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Warsh Gets His Chance to Prove the Fed Means It · The Financial Exchange Show

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Speaker 1: and Paul Lane.
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Speaker 2: It's Chuck, Paul and Tucker with you, and we got
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Speaker 2: a jam packed day today. Things that are on the calendar.
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Speaker 2: We've got a FED meeting, exciting one too, might I add,
1:21
Speaker 2: we've got earnings happening today. Just you know, a tiny
1:27
Speaker 2: little company called Inspirity reporting earnings today that everyone's all
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Speaker 2: excited about. If that one doesn't get you excited, something
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Speaker 2: called Q two is reporting Q two earnings, which is
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Speaker 2: a fantastic I don't know what they do the rest
1:44
Speaker 2: of the quarters. And m Yr reports earnings as well,
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Speaker 2: so we're pretty jacked up about those, not so much
1:50
Speaker 2: about Microsoft and Meta. Everyone gets excited about those, but
1:54
Speaker 2: the other ones are what you really have to appreciate
1:56
Speaker 2: if you're a real fan of the deep cuts. If
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Speaker 2: you're not, you know, jazzed up about earnings. We got
2:03
Speaker 2: oil prices that we're gonna be talking about. And if
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Speaker 2: that doesn't do it for you, then honestly go watch
2:12
Speaker 2: the rain. Like I got nothing, there's something for everyone today.
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Speaker 2: We're gonna kick things off talking about oil, which is
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Speaker 2: just this this ping ponging back and forth of down
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Speaker 2: you know, ten percent for a couple of days. Now
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Speaker 2: back up, seven percent today, and I come back to
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Speaker 2: the same place I've been in since March, which is, look,
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Speaker 2: there there are, you know, just among the principal players
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Speaker 2: in this, the United States and Iran, there are some
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Speaker 2: pretty big disagreements that exist on some pretty big items.
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Speaker 2: Beyond that, you have just within Iran some disagreements as
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Speaker 2: to how they should handle things. And this is before
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Speaker 2: you then get to the thoughts of you know, parties
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Speaker 2: such as the Israelis, the Saudis, the Aman with the
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Speaker 2: land you know, Katar Iraq, which is now taking fire
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Speaker 2: from both Iran and the United States, and Saudi Arabia,
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Speaker 2: and so you're kind of like, Okay, how's this all
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Speaker 2: gonna wind up? And I pretty much get to the
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Speaker 2: point where I've been saying this since the beginning. Iran
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Speaker 2: wants to inflict enough economic pain so that the United States.
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Speaker 3: Or anyone else never tries this again.
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Speaker 2: The United States wants to be able to come away
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Speaker 2: with a significantly degraded Iran to the point where they
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Speaker 2: can't cause problems in the straight of Horror moves or
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Speaker 2: the region for anyone. Israel, depending on the day of
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Speaker 2: the week, either wants Iran completely debilitated, or still kind
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Speaker 2: of there as a threat that they can you know,
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Speaker 2: use to you know, work things in the region going forward.
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Speaker 2: Iraq is just trying to hold together and is on
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Speaker 2: the verge of civil war. Might I add you've got
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Speaker 2: the Qataris who really just want to be mediators and
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Speaker 2: you know, friends with everyone and run some money on
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Speaker 2: the side and you know, move things around and you know,
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Speaker 2: kind of be the powerbroker in the region. I'm not
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Speaker 2: really sure what Oman wants, if I'm being entirely honest,
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Speaker 2: The UAE basically it's just like, here's a bunch of
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Speaker 2: money around. We just want to ship oil, you know,
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Speaker 2: through pipelines to avoid you from now on, just don't
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Speaker 2: shoot anything at us. And so you're left wondering, Hey,
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Speaker 2: how painful do things have to get for all of
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Speaker 2: these actors to finally just say enough's enough. We were
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Speaker 2: better off when we weren't fighting and could just make
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Speaker 2: our money on our own.
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Speaker 3: But it doesn't feel like we're there yet.
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Speaker 4: No, it certainly doesn't feel like the what are we at?
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Speaker 4: Five months or so?
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Speaker 3: Is five months yesterday?
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Speaker 4: Yeah? Is enough time to resolve that? There are just
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Speaker 4: so many different factors. I play like you mentioned that
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Speaker 4: make this just really hard to try and figure out
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Speaker 4: what direction this goes. I have finally taken the approach
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Speaker 4: over the last few months where I keep apprized of
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Speaker 4: the headlines and the developments, but really don't put a
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Speaker 4: lot lot of stock into anything. And I think you've
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Speaker 4: used the phrase on the show a lot, Chuck. You know,
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Speaker 4: let's see the actions, not the words that are spoken
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Speaker 4: from either the US, Iran or any of those other
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Speaker 4: parties that you just mentioned. It is something that we,
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Speaker 4: as you know, hosts of financial exchange, want to keep
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Speaker 4: investors and listeners apprized of the developments, but ultimately it's
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Speaker 4: hard to add a lot of real, you know, feedback
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Speaker 4: or constructive notes to this subject because it just becomes
5:32
Speaker 4: so hard to really figure out in which direction it's
5:36
Speaker 4: going to go. I mean, energy prices alone have baffled.
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Speaker 4: I mean they've They've always been hard to predict, but
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Speaker 4: this year just incredibly baffling. Like you mentioned, we're up
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Speaker 4: seven percent today, we were at close to one hundred
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Speaker 4: on Brent maybe last week. It all just the action
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Speaker 4: blurs together really fast.
