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Money Monday with Brian James · Brian Thomas

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Speaker 1: The talk station eight O six fifty five krosee the
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Speaker 1: talk station. It's Monday. That means it's time for money
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Speaker 1: Money with Brian James. Thanks to Allur Financial for one
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Speaker 1: and amount every Monday for a few segments Talk Bunny Issues.
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Speaker 1: Welcome back, Brian James, hope you had a wonderful weeknd
0:15
Speaker 1: my friend.
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Speaker 2: Good morning, and welcome back to snow day weather.
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Speaker 1: Apparently man not too bad though, I mean, hell, isn't
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Speaker 1: it nice that we're not over in the East coast
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Speaker 1: two feet of snow?
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Speaker 2: That is true. I'm glad that that waited to move
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Speaker 2: a little bit further across the country before it dumped.
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Speaker 1: On no key kidding.
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Speaker 2: Yeah, I feel sorry for I just missed our sixty
0:32
Speaker 2: degree days.
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Speaker 1: I do. It's coming fast enough, fifty two degrees on Wednesday,
0:35
Speaker 1: so we're going in the right direction there. Maybe the
0:37
Speaker 1: maple sap will start flowing again on my tapped maple
0:40
Speaker 1: trees because the hit stopped there for a couple of days.
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Speaker 2: That's the indicator of spring right there.
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Speaker 1: I know. Oh my god, mape so good too, Brian,
0:48
Speaker 1: Oh my god, the mapel syrup is wonderful. Anyway, something
0:51
Speaker 1: got shot down in any the constitutional scholars that were
0:54
Speaker 1: listening are looking at this. The ones who listened to
0:56
Speaker 1: oral arguments for the Supreme Court pretty much all uniformly said, well,
0:59
Speaker 1: don Trump's actions on tariffs are going to get shot
1:02
Speaker 1: down as unconstitutional. Of course, they were a lot of
1:04
Speaker 1: the major questions doctrine and said, listen, Congress did not
1:07
Speaker 1: specifically authorize a president under the applicable law to levy
1:12
Speaker 1: taxes or tariffs. It's not there. The absence of that
1:15
Speaker 1: means it's a major question. They would have talked about it.
1:17
Speaker 1: They would have put it in the language of the
1:18
Speaker 1: statute had they intended it. Since it's not there, it's unconstitutional.
1:22
Speaker 1: That is a good thing for a lot of people
1:24
Speaker 1: who hate the regulatory state. That's that Major Questions decision
1:28
Speaker 1: or from the West Virginia versus EPA. No, a tablespoon
1:31
Speaker 1: of water is not a navigable river, and you can't
1:33
Speaker 1: say it is, even though you want to. They didn't
1:35
Speaker 1: give you the express authority to regulate bits of water
1:39
Speaker 1: here and there. You need a specific authority. This is
1:41
Speaker 1: the same kind of argument. So we should be rejoicing
1:45
Speaker 1: in this on some level because it keeps the administrator
1:47
Speaker 1: from administrative state from growing. But obviously it really shot
1:51
Speaker 1: down a major pillar of Donald Trump's foreign policy, held
1:54
Speaker 1: up by his ability to quickly enact or remove tariffs.
1:57
Speaker 1: Now they're not there anymore. Brian, what does this mean, Well, what.
2:00
Speaker 2: It means is more chaos. And what's interesting to me
2:03
Speaker 2: is that the market is not reacting at all as
2:06
Speaker 2: we're sitting here right now. Futures are down in about
2:08
Speaker 2: a half a percent. Yeah, really kind of nothing. And
2:10
Speaker 2: the thinking there is because tariffs are no longer shocked
2:14
Speaker 2: tariffs and the chaos that come along with them. That
2:16
Speaker 2: was last April when we first we first started going
2:19
Speaker 2: down this path and levying tariffs on countries, and the
2:22
Speaker 2: market dropped nearly twenty percent at that time. Ever since then,
2:26
Speaker 2: the dust has kind of settled, the parties have sort
2:29
Speaker 2: of kind of staked their opinions out, and it's all
2:31
Speaker 2: known information. So more chaos coming out of the tariff
2:34
Speaker 2: discussion is really not that big of a deal to
2:36
Speaker 2: the market, because it had assumed it was going to
2:38
Speaker 2: be there, you know, all the time until I don't know,
2:41
Speaker 2: maybe until this administration shifts out or there's another viewpoint
2:44
Speaker 2: or whatever. But it's not the initial cold water shock
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Speaker 2: that it was, and there has been no real concrete
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Speaker 2: here's what's going to happen next. All we have said
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Speaker 2: so far is that what has happened is unconstitutional, but
2:56
Speaker 2: we haven't said that there going to be refunds. The
2:58
Speaker 2: president has come out and said he does have the
3:00
Speaker 2: power to enact these ten percent then wait, no, fifteen
3:03
Speaker 2: percent tariffs that can last for one hundred and fifty
3:05
Speaker 2: days under.
3:07
Speaker 1: A completely set of a different set of laws.
3:09
Speaker 2: Exactly, yeah, right, So he could have done this to
3:11
Speaker 2: begin with. There wouldn't have been much the Congress could
3:13
Speaker 2: have done, but the one hundred and fifty day limit
3:15
Speaker 2: kind of limits the authority and the bite that that
3:17
Speaker 2: would have. So you know, that's that's why the market's
3:20
Speaker 2: ever reacted a whole heck of a lot, because we
3:22
Speaker 2: don't know, the market doesn't like. It's always uncertainty that
3:24
Speaker 2: the market doesn't like. That's where we're at right now.
