Latest / The Financial Exchange Show / Waiting on Nvidia is the hardest part

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Waiting on Nvidia is the hardest part · The Financial Exchange Show

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Speaker 2: Chuck, Paul and Tucker with you here. And we've got
1:15
Speaker 2: Nvidia earnings after the bell today, and man, everyone is
1:21
Speaker 2: focused on this. I'm just going to quote from this
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Speaker 2: Bloomberg piece because I think it sits the stage rather well.
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Speaker 3: Here.
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Speaker 2: Quote, the options implied move in Video shares the day
1:30
Speaker 2: after earnings is about eight percent in either direction. According
1:33
Speaker 2: to data compiled by Bloomberg, that would equate to close
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Speaker 2: to a three hundred billion dollars swing in market value,
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Speaker 2: bigger than all but twenty five companies in the S
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Speaker 2: and P five hundred index. This is neither healthy nor
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Speaker 2: good in the long run, but for now, it just
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Speaker 2: is what it is. Uh. I'll quote this next sentence
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Speaker 2: just because it's wild. And according to strategists at Bank
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Speaker 2: of America, the report carries more risk for the benchmark
1:58
Speaker 2: than the next Federal Reserve meeting or inflation data. So
2:03
Speaker 2: there's a lot riding on in video earnings, which have
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Speaker 2: been really good for the last I mean, look, let's
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Speaker 2: be actually honest about this. For all of twenty twenty three,
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Speaker 2: they were beyond really good. They were borderline unbelievable. I
2:16
Speaker 2: means the kind of stuff where if you ever play
2:19
Speaker 2: any video game where you get to like create a character,
2:21
Speaker 2: create a player, it was kind of like unfair. Like
2:25
Speaker 2: the term video game numbers gets thrown around for a
2:27
Speaker 2: reason because oh, I created this guy in Madden and
2:30
Speaker 2: he ran for five thousand yards. That's the equivalent of
2:33
Speaker 2: what in video was doing with earnings. They were having
2:36
Speaker 2: earnings estimates where it'd be like, hey, their profit's gonna
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Speaker 2: be four billion, and they beat on profit by like
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Speaker 2: three billion dollars there. So it's been absolutely insane. Now
2:46
Speaker 2: when we look at the track record in the last
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Speaker 2: few earnings results, they still have been beating and they've
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Speaker 2: still had good quarters, but the pace of the growth
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Speaker 2: is slowing at at a pretty rapid pace. And the
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Speaker 2: question that's out there, I think, and the reasonable question
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Speaker 2: to ask here is, Hey, ultimately, is there going to
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Speaker 2: be a continuation of the growth cycle we've seen for
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Speaker 2: the last couple of years or is this normal tech
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Speaker 2: capex cycle where tech companies go nutty, you know, buying
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Speaker 2: up excess capacity for a couple of years, and then
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Speaker 2: it fades kind of back into the background. And we
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Speaker 2: need to see how the next couple of years play
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Speaker 2: out in order to get information on that, because I'll
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Speaker 2: be the first to tell you I don't know.
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Speaker 3: Yeah.
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Speaker 4: This quarter, in particular, Chuck is, is a bit of
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Speaker 4: a transitional one in the sense that they've come out
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Speaker 4: with a new chip, the Blackwell chip, and that is
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Speaker 4: replacing or is rather the more sophisticated version, the newest
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Speaker 4: and best that they have, and that is supposed to
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Speaker 4: add several billion dollars of revenue for this quarter. They're
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Speaker 4: anticipating that their quarterly numbers come in somewhere in the
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Speaker 4: thirty billion dollar range. I believe for Q four the
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Speaker 4: projections are are thirty seven billion, But I think for
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Speaker 4: this Q three numbers that we're going to hear about
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Speaker 4: postmarket clothes its mid thirties, So some of that will
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Speaker 4: be from their new Blackwell chip. But really there'll be
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Speaker 4: a lot of focus from investors as to how much
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Speaker 4: growth is the are these new chips going to add
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Speaker 4: for future quarters here and was there any impact because
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Speaker 4: there have been rumored production delays. There was also some
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Speaker 4: rumors of these new chips overheating in the servers, so
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Speaker 4: that is a potential for delay or a slip up
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Speaker 4: for Nvidia, Like you said, they've just been absolutely knocking
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Speaker 4: the cover off the ball in terms of their revenue
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Speaker 4: growth over the course of the last several quarters here,
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Speaker 4: So it's going to be an interesting one to get
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Speaker 4: a sense for. Is this momentum going to continue to
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Speaker 4: be fair Their biggest buyers, which are Microsoft, Google, Amazon
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Speaker 4: and Meta or Facebook, they have all indicated that they
4:51
Speaker 4: are going to continue to spend a whole boltload of
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Speaker 4: Capex heading into twenty five here, so the demand seems
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Speaker 4: to still be there. The CEO has mentioned the demand
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Speaker 4: for the jack the Blackwell chips that I was mentioning
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Speaker 4: to quote him exactly, is insane. So it's now time
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Speaker 4: to see what the numbers will look like after the
5:08
Speaker 4: close today.
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Speaker 2: And I also think it's it's always important to contextualize
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Speaker 2: this look whether in Video moves up ten percent, down
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Speaker 2: ten percent, or stays flat after earnings. The funniest thing,
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Speaker 2: in my opinion, would be if Nvidia just doesn't move
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Speaker 2: after earnings because there's so much money betting in either
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Speaker 2: direction that hey, there's gonna be this giant move, because
5:27
Speaker 2: that's what we've become accustomed to. The funniest possible outcome
5:31
Speaker 2: is the one where it's like, well, this is fine,
5:35
Speaker 2: We're good where we are, because you end up seeing
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Speaker 2: a bunch of people who are kind of out over
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Speaker 2: their skis. Then it's like, oh, well, I thought it
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Speaker 2: was gonna lose a ton, so I'm getting hurt.
