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Housing Wealth Meets a New Retirement Reality · The Financial Exchange Show

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  Speaker 1: and Mike Armstrong.
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  Speaker 2: Chuck, Mike and Tucker with you here and as we
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  Speaker 2: kick things off. That was a World Cup joke just
• 1:22
  Speaker 2: in case, Yeah you missed it either if you catch
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  Speaker 2: the game yesterday, I am meeting right in the middle
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  Speaker 2: of it, so about fifteen minutes. I gotta tell you,
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  Speaker 2: I feel like everyone is plugged into this World Cup.
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  Speaker 2: Like I had a men's league softball game yesterday and
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  Speaker 2: like all of these guys are guys who've like.
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  Speaker 3: Never watched a soccer game in their life, and everyone.
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  Speaker 2: Was like, oh, did you see the end of the game.
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  Speaker 2: Like it was like just everyone seems to be plugged
• 1:47
  Speaker 2: into this thing. So it's been awesome for pretty much
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  Speaker 2: everyone but the English manager yesterday.
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  Speaker 3: But I digress today.
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  Speaker 4: Have you seen some of the stories about the losing,
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  Speaker 4: Like there's any investigation into the Korean coach based on
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  Speaker 4: everything going on there, like from the Korean government, Yeah,
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  Speaker 4: because they fund the Korean soccer program and there's all
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  Speaker 4: these allegations of how he became the coach.
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  Speaker 3: You know, was it influenced in some way?
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  Speaker 2: Yeah, of course, Like every like you get to that
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  Speaker 2: level and like everything is about like, oh, like you
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  Speaker 2: knew this person who knew that, Like, yeah, of course.
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  Speaker 4: There's an open investigation that the president or whatever the
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  Speaker 4: leader of Korea South Korea is doing in Uruguay. They
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  Speaker 4: canceled the charter flight and made the team fly back.
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  Speaker 3: I did see that. I did see that, which is
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  Speaker 3: so petty, but anyway, we can move on now. Honestly,
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  Speaker 3: I'm surprised they even allowed them to fly back commercial. Yeah,
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  Speaker 3: you vote, it should.
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  Speaker 2: Have been what's the uh what what's the really jungly
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  Speaker 2: part like of northern Columbia. It's the Something Gap. What
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  Speaker 2: the heck is it? It's like, if you can navigate,
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  Speaker 2: you're like one of like the best, like you know, explores.
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  Speaker 3: It's the Something Gap. It's in like the northern part
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  Speaker 3: Pacific rainforest.
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  Speaker 2: Ben's got it. The Darien Gap, Thank you, there we go. Yes,
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  Speaker 2: the Daryan Gap. It's like one hundred mile stretch of
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  Speaker 2: jungle that is basically uninhabited, and it's like, if you
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  Speaker 2: can get through here, you can do anything. Come back home.
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  Speaker 2: If you yes, is a Darian Gap, that's your point.
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  Speaker 2: That's how I would have not how I would have
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  Speaker 2: approached it. That's how I would have thought. Maybe they
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  Speaker 2: did in any case markets today not approaching the Darien gap.
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  Speaker 2: The S and P is down fifteen points, so not
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  Speaker 2: really much going on there. Daw was up one hundred
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  Speaker 2: and twenty five. Not much going on there, nasdak can
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  Speaker 2: posit down two hundred and twenty four, so mixed markets.
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  Speaker 2: The Russell two thousand's actually up even with ten year
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  Speaker 2: treasury moving up four point one basis points. Russell doesn't
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  Speaker 2: usually like it when yields move higher, but it does
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  Speaker 2: today for some reason. Gotta be honest, this market for
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  Speaker 2: the last month just kind of weird. Like I wish
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  Speaker 2: could describe it in a better way, but I actually
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  Speaker 2: think weird is the best way, just because it's just
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  Speaker 2: been kind of weird. We're it's seventy five to fifty
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  Speaker 2: seven on the S and P right now. A month
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  Speaker 2: ago we're at seventy five seventy seven. Has it really
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  Speaker 2: moved anywhere, But like under the surface, it's just churn
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  Speaker 2: and churn and these violent rotations that you were seeing.
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  Speaker 2: Case in point today, more of the same. You take
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  Speaker 2: over get your worst performing sectors. Semiconductors down almost four
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  Speaker 2: percent this after Taiwan Semiconductor posts blowout earnings yesterday. It's
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  Speaker 2: not really what you would want to see. So what's
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  Speaker 2: picking up the slack? Healthcare up two percent?
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  Speaker 3: Why? I don't know.
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  Speaker 2: The money's got to go somewhere. Like it's the best
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  Speaker 2: explanation that I have for it. What else is moving
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  Speaker 2: in markets?
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  Speaker 1: Day?
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  Speaker 2: Dollar index with yields up, you'd expect the dollar to
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  Speaker 2: be up, and you would be right. Dollar index up
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  Speaker 2: point two four percent to one hundred point five point five.
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  Speaker 2: Gold still just can't find its footing. I gotta be honest,
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  Speaker 2: like some of this is a dollar story, but it
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  Speaker 2: just it can't get out of its way. I keep
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  Speaker 2: wanting to look at it and being like, okay, like
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  Speaker 2: it's it's getting ready, and it it might just still
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  Speaker 2: be getting ready. It's it's just it's it's getting I
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  Speaker 2: don't know if it's ready. Gold is at four thousand
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  Speaker 2: dollars and four thousand and two dollars. What's the best
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  Speaker 2: way to say that? Four thousand and two dollars? It
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  Speaker 2: sounds wrong, but that like when there's two zeros in
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  Speaker 2: a row, it it confused a little bit. Gold's just
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  Speaker 2: over four thousand dollars, down forty nine to fifty an ounce,
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  Speaker 2: and crude oil West Texts Intermediate up five cents a
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  Speaker 2: barrel to seventy nine to sixty five, triple a national average.
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  Speaker 2: Four Gas prices up five point three cents overnight to
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  Speaker 2: three ninety four and three tenths diesel. By the way,
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  Speaker 2: if you happen to be running you known f two
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  Speaker 2: to fifty or something. Your diesel is back up a
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  Speaker 2: five dollars nationally for the first time in about a
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  Speaker 2: month as well, up almost seven cents overnight. So gas
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  Speaker 2: price is creeping up with the price of crude as well.