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Speaker 2: I've started keeping a calendar, Okay, like legitimately I have
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Speaker 2: a separate Google calendar that I have that is literally
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Speaker 2: just titled it's literally just titled Iran war, and so
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Speaker 2: like it's it's a separate color code. And basically what
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Speaker 2: I have here is, you know, something where okay, I
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Speaker 2: can actually go back and say, this is what happened
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Speaker 2: on this day and this led to this, and this
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Speaker 2: led to that, because otherwise there's been forty six different Well,
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Speaker 2: we think we're making progress on a deal to we're
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Speaker 2: gonna you know, get rid of everything.
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Speaker 3: Like it's just I've.
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Speaker 2: Been through so many of these cycles that it's hard
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Speaker 2: to keep track of at this point, and so I
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Speaker 2: think it's instructive to be like, this is what happened
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Speaker 2: militarily today, this is what was said, and is there
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Speaker 2: any pattern that we tend to get to? And I
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Speaker 2: think that that's you know, how I'm trying to sort
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Speaker 2: through it. And as I've said along, I don't know
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Speaker 2: exactly how this ends, but games of Chicken are inherently
7:02
Speaker 2: an unstable equilibrium. It's not something where you can point
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Speaker 2: to and say this is how it definitively ends. It's
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Speaker 2: pretty much when one side finally says we've had enough,
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Speaker 2: we're done, and doesn't really seem like any side is
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Speaker 2: at that point right now in terms of where things stand.
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Speaker 2: The latest I mentioned Iraq. I gotta tell you it's
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Speaker 2: hard to picture a country just that has been more
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Speaker 2: screwed up by foreign influence than Iraq over the last
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Speaker 2: hundred years. And basically it's on the brink of civil
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Speaker 2: war right now. The latest what we have, and again
7:43
Speaker 2: this is just how confusing things are in the Middle East.
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Speaker 2: There is a group within Iraq called the Popular Mobilization
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Speaker 2: Forces the PMF is what they are known as, and
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Speaker 2: they are a paramilitary group that operates in Iraq with
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Speaker 2: the backing of Iran During the twenty tens, the PMF
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Speaker 2: was actually one of the forces that helped to defeat
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Speaker 2: ISIS in Iraq and up into Syria, which you'd be like, oh,
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Speaker 2: like great, like this now they are the ones that are,
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Speaker 2: you know, launching missiles and drones into Saudi Arabia and
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Speaker 2: at us Basis from Iraq because again they're Iranian aligned,
8:30
Speaker 2: and you know, for obvious reasons, the Iranians didn't really
8:32
Speaker 2: get along particularly well with ISIS, and so it made
8:36
Speaker 2: them kind of a useful force in one respect that
8:39
Speaker 2: actually got a little bit of support from the United
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Speaker 2: States during that time, because hey, like great, you're you're
8:46
Speaker 2: fighting ISIS.
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Speaker 3: The problem is that generally.
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Speaker 2: Like they're they're not aligned with US interest long term,
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Speaker 2: and that's you know, kind of how things look here.
8:59
Speaker 2: And so so since like twenty nineteen, I believe key
9:03
Speaker 2: members of the PMF have been designated terrorists and portions
9:08
Speaker 2: of it are part designated as terrorist organizations. So this
9:11
Speaker 2: is how these things evolve over like five to ten years.
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Speaker 2: Is one of the forces within Iraq that helped to
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Speaker 2: defeat ISIS is now lobbing missiles and drones at US
9:23
Speaker 2: and US affiliated forces. It's messy, and this is like
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Speaker 2: none of this just goes away tomorrow. You don't just
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Speaker 2: like put this back in the bottle and you're like, oh,
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Speaker 2: like this is done. Like this is a continued problem here.
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Speaker 2: So let's take a quick break and when we come back,
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Speaker 2: we'll move on from oil. I want to do a
9:41
Speaker 2: little bit of previewing of this FED meeting because I
9:43
Speaker 2: think it is one of the most interesting FED meetings,
9:47
Speaker 2: not necessarily the most important, the most interesting ones that
9:50
Speaker 2: we've seen in recent history.
9:52
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10:25
Speaker 2: We've got a FED meeting today two pm. We get
10:28
Speaker 2: the information as to what the FED is going to
10:31
Speaker 2: do with interest rates. And the interesting piece here is
10:36
Speaker 2: heading into this right now as of this particular moment
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Speaker 2: in time. Again, like you look at it, and it's
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Speaker 2: pretty uncertain as to what the FED does here right now.
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Speaker 2: According to the CME, it's basically a seventy to thirty
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Speaker 2: split as to whether the FED is going to hold
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Speaker 2: seventy percent versus thirty percent chance of a hike, and
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Speaker 2: the only time in the past fifteen years that we
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Speaker 2: have seen similar odds being priced. There's three other instances.
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Speaker 2: The first was in September of twenty twenty four, when
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Speaker 2: the FED unexpectedly went forward with a fifty basis point cut.
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Speaker 2: The other one was in twenty nineteen when the FED
11:26
Speaker 2: was deciding whether or not to pivot late that year,
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Speaker 2: and another one in twenty fifteen when the FED was
11:33
Speaker 2: just deciding whether or not to start hiking interest rates.
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Speaker 2: So this is you know, kind of a again I've
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Speaker 2: mentioned like, there aren't many instances where it's been you know,
11:43
Speaker 2: kind of really up in the air as to what
11:45
Speaker 2: the FED is going to do. And I do think
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Speaker 2: it's important to talk about what this means because let's
11:49
Speaker 2: say that the FED decides not to.
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Speaker 3: Hike interest rates.