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Speaker 5: There.
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Speaker 2: He thought it was gonna make a ton, so he's
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Speaker 2: getting hurt. And basically, if you just sat this one out,
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Speaker 2: you would have been fine. But it's it's hard for
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Speaker 2: people to resist the allure of in video right now.
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Speaker 2: It's just it's such front and center's stock in terms
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Speaker 2: of the overall popularity and it's its place in markets.
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Speaker 4: And also the reason that I always like to reiterate this,
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Speaker 4: it is responsible for a quarter of the S and
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Speaker 4: P five hundreds return year to date. It's up one
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Speaker 4: hundred and ninety six percent year to date, and of
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Speaker 4: the twenty four to twenty five percent that the SMP
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Speaker 4: is up year to date, they are twenty five percent
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Speaker 4: of it in Vidia as a company. So that's why
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Speaker 4: to listeners, that that's why this stock gets so much
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Speaker 4: press and we talk about it so frequently. And I
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Speaker 4: had a Daja vu moment this morning chuck about in
6:29
Speaker 4: videos earnings where when we were covering this in August,
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Speaker 4: I thought I recalled that it didn't really move that much.
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Speaker 4: I did look it up. It was off six percent
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Speaker 4: when they did report their last earnings in August, nine
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Speaker 4: percent increase in May, and sixteen percent in February of
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Speaker 4: twenty three. So I looked back in the last couple
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Speaker 4: and to me, the August one was more of this
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Speaker 4: kind of muted response. But every single quarter it seems
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Speaker 4: like there is a lot of variability that could go
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Speaker 4: in either direction on this.
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Speaker 2: So this is what we have going on with in
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Speaker 2: video after the bell, but before the bell today we
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Speaker 2: got some earnings as well from a little known retailer
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Speaker 2: by the name of Target. And unlike Walmart who reported
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Speaker 2: yesterday and stock was up I think just shy of
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Speaker 2: four percent. When it was all said and done, Walmart said, look,
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Speaker 2: you know, everything looks good on our side, Like we're
7:20
Speaker 2: humming right along. We're seeing you know, robust demand and
7:22
Speaker 2: it's not just coming from you know, lower income households.
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Speaker 2: We're seeing you know, growing demand from one hundred K
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Speaker 2: income households and up. Target today, on the other hand,
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Speaker 2: comes out with a real dud of an earnings reported
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Speaker 2: and kind of there their first real dud in quite
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Speaker 2: a while, where the stock is down twenty one percent
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Speaker 2: today on the news. And I think the thing that's
7:47
Speaker 2: interesting to me about Target's earnings here is it's not
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Speaker 2: like they aren't getting people into their stores. I'm gonna
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Speaker 2: quote here from Rahul Sharma, who's a retail analyst uh
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Speaker 2: and and someone that I follow online, and look here
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Speaker 2: here's what they effectively saw. They got people into their stores.
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Speaker 2: Walmart is an example. Yesterday had three point one percent
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Speaker 2: growth in foot traffic. Targets today came in at two
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Speaker 2: point four percent. That's not that different. The issue is
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Speaker 2: that targets tickets are getting smaller and Walmart's are getting bigger.
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Speaker 2: And that is why you end up with a situation
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Speaker 2: where Target is seeing margin pressure and they're not seeing
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Speaker 2: overall sales growth the way that they want. And that's
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Speaker 2: the fundamental difference. The question, Paul, Sorry, I got one
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Speaker 2: last thing to say, No, No, you should not yet,
8:44
Speaker 2: I mel way. It sounds like there's more to go here,
8:49
Speaker 2: but I guess I'll jump in the last piece. Here
8:53
Speaker 2: is this a case, and in this I don't have
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Speaker 2: the answer for is this a case where Target is saying, Hey,
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Speaker 2: the problem that we're having is those discretionary purchases that
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Speaker 2: people make there that they don't necessarily make at Walmart YEP.
9:08
Speaker 2: Is it indicating something about the consumer or is it
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Speaker 2: just their execution isn't good and it's a Target specific problem.
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Speaker 2: And I don't have a great answer for that.
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Speaker 4: I don't have a great answer my guests would be
9:20
Speaker 4: just judging what we've seen from both Walmart, which you
9:22
Speaker 4: just touched on in Costco too, they have seen that
9:26
Speaker 4: the stronger consumer demand and they both companies have indicated
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Speaker 4: that there is more appetite for discretionary spending. So I
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Speaker 4: have to think that it's somewhat of an execution problem
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Speaker 4: here where they have cut Target ten the price on
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Speaker 4: ten thousand items across their store over the last six
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Speaker 4: months or so. And what the CEO had reported is
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Speaker 4: Target runs this circle week where they sounds fun. Yeah,
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Speaker 4: I just I don't really love the name. I get
9:51
Speaker 4: where it comes from. But they had really good numbers
9:54
Speaker 4: there in terms of they added three million new members
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Speaker 4: to their loyalty program. They saw their biggest strength in
9:59
Speaker 4: terms of the sales for that week. However, what they
10:02
Speaker 4: were reporting is very sluggish sales in the week prior
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Speaker 4: to that. So what Target is indicating is that the
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Speaker 4: consumer is being extremely strategic and to your ticket items point,
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Speaker 4: very selective in terms of what they're purchasing a target
10:16
Speaker 4: where it seems that Walmart has can continue to drive
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Speaker 4: foot traffic and get the sales and larger tickets behind it,
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Speaker 4: and the willingness to spend on other items. I don't
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Speaker 4: know if this is because of the makeup of the
10:28
Speaker 4: business where Walmart gets about sixty percent of its sales
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Speaker 4: from grocery, where targets about twenty three percent. So perhaps
10:34
Speaker 4: the fact that Walmart is so intertwined with grocery sure
10:37
Speaker 4: that they've been able to pick up some of this
10:39
Speaker 4: discretionary spend as cut consumers feel a little bit better
10:42
Speaker 4: maybe where they are financially here. But it's very interesting
10:45
Speaker 4: just the contrasting reports from all retailers we talked about.
