Latest / The Personal Finance Club Show / The 401(k) Scam, Your Tariff Refund, and Money Printing | Ep 34

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The 401(k) Scam, Your Tariff Refund, and Money Printing | Ep 34 · The Personal Finance Club Show

0:13
Welcome back to the Personal Finance Club show.
0:15
Hey, Jen. Hi, Jeremy.
0:17
How's it going? Very good.
0:19
I heard you have a question for me.
0:20
I have a question for you. I, this is, I was thinking about
0:23
what you would think about this specifically you, what do you
0:26
think about the mental math that goes into when you like find
0:30
money on your Venmo or in your coat pocket and in your mind,
0:34
it's like free money, whether it's like $100, it could be $3.
0:37
Like what do you think about? Even if you know, like Venmo
0:39
will tell you where you got it from, like, oh, somebody paid me
0:41
for a meal like last month or whatever.
0:44
What are your thoughts on that mental math of like, it's free
0:46
money? Like this is $100 I can just
0:48
spend now? Yeah, honestly, I feel like even
0:52
even in my own life, like I'm like very much on like the
0:55
budgeting spreadsheet side of nerdiness.
0:57
But I don't, you know, I don't put Venmo in my like net worth
1:01
statement. And I there was a time in my
1:04
life where I had like cash and wall as like a category in my
1:08
budget where I would like keep track of like every dollar.
1:10
And then that's kind of died. And, you know, these days cash
1:13
is getting so rarely used. Like how often do you use cash
1:17
these days, do you think? You know the my downfall is I'm
1:21
in an apartment with laundry downstairs, so I have to go get
1:24
like quarters. Oh.
1:26
It takes quarters it doesn't take.
1:28
Like there's no cards yet. These, these, it's a small
1:31
building, but like I feel like I'll end up like if I'm at the
1:34
bank, I'll just end up getting like 40 or 60 bucks just to be
1:36
like, oh, next time I need quarters, like I'll get a couple
1:38
rolls and I'll be like, next time I'll just have like a
1:40
couple dollars in my pocket in case I go to the grocery store
1:43
and I can like ask them for quarters or whatever it may be.
1:45
Is there a quarter machine in your laundry mat or are you just
1:47
trying to get changed in the real world?
1:49
It is dirty. I do love my apartment in this
1:51
building, but that's the one downfall.
1:53
Yeah, no, having laundry in your unit is like the like the most
1:57
massive luxury in life. You can't have it all.
2:01
I know us people in the Midwest, like, you don't have laundry in
2:04
your unit. It's like, hey, in California,
2:06
things are rough out here. Yeah.
2:08
But yeah, I'd say like cash and you know, the Venmo money, like
2:12
I think all that stuff really does kind of feel like free
2:14
money because it's like, OK, well, it's on your credit card
2:16
statement. It's not coming out of your
2:18
checking account. It kind of feels like this like
2:19
other column of free money and you know, I think it's OK.
2:23
Like, you know, it's, I think for most people that's not their
2:26
like big problem that they like will go, you know, splurge at
2:30
Starbucks with the 20 bucks they find in their pocket.
2:33
I think the big problem is like the big things, you know, like
2:36
housing, transportation, job, things like that.
2:38
So I say, you know, I say go for it.
2:40
Do you do you when you get money like that, do you like, does it
2:42
feel like better to spend it? Sometimes, I mean, 'cause people
2:46
like, especially for smaller music gigs, people just like pay
2:49
by Venmo and I'll leave it in there 'cause then I'll have to
2:51
pay other people or like, you know, I, I'm rarely like cashing
2:54
out my Venmo account. So sometimes I'll go in there
2:57
and I'm like, oh, that really added up.
2:58
Like, and then I will kind of forget like what was that gig or
3:01
whatever. Some like, if there's like five
3:02
$600 in my Venmo, I'm like, Oh yeah, let's go.
3:05
Like, you know, 'cause then I'll think about times during the
3:08
month when I was like, I probably shouldn't buy that.
3:09
And I'm like, oh, I forgot about this $500.
3:11
You know what? I mean, yeah, so that's free
3:13
Venmo money, but if you're getting paid that way, I feel
3:16
like that should really be going on your checking account.
3:18
I feel like Venmo's got this incredible scam going where
3:20
they're just sitting on so much of people's money and people
3:23
forget about it or whatever. They're not getting interest on
3:25
it. I'm sure Venmo's making
3:28
something on that. Probably, probably.
3:30
I do try. I don't do the like instant
3:32
transfer thing where they take a bunch of money, but I think they
3:34
still get something. But no, I, I, I have to, I think
3:38
I should be better. And then if it goes through my
3:40
business account, then I, I have to end up reporting.
3:42
So it's, I, I probably should just immediately transfer it
3:44
because then it's harder to figure out if I lump sum
3:46
transfer like when I'm doing my taxes.
3:48
Like what was that from? Like what was that income?
3:51
So honestly, you just helped me work something out of my own
3:54
mind about how I should be budgeting using this.
3:58
All right, all right, now that we've learned it, let's so let's
4:03
jump into the show. What do we have today?
4:05
We've got a hot topic. Oh my gosh, this hot topic is
4:14
starting to feel a little bit stale at this point.
4:17
This is like a stale. This is like a hot cake, which
4:20
is like a hot pancake. This is like a stale pancake
4:23
topic, you know? But what is it?
4:25
It's hot, though, because we are still living in this.
4:28
So that today's hot topic is from a Bloomberg headline that
4:31
reads tariff refunds may be coming if you paid, here are
4:35
your options. So what do you know about this
4:37
new refund portal that everybody's talking about?
4:39
And how will this affect like everyday business owner and
4:42
consumer? So just to recap this, should we
4:46
might need to change the name of the show to personal tariff show
4:48
one of these days for the amount of time we waste talk about
4:51
stupid tariffs. And like now it's officially a
4:53
waste of time. Because just to recap, you know,
4:56
for the first year of the Trump administration, you know, Donald
4:59
Trump would show up to press conferences with like these big
5:01
poster boards of every country in the world and random numbers.
5:05
And people would like kind of dissect like how he came with
5:07
those numbers and they're insane.
5:08
And just he would basically be assigning tariffs and he would
5:12
say he's taxing these other countries to benefit the US
5:16
people. But you know, you know, everyone
5:18
who knows about the world and the tax laws, you can't just tax
5:21
other countries. You're taxing your own
5:23
countries, companies who are importing stuff.
5:26
And so if you go to Amazon by a cell phone case that was made in
5:30
China, typical example, whoever brought that cell phone case to
5:34
the US and put in a warehouse to then eventually get shipped out
5:37
from Amazon has to pay this tariff, this tax to the US
5:41
government. And he was basing all these
5:44
tariffs on the Trade Act of 1974, which basically said, hey,
5:49
if there's some sort of, you know, matter of national
5:53
security, you can, you know, do some things with trade to help
5:58
prevent it. So I think the idea, like the
6:00
spirit of that law was if China starts bombing us, the the
6:05
president can say, hey, stop selling China bombs.
6:07
You know, that makes perfect sense.
6:10
But Trump was saying the, you know, trade deficit is a matter
6:15
of of national security. And so I'm just going to start
6:18
assigning random tariffs and his own Supreme Court now that he's
6:21
like hand picked, you know, more than almost half of it, whatever
6:24
it is. Like very conservatively,
6:26
Supreme Court was like, yeah, come on bro.