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  Speaker 2: Piece in Bloomberg opinion, houses are no longer the best
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  Speaker 2: place for your money. Well, I often thought that banks
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  Speaker 2: were the best place for my money. But what does
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  Speaker 2: this piece actually mean? Because the title might not be
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  Speaker 2: representative of the whole piece.
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  Speaker 4: Correct, Yeah, And I don't know that that's what she
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  Speaker 4: meant when she wrote it.
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  Speaker 2: Now, sometimes I feel like the headline writers just kind
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  Speaker 2: of mess with Allison Schrager's pieces.
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  Speaker 3: Like, I agree, it does feel like that sometimes.
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  Speaker 4: So the one of the points that she makes is
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  Speaker 4: that the median house price in Nantucket is now nearly
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  Speaker 4: four million dollars. In nineteen ninety five, it was half
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  Speaker 4: a million dollars, which.
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  Speaker 2: By the way, can we just talk about that for
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  Speaker 2: a second, that if you had half a million dollars
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  Speaker 2: in nineteen ninety five and about them, you could just
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  Speaker 2: buy like property in Nantucket.
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  Speaker 3: Half a million dollars in ninety ninety five was quite
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  Speaker 3: a bit of money.
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  Speaker 2: But yes, it wasn't what it it takes your point,
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  Speaker 2: it's not four million, like if you do the inflation adjustment,
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  Speaker 2: I bet it's equivalent to like a million or a
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  Speaker 2: million two today.
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  Speaker 3: Yeah, unheard of.
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  Speaker 4: Now the S and P five hundred, had you put
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  Speaker 4: in the same half million dollars, would be worth more
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  Speaker 4: than eight point two million dollars today.
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  Speaker 3: Oh so that's pretty wild. So she's talking about investing
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  Speaker 3: the money compared to buying houses and got it.
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  Speaker 4: I do get a sense from a growing number of
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  Speaker 4: younger people that that is where they are placing their
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  Speaker 4: next dollar as opposed to buying their home. But to
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  Speaker 4: your point about them misrepresenting Allison's articles, maybe with the
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  Speaker 4: title that's what happened for the last thirty years, not
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  Speaker 4: necessarily what's going to happen with the.
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  Speaker 3: Next thirty years.
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  Speaker 4: And the nice thing about owning a home is when
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  Speaker 4: you put your money into it, and even if it
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  Speaker 4: does somehow fall in value by fifteen percent, the nice
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  Speaker 4: thing about owning a home is you still own a
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  Speaker 4: home that you can live in, So that part's pretty sweet.
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  Speaker 3: You can't live in your stock, I can't live in
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  Speaker 3: my stock.
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  Speaker 4: Yeah, if you go try and knock on Alphabet's doors,
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  Speaker 4: they are not going to let you set up a hammock.
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  Speaker 3: So I.
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  Speaker 4: Do acknowledge for a moment here that there is I
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  Speaker 4: think a fair bit of evidence that if you can
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  Speaker 4: be really disciplined and you want to go rent for
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  Speaker 4: a period of time, and so long as you're actually
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  Speaker 4: disciplined and save a bunch of money, and instead of
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  Speaker 4: spending the money that you're saving, go invest it, you know,
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  Speaker 4: with a rational investment plan that you can stick to
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  Speaker 4: for a long period of time. There's a compelling argument
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  Speaker 4: that maybe you could come out ahead compared to the homeowner.
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  Speaker 4: But what's great about being a homeowner is it is
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  Speaker 4: a forced.
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  Speaker 3: Way of saving money.
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  Speaker 4: It is you got to make a mortgage payment every month,
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  Speaker 4: you got to pay those property taxes, and in pretty
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  Speaker 4: much every environment that we've seen over those thirty.
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  Speaker 3: Years, your home is going to appreciate in value to.
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  Speaker 2: So couple things that I want to walk through because
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  Speaker 2: I think it's worth going through. If you look at
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  Speaker 2: the historical data on home price changes throughout the post
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  Speaker 2: World War two environment, just because I think that's I
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  Speaker 2: don't really care what home prices did in eighteen sixty five. Sure,
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  Speaker 2: we weren't alive then, and it was kind of a
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  Speaker 2: different world. I think that, you know, even though things
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  Speaker 2: have changed since the nineteen fifties, by and large, like
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  Speaker 2: we still you know, it's it's more similar than the
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  Speaker 2: eighteen fifties.
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  Speaker 3: Ye. So here's the thing. If you look at.
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  Speaker 2: Historical home price appreciation, it's almost always trailed what the
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  Speaker 2: stock market has done. Sure, historical home price appreciation is
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  Speaker 2: typically somewhere in the range of two to four percent
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  Speaker 2: per year. Now, the last ten to fifteen years has
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  Speaker 2: been hotter. There have been, you know a number of
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  Speaker 2: reasons why we can talk about that, Like it's I
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  Speaker 2: acknowledge that, but generally home prices move somewhere in the
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  Speaker 2: ballpark of like two to four percent annually. There are
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  Speaker 2: a few outliers, okay, And some of this also requires
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  Speaker 2: you just to adjust for inflation, like in the nineteen
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  Speaker 2: seventies as an example, Yeah, home price went up like
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  Speaker 2: ten point eight percent a year, I think it was
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  Speaker 2: according to the case Shiller Home Price Index, but it
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  Speaker 2: was almost all eaten up by inflation.
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  Speaker 3: It's just what it was.
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  Speaker 4: So in the aggregate, most of the time people are
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  Speaker 4: making the bulk of their money with homes by renting
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  Speaker 4: that the income where you generate on a property is
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  Speaker 4: oftentimes the main contributor. Yeah, sometimes you get lucky by
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  Speaker 4: buying a home on Nantucket in nineteen ninety.
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  Speaker 3: Five, but most of the time that's not. Well.
