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AI Stocks, Diesel Prices, and the Limits of Market Momentum · The Financial Exchange Show

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Speaker 1: is The Financial Exchange with Chuck Zotta and Paul Lane.
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Speaker 2: It's Chuck Paul and Tucker with you here on a Wednesday,
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Speaker 2: and we've got.
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Speaker 3: Some stories to talk about today.
1:18
Speaker 2: It's a good day for stories, even with an overall
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Speaker 2: dearth of interesting economic data or earnings. Paul, you get
1:26
Speaker 2: all fired up about the Thor Industries earnings report this morning?
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Speaker 4: So every morning I look at CNBC for what stocks
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Speaker 4: are moving, and today there were three that they mentioned,
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Speaker 4: and they are companies that I'm pretty tuned into the
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Speaker 4: market that even I wasn't that familiar with.
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Speaker 1: Exactly.
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Speaker 4: So I said, oh my gosh, it must be a
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Speaker 4: really slow day in terms of individual stock news if
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Speaker 4: these are the names that are being bantered about on CNBC.
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Speaker 2: I mean, look, we got General Mills, big cereal out there, paychecks.
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Speaker 2: They give you your paycheck not via paycheck anymore. We
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Speaker 2: asked a question on Monday. Paul, what percentage of U.S.
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Speaker 2: employers do you think use physical paychecks at this point?
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Speaker 3: What percentage of U.S. employees? Because I know at some
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Speaker 3: firms maybe you can request one, but... 20%? You think
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Speaker 3: it's that high? Interesting.
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Speaker 4: I hope it's not that high, but I just have
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Speaker 4: a feeling that it's higher than we would anticipate.
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Speaker 3: Okay, so let me think through this.
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Speaker 5: So.
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Speaker 2: The place that I could see it being higher is
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Speaker 2: a lot of entry-level jobs where someone doesn't necessarily have
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Speaker 2: a bank account, so they can't do direct deposit, and
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Speaker 2: so they need a paycheck in order to be able
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Speaker 2: to take it and cash it. Okay, I could buy
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Speaker 2: that being maybe 15% to 20%, actually.
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Speaker 3: Let's see what... Tucker, you got a dog in this fight?
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Speaker 1: Nope.
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Speaker 6: Okay. Okay.
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Speaker 4: Quick Google search indicates that it's only about three to
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Speaker 4: four percent.
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Speaker 3: I guessed one on Monday. So I'm glad it's closer
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Speaker 3: to me than you. I think it's because there's a
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Speaker 3: law firm. I shouldn't have let you persuade me that
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Speaker 3: it was higher.
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Speaker 4: I think it's the case because we deal with this
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Speaker 4: law firm that still does paper checks, so maybe that
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Speaker 4: had my estimate way higher.
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Speaker 3: Interesting. Interesting.
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Speaker 2: So let's dive into our top story today, which is
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Speaker 2: from Barron's. It's titled, AI Stocks Can't Carry the Entire
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Speaker 2: Market Forever. And I'll raise the question, why?
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Speaker 6: Why?
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Speaker 3: I'm in agreement with you.
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Speaker 4: I feel like there has been a recurring narrative over
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Speaker 4: the course of the last week where these publications that
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Speaker 4: we follow very closely are just looking for, they're grasping
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Speaker 4: at straws in what is a very quiet economic period,
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Speaker 4: still a lot of stuff going on geopolitically, to point
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Speaker 4: to why there should be concern with the market. In particular,
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Speaker 4: this one statistic that we ripped apart on the show
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Speaker 4: yesterday that Tucker brought to our attention, where somehow all
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Speaker 4: of a sudden stocks hitting 52-week highs and lows are
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Speaker 4: being quoted out as a statistical measure of concern for
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Speaker 4: the markets, where Yesterday, we read a piece where seven
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Speaker 4: stocks hit their fresh 52-week highs, but 30 hit their
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Speaker 4: 52-week lows. And all of a sudden, now we're supposed
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Speaker 4: to be concerned about the concentration of the market. To me,
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Speaker 4: all of this stuff, whether it's the 52-week highs and lows,
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Speaker 4: which I've never heard used as a metric to quote
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Speaker 4: where the market is going, all of this stuff to
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Speaker 4: me is just trying to create a narrative that For
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Speaker 4: the last few years, Chuck, that has been the story
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Speaker 4: that tech or AI, at least the last year or two,
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Speaker 4: has powered a lot of the market gains. So why,
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Speaker 4: to your point in the initial question you posed, why
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Speaker 4: couldn't that continue? I'm with you. It could continue. I
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Speaker 4: just don't understand why some of these publications feel the
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Speaker 4: need to make it seem as if there's this imminent end.
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Speaker 4: What's so hard about projecting markets is you don't know
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Speaker 4: how long this AI momentum is going to continue for.
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Speaker 4: It could be years, two to three years, and the
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Speaker 4: market could still roar on the backs of that. Really
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Speaker 4: what the story to me has been with the market,
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Speaker 4: whether you want to look month-to-date or quarter-to-date, is everything
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Speaker 4: that is adjacent to interest rates or energy goods that
5:15
Speaker 4: are being moved around and Different sectors of businesses, those
5:19
Speaker 4: have been beamed up. Utility sector down 10% quarter to date.
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Speaker 4: Real estate off 2% quarter to date. Consumer staples flat
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Speaker 4: to kind of negative on the quarterly basis.
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Speaker 3: Industrials.
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Speaker 4: Down 8% quarter date and materials flat to slightly negative.