10:48
Speaker 4: With Walmart yesterday being the largest retailer, it's not always
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Speaker 4: the same for all of its peers. It can be
10:56
Speaker 4: an execution issue.
10:57
Speaker 2: Let's take a quick break here. When we come back,
11:01
Speaker 2: we'll talk a little bit about how the Trump cabinet
11:05
Speaker 2: is continuing to develop right after this.
11:09
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12:14
Speaker 2: Let's talk a little bit about the to you know
12:17
Speaker 2: directly two positions in the cabinet that directly influence kind
12:22
Speaker 2: of the financial markets. The first, yesterday we got some
12:24
Speaker 2: clarity on Commerce Secretary, where Howard Lutnick, who has been
12:29
Speaker 2: heading up Donald Trump's transition team, is going to gain
12:33
Speaker 2: that appointment. Lutnick has been the CEO of Canter Fitzgerald
12:38
Speaker 2: for I don't know, probably twenty five thirty years at
12:42
Speaker 2: this appointment, dating back to the nineties, I think, and
12:46
Speaker 2: he's again been running Trump's transition team for I don't know.
12:50
Speaker 2: He was appointed that role obviously before the campaign ended,
12:54
Speaker 2: but in recent weeks it's come out that he was
12:57
Speaker 2: really pushing to be appointed the Treasury secretary, which I
13:02
Speaker 2: don't think would have been a great pick, simply because
13:06
Speaker 2: in talking with people who have dealt with Lutnik, he
13:09
Speaker 2: just doesn't have the depth of knowledge that some of
13:12
Speaker 2: the other candidates do. So I think this is a
13:15
Speaker 2: good thing, in my opinion, to keep him away from
13:18
Speaker 2: Treasury and throw him towards Commerce. I think it's something
13:22
Speaker 2: where you know, Lutnik has talked pretty favorably about some
13:25
Speaker 2: of the terrif ideas that have been discussed by the
13:29
Speaker 2: Trump campaign, So I think it makes it more likely
13:31
Speaker 2: that you see some of those implemented early in the term.
13:35
Speaker 2: And so the question is going to be I think
13:39
Speaker 2: there are two questions. First who ends up at Treasury
13:42
Speaker 2: and second what happens with Robert Leitthheiser, who is arguably
13:47
Speaker 2: kind of the architect of the trade policy of the
13:49
Speaker 2: first Trump term and someone who's been, you know, very
13:51
Speaker 2: influential in shaping the potential for policy in the future.
13:55
Speaker 2: Where does Lightheiser end up and at Treasury? Who ends
14:00
Speaker 2: up taking that roles it's Scott Bessont, who was you know,
14:03
Speaker 2: kind of the front runner initially but got some pushback
14:06
Speaker 2: from Lutnick and other members of the transition team. Or
14:09
Speaker 2: do you get some of the more recent entrants like
14:12
Speaker 2: Kevin Walsh or Mark Rowan. Those are the other names
14:16
Speaker 2: that are being talked about at this point, and I
14:18
Speaker 2: think any of those three are largely capable, with Besson
14:22
Speaker 2: probably being the most knowledgeable and with the longest track
14:26
Speaker 2: record of being a good operator in financial markets.
14:29
Speaker 4: Yeah, you would hope with you know, the Treasury secretary
14:33
Speaker 4: role that someone with depth of knowledge, and you know,
14:37
Speaker 4: Kevin Warsh is an example of someone working in the
14:39
Speaker 4: federal Reserve has the background in the space that he
14:41
Speaker 4: would be helpful to fill that role on the Commerce
14:45
Speaker 4: Department side of things. You know, Lutnick had mentioned back
14:49
Speaker 4: in October that, of course he's in favor of terrorists,
14:52
Speaker 4: which we've talked about quite frequently as really the most
14:54
Speaker 4: significant piece of what his role will look like as
14:58
Speaker 4: he takes over the the Commis Department and is in
15:01
Speaker 4: charge of trade here, and that's really been the focus
15:05
Speaker 4: of many investors in a contents out there, is what
15:07
Speaker 4: is the tariff policy going to look like? I don't
15:10
Speaker 4: think with this appointment necessarily this is an easy way
15:14
Speaker 4: to decide one where another how it's going to look.
15:16
Speaker 4: But certainly from at least the background of these both
15:20
Speaker 4: the appointment here from Lutnik as well as the candidates
15:23
Speaker 4: in the mix for Treasury secretary, at least that these
15:27
Speaker 4: candidates have, you know, the prerequisite knowledge to step into
15:30
Speaker 4: the role and do a good job with it.