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  Speaker 2: The other thing is people don't realize. Look if if
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  Speaker 2: you are buying a house and then selling it to
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  Speaker 2: move to that next house seven years later, the way
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  Speaker 2: that you typically have made your money is not through
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  Speaker 2: the price of the home going up, Like, yeah, that's
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  Speaker 2: part of it, but it's the fact that, hey, you
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  Speaker 2: took out a mortgage and you know, put twenty percent down.
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  Speaker 2: It's leverage, which means that your three percent annual rate
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  Speaker 2: of return is actually a fifteen percent when you're you know,
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  Speaker 2: focusing on the actual dollars in dollars out out and
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  Speaker 2: that is where the meat is. It's you're using leverage
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  Speaker 2: on an asset that typically goes up in value in
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  Speaker 2: and by the way, the other thing about a home
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  Speaker 2: that I do think is nice when you compare it
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  Speaker 2: to stocks, you can't press a button to sell it.
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  Speaker 2: And I know people think that that's a bug, but
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  Speaker 2: I happen to think it's a feature because the number
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  Speaker 2: one thing that I think a lot of people do
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  Speaker 2: with stocks that's stupid is that they sell them because
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  Speaker 2: the trend long term is okay. Earnings tend to go
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  Speaker 2: up over time, even if there's little wiggles. Imagine if
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  Speaker 2: like every morning you woke up and you saw the
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  Speaker 2: Zillow valley of your house and you just could push
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  Speaker 2: a button to sell. The second you saw a little wiggle,
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  Speaker 2: you'd be like, nope, time to get out. With a house,
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  Speaker 2: you have leverage and you cannot just hit the sell button.
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  Speaker 2: And it's an asset that tends to appreciate over time.
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  Speaker 2: That's like the whole ballgame. Now the piece that I
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  Speaker 2: will say, look, just because it tends to appreciate over
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  Speaker 2: time doesn't mean it always does. And there also is
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  Speaker 2: very much a location location location thing here. Nantucket is
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  Speaker 2: not the same as northern Maine, Central Ohio.
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  Speaker 3: Munsey, Indiana.
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  Speaker 2: Like, it's like these are totally different environments and so
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  Speaker 2: you do have to understand how that plays into this too.
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  Speaker 2: Let's take a quick break, or I mean, hey, like
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  Speaker 2: even just look at like Florida for the last year
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  Speaker 2: and a half. If you were leveraged to the Florida
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  Speaker 2: property market and needing an exit in the last year, oops,
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  Speaker 2: you were screwed. But I digress. Let's take a quick break.
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  Speaker 2: When we return, let's see, we're gonna talk.
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  Speaker 5: What wealth transfer.
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  Speaker 3: We're gonna do a follow up on that.
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  Speaker 2: The Great Wealth Transfer. Where's the money coming from, who's
• 12:45
  Speaker 2: it going to? How much money is there?
• 12:48
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• 13:26
  Speaker 2: Mike, we got a piece here in Barns. It's titled
• 13:28
  Speaker 2: the Great Wealth Transfer is taking longer than expected? Is
• 13:32
  Speaker 2: my bank holding up the payment? Like, what's going on,
• 13:36
  Speaker 2: boomers won't die? Why won't the boomers send me their money?
• 13:41
  Speaker 2: This is a funny piece to write, right, like, hey, boomers,
• 13:45
  Speaker 2: hurry up and die already. Like that's basically what it's saying.
• 13:50
  Speaker 2: It's not quite you know, the twenty twenty two Are
• 13:53
  Speaker 2: you worried about inflation? Stop feeding your pet? But it's
• 13:56
  Speaker 2: it's close.
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  Speaker 4: Yeah, I don't really understand a lot of this piece.
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  Speaker 4: There is one interesting thing here where Visa's reporting that
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  Speaker 4: of the ninety three trillion dollars that's held by baby
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  Speaker 4: boomers today, they only expect thirty six trillion will actually
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  Speaker 4: pass on to.
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  Speaker 3: The next generation, which makes plenty of sense. By the way.
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  Speaker 2: You know, it's because of a combination of spending and
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  Speaker 2: death that ends up off setting that taxes and donations too. Okay,
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  Speaker 2: so the four of those things, and if you think
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  Speaker 2: about who this is concentrated amongst, right, like Warren Buffett's
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  Speaker 2: not giving all of his wealth to his grandkids, so yeah,
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  Speaker 2: some chunk of that does not end up flowing.
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  Speaker 4: Visa's numbers exclude the top one percent. Yeah, never mind,
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  Speaker 4: So Warren Buffett's not in there.
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  Speaker 3: I wish you were.
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  Speaker 4: Here's the reality though, when it comes to this wealth transfer,
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  Speaker 4: the next generation of those inheriting this money have no
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  Speaker 4: real idea what may or may not becoming to them.
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  Speaker 4: In fact, I see as many scenarios where people are
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  Speaker 4: surprised by the inheritance, I see just as many who
• 15:08
  Speaker 4: are surprised by the lack of one.
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  Speaker 2: Yes, I would say the one constant for about seventy
• 15:15
  Speaker 2: five to eighty percent of families is that the older
• 15:20
  Speaker 2: generation doesn't want to give a ton of information to
• 15:23
  Speaker 2: the younger one before they pass. And I don't think
• 15:26
  Speaker 2: that's the right move if I'm being honest.
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  Speaker 3: Yeah, I can appreciate where it comes from.
• 15:32
  Speaker 2: I can appreciate the desire for privacy. But here's the thing.
• 15:37
  Speaker 2: If you're going to end up giving someone money when
• 15:40
  Speaker 2: you die, or not giving someone money when you die,
• 15:45
  Speaker 2: you need to tell them like I'm I'm kind of sorry.
• 15:48
  Speaker 2: Like you don't need to tell them like how much exactly,
• 15:51
  Speaker 2: But just a general idea can be useful because otherwise
• 15:56
  Speaker 2: it's otherwise they're encountering whatever that situation is probably one
• 16:00
  Speaker 2: of like the two or three most emotional points.
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  Speaker 1: Of their life.
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  Speaker 4: Yeah, it can cause fighting. We've talked about this before.