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Speaker 4: Consumer discretionary also slightly down. All of those major sectors,
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Speaker 4: six of the 11 in the S & P 500
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Speaker 4: that are very much impacted by fuel and cost of
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Speaker 4: energy and interest rates for borrowing capacity.
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Speaker 3: Those have been beaten up.
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Speaker 4: The things that have done well are areas of the market,
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Speaker 4: tech and communication services, which is very similar to tech
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Speaker 4: that don't really rely on the inflationary story as much.
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Speaker 4: They're not as impacted by it.
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Speaker 2: So if there's one word in the headline that I
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Speaker 2: think we can quibble with and we've talked about, it's like, yes,
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Speaker 2: AI stocks can't carry the market forever simply because you're
6:10
Speaker 2: not going to see the United States of NVIDIA. You
6:14
Speaker 2: won't get to a point where tech is 100% of
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Speaker 2: the market because that just doesn't make conceptual sense. And
6:23
Speaker 2: by the way, we see this when when we see
6:27
Speaker 2: these things in tech where the beginning of the year,
6:30
Speaker 2: remember when software was getting hammered back in February?
6:34
Speaker 3: Yep, SaaS apocalypse. Exactly.
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Speaker 2: And you had these software companies that were, you know,
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Speaker 2: getting hammered, losing like 50% of their value because at
6:41
Speaker 2: the time the thought was like, remember the latest thing
6:44
Speaker 2: in AI at the beginning of the year was, you know,
6:47
Speaker 2: this idea of like vibe coding. And it was like, oh,
6:49
Speaker 2: like companies are going to like vibe code like their
6:52
Speaker 2: entire ecosystem. And we said at the time, look, The
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Speaker 2: real threat to these companies is not that someone is
6:58
Speaker 2: going to be like, hey, I'm going to, you know,
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Speaker 2: vibe code a replacement for Salesforce because that's stupid, if
7:07
Speaker 2: we're being honest. The reason that companies hire outside vendors
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Speaker 2: is so that, number one, like, the biggest reason, to
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Speaker 2: be honest, if something breaks, they go and fix it. Like,
7:19
Speaker 2: if you're running a car dealer, you don't want your
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Speaker 2: vibe coder to be like, oh, like, I'm pulling my
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Speaker 2: hair out trying to figure out, like, why our CRM
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Speaker 2: isn't working anymore.
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Speaker 3: Like, no, like, have someone for that.
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Speaker 2: What we did say was the risk was, okay, some
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Speaker 2: of these companies, the reason why software has done well
7:37
Speaker 2: in the last 20, 30 years... is because these companies
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Speaker 2: have high margins because they have relatively low overhead. And
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Speaker 2: so once you get entrenched in these businesses, they tend
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Speaker 2: to re-up their contracts.
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Speaker 3: Super sticky, yeah. And so it's sticky business with good margins. Like,
7:51
Speaker 3: got it.
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Speaker 2: The risk is, hey, if people laid off from those
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Speaker 2: companies develop better, cheaper alternatives using AI, maybe it cuts
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Speaker 2: into the marginal sales growth of those companies and that
8:02
Speaker 2: becomes a thing. But you can pull the tape from
8:06
Speaker 2: us on the show back in whenever.
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Speaker 3: We were never.
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Speaker 2: Sitting here saying, oh, software's going to die. It was
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Speaker 2: much more, hey, on the margin, if you go from
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Speaker 2: a 20% growth rate to a 10% because you're losing
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Speaker 2: sales to new competitors who are coding with AI, that
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Speaker 2: could be a problem. It's not going to be that
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Speaker 2: every law firm develops their own AI coding. That was dumb.
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Speaker 2: So to tie it back into what we're talking about here,
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Speaker 2: I think that when we look at the AI ecosystem today,
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Speaker 2: the newest thing that everyone's hooked up on in the
8:42
Speaker 2: last week or two is AI agents for personal use.
8:47
Speaker 2: Meta dropped their Muse agent, what, like 10 days ago,
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Speaker 2: maybe 15 days ago. And it was basically like over
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Speaker 2: the weekend, people noticed it because they had all these
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Speaker 2: social media posts of like, hey, I was like trying
8:59
Speaker 2: to fly to this place and I had my, you know,
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Speaker 2: the flight was overbooked. So I had my muse agent,
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Speaker 2: you know, go and get me $ 250 for getting bumped
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Speaker 2: and then booked a cheaper flight after.
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Speaker 3: And people were like, oh, like, look at this.
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Speaker 2: So you saw all these companies that depend on like
9:17
Speaker 2: the stickiness of their revenue yesterday get hit. Companies like
9:20
Speaker 2: Planet Fitness, because no one likes to cancel their gym membership.
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Speaker 2: And so the idea is, hey, like, people are going
9:26
Speaker 2: to use Muse to cancel their gym membership. You had
9:29
Speaker 2: Adobe get hit because, oh, a bunch of people just
9:32
Speaker 2: subscribe to Adobe and pay monthly but don't realize it's
9:35
Speaker 2: still happening. People are going to use Muse to cancel
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Speaker 2: their Adobe membership. To which I say, number one... As
9:42
Speaker 2: someone who's canceled a Planet Fitness membership. I was just
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Speaker 2: going to say, unless Muse can show up physically. My dudes,
9:48
Speaker 2: you can't do it over the internet. At least you
9:51
Speaker 2: couldn't five years ago when I had to. You had to.