3:26
Speaker 2: Because there is no concrete can't do this, but you
3:29
Speaker 2: must do that. All we have is can't do this.
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Speaker 1: Right, And you know this is I guess uncharted waters
3:35
Speaker 1: because no president had ever asserted the ability to implement
3:39
Speaker 1: tariffs based upon that particular law before that emergency powers declaration.
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Speaker 1: So we don't know what's going to happen with the
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Speaker 1: tariffs that have been lovied already exactly.
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Speaker 2: And that's you know, we have a lot there's a
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Speaker 2: lot of cases right now with this administration where we
3:53
Speaker 2: all assume the Constitution said one thing, administration is going
3:56
Speaker 2: in an entirely other direction based off of some kind
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Speaker 2: of different interpretation or maybe really no interpretation at all
4:02
Speaker 2: sometimes of what's in the Constitution and just kind of
4:04
Speaker 2: rolling the dice to see what happens. But that even
4:07
Speaker 2: that itself is chaotic as that sounds that itself is
4:10
Speaker 2: becoming the norm. Unfortunately. I don't love that. But the
4:12
Speaker 2: market doesn't react to these things very passionately, and that's
4:15
Speaker 2: that's not a bad thing. We're gonna wait and see
4:17
Speaker 2: mode right now.
4:18
Speaker 1: Right And I get Trump's wanting to use tariffs as
4:22
Speaker 1: a lever to implement the foreign policy and negotiate treaties
4:25
Speaker 1: or arrangement, financial rerangements, or otherwise with foreign countries. That
4:28
Speaker 1: is within his power, but to within the constitutional framework,
4:33
Speaker 1: as we now have confirmed by the court, Congress is
4:37
Speaker 1: going to have to enact the tariffs if he threatens them,
4:40
Speaker 1: they're gonna have to be willing to stand behind him
4:42
Speaker 1: and do that. You know, they're going to have to
4:43
Speaker 1: deliberate on her. That's I think one of the points
4:45
Speaker 1: that you have to have. Congressional action to the deliberative
4:48
Speaker 1: process is extremely important. Matter of fact that Gorsich even
4:51
Speaker 1: pointed that out in his opinion. Deliberation tempers impulse and
4:55
Speaker 1: compromise Hammer's disagreements into workable solutions. That has been suspiciously
4:59
Speaker 1: absent and on anything with Congress for the last I
5:03
Speaker 1: don't know, as long as Trump's been around, and they've
5:04
Speaker 1: been struggling with Trump to arrangement system syndrome. They can't
5:07
Speaker 1: agree on anything at all. That's the problem, I suppose,
5:13
Speaker 1: as revealed the robmo of our constitution is revealed by
5:15
Speaker 1: the current gridlock we face. You're not going to get
5:18
Speaker 1: tariffs enacted with a very slim majority on either party. Therefore,
5:21
Speaker 1: it's sort of a toothless gesture for Trump to threaten tariffs,
5:24
Speaker 1: at least under the original structure, because Congress wasn't going
5:27
Speaker 1: to back them up.
5:29
Speaker 2: Yeah, And that's kind of the point, you know, because
5:31
Speaker 2: these are things that can that can of course permanently
5:35
Speaker 2: shift trade relations with a lot of the different countries
5:37
Speaker 2: that we work with. And the slightly scary thing to
5:40
Speaker 2: me is how the international markets have behaved over the
5:43
Speaker 2: last couple of years through all of this. If you
5:45
Speaker 2: don't have international stocks, and we've talked about this before,
5:47
Speaker 2: but if you don't have international stocks in your portfolio
5:50
Speaker 2: to some extent, right, we're not saying that the farm
5:52
Speaker 2: on anything, you are missing an opportunity because there are
5:55
Speaker 2: relationships being forged that probably would not have been explored
5:58
Speaker 2: but for these tariffs. Right, So other countries are saying,
6:01
Speaker 2: you know, if it's going to be this difficult to
6:03
Speaker 2: do business with the United States, then let's figure out
6:06
Speaker 2: if there are any other resources that we can tap
6:07
Speaker 2: into for these different supplies and whatever that we need.
6:11
Speaker 2: And those are those relationships are starting to take root,
6:14
Speaker 2: and we're starting to see that in the international markets
6:16
Speaker 2: they are outperforming the US markets by far these last
6:19
Speaker 2: couple of years. So hopefully that's a temporary thing. But
6:22
Speaker 2: at the end of the day, if we continue to
6:25
Speaker 2: the longer we push this out and the longer we
6:27
Speaker 2: want to smack our customers around, then that's probably going
6:30
Speaker 2: to have a much more permanent taking of route than
6:33
Speaker 2: we might prefer. I don't know that these other countries
6:35
Speaker 2: are necessarily going to line up to do business in
6:37
Speaker 2: the United States when the dust settles and we finally
6:39
Speaker 2: have a clear trade policy out there.
6:41
Speaker 1: Well, I guess curious, like on a post mortem basis,
6:44
Speaker 1: since that particular, those particular, that particular avenue of tariffs
6:48
Speaker 1: has been foreclosed by the Supreme Court, do we ever
6:50
Speaker 1: do we know right now as we sit here reflecting
6:53
Speaker 1: back on the tariffs, who actually ultimately paid them? Was
6:56
Speaker 1: this something that you and I shoulder of the burden on?
