Latest / The Financial Exchange Show / Brent Tops $100 as Inflation Pressure Builds Again

Transcript

Brent Tops $100 as Inflation Pressure Builds Again · The Financial Exchange Show

0:00
Speaker 1: The Financial Exchange is produced by Money Matters Radio and
0:02
Speaker 1: is hosted by employees of the Armstrong Advisory Group, a
0:05
Speaker 1: registered investment advisor. All opinions expressed are solely those of
0:08
Speaker 1: the hosts. Do not reflect the opinions of Armstrong Advisory
0:11
Speaker 1: or anyone else. Investments can lose money. This program does
0:14
Speaker 1: not offer any specific financial or investment advice. Please consult
0:17
Speaker 1: your own financial tax and estate planning advisors before making
0:20
Speaker 1: any investment decisions. Armstrong Advisory and the advertisers heard on
0:23
Speaker 1: this program do not endorse each other or their services.
0:26
Speaker 1: Armstrong and Money Matters Radio do not compensate each other
0:28
Speaker 1: for referrals and are not affiliated. This is The Financial
0:34
Speaker 1: Exchange with Chuck Zotta and Paul Lane. Your exclusive look
0:38
Speaker 1: at business and financial news affecting your day, your city,
0:42
Speaker 1: your world. Stay informed and up to date about economic
0:46
Speaker 1: and market trends, plus breaking business news every day. The
0:50
Speaker 1: Financial Exchange is a proud partner of the Disabled American
0:53
Speaker 1: Veterans Department of Massachusetts. Help us support our great American
0:57
Speaker 1: heroes by visiting DAV5K. Boston and making a donation today. This
1:03
Speaker 1: is the Financial Exchange with Chuck Zada and Paul Lane.
1:09
Speaker 2: Chuck, Paul Tucker with you here. And as we kick
1:13
Speaker 2: things off, I'm going to start today with a little
1:17
Speaker 2: bit of energy discussion just because We're unfortunately, uh, back
1:22
Speaker 2: above a hundred dollars, uh, per barrel for Brent crude, uh,
1:26
Speaker 2: trading right now at a hundred dollars and 69 cents
1:29
Speaker 2: up to 77, uh, since the start of the trading day.
1:35
Speaker 2: And this is the first time that we've been back
1:36
Speaker 2: above that mark since July. Uh, we only got above
1:40
Speaker 2: there for, I think it was literally like a day
1:43
Speaker 2: or two in July. We spent much of March and, uh,
1:48
Speaker 2: much of May in that hundred plus period on Brent. Uh, but, uh,
1:53
Speaker 2: this is a little bit, a little bit, uh, discouraging
1:57
Speaker 2: to see the reason why we're seeing this today, Paul,
2:01
Speaker 2: is that the events of the last 24 hours, basically the,
2:05
Speaker 2: the pattern, as I understand it, uh, Iran targeted a
2:10
Speaker 2: couple of us Navy ships with anti-ship ballistic missiles, uh,
2:14
Speaker 2: In response, the United States sunk five Iranian crude tankers
2:21
Speaker 2: that were anchored off of Karg Island. And then in
2:25
Speaker 2: response to that, Iran launched a barrage of anywhere between
2:30
Speaker 2: 20 and 35 ballistic missiles. It's unclear exactly how many.
2:34
Speaker 2: At a U.S. military installation in Jordan, many of those
2:38
Speaker 2: were intercepted, but not all of them. And so it
2:41
Speaker 2: does appear that we have tensions that are ratcheting up
2:44
Speaker 2: right now as opposed to ratcheting down. That continues to
2:48
Speaker 2: be the story.
2:49
Speaker 3: I'm glad that you're staying on top of all the
2:51
Speaker 3: back and forth because it is hard to keep your
2:55
Speaker 3: mind around all the back and forth between the two.
2:58
Speaker 3: But certainly tensions are rising. And as a result of that,
3:01
Speaker 3: we're seeing the inflationary pressure on oil and gas prices.
3:04
Speaker 3: We're also seeing on the interest rate front, we still
3:07
Speaker 3: sit at about 4.8%.
3:10
Speaker 2: On the U.S.
3:10
Speaker 3: 10-year Treasury.
3:12
Speaker 2: And the U.S.
3:13
Speaker 3: 2-year Treasury for short-term rates sits right now at 4.4%.
3:17
Speaker 3: So continually, the discussion will be surrounded for the next
3:22
Speaker 3: few weeks with the Fed meeting come up a week
3:24
Speaker 3: from today about what they will do in the face
3:29
Speaker 3: of what seems to be a very persistent inflationary pressure
3:33
Speaker 3: that looms out there, Chuck, because it's just hard to
3:36
Speaker 3: envision that we're going to get any real reprieve on
3:38
Speaker 3: the energy front, given all that you just mentioned. And really,
3:43
Speaker 3: the last few weeks just haven't really bolstered confidence that
3:47
Speaker 3: this is going to get resolved anytime soon.
3:50
Speaker 2: Yeah, so here's where we stand right now. AAA national
3:53
Speaker 2: average for gas prices currently sits at $ 4. 22 a gallon.
3:57
Speaker 2: That is up $ 0. 07 compared to yesterday. up 21 cents
4:02
Speaker 2: in the past month, and up about 103 in the
4:07
Speaker 2: past year. Diesel is where the real action has been lately.
4:11
Speaker 2: Diesel now at 594, up another 4 cents overnight. It
4:16
Speaker 2: is up 64 cents in the last month, and is
4:19
Speaker 2: now up $ 2. 24 in the last year. Patrick DeHaan runs
4:25
Speaker 2: the Gas Buddy website. If you've ever poked around there,
4:29
Speaker 2: it's basically a map of gas prices, and they also
4:31
Speaker 2: do some computations of national average, state averages, things like that.
