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Money Monday with Brian James · Brian Thomas

0:00
Speaker 1: That made America. 250 years of the struggle for life's liberty.
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Speaker 1: And the pursuit of happiness.
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Speaker 2: The stories that are still.
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Speaker 1: Shaping our nation. You've seen nothing yet.
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Speaker 2: 55KRC, The Talk Station. 805 right now, 55KRC, The Talk Station.
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Speaker 2: It being Monday, it's that time of week to get
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Speaker 2: the benefit of Brian James, Smallworth Financial, doing what we
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Speaker 2: call Money Monday. Talking about, well, thinking about retirement, what's
0:26
Speaker 2: going on in the world, and rate hikes. Welcome back.
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Speaker 2: Brian James, always good to have you on the show,
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Speaker 2: my friend.
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Speaker 1: Always good to be here. Appreciate the invite once again.
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Speaker 2: Well, and I don't want to throw you a curveball,
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Speaker 2: but you're on top of this kind of thing.
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Speaker 1: You love throwing me curveballs. It's your thing.
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Speaker 2: You always field them so well, Brian. I was just reading,
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Speaker 2: you know, for whatever reason, and maybe you can just
0:46
Speaker 2: address a general concept, it feels strange. economically it feels
0:51
Speaker 2: bad out there. It just, it doesn't feel like we
0:53
Speaker 2: are living great times for whatever reason. Is it the war?
0:57
Speaker 2: You pick something that's going on in the world. The
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Speaker 2: problem that we face, you know, existentially with artificial intelligence,
1:03
Speaker 2: whatever it happens to be.
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Speaker 1: I don't know.
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Speaker 2: I just get that the temperature does not feel really
1:06
Speaker 2: good right now as we're fast approaching November. Maybe it's
1:09
Speaker 2: because I just inundated with, with bad news articles each
1:13
Speaker 2: and every day. That's got me down on how I
1:15
Speaker 2: feel about things. But I was just reading this front
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Speaker 2: page in the wall street journal about Corporate America's profits
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Speaker 2: are booming and signal more good times ahead. And just
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Speaker 2: one quick read from the article. Across S & P, companies'
1:26
Speaker 2: per share earnings soared 53% in the second quarter from
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Speaker 2: a year earlier. Sales rose nearly 16%. Investment gains from
1:33
Speaker 2: tech giants Amazon and Alphabet added fuel to the big
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Speaker 2: earnings surge. Even without those gains, S & P 500
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Speaker 2: earnings rose the most since fall of 2021. Quarterly sales
1:44
Speaker 2: climbed more than they have in years. By nearly 2
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Speaker 2: to 1 margin, more companies raised their profit guidance. for
1:49
Speaker 2: the current quarter, then lowered it a turnaround from a
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Speaker 2: year ago when more were lowering their outlooks. I mean,
1:54
Speaker 2: that all sounds rosy and a lot of positive rosy information,
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Speaker 2: most notably if you've been following the markets, Dow Jones,
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Speaker 2: S & P, NASDAQ, et cetera, they all are pretty
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Speaker 2: much up over the year. So why is it that I,
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Speaker 2: maybe I'm misreading the temperature, but it seems to me
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Speaker 2: that there's a sort of a feeling of dread or
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Speaker 2: gloom out in the world, Brian, if I just misread this.
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Speaker 3: No, I think you've got it spot on. And some
2:16
Speaker 3: people don't like when I say this. We actually got
2:18
Speaker 3: a complaint a week or two ago when I used
2:20
Speaker 3: this comment, but I'm sticking by it. We are the
2:22
Speaker 3: United States of profit margins. All we care about. There's
2:24
Speaker 3: plenty of problems out there, right? The other thing you
2:26
Speaker 3: and I are going to talk about today is the
2:27
Speaker 3: likelihood of a rate hike. Well, it's starting to look
2:30
Speaker 3: more and more likely that we're going to get a
2:31
Speaker 3: rate hike because of inflation. That is what affects most people,
2:35
Speaker 3: not all people, but most people. On the other hand,
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Speaker 3: like you just said, we just finished one of the
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Speaker 3: greatest earnings season in history.
2:43
Speaker 1: Nearly all the S & P.
2:44
Speaker 3: 500 companies reported profits are up about 33% over a
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Speaker 3: year ago, and that easily tops the 23% that analysts
2:51
Speaker 3: thought they were.
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Speaker 1: Going to do.
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Speaker 3: So it's a tale of really two economies. One focus
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Speaker 3: is only on the stock market and profitability of companies.
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Speaker 3: And then the other focus is on can people actually
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Speaker 3: afford to pay their bills? And the answer is really
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Speaker 3: kind of increasingly less and less so. But we don't
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Speaker 3: really care about that. We don't have the leadership in
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Speaker 3: place that's really, truly going to actually do something about
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Speaker 3: what it's like to pay for your bills and to
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Speaker 3: go on about your living when they can simply lean
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Speaker 3: on the fact that, hey, the stock market's doing great.
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Speaker 1: Companies are making money hand over fist. We do not
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Speaker 1: have that leadership.