6:58
Speaker 1: Is this part of the inflationary reality or did we
7:01
Speaker 1: listen to the other side of the argument, which is no,
7:02
Speaker 1: the other countries ended up paying it. We got a
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Speaker 1: much better deal overall because the tariffs were in place.
7:07
Speaker 2: I don't see how the vast majority have not been
7:10
Speaker 2: paid by the by the American consumer, because if you
7:12
Speaker 2: think about how it works, if I'm going to go
7:14
Speaker 2: buy something from Costco, Costco has to then they're going
7:17
Speaker 2: to import some you know, box fans or something like that. Well,
7:20
Speaker 2: all that stuff is made overseas, and the tariff is
7:23
Speaker 2: is imposed when the stuff hits the shore. That's on
7:27
Speaker 2: cost Co's end of it. Costco is either going to
7:29
Speaker 2: eat it or they're gonna pass it along in the
7:31
Speaker 2: form of pricing. And I'm mentioning Costco specifically because they
7:33
Speaker 2: were among the very very very very very first to
7:36
Speaker 2: file the paperwork for potential refunds when this first came up,
7:40
Speaker 2: because of their opinion is that this isn't gonna hold water.
7:43
Speaker 2: It's gonna all come apart. Let's be at the front
7:45
Speaker 2: of the line. So I cannot believe that most of
7:49
Speaker 2: these have not been paid ultimately by the American consumer,
7:51
Speaker 2: because that's just how the math works. The prices get
7:54
Speaker 2: increased along the way as the suppliers get what they
7:56
Speaker 2: need in order to deliver to the consumer.
7:58
Speaker 1: Yeah, obviously all this brought about globalization, which has been
8:01
Speaker 1: going on for decades and decades. I mean, this is
8:03
Speaker 1: I think fundamentally a use tax. You know, if you
8:06
Speaker 1: want to buy foreign goods, then go ahead, You're gonna
8:09
Speaker 1: pay more for them. You're gonna pay more because you
8:11
Speaker 1: went with a foreign company. Choose the American alternative, which
8:14
Speaker 1: is not gonna go along with this extra tax you're
8:16
Speaker 1: paying because the tariff problem is there probably isn't a
8:21
Speaker 1: US made product, right, That wasn't in the brochure about
8:26
Speaker 1: tara If the longer term strategy that you want to
8:28
Speaker 1: have bring up brought about at least a lot of
8:30
Speaker 1: people are trying to achieve that dejective reshore if the
8:33
Speaker 1: manufacturing into the United States to give us these tiff
8:35
Speaker 1: free alternatives. Sadly, that just that that infrastructure isn't in place,
8:39
Speaker 1: because it's kind of like you can make a parallel
8:41
Speaker 1: to the grid situation electric electric electric. Yeah, but we
8:44
Speaker 1: don't have the grid to support the electric That's an
8:48
Speaker 1: important detail, right, Yeah, extremely important detail. Brian James.
8:52
Speaker 2: It's it's one thing to show the outline of if
8:54
Speaker 2: we impose tariffs, then down the road jobs will magically
8:57
Speaker 2: appear onshore here in the United States, but it's another
9:00
Speaker 2: thing entirely for that to actually occur. So, yeah, there
9:02
Speaker 2: have been some example since twenty twe US manufacturing construction
9:06
Speaker 2: spending is more than doubled, just driven by these semiconductors,
9:10
Speaker 2: EV's batteries, those kinds of things. Tariffs were part of that,
9:12
Speaker 2: but also industrial policy, the old Chips Act, Inflation Reduction
9:15
Speaker 2: Act that helped as well, but that has not spread that.
9:19
Speaker 2: That's the clearest example where we can say of the
9:21
Speaker 2: impact of tariff's. Manufacturing jobs though have not structurally exploded,
9:26
Speaker 2: we haven't seen employment, and manufacturing employment is higher than
9:29
Speaker 2: pre pandemic levels, but it's still well below the late nineties.
9:32
Speaker 2: Automations starting offset these labor gains, and a lot of
9:35
Speaker 2: reshort facilities are really highly automated and not creating as
9:39
Speaker 2: many jobs, So we're not seeing this impact yet. Maybe
9:43
Speaker 2: fingers crossed the state the stay optimistic, but we are
9:47
Speaker 2: not yet seeing identical impact of job creation, which is
9:49
Speaker 2: supposedly what all this was about. If we make it
9:52
Speaker 2: expensive to drag stuff on shore so we can buy it,
9:54
Speaker 2: that will encourage companies to create things here. But I
9:58
Speaker 2: think that assumes that labor costs and all these other
10:00
Speaker 2: things that we have to do in the United States
10:02
Speaker 2: are exactly the same as everywhere else. Businesses are not
10:05
Speaker 2: seeing the profit opportunity unfortunately that that this administration thinks
10:08
Speaker 2: is out there.
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Speaker 1: Brian James will continue and this is a puzzle to me.
10:11
Speaker 1: No idea in next subject matter, democratizing access to alternative
10:16
Speaker 1: assets for four oh one K investors, there's a mouthful.
10:19
Speaker 1: It's a, I guess an executive order. Brian James gonna
10:21
Speaker 1: explain that to us coming to talk station, Hey nineteen
10:25
Speaker 1: ifif about their ceed talk station all with financials Brian
10:29
Speaker 1: James every Monday for money, money to getting at eighty
10:32
Speaker 1: five get it for a few segments and pivoting over
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Speaker 1: to all right, we're gonna have to find out what
10:36
Speaker 1: an alternative asset is. But executive order characterizes democratizing access
10:41
Speaker 1: to alternative assets for four to one K investors. This
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Speaker 1: sounds like expanding opportunities for investment. Brian James.