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  Speaker 4: But especially blended families. Man, you've got a husband and
• 16:12
  Speaker 4: wife from separate marriages, with separate kids. There's you know,
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  Speaker 4: family heirlooms and homes involved. If you're not communicating that
• 16:19
  Speaker 4: stuff ahead of time, I can just assure you there
• 16:22
  Speaker 4: is a very good chance of it getting quite messy.
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  Speaker 4: This all feeds into our guide for the month of July.
• 16:28
  Speaker 4: It's all about talking to your kids about inheritance. Again,
• 16:33
  Speaker 4: as Chuck mentioned, it's not as though it needs to
• 16:35
  Speaker 4: be a full in depth conversation, but I can just
• 16:38
  Speaker 4: tell you from very real experiences that without those conversations,
• 16:43
  Speaker 4: there is confusion. There are sometimes fights, it can lead
• 16:48
  Speaker 4: families to breaking up and not talking to each other anymore.
• 16:51
  Speaker 4: And most of it, not all of it, but most
• 16:53
  Speaker 4: of it can be solved by some pretty basic conversations.
• 16:58
  Speaker 4: And so this guy's all about facilit leitating those conversations.
• 17:01
  Speaker 4: When to have them, who to have them with, and
• 17:03
  Speaker 4: what to get into. If you'd like your free copy
• 17:06
  Speaker 4: of the guide, the phone number to calls eight hundred
• 17:09
  Speaker 4: three nine three four zero zero one. You can request
• 17:12
  Speaker 4: it as always at Armstrong Advisory dot Com as well,
• 17:16
  Speaker 4: but that phone number for a free guide all about
• 17:18
  Speaker 4: talking to your kids about inheritance is eight hundred three
• 17:22
  Speaker 4: nine three four zero zero one.
• 17:24
  Speaker 1: The proceeding was paid for by Armstrong Advisory Group, a
• 17:26
  Speaker 1: registered investment advisor. Nothing in the ad or in any
• 17:29
  Speaker 1: Armstrong guide a specific financial, legal, or tax advice. Consult
• 17:32
  Speaker 1: your own financial, tax, and estate planning advisors before making
• 17:35
  Speaker 1: any investment decisions. Armstrong may contact you to offer investment
• 17:38
  Speaker 1: advisory services.
• 17:39
  Speaker 2: Americans think they need to have one point two million
• 17:41
  Speaker 2: dollars set aside to retire comfortably, but fifty one percent
• 17:44
  Speaker 2: of respondents expect to have less than five hundred thousand
• 17:47
  Speaker 2: dollars set aside when they reach retirement, according to the results.
• 17:52
  Speaker 3: So it's tough when you will get aggregated data like this.
• 17:57
  Speaker 3: Because here's the thing.
• 17:59
  Speaker 2: If we will get media incomes in the United States,
• 18:03
  Speaker 2: uh median household income for the country. Again, this is
• 18:08
  Speaker 2: for twenty twenty four. It's the last year for which
• 18:11
  Speaker 2: we have data. We get the twenty five data in
• 18:13
  Speaker 2: September this year. Uh median household income last year was
• 18:17
  Speaker 2: around eighty two thousand dollars.
• 18:20
  Speaker 3: So one point two million dollars is a retiree. But
• 18:23
  Speaker 3: let's let's let's back into this you need.
• 18:26
  Speaker 2: So let's say that you need to replace all of that,
• 18:29
  Speaker 2: just as an example, eighty thousand, Just to make the
• 18:32
  Speaker 2: math easy, average solid security benefit thirteen hundred bucks. So
• 18:37
  Speaker 2: let's say that you've got two of those in an
• 18:39
  Speaker 2: average household. Now you get twenty six hundred bucks a month.
• 18:42
  Speaker 2: You do the math, that's about thirty three thousand dollars
• 18:44
  Speaker 2: a year, which means you got a gap of forty
• 18:45
  Speaker 2: seven thousand dollars. One point two million basically closes that
• 18:49
  Speaker 2: gap on using the four percent rule as a rule
• 18:52
  Speaker 2: of thumb. But remember, if eighty three thousand dollars is
• 18:55
  Speaker 2: the median household income, fifty percent of households make less
• 19:00
  Speaker 2: than that. And so this is why the fact that
• 19:03
  Speaker 2: fifty one percent of you know households say that they
• 19:06
  Speaker 2: expect to have less than five hundred thousand saved. Well,
• 19:09
  Speaker 2: if your household income is only twenty thousand, you don't
• 19:13
  Speaker 2: need to save one point two million in order to
• 19:15
  Speaker 2: replace that. If your household income's thirty thousand, you don't
• 19:18
  Speaker 2: need to save one point two million to replace it.
• 19:21
  Speaker 4: And remember it'd be taxed a heck of a lot
• 19:22
  Speaker 4: less in retirement too, Let's discuss this a little bit
• 19:25
  Speaker 4: more when we return after this.
• 19:38
  Speaker 1: Bringing the latest financial news straight to your radio. Every day,
• 19:42
  Speaker 1: it's the Financial Exchange on the Financial Exchange Radio Network.
• 19:48
  Speaker 1: Tell you out fum whoa street watch trecking the stocks,
• 19:52
  Speaker 1: the data, and the headlines driving markets so far today
• 19:55
  Speaker 1: right here on the Financial Exchange Radio Network.
• 19:58
  Speaker 5: Markets are mixed with another pullback in tech as more
• 20:01
  Speaker 5: second quarter earning stream in this morning. Wall Street's also
• 20:04
  Speaker 5: monitoring the rising tensions between the US and Iran right now,
• 20:08
  Speaker 5: that was up a quarter of a percent, SMP five
• 20:11
  Speaker 5: hundred down only six points, Nasdaq selling off two thirds
• 20:15
  Speaker 5: of a percent, Russell two thousand is up about four
• 20:18
  Speaker 5: tenths of one percent. Ten Your charges are reeled up
• 20:20
  Speaker 5: two basis points at four point five to seven percent,
• 20:23
  Speaker 5: and oil dipping trading right around seventy nine dollars a barrel.