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Speaker 2: If you have a thirty percent chance of hike being
11:54
Speaker 2: priced in, then that means that the Fed is implicitly
11:57
Speaker 2: easing because they're taking that thirty percent off the table
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Speaker 2: the market's pricing and saying we're not gonna do it.
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Speaker 2: It's it's easing versus what the market expects. Likewise, if
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Speaker 2: they hike, it is a firmly, you know, more hawkish
12:11
Speaker 2: position than the market is expecting either. So either way,
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Speaker 2: the market's going to be surprised. The place that I
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Speaker 2: think if I were Kevin Warsh and I'm thankful each
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Speaker 2: and every day that I'm not, because I don't think
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Speaker 2: i'd actually want.
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Speaker 3: To be the FED chair.
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Speaker 2: I think I think that would just be too much
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Speaker 2: pressure for me. If I'm being honest.
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Speaker 4: Like I in a very thankless position.
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Speaker 3: Too well, no one ever likes you.
12:36
Speaker 2: If if if interest rates are too high, people are like,
12:40
Speaker 2: no one can buy houses because the interest rates are
12:43
Speaker 2: too high.
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Speaker 3: That's what everyone sounds like the last like three years.
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Speaker 2: And if interest rates are too low, like the twenty tens,
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Speaker 2: then you get people going.
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Speaker 5: Ugh, you're not letting us earn enough on our money.
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Speaker 5: You're punishing savers. And it's like, okay, well, like tell
12:58
Speaker 5: me what the right interest rate is. Then man like,
13:01
Speaker 5: I just no matter what, everyone's upset at you. So no,
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Speaker 5: it's it's not for me.
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Speaker 2: I like jobs where at least one person's happy, you know,
13:09
Speaker 2: just at least one of them. So if I were
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Speaker 2: worsh my approach would be, Hey, the bond market is
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Speaker 2: kind of running away from me right now. The long
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Speaker 2: end's been moving up, real interest rates have been moving
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Speaker 2: up over the last you know, month or so. My
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Speaker 2: approach would be, Hey, I've been talking a tough game.
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Speaker 2: I've been saying we're not gonna tolerate inflation. I gotta
13:36
Speaker 2: send a message to the market that we're not going
13:39
Speaker 2: to tolerate inflation. And it's not just what I say,
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Speaker 2: it's gotta be what I do. I'm gonna hike and
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Speaker 2: so I think that the counterintuitive place that we land
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Speaker 2: if that happens is if Worsh hikes, I think the
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Speaker 2: long end comes in because the message that's being sent
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Speaker 2: then is tak I'm willing to punish growth in order
13:59
Speaker 2: to rein in inflameation, and y'all better listen to me,
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Speaker 2: because otherwise you're gonna be off sides on this right.
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Speaker 2: If Worsh doesn't hike here, I don't think there's too
14:08
Speaker 2: much risk of the long end blowing out too too far.
14:12
Speaker 2: But I think you probably see the long end actually
14:14
Speaker 2: rise a little bit because it's well, Worsh is talking
14:17
Speaker 2: a tough game, but he's not really doing anything. And
14:20
Speaker 2: granted this is you know, the first, you know, his
14:22
Speaker 2: second meeting, so we're not gonna do too much, but hmm,
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Speaker 2: like it doesn't seem like he's willing to put his
14:30
Speaker 2: money where his mouth is yet if he doesn't hike here,
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Speaker 2: So I think that the healthiest thing for the bond
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Speaker 2: market is Worsh hikes today. I think if he doesn't,
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Speaker 2: it's not a huge deal because he still has a
14:44
Speaker 2: little bit of runway in this and that. But if
14:47
Speaker 2: I were Worsh, I'm coming into today's meeting with everyone,
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Speaker 2: and I'm saying, y'all better get behind me for a
14:52
Speaker 2: hike and we'll go with that.
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Speaker 1: Yeah.
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Speaker 4: I think that's an key point to end with, is
14:57
Speaker 4: that you got to get the votes right. You gotta
14:58
Speaker 4: have I don't know if he on board with you.
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Speaker 4: And two months into the job where you have this
15:04
Speaker 4: eclectic mix of appointments from different presidencies across the Board
15:09
Speaker 4: of Governors, are you Yeah, you always do, but and
15:13
Speaker 4: two months into your tenure, are you going to be
15:15
Speaker 4: able to rally support if you think that increasing rates
15:19
Speaker 4: is the right way to go? I said that yesterday
15:22
Speaker 4: to the sentiments on this is the most anticipated FED
15:28
Speaker 4: meeting that I can recall for as long as I've
15:31
Speaker 4: been doing the show with you guys. Where I don't
15:33
Speaker 4: have a good feel for what could happen. I could
15:36
Speaker 4: kind of see it going in either direction because of
15:40
Speaker 4: one side that says he's really been talking tough, this
15:42
Speaker 4: is his time to show it. But the other side
15:45
Speaker 4: sort of acknowledging the fact that, hey, we had a
15:48
Speaker 4: pretty weak inflation report for the month of June. I
15:51
Speaker 4: totally get it. A lot of that was influenced by
15:53
Speaker 4: the fact that energy prices have been whipsawing around like crazy,
15:56
Speaker 4: but we do sit at three and a half percent
15:59
Speaker 4: inflation year over year. Is there the case that after
16:03
Speaker 4: that report a lot of people were sort of earmarking, Okay,
16:05
Speaker 4: September is when action will really occur, and there's been
16:08
Speaker 4: some movement there on even the September front. I was
16:11
Speaker 4: looking this morning the idea of a fifty bass point
16:16
Speaker 4: hike in ince that September meeting came up a little
16:20
Speaker 4: bit over the course of the I guess the last
16:23
Speaker 4: day or two, but just a tremendous amount of movement
16:26
Speaker 4: on the interest right front, and something that for the
16:29
Speaker 4: first time in a long time for me personally, I'll
16:31
Speaker 4: be at least keeping an eye out for what this
16:33
Speaker 4: meeting looks like at two o'clock today.