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Speaker 2: And by the way, this was like the height of
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Speaker 2: the pandemic when like no one was supposed to go
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Speaker 2: anywhere Planet Fitness is like you've got to bring like
10:02
Speaker 2: a signed copy of your birth certificate in to cancel
10:06
Speaker 2: your membership it wasn't quite that ridiculous but I had
10:09
Speaker 2: to bring a letter into the gym to cancel it
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Speaker 2: and last time I checked Muse doesn't have legs so
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Speaker 2: sorry like that's that's not happening The real reason, you know,
10:21
Speaker 2: it's this idea of like, oh, you're going to get
10:23
Speaker 2: rid of all this friction, like your agent's just going
10:25
Speaker 2: to go and do all these things. Okay, like, let's
10:29
Speaker 2: stop for just a second. Number one, first you've got
10:32
Speaker 2: to actually think of all these things to do. Most
10:37
Speaker 2: people don't really do that. Number two, you've still got
10:41
Speaker 2: to affirmatively be like, yeah, I'm giving up on going
10:44
Speaker 2: to the gym, which, if we're being 100% honest about it,
10:48
Speaker 2: The reason most people don't cancel gym memberships isn't because
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Speaker 2: they just, like, forget to. It's they're like, well, maybe
10:54
Speaker 2: I'll go next week. That's the crux of it. So
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Speaker 2: this is the latest apocalypse. We've got to brand all
11:04
Speaker 2: these things now. So this is like the friction apocalypse
11:06
Speaker 2: or something like that. And I don't know that I
11:11
Speaker 2: fully buy that either just because, number one, like, I
11:16
Speaker 2: just don't buy the overall premise. Number two, you think
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Speaker 2: these companies just are going to give up on their business?
11:21
Speaker 2: They're not going to figure out how to evolve? Like,
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Speaker 2: they're not all going to be blockbuster video.
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Speaker 6: Right, right.
11:28
Speaker 3: You know?
11:29
Speaker 2: Sure, some of them might end up being dumb about this.
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Speaker 2: The other piece that I'll point out on the AI
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Speaker 2: agent thing for personal use, I think we might be
11:36
Speaker 2: getting a little bit ahead of ourselves because when we
11:40
Speaker 2: talk about some of the stuff that's being, you know,
11:43
Speaker 2: bandied about and that people have shown, like.
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Speaker 3: Oh, you can use it to plan your trip.
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Speaker 1: Yep.
11:49
Speaker 3: People like planning trips. Some people do.
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Speaker 4: Some people do.
11:55
Speaker 2: People like thinking about what they are going to do.
11:58
Speaker 2: The act of imagining your trip is almost as much
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Speaker 2: fun as the trip itself. You're like, oh, this sounds cool.
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Speaker 2: I want to do that. Could you use your AI
12:08
Speaker 2: agent to end up finally booking it? Yes, but you're
12:11
Speaker 2: still going to want to look at stuff because people
12:13
Speaker 2: like looking at stuff to do. No one sits around
12:17
Speaker 2: and is like, hey, I'm just going to show up
12:19
Speaker 2: to the airport and my itinerary is going to be
12:21
Speaker 2: whatever it is. That's a small portion of the traveling population.
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Speaker 4: It could consolidate the research process. Just, hey, give me
12:28
Speaker 4: four or five ideas to do in Austin, Texas.
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Speaker 2: But there's no money in that is my point. Ultimately,
12:34
Speaker 2: you're going to pay for give me four or five
12:36
Speaker 2: ideas about Austin, Texas. No, if you still had that,
12:38
Speaker 2: the Fromer's books would still be big business and they're not.
12:42
Speaker 4: Taking a cut on transactions from booking. You don't think
12:45
Speaker 4: that they could drive more traffic that way.
12:46
Speaker 3: Who's going to give up that? Who's going to give
12:48
Speaker 3: up that cut?
12:49
Speaker 2: You think that Expedia is not going to roll out
12:51
Speaker 2: its own agent to handle that.
12:54
Speaker 3: Part for you? So this is the thing.
12:56
Speaker 2: I just don't know that I buy that as being
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Speaker 2: a meaningful change either.
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Speaker 3: Let's take a quick break.
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Speaker 2: When we return, let's talk a little bit about a
13:04
Speaker 2: diesel export ban next.
13:07
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14:05
Speaker 2: Paul, yesterday, for the first time, the president floated the
14:09
Speaker 2: idea of a diesel export ban of some kind. Prior
14:13
Speaker 2: to this, we'd seen some chatter over the last week
14:16
Speaker 2: to ten days from various administration officials talking about the
14:20
Speaker 2: feasibility of it, a number of people in Congress and
14:22
Speaker 2: or the Senate talking about it. But yesterday was the
14:25
Speaker 2: first time that the president directly brought it up. and
14:31
Speaker 2: said that he is considering some type of diesel export ban.
14:36
Speaker 2: I'll quote here from the Wall Street Journal, Trump's support
14:38
Speaker 2: for the idea, blindsided industry officials, oil executives and lobbyists
14:42
Speaker 2: rushed to register their opposition to a ban, with several
14:44
Speaker 2: calling the president's lieutenants and congressional Republicans, according to people
14:47
Speaker 2: familiar with the matter. But now it seems, they said,
14:50
Speaker 2: it seems inevitable the U.S. will move forward with some measure,
14:53
Speaker 2: limiting their fuel shipments. So that's the piece from the
14:56
Speaker 2: Wall Street Journal.
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Speaker 1: This.
15:00
Speaker 3: Then this morning, and I don't.
15:02
Speaker 2: Have the full quote, but I have the reporting here.
15:08
Speaker 2: It came through a bunch of different wires.
15:11
Speaker 6: U.S.
15:11
Speaker 2: Energy Secretary Chris Wright says diesel export ban would not work,
15:15
Speaker 2: said it would raise gasoline and jet fuel prices.