• 20:28
  Speaker 5: United Health beat second quarter expectations and hiked its full
• 20:31
  Speaker 5: year profit outlook as it better manages high medical costs
• 20:34
  Speaker 5: and utilizes AI to help streamline operations. Shares are up
• 20:39
  Speaker 5: by four percent. Meanwhile, Taiwan's Semiconductor posted its fifth consecutive
• 20:44
  Speaker 5: quarter of record earnings, fueled by solid global demand for
• 20:48
  Speaker 5: AI infrastructure. However, the stock is now down by two percent. Elsewhere,
• 20:53
  Speaker 5: shares in psychedelic drug maker at Ti Beckley or surging
• 20:56
  Speaker 5: thirty four percent after Eli Lilly said it will buy
• 20:59
  Speaker 5: the company for two point eight billion dollars. Mark shares
• 21:03
  Speaker 5: are up nearly three percent after the FDA proved the
• 21:05
  Speaker 5: companies once daily medication to reduce LDL cholesterol, which will
• 21:10
  Speaker 5: sell for about thirty eight hundred dollars a year. And
• 21:13
  Speaker 5: Bloomberg is reporting that Apple is preparing to introduce its
• 21:16
  Speaker 5: biggest overhaul to the iPad Mini in half a decade,
• 21:20
  Speaker 5: plan for a release in October. Apple shares are up
• 21:24
  Speaker 5: one percent at the moment. I'm Tucker Silva, and that
• 21:28
  Speaker 5: is Wall.
• 21:28
  Speaker 2: Street Watch, like anything else that we want to cover.
• 21:32
  Speaker 2: As it relates to American retirement savings.
• 21:35
  Speaker 4: Well, I think the one message that people miss out
• 21:39
  Speaker 4: on is that you I think people generally know they
• 21:42
  Speaker 4: probably don't need quite as much income in retirement as
• 21:45
  Speaker 4: they do while they're working, but maybe not why. It
• 21:48
  Speaker 4: is not because your lifestyle becomes a lot cheaper in retirement. No,
• 21:52
  Speaker 4: that's not the case. Water finds its level the best
• 21:55
  Speaker 4: indication of what you're going to spend in retirement is
• 21:57
  Speaker 4: what you're most recently spending, maybe even a little bit
• 22:00
  Speaker 4: more because you have more time to do fun stuff.
• 22:03
  Speaker 4: But you won't have to pay FIKA because you won't
• 22:06
  Speaker 4: be generating work income. So your Medicare and Social Security
• 22:09
  Speaker 4: taxes that get taken out for that specific purpose don't
• 22:12
  Speaker 4: exist anymore. Your social Security benefit is taxable, but at
• 22:16
  Speaker 4: most only eighty five percent of it gets taxed.
• 22:19
  Speaker 3: Yep.
• 22:20
  Speaker 4: Your other income source, say, distributions from four oh one
• 22:23
  Speaker 4: k's or iras like I said, are taxable, but not
• 22:26
  Speaker 4: to Social Security Medicare, and in some states those might
• 22:30
  Speaker 4: not be taxable at all. You know, certain states do
• 22:33
  Speaker 4: not tax retirement income, others do. The Social Security payments
• 22:37
  Speaker 4: in most states are not taxable. And then finally, as
• 22:40
  Speaker 4: a sixty five year old, now you get a big
• 22:43
  Speaker 4: bonus tax deduction, which we will see if that sticks around,
• 22:46
  Speaker 4: but for the time being, at least you pay a
• 22:49
  Speaker 4: lot less in taxes once you reach the age of
• 22:51
  Speaker 4: sixty five due to some new Trump tax cuts from
• 22:54
  Speaker 4: the most recent bill. So all of that combined leads
• 22:57
  Speaker 4: to you're not needing quite as much as you were
• 22:59
  Speaker 4: pulling in before you were working. Plus you don't have
• 23:01
  Speaker 4: to save any money. Your goal is not to save
• 23:04
  Speaker 4: for retirement once you're retired. So all of that factors in.
• 23:08
  Speaker 3: Yeah, that makes sense. Let's see do we want to
• 23:11
  Speaker 3: talk about No, too few stocks control the S and
• 23:16
  Speaker 3: P five hundreds futures.
• 23:17
  Speaker 4: Okay, So this actually feeds into one point that I've
• 23:21
  Speaker 4: made before, which it does feel to me as though
• 23:26
  Speaker 4: the execution risk on behalf of giant American companies is
• 23:32
  Speaker 4: pretty unparalleled right now when it comes to actually getting
• 23:36
  Speaker 4: stuff right.
• 23:37
  Speaker 3: We've spent the last couple of decades. We US companies have.
• 23:42
  Speaker 4: Buy and large spent the last couple of decades taking
• 23:44
  Speaker 4: their profits and uncertain what to invest in next, have
• 23:48
  Speaker 4: bought back shares, paid out dividends. That's not the case
• 23:50
  Speaker 4: across the board, but it has been a major trend
• 23:53
  Speaker 4: among especially highly profitable tech companies over the last few decades. Hey,
• 23:57
  Speaker 4: we're going to just buy back our own stock. And
• 24:01
  Speaker 4: it's been a support to the overall market as a whole.
• 24:05
  Speaker 4: That has not ceased entirely, but it has gone away
• 24:08
  Speaker 4: quite a bit. And instead those same companies are saying
• 24:11
  Speaker 4: those profits that we were previously using just to manipulate
• 24:14
  Speaker 4: our own share price, not illegally, just you know, we're
• 24:17
  Speaker 4: going to make our shares more valuable, populating it. It's
• 24:21
  Speaker 4: not manipulating, it is decreasing these.
• 24:24
  Speaker 3: We can't figure out what to do with our money,
• 24:26
  Speaker 3: so we're going to buy back shares.
