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Markets Are Betting the Oil Crisis Ends Soon · The Financial Exchange Show

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Speaker 1: This is the Financial Exchange with Chuck Zada and Paul Lane.
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Speaker 2: Chuck, Paul and Tucker with the kicking things off today,
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Speaker 2: and top story is continues to be the situation in
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Speaker 2: the Middle East and the prospects for again basically getting
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Speaker 2: traffic back to normal through the Strait of Hormuz. The
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Speaker 2: two weeks ceasefire that was well agreed upon two weeks
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Speaker 2: ago was set to expire at around eight pm Eastern yesterday.
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Speaker 2: President Trump, about four hours in advance of that, announced
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Speaker 2: that he was unilaterally extending the ceasefire indefinitely, citing the
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Speaker 2: fact that he did not believe that there was a
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Speaker 2: cohesive negotiating team from Iran that was in place to
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Speaker 2: be able to secure any kind of deal. So I think, ultimately, again,
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Speaker 2: as we've talked about over the course of the last
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Speaker 2: almost two months, now, stop paying attention to what anyone
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Speaker 2: is saying, because it just doesn't matter. You can't speak
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Speaker 2: whatever you want into being, whether it's oil getting to
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Speaker 2: one place, whether it's an end to hostilities, whatever it
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Speaker 2: might be. It just doesn't work that way, and each
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Speaker 2: side has their own reasons for saying what they are saying. Publicly,
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Speaker 2: I've said all along, the more important thing is to
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Speaker 2: pay attention to what is actually being done. And at
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Speaker 2: this point we still have basically very minimal traffic going
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Speaker 2: through the strait of hor Moves and as such you
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Speaker 2: continue to see about twelve million barrels a day of
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Speaker 2: production shut ins across the region. We're getting to the
2:57
Speaker 2: point now where the stuff that you know was more
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Speaker 2: sporadic in terms of, you know, the impacts that you're seeing,
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Speaker 2: it's starting to become more pronounced, and it will in
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Speaker 2: the coming weeks. And basically where I think you are
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Speaker 2: right now. Again, I've said since the beginning of this,
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Speaker 2: look Sinco Demayo's the date on my calendar, not just
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Speaker 2: to have a couple of margarita's, but that's the date
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Speaker 2: at which, hey, if you don't have a resolution to
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Speaker 2: the straight off hoo moose situation by then, you really
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Speaker 2: start to run into problems because now you're not just
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Speaker 2: impacting Q two directly and acutely in terms of the
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Speaker 2: energy shortage that's going to build worldwide. Now you're stretching
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Speaker 2: out into Q three and people start raising questions about, gee,
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Speaker 2: how long is this going to go? And that means
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Speaker 2: that the market can't try to look through it the
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Speaker 2: way it's been doing, but instead has to price this
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Speaker 2: in as a more persistent shock, and that's going to
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Speaker 2: be problematic given the fact that you know, we're starting
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Speaker 2: to see impacts showing up around the world at this point.
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Speaker 3: Also concerning that you've had Iran c these two ships
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Speaker 3: in the Strait of Hermus, and you I believe had
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Speaker 3: the UK mentioning that a couple of their ships were
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Speaker 3: attacked as well. So the less concerned about that, yeah, right,
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Speaker 3: but still the straight in general, going from where we
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Speaker 3: were on Friday, where the strait was presumably open, to
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Speaker 3: now the continued disruptions between any ships passing through, there
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Speaker 3: is a further concern that we're not really making a
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Speaker 3: ton of progress here.
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Speaker 2: So basically, look, here's the deal. There is, at any
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Speaker 2: particular point in time, if you want to get into
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Speaker 2: like you know, just how you should think about the
4:39
Speaker 2: negotiating process, at any particular point in time, there is
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Speaker 2: a deal that is available that can be signed. Whether
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Speaker 2: it is one that is amenable to either side is
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Speaker 2: going to be an open question based on what each
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Speaker 2: side needs to be able to get out of this.
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Speaker 2: Where I do think there's an interest ding problem that
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Speaker 2: you know that you're going to run into on this
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Speaker 2: is Look, the Iranians don't really trust anyone right now.
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Speaker 2: Quite honestly, they probably shouldn't. Last couple of times that
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Speaker 2: they were negotiating with the United States, the United States
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Speaker 2: and or Israel attack them. Yep. Not saying that this
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Speaker 2: is good or bad. I'm just saying that this is
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Speaker 2: so they the Iranians, if they are negotiating, I'm going
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Speaker 2: to guess, Paul, I'm just gonna go out on a
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Speaker 2: limb here. They're gonna want something in writing, and maybe
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Speaker 2: more than that, you know, something where it's okay, go
5:43
Speaker 2: back to your country and have like something signed by
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Speaker 2: Congress or go to the UN and have something signed
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Speaker 2: by the UN.
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Speaker 1: Like.
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Speaker 2: They're not just gonna be like okay, like we believe
5:51
Speaker 2: you this time. Like no, Like they're probably a little
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Speaker 2: bit skittish. You know. The last time they were negotiating
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Speaker 2: with US United States killed there later, like put yourself
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Speaker 2: in their shoes, Like you wouldn't just be like sure, fine,
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Speaker 2: like whatever, like whatever you say, you're gonna want something
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Speaker 2: more iron clad. The problem that you have with getting
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Speaker 2: something ironclad is that number one, there's two problems. The
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Speaker 2: first is the last time there is any kind of
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Speaker 2: iron clad deal agreed to between the US and Iran
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Speaker 2: took two years to negotiate. The Ranians are notorious for
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Speaker 2: just like dragging their feed and prolonging things and dragging
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Speaker 2: things out and hey, wait, let's come back. Oh, we
6:33
Speaker 2: already negotiated this, let's come back to Like it's just
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Speaker 2: like what they've proven to do over the last fifteen
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Speaker 2: twenty years. So Number one, like it's something that's slow.