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Speaker 2: Yeah, Now this isn't new news. We talked about this
10:49
Speaker 2: last summer. We're at a second step of this. Really
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Speaker 2: the executive order, and that's the thing we sent you
10:55
Speaker 2: this morning, the executive orders from August seventh, and basically
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Speaker 2: that made it poly see that four oh one K
11:01
Speaker 2: and other defined contribution plans. This is an important word,
11:04
Speaker 2: should be allowed to include alternative assets if the plan
11:08
Speaker 2: fiduciaries decide that that's an appropriate thing for that specific plan.
11:11
Speaker 2: Plan fiduciaries. Those people exist in each and every company.
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Speaker 2: This is an individual employer decision. This isn't a you know,
11:19
Speaker 2: the the United States government cannot force plans to offer this.
11:21
Speaker 2: That's why we use the word should, But anyway, that's
11:24
Speaker 2: not news. What we're talking about here is the where
11:28
Speaker 2: we are within the timeframe. So we are now at
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Speaker 2: one hundred and eighty days past the initial announcement. Yeah,
11:34
Speaker 2: exactly what was required the executive order was that within
11:39
Speaker 2: one hundred and eighty days the Department of Labor should
11:41
Speaker 2: re examine and clarify fiduciary duty guidance for again for
11:44
Speaker 2: those individual employers under the ARISA Act, and and propose
11:49
Speaker 2: rules and guidance, including some safe harbors, basically saying here's
11:54
Speaker 2: what you can and cannot do with these things. And
11:56
Speaker 2: so we are at the point where we've got the
11:58
Speaker 2: first proposal. By the way, I think we kind of
11:59
Speaker 2: got over we're talking about alternative assets. These are private
12:02
Speaker 2: market investments. That's as opposed to public public means stocks
12:06
Speaker 2: and mutual funds. Private market investments are literally the purchasing
12:09
Speaker 2: of individual standalone companies as an investment, real estate, real
12:15
Speaker 2: estate debt, as well, commodities, just different things beyond your
12:18
Speaker 2: standard index based investments. So we're at the point now
12:21
Speaker 2: where that guidance is being released.
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Speaker 1: How does one go, I mean complicated as it is,
12:28
Speaker 1: at least from my perspective. Brian James. This is out
12:30
Speaker 1: of my element, I'll admit. But how does one acquire
12:33
Speaker 1: if it's not a stock you're buying, How does an
12:35
Speaker 1: individual like you or myself, or anybody else for that matter,
12:38
Speaker 1: acquire part of a company?
12:41
Speaker 2: Sure it is. It is simpler and more complicated than
12:44
Speaker 2: you might think. So if you're driving up and down
12:47
Speaker 2: the street and you see that that little vet clinic,
12:49
Speaker 2: or maybe that HVAC repair man that's been in that
12:52
Speaker 2: little house forever, now all of a sudden has a
12:54
Speaker 2: flashy new sign and then some kind of marketing campaign
12:57
Speaker 2: that goes with it. That very frequently means that there's
12:59
Speaker 2: a private equity investor behind that private equity is simply
13:03
Speaker 2: a gigantic pile of money that comes in and buys
13:05
Speaker 2: up little businesses and knits them together for the purposes
13:09
Speaker 2: of economies of scale serve. For example, maybe that HVAC
13:12
Speaker 2: repairman needs a lot of supplies and things. Well, you
13:15
Speaker 2: could buy ten of those different little tiny companies and
13:17
Speaker 2: then begin to negotiate different contracts with the suppliers for
13:21
Speaker 2: the sheet metal and all the other stuff. And get
13:22
Speaker 2: a better deal. That's just the American way. That's business
13:25
Speaker 2: becoming more efficient in increasing profit.
13:27
Speaker 1: Now that's a private company, not a publicly traded company.
13:30
Speaker 1: So once you are, we're there. We appreciate the concept
13:33
Speaker 1: you're talking about. So the buying of a share or
13:36
Speaker 1: a part of that business in order to reap the
13:38
Speaker 1: benefits of their profit. How does that happen?
13:40
Speaker 2: Correct? Now that that's what we're talking about. So these
13:42
Speaker 2: remain private investments, right, there's still these aren't public traded publicly.
13:46
Speaker 2: These are partnerships that exist no different than you and
13:49
Speaker 2: your neighbor could get together and create a partnership and
13:52
Speaker 2: go buy these little companies. That's all this is, but
13:54
Speaker 2: it's being offered. It's almost sort of in a gray
13:57
Speaker 2: area that the grouping of those companies is of being
14:00
Speaker 2: made public. And that's really a convoluted way to explain it.
14:03
Speaker 2: But basically grouping these together and marketing them and inviting
14:07
Speaker 2: larger piles of money. Remember there's twelve trillion dollars out
14:10
Speaker 2: there in the four oh one K, four h three
14:12
Speaker 2: B space. Of course these different investment groups would like
14:15
Speaker 2: to get access to those funds. That's the same thing
14:18
Speaker 2: that drove the stock market from the late seventies when
14:20
Speaker 2: the four oh one K was first invented and permitted
14:23
Speaker 2: to invest in the equities markets, when pensions were eliminated
14:26
Speaker 2: and there was an enormous amount of interest with in Okay,
14:28
Speaker 2: if I don't have a pension, then I need to
14:30
Speaker 2: do something to grow my money. And that's where the
14:32
Speaker 2: fifty years stock market boom largely stemmed from that we've
14:36
Speaker 2: been in this is just another iteration of that. So
14:38
Speaker 2: now we're taking these retirement dollars and we are allowing
14:41
Speaker 2: them to basically go purchase that teeny tiny little bakery
14:44
Speaker 2: down the road that might be, you know, providing a
14:47
Speaker 2: decent profit margin, basically saying that yes, you are permitted
14:50
Speaker 2: to invest in other things beyond the P and g's
14:52
Speaker 2: and the facebooks and the apples of the world.