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Speaker 5: Mm-hmm.
15:18
Speaker 2: Which is not wrong, but it puts him at odds
15:22
Speaker 2: with the president, obviously, and what he said yesterday. So
15:24
Speaker 2: I'm trying to reconcile where this is actually going. We've
15:28
Speaker 2: talked for the last month or two about how diesel
15:30
Speaker 2: is right at the epicenter of all of the problems
15:33
Speaker 2: in energy markets right now. And so it's clear that
15:38
Speaker 2: there's an issue that is here that the president and
15:42
Speaker 2: his administration are trying to work on. The problem is
15:46
Speaker 2: that there's no easy solution on this. Like If we
15:49
Speaker 2: talk about what a diesel export ban does, diesel export
15:54
Speaker 2: ban goes into place. Prices in predominantly the Gulf states,
15:59
Speaker 2: but also up through the Midwest would have the quickest
16:01
Speaker 2: drops there. The East and West Coast don't see as
16:04
Speaker 2: much oil that flows there from where most of the
16:07
Speaker 2: diesel is produced in the US. And so they would
16:10
Speaker 2: see some smaller drops, but still drops. So again, I'm
16:13
Speaker 2: not saying that you wouldn't see a short term benefit there.
16:17
Speaker 2: Here's the problem that you run into, is if you
16:20
Speaker 2: stop exporting one and a half million barrels of diesel
16:23
Speaker 2: per day to the rest of the world, the rest
16:25
Speaker 2: of the world immediately says, great, price of diesel everywhere
16:28
Speaker 2: else just shot up. So refiners everywhere else now say, great,
16:32
Speaker 2: we can make more money by paying more for oil.
16:35
Speaker 2: We're going to go get every freaking barrel we can
16:38
Speaker 2: get our hands on and start producing as much diesel
16:41
Speaker 2: as we can. Not that they aren't already, but they
16:43
Speaker 2: can pay more than domestic refiners who don't get the
16:46
Speaker 2: same amount. for their barrels of diesel. So now you've
16:50
Speaker 2: got barrels of crude that flow overseas. That in turn
16:53
Speaker 2: puts pressure on U.S. crude supplies, which are already not
16:56
Speaker 2: in a great spot. pushes up the price of U.S. crude,
17:00
Speaker 2: which compresses diesel margins further in the United States, meaning
17:04
Speaker 2: that refiners aren't incented to produce as much. It raises
17:08
Speaker 2: the cost of diesel then as crude eventually bleeds through
17:11
Speaker 2: into that. And so you get a snapback after the
17:14
Speaker 2: immediate short-term positive effects that you have here. And the
17:19
Speaker 2: other piece that I'll say, One of the key cornerstones
17:22
Speaker 2: of the president's agenda this term was increasing energy production
17:26
Speaker 2: and specifically selling that energy overseas, whether it's LNG, crude,
17:30
Speaker 2: whatever it might be. If you are now trying to
17:34
Speaker 2: sell that stuff overseas, but the message you're sending through
17:38
Speaker 2: a diesel export ban is, hey, if things get tight
17:42
Speaker 2: here domestically, we're not going to provide to you.
17:46
Speaker 3: Not a great partner. Then who looks to you.
17:49
Speaker 2: For being a long-term partner for the export of fuels?
17:51
Speaker 1: Right.
17:52
Speaker 4: The biggest thing that I was able to sort of...
17:56
Speaker 4: gather from this is what i didn't realize is just
17:58
Speaker 4: the trickle-down impacts of if you curb an export ban
18:02
Speaker 4: on diesel what impact that could have on jet fuel
18:06
Speaker 4: and on gasoline there's all these you know after effects
18:09
Speaker 4: that occur as a result of crude is the initial
18:12
Speaker 4: refining process but then it breaks down into these specialty
18:15
Speaker 4: fuels that are used yeah and if you are to
18:18
Speaker 4: curtail the just any crude processing and refining that can
18:23
Speaker 4: have impacts that go beyond just diesel costs. So while
18:26
Speaker 4: it may sound like something on a short term basis
18:29
Speaker 4: that voters may want to hear that you get a
18:33
Speaker 4: temporary pullback in diesel pricing, ultimately, what people need to
18:37
Speaker 4: be aware of is just the snowball of effects that
18:40
Speaker 4: it can create that will just be much more harmful
18:43
Speaker 4: than the initial, you know, pull down in prices would
18:46
Speaker 4: be beneficial to the US economy. So It is something
18:49
Speaker 4: that it would be, in my view, a short-sighted move
18:53
Speaker 4: to make this export ban. So we'll have to see
18:56
Speaker 4: how it progresses.
18:57
Speaker 2: Yeah, I truly don't know exactly where things go from here.
19:01
Speaker 2: And so we'll see exactly what happens. But again, there
19:06
Speaker 2: are no easy solutions here. The problem that you have,
19:10
Speaker 2: there still is not enough crude being produced in the
19:12
Speaker 2: Middle East. There still is a ton of refining capacity
19:15
Speaker 2: offline in the Middle East and in Russia. And until
19:18
Speaker 2: those things resolve, you don't have a solution here. There's
19:22
Speaker 2: nothing that is clean and simple. Let's take a quick break.
19:25
Speaker 2: When we return, we've got Wall Street Watch, and Todd
19:27
Speaker 2: Lutzky joins us for Ask Todd.
19:39
Speaker 1: Like us on Facebook and follow us on Twitter at TFEShow.
19:43
Speaker 1: Breaking business news is always first, right here on the
19:47
Speaker 1: Financial Exchange Radio Network. Time now for Wall Street Watch,
19:53
Speaker 1: tracking the stocks, the data, and the headlines driving markets
19:56
Speaker 1: so far today, right here on the Financial Exchange Radio Network.
