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The economy is still fine, but Americans are still gloomy · The Financial Exchange Show

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Speaker 1: and Mark Vandetti.
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Speaker 2: Welcome to this Wednesday edition of the Financial Exchange. Finally,
1:14
Speaker 2: for the first time in the last five sessions, the
1:17
Speaker 2: US stock markets S and P five hundred DOWD Jones
1:21
Speaker 2: are now in positive territory after the prior five sessions
1:25
Speaker 2: we're in negative territory. Paul Lane, Tucker Silva, and Mark
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Speaker 2: Vendetti here with you as we look into our Wednesday show.
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Speaker 2: Certainly big news coming late this afternoon that we'll talk
1:37
Speaker 2: about later in the show, and Nvidia is going to
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Speaker 2: be reporting its earnings after.
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Speaker 3: The close of the bell today.
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Speaker 2: We also had several companies report some of their earnings
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Speaker 2: before the bell today, including Lowe's GM and others. But
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Speaker 2: we're going to start the show by taking more of
1:53
Speaker 2: a larger picture view on the state of the US economy,
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Speaker 2: but specific to how consumers feel about it, and oftentimes, Mark,
2:02
Speaker 2: we can review data that comes out in terms of
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Speaker 2: investor sentiment, which I don't put a lot of stock
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Speaker 2: into as to whether or not investors feel bearish or bullets,
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Speaker 2: because oftentimes the overall consensus of retail investors can be misguided.
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Speaker 2: You know that old adage of when others are when
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Speaker 2: others are greedy, be fearful when you know others are.
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Speaker 3: What's when others are fearful, be greedy?
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Speaker 2: Right, you know what I'm going at basically the retail
2:37
Speaker 2: investor sentiment.
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Speaker 3: Yeah, you're not that serious, absolutely, but when.
2:42
Speaker 2: It comes to inflation expectations, that is something that is
2:46
Speaker 2: is more critical and when.
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Speaker 3: Others are fearful, really fearful exactly.
2:52
Speaker 2: Thanks for bringing me home there, but basically this idea.
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Speaker 2: We've seen several reports come out recently, not all of them,
2:59
Speaker 2: but several that have indicated that consumer confidence has dropped.
3:04
Speaker 2: There was a report that came out from the Conference
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Speaker 2: Board on Tuesday which indicated a I believe six or
3:10
Speaker 2: seven percent drop in consumer confidence. These are surveys that
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Speaker 2: are done to try and engage just how people feel
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Speaker 2: about the US economy, and it was noteworthy from what
3:21
Speaker 2: we saw on the Conference Board survey as well as
3:23
Speaker 2: the data that we get on a monthly basis from
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Speaker 2: the University of Michigan survey. So we start our show
3:28
Speaker 2: today by sort of diving into that, and perhaps that
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Speaker 2: was responsible for some of the market uneasiness that we've
3:34
Speaker 2: seen over the course of the last couple of days.
3:37
Speaker 2: So perhaps Mark, you could speak to this idea of
3:40
Speaker 2: how inflation and the expectations behind it from you and
3:44
Speaker 2: I and other consumers out there can be sort of
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Speaker 2: a self fulfilling prophecy in.
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Speaker 4: The nineteen seven to give you the history of this,
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Speaker 4: if you want it, and we get a little bit
3:54
Speaker 4: of time, so why not get into it, I guess.
3:56
Speaker 4: It used to be thought that there was an exploitable
3:58
Speaker 4: trade off between unemployment or output generally growth and inflation.
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Speaker 4: It used to be thought that policymakers could print money
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Speaker 4: fool people. Essentially, they would mistake the increase in economic
4:12
Speaker 4: activity that results from printing money and keeping interest rates
4:15
Speaker 4: low with real increases in the economy's ability to provide
4:19
Speaker 4: goods and services. So in the nineteen sixties, policymakers were
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Speaker 4: recommending that this trade off, this perceived trade off, be exploited.
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Speaker 4: We learn, though, in the nineteen seventies that people eventually
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Speaker 4: catch up. You can't fool all the people all the time.
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Speaker 4: They start to demand wage increases and firms start to
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Speaker 4: set next year's prices anticipating a higher rate of inflation.
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Speaker 4: It was at this point that the great Milton Friedman
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Speaker 4: and others, but Milton Friedman is associated most closely, I
4:48
Speaker 4: think with this idea that inflation expectations matter, that there's
4:51
Speaker 4: a natural rate of unemployment, there's a natural rate of
4:55
Speaker 4: economic growth, and you can't push the economy beyond its
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Speaker 4: natural rate of growth or below its natural rate of
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Speaker 4: unemployment indefinitely without accelerating not just high inflation, but growing inflation.
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Speaker 4: That's what the experience of the nineteen seventies taught us.
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Speaker 4: Not every economist degrees with that encapsulation of that, with
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Speaker 4: that conclusion, with that summary and conclusion, I should say,
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Speaker 4: but most would agree with some version of it. I
5:23
Speaker 4: think so since then, policymakers have been acutely aware of expectations.
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Speaker 4: They can become self fulfilling as people ask for higher
5:31
Speaker 4: wages and firms ask for higher prices exactly.
5:35
Speaker 2: And so if we look back over the course of
5:37
Speaker 2: the last couple of months, basically what we've seen is
5:40
Speaker 2: there was a tremendous surge of optimism when Trump was
5:44
Speaker 2: elected into office because of potential efforts to deregulate tax
5:48
Speaker 2: cuts and things like that, where things that were spoken
5:51
Speaker 2: about quite frequently.
5:52
Speaker 3: Now what has kind of gardnered a lot of.
5:54
Speaker 2: National headline attention is much talk about tariffs and potential
5:59
Speaker 2: immigration tach crackdown, but specific to what we cover on
6:02
Speaker 2: a daily basis, the economy is tariffs, and so there
6:06
Speaker 2: is this place that we find ourselves in where you know.
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Speaker 3: The market's still to be fair with all this.