16:36
Speaker 2: The if again, if if I were Worrish, I hiked
16:40
Speaker 2: today and then I take like one question in the
16:43
Speaker 2: press conference and just leave Belichick style, That's what I do,
16:47
Speaker 2: because he look, I'm a big believer. And if you
16:51
Speaker 2: really want to know how to central bank, you know,
16:54
Speaker 2: if you want like central banking for dummies, you don't
16:56
Speaker 2: look at what the Fed's done or the ECB. You
16:58
Speaker 2: want to go and be like, hey, show me what
17:00
Speaker 2: like the Brazilians do, because unlike the here's the thing,
17:04
Speaker 2: if the FED makes a mistake, ultimately everyone in the
17:08
Speaker 2: world still needs to own US dollars because it's how
17:11
Speaker 2: you do business. If the Brazilian central bank makes a mistake.
17:15
Speaker 3: They're screwed.
17:17
Speaker 2: Like everyone's just like nope, don't want to own any
17:20
Speaker 2: ray els right now, Like we'll pass on that.
17:23
Speaker 3: Like show me like show me em.
17:26
Speaker 2: Economies and how their central banks operate, And what you
17:29
Speaker 2: learn from them is, hey, it's almost always better to
17:35
Speaker 2: occasionally bop the market on its head and keep it
17:37
Speaker 2: in line, then let it get out of control, because
17:41
Speaker 2: once it gets out of control in those places, you
17:43
Speaker 2: you can't put it back in the bottle. It's like
17:45
Speaker 2: you're you're done, You've lost. And so that's kind of
17:48
Speaker 2: how I look at this, which is, look, the US
17:52
Speaker 2: bonds never get too out of control, because again we're
17:56
Speaker 2: the United States. But if you want to make sure
17:59
Speaker 2: that you stay that way, occasionally you got to bop
18:02
Speaker 2: the market on its head. And I think this is
18:04
Speaker 2: an opportune time too, because I think the US economy
18:06
Speaker 2: is still strong enough to be able to deal with it.
18:08
Speaker 2: And quite honestly, if you end up bringing that long
18:11
Speaker 2: end in and bringing down long term interest rates by
18:14
Speaker 2: virtue of hiking here, it actually can inject a little
18:18
Speaker 2: bit of juice into the US economy if there are
18:20
Speaker 2: any questions that are going on in the short term.
18:22
Speaker 2: And then if you've got to hike again, you've already
18:24
Speaker 2: set yourself on that path, and now you've got credibility,
18:28
Speaker 2: which is what matters. So that's how I look at this.
18:31
Speaker 2: And I don't know what they're going to do, but
18:36
Speaker 2: I suspect the market is underpricing the chance of a
18:39
Speaker 2: hike because Warsha, I don't think is a dummy, especially
18:44
Speaker 2: like he's got a direct line to some of the
18:46
Speaker 2: smartest people.
18:47
Speaker 3: You know, he's a Stanley.
18:49
Speaker 2: Drunk Miller guy, and you know, Drunken Miller is again
18:52
Speaker 2: kind of as plugged in and as influential as anyone
18:54
Speaker 2: in the financial industry. And I think that, coupled with
18:59
Speaker 2: the fact that you've already had some voices talking about yeplake,
19:03
Speaker 2: we could be willing to hike. I don't think he
19:05
Speaker 2: has to get too many people on board there to
19:07
Speaker 2: do so. But we'll see that the counter to that
19:11
Speaker 2: is Warsh has been, you know, a big proponent of
19:13
Speaker 2: talking about Hey, I think you know AI is going
19:15
Speaker 2: to lead to this productivity boost and so we don't
19:17
Speaker 2: need to worry as much about inflation. That's the counter
19:21
Speaker 2: which one wins out.
19:23
Speaker 3: Well, we'll see you later today.
19:24
Speaker 2: Let's take a quick break Wall Street Watch and ask
19:26
Speaker 2: Todd next.
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19:58
Speaker 6: The markets are selling off ahead of a busy afternoon
20:01
Speaker 6: with a federal announce of decision on interest rates at two,
20:04
Speaker 6: followed by tech earnings from Microsoft and Meta after the bell. Furthermore,
20:08
Speaker 6: Oil jumping higher after around target targeted a US base
20:12
Speaker 6: in Jordan. Right now, the Dow is selling off one
20:15
Speaker 6: and a half percent or eight hundred eight points lower,
20:17
Speaker 6: SMP five hundred down three quarters of a percent, NASDAK
20:21
Speaker 6: down about one percent or two hundred and thirty eight
20:24
Speaker 6: points lower, RUSS two thousand down nine tenths of one percent, tenure,
20:28
Speaker 6: treasure Reeled is up two basis points at four point
20:30
Speaker 6: six two percent, and Oil jumping over six and a
20:33
Speaker 6: half percent, trading at eighty four dollars a barrel. Procter
20:37
Speaker 6: and Gamble reported second quarter earnings that beat expectations but
20:40
Speaker 6: came up short on revenue as underwhelming demand for its
20:44
Speaker 6: products weighed on sales that stocked down by two percent. Meanwhile,
20:48
Speaker 6: shares an AI infrastructure company Vertive, are sinking thirteen percent
20:53
Speaker 6: after it reported mixed quarterly results where earnings and revenue beat,
20:57
Speaker 6: but its revenue year on year or a Gannett growth disappointed. Elsewhere,
21:02
Speaker 6: GE Healthcare Technologies is surging eleven percent after it beat
21:06
Speaker 6: earnings expectations for the second quarter and reaffirmed its full
21:11
Speaker 6: your earnings guidance. And Ford is up by nearly five
21:14
Speaker 6: percent after it reported mixed second quarter results but still
21:18
Speaker 6: hiked its twenty twenty six outlook, saying it was confident
21:22
Speaker 6: customers would continue to buy pricey pickups and SUVs. I'm
21:27
Speaker 6: Tucker Silva and that is Wall Street Watch.