20:00
Speaker 5: Markets are in negative territory as oil prices continue to
20:03
Speaker 5: be the primary focus, with Brent crude back above $ 100
20:07
Speaker 5: a barrel. The 10-year Treasury yield, by the way, is
20:09
Speaker 5: back above 5%. Right now, the Dow is down 87 points,
20:13
Speaker 5: nearly two-tenths of a percent lower. S & P 500
20:15
Speaker 5: is off About half a percent or 42 points off.
20:19
Speaker 5: NASDAQ selling off over 1% or 289 points lower. Russell
20:25
Speaker 5: 2000 selling off by 1%. 10-year treasury yield is up
20:28
Speaker 5: 8 basis points at 5.054%. Crude oil up 1.5% to
20:34
Speaker 5: trading $ 91 a barrel, while Brent is trading at $ 101
20:38
Speaker 5: a barrel. McDonald's this morning announced plans to invest billions
20:42
Speaker 5: of dollars to help franchisees use AI tools and upgrade
20:45
Speaker 5: their kitchens and menus today. to better compete with rivals. However,
20:49
Speaker 5: the stock is down by four percent. Meanwhile, shares in
20:52
Speaker 5: homebuilder KB Home down half a percent after the company
20:55
Speaker 5: lowered its profit outlook amid worsening housing market conditions. Elsewhere,
21:00
Speaker 5: The Wall Street Journal reported that activist investor Jana Partners
21:03
Speaker 5: was pushing theme flag company Six Flags toward a sale.
21:08
Speaker 3: Six Flags is.
21:09
Speaker 5: Down by half a percent. Shares in IonQ are jumping
21:13
Speaker 5: 5% after the quantum computing company said it demonstrated the
21:17
Speaker 5: industry's first end-to-end real-time quantum error decoder. And this just in,
21:23
Speaker 5: Bloomberg is reporting that the price for Disney Plus will
21:26
Speaker 5: increase 13% to $ 21.
21:27
Speaker 3: 49 per month.
21:27
Speaker 5: I'm Tucker Silva and that is Wall Street Watch.
21:37
Speaker 1: As promised....
22:06
Speaker 2: We're now joined by Todd Lutzky from the law firm
22:09
Speaker 2: of Cushing and Dolan for Ask Todd. Phone lines are
22:12
Speaker 2: wide open so that you can ask Todd your estate
22:16
Speaker 2: planning questions live on air right now. Remember, we usually
22:20
Speaker 2: get through two to three of your questions, so get
22:22
Speaker 2: calling early. and often, in order to speak with Todd here.
22:28
Speaker 2: 888-205-2263 is the number. Again, that is 888-205-2263, and this
22:35
Speaker 2: is your chance to speak with Todd live on air
22:38
Speaker 2: right now about your estate planning questions. 888-205-2263 is the number.
22:46
Speaker 1: Mr.
22:46
Speaker 3: Lutzky, how are you doing today? I am never better.
22:51
Speaker 3: How are you doing?
22:52
Speaker 1: Good.
22:52
Speaker 2: I have a buddy of mine who was claiming that
22:56
Speaker 2: he climbed Mount Everest.
22:59
Speaker 3: Well, people have done that. A lot of my friends
23:01
Speaker 3: don't believe him.
23:02
Speaker 1: Yeah.
23:02
Speaker 3: I think he made it up. I think so, too.
23:05
Speaker 1: Yeah.
23:05
Speaker 3: Yeah, I think so. He made it up. Todd, I
23:07
Speaker 3: want to talk to you a little bit about long-term care.
23:10
Speaker 1: Uh-huh.
23:11
Speaker 2: If we're talking about the cost of long-term care today
23:17
Speaker 2: in 2026... What's the range that we generally see for
23:23
Speaker 2: nursing homes? Is it different for in-home care? What are
23:27
Speaker 2: we looking at in terms of actual costs these days?
23:30
Speaker 7: Yeah, I think it's so important because a lot of
23:32
Speaker 7: people will call me and say, I've got somebody who
23:37
Speaker 7: needs long-term care and they don't define it. Then I
23:40
Speaker 7: have to ask because there's a big difference. Are your
23:44
Speaker 7: parents or loved one going into an independent living facility?
23:48
Speaker 3: Well, that's one thing.
23:49
Speaker 7: Or are they going into an assisted living? Now, lots
23:53
Speaker 7: of people call assisted livings nursing homes, but they're not.
23:57
Speaker 7: You have a different level of care that you get
24:00
Speaker 7: in assisted living, meaning you don't need as much care
24:04
Speaker 7: as you do when you go to a nursing home.
24:07
Speaker 7: Or I say, are they going to a full-fledged nursing home?
24:10
Speaker 7: So it makes a difference for a lot of reasons. One,
24:13
Speaker 7: the level of care you're getting, and two, the cost
24:16
Speaker 7: of that care. So independent livings are not nearly as
24:21
Speaker 7: high as a nursing home. I don't have a good
24:23
Speaker 7: handle on what every independent living, I think, is going
24:27
Speaker 7: to be a little different. So I don't really have
24:28
Speaker 7: a good handle on what independent living requires because I
24:32
Speaker 7: think if you don't need a lot of care, it
24:35
Speaker 7: might just be that you're paying rent. It might be $ 3, 000
24:38
Speaker 7: a month, $ 4, 000 a month, something like that to pay rent.