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Speaker 2: Time's kind of a problem right now because every day
6:47
Speaker 2: that you go by, the energy crisis is going for worldwide.
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Speaker 2: So that's part number one. Part two is if we
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Speaker 2: look at how the Trump administration has negotiated deals over
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Speaker 2: the past sixteen months, there's not much that's been in writing.
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Speaker 2: It's been a lot of verbal handshake agreements with different
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Speaker 2: countries to do X, Y and Z. There's been very
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Speaker 2: little in the way of papering things over and so
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Speaker 2: that could be problematic in terms of getting a deal
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Speaker 2: done as well, just because there's I think a fundamental
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Speaker 2: difference in terms of how the two sides may want
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Speaker 2: to solve something. There As far as the actual issues
7:25
Speaker 2: at play, I don't have any idea what the actual
7:29
Speaker 2: sticking points are what they're not Like I see what's reported,
7:31
Speaker 2: I don't know if it's true or not, and like
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Speaker 2: I don't have any insight into it. Oh no, Yeah.
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Speaker 2: But the piece that you come back to is look,
7:39
Speaker 2: at some point, in order to get a deal done,
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Speaker 2: both sides are gonna have to make some concessions there.
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Speaker 2: They're simply just at the point now where they haven't
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Speaker 2: gotten that done. So again, there's probably a deal that
7:53
Speaker 2: could be done right now if us were to give
7:57
Speaker 2: up X and Iron were to give up. Why, Clearly
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Speaker 2: they haven't gotten to that point yet where they're willing
8:02
Speaker 2: to do so. At some point they're going to The
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Speaker 2: question is how long does the clock tick? Because again,
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Speaker 2: Cinco de Mayo's coming, Tucker, I did a little bit
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Speaker 2: of math over the Uh, well, it took me overnight
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Speaker 2: to do this. We've got thirteen days until Cinco de Mayo. Okay,
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Speaker 2: I did the math. So, like we're getting down to it. Man,
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Speaker 2: is the point. And for those of you who are
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Speaker 2: like Chuck, like why does Cinco demio matter? Aside from
8:34
Speaker 2: like the obvious you know reasons, the reason why it
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Speaker 2: matters is this, there aren't a whole bunch of ships
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Speaker 2: just sitting outside of Hormus right now, waiting to pick
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Speaker 2: up oil. Because if you are a tanker operator in
8:46
Speaker 2: the greatest environment to operate a tanker in history, because
8:49
Speaker 2: everyone wants to pay for them right now, in order
8:52
Speaker 2: to get stuff from point A to point B, you
8:54
Speaker 2: don't just sit there empty outside of horror moves being like, well,
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Speaker 2: maybe we'll fill up in you know, a few weeks. No, like,
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Speaker 2: you are busting that tanker to the United States, just
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Speaker 2: like everyone else right now, being like, yep, get us
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Speaker 2: to the Gulf of Mexico, let's load up and get
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Speaker 2: the thing off to Europe Asia wherever we got to
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Speaker 2: get it to. So the problem is that in order
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Speaker 2: to get ships from like the Southeast United States to Hormuz,
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Speaker 2: it's like forty days. So here's the problem that you
9:22
Speaker 2: run into. If there aren't a bunch of ships just
9:23
Speaker 2: sitting there waiting to get in, you're not just gonna
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Speaker 2: get Iraq and Kuwait and the Saudi's and the UAE
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Speaker 2: and Katar just pumping oil again at the drop of
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Speaker 2: a hat.
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Speaker 3: When they don't have tankers waiting outside pick it up.
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Speaker 2: The storage is full, they they like they can't do it.
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Speaker 2: There's nowhere to put it right now.
9:38
Speaker 3: Not to mention them restarting their production. That's not gonna
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Speaker 3: be an overnight thing either.
9:42
Speaker 2: So you can't start production until you get the tankers
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Speaker 2: back there, which means, okay, if Cinco de Mayo happens,
9:47
Speaker 2: those tankers aren't getting back there in mass until late June.
9:51
Speaker 2: But that's fine because again, like late June, you can say, look,
9:54
Speaker 2: it's not perfect, it's not ideal, but fine. This was
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Speaker 2: a Q two story. Q three and Q four are
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Speaker 2: gonna be the story of Hey, like you know, supply
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Speaker 2: is still constrained, but the supply constrains. Yeah, and remember
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Speaker 2: the rate of change is what matters. It's not hey,
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Speaker 2: is supply tight? Is it supply getting better or worse?
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Speaker 2: Better is good? If you get past Sinco Demyo, now
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Speaker 2: we're into you know, Mother's Day and then Memorial Day.