15:33
Speaker 2: Can I make a recommendation just for future elections, Can
15:38
Speaker 2: we find a way to narrow the time between the
15:41
Speaker 2: election and the actual inauguration? Like, what are we doing
15:45
Speaker 2: here for two months at this point? This isn't seventeen
15:47
Speaker 2: seventy six anymore, where you've got to take a covered wagon,
15:51
Speaker 2: well not even you've got to like take like a
15:53
Speaker 2: horse drawn cart from Philly to New York or Philly
15:56
Speaker 2: to d C. In order to get this stuff. We've
15:58
Speaker 2: got airplanes and stuff. People are planning this stuff in advance.
16:02
Speaker 2: The campaign's been running for three years. Look, have the
16:07
Speaker 2: election everyone takes off the last week of the year, anyways,
16:11
Speaker 2: Have the election the last week of the year. Have
16:14
Speaker 2: the inauguration the first week of the next year. What's
16:16
Speaker 2: the problem here?
16:18
Speaker 3: I don't know what.
16:19
Speaker 4: I don't you with.
16:20
Speaker 2: Two months of this, like, what are they gonna do?
16:23
Speaker 2: What are they gonna just let's let's go, let's get.
16:26
Speaker 7: It over with. At this point, I don't know politics.
16:28
Speaker 4: I'm sure someone who does would argue that there needs
16:30
Speaker 4: to be some transition from current administration to new administration
16:34
Speaker 4: in terms of getting everything so made. You know, you
16:37
Speaker 4: need to get the U haul vans to the White House,
16:39
Speaker 4: get it bien stuff out, get.
16:40
Speaker 7: It scheduled already.
16:42
Speaker 2: Like you can move this stuff faster, Like companies move
16:44
Speaker 2: into a new headquarters in They're in there in a week.
16:47
Speaker 2: You know, we're not talking about the entire federal government
16:50
Speaker 2: turning over.
16:51
Speaker 4: Yeah, the companies coming in, but they're the leadership and
16:53
Speaker 4: all the people, the employees.
16:55
Speaker 7: There isn't full turnover.
16:56
Speaker 2: Well, there's not full turnerover to the federal We're not
16:58
Speaker 2: getting rid of three million people.
17:00
Speaker 4: Well, but there is still a large part of the
17:02
Speaker 4: administration that is turning over from Biden's cabinet to what
17:06
Speaker 4: the new cabinet will be.
17:07
Speaker 2: They knew this anyways, Biden wasn't running. Get your US schedule.
17:12
Speaker 7: I would agree with you.
17:12
Speaker 1: It is really long.
17:14
Speaker 2: But two months is like, come on, what are we
17:17
Speaker 2: gonna do here for the next two months. Well, here's
17:20
Speaker 2: what they might do. No, here's what they might enough, Like,
17:24
Speaker 2: let's just get it moving. We don't need a two
17:27
Speaker 2: month gap between election and inauguration.
17:29
Speaker 4: I definitely am getting tired about talking about tariffs because.
17:32
Speaker 7: Because we don't even know anything.
17:34
Speaker 2: This is what makes people are like, well, what do
17:36
Speaker 2: you think about the potential for Trump's tariffs?
17:39
Speaker 7: I don't know what they are.
17:41
Speaker 2: You're like, yes, I could oppine on every single thing
17:44
Speaker 2: that's been discussed, but that's a horrible use of any
17:47
Speaker 2: of our time.
17:48
Speaker 4: Yeah, it's gotta be. It's gotta be put into effect.
17:50
Speaker 4: You know, there there is so much speculation, and you're right,
17:53
Speaker 4: there's a long time to speculate as to what the
17:56
Speaker 4: cut it down.
17:57
Speaker 2: To a month even Hey, the election is the Tuesday
18:00
Speaker 2: after Thanksgiving. An inauguration is the first Sunday in January. Fine,
18:06
Speaker 2: like we can, we can do that, but like two
18:09
Speaker 2: months do we have.
18:10
Speaker 4: All the races called at this point? I think there
18:11
Speaker 4: was five.
18:12
Speaker 2: Still there's still still two House races that too out there. Uh,
18:17
Speaker 2: the House is either going to end up with a
18:20
Speaker 2: two hundred and twenty or two hundred and twenty one
18:22
Speaker 2: seat Republican majority, So it's going to be very narrow
18:27
Speaker 2: in terms of what you see there. And this is
18:31
Speaker 2: dependent on I think it's two races in California, where again,
18:36
Speaker 2: another thing that I got a problem with from an
18:38
Speaker 2: election perspective.
18:39
Speaker 4: How long it's taken because guys, was it the fifth Yeah,
18:43
Speaker 4: it was the fifth, it's the twentieth.
18:45
Speaker 2: Now, y'all gotta go down to Florida and figure out
18:48
Speaker 2: how they count the votes in two hours on election
18:50
Speaker 2: night that and do that because counting votes fifteen days
18:55
Speaker 2: after the fact, it's just kind of like, what are
18:59
Speaker 2: we doing here now. Granted one of these California House seats,
19:03
Speaker 2: there's been two hundred thousand votes tabulated at this point.
19:07
Speaker 2: There's a two hundred I'm sorry, a one hundred and
19:11
Speaker 2: ninety seven vote difference.
19:13
Speaker 7: So it's close. Wow like that one.
19:15
Speaker 2: Okay, maybe take a little bit longer on that, but
19:18
Speaker 2: still not two weeks, right, I could personally count to
19:21
Speaker 2: one hundred thousand and two weeks.
19:23
Speaker 4: That's a narrow margin.
19:24
Speaker 7: That's cool.
19:25
Speaker 2: I know it's kind of wild in any case. Thus
19:28
Speaker 2: concludes Chuck's Department of Government Efficiency. And we will have
19:34
Speaker 2: Todd Lutski joining us for Wall Street Watch, and I'm
19:36
Speaker 2: sorry for ask Todd and wallso have Wall Street Watch next.