21:31
Speaker 1: This is ask Todd on the Financial Exchange Radio network.
21:34
Speaker 1: If you have an existing estate plan or in the
21:37
Speaker 1: market for one, Todd Lutsky is here to answer your
21:39
Speaker 1: questions and help you plan for a later life. Ask
21:42
Speaker 1: Todd is presented by Cushing and Dolan, serving Massachusetts and
21:45
Speaker 1: New England for more than thirty five years, helping families
21:48
Speaker 1: with a state and tax planning, Medicaid planning, and probate law.
21:52
Speaker 1: Visit Cushingdolan dot com. Now here's Todd.
21:56
Speaker 2: Lutsky as we got Todd Lutsky with us here now
22:03
Speaker 2: for Ask Todd.
22:04
Speaker 3: Why do we call it ask Todd? You ask?
22:07
Speaker 2: We call it that because this is your chance to
22:09
Speaker 2: ask Todd your estate planning questions, live on air right now,
22:14
Speaker 2: this very minute. Last week we got through four of them.
22:17
Speaker 2: Usually we get through two or three. But phone lines
22:20
Speaker 2: are open at eight eight eight to zero five two
22:22
Speaker 2: two six three, So get calling to make sure you
22:25
Speaker 2: get in line to ask Todd your questions.
22:27
Speaker 3: Uh, not sure.
22:28
Speaker 2: We can make it a drive for five, but we'll
22:30
Speaker 2: see if we can get through five calls. But uh,
22:32
Speaker 2: eight eight eight to zero five two two sixty three
22:36
Speaker 2: is the number again, That is eight eight eight to
22:39
Speaker 2: zero five two two sixty three for your chance to
22:42
Speaker 2: ask Todd your estate planning questions. Mister Lutsky, how are
22:46
Speaker 2: you doing today?
22:47
Speaker 7: I am never better?
22:49
Speaker 3: You couldn't. I I'm getting excited.
22:51
Speaker 7: Actually, yeah, what's going on?
22:53
Speaker 8: Uh?
22:53
Speaker 3: Topsfield Fair is coming up in a couple months.
22:55
Speaker 7: I've heard that's a good place.
22:57
Speaker 3: Uh, the world's biggest pickle is going to be there
22:59
Speaker 3: this year. Really, a lot of.
23:01
Speaker 2: People kind of like, Okay, I don't get the hype,
23:03
Speaker 2: but I think it's a pretty big deal. Is it's
23:06
Speaker 2: a pretty big deal for sure? Yeah, that's my thought, Todd.
23:09
Speaker 2: Want to talk to you a little bit about, Uh,
23:11
Speaker 2: irrevocable trusts. Is it irrevocable or irrevocable?
23:15
Speaker 7: First, I don't know. Is it potato or patato? You
23:19
Speaker 7: know either one's okay, let's call the thing. Okay, So
23:22
Speaker 7: irrevocable trusts, who are they not right for? Like, who's
23:27
Speaker 7: the person new you look at and say you either
23:31
Speaker 7: shouldn't be looking at this or this would work out
23:34
Speaker 7: badly if you use this tool. So the question is
23:38
Speaker 7: is a little broad, But let me let me answer
23:40
Speaker 7: it this way because there's many kinds of irrevocable trust
23:45
Speaker 7: and I think that's important in your in your question, Chuck,
23:47
Speaker 7: because a lot of people don't realize that.
23:49
Speaker 3: Sure, they might hear.
23:50
Speaker 7: Us talking about these medicaid irrevocable trusts and think that
23:53
Speaker 7: that's the only kind that there is. But but that's
23:55
Speaker 7: not the case. So there are many different kinds. So
23:58
Speaker 7: in answering your question, that different kinds of trust will
24:02
Speaker 7: apply to different people in different situations. So let's start
24:07
Speaker 7: on the high end. Let's assume you have people that
24:10
Speaker 7: have you know, over fifteen million right and our or
24:14
Speaker 7: even pushing higher than that, and are interested in giving
24:18
Speaker 7: away assets, getting assets out of their estate for state
24:21
Speaker 7: tax purposes, you know, even doing that while they can
24:25
Speaker 7: retain control, believe it or not, there's ways to do
24:28
Speaker 7: that with these spousal lifetime access trusts. Well, that would
24:31
Speaker 7: be for higher net worth people, or we would be
24:35
Speaker 7: talking about irrevocable grant or spousal lifetime access trust or
24:40
Speaker 7: gifting type trusts. Okay, so I think that's one category.