4:36
Speaker 2: This is from 15 minutes ago, a tweet from Patrick. Because, again,
4:42
Speaker 2: he knows this stuff better than I do, and so
4:44
Speaker 2: when he talks, I listen. With diesel prices $ 2. 25 a
4:50
Speaker 2: gallon higher than a year ago, businesses are paying $ 284
4:54
Speaker 2: million more per day on diesel, while gasoline stands $ 1. 02
4:59
Speaker 2: a gallon higher than a year ago. Consumers are paying
5:02
Speaker 2: $ 377 million more per day, adding up to $ 4. 63 billion
5:09
Speaker 2: in additional fuel surcharges per week.
5:11
Speaker 4: Wow.
5:12
Speaker 2: So you're talking, again, your ballpark... $ 18 billion per month
5:19
Speaker 2: at these rates and about $ 220 billion a year in
5:24
Speaker 2: additional gas and diesel costs if you were to see
5:28
Speaker 2: these prices maintained for a year, which obviously we won't.
5:31
Speaker 2: The gas price does not stay the same for a year.
5:34
Speaker 2: It could go higher, it could go lower, but this
5:36
Speaker 2: is the scale of which we're seeing these higher prices
5:39
Speaker 2: now reflected in the aggregate. The big thing is that
5:45
Speaker 2: The diesel situation is starting to get pretty urgent, and
5:48
Speaker 2: the EIA data is delayed this week until tomorrow because
5:51
Speaker 2: of the Labor Day holiday. And so we don't have
5:56
Speaker 2: that in hand today. Normally we get it at 10.30 a.m.
6:00
Speaker 2: on Wednesdays. We'll get it at 10.30 tomorrow instead. But
6:05
Speaker 2: front-month diesel futures, meaning diesel for October delivery, in terms
6:11
Speaker 2: of what we are seeing right now, That is up
6:14
Speaker 2: 15 more cents today, meaning there's a pretty good chance
6:18
Speaker 2: that before the end of this week, we're going to
6:20
Speaker 2: see the national average for diesel take out the $ 6
6:23
Speaker 2: a gallon mark for the first time ever.
6:25
Speaker 1: Jeez.
6:26
Speaker 2: And the problem here is that this just, it seeps
6:29
Speaker 2: into everywhere in the economy. Gasoline, like, gasoline's the thing
6:33
Speaker 2: that annoys us because we look at it and we're like, oh,
6:37
Speaker 2: I paid $ 4 a month ago, and now it's at $ 4.
6:40
Speaker 5: 22.
6:40
Speaker 2: That's the one that annoys us, because the vast majority...
6:44
Speaker 2: And most of us don't own diesel vehicles. The handful
6:47
Speaker 2: of you that own F-250s and F-350s that are running diesel,
6:51
Speaker 2: you're looking at me like, Chuck, the diesel price is insane,
6:56
Speaker 2: because diesels have 64 cents, more than 10% in the
6:59
Speaker 2: past month. And the problem is the diesel inventories are
7:02
Speaker 2: very low, because... Of two factors. The biggest one, based
7:08
Speaker 2: on what I gather, three factors. Number one, Ukraine continues
7:13
Speaker 2: to pummel Russian oil refineries as part of its strategy
7:18
Speaker 2: to hammer the Russian economy to try to get out
7:21
Speaker 2: from under Russian attacks. Russia produces a ton of diesel
7:25
Speaker 2: and gasoline normally, and they export a decent amount. The
7:28
Speaker 2: problem is that with all of the refineries offline there,
7:31
Speaker 2: Russia not only has a diesel export ban that's currently
7:35
Speaker 2: in place, but they're actually importing diesel and gasoline because
7:37
Speaker 2: they can't produce enough to fit their domestic needs. So
7:40
Speaker 2: that's a problem. Problem number two. In order to produce diesel, ideally,
7:45
Speaker 2: you want heavier crude in order to maximize diesel output
7:49
Speaker 2: per barrel. Heavier crudes tend to come out of the
7:53
Speaker 2: Middle East in a lot of cases. You can also
7:55
Speaker 2: get them from Canada, the Alberta tar sands, and Venezuela
8:00
Speaker 2: and other places like that produce heavy crude as well,
8:02
Speaker 2: but not enough to offset what is not coming out
8:05
Speaker 2: of the Middle East, as well as there are a
8:07
Speaker 2: bunch of refineries in the Middle East that are not
8:09
Speaker 2: operating because you can't send all of this stuff out
8:12
Speaker 2: of the Strait of Hormuz or through pipelines that you
8:15
Speaker 2: previously could. The third reason we have diesel prices where
8:19
Speaker 2: they are, China, for whatever reason, and again, I don't
8:23
Speaker 2: speculate to know the why. Y'all can do that on
8:27
Speaker 2: your own time. But for whatever reason, because honestly, when
8:30
Speaker 2: it comes to the Chinese government, half the time we
8:32
Speaker 2: don't know the why. You just don't know. The Chinese government,
8:36
Speaker 2: for the last four or five months, has significantly spooled
8:40
Speaker 2: down state-owned refineries, and they have been putting pressure on smaller,
8:47
Speaker 2: what are called teapot refineries in China. to not run
8:50
Speaker 2: at full capacity. We don't know exactly why they're doing this.
8:54
Speaker 2: Maybe they have more finished products stored up than we think.
8:58
Speaker 2: Finished product you typically can't store forever. It's not like
9:01
Speaker 2: crude where you just stick it in a big salt
9:04
Speaker 2: cavern and call it a day. The storage doesn't last
9:07
Speaker 2: as long for a refined product. So it's unclear what's
9:11
Speaker 2: going on there in terms of why China hasn't ramped
9:14
Speaker 2: up capacity of their refineries. But it all leads to
9:18
Speaker 2: a picture right now where, and again, we talked to
9:22
Speaker 2: Tom Kloza on last Friday, I believe it was, who
9:26
Speaker 2: is an energy analyst for Gulf Oil. And he told
9:29
Speaker 2: you what we've been talking about for the last month
9:32
Speaker 2: or so. And he said in no uncertain terms, he's like,
9:35
Speaker 2: if things continue, like you could see $ 7, $ 8, $ 9
9:37
Speaker 2: diesel by the end of the year. And that's not
9:43
Speaker 2: something that I think anyone had on their bingo card
9:45
Speaker 2: before this year, Paul.