19:41
Speaker 1: Like us on Facebook and follow us on Twitter at
19:43
Speaker 1: TFE show. Breaking business news is always first right here
19:48
Speaker 1: on the Financial Exchange Radio Network. Time now for Wall
19:53
Speaker 1: Street Watch. A complete look at what's moving markets so
19:56
Speaker 1: far today right here on the Financial Exchange Radio New Work.
20:00
Speaker 3: Well.
20:01
Speaker 6: Markets are pulling back as Wall Street eagerly awaits third
20:04
Speaker 6: quarter earnings from AI in chip maker in Nvidia do
20:08
Speaker 6: out after today's close. Right now, the Dow is off
20:12
Speaker 6: by about a quarter percent, or ninety nine points, SMP
20:15
Speaker 6: five hundred is down by two thirds of a percent,
20:17
Speaker 6: and the Nasdaq down nearly one percent, lower one hundred
20:21
Speaker 6: and seventy four points. Russell two thousand is off by
20:24
Speaker 6: over three quarters of a percent, Tenure tres reeled is
20:27
Speaker 6: up by two basis points at four point four zero percent,
20:30
Speaker 6: and crude oil is up about a third of a percent,
20:33
Speaker 6: rating it's sixty nine dollars in sixty cents a barrel.
20:37
Speaker 6: Target shares sinking by twenty percent after the retailer failed
20:41
Speaker 6: to impress for its third quarter results, with the company
20:44
Speaker 6: missed earnings in revenue estimates and also cut its full
20:47
Speaker 6: year guidance merely three months after raising that forecast. Target
20:51
Speaker 6: sited only a slight uptick in customer traffic, while it's
20:54
Speaker 6: CEO noted lingering softness in discretionary categories sticking with retail,
21:00
Speaker 6: Whereas shares in TJX down by one and a half
21:03
Speaker 6: percent despite the parent company to tj MAX Home Goods
21:06
Speaker 6: and Marshalls saying it had higher traffic that boosted sales
21:11
Speaker 6: in the third quarter. TJX also lifted its full year guidance. Meanwhile,
21:16
Speaker 6: shares in Williams Sonoma surging by twenty six percent after
21:19
Speaker 6: the home goods retailer reported improved sales in market share gains,
21:23
Speaker 6: as well as stronger than expected profit despite a difficult environment. Elsewhere,
21:28
Speaker 6: Chinese electric vehicle maker Neo's loss widened in the most
21:33
Speaker 6: recent quarter as it cut prices amid intense competition. That
21:37
Speaker 6: stock is up by one and a half percent. Big
21:40
Speaker 6: news in the media world this morning, where NBC Universal
21:43
Speaker 6: announced Comcast will spin off its cable assets into a separate,
21:48
Speaker 6: publicly held company. The channels to be spun off include MSNBC, CNBCUSA,
21:54
Speaker 6: Oxygen E, Sci Fi, and Golf Channel. Those assets generated
21:59
Speaker 6: about seven billion dollars in revenue in the twelve months
22:02
Speaker 6: ended September thirtieth. Comcast shares are off by about half
22:06
Speaker 6: a percent so far.
22:07
Speaker 1: Today.
22:08
Speaker 6: I'm Tucker Silvan, that's Waltree Watch.
22:11
Speaker 1: This is Ask Todd on the Financial Exchange Radio Network.
22:15
Speaker 1: If you have an existing estate plan or in the
22:17
Speaker 1: market for one, Todd Letsky is here to answer your
22:20
Speaker 1: questions and help you plan for a later life. Ask
22:23
Speaker 1: Todd is presented by Cushing and Dolan, serving Massachusetts and
22:26
Speaker 1: New England for more than thirty five years, helping families
22:29
Speaker 1: with a state and tax planning, Medicaid planning and probate
22:32
Speaker 1: law Visit Cushingdolan dot com. Now here's Todd Lutsky.
22:37
Speaker 2: As promised, we are now joined by the one and
22:40
Speaker 2: only Todd Lotski from the law firm of Cushing and Dolan.
22:43
Speaker 2: We've got the phone lines open here at eight eight
22:47
Speaker 2: eight two zero five two two sixty three. That's the
22:50
Speaker 2: number to call if you've got a question for Todd.
22:53
Speaker 2: He answers him right here live on air. That studio
22:56
Speaker 2: line again is eight eight eight to zero five. I
23:00
Speaker 2: have two two six three. Last week we did not
23:02
Speaker 2: get to everyone that we had qu'ed up, So I
23:05
Speaker 2: ask hey, if you want to make sure that you
23:07
Speaker 2: get your question answered, you gotta get colin early. Eight
23:12
Speaker 2: eight eight to zero five two two sixty three. That
23:15
Speaker 2: is the number one more time. It's eight eight eight
23:19
Speaker 2: two zero five two two six three to ask your
23:22
Speaker 2: question to a state planning attorney Todd Lutsky. Mister Lutsky,
23:26
Speaker 2: how are you doing today?
23:28
Speaker 7: I am doing great? How about yourself? Pretty well? Myself?
23:31
Speaker 2: I'm really excited about uh, this year's upcoming Fibonacci convention.
23:37
Speaker 7: Actually Fibonacci fibonacci. Yeah, I don't know if I know
23:41
Speaker 7: that Fibonacci numbers. Yeah.
23:43
Speaker 2: Yeah, this this convention is gonna be as big as
23:45
Speaker 2: the last two put together.
23:47
Speaker 7: Okay, I get it. There you go, I get it.