6:13
Speaker 2: Are up in positive, positive territory two months into the year,
6:17
Speaker 2: but there is weakening sentiment from consumers out there because
6:22
Speaker 2: there are some of these concerns. The inflation report is
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Speaker 2: probably the biggest one. Now, I'll say the important caveat
6:29
Speaker 2: that we had a January inflation report that Mark and
6:31
Speaker 2: I covered on this show where it was hotter than anticipated.
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Speaker 3: Inflation was running at three percent year over year.
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Speaker 2: That has been talked about a lot on our show
6:39
Speaker 2: and other programs over the course of the last couple
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Speaker 2: of weeks.
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Speaker 4: That's an important point to make this administration, which has
6:45
Speaker 4: to deal with this problem now because that's why it
6:46
Speaker 4: got elected to deal with this problem. So stop complaining
6:49
Speaker 4: about it. I know the texts are going to come in.
6:51
Speaker 4: Stop dumping on the Trump administration, but stop complaining. It's
6:54
Speaker 4: why you got elected now. In fairness to them, though
6:56
Speaker 4: they inherited this problem. Core inflation. Underlying inflation is a
7:01
Speaker 4: broader synonym for that remains elevated. The current administration did
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Speaker 4: not create that problem, but tariffs could exacerbate it. Stimulative
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Speaker 4: fiscal policy could exacerbate it. These are the same mistakes
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Speaker 4: the last administration made. Biden inherited underlying inflation going up
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Speaker 4: because of all the stimulus that was pumped into a
7:20
Speaker 4: COVID constrained economy under the prior administration. So Biden inherited
7:25
Speaker 4: elevating elevating, not extreme, not even noticeable at that point
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Speaker 4: to most people, and then he made it a lot worse.
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Speaker 4: My fear is the current administration is going to make
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Speaker 4: the same mistake. They inherited a potentially dicey inflation situation,
7:40
Speaker 4: and they're about to fuel the fire. And it seems
7:43
Speaker 4: with tariffs, with stimulative fiscal policy, and with things that
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Speaker 4: reduced the economy's ability to supply goods and services, and
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Speaker 4: it seems like consumers might be catching on.
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Speaker 2: Those are the concerns right now. You hit on all
7:55
Speaker 2: the important ones that investors and consumers are concerned about,
7:58
Speaker 2: that these potential pies could lead to the furthering of inflation.
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Speaker 2: But it's really important to note for both political administrations,
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Speaker 2: they are not the end all be all when it
8:09
Speaker 2: comes to inflation. And I can't reiterate that point enough
8:11
Speaker 2: that if you look at the pie chart of you
8:14
Speaker 2: know how much responsibility should we assign to the political
8:18
Speaker 2: administration as to its impact on inflation. I don't know
8:21
Speaker 2: what percentage you put it at, but maybe twenty twenty
8:25
Speaker 2: five percent.
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Speaker 4: Let me, I'll tell you what how economists think about this.
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Speaker 4: In the long run, inflation is almost exclusively monetary, right,
8:32
Speaker 4: the only in the long run price said differently. And
8:34
Speaker 4: this gets a little bit technical, and I didn't get
8:36
Speaker 4: it for a long time, but I need to say
8:38
Speaker 4: it because it's correct. Inflation happens in the long run
8:42
Speaker 4: because prices ultimately adjust. It's it's the fact that not
8:48
Speaker 4: all prices adjust in the short run. I'm gonna contradict
8:51
Speaker 4: myself a little bit and try to simplify this and
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Speaker 4: not confuse myself. Inflation happens because some prices adjust more quickly.
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Speaker 4: Some prices, say, ry more quickly than others fall. If
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Speaker 4: oil prices go up, the price of everything else we
9:04
Speaker 4: all know this doesn't immediately go down. The price of
9:07
Speaker 4: everything else doesn't immediately go down. You have less money
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Speaker 4: in your pocket. Because oil prices went up, You're spending
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Speaker 4: more on it. Shouldn't the price of everything else go down?
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Speaker 4: Why doesn't that happen. I'm spending less on everything else.
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Speaker 4: I just spend a lot more on natural gas or
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Speaker 4: home eating oil. Those other prices are sticky. That's what
9:21
Speaker 4: causes inflation in the short run. In the long run,
9:24
Speaker 4: those prices all adjust, So inflation is just monetary. So
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Speaker 4: I'm not making any different a point pall than you
9:31
Speaker 4: just made, which is, in the long run, inflation is
9:34
Speaker 4: the Fed's fault, if you like, it's their problem. In
9:37
Speaker 4: the short run, it's a little bit more complex, but
9:39
Speaker 4: I would agree that there's nothing that policy makers can
9:43
Speaker 4: do about sticky prices in the short run, in the
9:46
Speaker 4: very short run.
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Speaker 2: The eggs point is just a great quick example to use.
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Speaker 2: You know, there's no impact that they can really have
9:52
Speaker 2: in the short run to make any sort of change
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Speaker 2: to egg prices. What they can dictate a political administration,
9:58
Speaker 2: fiscal policy, regulatory and trade policies, and who is appointed
10:02
Speaker 2: at the Federal Reserve. Those are the things that are
10:04
Speaker 2: in their control. And we sit at a point right
10:06
Speaker 2: now where there is, like I said, some uncertainty out
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Speaker 2: there from investors and consumers as to where inflation goes.
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Speaker 3: I think a lot of this.
10:14
Speaker 2: Could be negated by what we would I don't know
10:17
Speaker 2: what the report's going to look like, but we're going
10:18
Speaker 2: to get another inflation report, you know, a couple weeks
10:21
Speaker 2: into March here, and if that report indicates that perhaps
10:25
Speaker 2: that January data was a one off, then that will
10:28
Speaker 2: do a lot to assuage some of these doubts that
10:30
Speaker 2: people have on inflation. We need to see a consistent trend,
10:34
Speaker 2: and to be fair to the January report, there was
10:36
Speaker 2: a couple months of data prior to that that did
10:38
Speaker 2: a point to inflation being a little bit stickier. But
10:41
Speaker 2: we'll have to see more data.
10:42
Speaker 3: Company.