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Speaker 2: OK, and that's fine. I guess. Aren't consumers driving the
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Speaker 2: profitability of these companies? I mean, Abercrombie & Fitch, of all,
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Speaker 2: is one of the things that was mentioned. I mean, obviously, fashion, retail,
3:35
Speaker 2: all that kind of thing. But they had raised their
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Speaker 2: prices in spite of the fact they had much better
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Speaker 2: earnings going on. So somebody's out there buying it.
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Speaker 1: Of course.
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Speaker 3: And there are literally two worlds in this country. There
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Speaker 3: are people who can afford and they are benefiting from it.
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Speaker 3: That's a much smaller percentage than the people who are
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Speaker 3: struggling to make ends meet on a month-to-month basis. But
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Speaker 3: companies take advantage of the fact that we do have
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Speaker 3: an enormous amount, despite the scary headlines. Even during the
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Speaker 3: scary headlines of 22, I still had conversations with clients
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Speaker 3: who have plenty of money. And I wouldn't consider them,
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Speaker 3: this is not the hoi polloi of the world. These
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Speaker 3: are people who simply worked for Your Procter & Gamble's,
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Speaker 3: your Kroger's, you know, your companies have built up their
4:14
Speaker 3: 401ks in 2022. Yeah, those took a hit and it
4:17
Speaker 3: was kind of scary, but they've now recovered and they're
4:19
Speaker 3: up 30, 40 percent from that time. And so you've
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Speaker 3: got people who are looking at still looking at buying
4:24
Speaker 3: the second home, which, by the way, the second home
4:26
Speaker 3: nowadays is not a condo in Florida. It's now land
4:29
Speaker 3: in Indiana or Kentucky in the middle of nowhere. But
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Speaker 3: the point is, people are still thinking about doing it.
4:34
Speaker 3: And all of this– I talk all the time about
4:38
Speaker 3: the fact that we moved from people retiring off of
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Speaker 3: streams of income, right? Your parents, your grandparents probably were
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Speaker 3: more focused on their pension than their pile of money
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Speaker 3: in the stock market. Well, the last couple generations are
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Speaker 3: the first to approach retirement with a pile of money
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Speaker 3: instead of a stream of income. That pile of money,
4:54
Speaker 3: because we have treated it like a stream of income,
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Speaker 3: can't touch it, can only spend so much.
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Speaker 1: Of it, that pile has absolutely ballooned.
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Speaker 3: And people who have the pile are using it, and
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Speaker 3: they're spending, and that's driving prices up, not only on
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Speaker 3: real estate, but also I'd say people don't question the
5:09
Speaker 3: fact that it costs more to go buy steaks at
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Speaker 3: the grocery store. Well, the people with the assets grumble
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Speaker 3: about it and swipe their credit card anyway, so there's
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Speaker 3: no real market reaction. Meanwhile, the people who don't have
5:19
Speaker 3: that level of assets are the ones who suffer because
5:21
Speaker 3: they are increasingly falling behind.
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Speaker 2: Well, proving the value of being at least somewhat invested
5:26
Speaker 2: in the market, you get the benefits of this massive
5:28
Speaker 2: growth that's going on in spite of the instability that
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Speaker 2: exists in the world.
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Speaker 1: Oh, that's absolutely true.
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Speaker 3: And I would say that's why we haven't had a
5:35
Speaker 3: revolution in this country, because, you know, in the Middle Ages,
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Speaker 3: you were simply a peasant on the estate and all
5:39
Speaker 3: you could do was farm whatever and give it to
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Speaker 3: the king and the king would sell it and keep
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Speaker 3: the profits. Here, you get to carve off little chunks
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Speaker 3: of that market via 401k and IRA and investments and
5:49
Speaker 3: all that kind of stuff.
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Speaker 1: And that's great. And lots of people benefit from it.
5:52
Speaker 3: But you started this segment off by talking about kind
5:55
Speaker 3: of feeling that drumbeat underneath all this that maybe despite
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Speaker 3: the profitability, things aren't great. And that's because there's a
6:01
Speaker 3: lot of people out there getting left behind. Well, that and,
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Speaker 3: you know, I've seen the numbers, Brian. I mean, you're
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Speaker 3: familiar with the $ 40 trillion hole we've already dug ourselves
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Speaker 3: in and the trajectory on how big that deficit is
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Speaker 3: going to be into the future. The debt service we
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Speaker 3: pay on it, that seems to be a huge worry.
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Speaker 3: And it's been a worry of my entire life. We
6:18
Speaker 3: are not the United States of balanced budgets and zero deficits.
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Speaker 1: We are the opposite.
6:22
Speaker 3: If we can make more money by borrowing more money,
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Speaker 3: that is what we're going to do in the short run,
6:27
Speaker 3: the hell with the long run.
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Speaker 2: But what of the idea, at least traditionally speaking, these
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Speaker 2: wonderful profits that these companies are earning would translate into
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Speaker 2: job security because growing companies don't usually tend to shed
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Speaker 2: people off, but welcome to AI. Maybe that's another reason
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Speaker 2: people are worried.