6:29
That's that's too far. I'm so shocked like why'd they
6:32
let it get this far? How'd they get let it get this
6:35
far just to deny it? Well, like, who's they right?
6:38
They is just like Trump on day one starting to like print
6:42
posters at Kinko's. And then he goes and tells the
6:44
director of, I don't know, maybe it's I guess it's FedEx now.
6:48
I don't know. But yeah, he just prints some
6:51
posters. Then he sends an e-mail to his
6:53
person that he installs the head of like the Border Patrol who
6:56
like takes Paris. And then they start, you know,
6:59
telling their agents like, Hey, if someone wants their their
7:03
crate at the shipping dock, charge him this amount of money.
7:07
And so it just, it just happened.
7:08
It's because it came from the boss or whatever.
7:10
And then meanwhile people are suing up the chain and the other
7:14
branch of government, like the judicial branch of government.
7:17
And, and then the Supreme Court's like, no, no, you can't
7:19
do that. So now, so you know, that
7:22
happens. Supreme Court ruling came down.
7:24
And so now I guess this is such a stupid recap, but like that's
7:30
during that whole process before or during after the Supreme
7:33
Court ruling, 3000 companies sued the Trump administration
7:36
basically saying, yo, we're going to take this lawsuit in
7:39
our own hands and sue you because you can't do this.
7:41
It's illegal to do that because you're basing it on this like
7:44
law that it was not designed to, you know, install taxes.
7:47
It was designed to stop selling bombs to people bombing us or
7:50
whatever. And so now the Trump
7:54
administration looking at these 3000 lawsuits and the Supreme
7:57
Court ruling is like, OK, well, I guess, well, what we're doing
8:01
was illegal. Now we have to give the money
8:03
back. And so they took in $166 billion
8:09
in these illegal, now determined to be illegal tariffs as
8:14
determined by the Supreme Court, and now they have to give it
8:16
back. And so apparently the, what is
8:21
it? the US Customs and Border
8:22
Protection agency is the one that's responsible for this.
8:26
And on their website, there's, you know, this like very
8:30
government, you wall of text looking website and you can
8:32
click through it and you find APDF, which is right here.
8:35
And if you're just listening, it's another wall of text with,
8:39
you know, a bunch of steps and there's, there's no fewer than 5
8:43
QR codes on the right hand side where you can start.
8:46
I think it's funny that everybody has QR codes now
8:48
because everybody does everything on their phones.
8:50
So I'm like then you have to like go and be like where do I
8:52
put this so that I can like now scan this on my phone.
8:54
Although I guess. If you're trying to get it's a
8:57
website that links to a right, a website that links to a PDF that
9:01
links to that has AQR code, you're supposed to take a
9:03
picture, which will then apparently give you a link.
9:05
Like why couldn't that just have been the link?
9:07
Why we start, we started a web page.
9:10
Now we're we we got paper involved.
9:12
Now we're back at a web page. But I mean, you know, and I
9:14
think that's kind of the feeling the lot, you know, And so I
9:17
guess just to be clear, consumers weren't directly
9:21
paying these tariffs like businesses were when they're
9:24
importing shipping crates and things like that.
9:26
And businesses apparently have some sort of account with the,
9:30
you know, the, the Border Agency where they're paying the tariffs
9:33
to. And now they're basically
9:34
saying, OK, you can try to like figure out how much you paid,
9:38
how much you get back through this.
9:39
And you know, the my understanding is the businesses
9:42
don't feel super confident this is going to be a quick and clean
9:45
process. Well, what I've heard maybe
9:47
you're going to talk about this is that like some hedge funds
9:49
are like doing the process for people.
9:51
So like buying out the the like the the money.
9:56
Owed or whatever out of some sort of fraction.
9:58
Because people have to deal with the hassle of it.
10:00
I'm like this is a whole nother scam.
10:03
Capitalism baby, you're, you're owed $1,000,000 we'll pay you
10:06
800,000 right now and you know, start, start printing PDFs and
10:10
scanning QR codes and try to get the other 200,000.
10:14
Yeah. I mean, you know, capitalism
10:17
baby. And Speaking of capitalism, you
10:19
know, listeners of the show probably don't aren't going to
10:22
go get their direct refund because they're probably not an
10:24
importer exporter business or an importer business unless you are
10:28
a Vandelay Industries and you're importing Latex or whatever it
10:32
is. Do you get that reference?
10:33
In delay, is that Seinfeld? That's Seinfeld.
10:35
He was an importer. Whoa, he's an importer?
10:37
Yeah. Wow.
10:40
We're really well. Ageing, his fake job was
10:43
importer and so if Seinfeld was made today and they had the fake
10:47
vandal industries where he's a fake importer, he would be
10:50
paying tariffs. How you know man 2530 years
10:54
later from Seinfeld now. That is such a funny reference.
10:58
That's stupid. I'm like really dating myself.
11:00
You know, once I went to a Seinfeld stand up show and this
11:05
was probably 10 years ago now, so I was probably like 35 and I
11:08
was like, oh, Seinfeld. He's like the number one comic
11:10
in the world. Like this could be huge, like a
11:12
big auditorium, whatever, big theater.
11:15
And then like I get there and I realize that like, I'm probably
11:17
the youngest person in the entire audience, you know, not
11:20
by a lot, but like, like the audience was like 45 to 65.
11:24
And I'm like, I was like, oh, because like Seinfeld is
11:26
popular. Like the early 90s where I was
11:28
like 10. It's always like kind of like
11:30
the youngest person who is really like watching Seinfeld
11:32
and understanding it. Most people are like 20 to 40,
11:35
25 years ago. Now they're all 45 to 70.
11:38
And so I'm like, this is just very weird to be at this like,
11:40
big what I thought was going to be like a bunch of young people
11:42
going to a comic show. I was like, oh, of course, like
11:44
he's like 60. He's a comedian of a different
11:46
era now. Yeah, so that was the point of
11:49
viewing in the Medea house. I mean, but we were like
11:51
watching it with our parents, so.
11:53
Right, exactly. I mean, yeah, even me, I was
11:55
like, I'm think I'm too young to get these jokes, but still.
11:59
Anyway, so vandal industries tariffs.
12:01
But yeah, to bring it back, if you are not a vandal industries,
12:05
you're not an importer yourself, you might be thinking, hey,
12:08
didn't this, didn't these tariffs burn me?
12:10
And the answer is like, yeah, maybe because what happened was
12:12
like, let's say you're that cell phone seller in the US you
12:17
import a case of 10,000 cell phone cases from China.
12:20
And then you were expecting them to cost, you know, $3 a case.
12:25
But now with the tariff, they're going to cost $5 a case or
12:27
whatever it is. And you were selling them for $6
12:29
a case. You're like, oh, at $6 a case,
12:31
I, I'm actually losing money because I can't even cover, you
12:34
know, my, you know, my rent at my office or whatever.
12:38
And so you're like, OK, now I'm going to start charging $8 a
12:40
case. And so when you went to Amazon,
12:42
unbeknownst to you, cell phone case, just cell phone cases just
12:45
started costing more because these companies had to increase
12:48
their prices to like maintain their viability.
12:51
And now the cell phone import is going to go get a refund of 100
12:55
grand from the federal government.
12:57
And you might be thinking, do I get a piece of that?
13:00
And the answer is I doubt it. You know, you know, I think
13:03
every company back then had the choice.
13:05
Do I just, you know, eat this additional cost and become less
13:10
or not profitable? Or do I increase prices and, you
13:13
know, be part of the the, the tapestry that makes up
13:20
inflation? And I think a lot of them
13:22
basically chose the inflation route and so well.