• 24:27
  Speaker 4: Yeah, these days they are not doing that anymore. They
• 24:31
  Speaker 4: are taking those profits and they are investing them into
• 24:34
  Speaker 4: what they believe is going to be a massive future
• 24:37
  Speaker 4: growth engine of their business. And there's a lot of
• 24:40
  Speaker 4: things that they need to properly execute on that to
• 24:43
  Speaker 4: actually work, right, Like, not only do you have to
• 24:47
  Speaker 4: be able to design and support let's say the latest
• 24:49
  Speaker 4: AI model because that's what you're building, but you need
• 24:52
  Speaker 4: to rely on other companies to build the data center,
• 24:54
  Speaker 4: the energy infrastructure, the public policy in order to support
• 24:58
  Speaker 4: that stuff in order to actually power it and make
• 25:01
  Speaker 4: it all work. And you also need to rightly assess
• 25:04
  Speaker 4: the size of the market. And so I do think
• 25:07
  Speaker 4: that that's a different type of execution risk right now
• 25:10
  Speaker 4: compared to let's say, alphabet buying way MOO fifteen years ago.
• 25:20
  Speaker 3: Can you explain this one sentence to me, Index gains
• 25:24
  Speaker 3: going forward will rely heavily on the performance of the
• 25:26
  Speaker 3: Magnificent seven.
• 25:28
  Speaker 2: Okay, get that they're talking about, you know, because of
• 25:30
  Speaker 2: the profit growth projected by them, AI Darlings, Broadcom, Micron Technology,
• 25:35
  Speaker 2: Oracle and Dell Technologies, and somewhat surprisingly, Ford Motor Company,
• 25:40
  Speaker 2: Walmart Incorporated, and McKesson Corporation.
• 25:43
  Speaker 3: Yeah, why are they saying that? Here's I understand Walmart?
• 25:48
  Speaker 2: Like Walmart, I get because it still is, you know,
• 25:51
  Speaker 2: one of the fifteen biggest companies in the S and P.
• 25:53
  Speaker 2: And you know profit projections like okay can have an
• 25:56
  Speaker 2: influence there. McKesson, to the best of my knowledge, I'm
• 26:03
  Speaker 2: pulling it up right now, just that I can get
• 26:05
  Speaker 2: exactly where it stands in the S and P. Hang on,
• 26:08
  Speaker 2: just while I get there. Nope, still not there, Still
• 26:14
  Speaker 2: not there. I know it's I I understand, talker.
• 26:21
  Speaker 3: Here we go. Found it.
• 26:23
  Speaker 2: McKesson is zero point one five percent of the S
• 26:26
  Speaker 2: and P five hundred I I don't know how you
• 26:29
  Speaker 2: can make a case that a lot, even if they're
• 26:33
  Speaker 2: expecting like crazy profit growth, like let's say their profit
• 26:36
  Speaker 2: growth is gonna be like five hundred percent, which I don't.
• 26:39
  Speaker 3: I have no idea.
• 26:40
  Speaker 2: I paid zero attention to the company even if their
• 26:44
  Speaker 2: profit growth is five hundred percent, that still doesn't even
• 26:46
  Speaker 2: equal the S and P five hundred profit.
• 26:48
  Speaker 4: Growing by McKesson even doing that, Why why is it
• 26:52
  Speaker 4: them instead.
• 26:52
  Speaker 3: Of Eli Lilly? Why is Ford on this list? Yeah?
• 26:58
  Speaker 3: I don't know what that means.
• 27:00
  Speaker 4: How about we just say that the top ten companies
• 27:02
  Speaker 4: in the S and P five hundred have never been
• 27:04
  Speaker 4: more concentrated.
• 27:05
  Speaker 2: Right, Like, I just I don't understand what It doesn't
• 27:09
  Speaker 2: even explain why Ford is on that. If they gave
• 27:12
  Speaker 2: me some kind of explanation, like and Ford matters because
• 27:14
  Speaker 2: of X y Z, at least I could refute it
• 27:16
  Speaker 2: or be like, oh, I hadn't thought of that. Instead,
• 27:19
  Speaker 2: it's just, well, it's the mag seven and Semiconductors and Ford,
• 27:23
  Speaker 2: Walmartin McKesson. Okay, Well two of these things are not
• 27:27
  Speaker 2: like the other, and I just I don't know what
• 27:30
  Speaker 2: to do with it.
• 27:31
  Speaker 3: So I'm I can't.
• 27:34
  Speaker 2: Be critical of the the inclusion just because I don't
• 27:36
  Speaker 2: know why to be. But I'm critical of the fact that, well,
• 27:41
  Speaker 2: you put something like that in there. You gotta you
• 27:43
  Speaker 2: gotta tell me more, you know, I hope you didn't
• 27:46
  Speaker 2: run up against a word count or anything. Like that,
• 27:48
  Speaker 2: because that'd be embarrassing. I don't know, it's just it's
• 27:53
  Speaker 2: challenging for me to understand what's what's what's going on there. Uh,
• 27:56
  Speaker 2: let's see the identity crisis at Elon Musk's k AI outfit.
• 28:02
  Speaker 2: The company wants to compete with Anthropics COUD, but has
• 28:04
  Speaker 2: been slowed down by internal chaos and an inconsistent strategy.
• 28:08
  Speaker 2: So Elon Musks companies tend to be chaotic film Middle eleven, Like,
• 28:12
  Speaker 2: I don't think there's anything unique there. The fact is
• 28:15
  Speaker 2: he's been able to pull it off at Tesla. Yeah,
• 28:18
  Speaker 2: for all of the talk about you know, oh, Twitter's
• 28:20
  Speaker 2: gonna you know, go under or whatever. Yeah, Like it's
• 28:23
  Speaker 2: not exactly the most pleasant place to hang out, but
• 28:26
  Speaker 2: it's not like the company is like blown up or whatever.
• 28:28
  Speaker 2: Like the service still runs just fine, and SpaceX is
• 28:33
  Speaker 2: pretty much the only game in town for launching reusable rockets.
• 28:37
  Speaker 2: So like, I'm not trying to say, like, okay, SpaceX,
• 28:42
  Speaker 2: which now owns XAI, So I guess we just it's
• 28:45
  Speaker 2: really confusing when you have to refer to as as SpaceX,
• 28:48
  Speaker 2: because it makes people think you're talking about the rocket company,
• 28:50
  Speaker 2: not the AI company.
• 28:52
  Speaker 3: Right when they're really the same thing.