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Speaker 1: Again, yeah, absolutely.
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Speaker 3: And that goes right back to what I've been saying,
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Speaker 3: that companies aren't looking at those profits as a way
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Speaker 3: to continue to grow by hiring more people. They're looking
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Speaker 3: at the profits as, hey, how else can we make
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Speaker 3: more of these profits? How can we get rid of
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Speaker 3: some of these expensive people, get rid of our human
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Speaker 3: resources and start to rely?
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Speaker 1: I mean, that's the headline.
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Speaker 3: Nobody can argue that. Every company out there is looking
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Speaker 3: at AI to reduce the reliance that it has to
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Speaker 3: have on expensive people. And that, again, the sole goal
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Speaker 3: there is to increase profit margin.
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Speaker 1: That's what we're about.
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Speaker 3: If you're on the right side of it, you're going
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Speaker 3: to do okay. But if you're on the wrong side
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Speaker 3: and not paying attention, you're going to struggle.
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Speaker 2: Yeah, well, I wish AI wasn't around because then there
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Speaker 2: wouldn't be a wrong side to be on with that.
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Speaker 2: But I can't have the world that I'm desirous of.
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Speaker 2: We've got to deal with what we're getting, and we'll
7:26
Speaker 2: have to just sit back and wait and see how
7:27
Speaker 2: bad it ultimately gets. Anyhow, you wanted to talk about
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Speaker 2: the Fed rate hike. Is that coming our way? Or
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Speaker 2: are we looking at the status quo? And I doubt
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Speaker 2: anybody's going to lower the rate, but what's your take
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Speaker 2: on this, Brian James?
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Speaker 3: Yeah, Fed rate hike is now a real possibility, and
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Speaker 3: that's kind of a reversal from the cut-friendly narrative investors
7:47
Speaker 3: have become used to. That's basically one of the things
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Speaker 3: that President Trump ran on was let's get rates as
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Speaker 3: low as possible and really never got into the consequences
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Speaker 3: of that. To be fair, no politician ever gets into
7:58
Speaker 3: the downside of whatever is on their platform during the campaign.
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Speaker 1: It's when the reality strikes.
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Speaker 3: So where we are right now, interest rate futures are
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Speaker 3: putting the odds of a September hike at roughly 60%.
8:10
Speaker 3: That was a spike after a speech from Kevin Warsh,
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Speaker 3: who doesn't say much.
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Speaker 1: And he said from the beginning he's not.
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Speaker 3: Going to talk very much because he doesn't want to
8:18
Speaker 3: paint himself into a corner. He doesn't want to create
8:20
Speaker 3: opportunities for arbitrage in the markets. So he doesn't say
8:23
Speaker 3: very much. So it was a little bit surprising he
8:24
Speaker 3: was as clear as he was that he said there
8:25
Speaker 3: should be no misunderstanding that the Fed's 2% inflation objective,
8:30
Speaker 3: as measured by personal consumption expenditures– that's.
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Speaker 1: The PCE– It's different from the CPI. That is a
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Speaker 1: firm fixed target.
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Speaker 3: So he basically removed any doubt that the Fed might
8:40
Speaker 3: change its inflation target. So if they want this 2%,
8:42
Speaker 3: we're sticking to it. We've got to be looking for
8:45
Speaker 3: rate cuts. That's really the only solution, the only path
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Speaker 3: to get there.
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Speaker 2: What would you expect by way of hike?
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Speaker 1: Hikes, I said.
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Speaker 2: Quarter point?
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Speaker 3: Yeah, that's what the market is looking at right now,
8:58
Speaker 3: but we never know, right? So we do still believe
9:04
Speaker 3: that it would be a tap the brakes, tap the
9:06
Speaker 3: gas type of a mentality, but we don't know until
9:08
Speaker 3: we know. And like we said, Kevin Walsh doesn't like
9:10
Speaker 3: to talk a whole heck of a lot, so we're
9:12
Speaker 3: sort of fortunate we got what we got. Well, let's
9:14
Speaker 3: just talk on the fun fact. We'll say it's a
9:16
Speaker 3: quarter point increase. How is that going to impact something
9:18
Speaker 3: that really fundamentally impacts so many people, which is the
9:21
Speaker 3: mortgage rates? That's going to drive it up for sure.
9:24
Speaker 3: I mean, there's no doubt there. The thing you want
9:27
Speaker 3: to keep an eye on is the 10-year treasury. And
9:30
Speaker 3: that's the one that banks usually use to kind of
9:33
Speaker 3: decide what they're going to start charging for mortgages. The
9:37
Speaker 3: Federal Reserve does not decide your mortgage rates. It almost
9:40
Speaker 3: gives more of a guideline, and then markets ultimately decide
9:43
Speaker 3: what that rate is going to be.
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Speaker 1: Banks have to keep up with it, too.