9:46
Speaker 3: No, the energy market has just been, it's actually been
9:50
Speaker 3: surprising that it's been able on the crude side to
9:52
Speaker 3: sustain as long as it has for the last six
9:55
Speaker 3: or seven months or so amidst all this pressure. But
9:58
Speaker 3: the diesel, to your point, it is worth emphasizing it
10:02
Speaker 3: is just every ever present in the economy from everything
10:06
Speaker 3: that you and i consume and listeners out there it
10:08
Speaker 3: is really just the uh the the fuel pun intended
10:12
Speaker 3: that makes the economy go let's.
10:14
Speaker 2: Take a quick break here when we return uh that's
10:17
Speaker 2: enough diesel and gas talk for now Instead, we're going
10:20
Speaker 2: to talk a little bit about how you all feel
10:23
Speaker 2: about the economy next.
10:26
Speaker 1: The Financial Exchange streams live on YouTube. Like our page
10:30
Speaker 1: and stay up to date on breaking business news all
10:32
Speaker 1: morning long. This is the Financial Exchange Radio Network. Follow
10:38
Speaker 1: the Financial Exchange Show on Instagram and see what's driving
10:41
Speaker 1: the conversation about Wall Street and economic trends. This is
10:45
Speaker 1: the Financial Exchange Radio Network.
10:52
Speaker 6: The Financial Exchange is a proud partner of the Disabled
10:55
Speaker 6: American Veterans Department of Massachusetts, and this year's 5K is
10:59
Speaker 6: officially sold out. The race will take place on Saturday,
11:04
Speaker 6: November 7th at Fort Independence on Castle Island, and we
11:07
Speaker 6: hope you can take this opportunity to consider making a donation.
11:11
Speaker 6: Your gifts help provide vital services like free transportation to
11:15
Speaker 6: medical appointments and safe housing for single veterans and their families.
11:19
Speaker 6: Donate today at DAV5K. Boston. That's DAV5K. Boston.
11:26
Speaker 2: Paul, we got a piece in the Wall Street Journal.
11:29
Speaker 2: It's titled, Six Charts That Explain How Americans Really Feel
11:32
Speaker 2: About the Economy. And I went through the charts. The
11:36
Speaker 2: first is Gallup does some polling on this from time
11:40
Speaker 2: to time. And basically it says that, okay, there are
11:44
Speaker 2: right now More people rating the economy poor compared to
11:49
Speaker 2: good or excellent. And that's basically been the case for
11:52
Speaker 2: the last six years. And we haven't really seen that
11:56
Speaker 2: other than the financial crisis or bursting of the tech bubble.
12:00
Speaker 2: Got it. So people feel bad. Uh, then we have
12:03
Speaker 2: the university of Michigan consumer sentiment data, which I've talked about.
12:06
Speaker 2: They switched over to a new online methodology a couple
12:10
Speaker 2: of years ago. And ever since then, the results have
12:11
Speaker 2: just been worse than ever.
12:13
Speaker 3: So though they claim that it is not impactful and
12:16
Speaker 3: that they had sourced it a lot prior to making
12:18
Speaker 3: that switch.
12:19
Speaker 2: But, uh, to be honest, I just don't, the university
12:22
Speaker 2: of Michigan one, it's sad because it used to be
12:24
Speaker 2: the gold standard of sentiment surveys in the U S
12:27
Speaker 2: and I just think it's useless now. Uh, Other ones
12:30
Speaker 2: that I do think are useful in pulling this picture together, though.
12:33
Speaker 2: Real wage gains in December of 25 from five years earlier.
12:37
Speaker 2: So real wages, remember, how much did wages go up
12:41
Speaker 2: accounting for inflation? And what this distribution shows here is
12:47
Speaker 2: that somewhere in the ballpark of 35 to 40 percent
12:52
Speaker 2: of Americans have had negative real wage gains. over the
12:57
Speaker 2: 2020 through 2025 period. Basically saying, look, even though they
13:02
Speaker 2: might have seen their wages go up 1% or 2%
13:04
Speaker 2: a year, inflation went up more, and so their real
13:07
Speaker 2: wages are negative. Okay, yep, I get that. Wage growth
13:13
Speaker 2: for job stayers versus job switchers has kind of come
13:17
Speaker 2: back and normalized, so I'm not sure why this is
13:20
Speaker 2: a chart that describes why Americans feel the way they feel,
13:23
Speaker 2: because Right now, it basically looks like it did pre-pandemic,
13:27
Speaker 2: so I'm not buying that one. And then housing affordability
13:31
Speaker 2: is a big thing as well, and credit card interest
13:33
Speaker 2: rates are higher. Paul, make sense of this for me,
13:38
Speaker 2: and then I'll give you my thoughts.
13:40
Speaker 3: In terms of what stock should we put in this,
13:43
Speaker 3: or how real do I think it is?
13:46
Speaker 2: Is this actually telling us what the problem is?
13:50
Speaker 3: Any of these six charts, are they pointing to the problem?
13:53
Speaker 3: If I had to nail it down to just one
13:54
Speaker 3: concise way to sum it up, it's inflation, really. And
13:58
Speaker 3: we've had this conversation before when this polling data comes out.
14:01
Speaker 3: To me, it is a scenario where we went through
14:05
Speaker 3: a 15, 20 year period plus where inflation really wasn't
14:09
Speaker 3: even discussed at all post great financial recession or post
14:14
Speaker 3: great financial crisis.
14:15
Speaker 2: And now over the course of.
14:16
Speaker 3: The last five to six years, that chart that you
14:18
Speaker 3: hit on in terms of the real wage growth, to me,
14:21
Speaker 3: that is, I feel, the biggest story if you're looking
14:25
Speaker 3: as to the reason why Americans feel negatively about the economy.