14:54
Speaker 1: How is your new How is your ownership interest expressed
14:57
Speaker 1: as in the form of a contract as opposed to
14:59
Speaker 1: a share, Like I want a slice of that action,
15:01
Speaker 1: I'm going to have to enter into some sort of
15:03
Speaker 1: agreement so I know that I'm entitled to get whatever
15:05
Speaker 1: percentage of profits that they turn.
15:07
Speaker 2: Oh sure, So I think there's two different questions there
15:10
Speaker 2: are two different conversations we're having here. To answer your
15:12
Speaker 2: question directly, this would be something where you're literally sitting
15:15
Speaker 2: down and you are signing a contract that you are
15:17
Speaker 2: purchasing a percentage share of a partnership. Right, that's pure
15:21
Speaker 2: private equity. That's just two people getting together saying, Hey,
15:24
Speaker 2: I have a thing. I want to buy a chunk
15:25
Speaker 2: of that thing. What this is doing and it's right
15:28
Speaker 2: there in the name of the thing the White House
15:29
Speaker 2: released democratizing four oh one K investments. This is putting
15:33
Speaker 2: it in a format where you won't be jumping through
15:35
Speaker 2: the hoops, you won't be signing those contracts because there's
15:37
Speaker 2: a middleman who has done it for you. Exact same
15:40
Speaker 2: structure is when people first learned about mutual funds at
15:43
Speaker 2: a wide scale in the sixties and seventies. You're not
15:45
Speaker 2: buying individual stocks, You're buying something that will do it
15:48
Speaker 2: for you. That's the same structure. But right now there's
15:51
Speaker 2: no legal infrastructure in place. That's the discussion we're having
15:54
Speaker 2: right now, how do you actually make this happen?
15:55
Speaker 1: And the person that would make that happen would be
15:57
Speaker 1: the planed fiduciary plan fiduciary.
16:01
Speaker 2: That's somebody who generally works for or or or supports
16:04
Speaker 2: your employer. Uh, you know, this could be your your
16:07
Speaker 2: your company might have like a four to oh one
16:08
Speaker 2: k discussion group or a four oh one k fiducial group, whatever,
16:12
Speaker 2: investment committee, and they're the ones who decide, we will
16:16
Speaker 2: offer this mutual fund but not that one. And they'll
16:18
Speaker 2: soon be discussing we will offer this private equity solution,
16:21
Speaker 2: or this this private debt solution, not that one. Those
16:24
Speaker 2: are people who purely support your company in making those decisions.
16:27
Speaker 2: Guess who's behind the construction of all of these different partnerships,
16:31
Speaker 2: all the major financial institutions, So make make no bones
16:34
Speaker 2: about it. That's where this is coming from. This is
16:36
Speaker 2: an opportunity for big financial institutions to tap into a
16:40
Speaker 2: pile of money to which they have not had access
16:42
Speaker 2: before for these types of alternative assets.
16:44
Speaker 1: And they'll presumably then be doing uh what.
16:47
Speaker 2: Hanging money, charge charging, charging admission.
16:50
Speaker 1: That's right, all that comes down to because this clearly
16:52
Speaker 1: is going to result in more work to be done.
16:54
Speaker 2: Oh, of course absolutely. I don't think it's necessarily a
16:57
Speaker 2: bad thing. I mean, private equity is not a new
16:59
Speaker 2: investment and class at all. It's been around for you know,
17:02
Speaker 2: for centuries. Really, it's just not relying on a public
17:05
Speaker 2: market to introduce the buyer to the seller. That's all
17:08
Speaker 2: it is. But that's that's where the bridge is being
17:11
Speaker 2: built between to provide easier access to the end investor,
17:15
Speaker 2: which nowadays can be your average consumer, your average four
17:18
Speaker 2: to one K participant, versus somebody who just has a
17:21
Speaker 2: gigantic pile of money and can afford to buy these
17:23
Speaker 2: little companies on their own.
17:24
Speaker 1: Well, might a poor fiduciary suggestion. In other words, Yeah, this
17:27
Speaker 1: is a great idea, We're going to open it up
17:29
Speaker 1: for your investments. And that didn't work out real well.
17:33
Speaker 1: Will there analysis along the fiduciary lines, and whether it's
17:35
Speaker 1: an appropriate investment or not be challenged later in court
17:38
Speaker 1: to the extent somebody loses a whole bunch of money.
17:40
Speaker 2: Oh absolutely, And that's what the fiduciary is there to do.
17:43
Speaker 2: They're the ones who make the decision. So a lot
17:45
Speaker 2: of people don't know this, but your employer takes a
17:47
Speaker 2: fiduciary role by purely offering a four to one K
17:50
Speaker 2: to begin with. So, and that means your company can
17:53
Speaker 2: be exposed. Maybe you make widgets and they roll down
17:55
Speaker 2: a conveyor belt that's the primary profit driver for the business. Well,
17:58
Speaker 2: they have to have this little side entity that worries
18:01
Speaker 2: about whether they are making the right decisions for their
18:03
Speaker 2: employees or not. They're exposed there too, just as much
18:06
Speaker 2: as they are exposed if their widgets, you know, do
18:09
Speaker 2: some damage to somebody. So this is not going to
18:11
Speaker 2: be a quick thing. The rules and all that aren't
18:13
Speaker 2: even out there. Really, the reason we're talking about it
18:15
Speaker 2: today is because we've got the first iteration of that guidance.