10:43
Speaker 4: This problem didn't just re emerge. It's been a persistent,
10:47
Speaker 4: gnawing problem for years.
10:49
Speaker 3: Yep.
10:50
Speaker 4: And credit the Trump administration for going out and trying
10:53
Speaker 4: to buy eggs, because they are feeding into inflation expectations
10:57
Speaker 4: right now. I thought that was sort of a clever solution,
11:00
Speaker 4: and they went to Turkey or something to buy eggs.
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Speaker 4: I don't know how much that'll help the problem in
11:04
Speaker 4: the short term, but anything at all to reduce pressure
11:07
Speaker 4: and help keep inflation expectations at Bay should be helpful
11:11
Speaker 4: on the margin.
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Speaker 2: Taking a look around at markets all still in positive territory,
11:16
Speaker 2: with the S and P five hundred up about three
11:19
Speaker 2: quarters of a percent and the Dow Jones up over
11:21
Speaker 2: one hundred eighty points. We're going to take a quick
11:23
Speaker 2: break here on the Financial Exchange. Where when we come back,
11:26
Speaker 2: when we're talking a little bit about higher prices and
11:28
Speaker 2: inflation and the FED as well as the Ukraine agreeing
11:32
Speaker 2: to a mineral rights deal with the US. That's right
11:35
Speaker 2: after this break here on the Financial Exchange.
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12:48
Speaker 3: Coming back from break here.
12:49
Speaker 2: In the previous segment, we were talking about inflation and
12:52
Speaker 2: just some of the data that we received recently, whether
12:55
Speaker 2: it be from the University of Michigan survey or the
12:57
Speaker 2: Consumer Board of Confidence. Consumer Board released a report on
13:02
Speaker 2: the confidence that US consumers have on the economy.
13:06
Speaker 3: Those have scaled back a little bit.
13:08
Speaker 2: As we were mentioning in flace and expectations have risen
13:11
Speaker 2: the most since we saw in a month of since
13:14
Speaker 2: twenty twenty one, in the month of February, and in
13:18
Speaker 2: terms of the bond market, we've got the US ten
13:21
Speaker 2: year treasurey at the moment sitting at four point three
13:23
Speaker 2: one percent, so perhaps a little surprising that, you know,
13:27
Speaker 2: you have more concerns about longer term inflation, but US
13:31
Speaker 2: tenure treasure coming down a little bit. Some have argued
13:33
Speaker 2: that was a flock to safety that brought down some
13:36
Speaker 2: of the yields.
13:37
Speaker 3: But that's been an interesting dynamic.
13:38
Speaker 4: That and we have thankfully data on what portion of
13:44
Speaker 4: the decline and interest rates so far this month. And
13:47
Speaker 4: I'll use the ten year treasury for context and for
13:51
Speaker 4: specifics here that yield is down about a quarter of
13:55
Speaker 4: a percent. Sometimes we put that into finance jargon and
13:58
Speaker 4: call it twenty five so called basis points. A basis
14:01
Speaker 4: point is just one one hundredth of one one hundredth
14:04
Speaker 4: or a percent of a percent. If you ever wondered
14:07
Speaker 4: what that jargon means.
14:08
Speaker 3: I never know why we do those things. I think
14:10
Speaker 3: finance we love to make things.
14:12
Speaker 4: More mysterious, and we're adding value. Don't try to do
14:16
Speaker 4: this yourself, mister investor. You didn't even know what a
14:18
Speaker 4: basis point was, you, you pour rube.
14:21
Speaker 2: Of course, I'll never forget the first time I heard that.
14:24
Speaker 2: I was sitting there in my early, my courage, what
14:26
Speaker 2: the heck is going on? Then you learn what it is.
14:28
Speaker 2: It's just like saying er point two five.
14:30
Speaker 4: Point zero, if a percent is point zero one, a
14:33
Speaker 4: basis point is point zero zero zero one, anyway percent
14:35
Speaker 4: of a percent if you're interested, just I'm not gonna
14:38
Speaker 4: I'm gonna call it a quarter of a percentage point
14:40
Speaker 4: is the total decline. And treasuries we could break that
14:43
Speaker 4: out between expected inflation and so called real yields. We
14:47
Speaker 4: do that using treasure inflation protected securities. That's one of
14:50
Speaker 4: the cool things about them. In addition to being a
14:52
Speaker 4: handy diversifier depending on your objectives, they also allow finance
14:55
Speaker 4: people to make to draw conclusions about exactly what's happening
14:58
Speaker 4: in the bond market. And and the vast majority of
15:01
Speaker 4: the drop so far in yields this month is in
15:03
Speaker 4: real yields. It's so not expected inflation, that's not reduced
15:08
Speaker 4: inflation or price increase expectations that's driving it, but perhaps
15:12
Speaker 4: concerns about economic activity. There are any number of explanations
15:16
Speaker 4: for why real yields and this is not a this
15:20
Speaker 4: is not a perfectly airtight conclusion, but it's a reasonable one.
15:24
Speaker 4: There are lots of potential explanations, but the strongest is
15:26
Speaker 4: probably economic growth jitters and those are validated by some
15:30
Speaker 4: of these sentiment surveys, which some people deride as being
15:33
Speaker 4: soft and stuff, but they actually help for casters improve
15:37
Speaker 4: their predictions, which is why firms in the conference boards
15:40
Speaker 4: spend a lot of money to produce them.
15:42
Speaker 2: Ukraine agrees to a mineralites deal with the United States.
15:45
Speaker 2: This will be officially signed in on Friday. Initially, the
15:50
Speaker 2: US had demanded for five hundred billion in potential revenue
15:53
Speaker 2: from the development of Ukraine's mineral resources. The deal has
15:58
Speaker 2: since been revised. This specifix of it aren't fully released.
16:02
Speaker 3: At this point.