14:29
Speaker 3: It is the silent killer of inflation. The wage growth
14:33
Speaker 3: hasn't come to meet the inflationary increase that we've seen
14:37
Speaker 3: over the last five or six years or so. There
14:39
Speaker 3: are certainly ways that you could argue against that. There
14:42
Speaker 3: are people whether you want to go the K-shaped economy
14:46
Speaker 3: argument route that, hey, the people who have been investing
14:48
Speaker 3: in the market have benefited from great asset growth over
14:51
Speaker 3: this period of time. But I think most Americans, it's
14:54
Speaker 3: that sticker shock that still lingers with them when they
14:58
Speaker 3: go to buy groceries or other items that is attributable
15:02
Speaker 3: for all this negative sentiment.
15:04
Speaker 2: Yeah, it is inflation. And the case that I'll make,
15:10
Speaker 2: and look at I don't want this to be misconstrued.
15:13
Speaker 2: Recessions suck, and they're awful, and they're horrible. So let
15:16
Speaker 2: me get that out of the way. And usually when
15:18
Speaker 2: someone says that, then they say something terrible anyways. But
15:20
Speaker 2: I promise I'm not going to say something terrible. Here's
15:23
Speaker 2: the deal. In a recession, yes, it's true that we
15:26
Speaker 2: all feel it to a certain extent. But the people
15:28
Speaker 2: that feel it the most are the ones that get
15:32
Speaker 2: laid off. And, Paul, when we talk about generally what
15:35
Speaker 2: we see with unemployment in a recession... usually the increase
15:38
Speaker 2: in unemployment is like a 2% to 4% increase over
15:42
Speaker 2: the baseline. With inflation, we're all feeling it. Everybody, yeah.
15:48
Speaker 2: We all do. So I think that's a big part
15:51
Speaker 2: of it is in a recession, yes, like, let's say
15:55
Speaker 2: you don't lose your job in a recession. You're still
15:58
Speaker 2: on edge. You're still nervous. You still have a boss
16:00
Speaker 2: breathing down your neck. Like, nothing feels good there. But
16:04
Speaker 2: it's not the same as, oh, we're all getting hit
16:07
Speaker 2: by inflation in some way, shape, or form. Like, it's different.
16:12
Speaker 2: The other piece that I will say, and this I
16:13
Speaker 2: think is something that matters as well, is I think
16:20
Speaker 2: that the cumulative toll of the last six years is
16:25
Speaker 2: just weighing on us. Because every year, it's just been
16:31
Speaker 2: something new that we've had to deal with in a
16:34
Speaker 2: way that is just remarkably intense compared to what we've
16:39
Speaker 2: seen in previous business cycles. So 2020, I don't even
16:44
Speaker 2: need to talk about it. It was wild. 2021 then
16:48
Speaker 2: was the year where, okay, people are finally doing more
16:52
Speaker 2: and trying to buy more stuff, and you'd order a
16:56
Speaker 2: set of chairs, and it would take eight months to
16:57
Speaker 2: get there because everything was messed up from supply chain perspectives.
17:00
Speaker 2: Then 2022, peak inflation. Inflation hits 9% in the first
17:08
Speaker 2: half of the year. Everyone's just like, man, this sucks.
17:11
Speaker 2: This is brutal. Then, the back end of that, you've
17:14
Speaker 2: got interest rates that get jacked up heading into 2023,
17:18
Speaker 2: and you've got the Silicon Valley bank failure, and everyone's like, oh,
17:21
Speaker 2: interest rates are through the roof now, and are there
17:24
Speaker 2: going to be more bank failures, this and that.
17:26
Speaker 3: Almost forgot about that one.
17:29
Speaker 2: 2024, we had concerns in the back half of the
17:31
Speaker 2: year about... The labor market and what was happening there.
17:35
Speaker 2: Remember the SOM rule triggered in 2024?
17:38
Speaker 3: Yes.
17:38
Speaker 2: And we were talking about, gee, does this mean recession
17:40
Speaker 2: is coming? So that was the big fear in 2024. 2025,
17:44
Speaker 2: we had all the tariff stuff that we went through. 2026,
17:47
Speaker 2: we've got the war in the Middle East and higher
17:50
Speaker 2: gas prices and this and that. It's just been one
17:54
Speaker 2: unique thing after another for the last six years. Whereas
17:58
Speaker 2: other business cycles, I'm not saying that, like, you didn't
18:00
Speaker 2: have problems. Because my big thing that I always say is, look,
18:03
Speaker 2: every single year, there's, like, something that stresses out markets
18:07
Speaker 2: or this and that. But they're usually more run-of-the-mill, more
18:11
Speaker 2: normal things than what we've seen the last six years.
18:14
Speaker 2: You know, 9% inflation is a once-in-a-lifetime thing in the
18:18
Speaker 2: United States. Right. A pandemic. Maybe twice. Truly once-in-a-lifetime thing.
18:22
Speaker 1: Right.
18:22
Speaker 2: Pandemic. Once-in-a-lifetime thing. Right. The rise in interest rates that
18:27
Speaker 2: we saw, the magnitude of it is something that happens
18:30
Speaker 2: like every 20 years or so, a move of that
18:33
Speaker 2: much in interest rates. So the point I'll make is, guys,
18:38
Speaker 2: I think that a lot of people are just beat
18:39
Speaker 2: up from the last five or six years.
18:42
Speaker 1: I'm with you.
18:43
Speaker 3: I do think that is. I was trying to think,
18:45
Speaker 3: you know, the pre-2017, 2018, 2019, those years prior to
18:50
Speaker 3: the pandemic. And maybe this is just because of the
18:52
Speaker 3: distant memory. I just don't feel as if there were
18:55
Speaker 3: economic events that were as large scale that sort of presided,
19:00
Speaker 3: you know.