13:25
My other question is like, yeah, well those like if I'm a, if I'm
13:28
a retailer and I'm selling cell phone cases, I'm not going to
13:31
now bring the price down like the cases are now $22.00 well
13:36
as. They say, they say like prices
13:37
like rise like a rocket and like fall like a feather.
13:41
And so, you know, probably a lot of those cell phone cell or cell
13:44
phone case sellers were thinking, hmm, sales didn't
13:47
actually drop much when I went from 6 to $8 or whatever it is.
13:52
Do I really need to compete? And like, all my competitors are
13:55
the same thing and they're not lowering their prices.
13:56
And so, you know, while it might not be strict collusion, they're
14:00
kind of all just pricing with the market now and the markets
14:03
now higher. And so, you know, that's
14:05
inflation, right? And maybe that's a failure of
14:08
capitalism. I don't know.
14:10
My prediction though is that there will be virtually no
14:14
direct consumer refunds, but I predict a bunch of companies are
14:18
going to use this as a marketing ploy to basically run sales or
14:25
give some sort of credit or something like that.
14:27
And. So you know.
14:29
Your cell phone importer might say, hey, we're having a, you
14:32
know, tariff refund 2 for one sale, buy one case, get 2, you
14:36
know, get 2 or whatever it is. And you know, is that really a
14:40
refund? Is that a credit?
14:42
Is that just a sale they would be happy to run any way to, you
14:45
know, get more, you know, revenue?
14:48
Yeah, I don't know. But yeah, I bet some like very
14:50
hippie companies like a like a Ben and Jerry's or a Doctor
14:54
Bronner's or something like that.
14:55
Like they might be like actually trying to like send out if if
14:59
they were hit by this, I don't know, like their extended their
15:01
tariffs. But, you know, FedEx and Costco
15:05
are to the companies that are currently suing with the Trump
15:08
administration. So they're big companies mixed
15:10
up in this, too. And I could definitely see
15:11
Costco doing something. Costco.
15:13
Oh yeah, they've been standing on business this whole time.
15:16
Exactly. And they like, they know
15:18
everyone's got memberships, they know who bought everything.
15:20
They could potentially just send out a refund check to everyone
15:23
like they do with their little credits.
15:25
So yeah, that's a tariff situation.
15:27
It kind of feels like the tariff situation the the Strait of
15:30
Hormuz. Am I saying that right, Hormuz?
15:32
I think so, yeah. OK, on those pronunciations.
15:36
So yeah, I'm gonna go ahead and. I really like waiting into
15:39
business that neither of us have any knowledge about Middle
15:43
Eastern pronunciations. Let's go.
15:46
But it feels like the state of Hormuz was open and then the
15:50
Trump administration did a whole bunch of stuff, and now they're
15:52
trying to get reopen and, you know, declare success.
15:55
And we're like, wait, didn't we start here?
15:57
And tariffs are kind of the same.
15:59
We just did a whole bunch of crazy tariff shit for a year and
16:02
a half. And now we're back to, like, try
16:05
a refund and get back to where we started.
16:09
I'm not sick of winning yet, but we'll, you know, you can decide
16:12
if you are. So yeah, but that's tariffs.
16:14
Don't hold your breath for your own refund.
16:16
Nice. You did a great job explaining
16:18
that. So I, I think you're getting
16:19
better now that we've talked about it for like.
16:22
Yeah, I know Personal Tariff Club is alive and well a a topic
16:27
that I thought we wouldn't cover.
16:28
This goes back to like the Boston Tea Party and stuff.
16:32
Now we're now we're bringing right back into 2026.
16:36
Hot off the press. OK, well on that note, let's
16:38
move on to Do you want to have your question answered on the
16:42
show? Go to
16:43
personalfinanceclub.com/ask. Can I ask a dumb one?
16:47
You're asking smart questions. This is a really smart question
16:49
to really dumb guys. What is our smart question
16:52
today? This is from David in South
16:54
Carolina, my neighbor, well, I'm not there.
16:57
I'm not North Carolina now, but those are my peoples.
17:00
We, I want to say also we get like a good diversity of
17:03
questions from like all over the US At this point I don't think
17:06
we've gotten any international yet, but that's pretty good.
17:09
Hey, we got, we got range baby. People always ask me like, oh,
17:12
is that just people in San Diego follow you?
17:14
I was like, no, when you look at the metrics, it's pretty much,
17:17
you know, population spread out like the rest of the US is.
17:21
That's pretty dope. OK, so.
17:22
I think we are about 75% US, 25% international.
17:25
So but I do feel bad for the international people because
17:28
there's a lot of Roth IRA talk, you know, on the podcast that
17:33
just doesn't apply because that's AUS tax law thing.
17:36
So but you know, the 2 rules still apply.
17:39
And I do hear from a lot of international people who are
17:41
becoming millionaires in their own rights following the 2
17:44
rules. So hopefully shout out to you
17:46
guys. OK, so this is David in South
17:49
Carolina. David asks.
17:51
I was fortunate to inherit control of a custodial account
17:54
after college with a few 10s of thousands.
17:57
It was actively managed. It was an actively managed
18:00
brokerage account at a 1% fee, which at the time didn't seem
18:03
too bad. I continue to contribute for
18:05
about 20 more years and it has grown to over 1,000,000.
18:08
Yay. But I'm now paying over 10,000
18:11
per year in fees. Ouch.
18:13
Plus now I understand that compounded over time, that
18:16
nearly 1% fee has likely cost a lot more in potential returns.
18:20
But it's not obvious how to get out of this setup and into the
18:23
ETF approach. Jeremy.
18:27
That's a great question David. And so you know first of all
18:30
congratulations like good problem to have you know you are
18:33
basically asking a logistical with all the different
18:37
individual holdings and tax question.
18:39
But you know the headline here is you have 1,000,000 bucks or
18:44
so you said more than a million. Let me first and you, and you're
18:49
talking about the 1% fee, just just to kind of clarify what
18:53
that means is if you go hire a typical financial advisor or an
18:58
asset manager, they'll basically take all your money for you,
19:02
invest it for you. They'll choose the stuff to
19:04
invest in and then they charge what's called an AUM fee or
19:07
assets under management. And 1% is like kind of very
19:10
typical, average. If you have like lots and lots
19:12
of like many, many millions might like come down a little
19:14
bit. If you have very little, it
19:15
might be more than 1%. But 1% is pretty typical.
19:18
And you're exactly right. If you have 1,000,000 bucks
19:20
there, 1% of 1,000,000 is $10,000.
19:24
And that's real money being debited from your real account.
19:28
And it feels very abstract when it's just like, oh, it's all
19:31
kind of lost in the, the wishy washyness of the stock market.
19:35
And you know, they're providing this, you know, hard to pin down
19:38
value. So it's probably fine.
19:41
But no, for sure, it's $10,000 a year.
19:43
And that's a massive amount of money.
19:45
You know, when I think about the things I spend $10,000 a year
19:48
on, there's not much other than, you know, housing, you know,
19:52
maybe food, like generally, you know, just really big expenses.
19:56
So to pay your investment manager $10,000 a year, are they
20:00
providing that much value? I don't know.
20:02
So quickly the quick painful math.