16:03
Speaker 2: We should get more information on that on Friday. Ukraine
16:06
Speaker 2: we have of course paid I believe about one hundred
16:09
Speaker 2: billion dollars in our support to the country during the
16:13
Speaker 2: war over the last couple of years, and a good
16:16
Speaker 2: portion of that of course going to military aid. In
16:19
Speaker 2: terms of Ukraine, they have a lot of natural resources
16:23
Speaker 2: that on the mineral side of the things that we
16:25
Speaker 2: would find useful for cell phones and all sorts of
16:28
Speaker 2: other different products out there. Lithium, graphite and titanium are
16:32
Speaker 2: three that people would at least be familiar with those
16:35
Speaker 2: types of minerals, and twenty of the fifty minerals that
16:38
Speaker 2: the US considers critical are found in Ukraine. The small
16:42
Speaker 2: caveat there is that forty percent of those deposits are
16:46
Speaker 2: now sitting in Russian occupied territory. So there's certainly some
16:50
Speaker 2: work to be done. And it's a wrinkle, yeah, a
16:52
Speaker 2: big wrinkle, And there's certainly some work to be done.
16:56
Speaker 2: Both we have to hear the final specifics on this deal.
16:59
Speaker 2: There's gonna need to be some investment in order to
17:02
Speaker 2: you know, unearth those mineral resources. And you know, all
17:06
Speaker 2: of this is going to take time. So other than that,
17:09
Speaker 2: I'm certainly not an expert in the mineral rights deal space,
17:13
Speaker 2: but that is something that is no worthy. No, no,
17:18
Speaker 2: you know, Chuck might have some sort of capacity in that,
17:21
Speaker 2: in that realm, but my my sweet, spots are a
17:24
Speaker 2: lot smaller in range of economic knowledge.
17:29
Speaker 3: Doesn't extend to mineral rights, but it's not worthy from
17:32
Speaker 3: an economic.
17:32
Speaker 4: Yeah, not a lot of detail at this point. Yeah,
17:34
Speaker 4: I'll say only that five hundred billion may sound like
17:37
Speaker 4: a lot, and they're we're hearing a lot of big
17:40
Speaker 4: numbers out of Washington lately. And they're all settling on
17:43
Speaker 4: five hundred billion apples making a five hundred million dollar investment, right,
17:46
Speaker 4: soft Bank made a five hundred million dollar investment. What's
17:48
Speaker 4: the right number to attach to the value this year? Oh,
17:50
Speaker 4: I don't know what's top of mind. Five hundred billion.
17:53
Speaker 3: Trillions of dollars.
17:54
Speaker 4: These these reserve estimates come from Soviet era surveys, so
17:58
Speaker 4: take it for what it's worth. I'm not saying that
18:01
Speaker 4: Ukraine is not blessed with plentiful resources. What I'd love
18:05
Speaker 4: to hear. We never heard it from Joe Biden. We
18:07
Speaker 4: haven't heard it yet from Donald Trump. Why are we
18:09
Speaker 4: there beyond expropriating mineral rights? Why are we there? Why
18:14
Speaker 4: are we backing them? Why is it important to American interest?
18:17
Speaker 4: Neither president has made a case. Maybe Trump's still figuring
18:20
Speaker 4: his views out. It sounds like he might be. We've
18:22
Speaker 4: not yet heard a compelling case for why we're spending
18:24
Speaker 4: money in time there. I'd love to hear that. I
18:27
Speaker 4: think the American people deserve it. The last administration didn't
18:30
Speaker 4: do it. This one so far hasn't done it. I
18:31
Speaker 4: don't think it's just for mineral rights, right, I don't
18:34
Speaker 4: think Maybe it is make the case because it's gonna
18:37
Speaker 4: it's gonna cost that we have to defend those rights,
18:39
Speaker 4: presumably one way or the other. So now we're getting
18:42
Speaker 4: entangled in Ukraine's future.
18:43
Speaker 3: What indefinitely let's go to our mineral rights Expt. Paul
18:46
Speaker 3: Lane here, But five.
18:50
Speaker 4: Hundred billion balls not a lot. Our GDP is thirty trillion. Yeah,
18:54
Speaker 4: that's a five hundred with nine zeros versus a thirty
18:57
Speaker 4: with twelve zeros. That might not sound like a big gap,
19:00
Speaker 4: but it's it's quite a bit larger.
19:02
Speaker 3: It's a drop in the bucket.
19:04
Speaker 2: Another potential tariff that could be under consideration. Trump is
19:07
Speaker 2: announcing an inquiry that could lead to tariffs on copper.
19:11
Speaker 2: The US imported forty five percent of its copper and
19:14
Speaker 2: consume seventeen billion of copper in twenty twenty four. Over
19:18
Speaker 2: the last decade, US copper production has dropped about twenty percent,
19:22
Speaker 2: so that is really the focus behind this. Again, this
19:24
Speaker 2: is just an inquiry, So no news on potential tariffs
19:26
Speaker 2: just yet.
19:27
Speaker 3: We're going to take a quick break here on the
19:28
Speaker 3: Financial Exchange.
19:29
Speaker 2: But when we come back, we're me doing Wall Street
19:31
Speaker 2: Watch and ask Todd have your questions ready our studio
19:34
Speaker 2: line eighty eight two zero five two two sixty three.
19:37
Speaker 2: Ask tod is right after this break.
19:39
Speaker 1: Like us on Facebook and follow us on Twitter. Act
19:42
Speaker 1: TFE show. Breaking business news is always first right here
19:47
Speaker 1: on the Financial Exchange Radio Network. Time now for Wall Street.
19:52
Speaker 1: Watch a complete look at what's moving market so far
19:55
Speaker 1: today right here on the Financial Exchange Radio Network.