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Speaker 2: Now this becomes a Q three story where investors can't
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Speaker 2: just look past the bad Q two and be like
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Speaker 2: one off because of the Middle East. Then it starts
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Speaker 2: becoming Okay, now it's a couple quarters. And by the way,
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Speaker 2: those problems are worsening and multiplying, and so this is
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Speaker 2: this is why Cinco de Mayo is my day, baby,
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Speaker 2: like that is the day that it matters, because did
10:44
Speaker 2: you guys see oh, yesterday Luftanza the German airline YEP,
10:47
Speaker 2: twenty thousand flights canceled over the Octombers yeas one hundred
10:51
Speaker 2: and fifty flights a day. Now in the broad scheme
10:53
Speaker 2: of European air travel, it's not a ton it's about
10:57
Speaker 2: one percent of you know, daily European air travel. But
10:59
Speaker 2: just wait until Air France gets involved, Wait until British
11:02
Speaker 2: Airways gets involved, Wait until I don't know who else
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Speaker 2: flies in there, Bryanair, Wait until SAS gets involved. Like
11:10
Speaker 2: you can go down the list KLM, like all of
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Speaker 2: these companies are sitting there, and if they start doing
11:15
Speaker 2: similar things very quickly, you end up in a place
11:19
Speaker 2: where Europe now has you know, fifteen to twenty percent
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Speaker 2: fewer flights than they did you know, last year. And again,
11:25
Speaker 2: this is just on the aviation side of things. It's
11:28
Speaker 2: not just going to affect passenger you know, flights. You
11:31
Speaker 2: better believe the DHL and FedEx and ups are going
11:34
Speaker 2: to be impacted by this as well in terms of hey, like,
11:37
Speaker 2: how are we going to pay for this?
11:38
Speaker 3: What do we do, and yet we sit with a
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Speaker 3: market that is up eight percent month to day and
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Speaker 3: continues to rally today, in which we do we should
11:47
Speaker 3: get into.
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Speaker 2: And I'm not here to say like everyone should be
11:50
Speaker 2: scared because I've made the case for the last week. Look,
11:53
Speaker 2: if you want to believe that stocks were fairly valued
11:55
Speaker 2: at last year's multiples, we're still about five percent off
11:59
Speaker 2: last year's multiple. The S and P has a clear
12:01
Speaker 2: path to seventy five seventy seven hundred if this clears up.
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Speaker 2: So I'm just outlining all the cases where hey, your
12:09
Speaker 2: your your bare case for markets in the economy. Hey,
12:12
Speaker 2: you got this tick and cock that problems are starting
12:15
Speaker 2: to show up and you need to start getting too
12:16
Speaker 2: a resolution in the next couple weeks. Your good case
12:20
Speaker 2: is okay, if if things you know, your your bold
12:22
Speaker 2: case is Hey, if things you know get cleared up, great,
12:25
Speaker 2: There's plenty of roomment for multiples to expand and earnings
12:27
Speaker 2: to still expand.
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Speaker 1: Like that.
12:28
Speaker 2: There, there is that there. But again we're getting down
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Speaker 2: to it now. Let's take a quick break. When we return,
12:37
Speaker 2: let's talk a little bit about what is propelling this market.
12:39
Speaker 2: I touched on it briefly now, but let's talk more
12:42
Speaker 2: after this.
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Speaker 2: Plus the last segment we were talking about, Hey, this
13:52
Speaker 2: is why you need to get the straight upform moves
13:54
Speaker 2: open because if not, things start to get kind of hourly,
13:56
Speaker 2: you know, in a couple of weeks, and markets will
13:58
Speaker 2: have a hard time looking through if they both believe
14:01
Speaker 2: that to be something indefinite as opposed to something with
14:04
Speaker 2: a concrete window that it's happening during. So despite that,
14:10
Speaker 2: the question is, hey, like, why have stocks gone up
14:14
Speaker 2: for the last couple weeks, And the answer is twofold
14:17
Speaker 2: number one. The market now wants to price in that
14:20
Speaker 2: this is a finite occurrence that is going to come
14:23
Speaker 2: to an end sooner rather than later. And second, if
14:28
Speaker 2: you look at the market in terms of evaluation, it's
14:31
Speaker 2: gotten cheaper relative to last year because earnings estimates have
14:35
Speaker 2: gone up. It's not to say it's cheap historically, but
14:38
Speaker 2: it is to say that, hey, if you were a
14:40
Speaker 2: buyer of stocks, if you were a buyer of the
14:42
Speaker 2: S and P five hundred and twenty two x forward
14:44
Speaker 2: earnings last year, why wouldn't you be a buyer of
14:47
Speaker 2: it at twenty point nine x forward earnings this year.
14:49
Speaker 3: The thing that I am having so much trouble wrapping
14:52
Speaker 3: my mind around is that first part of your sentiment
14:55
Speaker 3: there that, hey, the market is pricing in that this
14:57
Speaker 3: is sort of a finite situation that is going to
15:01
Speaker 3: have an end point to it. And to go back
15:04
Speaker 3: to what the points you made in the first segment,
15:06
Speaker 3: to me, I can think of four or five different
15:09
Speaker 3: bullet points that you could list out that would indicate
15:12
Speaker 3: that this perhaps is going to take longer or will
15:15
Speaker 3: be hard pressed to be resolved within the next couple
15:18
Speaker 3: week timeframe. And I just am confused as to why
15:22
Speaker 3: the market feels that even as we sort through each
15:26
Speaker 3: of these daily updates between what's going on between the
15:28
Speaker 3: US and Iran. I'm not saying that I'm so pessimistic
15:31
Speaker 3: that I don't think anything can happen, but I do
15:34
Speaker 3: feel like if I was to put a probability chart together,
15:37
Speaker 3: I wouldn't go, oh, it's overwhelming eighty percent that we
15:41
Speaker 3: are going to get something done within the next few weeks.
15:43
Speaker 3: And it feels as if the market is pricing it
15:45
Speaker 3: in with that higher probability with the action that we've
15:48
Speaker 3: seen in the last few weeks. And that's what Chuck,
15:50
Speaker 3: I'm having trouble wrapping my mind around. And the Wall
15:52
Speaker 3: Street Journal does a good piece of sort of perhaps
15:55
Speaker 3: indicating that the sort of speculative risk on environment is better.