19:01
Speaker 2: Yeah, they just weren't as intense. And look, I cut
19:04
Speaker 2: my teeth in this business coming out of the financial
19:06
Speaker 2: crisis in 2009. So I remember all the double-dip recession
19:11
Speaker 2: fears in 2011 and 2012. Like, I went through, you know,
19:15
Speaker 2: the Eurozone. Is it going to hold together? Are we
19:18
Speaker 2: going to see, you know, Italy even, Grexit? And I
19:22
Speaker 2: can't remember the other ones that we had. Like, I
19:25
Speaker 2: don't know. But this is just more intense the last
19:28
Speaker 2: six years, I think. Let's take a quick break. We
19:30
Speaker 2: got Wall Street Watch, and Todd Lutzky joins us next.
19:39
Speaker 1: Like us on Facebook and follow us on Twitter at TFEShow.
19:43
Speaker 1: Breaking business news is always first, right here on the
19:47
Speaker 1: Financial Exchange Radio Network.
20:06
Speaker 2: As the tit-for-tat attacks between the U.S.
20:08
Speaker 6: And Iran continue. Right now, the Dow is down about
20:12
Speaker 6: six-tenths of a percent, or about 300 points lower. S
20:15
Speaker 6: & P 500 down about a third of a percent,
20:18
Speaker 6: or 24 points off. NASDAQ down over four-tenths of one percent,
20:22
Speaker 6: or 110 points lower. Russ 2000 is down three-quarters of
20:25
Speaker 6: a percent. Ten-year treasury yield flat at 4.806%. Crude oil
20:28
Speaker 6: up 3%, trading at $ 96 a barrel.
20:29
Speaker 2: And Brent....
20:35
Speaker 6: Is at $ 101 a barrel. Several energy stocks seeing gains
20:39
Speaker 6: in reaction to the climb in oil prices. Exxon and
20:42
Speaker 6: Chevron are up over 1%, while Occidental Petroleum shares are
20:46
Speaker 6: up by 2%. Meanwhile, convenience store chain Casey's General Store
20:50
Speaker 6: posted mixed quarterly results, where its earnings and revenue beat estimates,
20:54
Speaker 6: but reported a 0.3% year-over-year decline in fuel sales, that
20:59
Speaker 6: stock plunging by 17%. Elsewhere, Chime Financial jumping 6% after
21:05
Speaker 6: the financial technology company agreed to pay $ 590 million in
21:10
Speaker 6: cash to acquire lender Stride Bank. And Apple down about
21:15
Speaker 6: half a percent ahead of its anticipated product event this afternoon,
21:19
Speaker 6: where the tech giant will unveil its first foldable iPhone
21:24
Speaker 6: that has been in the makings for a decade. The
21:26
Speaker 6: event will also be a first for new CEO John Ternes.
21:32
Speaker 6: I'm Tucker Silva, and that is Wall Street Watch.
21:35
Speaker 1: This is Ask Todd on the Financial Exchange Radio Network.
21:39
Speaker 1: If you have an existing estate plan or are in
21:41
Speaker 1: the market for one, Todd Lutzke is here to answer
21:44
Speaker 1: your questions and help you plan for a later life.
21:46
Speaker 1: Ask Todd is presented by Cushing & Dolan, serving Massachusetts
21:50
Speaker 1: and New England for more than 35 years, helping families
21:53
Speaker 1: with estate and tax planning, Medicaid planning, and probate law.
21:57
Speaker 1: Visit CushingDolan.com. Now, here's Todd Lutzke.
22:03
Speaker 2: We are now joined by the one, the only Todd
22:07
Speaker 2: Lutzky from the law firm of Cushing and Dolan. It
22:10
Speaker 2: is your chance to ask Todd your estate planning questions
22:13
Speaker 2: live on air right now. And we've got the phone
22:17
Speaker 2: lines wide open at 888-205-2263. Again, that number is 888-205-2263.
22:20
Speaker 2: We can usually get to Two or three of your calls,
22:31
Speaker 2: so get calling early and often to make sure you
22:34
Speaker 2: don't miss your opportunity to ask Todd your estate planning
22:38
Speaker 2: questions live on air right now. That phone number is 888-205-2263. Again, 888-205-2263.
22:43
Speaker 6: Mr.
22:43
Speaker 2: Lutzky, how are you doing today? I am never better,
22:46
Speaker 2: and you? Had a tough long weekend.
22:59
Speaker 4: What's going on?
23:00
Speaker 2: Accidentally swallowed invisible ink.
23:02
Speaker 7: Yeah?
23:03
Speaker 2: Spent the whole weekend waiting to be seen at the hospital.
23:06
Speaker 4: Yeah, I can imagine.
23:07
Speaker 2: Yeah, real problem. Todd, I want to talk to you
23:10
Speaker 2: a little bit about trust and how they distribute assets
23:16
Speaker 2: to beneficiaries. What are the advantages in terms of, well,
23:21
Speaker 2: give me any advantages, I guess, in terms of how
23:24
Speaker 2: trusts are superior to either just naming beneficiaries on an
23:29
Speaker 2: account or using a will to distribute assets.
23:32
Speaker 4: Well, there's so many. I'm glad you're making me only
23:34
Speaker 4: do one, but if I can get two in, I will.
23:36
Speaker 2: I want all of them, Todd. Right now.
23:40
Speaker 4: I have an hour show, more than that. But the
23:43
Speaker 4: good news is a couple of them. One I think
23:45
Speaker 4: a lot about is second marriages. I mean, can you imagine?
23:48
Speaker 4: You don't want to You want to take care of
23:50
Speaker 4: your children from a prior marriage. You want to take
23:53
Speaker 4: care of your current spouse because you love your spouse
23:55
Speaker 4: and you don't want your spouse to then disinherit your
23:58
Speaker 4: own kids and leave things to her kids. But you
24:01
Speaker 4: want to control all of that. Well, how would you
24:04
Speaker 4: possibly do that, right? If you just leave everything designated
24:07
Speaker 4: beneficiary spouse or everything joint to the spouse, then, you
24:11
Speaker 4: know– all bets are off when you pass away for
24:14
Speaker 4: your side of the family. But if you set up
24:17
Speaker 4: a trust, not only will you be avoiding the probate
24:20
Speaker 4: and sheltering assets for estate taxes, but you're able to
24:24
Speaker 4: really control the family behind the estate plan is what
24:27
Speaker 4: I say is really the more important piece of this equation.