19:59
Speaker 5: All markets are bouncing back, looking to snap their four
20:02
Speaker 5: day losing streak as Wall Street eagerly awaits a big
20:05
Speaker 5: earnings report from Nvidia do out after today's close. Right now,
20:09
Speaker 5: the Dow is up by about half a percent or
20:12
Speaker 5: two hundred and two points or two hundred and seven
20:15
Speaker 5: points excuse me, S and P five hundred is up
20:18
Speaker 5: about three quarters of a percent or forty three points,
20:21
Speaker 5: and the Nasdaq up nearly one percent higher, or one
20:23
Speaker 5: hundred and eighty nine points. RUSS two thousand and up
20:27
Speaker 5: one and a quarter percent or twenty seven points. Ten
20:30
Speaker 5: year treasure reeled is flat now at four point three
20:33
Speaker 5: zero percent, and crude oil also flat, trading just below
20:37
Speaker 5: sixty nine dollars a barrel. Lowe's posted better than expected
20:42
Speaker 5: fourth quarter earnings and revenue this morning, where a home
20:45
Speaker 5: improvement retailer said its full year total sales could see
20:49
Speaker 5: modest growth that stock up by two percent. Meanwhile, shares
20:53
Speaker 5: in super Microcomputer jumping by twenty two percent after the
20:57
Speaker 5: tech company met the NASDAQS listing debt line to report
21:01
Speaker 5: financial results for the most recent fiscal year to the SEC,
21:05
Speaker 5: bringing it back into compliance with reporting requirements. Elsewhere, GM
21:11
Speaker 5: shares up by six percent after the automaker announced an
21:14
Speaker 5: increase of its quarterly dividend by twenty five percent to
21:18
Speaker 5: fifteen cents per share. Sticking with auto where Stillanta shares
21:22
Speaker 5: down by three percent after the jeep parent company reported
21:26
Speaker 5: a seventy percent drop in full year profit and also
21:29
Speaker 5: gave a cautious outlook for growth and profitability this year.
21:33
Speaker 5: Eli Lilly said it will invest at least twenty seven
21:36
Speaker 5: billion dollars to build four new manufacturing sites in the
21:40
Speaker 5: US as demand for its weight loss in diabetes injections
21:44
Speaker 5: sores in the company develops new drugs that stock up
21:47
Speaker 5: over one percent. BP said it would boost oil and
21:50
Speaker 5: gas production and sharply cut clean energy investment, pivoting back
21:55
Speaker 5: to fossil fuel fuels that stock down by two percent
21:59
Speaker 5: and TGX up by two percent after the parent company
22:02
Speaker 5: to Marshalls and Home Goods beat earnings and revenue expectations
22:07
Speaker 5: for the previous quarter. I'm Tucker Silva and that's Wall
22:10
Speaker 5: Street Watch.
22:12
Speaker 1: This is Ask Todd on the Financial Exchange Radio Network.
22:16
Speaker 1: If you have an existing estate plan or in the
22:18
Speaker 1: market for one, Todd Lutsky is here to answer your
22:21
Speaker 1: questions and help you plan for a later life. Ask
22:23
Speaker 1: Todd is presented by Cushing and Dolan, serving Massachusetts and
22:26
Speaker 1: New England for more than thirty five years, helping families
22:30
Speaker 1: with estate and tax planning, Medicaid planning, and probate law.
22:33
Speaker 1: Visit Cushingdolan dot com. Now here's Todd Lutsky.
22:39
Speaker 2: It is Wednesday, so it's time for Ask Todd. If
22:42
Speaker 2: you have any questions in the estate playing realm, whether
22:45
Speaker 2: it's regarding estate taxes, probate trusts, give our studio line
22:49
Speaker 2: a call at eight eight eight two zero five two
22:52
Speaker 2: two six y three. Again that phone number for any
22:54
Speaker 2: of your state planning questions. Eight eight eight two zero
22:58
Speaker 2: five two to three.
23:01
Speaker 3: Todd. How we doing today?
23:02
Speaker 6: I am never better in you doing well?
23:04
Speaker 3: Doing well? Todd.
23:05
Speaker 2: Recently I came across a piece where trust and will.
23:09
Speaker 2: A company out there did a survey where eighty two
23:12
Speaker 2: percent of Americans recognized that there was an importance behind
23:15
Speaker 2: a state planning, but only thirty one percent of them
23:19
Speaker 2: actually had a will as a result of this survey.
23:21
Speaker 2: So my question to you is, what are some factors
23:24
Speaker 2: out there that people should consider as to whether or
23:27
Speaker 2: not and a state plan is something that they should
23:29
Speaker 2: think about, whether it's aged, they're economics behind their family.
23:32
Speaker 2: What are some of the factors that you had to
23:34
Speaker 2: ask people to sort of think about before going down
23:36
Speaker 2: this road.
23:37
Speaker 6: Yeah, I think it's really interesting those statistics you throw
23:41
Speaker 6: out there that it's like everybody knows it's important. But
23:45
Speaker 6: let's face it, for all of us, it's the easiest
23:47
Speaker 6: thing in the world to put off. Right, Why do
23:49
Speaker 6: I want to talk about death and taxes? It's not fun,
23:52
Speaker 6: not sexy. I make it fun. Come on, it's fun.
23:55
Speaker 6: Death and taxes can be fun, but it's not. And
23:59
Speaker 6: at the end of the day, it's not easy to
24:00
Speaker 6: talk about. But I would say there's there's really a
24:04
Speaker 6: laundry list of things. But if we group it, you know,
24:08
Speaker 6: I would say, you know, young people, you know like yourself,
24:12
Speaker 6: you know, you you know, younger people may not have,
24:15
Speaker 6: you know, thirteen million dollars of assets to worry about
24:19
Speaker 6: federal estate tax or maybe even you know, a two
24:22
Speaker 6: million in Massachusetts, although it's easy to get there with
24:25
Speaker 6: a house and some other assets you don't think about.
24:27
Speaker 6: But and life insurance puts you right over the top.
24:31
Speaker 6: But it's more about if they have young children. Yeah,
24:34
Speaker 6: I mean, so if you have young children, I think
24:36
Speaker 6: at the end of the day, forget the taxes and
24:38
Speaker 6: the probates so much. That's important. But you know, they
24:41
Speaker 6: can't own anything, and so if they can't own anything,
24:45
Speaker 6: then I don't want some guardian in my will. Well,
24:48
Speaker 6: first of all, you need you need a will at
24:50
Speaker 6: a bare minimum if you're if you're not going to
24:51
Speaker 6: do anything as a young family member, just because that's
24:54
Speaker 6: who appoints the guardian. So but I also would not
24:57
Speaker 6: want the guardian to be in owning all of my stuff.