16:00
Speaker 3: And you just have investors convinced that, hey, that Trump
16:04
Speaker 3: is going to again like what we saw last year
16:07
Speaker 3: with tariffs, make either policy decisions that allow us for
16:11
Speaker 3: an agreement.
16:12
Speaker 2: To me but made.
16:13
Speaker 3: But you're dealing with two different parties here, and so
16:15
Speaker 3: that's why I have a harder time just putting stock
16:18
Speaker 3: into that.
16:19
Speaker 2: Here's where I can get to, Like, let's say that
16:23
Speaker 2: here's where I can get to. Is it fair to
16:27
Speaker 2: say that in the last two weeks, I'll actually I
16:31
Speaker 2: wone ask the question. I think it's fair to say
16:33
Speaker 2: in the last two weeks, despite each side, the Iranians
16:37
Speaker 2: and the US, saying hey, you violated the terms of
16:41
Speaker 2: the ceasefire, no one's actually started launching stuff at each
16:45
Speaker 2: other again, right, they haven't.
16:48
Speaker 3: Like they haven't.
16:49
Speaker 2: The blockade, Yeah they have it again, the US yesterday
16:52
Speaker 2: or whatever day it was disabled, you know a ship
16:54
Speaker 2: in the region. Iran responds by, you know, disabling a
16:58
Speaker 2: couple ships in the region. But like they're not shooting
17:00
Speaker 2: at each other, they're shooting at neutral ships. Now, like, hey,
17:04
Speaker 2: let's not shoot at each other. Let's just shoot it
17:06
Speaker 2: like all these people trying to pass.
17:07
Speaker 3: We are back, you know.
17:09
Speaker 2: Like but but my point is like, they're not shooting
17:11
Speaker 2: at each other. And I don't think there's really the
17:14
Speaker 2: appetite because generally, like when you say, like, hey, the
17:17
Speaker 2: other side violated the ceasefire a lot of times, the
17:19
Speaker 2: next thing that happens is fine, you violated it. Great,
17:22
Speaker 2: we're attacking again, and that hasn't happened. So I don't
17:24
Speaker 2: think there's much appetite for conflict. So here's where I
17:28
Speaker 2: can get to is absent an appetite for additional conflict,
17:33
Speaker 2: which again might be true, might not, Like, who knows.
17:36
Speaker 2: I also see a whole bunch of US cargo flights
17:38
Speaker 2: going into the region and stuff. I see, you know,
17:40
Speaker 2: another carrier group coming in. It's like, Okay, I've kind
17:43
Speaker 2: of seen this story before and it makes me a
17:45
Speaker 2: little bit nervous. But let's say that no one wants
17:47
Speaker 2: to engage in conflict anymore. Where we stand at this
17:52
Speaker 2: very moment is the absolute worst that from a flow perspective,
17:57
Speaker 2: the energy and commodity crisis will be because every single
18:02
Speaker 2: day countries and companies are saying, how do we source
18:05
Speaker 2: either additional product or change our input mix in order
18:07
Speaker 2: to get away from where the reliance are? You know,
18:11
Speaker 2: like you've got you know, countries in Asia that are saying, great,
18:13
Speaker 2: we're not going to use as many net gas plants,
18:15
Speaker 2: fire the cold ones and the nukes back up. You've
18:18
Speaker 2: got uh, you know, countries saying okay, like our people
18:21
Speaker 2: need to work remotely, Like you've got countries that are saying, okay,
18:24
Speaker 2: we need to like authorize Mexico is like, yes, let's
18:27
Speaker 2: authorize more drilling in order to like make things you know,
18:30
Speaker 2: easier and cleaner for us. So I look at all
18:34
Speaker 2: of this and I think, if you want to believe,
18:38
Speaker 2: even if Hormuz remains closed indefinitely, which I can't believe,
18:42
Speaker 2: I'm even saying this because it's completely insane to think,
18:44
Speaker 2: let alone say, in front of thousands of people, if
18:48
Speaker 2: Hormuz remains closed indefinitely, the supply picture is still going
18:52
Speaker 2: to look better eighteen months from now than it does today,
18:55
Speaker 2: assuming no conflict, no further escalation in conflict. I'm not
19:00
Speaker 2: saying that that's good, because like where you still get
19:02
Speaker 2: to is even if this remains closed another month. Now
19:05
Speaker 2: you're talking to one point five billion barrels of oil
19:08
Speaker 2: that are just not being produced, and that means you're
19:11
Speaker 2: basically at tank bottoms in a lot of the world
19:13
Speaker 2: as far as the world can't really operate once it
19:17
Speaker 2: loses that much oil. So like again, like you're getting
19:20
Speaker 2: too problematic points, But I don't know, I'm trying to
19:25
Speaker 2: look on the bright side. So there's that. Let's take
19:30
Speaker 2: a quick break when we return Wall Street Watch and
19:33
Speaker 2: ask Todd Like.
19:39
Speaker 1: Us on Facebook and follow us on Twitter at TFE show.
19:43
Speaker 1: Breaking business news is always first right here on the
19:47
Speaker 1: Financial Exchange Radio Network. Time out full Wall Street Watch
19:52
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 4: Markets well into positive territory if the US and definitely
20:04
Speaker 4: extended it sees fire with Iran. Despite the uncertainty, investors
20:08
Speaker 4: are reacting favorably to a strong earning season.
20:12
Speaker 2: Right now.