24:31
Speaker 4: And so here you could take care of the spouse.
24:34
Speaker 4: The trust would be irrevocable when you die. You could
24:37
Speaker 4: have the trustee or the spouse being entitled to income
24:41
Speaker 4: or from the assets, maybe even the ability to take
24:44
Speaker 4: principle as needed, but ultimately controlling so that when the
24:50
Speaker 4: spouse dies, there's something left for your side of the family,
24:54
Speaker 4: if that's what you wish, or to take care of
24:56
Speaker 4: both sides of the family, if that's what you wish.
24:58
Speaker 4: But you can do all of that in a trust.
25:01
Speaker 4: Can't just do it if you give it away. Now,
25:04
Speaker 4: people listening are going to say, just to give you
25:06
Speaker 4: one more, People listening are going to say, well, that's great, Todd,
25:09
Speaker 4: for second marriages. But what about all of us folks
25:12
Speaker 4: who are in our first marriage? Does that matter?
25:15
Speaker 2: Well, yeah.
25:15
Speaker 4: I mean, if they're still like, you know, your kids,
25:17
Speaker 4: you say, geez, I don't want them to lose it
25:19
Speaker 4: to a future divorce. I don't want them to be
25:22
Speaker 4: subject to any other creditors. I'd like to maybe figure
25:25
Speaker 4: out a way to, you know, get it to the
25:28
Speaker 4: next generation, the grandkids, and maybe get their estate tax free.
25:33
Speaker 4: if I can. So letting all that money, all those
25:36
Speaker 4: assets that you have when you die as parents build
25:39
Speaker 4: up in a trust for the benefit of both your
25:41
Speaker 4: children and grandchildren at the same time. And all the
25:45
Speaker 4: while that growth, let's say it doubles multiple times over
25:49
Speaker 4: their lifetime, even though they have access to it, they
25:52
Speaker 4: don't own it. So if they don't own it, all
25:55
Speaker 4: of that growth is happening as they tax free. So
25:59
Speaker 4: even if they don't get divorced or have a creditor problem,
26:02
Speaker 4: This money could be growing, and to the extent they've
26:05
Speaker 4: not taken it when they die, it's not going to
26:08
Speaker 4: be included in their estate. And we're talking about a
26:11
Speaker 4: 40% hit. You know, just federal, that could be a
26:15
Speaker 4: tremendous amount of tax-free growth. So, folks, there's so many ways.
26:20
Speaker 4: You've got to do planning. You can't just leave things
26:22
Speaker 4: to your family.
26:24
Speaker 2: Talking with Todd Lutzky from the law firm of Cushing
26:27
Speaker 2: and Dolan. We do still have room on the phone
26:29
Speaker 2: lines at 888- 205-2263 for you to ask Todd your
26:35
Speaker 2: estate planning questions live on air right now. Again, that
26:39
Speaker 2: number is 888-205-2263. We're going to take a quick break here,
26:46
Speaker 2: but when we come back, we're going to get right
26:49
Speaker 2: to your questions with Todd. That phone number one more
26:52
Speaker 2: time is 888-205-2263.
26:58
Speaker 1: Ask Todd with Todd Lutzke, every Wednesday at 10.30, only
27:02
Speaker 1: here on the Financial Exchange Radio Network. You're listening to
27:07
Speaker 1: Ask Todd with Todd Lutzke on the Financial Exchange Radio Network.
27:21
Speaker 2: Still have room on the phone lines for your estate
27:23
Speaker 2: planning questions for Todd at 888-205-2263. That number again is 888-205-2263.
27:33
Speaker 2: Let's go first to Monica in Massachusetts. Monica, you are
27:38
Speaker 2: on with Todd Lutzky.
27:40
Speaker 7: Hi. How are you?
27:42
Speaker 4: Very well, thanks.
27:44
Speaker 5: I had a quick question. I know you talk about
27:46
Speaker 5: this before, but I just wanted to know, I guess
27:49
Speaker 5: I'll tell you.
27:49
Speaker 7: I'm 62. I'm married.
27:53
Speaker 5: What is best, a revocable or an irrevocable trust?
27:57
Speaker 1: 62.
27:57
Speaker 7: I hear different things. 62. I'm still working. I'm a teacher.
28:01
Speaker 7: I have to put in the years. So I do
28:02
Speaker 7: have a pension in Massachusetts.
28:05
Speaker 4: So you're married with kids?
28:09
Speaker 1: Yes.
28:09
Speaker 7: Three. They're older.
28:10
Speaker 4: Any grandkids yet?
28:12
Speaker 1: One.
28:12
Speaker 7: Okay.
28:14
Speaker 4: And just, ballpark, you and your husband. So when you
28:17
Speaker 4: answer these questions, I have to know some of these
28:19
Speaker 4: details in order to help. It kind of drives the answer.
28:23
Speaker 4: And so 62, how old's your husband? 62.
28:27
Speaker 7: Oh, okay.
28:29
Speaker 4: And if you add up all your assets, you know,
28:32
Speaker 4: retirement accounts, investment accounts, bank accounts, real estate, you know,
28:37
Speaker 4: even death benefit of life insurance, you know, how much,
28:40
Speaker 4: how much you think that adds up to? Under $ 2 million?
28:44
Speaker 4: Under $ 4 million? These are Massachusetts estate tax numbers.
28:48
Speaker 7: Yeah. Under $ 2. I mean, our house is probably worth
28:51
Speaker 7: like $ 800.
28:51
Speaker 1: Yeah.
28:51
Speaker 7: And then my husband has.
28:55
Speaker 5: So much in his 401k, and I just have my
28:59
Speaker 5: state pension, my school pension.
29:01
Speaker 1: Right.