25:02
Speaker 6: I would say, why not have a trust own my
25:05
Speaker 6: stuff and put a trustee that I like or trust
25:10
Speaker 6: in that position, because then they have a fiduciary obligation
25:14
Speaker 6: to manage the money a certain way, use the real
25:18
Speaker 6: estate a certain way, you know, But they don't own it,
25:21
Speaker 6: but trust owns it. So and then that would be
25:23
Speaker 6: providing for my children as they grow up over time,
25:26
Speaker 6: I can stagger the distributions. I can control how they
25:29
Speaker 6: get it when they get it, and so I think
25:33
Speaker 6: that's a reason for young people. Next group would be, no,
25:37
Speaker 6: we're older now, kids have moved out, we might have grandkids,
25:40
Speaker 6: and you know, we're in our sixties. Well, we have
25:44
Speaker 6: stuff now. So if we have stuff now, we're more
25:47
Speaker 6: worried about, you know, estate taxes, whether it be federal
25:50
Speaker 6: or state. We're worried about probate. We're you know, worried
25:52
Speaker 6: about staying in control and taking care of the family
25:55
Speaker 6: with a bloodline distribution. So those would be typical reasons
25:59
Speaker 6: as we get you know, a little older. And if
26:02
Speaker 6: we're you know, in our mid sixties or so, and
26:05
Speaker 6: we're saying, well, maybe I don't have a federal estate
26:07
Speaker 6: tax problem. Maybe now I need to think about nursing homes. Well,
26:11
Speaker 6: if I'm sixty five and I can get a five
26:13
Speaker 6: year waiting period going and have all my assets protected
26:16
Speaker 6: by the time I'm seventy and it's in my rear
26:18
Speaker 6: view mirror, well that might not be a bad idea. Either,
26:21
Speaker 6: So I need to understand how the irrevocable trust works
26:23
Speaker 6: so that I can see if I can live with
26:25
Speaker 6: it and get my stuff not only protected from the
26:28
Speaker 6: nursing home, but also avoiding probate and taxes and bloodline planning.
26:32
Speaker 6: So lots of reasons to do it. And I think
26:34
Speaker 6: another group would just be, hey, I just got kids
26:37
Speaker 6: and I don't want to go into their future spouses, right,
26:40
Speaker 6: you know, there's plenty of things to think about and
26:42
Speaker 6: controlling these things, you know, controlling these assets from the
26:45
Speaker 6: grave and even skipping generation, skipping taxes by getting it
26:48
Speaker 6: to the grandchildren. So I think those are all different
26:52
Speaker 6: walks of life that would give you reason to say, yeah,
26:55
Speaker 6: let's figure out how to do this.
26:56
Speaker 2: Absolutely a lot of good information there. We're talking here
26:59
Speaker 2: with Todd lets from Cushian Dolan. If you have any
27:01
Speaker 2: questions pertaining some of the subjects that he just talked about,
27:04
Speaker 2: whether it's regarding state tax is, trust work, probatea voids,
27:08
Speaker 2: all those types of things, give our studio line a
27:10
Speaker 2: call at eight eight eight to zero five two two
27:14
Speaker 2: sixty three. Again that phone number for any questions for
27:17
Speaker 2: Todd Lutsky eight eight eight to zero five two two
27:21
Speaker 2: six three. We're going to take a quick break here
27:24
Speaker 2: on the Financial Exchange. When we come back, we'll have
27:26
Speaker 2: your questions with Todd right after this.
27:30
Speaker 1: Ask Todd with Todd Lutsky every Wednesday at ten thirty
27:34
Speaker 1: only here on the Financial Exchange Radio Network. Todd Lutsky
27:40
Speaker 1: answers your questions about a state and elder life planning
27:42
Speaker 1: every Wednesday at ten thirty right here on the Financial
27:46
Speaker 1: Exchange Radio Network.
27:55
Speaker 2: We are back here with Todd Lutsky from Cushian Dolan
27:58
Speaker 2: for our weekly segment of Ask Todd. If you have
28:01
Speaker 2: any questions in the estate planning realm regarding probate avoidance,
28:05
Speaker 2: trust wills, anything in that nature, give our studio line
28:08
Speaker 2: a call it eight eight eight two zero five two
28:11
Speaker 2: two six three again that number for any of your questions.
28:14
Speaker 3: Eight eight eight two zero five two to six three.
28:17
Speaker 2: Todd, you've obviously had a trans amount of experience in
28:20
Speaker 2: the industry and you've seen probably the benefits of estate
28:24
Speaker 2: planning being done properly over the course of families' lives
28:28
Speaker 2: playing out.
28:28
Speaker 3: But also some pitfalls as well.
28:30
Speaker 2: Are there any instances that come to mind recently where
28:33
Speaker 2: you found a situation where not the proper work was
28:36
Speaker 2: not done and that caused a tremendous issue for airs
28:39
Speaker 2: of a family.
28:40
Speaker 6: Yeah, you know, I think that when you ask a
28:44
Speaker 6: question like that, it's more like, Okay, I got to
28:46
Speaker 6: get my estate plan in order, which, by the way,
28:48
Speaker 6: is what we're talking about with our guide this month.
28:50
Speaker 6: It's back to the basics. I want to get started.
28:52
Speaker 6: I want to figure out how to do my estate plan.