20:12
Speaker 4: The Dow is up three quarters of a percent, SMP
20:15
Speaker 4: five hundred up nearly nine tenths of a percent, Nasdaq
20:18
Speaker 4: rallying one point two percent, Russell two thousand up nearly
20:21
Speaker 4: one percent. Tenure treasureil flat at four point two eighty
20:25
Speaker 4: six percent, Dan oil up two percent higher, trading at
20:29
Speaker 4: ninety one dollars a barrel. Well minutes ago, the Wall
20:34
Speaker 4: Street Journal reported that the Trump administration is nearing a
20:37
Speaker 4: rescue deal for Spirit Airlines. Under the agreement being discussed,
20:40
Speaker 4: the US government would loan the embattled discount carrier as
20:44
Speaker 4: much as five hundred million dollars, receiving in return warrants
20:47
Speaker 4: to take a potential significant stake in Spirit. Again, this
20:51
Speaker 4: was breaking news as of minutes ago from the Wall
20:54
Speaker 4: Street Journal. Boeing posted smaller than expected loss in the
20:57
Speaker 4: first quarter as aircraft deliveries increase please, while his defense
21:01
Speaker 4: and services units also showed improvement. Shares are up by
21:04
Speaker 4: three percent. Meanwhile, United Airline stock is dropping four percent
21:08
Speaker 4: after it cut its twenty twenty six earnings forecast. Is
21:12
Speaker 4: it continues to grapple with the surge in jet fuel prices,
21:17
Speaker 4: and Tessa will report earnings after today's closing bell. I'm
21:23
Speaker 4: Tucker Silva and that is Wall Street Watch.
21:27
Speaker 1: This is Ask Todd on the Financial Exchange Radio network.
21:30
Speaker 1: If you have an existing estate plan or in the
21:33
Speaker 1: market for one, Todd Letsky is here. To answer your
21:35
Speaker 1: questions and help you plan for a later life. Ask
21:38
Speaker 1: Todd is presented by Cushing and Dolan, serving Massachusetts and
21:41
Speaker 1: New England for more than thirty five years, helping families
21:44
Speaker 1: with a state and tax planning, medicaid planning, and probate law.
21:48
Speaker 1: Visit Cushingdolan dot com. Now Here's Todd Lutsky.
21:53
Speaker 2: Todd Lunsky from Cushing and Dolan joins US now for
21:56
Speaker 2: Ask Todd. Phone lines are wide open for you to
21:59
Speaker 2: ask Todd your estate planning questions live on air right now.
22:04
Speaker 2: Eight eight eight two zero five two two six three
22:08
Speaker 2: is the number again? It is eight eight eight to
22:11
Speaker 2: zero five two two six three. That's the number to
22:14
Speaker 2: call it Ask Todd your state planning questions live on air.
22:18
Speaker 2: We usually get through two maybe three on a good day,
22:21
Speaker 2: so UH get calling early to make sure you get
22:23
Speaker 2: in line and we can get to your question. That
22:26
Speaker 2: phone number again is eight eight eight to zero five
22:30
Speaker 2: two two six three. Mister Lutsky, how you doing today?
22:32
Speaker 5: I am never better? And and you I'm okay? I
22:37
Speaker 5: Uh that's good to stop.
22:39
Speaker 2: I I did get pulled over yesterday.
22:41
Speaker 5: I'm pulled over like bye bye police officer.
22:43
Speaker 6: Yeah.
22:43
Speaker 2: They came by and said, you know, do you know
22:45
Speaker 2: how fast you were going? And I said, well, I'm
22:47
Speaker 2: just trying to keep up with the traffic. And he
22:49
Speaker 2: looked around. He's like, well there is no traffic. I go,
22:51
Speaker 2: I know that's how far behind I am. So you
22:54
Speaker 2: know that's good. It's fine, Uh, Todd. I want to
22:57
Speaker 2: talk to you a little bit about keeping assets in
23:01
Speaker 2: the family after you pass away. I know that obviously,
23:06
Speaker 2: with you know, some basic estate planning, you can say, okay,
23:08
Speaker 2: I want things to go to my children when I
23:11
Speaker 2: pass Yeah. Beyond that, let's say that a child predeceases you,
23:17
Speaker 2: or a child gets divorced from their spouse. What other
23:20
Speaker 2: things can you do through a state planning to help
23:23
Speaker 2: ensure that assets remain in your family?
23:26
Speaker 5: Yeah, I think well, well, one quick answer is obviously,
23:30
Speaker 5: don't leave them outright, if you leave any assets outright.
23:34
Speaker 5: And I don't want to make it sound like you can't.
23:36
Speaker 5: By the way, folks, everybody's family is different. Everybody's family
23:40
Speaker 5: understands that their dynamics are different. Level headed kids, not
23:44
Speaker 5: level headed kids, good with money, not good with money,
23:47
Speaker 5: Drug addicts, you know, addiction issues. It could be any
23:50
Speaker 5: number of things right, But just understand, if the trust
23:54
Speaker 5: you prepare says I divide everything equally to my children
24:00
Speaker 5: and pay it out to them, all bets are off.
24:04
Speaker 5: I think that's where we start with your question, Chuck,
24:06
Speaker 5: is that you know if you do that, nothing wrong
24:09
Speaker 5: with it, No right or wrong answer here, but all
24:12
Speaker 5: bets are off. Once they're in the hands of the children,
24:16
Speaker 5: they can do whatever they want with it. They can
24:18
Speaker 5: spend it, they can save it, they can you know,
24:20
Speaker 5: it's included in their estate for a state tax purposes.
24:23
Speaker 5: If they don't spend it, if they get divorced, it
24:25
Speaker 5: is going to be subject to the marriage So fifty
24:27
Speaker 5: percent is going to be lost. I mean, it's subject
24:29
Speaker 5: to any other creditors and it may never find its
24:32
Speaker 5: way to grand children. If that's one of your wishes,
24:36
Speaker 5: you have to understand that once you put it in
24:38
Speaker 5: their hands again, all bets are off. But it gives
24:42
Speaker 5: them complete control. Not horrible, but not the way to go.