9:46
Speaker 3: Banks are borrowing at whatever that Federal Reserve rate is
9:50
Speaker 3: set at. So if that interest rate goes up, mortgages
9:52
Speaker 3: have to go up as well because, again, banks have
9:54
Speaker 3: to maintain those profit margins. So if you are sitting
9:58
Speaker 3: in an adjustable rate mortgage that's going to adjust in
10:00
Speaker 3: the next year or two, you might want to get
10:02
Speaker 3: a little more proactive about that and do something here
10:04
Speaker 3: in the short run, rather than wait and be told
10:06
Speaker 3: what your new interest rate is.
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Speaker 2: Yeah, time to lock it in probably. Brian James will
10:09
Speaker 2: continue with Money Money with Brian James. Do retirees have
10:13
Speaker 2: enough money? What is enough? We'll talk about that with
10:16
Speaker 2: Brian coming up next. Don't go away.
10:17
Speaker 1: Your week. Operation Economic.
10:19
Speaker 2: The talk station. 818 55 care CD talk station. All
10:25
Speaker 2: worth financials. Brian James doing what we call here on
10:27
Speaker 2: the 55 care morning show money Monday. All right, Brian.
10:31
Speaker 2: Now you get this question all the time is a
10:32
Speaker 2: financial planner. How much do I need to retire? What
10:35
Speaker 2: is enough money? And with inflationary pressures, obviously dominating the
10:38
Speaker 2: news headlines and dealing with a lot of seniors and
10:41
Speaker 2: Folks getting ready for retirement, apparently citing inflation as a
10:44
Speaker 2: real problem. Is there an answer to that question, generally speaking, Brian?
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Speaker 3: Well, I don't like the answer to that question because
10:52
Speaker 3: that leaves everybody with an assumption that all I got
10:55
Speaker 3: to get to do, all I got to do is
10:56
Speaker 3: get to this X number and then I'm good to go.
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Speaker 3: And it's definitely not the same for everybody. The pile
11:01
Speaker 3: of money is completely irrelevant, Brian. It's the stream of
11:05
Speaker 3: income that needs to come out of that pile of
11:07
Speaker 3: money is what matters. And that can be very different
11:09
Speaker 3: for anybody based on what the lifestyle is.
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Speaker 1: So we pound on this all the time.
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Speaker 3: If you don't understand what your spending is, then don't
11:16
Speaker 3: waste any time claiming that you need to get to
11:18
Speaker 3: X number of dollars before you can actually retire because
11:21
Speaker 3: you got to understand what your situation is, right? You
11:23
Speaker 3: can't pull the trigger before you know where the target is.
11:26
Speaker 3: So this is coming up, new survey of Americans out there.
11:29
Speaker 3: This is not exactly earth shattering, but about 25% of
11:32
Speaker 3: respondents basically said that, hey, groceries, utilities, and gasoline are
11:36
Speaker 3: now the top financial concern.
11:37
Speaker 1: I'm not going to call this earth shattering information here.
11:41
Speaker 1: Life is just plain expensive.
11:43
Speaker 3: And so basically, there's more and more information out there
11:47
Speaker 3: about people highlighting the fact that things aren't working out
11:49
Speaker 3: so well. Now, if these are people with average savings
11:52
Speaker 3: around a half million dollars, these are.
11:54
Speaker 1: Folks who are doing OK. But this is not the
11:57
Speaker 1: ultra wealthy.
11:57
Speaker 3: So this group is paying a lot more attention to
12:00
Speaker 3: these ongoing daily expenses. But even when the retirement plan works,
12:04
Speaker 3: inflation often can make it feel less secure and a
12:07
Speaker 3: lot less enjoyable. And we've certainly got those headlines right now.
12:10
Speaker 2: Well, I guess, is this a question of adjusting our expectations?
12:15
Speaker 2: Because I see that, you know, belt tightening is concentrated
12:18
Speaker 2: in discretionary categories. Okay, fine. Dining out, number one. Shopping
12:21
Speaker 2: for non-essential items. Travel, vacations, entertainment. And I look at that,
12:26
Speaker 2: and here you go. You talk about different choices for
12:28
Speaker 2: different people, different financial realities for different people depending on
12:31
Speaker 2: their lifestyles. When I read that, I'm like, geez, we
12:35
Speaker 2: don't dine out that much to start with. We don't
12:37
Speaker 2: buy really any non-essential items because why would you buy
12:39
Speaker 2: something that's non-essential? My wife and I aren't real travelers.
12:42
Speaker 2: We don't go very, very. And limited entertainment. So all
12:46
Speaker 2: those categories, I don't even really spend much money on
12:49
Speaker 2: to start with. So is that the key? Maybe ignoring
12:52
Speaker 2: some of the non-essential realities of the world so you
12:54
Speaker 2: can afford all the essential things? Medicine, food.
12:58
Speaker 1: That's a choice. Right.
12:59
Speaker 3: That's a choice that you guys made decades ago. And
13:02
Speaker 3: to be frank, it's probably whether you knew it or
13:04
Speaker 3: not at the time, that's probably what attracted you to
13:07
Speaker 3: each other way back when. Kind of a frugal mindset,
13:10
Speaker 3: responsible and so forth.
13:12
Speaker 1: Yeah.