20:03
I don't know your exact numbers. You kind of gave some vague
20:05
numbers, which is totally fine. But let me assume you had
20:08
$50,000 that you inherited. And then, you know, you have
20:11
1,000,000 bucks. You're adding a bunch of this
20:13
along the way. So let's say you're adding $1200
20:15
a month. And let's say the the portfolio
20:19
they invested you in return at 10% per year, but they took out
20:22
a 1% per year fee, meaning the net gain to you was 9% per year.
20:27
That means today you'd have about 1,000,000 bucks, one point
20:29
O 1,000,000 bucks. Just that's how the math of that
20:32
compounding works. You know your specific situation
20:34
might be different like when you put the money in, you know the
20:37
growth, which time it grew, things like that.
20:39
Let's say same exact scenario, 50,000 + 1200 a month, but this
20:44
time instead of paying the 9% or paying the 1% fee and getting a
20:48
nine percent return, you get all 10% that the market was
20:51
providing there in that time. Instead of one point O 1,000,000
20:54
you'd have 1.16 million. So you know it's not crazy
20:58
different. You wouldn't have like 10
20:59
million or 5 million or 3,000,000, but it is $150,000
21:04
that your net lower due to those fees.
21:07
You didn't pay all that in fees, much of its fees and the rest of
21:10
it's basically opportunity cost. The fees that you paid earlier
21:13
in the in the early years didn't have the chance to grow later.
21:18
And you know, and that was only, you know, I say only 20 years is
21:21
significant in a period of time, but the longer it goes, the, the
21:24
more those fees compound. And I think you're starting to
21:26
feel that now you're like $10,000 a year.
21:29
Do I want to keep paying that? So that that's, that's the math,
21:35
you know, in that example I gave, to be fair, I don't know
21:38
what stocks you're in. I don't know if you outperform.
21:40
It's totally possible that this manager happened to pick really
21:43
good stocks for this time and actually provided a 12% return
21:46
in my net of his fee. You got 11% and you actually
21:50
beat the market by a little bit. That's possible.
21:52
But I do know, you know, that's called alpha when you beat the
21:55
market by a little bit, if you actually provide real alpha.
21:57
What I do know is some total across all investors in the
22:01
world, the total of alpha is 0 because for everyone who beats
22:04
the market, someone has to lose the market market.
22:06
And the more you learn about this, the more you really start
22:09
to believe that anyone who's getting alpha is much more
22:13
likely to be lucky than good. And so if there was alpha, you
22:16
know, if he'd actually beat the market, is that going to
22:18
continue? You know, I personally don't
22:20
think so. But also, you know, he might be
22:23
have been providing other services.
22:25
He might have been providing financial planning services,
22:28
things like helping you with taxes or student loans or paying
22:31
down debt or buying a house. You know, he might just have
22:34
been a financial advisor there for your for your service.
22:38
I don't know a lot of these asset managers, some of them do
22:42
that, some of them don't. It's up to you to decide if that
22:45
was valuable. And he might have also been
22:47
providing other value to you, like preventing you, you know,
22:50
20 years ago it was 2006. And so two years later was the
22:54
2008 financial crisis. He probably said to you,
22:57
hopefully, hey, don't sell everything right now.
23:00
Stock market crashes are part of investing and maybe kept you on
23:04
your path. And that sort of coach along the
23:06
way maybe LED you to have 1,000,000 bucks to say when if
23:09
you were didn't have that guidance, maybe you would have
23:12
had 500,000 or who knows, right. And so, you know, the world is
23:17
nothing if not Shades of Grey. And so obviously I have my
23:19
opinion about, you know, paying high fees as part of your
23:22
investments. But it's worth noting that there
23:24
are some benefits that you might have been, you know, sitting
23:28
along this way, too. Like I said, headline is
23:30
1,000,000 bucks. Jen, you convinced yet?
23:33
I'm I'm. Not I'm convincing y'all.
23:37
I know what to say. What?
23:38
What? No, you, you're, you're, you're
23:40
doing fantastic. Jen, Jen's just my yes man.
23:46
She's like, yeah. I'll be calling you out because
23:49
you sometimes you let me not let me not.
23:50
Get in. OK, that's true.
23:51
You do? Yeah.
23:52
Sometimes you act crazy. David, thank you for your very
23:56
thoughtful question. Wait, wait.
23:57
We're not done yet. We're only halfway done.
23:59
Oh my God, we. Haven't even started, that was
24:02
just the recap. We're just getting warmed up.
24:05
Folks, I, I always suspect, suspected Jenna was watching
24:08
Grey's Anatomy in the other browser tab and she's like, Oh
24:12
yeah. OK, so anyway, that's where
24:14
you're at with your advisor, but what do you do?
24:16
You're basically asked 2 questions.
24:17
Question number one was the logistics.
24:21
How do I transfer this? And, and the answer is that's
24:23
actually pretty easy. Any brokerage custodian really
24:27
loves transferring assets in. And so you can go to Fidelity,
24:30
you can click start a transfer, you can put in the details of
24:32
your existing, you know, advisor and then they basically just do
24:36
it, They pull it. And there's, you know, the, the
24:39
system is set up so you can actually do a pull and you don't
24:43
even need to tell your advisor about necessarily.
24:45
That said, being that you've been with him for 20 years, I
24:47
would recommend probably sending them a nice e-mail saying hey,
24:50
thank you for your service all these years.
24:52
You can be very polite, let them know you plan to self match
24:55
going forward and that they should expect an incoming
24:57
transfer request. That's all.
24:59
They're. Going to be sad because like
25:01
that was $10,000 a year that I was getting for doing probably
25:05
not very much. I don't know your advisor, but a
25:07
lot of them basically are in the business of collecting AUM,
25:10
collecting assets under management to, you know, and
25:12
it's a, it's a good business once you've got it right because
25:14
people don't leave very often. So the process is pretty simple.
25:18
You know, it's going to take, you know, 7 business days or,
25:23
you know, some annoying, you know, there might be a form you
25:25
have to sign or fill in or whatever.
25:27
But once you do it, it's not that big of a deal.
25:30
The kind of like the more meaningful financial question
25:33
you're asking is like is OK, what about taxes?
25:36
And so your current situation is this advisor was basically
25:38
putting you in individual stocks now many of which have these
25:43
really large unrealized gains. And one of the kind of downsides
25:47
of individual stocks is that you, you know, you might have
25:50
really big gains in a way that is less tax efficient than if
25:52
you were investing in an ETF along the way.
25:55
And so you basically have three options.
25:58
Before I tell you the options, I want to kind of look at the
26:00
actual tax impact you're looking at.
26:05
I don't know your exact numbers, but just go with my assumptions.
26:08
Again, let's say you inherited 50,000.
26:11
You're putting 1200 a month. That means to date you put in
26:14
$338,000 based on what you inherited plus what you put in.
26:18
Dad's your principal that has already been taxed.
26:21
It got taxed. You know you had a step up basis
26:24
when you inherited it, meaning you don't owe any tax on the
26:26
inheritance and you this money you're putting in is after tax.
26:31
You already paid income tax on that $1200 per month.
26:33
So that 338,000 is never going to be taxed again.
26:37
Your value is 1,000,000. That means you have unrealized
26:40
gains of 662. Again, this is assumptions.
26:43
You need to look in your account.
26:44
You'll be able to see line items right there, what your actual
26:46
unrealized gains are. And you want to get that
26:48
statement so you know, and know what you're up against.
26:51
If there's been a lot of trading along the way, which is possible
26:53
with an advisor and they've been swapping out stocks every year,
26:56
it might be possible. You have little to no unrealized
26:58
gains because they, they bought calc last year, they sold it,
27:01
they bought Pepsi this year, they sold it.