18:18
Speaker 2: It's going to change a lot. So don't look at
18:21
Speaker 2: your four to one k right now for these for
18:23
Speaker 2: these options, they're not there yet. The guidance is going
18:25
Speaker 2: to have to come out and your investment committee of
18:27
Speaker 2: your employer is going to have to decide that, yes,
18:30
Speaker 2: this is a good thing we should offer our employees.
18:32
Speaker 2: So something to pay attention to. But it's still a
18:34
Speaker 2: bit on the horizon.
18:34
Speaker 1: Well, we do like options out here in the world,
18:36
Speaker 1: and apparently Blackrock has also confirmed that we're going to
18:39
Speaker 1: be talking about the black Rock Retirement survey with Brian James.
18:42
Speaker 1: Don't go away. This was your Week, Reverend Jesse Jackson
18:47
Speaker 1: get bit. Yeah, it's a thirty fifty five kir CD
18:50
Speaker 1: talk station Money Money with Brian James. One more segment
18:52
Speaker 1: here with Brian. Apparently American investors like choice, at least
18:56
Speaker 1: that's what the Blackrock Retirement survey suggests from my cursory
19:01
Speaker 1: reading of it. Brian James.
19:02
Speaker 2: Yeah, So this is coming from a black Rock survey
19:04
Speaker 2: that was conducted not long ago, right at the end
19:06
Speaker 2: of January, and go figure. Americans want broader retirement tools.
19:11
Speaker 2: Another not earth shattering our conclusion from this is that
19:14
Speaker 2: people aren't financially prepared. I think we know that we
19:17
Speaker 2: want we want to ask that question every every six
19:19
Speaker 2: months or so, just to make sure everybody feels that
19:21
Speaker 2: there's a train, you know, still closing down on them.
19:24
Speaker 2: But in any case, so some of the questions they
19:26
Speaker 2: asked about about two thirds of US registered voters support
19:29
Speaker 2: expanding retirement plan options to include private market assets. And
19:33
Speaker 2: this goes back to what we were just talking about, right,
19:35
Speaker 2: you know that that that is starting to happen, The
19:37
Speaker 2: discussions are happening out there to allow for that, you know,
19:40
Speaker 2: and that same two thirds that say that retirement plan
19:43
Speaker 2: should have equal access to investment options. Whether their government, nonprofit,
19:47
Speaker 2: or corporate doesn't really matter. The interesting part of this
19:49
Speaker 2: is this is bipartisan, So about two two thirds of everybody,
19:52
Speaker 2: two thirds of Republicans, two thirds of Independents, and two
19:54
Speaker 2: thirds of Democrats all agree that this is a good idea.
19:58
Speaker 2: So so I think this is just a conclude usion
20:00
Speaker 2: where we can say, yes, people are looking at what
20:02
Speaker 2: their options are there understanding that the market has kind
20:05
Speaker 2: of moved and there's different things out there.
20:06
Speaker 1: Well, you mentioned in context of the last second with
20:08
Speaker 1: alternative asset investment, that the plan fiduciary would be the
20:12
Speaker 1: one responsible for determining whether or not they would allow
20:15
Speaker 1: investment any to give an alternative asset. But you know,
20:18
Speaker 1: I read something which is of course in the black
20:20
Speaker 1: Rock survey, for example, a certain pensions plans for government
20:23
Speaker 1: workers invest in options not available to plans provided to
20:26
Speaker 1: employees through for profit or non for profit companies. When
20:29
Speaker 1: I read something like that, it just makes me wonder, well,
20:31
Speaker 1: how do we end up with a system where some
20:34
Speaker 1: can and some can't. That just seems to be fundamentally unfair.
20:37
Speaker 1: You're you're just you're limited by virtue of where you
20:40
Speaker 1: are in the world, and why wouldn't we all have
20:41
Speaker 1: access to the same kind of thing.
20:43
Speaker 2: Well, I think that goes that goes down to what
20:46
Speaker 2: you just mentioned, that fiduciary decision making body that exists
20:49
Speaker 2: for each four oh one k they can choose to
20:52
Speaker 2: offer this and not offer that. I think what that
20:54
Speaker 2: refers to is there are some federal benefits out there.
20:57
Speaker 2: They're just better than what the rest of the you know,
20:59
Speaker 2: democ critized society can get a hold of. And I
21:02
Speaker 2: think it goes back to that's the American way, h
21:04
Speaker 2: pick your poison. There there if if the federal government
21:07
Speaker 2: funds a lot of this, so we basically buy the
21:10
Speaker 2: by the process of putting people in place as are representatives.
21:13
Speaker 2: They are the ones who choose what federal benefits for
21:15
Speaker 2: federal employees. What that looks like. They've got an awful
21:18
Speaker 2: lot of money with which they can do that versus
21:20
Speaker 2: an individual you know, company can only offer what's available
21:24
Speaker 2: to it it can fund. You know, individual companies can
21:27
Speaker 2: can throw out a lot of benefits if they want to,
21:29
Speaker 2: if they've got the money to support it. But nobody
21:31
Speaker 2: is forced to use one set of benefits, and you know,
21:35
Speaker 2: so I guess it kind of goes both ways. Maybe
21:37
Speaker 2: the federal benefits are bigger, are better in some cases
21:40
Speaker 2: because there's simply more money with which to build it.