29:01
Speaker 4: So, you know, if you're under $ 2.
29:04
Speaker 7: Life insurance. Like, we have a huge life insurance, but
29:07
Speaker 7: it's only when he's working. Right.
29:10
Speaker 2: Right.
29:10
Speaker 4: And it goes away.
29:11
Speaker 1: Sure.
29:12
Speaker 7: Yeah.
29:12
Speaker 4: I do. When you're under $ 2 million, that's a Massachusetts
29:17
Speaker 4: estate tax number. And, again, this sort of will help
29:20
Speaker 4: everybody in this sort of world that's listening. If you're
29:23
Speaker 4: under $ 2 million and you have, you know, real estate,
29:28
Speaker 4: some money, et cetera, some qualified retirement accounts, and you
29:32
Speaker 4: have children, and your goals, I think, would be, you know,
29:35
Speaker 4: avoid probate.
29:36
Speaker 2: So, yes.
29:37
Speaker 4: And, again, I'm going to help answer whether we do revote.
29:40
Speaker 2: Or irrevocable.
29:41
Speaker 4: I know that was your question. I'm getting there, I promise. So, one,
29:44
Speaker 4: we would want to avoid probate. And a trust will
29:48
Speaker 4: do that, whether it's revocable or irrevocable. We would want
29:52
Speaker 4: to make sure.
29:52
Speaker 2: Yeah, I don't want to see.
29:53
Speaker 7: Anybody paying taxes.
29:54
Speaker 4: We just want to make sure we don't go over.
29:58
Speaker 4: I'll just run through a list. We want to make
30:00
Speaker 4: sure we don't go over the estate tax exemption. Or
30:04
Speaker 4: if we do, we don't want to give Massachusetts any
30:06
Speaker 4: death taxes. So that would happen by preparing a trust
30:12
Speaker 4: and having marital shares and remainder shares. So even if
30:14
Speaker 4: you went over $ 2 million... but stayed under $ 4 million
30:17
Speaker 4: just in case your assets grow, we would be able
30:20
Speaker 4: to shelter that amount from estate taxes. So that's pretty easy.
30:25
Speaker 4: Then we want to make sure you have a bloodline
30:27
Speaker 4: plan figuring out how to get your assets to your
30:30
Speaker 4: family in the most efficient manner possible. And then this
30:34
Speaker 4: would be my last question, right? Do you want to
30:37
Speaker 4: protect your assets in the event you go to a
30:39
Speaker 4: nursing home? Would that be on your list? Did we
30:44
Speaker 4: lose you?
30:45
Speaker 2: Oh, okay.
30:45
Speaker 7: No, I'm here.
30:46
Speaker 5: I'm just saying, I'm like, I'm never going to go
30:48
Speaker 5: with one, but I don't know.
30:50
Speaker 7: So yes, of course.
30:51
Speaker 4: But again, in answering your question, everybody I meet, I
30:54
Speaker 4: sort of ask them what's on their mind, you know,
30:57
Speaker 4: what's important for them and their family. And so based
31:01
Speaker 4: on the size of your estate and your age, those
31:04
Speaker 4: would have been the questions I would ask you. And
31:07
Speaker 4: I would ask anybody that comes in, you know, these
31:09
Speaker 4: are the kinds of things that might be important to them.
31:12
Speaker 4: And again, there's no right or wrong answer here. So,
31:13
Speaker 4: you know, don't worry. But If the answer to your
31:16
Speaker 4: question was yes on the first three items and yes,
31:20
Speaker 4: I want to protect what I can from the nursing home, well,
31:23
Speaker 4: then you've helped me tell you that the right kind
31:26
Speaker 4: of trust for you would be the irrevocable version, a
31:30
Speaker 4: Medicaid income only trust that we talk a lot about.
31:33
Speaker 2: On the radio.
31:34
Speaker 4: And it is also an irrevocable trust that is very
31:38
Speaker 4: different than many other irrevocable trusts that are out there.
31:42
Speaker 4: So this would be one that you would not worry
31:44
Speaker 4: about losing control over, whereas many people hear that word
31:49
Speaker 4: and say, I'm going to lose control. Well, not so
31:52
Speaker 4: much in this case. So I hope that answers the question.
31:55
Speaker 4: So for you and for other people in that category,
31:58
Speaker 4: I would think irrevocable trust. you know, no, Todd, we're
32:04
Speaker 4: not really worried about nursing home planning. Well, then we
32:06
Speaker 4: would have shifted and would have said, no, an irrevocable
32:08
Speaker 4: trust is probably not right for you. A revocable trust
32:12
Speaker 4: would be right for you. And because of the size
32:14
Speaker 4: of the estate, no additional gifting or anything, you know,
32:17
Speaker 4: would be needed. So, but folks, that's exactly the kinds
32:21
Speaker 4: of questions that you want to be thinking about when
32:25
Speaker 4: you're getting ready to do your estate planning questions. So Monica,
32:27
Speaker 4: thanks everybody for that kind of question. Now, in that regard,
32:31
Speaker 4: this guide that we're giving away this month, we talk
32:35
Speaker 4: about what were the assets that Monica had, right? Well,
32:38
Speaker 4: one of those assets might be, and I heard it is,
32:40
Speaker 4: a qualified retirement plan. So if you have a retirement plan,
32:44
Speaker 4: an IRA, how do we fit that asset into your
32:47
Speaker 4: estate plan? It's a difficult asset to fit in because
32:51
Speaker 4: you've got to deal with income taxes and estate taxes.
32:54
Speaker 4: And folks, naming your estate beneficiary, naming the IRA the
33:00
Speaker 4: beneficiary as your estate is what this guide is all about.
33:04
Speaker 4: How and why would we do that? Should we name
33:06
Speaker 4: our spouse? Should we name our revocable or irrevocable trust?