• 28:55
  Speaker 2: I guess people do that when they talk about Berkshire Hathaway,
• 28:57
  Speaker 2: but there they talk about Warren Buffett investing, not hey,
• 29:00
  Speaker 2: you make railroads and seats for airplanes and own Jordan's
• 29:05
  Speaker 2: furniture and other stuff.
• 29:08
  Speaker 3: So I'm not really.
• 29:09
  Speaker 2: Surprised that like life at an Elon Musk company is chaotic,
• 29:12
  Speaker 2: because that seems to be how he likes to run things.
• 29:15
  Speaker 2: He doesn't seem to like a particularly organized way of
• 29:20
  Speaker 2: doing things. I don't think that's surprising.
• 29:24
  Speaker 3: That's it.
• 29:24
  Speaker 4: I don't think you can point to his strategy as
• 29:27
  Speaker 4: one hundred percent successful across every business.
• 29:30
  Speaker 3: And I know that's not what you're saying.
• 29:31
  Speaker 4: No, But you know, just because it's chaotic and typical
• 29:34
  Speaker 4: of Elon does not mean it's going to be successful.
• 29:36
  Speaker 1: No.
• 29:36
  Speaker 2: I think the big thing is, hey, there are valid
• 29:41
  Speaker 2: reasons why Xai didn't hasn't gotten the uptake the uptake
• 29:45
  Speaker 2: that it's wanted to this point, and are they able
• 29:48
  Speaker 2: to remedy that. I'm not really sure? Like that's I
• 29:52
  Speaker 2: think a valid question to ask. The internal chaos is,
• 29:58
  Speaker 2: I don't know, you go in any like large company
• 30:01
  Speaker 2: and I'm sure you'll find someone willing to talk about chaos,
• 30:03
  Speaker 2: like big companies are always kind of messy.
• 30:05
  Speaker 4: That's it is grock even in a top five conversation.
• 30:11
  Speaker 3: When it comes to generative AI in terms of most used,
• 30:15
  Speaker 3: whatever metric you wanted to find it, you know, most advanced,
• 30:18
  Speaker 3: most used, I don't know anybody uses it.
• 30:20
  Speaker 2: It's here's the thing in terms of most advanced, quite
• 30:23
  Speaker 2: honestly changes every week.
• 30:25
  Speaker 3: It does.
• 30:25
  Speaker 2: It's it's not worth being like, oh this one. I
• 30:28
  Speaker 2: can't keep track of the rankings at this point. The
• 30:30
  Speaker 2: other thing that I'll add on that for ninety nine
• 30:33
  Speaker 2: point nine percent of the population, you don't need the
• 30:35
  Speaker 2: most advanced AI, right Like it's you're fine with one
• 30:39
  Speaker 2: that's not the most advanced In terms of actual use.
• 30:42
  Speaker 2: I do think it still gets a decent amount of
• 30:44
  Speaker 2: use just because of the built in nature with Twitter.
• 30:48
  Speaker 2: But I'll be honest, I don't really know if it
• 30:53
  Speaker 2: I don't even know if it really exists beyond that, Like,
• 30:55
  Speaker 2: I just I don't know where to go to find it.
• 30:58
  Speaker 2: Even so, so that's kind of what we've got going
• 31:01
  Speaker 2: on with SpaceX and XAI there. Speaking of companies related
• 31:08
  Speaker 2: to Elon Musker, at least industries Lucid Group, which is
• 31:13
  Speaker 2: they make evs and they launched back in did they
• 31:18
  Speaker 2: launch in late twenty twenty or twenty one?
• 31:21
  Speaker 4: It feels to me like it was one of those
• 31:22
  Speaker 4: EV companies that launched right during the craziness over EV's.
• 31:27
  Speaker 3: It was one of those two.
• 31:28
  Speaker 2: So a couple of days ago, there was an article
• 31:29
  Speaker 2: that came out saying that they were considering filing for bankruptcy.
• 31:32
  Speaker 2: The stock fell fifty seven percent. They came out said no,
• 31:35
  Speaker 2: we're not filing for bankruptcy, and so the stock bounced
• 31:39
  Speaker 2: back up and recovered most of those losses. But this
• 31:44
  Speaker 2: piece makes Lucid's failure out to be something where it's
• 31:47
  Speaker 2: talking about like, hey, this is, you know, evidence that
• 31:51
  Speaker 2: US EV companies are not competitive, when in fact, like look,
• 31:57
  Speaker 2: if you look at the biggest shareholder in lou Sid,
• 32:00
  Speaker 2: it's Saudi Arabia's public investment fund, who generally has proven
• 32:04
  Speaker 2: that outside of oil and gas companies, they're not really
• 32:10
  Speaker 2: great stewards of capital at this point, like they tend
• 32:13
  Speaker 2: to be late to the game and pick the wrong horse.
• 32:17
  Speaker 2: And so I'm just not sure that this is actually
• 32:18
  Speaker 2: telling you anything about the state of evs in America.
• 32:22
  Speaker 4: Practical question though, if that does go bankrupt and assume
• 32:26
  Speaker 4: for a minute that nobody goes and picks it.
• 32:28
  Speaker 3: Up out of bankruptcy. Yeah, are these cars even driveable?
• 32:30
  Speaker 2: Like do they just turn into bricks? I don't know,
• 32:33
  Speaker 2: because they're heavily reliant on software in ways that other
• 32:36
  Speaker 2: vehicles are not necessarily it's a question.
• 32:39
  Speaker 3: Quick break here. When we come back, let's do stack
• 32:41
  Speaker 3: Roulette and Paula Monica. That's what I meant by paul
• 32:44
  Speaker 3: A Monica.
• 32:45
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• 32:49
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• 32:52
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• 32:55
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• 32:57
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• 33:01
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• 33:32
  Speaker 2: Joining us on the line now is the one and
• 33:33
  Speaker 2: only Paul Monica from Baron's Paul, How you.
• 33:36
  Speaker 6: Doing I'm good. Thanks.
• 33:39
  Speaker 3: How you guys doing doing well?
• 33:40
  Speaker 1: Yeah?