13:12
Speaker 3: So I'm going to go out on a limb and
13:13
Speaker 3: guess that you probably don't have a great feel for
13:15
Speaker 3: exactly what your monthly budget is on a monthly basis
13:17
Speaker 3: because you don't have to. Therefore, you're not really worried
13:20
Speaker 3: about the streams of income or the piles of money.
13:23
Speaker 3: You have a gut feel that things are going to
13:25
Speaker 3: be OK.
13:25
Speaker 1: Is that a fair statement?
13:26
Speaker 2: Uh i don't have the gut feeling that things are
13:28
Speaker 2: going to be okay in the world now whether or
13:31
Speaker 2: not that i mean because so many things are out
13:33
Speaker 2: i'm talking about.
13:34
Speaker 1: The thomas estate is the thomas estate in.
13:36
Speaker 2: Good hands we're okay yes we are fine in the
13:38
Speaker 2: along those lines and you're right i did marry my
13:41
Speaker 2: wife my wife married me for the i think they're
13:44
Speaker 2: probably a pretty primary reason i grew up in delhi
13:47
Speaker 2: ergo i have genetic frugality in my veins and she
13:49
Speaker 2: grew up on a poor dairy farm and didn't have
13:52
Speaker 2: anything to start with. And so she found herself not
13:54
Speaker 2: in need of all those things. So anyway, it worked
13:55
Speaker 2: out really well, but I don't know, Brian, I guess,
13:59
Speaker 2: go ahead.
14:01
Speaker 3: No, and that's kind of what I'm saying. You guys
14:04
Speaker 3: didn't make a choice. I'm going to go ahead and guess.
14:05
Speaker 3: You didn't put spreadsheets side by side to see if
14:07
Speaker 3: you have matching beliefs on budgets.
14:10
Speaker 1: That's my point.
14:11
Speaker 3: You just kind of know it's rooted in your very
14:14
Speaker 3: being that we're just going to keep things. We're going
14:16
Speaker 3: to spend less than we make, period, end of story.
14:18
Speaker 3: And that is what has enabled you to build what
14:21
Speaker 3: you have, and you're not really worried about money. You
14:23
Speaker 3: notice the headlines because you know how the world works,
14:25
Speaker 3: and you recognize that there are big problems out there
14:28
Speaker 3: that we don't have that other people do.
14:30
Speaker 1: So I think what.
14:31
Speaker 3: People are feeling more and more intensely is the fact
14:33
Speaker 3: that these numbers aren't working. And there are a lot
14:35
Speaker 3: of people out there who maybe lived a little differently,
14:37
Speaker 3: a little– and I wouldn't even say extravagantly, but a
14:40
Speaker 3: little higher on the hog than the average.
14:42
Speaker 1: And now it's catching up a little bit.
14:43
Speaker 3: I have had two conversations in the last two weeks
14:45
Speaker 3: with people who bought the nice, fancy condo down in.
14:48
Speaker 1: Naples or on the west coast of Florida, whatever.
14:51
Speaker 3: And they have decided, you know what, this has been great,
14:53
Speaker 3: but we really can kind of see some storm clouds
14:55
Speaker 3: on the horizon. And when I say the horizon, I
14:57
Speaker 3: mean 15 years from now. They're starting to worry about
15:00
Speaker 3: what those costs of maintaining that property are going to
15:02
Speaker 3: be with regard to insurance and taxes and all that
15:05
Speaker 3: other stuff, not to mention just maintaining two properties. And
15:08
Speaker 3: they're realizing, you know what, we've had our fun. We
15:10
Speaker 3: really need to be a little more responsible. That's probably
15:12
Speaker 3: not something the Thomas family is going to decide because
15:14
Speaker 3: you chose to live differently years ago. These aren't folks
15:17
Speaker 3: who bankrupted themselves to buy it. They're in perfect financial
15:20
Speaker 3: condition now, but they're seeing that there is more risk
15:23
Speaker 3: than there used to be in the future. That's the
15:25
Speaker 3: whole point of forecasting things.
15:27
Speaker 2: I got you. Well, and part of the point of
15:29
Speaker 2: the article you relied on in talking about this, most
15:31
Speaker 2: telling finding for wealth management professionals, that will be you,
15:34
Speaker 2: the gap between financial preparation and life preparation. Why don't
15:38
Speaker 2: you take a minute and just break that reality down?
15:40
Speaker 2: Because that's what you do every day as a financial planner.
15:43
Speaker 3: Oh my gosh, yeah. I'm not a financial advisor. I'm
15:45
Speaker 3: an unlicensed marriage counselor because it's my job to kind
15:48
Speaker 3: of mitigate the stress that comes up when we realize
15:51
Speaker 3: what I just spoke about with, which is sometimes what
15:54
Speaker 3: we thought was going to be okay five, six, seven
15:56
Speaker 3: years ago when we first pulled the trigger on retirement
15:59
Speaker 3: may now not be okay because of, not because of investments, right?