24:46
Speaker 2: Talk to me a little bit about the way to
24:48
Speaker 2: go that, like, what is the way to go? Yeah?
24:51
Speaker 5: So I think at a bare minimum you should think about,
24:54
Speaker 5: you know, the overall family. If your goal is to say, yeah,
24:57
Speaker 5: I'd like to take care of not only my children,
25:00
Speaker 5: but maybe even take care of my grandchildren, and I
25:03
Speaker 5: might want to do that in a way that doesn't
25:06
Speaker 5: disinherit my children, Like you don't have to necessarily say, Okay,
25:10
Speaker 5: I'm going to give, you know, twenty percent to my
25:13
Speaker 5: grandchildren and only eighty percent to my children. What you
25:16
Speaker 5: can do, but somehow that doesn't fit well because you say, geez,
25:20
Speaker 5: you know, I kind of took away from my kids, right.
25:22
Speaker 5: But if you don't want to do that, you can
25:24
Speaker 5: just set up shares equally for the children and the
25:28
Speaker 5: grandchildren at the same time. And if you have that
25:31
Speaker 5: set up, then you can have language in there that
25:33
Speaker 5: allows distributions to come out in the trustees sole discretion
25:38
Speaker 5: for not only the child, but the child's children. So
25:42
Speaker 5: the grandchildren don't even have to wait until the parent
25:47
Speaker 5: in this case the child dies for it to get
25:50
Speaker 5: down to the grandchildren. So if they needed it for
25:53
Speaker 5: college or a prep school or some kind of education issue,
25:56
Speaker 5: or you know, you're taking a family vacation, you can
25:59
Speaker 5: make dish contributions out in the trustees' discretion to them.
26:03
Speaker 5: That does multiple things. It provides equally to the family
26:07
Speaker 5: without disinheriting kids at all. It allows grandchildren to participate
26:12
Speaker 5: sooner rather than later. And most importantly, it provides that
26:16
Speaker 5: if you haven't taken it, you don't own it, so
26:19
Speaker 5: it's not taxable when you die for state tax purposes,
26:23
Speaker 5: children not the parents children. And if you get divorced,
26:28
Speaker 5: you don't own it, so if you don't own it,
26:30
Speaker 5: it's not a marital asset, so it's actually protected from creditor.
26:33
Speaker 5: So lots of things to think about, not just divorces,
26:36
Speaker 5: but even tax planning is a good idea with sort
26:40
Speaker 5: of hanging on to stuff in a trust for kids.
26:42
Speaker 2: Talking with Todd Lutsky from the law firm of Cushing
26:45
Speaker 2: and Dolan, reminder, we still have room on the phone
26:47
Speaker 2: lines for your estate planning questions to Todd live on air.
26:51
Speaker 2: Eight eight eight to zero five two two sixty three
26:55
Speaker 2: is the number again, that is eight eight eight to
26:58
Speaker 2: zero five to two six three. We're gonna take a
27:02
Speaker 2: quick break here, but when we come back, it's gonna
27:04
Speaker 2: be right to your questions with Todd. That number again
27:07
Speaker 2: is eight eight eight to zero five two two six three.
27:12
Speaker 1: Ask Todd with Todd Lutsky every Wednesday at ten thirty
27:15
Speaker 1: only here on the Financial Exchange Radio Network. Don't miss
27:21
Speaker 1: Ask Todd with Todd Lutsky every Wednesday at ten thirty
27:24
Speaker 1: only here on the Financial Exchange Radio Network.
27:37
Speaker 2: Still room on the phone lines for your questions for
27:40
Speaker 2: Todd Lutsky eight eight eight to zero five two two
27:45
Speaker 2: six three is the number again, Still room on the
27:49
Speaker 2: phone lines for your estate planning questions for Todd at
27:52
Speaker 2: eight eight eight to zero five two two six three.
27:55
Speaker 2: Let's go to fill on the Cape Phil. What is
27:58
Speaker 2: your question for Todd?
28:00
Speaker 6: Good morning Todd. On an irrevocable trust, if you have
28:04
Speaker 6: one of your children as the trustee, do they automatically
28:08
Speaker 6: become the executor?
28:10
Speaker 5: So the quick answer is no, But let me explain
28:16
Speaker 5: the difference and maybe this will adjust your question. When
28:20
Speaker 5: people use the word trustee, so things have legal terms
28:24
Speaker 5: of art that mean things to us US lawyers, right,
28:28
Speaker 5: So when I hear the word trustee, that means that
28:32
Speaker 5: that person is in charge of the trust and what's
28:37
Speaker 5: in it. When I hear the word executor, which, by
28:41
Speaker 5: the way, nowadays the new word that used to be
28:44
Speaker 5: executor is now personal representative. Just to be clear, A
28:50
Speaker 5: personal representative is the person who governs the will and
28:56
Speaker 5: the assets that go through probate, so they are completely
29:00
Speaker 5: mutually exclusive. And and no, just because you appoint one
29:04
Speaker 5: person trustee does not mean you need to appoint that
29:08
Speaker 5: same person as personal representative on the will.
29:13
Speaker 2: Was that?
29:14
Speaker 5: Did that clear it up for you? Yes?
29:17
Speaker 1: That that does?
29:17
Speaker 6: Swear it up? And just one real quick last question. Yeah,
29:22
Speaker 6: where would you find it when you build the trust?