24:46
Speaker 7: Let's dial it back and say, well, what if we're
24:49
Speaker 7: in the under four to five million dollar range, probably
24:52
Speaker 7: you know, you're you're around that two million dollar number
24:54
Speaker 7: for mass or maybe you're meyrity or three million. You know,
24:58
Speaker 7: more and more people might be fitting into this kind
25:00
Speaker 7: of category, and so what would we do for them, Well,
25:05
Speaker 7: I might consider the irrevocable medicaid type trust, which is
25:09
Speaker 7: the one we actually are talking about more frequently and today,
25:13
Speaker 7: in fact, is what's laid out in the guide. And
25:17
Speaker 7: again I would say it would be right for them,
25:19
Speaker 7: you know, but not if they're forty so none you
25:21
Speaker 7: got to look at their age. So you got to
25:23
Speaker 7: not only look at the you know, the net worth
25:26
Speaker 7: of the individual, which drives the kind of trust that
25:29
Speaker 7: you might need, but also their age. So I would say,
25:34
Speaker 7: you know, rule of thumb sixty five is a good
25:37
Speaker 7: time to say, if you're doing your planning, I would ask,
25:42
Speaker 7: are you concerned with protecting assets from the nursing room,
25:44
Speaker 7: to try to learn what kind of irrevocable trust is
25:47
Speaker 7: right for you? You know or you know if if
25:51
Speaker 7: if not, then we would go with with revocable type trust.
25:55
Speaker 7: So that would be the you know, our first concern.
25:57
Speaker 7: Maybe they're not even concerned about that. Well, if that's
25:59
Speaker 7: not an issue, then we would do revocable. So I
26:02
Speaker 7: think it's a function of of age and then net worth.
26:05
Speaker 7: So if and those are the two main kinds of
26:10
Speaker 7: irrevocable trusts.
26:11
Speaker 2: Talk with Todd Letsky from the law firm of Cushing
26:13
Speaker 2: and Dolan, still have room on the phone lines for
26:16
Speaker 2: your estate planning questions. Eight eight eight two zero five
26:21
Speaker 2: two two sixty three. That is the number to call
26:23
Speaker 2: to ask Todd your state planning questions, live on air
26:27
Speaker 2: right now again eight eight eight two zero five two
26:32
Speaker 2: two sixty three. We're gonna take a quick break here,
26:34
Speaker 2: but when we return, we're gonna get right to your
26:37
Speaker 2: questions with Todd. That phone number is eight eight eight
26:40
Speaker 2: two zero five two two six three. One more time,
26:44
Speaker 2: that number is eight eight eight two zero five two
26:49
Speaker 2: two sixty three.
26:50
Speaker 1: Ask Todd with Todd Letsky every Wednesday at ten thirty
26:54
Speaker 1: only here on the Financial Exchange Radio Network. Listening to
27:00
Speaker 1: Ask Todd with Todd Lutsky on the Financial Exchange Radio Network.
27:14
Speaker 2: Talking with Todd Lutsky from cushingon Dolan. Remember we call
27:18
Speaker 2: it segment Asked Todd, So you can ask Todd your
27:20
Speaker 2: estate planning questions.
27:22
Speaker 3: Eight eight eight two zero five two two sixty three
27:25
Speaker 3: is the number.
27:26
Speaker 2: Still a bit of room on the phone lines again.
27:28
Speaker 2: Eight eight eight two zero five two two six three
27:32
Speaker 2: is the number. Let's go to Sean in Mons and Sean,
27:34
Speaker 2: what is your question for Todd.
27:37
Speaker 8: Good morning guys, Morning Todd, long time, long time listener.
27:42
Speaker 8: My wife and I are started doing some planning, and
27:45
Speaker 8: I don't know if I'm going to say this the
27:47
Speaker 8: right way. Someone said to her that you get a
27:50
Speaker 8: revocable trust and then convert it over to start with
27:54
Speaker 8: a revocable and then you slide it into an irrevocable trust. Okay, well,
27:59
Speaker 8: look primarily for an irrevocable medicaid trust grant or irrevocable
28:04
Speaker 8: medicaid trust. Does that sound right to you?
28:07
Speaker 1: Or so?
28:08
Speaker 7: Let me ask you a couple of questions to you know,
28:12
Speaker 7: try to get a feel for the whole situation. So
28:15
Speaker 7: you're married, I assume with children, yes, okay? And and
28:23
Speaker 7: total value? Give me a round number, real estate money,
28:25
Speaker 7: IRA's net worth.
28:26
Speaker 3: What do you are you?
28:27
Speaker 7: Under four million? Over four min so over two million?
28:33
Speaker 8: Yeah, no, sir, so somewhere.
28:35
Speaker 7: Between two and four million. So that's an important number, right,
28:38
Speaker 7: Not only that? And how old are you?
28:41
Speaker 8: I'm sixty seven, my wife is sixty.
28:44
Speaker 7: So I'm going to try to say this as politely
28:46
Speaker 7: as I can. I would if we had met for
28:51
Speaker 7: the first time, I would have asked you these questions.
28:53
Speaker 7: And many more about the type of assets and family dynamics.
28:56
Speaker 7: I mean, we would have we would have walked through
28:59
Speaker 7: a whole bunch of questions. But it's these questions, it's
29:02
Speaker 7: the net worth, it's the age, it's the family dynamics
29:06
Speaker 7: that help us determine what your objectives are. Right, And
29:10
Speaker 7: so then I would say, okay, you're here to you know,
29:13
Speaker 7: avoid probate. You probably say yes, right. You know, if
29:17
Speaker 7: you're a three million, I would say we want to
29:20
Speaker 7: make sure we don't give Massachusetts any death tax. Likely
29:23
Speaker 7: you would say yes. And then I would say, you know,
29:27
Speaker 7: we want to get a bloodline plan to the family.