16:02
Speaker 3: The markets goes up and down, but it's as long
16:03
Speaker 3: as we've been invested, we're still making money. But our expenses,
16:06
Speaker 3: speaking hypothetically, don't match up with what our income sources
16:10
Speaker 3: will be at that time. And I would much rather
16:12
Speaker 3: have people realize that now and make adjustments so that
16:16
Speaker 3: rather than go over the cliff and have to sell
16:18
Speaker 3: that extra property or reduce the lifestyle.
16:22
Speaker 1: Just at the drop of a hat because we plan
16:25
Speaker 1: to head for it. So it's just a lot less
16:27
Speaker 1: whiplash at that time.
16:28
Speaker 2: All right. Fair enough. And by the way, do you
16:30
Speaker 2: know about some property that's for sale in Indiana there
16:32
Speaker 2: that's just rural property, Brian?
16:35
Speaker 1: There's plenty of it out there.
16:36
Speaker 3: There are more and more websites that focus on property,
16:39
Speaker 3: not houses. But I'm telling you, those prices are up there.
16:42
Speaker 2: They have gone through the bloody roof, Brian James, because,
16:45
Speaker 2: you know, I did mention my wife grew up on
16:47
Speaker 2: a farm, and I think she has desires to maybe
16:49
Speaker 2: have a farm of her own someday. Hopefully that happens
16:53
Speaker 2: before we die of old age. Talk to your advisor.
16:56
Speaker 1: Make it happen.
16:57
Speaker 2: Hey, there he is. Bitcoin is back. Should you buy some? Brian,
17:01
Speaker 2: I didn't realize it had gone anywhere, but should you
17:04
Speaker 2: buy some? Since I don't know anything about Bitcoin, never have.
17:07
Speaker 2: Peace to God. Passes all human understanding. Brian James is
17:10
Speaker 2: going to break that one down for us. Coming up next,
17:11
Speaker 2: don't go away. It's 825.
17:14
Speaker 1: 55KRC.
17:15
Speaker 2: The Simply Station. 828.
17:19
Speaker 1: 55KRC.
17:19
Speaker 2: The Talk Station. One more here with Brian James from
17:22
Speaker 2: Money Monday from All Wealth Financials. Brian James. Brian Thomas
17:26
Speaker 2: is really clueless when it comes to Bitcoin and other cryptocurrencies.
17:31
Speaker 2: I just have never gotten over the whole idea that
17:33
Speaker 2: one moment in time, there was nothing in the world.
17:36
Speaker 2: And the next moment, you've got ones and zeros that
17:38
Speaker 2: represent this massive investment opportunity. Bitcoin at $ 80, 000 for the
17:45
Speaker 2: first time in more than three months. So it goes
17:47
Speaker 2: up and it goes down. It doesn't seem to have
17:49
Speaker 2: any connection with anything. But then again, from my perspective,
17:51
Speaker 2: how in the hell could it? It's Ether currency. But
17:54
Speaker 2: you know better than me on this, and now I
17:55
Speaker 2: guess there's that question, and then there's pivoting over, is
17:58
Speaker 2: this something we should all be invested in?
18:02
Speaker 1: Well, let's talk about why we're talking about it in
18:04
Speaker 1: the first place.
18:04
Speaker 3: So strong August rally.
18:06
Speaker 1: You're right.
18:07
Speaker 3: You and I haven't talked about Bitcoin in a long time.
18:08
Speaker 3: And then August came along. So it was up about 24%
18:11
Speaker 3: for August at one point. But it stalled just below 80,000,
18:15
Speaker 3: briefly got above 81, and right now somewhere around 78,000
18:18
Speaker 3: or so. So we can go ahead and call 80,000
18:20
Speaker 3: the psychological ceiling because the herds that were flocking into
18:24
Speaker 3: it during August have stopped. So for some reason, we've
18:26
Speaker 3: identified that's the new place. And we're not guessing at
18:30
Speaker 3: those reasons, of course.
18:31
Speaker 1: Some parts of this have to do with interest rates.
18:34
Speaker 1: Go ahead. You got a question?
18:35
Speaker 2: No, I was just going to say, it's like when
18:37
Speaker 2: the debt drops $ 40 trillion, people start paying attention to
18:39
Speaker 2: it for the first time ever. So $ 80, 000 for Bitcoin,
18:42
Speaker 2: kind of an analogy there.
18:44
Speaker 1: Exactly. That's correct. It got loud in August, right? It
18:47
Speaker 1: got loud. We all looked at it. That's why we're
18:48
Speaker 1: talking about it right now.
18:49
Speaker 3: But the difference here, I think, and to your point
18:52
Speaker 3: of why do people invest in it, it's another place
18:55
Speaker 3: to hide dollars that will move up and down. It's
18:58
Speaker 3: probably among all the things that you can invest in,
19:00
Speaker 3: it's the least predictable because we simply have the least
19:03
Speaker 3: experience investing. with any cryptocurrency as an asset regarding Fed policy,
19:08
Speaker 3: ETF flows, liquidity, interest rates, all that kind of stuff. Stocks,
19:13
Speaker 3: we've got hundreds of years worth of information knowing how
19:16
Speaker 3: investors react with regard to stocks in all those situations.