24:41
Speaker 7: If you need assisted living, so this means you need
24:46
Speaker 7: Probably not 24-7 care. You just need somebody to check
24:50
Speaker 7: in occasionally, maybe cook some meals, et cetera, depending on
24:54
Speaker 7: what the facility offers. You're looking more in the $ 7, 000.
24:58
Speaker 3: $ 8, 000.
24:59
Speaker 7: $ 9, 000 range per month. Maybe you hit $ 10, 000 depending on
25:05
Speaker 7: how much care, how fancy the facility is. But if
25:11
Speaker 7: you need 24-7 care and you're moving into a nursing home, facility. Well,
25:17
Speaker 7: those are, you know, I'm going to say typically, yeah, 17,000.
25:24
Speaker 3: A month, maybe somewhere in that range.
25:26
Speaker 7: Now you hear the hesitation of my voice and that's
25:29
Speaker 7: because if you go to certain places, there's really fancy
25:34
Speaker 7: facilities that I've seen and people are paying upwards of 21, 22,000
25:38
Speaker 7: a month.
25:39
Speaker 3: I mean, you just can't really, you know, afford that
25:41
Speaker 3: very long.
25:42
Speaker 7: So I think you need to understand which is which
25:45
Speaker 7: And when you're going there, and lastly, sometimes people will say, oh, well, geez, no,
25:49
Speaker 7: I'm going to have to put my parent in a
25:51
Speaker 7: memory care facility. Well, that's not going to help me
25:54
Speaker 7: if I'm trying to help you because memory care facilities
25:57
Speaker 7: could be either one. Could be full-fledged nursing home or
26:00
Speaker 7: could be assisted living, depending on the category. So You
26:04
Speaker 7: really need to check with the people that are admitting
26:08
Speaker 7: you during the admission process.
26:10
Speaker 3: Sort of ferret this out.
26:12
Speaker 2: Talking with Todd Lutzky from the law firm of Cushing
26:14
Speaker 2: and Dolan. We've still got room on the phone lines
26:16
Speaker 2: for your calls regarding your estate planning questions.
26:20
Speaker 3: 888-205-2263 is the number. Again, that is 888-205-2263. We're going
26:23
Speaker 3: to take a quick break here, but when we return.
26:34
Speaker 2: We're going to get right to your questions with Todd.
26:36
Speaker 2: That phone number is 888-205-2263. Again, it is 888-205-2263.
26:47
Speaker 1: Ask Todd with Todd Lutzke. Every Wednesday at 1030. Only
26:51
Speaker 1: here on the Financial Exchange Radio Network. You're listening to
26:57
Speaker 1: Ask Todd with Todd Lutzke on the Financial Exchange Radio Network.
27:14
Speaker 2: Talking with Todd Lutzky from the law firm of Cushing
27:16
Speaker 2: and Dolan. If you've got a question for Todd, phone
27:19
Speaker 2: number is 888-205-2263. Still room on the phone lines. Again,
27:26
Speaker 2: that number is 888-205-2263. Let's go to Jack in Plymouth. Jack,
27:33
Speaker 2: what is your question for Todd Lutzky?
27:36
Speaker 6: I own two houses.
27:39
Speaker 1: How do I.
27:41
Speaker 3: Sell one without capital gain.
27:44
Speaker 1: Wow.
27:45
Speaker 7: So that's a great question because it's so hard to
27:48
Speaker 7: avoid income taxes here.
27:51
Speaker 3: But let me just ask you a quick question. Is
27:53
Speaker 3: one of these houses your primary residence?
27:57
Speaker 6: Yes.
27:58
Speaker 3: Is the one you want to sell your primary residence?
28:02
Speaker 6: No.
28:02
Speaker 3: Okay. So the one you want to sell, is that
28:05
Speaker 3: a rental property?
28:07
Speaker 1: No.
28:07
Speaker 3: It's just a second home?
28:10
Speaker 1: Yes.
28:10
Speaker 3: Okay. So, um, let me ask you this. Uh, what,
28:16
Speaker 3: what did you pay for it when you bought it
28:20
Speaker 3: long ago, perhaps?
28:22
Speaker 6: It was long ago, about 50 grand.
28:25
Speaker 3: And over the years, have you put a lot into it?
28:28
Speaker 5: Oh yeah.
28:29
Speaker 3: So guess.
28:30
Speaker 6: I've changed just about the whole thing.
28:32
Speaker 1: Yeah.
28:32
Speaker 7: So guess about how much money did you put into it?
28:34
Speaker 7: Like say new roof, new kitchen, new bathroom, new, you know, what,
28:37
Speaker 7: what have you, uh, If you had to guess, how
28:40
Speaker 7: much do you think you put into it?
28:41
Speaker 6: $ 100, 000?
28:41
Speaker 3: $ 200, 000? About $ 200, 000. A little.
28:44
Speaker 6: More than $ 200, 000. Because I have replaced the roof. I
28:50
Speaker 6: have done the remodeling to it.
28:54
Speaker 7: So let's call it your total cost is the $ 50, 000
28:56
Speaker 7: you paid plus $ 200, 000.
28:57
Speaker 3: So call it $ 250, 000. Okay?
29:01
Speaker 1: Yeah.
29:02
Speaker 3: How much is it worth today?
29:06
Speaker 1: Four something.
29:07
Speaker 5: Maybe five.
29:08
Speaker 7: Call it 500, right? So for easy numbers, there's a $ 250, 000 gain.