27:03
And then that you've been paying that tax along the way.
27:05
So if you know, my example is kind of the more extreme example
27:08
where basically there's been no realized gains yet.
27:12
You've, you've just held everything until now and you
27:14
have this huge unrealized gain, which means you didn't sell
27:16
anything and you didn't get the cash out and you didn't pay tax
27:19
on anything. So all that 662,000, if you were
27:24
to pay a 20% capital gains rate on that entire bill, that'd be
27:29
$133,000 in tax, meaning instead of having a million bucks, you'd
27:33
have 867,000. So you know, is that a great
27:39
thing to have happen? No.
27:42
But also you then would have 867,000 fully 100% tax free.
27:48
It's you paid the tax on it now and you could go take it and buy
27:50
a house in cash or whatever you want to do with it.
27:53
And so I just say that because that's kind of like the worst
27:57
case scenario that's kind of what you're up against is trying
27:59
to either delay, basically delay paying that tax because there's
28:04
only one way to get out of paying that tax on the capital
28:07
gains. Do you know what it is, Jen?
28:08
I kind of already said it earlier by mistake.
28:10
There's only one way to get out of paying that tax.
28:12
Capital gains tax. Like how can you?
28:14
How can you not pay that capital gains tax ever?
28:17
Die and. That's 100% right.
28:20
Die. You just got it.
28:21
One word, Die. All you have to do is die.
28:23
OK. And so, you know, David, let's
28:25
say you die and let's say it's still 1,000,000 bucks and then
28:28
you have kids. I don't know if you have kids,
28:29
but let's say you have kids they inherited, they would get that
28:31
1,000,000 bucks and then they get a step up in basis, meaning
28:34
instead of having their basis be 338,000 like yours is, that
28:38
$662,000 in gains gets stepped up and now their basis is
28:42
1,000,000. Dying is this incredible tax
28:45
advantage for the beneficiaries, right?
28:47
But that said, it's got a really big downside, which is you have
28:51
to die, you know, and David, I, I want you to use this money, I
28:55
want you to spend, I want you to live with it, make it better.
28:58
And so, you know, paying this entire tax bill, it is fully an
29:03
option. You could choose to do that if
29:04
you want. That's can be your choice.
29:05
And you can say I'm going to pay it all in 2026.
29:07
I'm going to take my 867 and spend half on hookers and blow
29:11
and the other. Half whoa whoa whoa.
29:14
Flagging episode I guess. Yeah, I know.
29:17
We always get about 1/3 of the way through the episode.
29:19
I'm like, no. Who's Wheeler?
29:21
Another PG13 episode. I'm innocent.
29:25
That's true. I mean, you know, we're A-Team.
29:27
I'm the bring down the team and you're the one that tries to
29:31
save it. We each have our roles.
29:33
You're only as strong as your weakest link.
29:35
Exactly. We're a chain, and the chain
29:39
that drops swear words by mistake every once in a while
29:42
and says hookers and blow. But you know.
29:45
And you said a children. 'S book called Hookers and Blow.
29:47
It's about a tow truck named Hookers and a snow blower named
29:51
Blow and and they go around town trying to save Christmas because
29:56
of a heavy snow. Excuse me, are you done with
30:00
David's question? No, David, we're not even close
30:03
to getting done yet. You've probably already gone
30:07
through a few tax years while you're waiting for this question
30:09
to be answered because it's answers like.
30:11
The podcast for six months. But this episode is about 18
30:15
months so far. This is a very long episode
30:18
where by the time this episode finishes, we're going to be in
30:21
tax year 2028. That's the entire problem, Jen.
30:25
OK, All right. So.
30:28
So basically you can't not pay those taxes unless you die.
30:31
So if you want to delay the paying those taxes, you have
30:33
three options. 1 you can you can just totally DIY.
30:36
You can go to Fidelity DIY stands for do it yourself.
30:39
You can go to Fidelity or Vanguard or Schwab I.
30:42
Think you broke that down just. Saying acronyms is now getting
30:45
gender left. We've fully gone off the rails.
30:47
Who? Doesn't know what DIY means.
30:50
I don't know. I'm not on Pinterest.
30:51
I think I thought it was like a Pinterest thing.
30:53
He's talking down on you, South Carolina.
30:55
That's crazy. Everybody knows DIY.
30:56
OK, fine. You can just totally DIY.
30:59
You can go to Fidelity, you can click initiate transfer, you're
31:01
going to get all of your individual positions there and
31:03
then you can just sell them whenever you want.
31:05
You know, you could probably pull up a spreadsheet and look
31:07
at your tax income this year and tax income that year and make a
31:09
little plan. That said, if you do that, like
31:12
my general advice is don't let the tail wag the dog.
31:15
If you have, you know, 90, I don't know what your stocks are,
31:18
but let's say 90% of your portfolio is in NVIDIA and
31:21
you're like, oh, I don't want to realize this gain.
31:22
I'm going to wait till next year to realize the gain.
31:25
And then your $1,000,000 portfolio becomes 400,000
31:28
because NVIDIA just crumbles because the unexpected AI thing
31:32
happens next year that none of us are expecting.
31:35
That could happen. No one knows that that's going
31:37
to happen. And you know, your tax savings
31:39
don't look so good anymore if the value went down by 60%,
31:42
right? And so, you know, generally if
31:45
you want to be diversified in ETFs, you should do that first
31:48
and then worry about mitigating the taxes 2nd.
31:50
And so you could totally just DIY and you know, the the
31:55
baseline there is at worst, you're going to pay all the tax
31:57
bill in this tax year currently and go on with your life.
32:02
Option number 2 is go find a flat fee financial advisor and
32:05
so you know where. Can I find one of those?
32:08
Oh my gosh. Well, Jen, just tee him up and
32:10
I'll knock him out of the park. You know, a flat fee financial
32:14
advisor is one who doesn't charge that AUM fee, who doesn't
32:17
have this weird incentive to keep you in a complex portfolio
32:20
that they that they have to match.
32:21
And they're going to help to help you with what you want to
32:24
be helped with if you want to move into ETFs, which is a great
32:26
move, by the way. They're going to say, OK, hey,
32:29
here's your six positions that need help.
32:31
Here's your plan for your next 18 months.
32:32
You're going to sell these at these points.
32:34
This is why you're going to do this rollover.
32:36
You're going to realize these losses.
32:37
They're going to basically make a plan to mitigate your tax
32:39
bill. You're still going to pay taxes
32:41
because they can't defy U.S. tax law, but they can point out some
32:46
options that you might have. And to answer your question,
32:49
Jen, of course, I'm a Co founder of Nectarine and you can find
32:52
them at hellonectarine.com. I think that you might think
32:56
this is a big sales pitch, which I guess it is.
32:58
But the only reason I started this company is because
33:01
questions like this constantly coming up.
33:02
I'm like, oh God, you really got to talk to an advisor.
33:05
But when he's not trying to sell you anything, we need a
33:07
marketplace of flat fee advisors whose reviews and prices are
33:12
clearly posted. And so you can go find one.
33:14
And you know, if you're paying $10,000 per year, paying, you
33:18
know, like $1000 for a few hours of advice or like $3000 for a
33:23
complete financial plan is a pretty good deal.
33:27
You know, it's like 70% off your first year, and then there's no
33:30
recurring bills. So that's very reasonable.