29:25
Speaker 6: I mean, is it now not the executor? Is that
29:30
Speaker 6: something that I should go back to your office and
29:34
Speaker 6: have it re rewritten looked at.
29:36
Speaker 5: I'm not sure I'm understanding the question now, So are
29:40
Speaker 5: you asking me what?
29:41
Speaker 2: What are you asking me?
29:42
Speaker 5: Who is the trustee on your trust?
29:45
Speaker 6: Well, no, I know who that is. I'm not sure
29:47
Speaker 6: about the executor or the person.
29:50
Speaker 5: Of personal personal representative personal. Yeah, so what you need
29:55
Speaker 5: to do for your person? I don't think you need
29:57
Speaker 5: to come in for that if you've already signed all
30:01
Speaker 5: the documents at least when we're done. We always send
30:04
Speaker 5: out this book, uh with with all the documents in it.
30:07
Speaker 5: There's a table of contents in the book along with
30:10
Speaker 5: a thumb drive. But if you have the book, just
30:14
Speaker 5: open it up and look on the table of contents,
30:16
Speaker 5: you'll see a list the first two or first one
30:19
Speaker 5: is generally the irrevocable trust, and then the next one
30:23
Speaker 5: is the will. So just flip to that tab, look
30:26
Speaker 5: at the will. And when you look at the very
30:29
Speaker 5: first page of the will, and this is good for everybody.
30:31
Speaker 5: If you're if you're not sure who's serving on your
30:36
Speaker 5: will or who's serving as trustee on your trust, this
30:38
Speaker 5: is important. So look at the will on the very
30:41
Speaker 5: first page of the will. Actually you won't see it
30:43
Speaker 5: on the first page. You're gonna have to flip through
30:46
Speaker 5: the will, probably to around paragraph four, but there'll be
30:51
Speaker 5: a heading that says personal representative or upon the death
30:55
Speaker 5: you know, upon my death I appoint and it'll have
30:58
Speaker 5: personal representative and a name there. So in your case anyway, Phil,
31:02
Speaker 5: it's in bold capital letters, so you can't miss it.
31:05
Speaker 5: So flip through to like paragraph four of the will
31:08
Speaker 5: and you'll see who's listed as personal representative. Now, if
31:12
Speaker 5: you are not happy with who you appointed as personal representative,
31:17
Speaker 5: then yes, you need to make a phone call to
31:19
Speaker 5: us and we can help you change that personal representative.
31:23
Speaker 5: It's perfectly changeable anytime you want. So good news on
31:28
Speaker 5: that front. Folks, And I hope that helps a little
31:29
Speaker 5: bit on really what are these are good questions because
31:33
Speaker 5: they're regular operational, day to day questions for people, and
31:36
Speaker 5: the same thing Phil. I'll just expand on it a
31:38
Speaker 5: little bit. The irrevocable trust. When you see that, that's
31:42
Speaker 5: on page one right at the very top, it lists
31:46
Speaker 5: who the trustee is. But like I said, if you're
31:48
Speaker 5: not happy with who the trustee is, even though it's
31:51
Speaker 5: an irrevocable trust, you, Phil have retained the power to change,
31:56
Speaker 5: remove and replace that trustee any time you want, so
32:00
Speaker 5: you can change either the trustee or the personal representative
32:04
Speaker 5: on the will if you're not comfortable. So hopefully that's
32:07
Speaker 5: helpful a little bit. And folks, let me get to this.
32:11
Speaker 5: This is great. I'm glad Phil did the planning. But
32:13
Speaker 5: what we didn't talk about with Phil's situation is that
32:18
Speaker 5: this trust likely directs where his assets go when he dies.
32:22
Speaker 5: And that's really what this guide is all about this month, right,
32:24
Speaker 5: how to leave assets to beneficiaries. Well, I'm happy on
32:28
Speaker 5: the one front that he's avoiding probate, and since it's irrevocable,
32:32
Speaker 5: he's protecting assets from the nursing home. All that is
32:35
Speaker 5: great stuff, but the family behind the estate plan. So
32:38
Speaker 5: then you read this document and it could have all
32:40
Speaker 5: kinds of language in it as to how you get
32:43
Speaker 5: those assets to your family when you die. So many
32:46
Speaker 5: things to think about. What if you're getting a second
32:49
Speaker 5: you know, what if it's a second marriage for you.
32:51
Speaker 5: What if it's if you have a special needs child.
32:53
Speaker 5: What if you're concerned about divorces of your children, you know,
32:56
Speaker 5: generation skipping tax planning. There's so many ways to leave
33:01
Speaker 5: the assets to the children, and you've got to learn
33:04
Speaker 5: how to do that. So get this guide that'll teach
33:06
Speaker 5: you how to leave your assets to your family eight
33:09
Speaker 5: six six eight four eight five six nine nine or
33:13
Speaker 5: Legal Exchange Show dot com again eight six six eight
33:18
Speaker 5: four eight five six nine to nine or Legal Exchange
33:22
Speaker 5: Show dot com and learn how to leave your assets
33:24
Speaker 5: to your family and also for more information go to
33:27
Speaker 5: our Instagram page at Cushing Dolan, PC Todd.
33:31
Speaker 2: Last segment, we were talking about kind of the additional work
33:35
Speaker 2: that someone can do in order to keep assets within
33:39
Speaker 2: a family after passing away. Have you seen instances where
33:43
Speaker 2: the level of control someone tries to exercise goes too
33:47
Speaker 2: far and it becomes just more of a mess for
33:52
Speaker 2: there in for their errors to deal with because they
33:55
Speaker 2: tried to do too much.