19:20
Speaker 3: But cryptocurrency, maybe 20, maybe not even that. But what
19:24
Speaker 3: it starts to look like, though, it It was originally
19:28
Speaker 3: pitched to investors as a sort of a niche asset
19:31
Speaker 3: that would be separated from the market, disconnected from the
19:35
Speaker 3: ups and downs of the market. But the reality has
19:37
Speaker 3: come that it's been treated like a speculative asset. And
19:40
Speaker 3: it really starts to seem to respond to the same
19:43
Speaker 3: risk on, risk off types of moves that are that
19:45
Speaker 3: we are normally associated with the technology market. So it's
19:48
Speaker 3: behaving more like the tech sector than an actual speculative
19:51
Speaker 3: commodity at the moment.
19:53
Speaker 2: Well, does that make it like a meme stock?
19:57
Speaker 1: Kind of.
19:57
Speaker 3: I mean, I think there's still there's still opportunity out
20:00
Speaker 3: there and there's still I mean, let's face it, when
20:02
Speaker 3: it goes up, it's because another chunk of the herd
20:04
Speaker 3: has gotten the idea that, hey, I need to put
20:06
Speaker 3: more money into this. And it's going to settle out as,
20:10
Speaker 3: you know, some kind of here's roughly what we should
20:12
Speaker 3: have in our portfolios. exposed to cryptocurrency, it's way, way
20:16
Speaker 3: early in the game to say, here's the job, here's
20:18
Speaker 3: the role it plays. I'm not a big fan of
20:21
Speaker 3: saying we need X percent in cryptocurrency because it just
20:23
Speaker 3: doesn't seem to make any sense.
20:24
Speaker 1: I'm not going to put enough in there.
20:26
Speaker 3: That a client is going to get exposed to significant risk.
20:29
Speaker 1: Frankly, we don't put anything in there at the moment.
20:31
Speaker 3: But even if we did, it would be at a
20:34
Speaker 3: client's request, and it wouldn't be so much that it's
20:36
Speaker 3: really going to change a life if it doubles or
20:39
Speaker 3: even triples overnight because clients who think from a financial
20:42
Speaker 3: planning standpoint really, really, really get.
20:44
Speaker 1: Upset when something drops by 50%, and they don't care
20:47
Speaker 1: that it could go up by 200%.
20:48
Speaker 2: Well, are there crypto funds that sort of have– because
20:52
Speaker 2: let's face it. How many cryptocurrencies are there out there
20:54
Speaker 2: in the world? I get the impression there's a lot
20:56
Speaker 2: of them. Bitcoin just happens to be the best known.
20:59
Speaker 3: Yeah, I mean, who knows? It's innumerable at this point
21:02
Speaker 3: because anybody can create one, right? And for a while,
21:05
Speaker 3: we had our people who were famous for 15 minutes.
21:09
Speaker 3: The go-to move was to create a cryptocurrency based off
21:13
Speaker 3: of whatever the little thing they did in their lives
21:14
Speaker 3: that got them some attention. That seems to have died down,
21:17
Speaker 3: but those currencies are still out there. We're talking, yes,
21:20
Speaker 3: about the bigger ones, the larger ones that actually do
21:23
Speaker 3: participate in the economy. So, yeah, you can buy, of course,
21:26
Speaker 3: you can buy Bitcoin on the coin exchanges such as
21:29
Speaker 3: Coinbase and so forth. But also it's becoming a little
21:31
Speaker 3: more mainstream in terms of now you can buy Bitcoin
21:34
Speaker 3: via exchange traded funds. So it looks and feels a
21:37
Speaker 3: little more like a regular investment. And that is how
21:40
Speaker 3: institutions are starting to put money in. And so spot
21:43
Speaker 3: Bitcoin ETFs are still attracting meaningful institutional money. But the
21:47
Speaker 3: pace of those inflows has slowed. $ 925 million for the
21:51
Speaker 3: week ending August 28th. That is down from roughly $ 1. 9
21:56
Speaker 3: billion the previous week. So $ 2 billion one week, down 50%
22:00
Speaker 3: just over the course of a week. So yes, those
22:02
Speaker 3: things are out there, but they do respond just like stocks.
22:05
Speaker 2: You mean the exchange traded funds go up and down
22:07
Speaker 2: like that?
22:08
Speaker 1: Oh, yeah, that's what I mean. It's exactly what I mean.
22:10
Speaker 3: So you can easily buy it in any investment account nowadays.
22:13
Speaker 3: It's a lot easier than it used to be. You
22:14
Speaker 3: didn't have to get into the whole Coinbase world, digital
22:17
Speaker 3: wallets and all that. You know, now it's a lot easier.
22:19
Speaker 3: But again, even the institutions will regulate the amount of
22:23
Speaker 3: money that they're putting in there on a weekly basis.
22:26
Speaker 2: Well, I suppose to some degree, and again, I'm not
22:28
Speaker 2: overly familiar with the concept of mining if they still
22:31
Speaker 2: do that, mining for cryptocurrency. I suppose AI will have
22:33
Speaker 2: some connection with that as well.