33:34
The third option is getting into kind of a technical solution to
33:39
this exact problem that you may or may not like.
33:44
And so there's this thing called direct indexing.
33:47
And if you go by VOOVOO is Vanguard's S&P 500 ETF and you
33:56
look inside of it, there's 500 individual stocks.
34:00
And just by buying 1 little ticker symbol with a ticker code
34:03
VO, you own 500 stocks. The tons of benefits, I won't go
34:08
into them, but there's one downside, which is you can't
34:11
sell individual positions inside of that ETF.
34:14
And so there's proponents of direct indexing who say, hey,
34:19
what if Adobe for some reason has caught the Photoshop icon
34:23
out of the corner of my eye? What if Adobe went way down in
34:26
value and then, you know, Netflix went way up in value and
34:31
I want to take some money out with an ETFI, have no choice.
34:35
I just kind of have to lop it off at the top, everything equal
34:37
and then pay some capital gains with direct indexing.
34:40
I could sell some on my Netflix, also sell some of my Adobe,
34:45
cancel out those gains with with losses, get some money out and
34:50
not have to pay any capital gains today.
34:52
And that's kind of what your goal is here.
34:54
If that is your goal is to kind of delay paying that capital
34:57
gains tax. And so direct indexing is
34:59
basically buying those 500 positions or maybe it's just 30
35:03
or 50 or whatever it is to basically give you a really
35:05
diversified approach towards the mark the market, but now a
35:10
little bit more flexibility in terms of which ones you sell.
35:13
There's a company called Frac FREC, it's all capital and they
35:18
basically specialize in your problem, which is you give them
35:21
all these weird individually, large realized or large
35:24
unrealized gains positions and they will start direct indexing
35:27
for you. And they'll even pull some weird
35:30
tricks with options and things like that to basically give you
35:32
instant diversification. So to avoid that downside NVIDIA
35:36
risk I kind of talked about a minute ago.
35:38
So they say they kind of give you instant, you know,
35:41
diversification by spreading out your investments without having
35:45
to realize those gains. And you know, what you're left
35:49
with is basically one FRC account that kind of feels like
35:52
one interface, but you have, you know, dozens or potentially even
35:55
hundreds of underlying positions.
35:57
If you were to leave FREC one day, you'd kind of be back where
36:00
you are now, which is OK. Now I got to go to Fidelity and
36:03
I still have a bunch of individuals, individual stocks.
36:06
But some people are like, yeah, no, I like FREC.
36:08
I don't plan to leave. I just want to have someone
36:10
manage it, you know, de risk with this diversification
36:13
approach and not, you know, be more tax deferred by not
36:17
realizing these gains right now. So it's kind of like a robo
36:21
advisor designed to do this direct indexing thing.
36:25
You know, I I don't you know, I did not Co found Fex Freck or
36:32
else or else I probably wouldn't have mispronounced it just now
36:34
and I'd probably be giving a much more full throated
36:36
investment like I do for Nectarine, of course.
36:39
But you know, I don't really have a horse in this race.
36:43
I think for some people who really have a lot of money at
36:45
stake and really want to do this, I think it's a really
36:47
great option that's out there. I think for some people it might
36:50
just not be worth it. You know, the the delay of these
36:53
taxes, which you're going to owe one day when you want to, you
36:55
know, cash out anyway until unless you die, of course, might
36:59
not be worth it. And so it's up to you.
37:02
You know, I kind of do feel like it's going on this rabbit hole
37:04
of like, you know, is it really, you know, all the stuff just to
37:07
just to delay the tax on, you know, of a few 100 grand, It's
37:11
up to you. So those are three options.
37:13
Do IDIY just go to Fidelity, Just sell it, sell it all and
37:17
you know, realize the gains 2 do that kind of same thing, but
37:20
with the guidance of a flat feed visor from hellonectarine.com or
37:25
three, transfer it all to FREC, which I think let me give you
37:29
the website, it's frec.com, FREC and then they kind of specialize
37:35
in this specific thing. So those are your options,
37:38
David. Really laid it all out for our
37:41
friend over there in South Carolina.
37:43
Jen's like, weren't we wrapping up 30 minutes ago?
37:46
No, that was my fault. I was on Mars.
37:49
Sorry about that. Thank you, David, for your
37:53
question. We are done now.
37:55
Yes. We're totally done.
37:57
And I don't blame you. I I mean, I get bored.
37:59
Listen to myself sometimes. Just gotta keep you awake in the
38:01
car. Hopefully that's, that's the
38:03
dream is you don't crash and have a fiery tragedy.
38:06
Oh. My gosh.
38:07
OK. Thank you, David for your
38:09
question. Let's move on to our next
38:11
segment, Scroll Patrol. Scroll Patrol.
38:18
Hey, all right, I'm on the Internet looking for videos.
38:22
Jeremy has not seen this video before.
38:23
We're going to watch it together.
38:25
He's going to live, react and give it a score.
38:28
So stakes are very high. So Jeremy, go ahead and click on
38:32
that video and let's watch it together.
38:34
Here we go, babe. Why did you cash out your 4-O1K?
38:38
So in 2019 I cashed out over $100,000 out of my 4 O 1K to
38:43
invest in real estate. And that's because 401 KS are
38:47
the single greatest scam that anybody can invest in Now for
38:51
99% of people. If you have no discipline
38:53
financially and you don't want to invest your own money for
38:57
sure get your employer match that's fine.
38:59
But what 401 KS are designed for is the US government literally
39:02
said most people don't have enough discipline to actively
39:06
invest money on their own. So we're going to create a
39:08
program that forces people to get into equities, AKA the stock
39:12
market. And so the 401K is designed for
39:14
you to not pay tax right now and then draw on it later at 65
39:19
where you're supposed to be paying less tax.
39:22
But the issue is I'm going to be really, really rich at 65 years
39:25
old and I'm going to be in a higher tax bracket.
39:28
So you are literally having no benefit to having a four O 1K
39:31
because you have 0 control with that capital that's inside the
39:35
vehicle of the four O 1K. So look, I'm not your financial
39:39
advisor. I'm not giving financial advice.
39:40
If you want to ride that four O 1K, do it.
39:42
I'm just saying that if you want to understand how to actively
39:47
invest your money in real estate and businesses and stuff like
39:49
that, it's much better to pay the 10% pre penalty to go ahead
39:53
and get that money out of the four O 1K to where you can
39:55
control it and actually grow it. And do something with it.
39:59
Most people are just sitting like you're wasting money in a
40:01
401K. OK.
40:05
He's not giving financial advice.
40:08
Before we get into the the substance of this and so far, is
40:13
there any like this man didn't touch the steering wheel until
40:16
like a minute 15 into the end of the video.
40:19
I thought he was in the passenger seat and and it does
40:22
look like the it's, you know, he's sitting on the right side
40:25
of the car from our perspective. If you're not watching this,
40:27
she's got to trust me. But he's sitting on the right
40:29
side of the car and he has an American accent.
40:31
So I take that to me and he's in the passenger seat.
40:33
But then at like a minute 15 in this video, he starts steering,
40:37
which makes me think that it was a self facing camera.
40:40
It's flipped and he's been driving this whole time.
40:42
Yeah, I hope the girl's not driving because she was filming.
40:46
So I mean which is better? Right.
40:47
This is maybe we need, we need to address the safety concerns
40:50
here. Also, why is everybody who gives
40:52
advice like this shirt so tight? Yeah, the guy has been, he has
40:57
not skipped bicep day at the gym, so full credit to that.