21:43
Speaker 2: But on the other hand, there's a lot of people
21:45
Speaker 2: out there who would object to the notion that the
21:47
Speaker 2: federal government is going to tell me what I can
21:49
Speaker 2: and cannot offer, you know, without giving me any say whatsoever.
21:53
Speaker 2: The downside of that is, now we've got these little
21:55
Speaker 2: fiduciary groups inside of each employer who has to make
21:58
Speaker 2: those decisions.
21:59
Speaker 1: Fair enough, that's the way the system is designed, although
22:01
Speaker 1: I'm still puzzling over how it is that way, but
22:04
Speaker 1: everybody seems to be in fair A lot of people
22:06
Speaker 1: in favor of child savings accounts, whether or not you
22:08
Speaker 1: think Trump has it within his authority to create one
22:10
Speaker 1: thousand dollars savings accounts for certain people but not others,
22:13
Speaker 1: the concept of child savings accounts is widely embraced. Why
22:17
Speaker 1: wouldn't you have a tax advantage investment account for your children?
22:20
Speaker 2: Well, see, this is where I think the first of all,
22:22
Speaker 2: these don't exist yet. We don't have the ability to
22:24
Speaker 2: invest in them yet. And I would argue nowadays you
22:26
Speaker 2: already do have a tax advantage account you can set
22:29
Speaker 2: up for your kids. That's a five twenty nine place.
22:31
Speaker 2: And now, especially now that they change the rules to
22:34
Speaker 2: allow for to allow it to become roth contributions down
22:37
Speaker 2: the road, so you can start investing now for something
22:39
Speaker 2: that will be permanently tax free for a newborn sixty
22:43
Speaker 2: five years later. These Trump child savings accounts, I think
22:46
Speaker 2: the attraction right now is the federal seed money. So
22:49
Speaker 2: they're being proposed that one thousand dollars for any child
22:52
Speaker 2: born within the second Trump administration. These types of accounts
22:56
Speaker 2: will continue past that, but the federal seed money doesn't exist,
22:59
Speaker 2: doesn't ass exists on into the future. I'm struggling a
23:03
Speaker 2: little bit to get excited about these things. There's not
23:05
Speaker 2: a ton of money that is that is allowed to
23:08
Speaker 2: go into these that that offsets the fact that it's
23:12
Speaker 2: going to be taxed. I mean, beyond the original money
23:15
Speaker 2: that comes from the federal government that is free. Yes,
23:17
Speaker 2: you're allowed to put your own dollars in, but it's
23:19
Speaker 2: going to be taxed in the future when that child.
23:21
Speaker 1: Pulls it out like a four account, correct.
23:24
Speaker 2: Yeah, yeah, And that's not unlike a custodial account. It's
23:27
Speaker 2: not that different. So these aren't magical accounts that somehow
23:29
Speaker 2: provide some financial benefit beyond that thousand dollars. I'm not
23:33
Speaker 2: you know that thousand bucks a thousand bucks. But we're
23:35
Speaker 2: still talking about investments, We're still talking about tax I'm
23:38
Speaker 2: still preferential to leaning toward the five twenty nine sides
23:41
Speaker 2: supported by the Wroth option in the future, because that
23:44
Speaker 2: can be purely tax free. If I'm looking for something
23:47
Speaker 2: for when they're sixteen, eighteen years old, I might just
23:49
Speaker 2: keep those dollars in my own name, and when it's
23:51
Speaker 2: time to buy a car or whatever, I can do
23:53
Speaker 2: that out of my own dollars. It doesn't have to
23:54
Speaker 2: have been first in their name. I'm not excited about
23:57
Speaker 2: the benefits of this yet.
23:58
Speaker 1: No, and doubling down on depressing you finally get to
24:00
Speaker 1: retirement and emergency savings issues, and I'd say it's a
24:03
Speaker 1: pretty substantial issue. Thirty percent of US registered voters have
24:07
Speaker 1: zero dollars in retirement savings. Zero. And I write a
24:10
Speaker 1: statistic the other day, Brian, you can correct me if
24:12
Speaker 1: I'm wrong on if you saw it, average American is
24:15
Speaker 1: something like nine hundred and fifty bucks save for retirement.
24:18
Speaker 2: Yeah, I mean, and if you're you're talking about everybody
24:20
Speaker 2: under the sun. Remember there's a lot of people outside
24:22
Speaker 2: our various social bubbles who are living very very very
24:26
Speaker 2: different lives, and we don't tend across pass all that month.
24:28
Speaker 2: So you're talking every person under the sun that you're
24:30
Speaker 2: seeing every every homeless person out there. We're just dividing
24:33
Speaker 2: this across you know, the entire population. Yeah, most people
24:36
Speaker 2: don't have don't have squat and that that is a
24:39
Speaker 2: major problem. But it's not something that we've chosen to
24:41
Speaker 2: do much about. We've chosen to you know, it's a
24:44
Speaker 2: it's a merit based you know, a merit based opportunity
24:47
Speaker 2: here and good bad are indifferent those That's how we
24:50
Speaker 2: structure our benefits. If you can get yourself educated and
24:54
Speaker 2: can get yourself a good career, then you're going to
24:56
Speaker 2: do okay. If you can't fight your way out of
24:58
Speaker 2: that system, then you may be there. And that's who
25:00
Speaker 2: we're talking about that has the nine hundred and fifty bucks.