22:35
Speaker 1: Oh, for sure.
22:37
Speaker 3: I know people who were– so 15 years ago, people
22:40
Speaker 3: would build expensive computer rigs and stick them in a closet.
22:43
Speaker 3: It had to be ventilated because they would get so hot.
22:45
Speaker 3: Those were crypto mining devices. But now it costs so
22:48
Speaker 3: much in electricity, and you're so unlikely to actually make
22:52
Speaker 3: enough that it just doesn't make any sense. But now–
22:54
Speaker 3: so now it's all about scale. A lot of these
22:56
Speaker 3: data centers out there– This is what they're doing. They've
22:58
Speaker 3: got the money to build scale. And so they're the
23:00
Speaker 3: ones doing the mining. And let's all remember, there is
23:02
Speaker 3: a finite point in the future where you can't mine
23:04
Speaker 3: Bitcoin anymore. So what will happen to those data centers,
23:08
Speaker 3: those investments remains.
23:09
Speaker 1: To be seen.
23:10
Speaker 3: But yes, it is not nearly as profitable now to
23:12
Speaker 3: do it as it was in the very.
23:14
Speaker 1: Beginning of all this.
23:15
Speaker 2: OK, now we're talking about cryptocurrency as an investment risk.
23:19
Speaker 1: It is.
23:20
Speaker 2: I mean, it's going to go up. It's going to
23:21
Speaker 2: go down. Value cryptocurrency goes up and down. That's just
23:23
Speaker 2: like a stock would. How where are we in terms
23:26
Speaker 2: of using Bitcoin as an actual currency? Because, you know,
23:29
Speaker 2: I'm old school. I think of a dollar has a
23:31
Speaker 2: value and get out of the store. It prices 50 cents.
23:34
Speaker 2: I get 50 cents back. But if crypto is $ 80, 000
23:37
Speaker 2: today and it's $ 20, 000 tomorrow, notably volatility, how does that
23:40
Speaker 2: act as a an efficient currency? And how do you
23:42
Speaker 2: end up calculating the cost of a good or service
23:44
Speaker 2: if you're there to buy with it?
23:46
Speaker 3: Well, I think you don't because nobody's really doing that
23:48
Speaker 3: right now at any kind of significant level. Remember, not
23:52
Speaker 3: that long ago, I believe it was Tesla, maybe Google,
23:55
Speaker 3: there were companies out there saying, yes, we will accept cryptocurrency.
23:59
Speaker 3: We will accept Bitcoin as payment for our goods and services.
24:02
Speaker 3: This is maybe seven, eight years ago when it was
24:05
Speaker 3: a bigger, flashier headline. But they quietly stopped doing that
24:10
Speaker 3: because a publicly traded company can't afford to have its
24:13
Speaker 3: accounts receivable. Money that people owe me, I can't have
24:16
Speaker 3: that swinging by 10%, 20% on a quarterly basis just
24:19
Speaker 3: because the currency I've chosen to accept is bouncing all
24:21
Speaker 3: over the place. And let's not forget, El Salvador in
24:25
Speaker 3: 2021 made Bitcoin legal tender, and they were going to
24:27
Speaker 3: be the Bitcoin capital of the world. And that quietly
24:30
Speaker 3: has basically failed and hasn't gone anywhere at all. The
24:33
Speaker 3: goal there was to bring these unbanked people that they
24:35
Speaker 3: have a lot of folks without bank accounts in El Salvador,
24:38
Speaker 3: and they wanted to kind of give them a solution.
24:41
Speaker 3: And of course, 2022 happened, Bitcoin got crushed. And El
24:45
Speaker 3: Salvador is not in a position to be able to
24:46
Speaker 3: handle that kind of thing. So this is why you
24:49
Speaker 3: are not hearing any more about El Salvador and Bitcoin,
24:51
Speaker 3: because it really didn't get off the ground.
24:52
Speaker 1: Right.
24:53
Speaker 2: And that's exactly the direction I would have called it
24:55
Speaker 2: if I had been asked ahead of time how it
24:57
Speaker 2: was going to work out for all the reasons I
24:58
Speaker 2: just pointed out.
24:59
Speaker 3: I bet if you listen to your recordings then, I'll
25:02
Speaker 3: bet you did say that.
25:04
Speaker 2: I've said it a bunch of times over the years, man.
25:06
Speaker 2: It's like, because... For me, cryptocurrency is like the peace
25:10
Speaker 2: of God. It passes all human understanding, and I'm not
25:12
Speaker 2: going to get involved. Brian James, my portfolio is not
25:15
Speaker 2: at risk for crypto. I appreciate what you do each
25:17
Speaker 2: and every week. I'm here on the 55KRC Morning Show.
25:19
Speaker 2: We'll do Money Monday next week again. Have a great
25:21
Speaker 2: week between now and then, my friend.
25:23
Speaker 1: You too. Thanks for the microphone. We will talk to
25:25
Speaker 1: you in a week.
25:25
Speaker 2: I enjoy it. 836-55KRC, the talk station. Feel free to call.