33:10
Speaker 4: Or do we name the estate? If you're going to
33:12
Speaker 4: name the estate, there's a way of now doing it
33:14
Speaker 4: where you can shelter assets for estate taxes. You can
33:19
Speaker 4: avoid probate. You can provide an income distribution out to
33:24
Speaker 4: the surviving spouse without having an adverse income tax effect.
33:29
Speaker 4: And at the same time, you can protect it from
33:32
Speaker 4: the nursing home. So this is something new. It's only
33:35
Speaker 4: been around since 2022, which is new in the estate
33:37
Speaker 4: planning world. Call and get the guide and figure out
33:40
Speaker 4: the best way to fit your IRA into your estate plan.
33:44
Speaker 4: Why name your estate an IRA beneficiary? 866-848-5699 or LegalExchangeShow.com. Again,
33:50
Speaker 4: 866-848-5699 or LegalExchangeShow.com. And you can always go to CushingDolanPC.com.
34:02
Speaker 4: Instagram page for more information.
34:04
Speaker 2: Todd, what options exist through estate planning to help manage
34:09
Speaker 2: and protect those assets even after you've passed away? Like
34:13
Speaker 2: what kind of management can you do that's built into
34:16
Speaker 2: trust that survives even your passing?
34:20
Speaker 4: So, and again, I think this is really a great
34:22
Speaker 4: follow-up question to your question earlier, Chuck, in the sense
34:25
Speaker 4: that we said, why name a trust a beneficiary? And
34:28
Speaker 4: we listed two. or why use a trust for beneficiaries,
34:31
Speaker 4: we listed some ways. And this is an extension really
34:35
Speaker 4: of that question in the sense that, okay, Todd, now
34:38
Speaker 4: we understand why we're doing it. Well, how does it work? Well,
34:41
Speaker 4: when you die, a trust doesn't end. It doesn't have
34:44
Speaker 4: to end.
34:45
Speaker 2: It can end.
34:47
Speaker 4: It's however you as a parent, as a family want
34:52
Speaker 4: it to continue or not. So example, if the trust
34:55
Speaker 4: simply says, divide everything and pay it out to the kids, well,
35:00
Speaker 4: that trust is pretty much going to end right away.
35:02
Speaker 4: It's going to pay it right out to the kids.
35:05
Speaker 4: But if you say, geez, I really do want to
35:09
Speaker 4: protect it from creditors, let's say, divorces like we talked about.
35:13
Speaker 4: We want that generational building wealth to happen estate tax-free. Well,
35:20
Speaker 4: then I don't want my trust to end. And if
35:22
Speaker 4: I don't want my trust to end, then I got
35:23
Speaker 4: to name a trustee. I got to name a contingent trustee.
35:27
Speaker 4: And I got to have language in there that says,
35:28
Speaker 4: hold everything in trust for the benefit of the children
35:34
Speaker 4: or separate shares for the children, whatever your desire is.
35:38
Speaker 4: And then that language built in there, meaning you're going
35:42
Speaker 4: to have this trustee who can make distributions out in
35:45
Speaker 4: the trustee's discretion. It's that sole discretionary distribution language that
35:53
Speaker 4: allows the asset to grow and estate tax-free, and to,
35:57
Speaker 4: quite frankly, not be owned by the kids. And so
36:03
Speaker 4: if it's not owned by the kids, and let's say
36:06
Speaker 4: they get divorced down the line, well, the trust still
36:09
Speaker 4: owns it. It's not a marital asset, and it's going
36:12
Speaker 4: to avoid being subject to the divorce. And even if
36:16
Speaker 4: you don't get divorced, it's now also not theirs when
36:20
Speaker 4: they die, to the extent they've not taken it, physically
36:23
Speaker 4: taken it, out of the money. I mean, out of
36:26
Speaker 4: the trust while they're there, while they're alive, whatever it
36:30
Speaker 4: grows to by the time they die, they don't know
36:35
Speaker 4: because they didn't take it. Well, if they don't own it,
36:37
Speaker 4: guess who can't tax it, right? The Fed or the state.
36:42
Speaker 4: And again, when we're talking about a 40% haircut, you know,
36:45
Speaker 4: when you die, if you're talking about several million dollars
36:48
Speaker 4: in there doubling multiple times over a child's lifetime, that could,
36:53
Speaker 4: lead to significant estate tax savings. So trust live on, folks.
36:57
Speaker 4: That's how they work.
36:59
Speaker 2: Mr. Lutzky, I appreciate you joining us today. Thank you
37:02
Speaker 2: so much for the time, as always. Always a pleasure.
37:06
Speaker 4: Thank you.
37:07
Speaker 1: This has been Ask Todd on the Financial Exchange Radio Network.
37:11
Speaker 1: Ask Todd with Todd Lutzke has been presented by Cushing
37:14
Speaker 1: and Dolan, serving Massachusetts and New England for more than
37:16
Speaker 1: 30 years, helping families with estate and tax planning, Medicaid planning,
37:20
Speaker 1: and probate law. Call 800-393-4001 or visit CushingDolan.com. The views
37:26
Speaker 1: expressed in this segment are solely those of Cushing and Dolan.
37:29
Speaker 1: Armstrong Advisory does not provide any legal or tax advice.
37:31
Speaker 1: Please consult with your legal or tax advisor on such matters.
37:34
Speaker 1: Cushing and Armstrong do not endorse each other and are
37:36
Speaker 1: not affiliated.
37:38
Speaker 2: Still got more coming up as we head towards hour two.
37:40
Speaker 2: Treasury Secretary Scott Besant with some additional words related to
37:45
Speaker 2: the bond market. We'll discuss that. Also, what we are
37:49
Speaker 2: hearing from Anthropic and OpenAI with regards to AI safety.
37:55
Speaker 2: And then beyond that, we also are approaching the next
38:00
Speaker 2: Fed meeting as well. Now just seven days away is
38:03
Speaker 2: next Wednesday is when the September meeting is scheduled for.
38:07
Speaker 2: We'll give a little bit of an early preview for that.
38:11
Speaker 2: And we got a whole lot more coming up. So
38:15
Speaker 2: stick around for our two.