want everything consolidated.
• 32:42
  SPEAKER_01: Well, I will tell you from a financial, this is the way I approach life personally.
• 32:45
  SPEAKER_01: I think it makes sense from a financial planning perspective.
• 32:48
  SPEAKER_01: Diversification is not the number of accounts you have or the number of entities that you deal with.
• 32:54
  SPEAKER_01: Diversification is what goes on in the account, not the number of there's a lot of people that have said, well, you know, I I'm pretty well spread out.
• 33:02
  SPEAKER_01: I got some here, I got some here, I got some there.
• 33:05
  SPEAKER_01: Nobody really understands what all of it is, including the person that owns all of it.
• 33:09
  SPEAKER_01: That's not where the diversification comes.
• 33:11
  SPEAKER_01: The diversification, you can have one single account and have tons of diversification in it.
• 33:16
  SPEAKER_01: So your diversification is I left five accounts here, there, there, got some at the bank, got some of my old employer, some of my newer.
• 33:22
  SPEAKER_01: That's certainly not diversification.
• 33:24
  SPEAKER_01: I would, you know, I would indicate that's diversification.
• 33:28
  SPEAKER_01: Um so you could certainly simply interest it.
• 33:31
  SPEAKER_01: It is, it is, it's for today it is.
• 33:35
  SPEAKER_01: Uh, but you know, you could certainly have, you know, one type of retirement account.
• 33:42
  SPEAKER_01: You could have one type of non-retirement account, you could have checking savings and you know, all these other things and be wonderfully diversified.
• 33:51
  SPEAKER_01: You might only have two or three types of accounts and have great diversification.
• 33:57
  SPEAKER_01: Um, but yes, many people do to simplify.
• 34:01
  SPEAKER_01: Uh, what happens?
• 34:02
  SPEAKER_01: Hey, you can look up your own state's public records.
• 34:06
  SPEAKER_01: There are plenty of retirement plans that are sitting out there that have been claimed by the state because nobody nobody remembered that they were there, nobody's servicing them.
• 34:16
  SPEAKER_01: And then, you know, the estate just the state just takes them.
• 34:18
  SPEAKER_01: Oh, we can't find these people.
• 34:20
  SPEAKER_01: Um, does that happen?
• 34:22
  SPEAKER_01: Oh, yeah, that happens.
• 34:23
  SPEAKER_01: Yeah, what the heck, you know, I'm making more money.
• 34:26
  SPEAKER_01: Uh couple thousand bucks I left that company 10 years ago.
• 34:30
  SPEAKER_01: Well, what's a big deal?
• 34:31
  SPEAKER_01: Um, that starts to add up.
• 34:33
  SPEAKER_01: So those are your choices.
• 34:35
  SPEAKER_01: Important to note, it's your money.
• 34:37
  SPEAKER_01: It's your money.
• 34:37
  SPEAKER_01: Nobody's gonna run in and just abscond with it.
• 34:40
  SPEAKER_01: Uh you know, they can't just dip in there and say, well, Brian left two weeks ago.
• 34:45
  SPEAKER_01: And uh, I guess he doesn't want this retirement account.
• 34:48
  SPEAKER_01: We'll just take it for him.
• 34:49
  SPEAKER_01: Uh you know, they're they're very that that would be very difficult for them to do.
• 34:56
  SPEAKER_01: So it's your money, you make the choice based on your situation.
• 34:59
  SPEAKER_01: We'd be glad to help you walk through the pros and cons of the choices so you make what is a good choice for you.
• 35:06
  SPEAKER_00: Well, that's a great breakdown.
• 35:08
  SPEAKER_00: Um, before we head out for the weekend, um, I just want to say next week, a lot of economic data coming out.
• 35:15
  SPEAKER_00: We get ISM manufacturing, job openings, uh ADP numbers, ISM services, non-farm payrolls, unemployment rate.
• 35:26
  SPEAKER_00: So definitely potentially market moving.
• 35:29
  SPEAKER_01: So we will well, hey, but before you tune into Friday Live next Friday, which is what?
• 35:35
  SPEAKER_01: Uh oh, next Friday is September 4th.
• 35:38
  SPEAKER_01: Woo! September War 2026.
• 35:41
  SPEAKER_01: Before you tune into Friday Live, grab an extra cup of coffee because we're gonna tear into it.
• 35:46
  SPEAKER_00: And we will all be in one place next Friday.
• 35:48
  SPEAKER_00: So we might do it all on one per on one screen in person.
• 35:53
  SPEAKER_00: Let's do it.
• 35:55
  SPEAKER_00: All right, well, everyone have a nice weekend.
• 35:57
  SPEAKER_00: I'm gonna flip on the disclosures and we'll be back next Friday.
• 36:00
  SPEAKER_01: Be safe.
• 36:00
  SPEAKER_01: Thanks.
• 36:01
  SPEAKER_01: Security is offered through LPL Financial LLC, member FINRA and SIPC.org.
• 36:06
  SPEAKER_01: Advisory services offered through LPL Financial LLC, a registered investment advisor.
• 36:12
  SPEAKER_01: Brian Peluso, Michael Kutch, and David Harper are registered representatives of LPL Financial LLC.
• 36:18
  SPEAKER_01: Content discussed is for informational purposes only and not intended as an offer or solicitation to buy or sell any security or investment strategy.
• 36:27
  SPEAKER_01: Any opinions expressed are those of the authors and do not necessarily reflect the views of LPL Financial or its affiliates.
• 36:33
  SPEAKER_01: All investments involve risk, including the possible loss of principal.
• 36:38
  SPEAKER_01: This communication may include links or references to third-party websites.
• 36:41
  SPEAKER_01: These links are provided as a convenience only.
• 36:44
  SPEAKER_01: LPL Financial and its representatives are not responsible for the accuracy or content of such sites.
• 36:49
  SPEAKER_01: Brian, Mike, and David and HBK Profident Advisors may only transact business in states where they are properly registered or exempt from registration.
• 36:58
  SPEAKER_01: Please contact us directly for information regarding licensing and registration status.
• 37:04
  SPEAKER_01: Past performance is not indicative of future results.
• 37:08
  SPEAKER_01: You should consult with your financial advisor, tax professional, andor attorney regarding your specific situation before making any investment decisions.