23:49
Speaker 2: I knew you'd get there. I knew you would, Todd.
23:51
Speaker 2: I want to talk a little bit about gifting since
23:53
Speaker 2: we are in you know, the holiday season of giving mood,
23:56
Speaker 2: you know, all all that you know stuff. Yeah, when
24:00
Speaker 2: it comes to gifting, and specifically a gifting strategy, a
24:04
Speaker 2: long term one for in a state, when is the
24:07
Speaker 2: right time to start considering that such that you're able
24:11
Speaker 2: to actually use it to manage the size of your estate,
24:15
Speaker 2: but that you're not causing problems by gifting too much
24:18
Speaker 2: too early.
24:19
Speaker 7: Yeah, And I think, I think why why tax attorneys
24:23
Speaker 7: like ourselves are always busy in the year end is
24:26
Speaker 7: November and December. Like, let's say we've done planning for
24:29
Speaker 7: clients years ago, right, and you know they generally, depending
24:33
Speaker 7: on the size of their state. Of course, if it's
24:35
Speaker 7: a smaller estate, they might not be overly concerned about
24:38
Speaker 7: about gifting because it's not designed or needed. I should
24:42
Speaker 7: say to you know, reduce the estate tax but for
24:47
Speaker 7: larger estates, you know, and again you could be thinking
24:50
Speaker 7: both for Massachusetts or your state estate tax and federal
24:54
Speaker 7: you know, they tend to call, you know, November December. Right,
24:57
Speaker 7: it's a year end deal. Should we make any gifts? Sure?
25:00
Speaker 7: Two reasons. One, they can check and see how the
25:02
Speaker 7: estate has done over the years. What have they Has
25:04
Speaker 7: the estate grown much this year? And do we need
25:07
Speaker 7: to make a gift? And you know what, for some people,
25:10
Speaker 7: it's just that year end present interest exclusion gift. Maybe
25:14
Speaker 7: I don't need to make a ton of gifts, but
25:16
Speaker 7: remember one of the ways to make a gift is
25:19
Speaker 7: a present interest exclusion gift, which today is I believe
25:23
Speaker 7: eighteen thousand dollars per year per person that you can
25:28
Speaker 7: give away. And it's per year. So as you approach
25:31
Speaker 7: year end, you might say, hey, should I use my
25:34
Speaker 7: exclusion before I lose it? I know I get it
25:36
Speaker 7: every year, but why not use it? If I can
25:39
Speaker 7: write a check any way you want to anybody you
25:42
Speaker 7: want for that amount or less eighteen thousand or less,
25:47
Speaker 7: and there is no filing requirement and no gift tax
25:51
Speaker 7: to be paid, no reporting requirement of any kind, just easy.
25:55
Speaker 7: So that might be why.
25:56
Speaker 2: Talking with Todd Lutski from the law firm of Cushing
25:59
Speaker 2: and Dolan. To ask Todd your estate planning question about
26:02
Speaker 2: your estate plan call eight eight eight to zero five
26:07
Speaker 2: two two six three. We do still have room on
26:09
Speaker 2: the phone lines here again at eight eight eight to
26:13
Speaker 2: zero five two two six three. Make sure you get
26:16
Speaker 2: calling early so that you can get your question answered
26:19
Speaker 2: by Todd live on air. Again. That number is eight
26:23
Speaker 2: eight eight to zero five two two sixty three. Todd,
26:28
Speaker 2: what kind of issues come up when someone starts talking
26:31
Speaker 2: about gifting property? Just quick summary of them?
26:34
Speaker 7: Yeah, so property is a is a tough one to
26:36
Speaker 7: give away. You're mentioning property, which begs the question that
26:40
Speaker 7: there's many kinds of assets that you can gift. When
26:43
Speaker 7: you're thinking about gifting property might not be on the forefront,
26:47
Speaker 7: depending on how quickly you think it might grow. I mean,
26:49
Speaker 7: if it's gonna balloon in value and you can get
26:51
Speaker 7: it out of your estate when it's low in value
26:53
Speaker 7: and have all the growth occur outside the estate, well
26:56
Speaker 7: that might be helpful. But if it's low basis and
26:59
Speaker 7: I'm giving away that property, I'm trapping capital gains tax
27:03
Speaker 7: liability at twenty eight point eight percent at a bare minimum,
27:07
Speaker 7: not counting depreciation recapture, if in fact it was rental
27:11
Speaker 7: property that I gave away number one and number two.
27:15
Speaker 7: If I do that, I might be saving on the
27:18
Speaker 7: estate tax, but I better be saving more than twenty
27:21
Speaker 7: eight point eight percent. If it's state tax, I'm saving
27:24
Speaker 7: state estate tax. It's only ten percent here in mass
27:28
Speaker 7: But if it's federal in state it's forty and ten,
27:31
Speaker 7: it's fifty percent.
27:33
Speaker 6: Ah.
27:33
Speaker 7: Well, now I'm starting to see the leverage between twenty
27:36
Speaker 7: eight percent versus fifty percent. And that's because by keeping
27:40
Speaker 7: a highly increased basis asset, our low basis asset, excuse me,
27:46
Speaker 7: you eliminate the built in gain when you die.
27:48
Speaker 2: Talking with Todd Lotski from the law firm of Cushing
27:51
Speaker 2: and Dolan again, still a little bit of room on
27:54
Speaker 2: the phone lines at eight eight eight two zero five
27:57
Speaker 2: two two sixty three. We're going to take a quick
28:00
Speaker 2: break right now, but when we come back, we're gonna
28:03
Speaker 2: get right to your calls with Todd. That phone number
28:07
Speaker 2: is eight eight eight to zero five two two six three.