41:00
I mean, hey, like I'm a fitness guy too.
41:02
I like that. But yeah, no, it's always like
41:05
the 27 year olds with like the, you know, 2 sizes too small Polo
41:10
who, you know, just say just magically make more in real
41:12
estate. OK, I mean, I almost pulled my
41:17
eyeballs when he said four O 1 KS are the biggest scam because
41:20
like No 4 O1 KS are not as I mean, I don't even know how to
41:23
like how to destroy this, but I'll I'll go systematically.
41:28
Yeah, 41 KS are not the biggest scam.
41:31
It's simply a tax savings and his, you know, I feel like all
41:35
these like scam videos we see, they always have this like a
41:38
little hint of truth, which is if you're in a higher tax
41:41
bracket later than you are now, then you might be paying higher
41:44
income tax kind of, but you're, you know, you're you're not
41:47
paying capital gains or dividends tax along the way.
41:50
And so there's actually this huge benefit to, you know,
41:52
compound growth that you wouldn't get if you were in a
41:55
non tax advantage account like real estate where you're paying,
41:58
you know, tax on your rent or you're paying tax on dividends
42:01
or if you're in a brokerage account.
42:03
So even if you're in a higher tax bracket in retirement, which
42:06
to be fair, you might be because a lot of people who are
42:08
investing early and often will end up with lots of money and be
42:11
making big withdrawals. But there's like so many ways to
42:15
deal with that then. So just to blanket say you're
42:19
going to pay more in tax, therefore pay pay all your tax
42:22
now, which you would have to do anyway, plus your 10% penalty
42:25
and go get magically better returns outside of the safety of
42:28
a tax advantage account, you know, does not make sense.
42:32
That said, like, you know, real estate is good investing too.
42:35
I'm not against real estate. And it's possible to make more
42:38
real estate than you do in the stock market.
42:41
It's also possible to make less than you do in the stock market.
42:44
And you know, his his proposal that you're automatically better
42:49
off by doing this is like, so you know, wholly false.
42:54
And in fact, most wealthy people are trying to do the opposite,
42:57
get more and more and more money into their own foreign K.
43:01
You know, he said you have 0 control.
43:03
He had a lot of air quotes. If you were not, if you're just
43:05
listing, it's like he called them equities and air quotes.
43:07
I'm like, no, they are equities. They're, you know, ownership in
43:09
the companies of the world. And they're probably companies
43:12
that are being a lot better marriage than whatever rinky
43:14
dink stuff this guy's doing. So, you know, those publicly
43:19
traded copies of the world, being an owner of them is like
43:22
an amazingly efficient way to generate amazing wealth.
43:26
So, you know, anyone who says 4 O 1K is a scam, that's a lie.
43:33
It's not a scam. It's, it's like a tax advantage
43:36
offered a limited tax advantage. You can't even put that much
43:39
into a four O 1K offered you by the government.
43:42
You know, there are rules around it.
43:43
But when you, when you leave a four O 1K or when you leave a
43:46
job, you can potentially roll over your, you can roll over
43:49
your 4-O1K into an IRA and you can even invest that IRA in real
43:53
estate. And so, you know, paying a
43:55
penalty to get out of get out of the tax, manage this situation
44:00
is a terrible idea, He said some other crazy stuff.
44:06
And then I really got distracted by whether or not he was driving
44:09
because I'm pausing a screenshot of like his hands are not on the
44:12
wheel. Yeah, I guess.
44:15
Is he driving with his knee? Some people do that.
44:17
Maybe early in the video his left hand is grabbing the wheel
44:20
like just out of frame. Well, OK, also, I don't know if
44:23
you've, I'm sure you do know about this.
44:25
My friend has a Subaru or she had a Subaru where it was like
44:27
kind of self driving and it would know you didn't have to if
44:29
you were on the freeway you didn't really have to touch the
44:32
wheel if you don't want to. Totally.
44:34
I mean, you know, I have a Tesla and that's like, you know, I
44:38
only touch the wheel when I'm on the freeway and so far as it
44:41
yells at me if I don't, otherwise it's like really,
44:43
really good about staying in the lanes.
44:44
And so like I did that, except I'm also not recording videos
44:47
while I'm doing it. Right, right, right.
44:49
Like this is like fully unsafe because he's definitely like
44:52
looking at the camera most of the time and you don't have to
44:54
be looking away from the road very much to miss.
44:57
Or something happened? You know, if someone cutting off
45:00
a kid running across chasing a ball, yadda yadda yadda.
45:02
So don't support this. I don't know.
45:06
I give this guy AD minus. D.
45:09
Minus not F is because there's like a couple little hints of
45:11
like, you know, he is talking about investing early and often
45:14
in building wealth. That's like a good thing.
45:16
But this is just nonsense. D minus on the video and then an
45:20
F for Rd. safety. Yeah, Rd. safety I give him an F
45:23
and for for polo shirt sizing I give him AC plus.
45:32
Wow. It's not that bad.
45:34
It's not the worst I've seen. No, we've definitely seen worse.
45:37
There's not enough chess here for us to be fully offended.
45:40
Oh yeah, exactly. We've got an athlete but here to
45:43
been fully nipping out. All right, flag the episode
45:46
again. This can't even go on the
45:48
Internet OK the. Internet's not ready for this
45:52
filth. We're moving on before we get
45:54
ourselves into too much trouble. 2 Jeremy had time today.
46:01
I had time today. You guys are starting flame wars
46:03
with me on the Internet. Yes, yes, yes.
46:05
We're in the comments section. We're on Instagram.
46:08
You posted about an S&P record high.
46:11
Tell us what we're seeing before we get into the comments
46:14
section. Yeah.
46:15
So, you know, as of, you know, spring of 2026, so far this year
46:22
there's been this Iran war that, you know, the US started and
46:26
then is hopefully trying to resolve.
46:29
And so the market tanked the tune of almost 10%, I think, and
46:33
then it recovered. And now as of late April, we're
46:36
actually for the first time in history saw the S&P 500 close
46:40
over 7000. What does that mean?
46:42
Doesn't really mean anything specifically.
46:43
It's just like the share price of the underlying, you know,
46:47
companies added up. It doesn't include, it doesn't
46:49
include dividends or anything like that.
46:51
But it is just an interesting thing to note that never before
46:55
in history could you, you know, have basically bought a share of
46:58
VOO for as much or sold a share. I guess if you're trying to make
47:01
money, sold a share of VO for as much as you can.
47:05
Today we're at the markets at all time record highs and it's a
47:09
big round Number. And so that's worth noting in an
47:13
IG post and then this person said.
47:17
Are we really celebrating inflation?
47:19
The money printer isn't your friend.
47:23
So, and what they're saying is, OK, it's above 7000, but the
47:26
reason it's above 7000 is that the federal government is just
47:30
frantically flooding money into the economy by printing money,
47:36
as they call it these days. It's a lot less of like physical
47:39
paper, a lot more of like just pushing money in the banks and
47:41
things like that. And therefore everyone has more
47:46
money. And when everyone has more
47:48
money, that causes inflation. So for example, let's say I
47:51
could go click a button with my mouse and deposit $1,000,000
47:56
like brand new money just fictionalized, you know, just
47:59
created out of thin air into every single person's checking
48:02
account in the in the US. What would that do to prices?
48:07
You know, every small business would suddenly have like people
48:12
clamoring to buy them out of stock.