29:13
Speaker 7: If you sell this property, that gain, the tax on that,
29:17
Speaker 7: I know only one way to avoid the capital gains
29:19
Speaker 7: tax on that. You would need to do a 1031 exchange,
29:25
Speaker 7: which means you need to sell it and buy something
29:30
Speaker 7: of like kind for to be held for investment like
29:33
Speaker 7: I either renting it you can't just buy a vacation
29:38
Speaker 7: home and use it. You'd have to buy some kind
29:40
Speaker 7: of an investment-type property, like buy another property and rent it,
29:43
Speaker 7: so that would be held for investment, like kind. Then
29:48
Speaker 7: the gain would just be deferred. You would pay no
29:51
Speaker 7: gain as long as you invest the entire amount of
29:54
Speaker 7: the money and don't have any boot, nothing left over.
29:57
Speaker 7: Then that gain would be deferred. it means you don't
30:01
Speaker 7: pay tax now, but if you defer the gain, that
30:04
Speaker 7: gain just rolls into the new property. And whenever you
30:07
Speaker 7: sell that property, you would have to pay the gains.
30:09
Speaker 7: But if you die owning it, that new property that
30:12
Speaker 7: you buy, then you would wipe out that built-in gain
30:15
Speaker 7: and it would never be paid and your beneficiaries could
30:17
Speaker 7: get it with a step-up in basis. And then they
30:21
Speaker 7: could sell it for no capital gains tax. So that's
30:24
Speaker 7: really your only option on that front that I'm aware of.
30:29
Speaker 7: And And by the same token, if you're going to
30:31
Speaker 7: do all of that and actually preserve it for your family,
30:34
Speaker 7: you might want to think about owning these properties in
30:36
Speaker 7: some kind of a trust so that they're still around
30:39
Speaker 7: or not taken either by taxes or perhaps by a
30:42
Speaker 7: nursing home so that it's available to get that step
30:45
Speaker 7: up in basis when you pass for your family.
30:49
Speaker 3: So hopefully that helps a little.
30:51
Speaker 7: Folks, that's a great question because capital gains taxes are
30:54
Speaker 7: not easy to avoid. If you have the gain, you
30:57
Speaker 7: pay the tax. But There are ways of planning to
31:01
Speaker 7: protect your assets like IRAs. This is the guide we're
31:04
Speaker 7: giving away this month. IRAs are part of everyone's estate plan.
31:08
Speaker 7: Most people have these. And so if they have them,
31:12
Speaker 7: how do you make them fit into your estate plan
31:14
Speaker 7: so that you can get estate tax savings?
31:17
Speaker 3: You don't want to just designate the spouse. Most of
31:19
Speaker 3: us do.
31:20
Speaker 7: And it's good from an income tax standpoint, but not
31:22
Speaker 7: great from an estate tax planning standpoint. We want to
31:25
Speaker 7: not increase our income tax problem with RMDs being too high.
31:30
Speaker 3: So we want to keep that in mind.
31:32
Speaker 7: And depending on the size of our estate, we may
31:35
Speaker 7: want to protect it from the nursing home, which also
31:37
Speaker 7: is very hard to do because I can't move it
31:39
Speaker 7: right away into a trust without paying tax. This guide
31:43
Speaker 7: helps us understand how to do all of that. Shelter
31:46
Speaker 7: it for estate taxes. ultimately not cause an income tax problem,
31:49
Speaker 7: and even protect it from the nursing home, but you
31:51
Speaker 7: got to couple it with a testamentary trust.
31:54
Speaker 3: All that is explained in this guide.
31:56
Speaker 7: Lots of rules to follow to get these benefits, so
32:00
Speaker 7: you need to get the guide to understand them. 866-848-5699
32:03
Speaker 7: or LegalExchangeShow.com. Again, 866-848-5699 or LegalExchangeShow.com.
32:17
Speaker 2: Todd, I got another one here for you. Let's go
32:18
Speaker 2: to Bob in the car. Bob, you are on with
32:21
Speaker 2: Todd Lutzky.
32:23
Speaker 6: Good morning, Todd. A couple of quick questions for you.
32:28
Speaker 6: I have an irrevocable Medicaid trust that you folks set
32:31
Speaker 6: up for me.
32:32
Speaker 3: Okay.
32:33
Speaker 6: Is there any way to alter the beneficiaries and a
32:36
Speaker 6: beneficiary or somehow change the percentage?
32:40
Speaker 3: So let's do one at a time. Let's do that
32:43
Speaker 3: one first. The answer is? Yes. Okay.
32:49
Speaker 7: So do you currently have it set up with, let's say,
32:53
Speaker 7: equally to your kids perhaps?
32:56
Speaker 6: I have it set up to one child, but it's
32:58
Speaker 6: the secondary beneficiaries that I'm mostly concerned.
33:02
Speaker 3: So it says to your child, if living, otherwise to
33:07
Speaker 3: whoever you listed. Are they like nieces, nephews, siblings? What
33:10
Speaker 3: are they?
33:11
Speaker 6: Nieces and nephews, yes.
33:13
Speaker 3: Okay. So I will look at your trust.
33:16
Speaker 7: Because I'll need to look at that, but it's probably,
33:19
Speaker 7: it's in the paragraph during life that it says, you
33:22
Speaker 7: have a power to appoint, whether in equal or unequal shares,
33:28
Speaker 7: it's probably paragraph 4.04, if I had to guess, or 4.05,
33:34
Speaker 7: that says you have the power to appoint, whether in
33:37
Speaker 7: equal or unequal shares, the assets of the trust, as
33:43
Speaker 7: you see fit by exercising your power through the will.
33:48
Speaker 7: That's called a limited power of appointment, meaning you can
33:51
Speaker 7: now change the percentages amongst people like nieces, nephews, siblings.