28:11
Speaker 2: Again eight eight eight to zero five two two sixty three.
28:16
Speaker 1: Ask Todd with Todd Lutsky every Wednesday at ten thirty
28:20
Speaker 1: only here on the Financial Exchange Radio Network. You're listening
28:26
Speaker 1: to Ask Todd with Todd Lutsky on the Financial Exchange
28:30
Speaker 1: Radio Network.
28:34
Speaker 2: All right, Todd, right to the callers. You want to
28:36
Speaker 2: chat with your number one? We got Steve in a watertown. Steve,
28:40
Speaker 2: you are on with Todd Lutsky. What's your question for him?
28:44
Speaker 5: Hi, Todd, I'm of my house and I want to
28:50
Speaker 5: know how we how can she pay me without me
28:54
Speaker 5: getting screwed? It back out one hundred dollars.
28:58
Speaker 7: So I gotta ask you a couple of questions because
29:00
Speaker 7: it's such a great question, and if it was easy,
29:03
Speaker 7: I would answer it. But let me see. So you
29:05
Speaker 7: bought this house together, Yes.
29:08
Speaker 5: But nothing was on the book. But because I wasn't
29:10
Speaker 5: working at the time, and we've made a deal where
29:14
Speaker 5: I paid it down payment, I bought all the furniture.
29:16
Speaker 4: Yeah, you know.
29:17
Speaker 7: And then yeah, so hold hold on, hold on, Are
29:20
Speaker 7: you on the deed at all? No, So you're not
29:24
Speaker 7: on the deed. So when this sells, you are going
29:26
Speaker 7: to have no taxable event because it's well, she's not selling.
29:30
Speaker 5: It, it's just buying my share out.
29:32
Speaker 7: So I and how much are you are? Are you
29:36
Speaker 7: technically owed let's call it that way. It's kind of
29:38
Speaker 7: like you're owed something because you put money into this.
29:41
Speaker 5: House, right about one hundred thousand.
29:44
Speaker 7: Okay, So again, I'm not sure that's going to be
29:47
Speaker 7: structured as a sale, right, that's just simply going to
29:50
Speaker 7: be her writing you a check for one hundred thousand
29:51
Speaker 7: dollars because she's not selling her house, correct, right, So
29:55
Speaker 7: so this is not going to be structured as a
29:57
Speaker 7: sale in any way. It's not going to even be
30:00
Speaker 7: portable to me. It's almost like you could structure it
30:02
Speaker 7: as a gift. Say, she's just giving you back the
30:04
Speaker 7: one hundred thousand that you gave her earlier, right, because
30:08
Speaker 7: in essence, that's what you did. You didn't get on
30:11
Speaker 7: the deed. You didn't buy into her house. You simply
30:14
Speaker 7: gave her money and she bought furniture. So I would say,
30:18
Speaker 7: at the end of the day, she's giving it back
30:19
Speaker 7: to you. Now, remember, is it a taxable gift? Arguably
30:22
Speaker 7: it is. Arguably it was a taxable gift when you
30:24
Speaker 7: gave it to her, But at the you know, probably
30:28
Speaker 7: nobody thought it was that. Nobody filed a seven h
30:30
Speaker 7: nine gift tax return. I think you should have at
30:33
Speaker 7: the and but don't worry because either way there's no
30:37
Speaker 7: tax due because each of you have a thirteen point
30:41
Speaker 7: six million dollar gift tax exemption to use once in
30:46
Speaker 7: a lifetime thirteen point nine million come twenty twenty five
30:51
Speaker 7: January one. So I'm gonna say, tell her to give
30:54
Speaker 7: you the money back, and arguably it's a gift. You
30:56
Speaker 7: can inform her that she should file, but no gift
30:59
Speaker 7: taxes will be do so I think that's the easiest
31:03
Speaker 7: way to take care of business. Folks. That's an easy
31:07
Speaker 7: gift idea, but making gifts in general is not always
31:11
Speaker 7: so easy. So even here, no one really thought that
31:14
Speaker 7: this was a gift. But you know what, sometimes you
31:17
Speaker 7: throw a person's name on a child's name or something
31:20
Speaker 7: on a joint broke at your bank account. Did you
31:22
Speaker 7: make a gift? What if I put a name on
31:25
Speaker 7: a piece of property, like a rental property or a home,
31:28
Speaker 7: Have I made a gift? Are there any income tax
31:31
Speaker 7: ramifications associated with that gift now that it's a rental
31:34
Speaker 7: property in a child's name? Wow? You know these are
31:38
Speaker 7: all what about creditor issues? So folks, there's so many
31:42
Speaker 7: ways that there's so many things that can be impacted
31:46
Speaker 7: when you make a gift. You really need to understand
31:49
Speaker 7: how to make it and if you should make it,
31:53
Speaker 7: and again, maybe not putting it in the hands of
31:55
Speaker 7: children is a better way to do it. Put it
31:57
Speaker 7: in the hands of a gifting trust. Folks, lots to
32:01
Speaker 7: think about. Figure out what's the best way for you
32:04
Speaker 7: to make a gift or not to gift eight six
32:07
Speaker 7: six eight four eight five six nine nine or Legal
32:12
Speaker 7: Exchange Show dot com. Get the guide Making the Most
32:15
Speaker 7: of Gifting Assets eight six six eight four eight five
32:19
Speaker 7: six nine nine or Legal Exchange Show dot com.
32:24
Speaker 2: Todd, I've got another one here for you. Let's go
32:26
Speaker 2: to Jeff on the Cape. Jeff, what is your question
32:28
Speaker 2: for Todd?