28:55
Speaker 6: So you know, I think picking a lawyer in that
28:57
Speaker 6: regard is part of that equation, and how do I
29:01
Speaker 6: go about picking one? Because when you draft documents, it's
29:06
Speaker 6: very important that they're drafted properly. So there's an interesting
29:10
Speaker 6: case out there now where a family had some estate
29:15
Speaker 6: planning documents prepared and the parents have passed away, and
29:19
Speaker 6: there were actually five kids, and as you might imagine,
29:24
Speaker 6: the kids aren't all getting along, which, by the way,
29:27
Speaker 6: is another reason to do your estate plan right. You
29:29
Speaker 6: got to be clear in terms of what your wishes
29:32
Speaker 6: are and keep the kids at bay. So it was
29:34
Speaker 6: very interesting. It had really only a piece of property
29:38
Speaker 6: in the trust that was their biggest asset was like
29:40
Speaker 6: five six hundred thousand dollars. It wasn't a huge property,
29:44
Speaker 6: but it was sold before they died, and the document
29:48
Speaker 6: says this particular property XYZ is supposed to go one
29:53
Speaker 6: quarter to each of four kids. Now there's five kids.
29:58
Speaker 6: One kid is the trustee, B C and D are
30:01
Speaker 6: to get one quarter of this property located at x
30:05
Speaker 6: y Z. And then it says, however, if there's other
30:08
Speaker 6: assets in the trust, they are to go one fifth.
30:11
Speaker 6: So that's the fifth child is now included. And then
30:14
Speaker 6: it says with regard to the fifth child, the fifth
30:16
Speaker 6: child is to get none of the real estate, but
30:19
Speaker 6: one fifth of the other assets. Oh, seems seems clear,
30:24
Speaker 6: but it's not because why real estate was sold before
30:27
Speaker 6: they died, So there's no real estate in the trust.
30:29
Speaker 6: There's only other assets. So the kids are saying, no,
30:32
Speaker 6: you don't get any because this the money that's in
30:34
Speaker 6: there is only the money from the sale of the property,
30:36
Speaker 6: and that's ours. No, that's not what the document says.
30:39
Speaker 6: The document says, you get the real estate. Don't say
30:43
Speaker 6: it's money. It doesn't say anything about money. In fact,
30:45
Speaker 6: it does. It says the other assets, which would be money,
30:49
Speaker 6: is to go five ways. And so now the trustee
30:52
Speaker 6: is in a position where I'm saying, well, what do
30:54
Speaker 6: I need to do? What do you do? You do
30:56
Speaker 6: a declaratory judgment and you issue, you go to the
31:00
Speaker 6: court and you say, Court, I need you to tell
31:03
Speaker 6: me how to do this as trustee, which would be
31:06
Speaker 6: the client we would represent, saying you know, I don't
31:09
Speaker 6: want to violate my fiduciary responsibility and give the money
31:13
Speaker 6: to the wrong people. I need you to clarify for
31:15
Speaker 6: me what this means. That's not a problem. The other
31:19
Speaker 6: kids are all upset about that. Yet there's a no
31:22
Speaker 6: contest clause in the will, that in the document that
31:24
Speaker 6: says if anyone challenges the trust or prevents the terms
31:29
Speaker 6: of the document frame from being executed properly, they immediately lose.
31:34
Speaker 6: So I say, there's really no downside here. I say,
31:36
Speaker 6: bring the declaratory judgment action, get your guidance from the court,
31:39
Speaker 6: and if they give you any grief, I think they
31:41
Speaker 6: violate the no contest clause. So it's still good. It's
31:45
Speaker 6: not really a bad story. It's a good story. A
31:47
Speaker 6: little bad on the drafting, but at the end of
31:49
Speaker 6: the day, having language in there is going to ensure
31:53
Speaker 6: the donors intent is satisfied here and that's really what
31:56
Speaker 6: this is all about. We just want to make sure
31:59
Speaker 6: that your will wishes are taken care of. So interesting case,
32:03
Speaker 6: bad drafting, but I think at the end of the day,
32:06
Speaker 6: the donor's wishes are going to be satisfied. And of
32:10
Speaker 6: course the estate planning was done well. So, folks, if
32:12
Speaker 6: you want to get your estate planning in order, get started.
32:16
Speaker 6: You've never known where to start, You're not sure how
32:19
Speaker 6: to begin. This back to the basics guide is really
32:22
Speaker 6: wonderful as we approach the end of the month, folks.
32:24
Speaker 6: It's a guide where it's basically my legal recommendation to
32:28
Speaker 6: a made up family and made up facts and numbers,
32:31
Speaker 6: and you could actually put your own family in here
32:33
Speaker 6: and say, hey, does this actually a legal recommendation that
32:36
Speaker 6: works for my family. But it also explains the basic
32:39
Speaker 6: documents from health cares to powers of attorney, etc. To
32:44
Speaker 6: the trust that was recommended in this particular case, which
32:47
Speaker 6: was an irrevocable trust, and it explains all about how
32:51
Speaker 6: it works, from taxes to bloodline planning to control while
32:54
Speaker 6: you're living. Folks, get your estate plan in order figure
32:58
Speaker 6: out how to begin the process. Get the guide eight
33:02
Speaker 6: sixty six eight four eight five six nine nine or
33:06
Speaker 6: Legal Exchange Show dot com again eight sixty six eight
33:10
Speaker 6: four eight five six nine nine or Legal Exchange Show
33:14
Speaker 6: dot com.
33:14
Speaker 2: We're gonna go to the phones. We've got d from
33:17
Speaker 2: New Hampshire on what is your question for Todd?
33:20
Speaker 7: Hi, Tott, thank you? My mother, Uh has a I
33:24
Speaker 7: live in New Hampshire. She lives in Massachusetts.
33:27
Speaker 1: Huh.
33:27
Speaker 7: She has a piece of property. It's an old camp
33:31
Speaker 7: up on the lake in New Hampshire. She has put
33:34
Speaker 7: the property into an irrevocable trust, with my brother being
33:40
Speaker 7: the trustee. Okay, And the thing was is, you know
33:43
Speaker 7: we were my husband and I were supposed to we
33:47
Speaker 7: we're the ones that take care of the camp and
33:48
Speaker 7: do all the spending of everything to take care of it,
33:51
Speaker 7: and she wants to sell it to us. But now
33:54
Speaker 7: that it's an an irrevocable trust, we can't do that.
33:57
Speaker 4: Is that right?
33:58
Speaker 6: No, that's not right. I mean I haven't read the document.