33:59
Speaker 7: If they're listed, we would have listed them in the
34:01
Speaker 7: class already. So if it says nieces, nephews, and your
34:06
Speaker 7: child and siblings, you can then change the percentage amounts
34:12
Speaker 7: among that group. You couldn't come back and add, you know,
34:15
Speaker 7: Cousin Vinny. He wouldn't be in that group. But you
34:19
Speaker 7: would be able to make alterations amongst the group that
34:23
Speaker 7: you've already included. So I'm going to tell you yes
34:27
Speaker 7: on that, but we'll just need to give you the
34:29
Speaker 7: finer details.
34:31
Speaker 3: Next question.
34:33
Speaker 6: Next question. I have a small business worth maybe $ 1. 52 million.
34:39
Speaker 6: which I have office for at this time. Is there
34:44
Speaker 6: any way to shelter some of that if I don't
34:50
Speaker 6: sell it?
34:51
Speaker 7: So did we ever– the shares of that company, are
34:55
Speaker 7: they owned inside the irrevocable trust, or do.
34:58
Speaker 3: You own them in your name?
35:00
Speaker 6: I own them in my name.
35:01
Speaker 7: So– the answer is yes, we can do it either way,
35:04
Speaker 7: regardless of your answer. I was just hoping not to
35:07
Speaker 7: have to sort of reset the five year waiting period. But,
35:10
Speaker 7: but again, I say reset, but, but only for that item.
35:14
Speaker 1: Okay.
35:15
Speaker 7: Not, not for everything else that you've put in the trust,
35:17
Speaker 7: that stuff's, if it's been in there five years as
35:20
Speaker 7: long protected, don't worry about it. Um, so the business,
35:25
Speaker 7: you know, first and foremost, you should seek some counsel
35:28
Speaker 7: on selling a business, you know, understanding the taxes that
35:30
Speaker 7: go along with selling the business. Very important, and we
35:34
Speaker 7: need to help you with that. And it's certainly something
35:37
Speaker 7: we can offer that as well so you understand the
35:39
Speaker 7: tax ramifications. Once you get the sale proceeds, they're going
35:43
Speaker 7: to be, because you're the owner, they're going to issue
35:46
Speaker 7: the stock, the money, to you. You're then going to
35:50
Speaker 7: put it in your bank account, your investment account, what
35:52
Speaker 7: have you. So if you can walk away with 1.5,
35:55
Speaker 7: if you sell it for 2 and you walk away with,
35:57
Speaker 7: I don't know, 1.7, whatever, you've got to pay the tax.
36:01
Speaker 7: You can then say, what do I want to do
36:02
Speaker 7: with that money? Well, I want to protect it from probate,
36:05
Speaker 7: shelter it for estate taxes, protect it from the nursing
36:07
Speaker 7: home since you've got the irrevocable trust.
36:10
Speaker 3: The answer is good. Let's add it to the trust. Now,
36:14
Speaker 3: how old are you?
36:16
Speaker 6: I'm 76.
36:18
Speaker 3: Yeah, so good.
36:19
Speaker 7: So we can add it to the trust. Yes, there'll
36:22
Speaker 7: be a new five-year waiting period for that new addition.
36:26
Speaker 3: But so what?
36:27
Speaker 7: If I don't do it, it's never going to be protected.
36:29
Speaker 7: If I do it, at least I have the clock
36:31
Speaker 7: running and I'm, you know, helping myself get to a
36:35
Speaker 7: point where it'll be protected. And then you can invest it,
36:38
Speaker 7: manage it. You can collect all the income. You will
36:41
Speaker 7: pay on the taxes on that income the same as
36:44
Speaker 7: you always would because it's a grantor trust. And you'll
36:47
Speaker 7: really be off and running with your estate plan and
36:51
Speaker 7: probably don't need to update your estate plan if you
36:54
Speaker 7: haven't gone well over the, you know, four or five
36:56
Speaker 7: million dollar mark.
36:57
Speaker 3: So Hopefully that's helpful. So thank you.
37:00
Speaker 1: Mr.
37:00
Speaker 3: Lutzky, thank you so much for joining us today. We
37:03
Speaker 3: appreciate it. It is always my pleasure. Thank you.
37:06
Speaker 1: This has been Ask Todd on the Financial Exchange Radio Network.
37:09
Speaker 1: Ask Todd with Todd Lutzke has been presented by Cushing
37:12
Speaker 1: & Dolan, serving Massachusetts and New England for more than
37:15
Speaker 1: 30 years, helping families with estate and tax planning, Medicaid planning,
37:18
Speaker 1: and probate law. Call 800-393-4001 or visit CushingDolan.com. The views
37:25
Speaker 1: expressed in this segment are solely those of Cushing & Dolan.
37:27
Speaker 1: Armstrong Advisory does not provide any legal or tax advice.
37:29
Speaker 1: Please consult with your legal or tax advisor on such matters.
37:32
Speaker 1: Cushing & Armstrong do not endorse each other and are
37:34
Speaker 1: not affiliated.
37:35
Speaker 2: Still more to come as we head to the second hour.
37:39
Speaker 2: We'll talk a little bit about the upcoming U.S.-China meeting.
37:43
Speaker 2: In addition, a little bit more chatter about AI and Metamuse.
37:47
Speaker 2: We'll discuss that and where things go on that front.
37:51
Speaker 2: And then, tell me if you've heard this before, a
37:55
Speaker 2: new proposal to give a bunch of first-time homebuyers some
37:59
Speaker 2: money because I'm sure that is what's going to make.
38:02
Speaker 3: Housing more affordable. Let's take a quick break. When we return,
38:06
Speaker 3: we've got all that and more coming up in Hour 2.