48:13
And so they'd be raising their prices to like try to stay in
48:16
stock basically. We know when you create a lot of
48:19
money like that, prices go up because now people can compete
48:22
with each other and and as there's more demand because
48:24
people have more money in their checking account, prices go up.
48:27
That's econ one O 1. And that's what this commenter
48:30
saying is saying, Hey, this higher share price of this than
48:35
P500 isn't, you know, real economic growth or, you know,
48:41
great success of the company. That's just purely money
48:43
printing. And you know, my answer to that
48:47
is, yeah, maybe partially true. You know, there's definitely
48:50
this concept of inflation is a rising tide that pushes the
48:55
stock market up. And you know, my my main answer
48:59
to that is even if that's true, well, I guess before I go to to
49:03
my main answer, you know, it's partially true, but primarily
49:06
it's not true. Most of the growth of the market
49:08
isn't just keeping track of inflation.
49:10
It's above and beyond inflation. Going back to the year 2000, the
49:14
total S&P 500 turn is about 8.1% and that includes the lost
49:18
decade when you know, the year after 2000.
49:20
So I could have done the same numbers with 2010 and had to be
49:23
like, you know, 13 percent or something.
49:25
But this chart I'm showing goes starts around 2000, so I'll say
49:28
that number. So it's around 8.1%.
49:31
Inflation has been 2.5%. It's not delta that what what is
49:35
it 5.6% between the inflation and the the total growth is real
49:42
growth, not nominal, but real after inflation, above and
49:44
beyond inflation. So partially, no, you're wrong.
49:47
Like most of this isn't just inflation, it's actually real
49:49
growth. And then my other, my other
49:51
response is what's your alternative if you are just if
49:55
you're mad about inflation, are you going to keep money in your
49:59
checking account? Are you going to bury cash in a
50:03
tin can in your backyard? You know, people who say
50:06
comments like this would probably say things like I would
50:08
buy gold or Bitcoin or something like that, which is fine because
50:12
those do at least keep up with inflation usually.
50:15
But if you look at a really long track record of gold, it really
50:18
doesn't be inflation. It kind of keeps up with
50:20
inflation and dramatically underperforms the stock market.
50:23
But be fair to gold set a good 30 years or so.
50:27
But just to give a give a bit of an example, like let's say
50:30
you're like, OK, the S&P 500, it's just all it's doing is
50:34
reflecting all this money printing.
50:36
It's just a, you know, money printer chart.
50:40
It's not real growth. Let's say you go back to the
50:43
year 2000 and you had $10,000. If you buried that $10,000 in
50:47
the coffee can in the in your backyard and dug it up today,
50:50
you'd have $10,000. You could buy a lot less with
50:53
that due to inflation, but your $10,000 didn't grow if it's cash
50:56
in a coffee can, right? Let's say now you put a savings
51:00
account and a lot of these years, you know, these values in
51:03
the stock market over the last 26 years, rates have been
51:06
really, really low. And so, you know, savings
51:09
accounts on average might have only been paying like 1% or so
51:12
over that time. It's like, let's say you got a
51:13
1% return in the savings account.
51:16
If you put that 10,000 bucks in a 1% savings account today,
51:19
you'd have 12,952 bucks. You know, better than the coffee
51:23
can, but not great. And so then let's say instead in
51:27
the year 2000, you bought the S&P 500 and you had to deal with
51:30
the.com crash, the financial crisis, the COVID crash, the
51:33
2022 stagflation, like all these crashes that we were talking
51:38
about. If you put that $10,000 into the
51:43
S&P 500 today, you would have 75,764.
51:48
And so it's, you know, if this is just inflation, do you want
51:51
your $12,000 in your savings account or your $75,000 in the
51:55
stock market? So it, it beats inflation by a
51:58
lot. So you know for sure inflation
52:01
is part of this rising tide that raises prices and, you know,
52:05
raises the stock market. But you know, that's exactly why
52:08
you want to be on top of that tide.
52:10
Nothing underneath that, you know, drowning, just holding
52:12
cash. So, you know, commenter, I see
52:16
your point, but I, you know, I'm still investing, you know for
52:19
sure. You see your point, but do you?
52:23
You're not with it. I mean, I'm not with the point.
52:26
No, I, you know, I, I do feel like this is kind of the moon
52:29
landing wasn't real kind of comment didn't foil hat stuff.
52:35
You know, it's just it's like so mad at this one specific thing
52:38
about, you know, new money creation.
52:40
It's like missing the bigger point, and that's not a good way
52:43
to to build wealth, I don't think.
52:46
Period. OK, we did it.
52:48
We made it to the end of the episode.
52:51
Great work, Jen. And we only had three or four
52:55
questionably adult topics, so apologies if you're listening in
52:58
the. Car with your kids.
52:58
Very operative word. OK, you want to hit us with the
53:02
2 rules of looking? At it.
53:04
You're not just throw me under the bus.
53:05
We're not a team. We're not.
53:06
We're not a. This is recorded medium.
53:09
All people have to do is rewind. I'm not lying.
53:12
Yeah, and the podcast said these things and we're the podcast.
53:17
I'm going to ask like disclaimer at the end.
53:20
Have you ever played spades? Spades.
53:23
It's a card game where you have to like you.
53:25
You each make an individual bid and then you team up and your
53:28
combined bid is what your team has to get.
53:30
And sometimes people are like, oh, I got mine, you need to get
53:32
yours. It doesn't matter.
53:34
It doesn't matter. I have much more synergy with my
53:37
partner than we've had in this episode, OK.
53:40
Oh, now she's trashing the podcast.
53:43
Oh. We're like getting a we're
53:44
catching a vibe. You went on your own hookers and
53:48
blow is Jeremy TMI. Can't make eye contact because
53:51
your internet's too bad. You look like you're being
53:54
filmed on a potato, but what am I supposed to do?
53:57
You've got a big potato face over there.
53:58
No, wait, it's the potato, the person of the camera.
54:01
Potatoes are crazy. Yeah, I think, I think when you
54:03
say film not a potato, you're not the potato.
54:05
The camera's the potato. Yeah, you're you're off the
54:08
rails. All right, and if you want.
54:10
Thank you. What were you going to say?
54:14
I'm. Walking out, I said This is why
54:16
I can't be a team with you, because you just call me potato.
54:20
I didn't call you, I corrected myself.
54:22
The camera's the potato. I guess technically the Internet
54:25
connection's the potato. I don't know why you plugged the
54:27
potato to your computer, but OK. No one's a potato.
54:30
But if you want to be able to buy a lot of potatoes, you can
54:33
build wealth. And you know how you do that?
54:35
By following the 2 rules of Personal Finance Club.
54:37
Rule #1 live below your means and rule #2 invest early and
54:41
often. CNX Potato.
54:43
The Personal Finance Club show is produced by Jeremy Schneider
54:45
and Jed Mundia, music by Essa Balu and Homie.
54:49
Send your questions to podcast at personalfinanceclub.com.
54:52
The Personal Finance Club show is Co hosted by Jeremy Schneider
54:55
who is a co-owner of Nectarine, an SEC registered investment
54:59
advisor. The views expressed on this show
55:01
are those of the hosts and guests and do not necessarily
55:04
reflect the views of Nectarine. Please refer to
55:07
hellonectarine.com for all relevant disclosures.
55:10
This podcast is for informational and educational
55:12
purposes only and should not be construed as personalized
55:15
investment advice or a solicitation to buy or sell any
55:18
security. Listeners should consult their
55:21
own financial, legal or tax professionals for advice
55:23
specific to their