25:02
Speaker 1: And stuck means you are living, I mean, assuming you
25:05
Speaker 1: contributed to it at some point. Social Security is what's
25:08
Speaker 1: going to pay your rent when you're retired. This is
25:10
Speaker 1: the Canarian a coal mine. Brian, I've been screaming about
25:12
Speaker 1: so Security like everybody else who's paying attention to it.
25:15
Speaker 1: I mean, it's set for collapse. I mean they never
25:17
Speaker 1: got like an end date on it where the money
25:18
Speaker 1: coming out is going to be far more than the
25:20
Speaker 1: money coming in. It's set up for disasters. So if
25:23
Speaker 1: you have nothing and you're not capable of preparing for
25:25
Speaker 1: yourself in the future, that's what you're defaulting to. And
25:28
Speaker 1: that's a problem that needs to be fixed and has
25:30
Speaker 1: desperately been screaming for a fix for as long as
25:33
Speaker 1: I can remember.
25:33
Speaker 2: Right, and we have yet to see a politician on
25:36
Speaker 2: either side of the Aisle champion it and say that
25:38
Speaker 2: here's how we're going to fix social Security. And my
25:40
Speaker 2: personal belief is that that's because there is no way
25:43
Speaker 2: to position that as anything but a sacrifice by somebody.
25:46
Speaker 2: We either need to lower benefits on future retirees or
25:50
Speaker 2: increase taxes on current workers. End of story. There's a
25:53
Speaker 2: million ways those can be done, but those are the
25:54
Speaker 2: two levers we can pull, and that's a sacrifice. Nobody benefits.
25:58
Speaker 2: There's nothing the way we can say it's happy story
26:00
Speaker 2: for everybody. So therefore no politician is going to attach
26:03
Speaker 2: their wagon to it and then try to run for reelection.
26:07
Speaker 1: And then factor into something I always been worried about
26:09
Speaker 1: with that four oh one K being taxed as the
26:11
Speaker 1: money gets pulled out, Do you know what the tax
26:13
Speaker 1: is going to be when you start pulling the money out?
26:15
Speaker 2: Of course not. Yeah, we definitely don't know that you
26:17
Speaker 2: knew what the tax was when you took the deduction.
26:19
Speaker 2: You can look at the current taxier's bracket and calculate
26:21
Speaker 2: exactly how much you're saving, but you can't guess at
26:24
Speaker 2: how much you're going to be paying in the future.
26:26
Speaker 2: And what you're referring to is Social Security and a
26:29
Speaker 2: few other big things are unfunded obligations that means we
26:32
Speaker 2: don't budget for them. So even though we can't make
26:34
Speaker 2: our budget anyway, there's still a lot of stuff that
26:36
Speaker 2: we're not even accounting for in it. So what you're
26:38
Speaker 2: kind of hinting at is the only way we're gonna
26:39
Speaker 2: be able to pay these bills is by someday probably
26:42
Speaker 2: raising taxes. So somebody with millions of dollars in a
26:45
Speaker 2: pre tax four oh one K is a little bit
26:47
Speaker 2: of a sitting duck. You're already kind of a sitting
26:49
Speaker 2: duck anyway, because at age seventy three or seventy five,
26:51
Speaker 2: you're gonna have to take require minimum distributions and pay
26:53
Speaker 2: those taxes. So what should you do about this? Start
26:56
Speaker 2: learning about the roth side and maybe let go of
26:58
Speaker 2: the notion that I'm in the highest pre I there
27:00
Speaker 2: therefore I need all the tax benefits I can get.
27:02
Speaker 2: Right now, I know a lot of happy people who
27:05
Speaker 2: are happy because they have two different piles of money
27:07
Speaker 2: in retirement, a wroth pile and a pretext pile.
27:10
Speaker 1: Oh, Brian James, if I can only turn back the
27:12
Speaker 1: wheels of time and elect a wroth option as opposed
27:15
Speaker 1: to the four oh one k traditional that I'm in, Sadly,
27:18
Speaker 1: I'm closer to retirement now than I ever was, and
27:20
Speaker 1: I think it's a little rate to well unring the bell.
27:24
Speaker 2: Yeah, well, I mean I'm sort of similar. You know,
27:26
Speaker 2: I'm a little bit behind you, but I'm sort of
27:28
Speaker 2: similar in terms of probably the highest bracket I'll ever see.
27:31
Speaker 2: But I'm consciously deciding to go ahead and pay the
27:33
Speaker 2: taxes on a portion of it because I want to
27:35
Speaker 2: have a decent sized pile of tax free money along
27:38
Speaker 2: alongside my pile of pre tax dollars. For that exact reason,
27:41
Speaker 2: then there's no other way to get there than than
27:44
Speaker 2: just by eating the taxes nowadays, but if you're talking
27:46
Speaker 2: about roth, you're talking about dollars that are probably going
27:48
Speaker 2: to sit there for decades, well into your retirement, if
27:51
Speaker 2: not get inherited by your kids.
27:53
Speaker 1: Tex Brian James. Thanks to all Worth Financial for learning
27:55
Speaker 1: out as I always appreciate you shining light on what's
27:57
Speaker 1: going on here and the financial world will do it
27:59
Speaker 1: again next Monday. Have a great week between now and then.
28:01
Speaker 2: Yees sir, having to have a good day, stay warm.
28:03
Speaker 1: Thanks brother you two eight forty here fifty five karros.
28:05
Speaker 1: The talk station phone lines are