33:57
Speaker 5: I think I know where you're going with this, and
33:58
Speaker 5: it's it's very true. So like I had somebody who
34:02
Speaker 5: came in just recently and they're like, well, I'd like
34:04
Speaker 5: it to go to my significant other, but I don't.
34:08
Speaker 5: My significant other is very good person, but not good
34:10
Speaker 5: with money, and so can I have that person be
34:13
Speaker 5: like trustee? But I don't want that person to have
34:16
Speaker 5: to ask permission for every little thing that needs to
34:20
Speaker 5: be done. That's you know what I'm saying. Sure, Or
34:22
Speaker 5: they come in sometimes and they say, okay, well I
34:25
Speaker 5: wanted to go out, but I wanted to go out
34:27
Speaker 5: for these reasons abcd F. Okay, that's it. Well again,
34:33
Speaker 5: if you start listing things, so there's two issues. One,
34:37
Speaker 5: when you list things, if they're not there, then arguably
34:42
Speaker 5: it can't come out. So now it's too restrictive. So
34:44
Speaker 5: that might be one issue that you're trying to get at, Chuck,
34:47
Speaker 5: is that you know, jeez, I wanted to provide for
34:50
Speaker 5: my family, but by listing items, trying to think of
34:54
Speaker 5: every little thing you need, you could actually be restricting
34:58
Speaker 5: an asset that might help a family member. So rather
35:01
Speaker 5: than do it that way like we were talking earlier, Chuck,
35:05
Speaker 5: make it this sole discretionary distribution. Don't put items in
35:11
Speaker 5: this way. No matter what comes up, the trustee and
35:15
Speaker 5: the trustees' discretion can say, yeah, that's a good idea.
35:19
Speaker 5: I want it to go out for this, not have
35:21
Speaker 5: to worry about it being too restrictive. And then you
35:24
Speaker 5: might say, well, Todd, what if that person is somebody
35:28
Speaker 5: who just likes to say no a lot? Well, now,
35:32
Speaker 5: isn't it too restrictive? Anyway?
35:35
Speaker 2: Could be.
35:35
Speaker 5: But what you could do is you could give your children,
35:38
Speaker 5: as beneficiaries of that trust, the power to remove and
35:44
Speaker 5: replace that disinterested trustee. So the trustee can be a
35:50
Speaker 5: child who manages invest does everything. Ninety nine percent of
35:53
Speaker 5: the job is done by the child or children, but
35:57
Speaker 5: they can't take it. The one thing the disinterested trustee
36:01
Speaker 5: does is exercises that sole discretion. Sounds good, sounds restrictive, though,
36:06
Speaker 5: But Todd, if this person said no all the time,
36:10
Speaker 5: couldn't the beneficiary just remove that person and put somebody
36:13
Speaker 5: else on. It's maybe more amendable. Yeah, exactly, So that's
36:18
Speaker 5: what we want. But when you give your kid that
36:21
Speaker 5: level of power, that great power, the great responsibility that
36:24
Speaker 5: comes with that power is understand this. If you explain
36:30
Speaker 5: this to children after the parents die, and one kid says, yeah,
36:34
Speaker 5: I get it, I love it. Best way to receive
36:36
Speaker 5: an inheritance ever, But the other kid says, I hate it.
36:39
Speaker 5: I want my money today. Well, if you've given the
36:42
Speaker 5: kid the right to remove and replace that trustee, I
36:45
Speaker 5: guess I explained to him, Yeah, don't take it. It's
36:48
Speaker 5: not a good idea. But if I say no, you're
36:50
Speaker 5: gonna You're gonna remove me, they can.
36:51
Speaker 2: Put Ronald McDonald's the trustee and say give me all
36:53
Speaker 2: the money and they so, I just I just give
36:56
Speaker 2: it to them.
36:56
Speaker 5: Then, so I mean, so, yes, you give them the
36:58
Speaker 5: power to take it. But again, how much power you
37:00
Speaker 5: give them is strictly.
37:01
Speaker 2: Up to you. Todd. Thank you so much for joining
37:03
Speaker 2: us today.
37:04
Speaker 5: Always pleasure. Thank you.
37:06
Speaker 1: This has been asked Odd on the Financial Exchange Radio network.
37:09
Speaker 1: Ask Todd with Todd. Lutsky has been presented by Cushing
37:12
Speaker 1: and Dolan, serving Massachusetts and New England for more than
37:15
Speaker 1: thirty years, helping families with the state and tax planning
37:18
Speaker 1: Medicaid Planning and Probate Law call eight hundred and three
37:20
Speaker 1: nine three four thousand and one or visit Cushingdolan dot com.
37:24
Speaker 1: The views expressed in this segment are solely those of
37:26
Speaker 1: Cushing and Dolan. Armstrong Advisory does not provide any legal
37:29
Speaker 1: or tax advice. Please consult with your illegal or tax
37:31
Speaker 1: advisor on such matters. Cushing and Armstrong do not endorse
37:33
Speaker 1: each other and are not affiliated.
37:35
Speaker 2: Still more to come as we head towards our two,
37:38
Speaker 2: including a little bit more chatter about Apple and their
37:41
Speaker 2: new CEO, what's the landscape look like? What does it
37:45
Speaker 2: mean that they picked a hardware guy to be the leader?
37:50
Speaker 2: Also going to be talking a little bit about AI,
37:52
Speaker 2: and then a little bit more on what's going on
37:56
Speaker 2: with airlines right now. And finally piece that we're gonna
38:01
Speaker 2: have to get to is uh where it was?
38:04
Speaker 4: There?
38:04
Speaker 2: It is? There's a pasta sauce that wants to record
38:09
Speaker 2: your family. Should you let it? We'll discuss over some
38:14
Speaker 2: CD after this