29:30
Speaker 7: And my last question would be because of these factors
29:32
Speaker 7: that you gave me age net worth, I would say
29:36
Speaker 7: to you, are you concerned about protecting the assets from
29:39
Speaker 7: the nursing home? And your answer would be what, yes, sir? Okay,
29:43
Speaker 7: so we've got four yess here now. Knowing that, I
29:49
Speaker 7: would then proceed to what is known as my whiteboard,
29:53
Speaker 7: where I would explain to you and your family how
29:57
Speaker 7: the irrevocable trust works. Okay, so why on earth would
30:02
Speaker 7: I ever and stead I'm trying to do this in
30:04
Speaker 7: a polite manner. And why on earth would I ever
30:06
Speaker 7: even introduce a revocable trust when it's clearly not needed
30:12
Speaker 7: based on your answers to these questions, So I don't
30:17
Speaker 7: know if he's trying to sell something that's just not needed,
30:21
Speaker 7: and then you've got to pay again to do an
30:22
Speaker 7: irrevocable trust. Again, I don't know number one. Number two.
30:28
Speaker 7: If the goal is protecting assets from the nursing home,
30:34
Speaker 7: if I want to get that five year clock started,
30:36
Speaker 7: I would think I'm sixty seven. I want to get
30:38
Speaker 7: that started as soon as I can, so that you know,
30:40
Speaker 7: by the time I'm like seventy two, this is in
30:43
Speaker 7: my rear view mirror and what I put in the
30:46
Speaker 7: trust is fully protected. So if I did a revocable
30:51
Speaker 7: trust first, anything that I would put in there would
30:55
Speaker 7: never be even starting that five year clock to run.
30:59
Speaker 7: I'd be actually just wasting time by putting assets in
31:03
Speaker 7: that trust so that later on I can pay money
31:07
Speaker 7: and convert it to an irrevocable trust. And how long
31:11
Speaker 7: am I going to wait? Do I convert it when
31:12
Speaker 7: I'm seventy Now I got to get to seventy five
31:15
Speaker 7: before it's protected. So you're starting to see the sort
31:19
Speaker 7: of the logic here.
31:20
Speaker 8: Yeah, it was presented to her where it would be
31:23
Speaker 8: almost very shortly after drying up the revocable, then it
31:28
Speaker 8: would turn it over to an irrevocable. Did he say
31:30
Speaker 8: in a very short period?
31:32
Speaker 7: Why why would we need that revocable to begin with?
31:35
Speaker 7: That's the part of.
31:36
Speaker 8: Lit me, sir. I've been listening to you for years
31:39
Speaker 8: and it didn't sound right to me. So that's why
31:42
Speaker 8: I'm waited till today, and I'm going to call and
31:45
Speaker 8: ask Tom.
31:46
Speaker 7: All right, well, if I can help, let me know
31:49
Speaker 7: and we'll take it from there. And so good sir, great,
31:53
Speaker 7: appreciate the call, and thanks for thanks for listening. So, folks,
31:56
Speaker 7: I think his call is really you know, time and
32:01
Speaker 7: spot on to what we're doing with our guide right
32:04
Speaker 7: this month. The guide is unlocking the power of irrevocable trust.
32:07
Speaker 7: And like Chuck said, you know, don't you say the
32:09
Speaker 7: word irrevocable. But this kind of irrevocable trust happens to
32:13
Speaker 7: be the one that is designed to protect the assets
32:16
Speaker 7: from the nursing home and is the one I was
32:18
Speaker 7: referring to to the to the collor for Sean here.
32:23
Speaker 7: So that's exactly the kind of trust that I was
32:26
Speaker 7: describing to Sean. So, folks, these trusts, the biggest fear
32:31
Speaker 7: people have in them is that they lose control. And
32:34
Speaker 7: I can't stress it enough that you really don't. But
32:37
Speaker 7: there's no way to really believe us other than maybe
32:39
Speaker 7: get the guide and learn. This guide in a question
32:42
Speaker 7: and answer format will walk you through you know how
32:46
Speaker 7: it works while you're alive. What can I put in it?
32:48
Speaker 3: You know?
32:49
Speaker 7: Can I put rental property? And can I collect the income?
32:52
Speaker 7: Do I have to make a gift tax return? Do
32:54
Speaker 7: I have to pay income taxes at a separate rate?
32:57
Speaker 7: How does that work? How does the estate planning work? Folks?
33:00
Speaker 7: It's really not just about probate and taxes in this guide,
33:04
Speaker 7: but how it really operates for you and will your
33:07
Speaker 7: life be disrupted by having it? So please call and
33:11
Speaker 7: get it. We're getting near the end of the month here, folks.
33:14
Speaker 7: If you've never known whether or not these re irrevocable
33:17
Speaker 7: trusts are right for you, if you read this, I
33:20
Speaker 7: think you'll be able to decide it is or it
33:23
Speaker 7: isn't right for you. Eight six six eight four eight
33:27
Speaker 7: five six nine nine or Legal Exchange Show dot Com
33:31
Speaker 7: again eight six six eight four eight five, six, nine
33:35
Speaker 7: nine or Legal Exchange show dot com. And you can
33:38
Speaker 7: always go to Cushing Dolan PC our Instagram page for
33:42
Speaker 7: more information.
33:43
Speaker 2: Todd, when we talk about those irrevocable medicaid trusts, are
33:47
Speaker 2: there instances that you find where they do need a
33:52
Speaker 2: long term care policy in an estate plan as well
33:55
Speaker 2: in order for things to work out optimally?
33:57
Speaker 3: Or is it one or the Other's great question.
34:00
Speaker 7: So you know, obviously we're a supporter of long term
34:05
Speaker 7: care and insurance.
34:07
Speaker 3: It's it's a.
34:08
Speaker 7: Good product to have if you can get it right.