32:30
Speaker 1: Good morning, Todd.
32:32
Speaker 5: Really enjoy the show. Thank you. I wanted to ask
32:34
Speaker 5: you a question about the gift asset. Is that tax deductible? Well,
32:40
Speaker 5: the person that is giving the gift to a family.
32:44
Speaker 7: Member, so great, great question. Not only is it not
32:48
Speaker 7: tax deductible, I'm sure you're familiar with the phrase no
32:51
Speaker 7: good deed goes unpunished, right, So here's the story. It
32:55
Speaker 7: is the giver, the giver not the receipipient who has
33:01
Speaker 7: to pay a gift tax. The recipient never has a
33:05
Speaker 7: gift tax when they receive it, and the recipient doesn't
33:08
Speaker 7: have an income tax when they receive it, but the
33:12
Speaker 7: giver once again has to pay potentially subject to gift tax.
33:18
Speaker 7: Not only do they are they subject to gift tax.
33:20
Speaker 7: There is no income tax ramification associated with a gift ever,
33:25
Speaker 7: so it's not income taxable, but it's also not income deductible.
33:31
Speaker 7: So there you go. No good deed goes unpunished.
33:35
Speaker 2: Keep moving for you here, Todd, Let's go to Casey
33:37
Speaker 2: in Plymouth. Casey, you are now on with Todd Latsky.
33:43
Speaker 3: Hi, Todd, I just have a question. So my husband
33:46
Speaker 3: and his siblings inherited a property from their mom when
33:49
Speaker 3: she passed away. His sister has lived in the property,
33:53
Speaker 3: and now he's, you know, several years later, is buying
33:56
Speaker 3: the siblings out well below market value. I'm just wondering,
34:02
Speaker 3: with what he makes on that property from the sister,
34:05
Speaker 3: how does he avoid any type of tax if possible,
34:09
Speaker 3: considering they're making a lot less than they would have
34:11
Speaker 3: if it was on the market.
34:12
Speaker 7: What's the value of the property, Probably four hundred and
34:19
Speaker 7: call it four to fifty. So if it's four fifty,
34:22
Speaker 7: so here's the deal. How long ago did did the
34:25
Speaker 7: individual die that they caused them to inherit the property.
34:30
Speaker 5: It's been.
34:33
Speaker 7: Roughly three years. Three years great, So here's the story
34:37
Speaker 7: on the date of death. And there's a lot going
34:40
Speaker 7: on here because it's going to be treated technically as
34:42
Speaker 7: a part sale, part gift because it sounds like they're
34:45
Speaker 7: buying it for way under fair market value. So a
34:49
Speaker 7: couple of things going on. One on the date of
34:51
Speaker 7: death three four years ago, all the siblings that inherited
34:55
Speaker 7: this got it with a step up in basis, which
34:59
Speaker 7: is wonderful. So if the property back then was worth
35:03
Speaker 7: three hundred and fifty thousand dollars three years ago, then
35:07
Speaker 7: they were to sell it right then and there their
35:08
Speaker 7: gain would be zero because their basis would be three fifty.
35:12
Speaker 7: So he got a one third step up in basis.
35:16
Speaker 7: So one third of the value on the date of
35:18
Speaker 7: death is his cost basis. Now if he sells it
35:22
Speaker 7: to her or to the sister now and he gets
35:27
Speaker 7: more than what his cost basis was for his peace,
35:30
Speaker 7: so his one third of the proceeds if it exceeds
35:34
Speaker 7: his cost basis, which was one third of the value
35:37
Speaker 7: on the date of death. Then that difference will be
35:41
Speaker 7: treated as a taxable a capital gain, and since he
35:45
Speaker 7: hasn't been living there, then he has to pay capital
35:49
Speaker 7: gains tax on that on that piece. Now, I suspect
35:54
Speaker 7: that it's very possible, since they're buying it at less
35:57
Speaker 7: than fair market value, that the piece that he gets
36:01
Speaker 7: his one third, if you will, might be less than
36:06
Speaker 7: or equal to the fair market value his basis, which
36:11
Speaker 7: was again one third of the fair market value on
36:13
Speaker 7: the date of death, because it wasn't that long ago,
36:15
Speaker 7: so it may end up being a wash for him.
36:19
Speaker 7: He probably won't be able to generate a loss, but
36:22
Speaker 7: he might not have a large capital gain, so that's
36:25
Speaker 7: good for him. On her end, however, you may not
36:29
Speaker 7: care about this, but just for educational purposes for the radio.
36:33
Speaker 7: On her end, she's buying the property, but she's buying
36:37
Speaker 7: it for less than fair market value, so arguably she's
36:42
Speaker 7: not going to have much of an issue at all
36:44
Speaker 7: because she's the buyer. But I wonder if on his end,
36:48
Speaker 7: actually back on his end, he's making a part gift,
36:51
Speaker 7: so he might have no capital gains tax. But because
36:54
Speaker 7: he's selling it for less than fair market value. He
36:57
Speaker 7: might have a gift tax associated with it, part sale
37:00
Speaker 7: park gift. Sorry for that Rush, but there's a lot
37:03
Speaker 7: going on in this case. Gifting's not easy.
37:05
Speaker 2: Mister Lutsky, Thank you so much for joining us today.
37:08
Speaker 7: Always a pleasure.
37:10
Speaker 1: This has been asked Odd on the Financial Exchange Radio
37:13
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37:16
Speaker 1: Cushing and Dolan, serving Massachusetts and New England for more
37:19
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37:22
Speaker 1: Medicaid planning, and probate law. Call eight hundred three nine
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