34:00
Speaker 6: I would certainly have to read the document. But any
34:03
Speaker 6: irrevocable trusts that we would ever draft certainly give the
34:07
Speaker 6: trustee the power to sell the property, so as long
34:10
Speaker 6: as it's sold for fair market value. I don't think
34:13
Speaker 6: the trust would be prohibited in terms of who it
34:15
Speaker 6: sells it to. Like let's say I want it to
34:17
Speaker 6: buy it. The trustee should be able to say, yeah,
34:20
Speaker 6: I'm going to sell you Todd the camp and then
34:23
Speaker 6: I give you know, whatever it's worth. Here's five hundred
34:25
Speaker 6: thousand dollars, and I put that five hundred thousand dollars
34:27
Speaker 6: into the trust. So the trust still has the asset.
34:32
Speaker 6: It's just now money and not real estate, and that
34:35
Speaker 6: money would still be held for the benefit of the
34:37
Speaker 6: family the way that your mom wants it to go.
34:41
Speaker 6: So I don't know why somebody is telling you that
34:44
Speaker 6: it can't be done. Again, I haven't read the document.
34:47
Speaker 6: But as long as the trustee has the power to
34:49
Speaker 6: sell the property, which I suspect they do, they you
34:53
Speaker 6: know you could buy it. My question is why do
34:55
Speaker 6: you want to buy it? Why not just inherit it?
34:58
Speaker 7: Because we we have a house that we are selling,
35:02
Speaker 7: and it's my understanding that once we sell this house
35:06
Speaker 7: for capital gains that we should buy something else.
35:10
Speaker 6: So is the house you have your primary residence. Yes,
35:14
Speaker 6: so you get a five hundred thousand dollars exclusion when
35:17
Speaker 6: you sell your primary residence. If you've owned and used
35:19
Speaker 6: it as your primary residence for two of the last
35:22
Speaker 6: five years. There is no requirement to buy another piece
35:26
Speaker 6: of property at all, so your tax savings is not
35:30
Speaker 6: driven by you buying another piece of property. Oh okay, See,
35:35
Speaker 6: people just need to get the right advice. You're acting
35:38
Speaker 6: under unfortunately misinformation. So sell your house, buy if you
35:43
Speaker 6: want to buy, but it has no bearing on buying
35:47
Speaker 6: another piece of property. And therefore, again I'm back to
35:50
Speaker 6: the idea, why do we need to sell the house?
35:52
Speaker 6: Why not just wait around and maybe inherit it right?
35:55
Speaker 6: Is there any other reason you would need to own
35:57
Speaker 6: the house now?
35:58
Speaker 7: Yeah, we want to move out of out of this,
36:00
Speaker 7: you know, out of the state. And he's it's a
36:05
Speaker 7: convoluted situation. We have the house, we want to buy
36:09
Speaker 7: the camp so that we can build a permanent house.
36:11
Speaker 6: Okay, is the is the trustee willing to sell?
36:15
Speaker 7: I think so we have an approach to me Yet
36:17
Speaker 7: I know my mom said that she had actually given
36:20
Speaker 7: us a price, you know, of what she would sell
36:23
Speaker 7: it to us for.
36:24
Speaker 6: Well, be careful. You might want to do fair market
36:26
Speaker 6: value so as not to upset siblings, so that everybody's
36:29
Speaker 6: treated equally and then you may need to adjust the
36:31
Speaker 6: language of the trust after you buy the house. Are
36:34
Speaker 6: you still getting a piece of what's in there? I
36:35
Speaker 6: don't know, but check with your check with your mom
36:38
Speaker 6: on that, but check with the trustee. I'm going to
36:41
Speaker 6: venture to guess that this trust does have the power
36:44
Speaker 6: to sell, So let the trustee sell you the property
36:48
Speaker 6: if that's what you want. But remember you're not doing
36:51
Speaker 6: it because there's any tax savings for you. So hopefully
36:54
Speaker 6: that helped a little. And these are kind of questions
36:56
Speaker 6: that are are really wonderful because people sometimes get misinformation.
37:00
Speaker 6: But hopefully I've straightened things out for her.
37:02
Speaker 3: That was fantastic, Todd. Thank you so much for your
37:04
Speaker 3: time this week. We really appreciate it.
37:06
Speaker 6: Always a pleasure.
37:08
Speaker 1: This has been asked Odd on the Financial Exchange Radio network.
37:11
Speaker 1: Ask Todd with Todd. Lutsky has been presented by Cushing
37:14
Speaker 1: and Dolan, serving Massachusetts and New England for more than
37:17
Speaker 1: thirty years, helping families with the state and tax planning,
37:20
Speaker 1: Medicaid planning, and probate law. Call eight hundred three nine
37:23
Speaker 1: three four thousand and one or visit Cushingdolan dot com.
37:26
Speaker 1: The views expressed in this segment are solely those of
37:28
Speaker 1: Cushing and Dolan. Armstrong Advisory does not provide any legal
37:31
Speaker 1: or tax advice. Please consult with your illegal or tax
37:33
Speaker 1: advisor on such matters. Cushing and Armstrong do not endorse
37:35
Speaker 1: each other and are not affiliated.
37:38
Speaker 2: Taking a look around at markets, we've got the Dow
37:41
Speaker 2: Jones up over about two hundred points, the SMP five
37:44
Speaker 2: hundred is up close to fifty points zero point eight percent,
37:46
Speaker 2: and the Nasdaq is rallying quite a bit, up over
37:49
Speaker 2: one percent. All eyes will be on in Vidia as
37:53
Speaker 2: they will report their earnings after the close of the
37:56
Speaker 2: market today. We'll have a full recap of those earnings
37:59
Speaker 2: on tomorrow morning, and then to kick off our second hour,
38:02
Speaker 2: we'll also be previewing those Nvidia earnings and what to
38:05
Speaker 2: expect come four o'clock this afternoon. That's all the time
38:09
Speaker 2: that we have for the first hour here on the
38:10
Speaker 2: financial experience.
38:11
Speaker 3: But stick with us. We got a lot more to
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Speaker 3: cover right after this break