34:11
Speaker 7: That's sort of the the caveat behind this right because
34:15
Speaker 7: you know they can be expensive. They you can't wait
34:17
Speaker 7: too long. You got to get it when you're much
34:19
Speaker 7: younger these days, otherwise the you know, the insurance folks
34:22
Speaker 7: won't give it to you. I don't know what the
34:24
Speaker 7: minimum age is, but I bet seventy would be too late.
34:27
Speaker 7: So I'm thinking fifty five is a good time to
34:30
Speaker 7: get it now. Having said that, if you happen to
34:33
Speaker 7: get it, and again you know it's Cadillac policy or
34:35
Speaker 7: even one as you said, Chuck, that might just be
34:38
Speaker 7: there to aid or help with the process, you can
34:41
Speaker 7: get kind of a middle of the road type policy.
34:44
Speaker 7: So if you already have one, keep it. You know,
34:47
Speaker 7: that's if you can afford it. It's probably helping to
34:49
Speaker 7: do exactly what Chuck said, and that is, you know,
34:53
Speaker 7: provide some assistance to in home care perhaps, or you know,
34:58
Speaker 7: if I need to pay a little bit of money
34:59
Speaker 7: for the nursing home, it helps, so keep it. That said,
35:04
Speaker 7: it's never really the end all be all. So while
35:08
Speaker 7: you could do irrevocable trust planning and not have insurance,
35:14
Speaker 7: and that could work. Sure, Okay, I don't believe the
35:19
Speaker 7: reverse is true, so I would not be saying, oh, yeah,
35:22
Speaker 7: I have long term care insurance, therefore I don't need
35:24
Speaker 7: to do any planning. No, I would say that that's
35:28
Speaker 7: a supplement and you should put as much into the
35:31
Speaker 7: trust as you can get it protected. Nice to keep
35:33
Speaker 7: the supplement, but remember it's not likely going to protect
35:37
Speaker 7: everything you have.
35:40
Speaker 2: Is what's the reason for that? Is that just because
35:42
Speaker 2: of the limitations of the policies. Is it because of
35:45
Speaker 2: you know, the potential for longer you know, long term
35:47
Speaker 2: care stays?
35:48
Speaker 3: Like, yeah, what's the main reasons?
35:50
Speaker 7: I would say, you're right, it's it's oftentimes these policies
35:54
Speaker 7: are not paying out sixteen seventeen thousand dollars a month,
35:57
Speaker 7: so it's not covering it. But it can be supplemental,
36:01
Speaker 7: as you said, it can be sure, it can be
36:02
Speaker 7: you know, helpful to have it. So you know, I
36:05
Speaker 7: would say, you know, getting it is not a bad
36:08
Speaker 7: idea if you have it. But and again some people say, well,
36:11
Speaker 7: I'll take it out because I heard it protects my
36:13
Speaker 7: house if I get at least I think it's one
36:16
Speaker 7: hundred and twenty five dollars a day payout for two years.
36:19
Speaker 7: It protects the house. Well, it might help protect the house,
36:23
Speaker 7: but nothing else. People, what about my iris? What about
36:25
Speaker 7: my investment portfolio? What about you know, my my bank accounts?
36:29
Speaker 7: What about my rental property? What about my vacation home?
36:32
Speaker 7: You're right, folks, it doesn't do that, and so you
36:36
Speaker 7: know it's not it has a purpose, Chuck for sure. Okay,
36:41
Speaker 7: but I'm not sure that it gets us to the end.
36:45
Speaker 7: All be all in doing your planning. But planning can
36:49
Speaker 7: get you there.
36:50
Speaker 2: So in a lot of cases, even if you have one,
36:53
Speaker 2: it still makes sense to explore the other, particular if
36:56
Speaker 2: you already if it's just the long term care insurance
36:58
Speaker 2: piece that you have, I would agree.
37:00
Speaker 3: Todd, thanks so much for joining us. We appreciate it.
37:03
Speaker 7: Always a pleasure.
37:04
Speaker 1: This has been asked Odd on the Financial Exchange Radio network,
37:08
Speaker 1: Ask Todd with Todd. Letsky has been presented by Cushing
37:10
Speaker 1: and Dolan, serving Massachusetts and New England for more than
37:13
Speaker 1: thirty years, helping families with the state and tax planning,
37:16
Speaker 1: Medicaid planning, and probate law. Call eight hundred and three
37:19
Speaker 1: ninety three four thousand and one or visit Cushing Doolan
37:22
Speaker 1: dot com. The views expressed in this segment are solely
37:24
Speaker 1: those of Cushing and Dolan Armstrong Advisor. He does not
37:26
Speaker 1: provide any legal or tax advice. Please consult with your
37:29
Speaker 1: legal or tax advisor on such matters. Cushing and Armstrong
37:31
Speaker 1: do not endorse each other and are not affiliated.
37:34
Speaker 2: Still plenty more to come as we continue towards the
37:37
Speaker 2: second hour. We got a bunch of earnings to preview.
37:40
Speaker 2: Mark Zuckerberg is chatting up a storm, so we're going
37:43
Speaker 2: to talk about what the zuck had to say and
37:46
Speaker 2: other things that I want to get to. We've got
37:50
Speaker 2: an IPO coming up for a sandwich shop this week
37:53
Speaker 2: that piqued my interest, being the hungry person that I
37:58
Speaker 2: tend to always be. And then we'll talk about FIFA
38:01
Speaker 2: and the World Cup and why they just can't get
38:05
Speaker 2: their hands on enough money. We'll discuss all that an
38:10
Speaker 2: hour two