• 33:40
  Speaker 2: You got a piece out this week. It's titled T
• 33:43
  Speaker 2: Mobile will Survive threat from SpaceX's Starlink. It's the best
• 33:47
  Speaker 2: bet in wireless. As a as a proud T Mobile subscriber,
• 33:52
  Speaker 2: I'm glad to hear that they're going to subscribe survive
• 33:55
  Speaker 2: even though they just raised my plan costs. I was
• 34:00
  Speaker 2: a holdover from the Sprint days actually, and it's part
• 34:04
  Speaker 2: of that deal. They had said they would never raise
• 34:06
  Speaker 2: my rates. But here we are and they're raising my rates.
• 34:09
  Speaker 3: What's what's the deal with with T Mobile? What's going
• 34:11
  Speaker 3: on with them?
• 34:11
  Speaker 6: Yeah? Net never is uh never.
• 34:15
  Speaker 3: Never's not as long as you think, exactly.
• 34:17
  Speaker 6: Yes, exactly. Well, you know what you raised an interesting point.
• 34:21
  Speaker 6: One of the problems that investors used to have with
• 34:26
  Speaker 6: the wireless companies was that they were known for these
• 34:30
  Speaker 6: aggressive promotions and kind of cut through pricing to try
• 34:35
  Speaker 6: and get more subscribers. And now even though there is
• 34:40
  Speaker 6: competition from you know, some of the broadband companies like
• 34:43
  Speaker 6: Comcasts and Charter and potentially coming from from space X
• 34:47
  Speaker 6: with Starlink. This business has now become a lot more
• 34:51
  Speaker 6: rational for you know, investors, even though consumers like yourself
• 34:57
  Speaker 6: may not like it. With the Mobile acquiring sprints, you
• 35:01
  Speaker 6: really have just three major companies with T Mobile, AT
• 35:06
  Speaker 6: and Tea and Verizon, and you don't have the price
• 35:09
  Speaker 6: wars as much anymore. And that's good for investors. It's
• 35:13
  Speaker 6: good for the revenue, it's good for profits. So you know,
• 35:16
  Speaker 6: there's been a little bit of volatility with the stock
• 35:18
  Speaker 6: of the lead, I think because of some of the
• 35:19
  Speaker 6: concerns about what Starlink might do. But you know, analysts
• 35:24
  Speaker 6: are largely uh, you know, unconcerned because starlink is probably
• 35:30
  Speaker 6: going to be great for rural customers in places where
• 35:34
  Speaker 6: it's not easy to get wireless cell phone service because
• 35:37
  Speaker 6: you don't have the towers nearby. But if you live
• 35:40
  Speaker 6: in a major city like Boston, New York, LA, Chicago,
• 35:44
  Speaker 6: et cetera, you probably are going to need Starlink ause
• 35:47
  Speaker 6: you're likely fine with coverage from one of the big three,
• 35:50
  Speaker 6: including Team Mobile.
• 35:53
  Speaker 2: Let's be honest, like, how much do people again maybe
• 35:55
  Speaker 2: I'm the outlier, how much do people really need coverage
• 35:59
  Speaker 2: at this point? Like most of the time Are you
• 36:00
  Speaker 2: just using your phone on Wi Fi anyways? Is it
• 36:04
  Speaker 2: not that big of a deal to most people? Or
• 36:06
  Speaker 2: am I just weird?
• 36:10
  Speaker 3: I don't know.
• 36:10
  Speaker 6: I don't think it's a weird question. I mean, obviously,
• 36:13
  Speaker 6: I think Wi Fi is certainly something that more people
• 36:18
  Speaker 6: are using. But you know, it's not as if, you know,
• 36:23
  Speaker 6: you can just throw away the monthly plan that you're
• 36:28
  Speaker 6: paying for in order to have your phone in the
• 36:31
  Speaker 6: first place. So I think, you know, as T Mobile
• 36:35
  Speaker 6: attracts more subscribers, that's that's good for the stock. And
• 36:39
  Speaker 6: you know, this is a company also that even though
• 36:42
  Speaker 6: they may not have as high of a dividend as
• 36:45
  Speaker 6: APNT and Verizon, your classic kind of widow and orphan
• 36:50
  Speaker 6: income stocks, T Mobiles dividends still yields around two point
• 36:54
  Speaker 6: two percent, which isn't too shabby, especially when you've got
• 36:57
  Speaker 6: earnings growth that you know about double the expected growth
• 37:01
  Speaker 6: rate over the next few years. The Briton an AT
• 37:03
  Speaker 6: and T and the evaluation is not that much of
• 37:07
  Speaker 6: a premium. So you know, tea Mobile looks like that
• 37:10
  Speaker 6: kind of solid bet where you know it's squarely uh
• 37:14
  Speaker 6: in the crosshairs for for both growth and income investors.
• 37:19
  Speaker 3: Very good. Paul, appreciate you joining us today. Thank you
• 37:22
  Speaker 3: so much for the time.
• 37:24
  Speaker 6: Thank you very much, and yeah, I'll talk to you
• 37:26
  Speaker 6: about a week after my vacation.
• 37:28
  Speaker 2: Sounds great. Enjoy that is Paul themonica from Barons. Uh,
• 37:34
  Speaker 2: we've got like not much time left, but the next
• 37:37
  Speaker 2: piece in our stack just has a picture of a
• 37:39
  Speaker 2: delicious looking burger and fries, and I gotta tell you
• 37:44
  Speaker 2: I really want one right now.
• 37:48
  Speaker 4: Well, you can go to UH dining dining options all
• 37:52
  Speaker 4: over the country who are starting to offer happy meals
• 37:55
  Speaker 4: to adults in order to I don't want.
• 37:57
  Speaker 3: I don't want a happy meal.
• 37:58
  Speaker 4: I want I do know what You're getting chucked because
• 37:59
  Speaker 4: you're acting like a child.
• 38:00
  Speaker 3: This one's twenty seven dollars. Have fun, so a martini
• 38:05
  Speaker 3: or something. It should come with three martinis. That's a lunch.
• 38:10
  Speaker 2: Let's take a quick break for the rest of the
• 38:12
  Speaker 2: day and I'll let you know how my lunch went
• 38:14
  Speaker 2: tomorrow