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Are US stocks in bubble territory? · The Financial Exchange Show

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Speaker 1: and Paul.
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Speaker 2: Lane, Chuck, Paul and Tucker with you today and markets
1:13
Speaker 2: looking to try to recover some of their losses from yesterday,
1:18
Speaker 2: which was not a great day in equity markets overall.
1:22
Speaker 2: You had stocks and bonds sliding over the course of
1:26
Speaker 2: the day, and the headline in the Bloomy Berg is
1:31
Speaker 2: stocks and bonds slide on Trump tariff worries. And I'm
1:35
Speaker 2: just not quite sure that that's actually you know the
1:38
Speaker 2: story here. Quite honestly, no one knows exactly why everyone
1:42
Speaker 2: decides to buy or sell in any given day. So
1:44
Speaker 2: more often than not, this is like giving a bunch
1:46
Speaker 2: of monkeys a bunch of numbers and saying, hey, figure
1:50
Speaker 2: out what the meaning is behind these, Like sometimes a
1:53
Speaker 2: day is just a day. I was looking at this
1:56
Speaker 2: because I review every trading day at the start of
1:58
Speaker 2: the next one, just to kind of see what was
2:00
Speaker 2: going on and why things were moving. And the dip
2:03
Speaker 2: that we started to see, both in equity markets and
2:05
Speaker 2: on the bond side of things started at ten am,
2:08
Speaker 2: and at ten am youwsday, we had two pieces of
2:10
Speaker 2: data that were released. We had the ISM services data
2:14
Speaker 2: which came in stronger than expected and also had a
2:17
Speaker 2: prices paid component that was hotter than the previous reading.
2:20
Speaker 2: And then we also had the jolt support the job
2:23
Speaker 2: openings in Labor Turnover Survey report that while the numbers
2:26
Speaker 2: for hiring, quits, layoffs, things like that are all continuing
2:30
Speaker 2: to show, you know, kind of muted numbers, the headline
2:33
Speaker 2: number four job openings went up in last month was
2:36
Speaker 2: revised up, and so both those reports kind of indicated strength,
2:39
Speaker 2: which is why bond sold off in my opinion. And
2:43
Speaker 2: then subsequently, the saying that I always have enjoyed is, hey,
2:47
Speaker 2: what's going to happen to investors when they find out
2:49
Speaker 2: that there are bonds in their stocks? Because ultimately bond
2:52
Speaker 2: prices in bond yields do influence stocks as well. So
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Speaker 2: some of this could be Trump terriff worry, some of
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Speaker 2: it might not be. I really don't know, because we
3:02
Speaker 2: don't know anything concrete yet, and we're not going to
3:05
Speaker 2: for at least another twelve days. We're just gonna have
3:09
Speaker 2: to kind of wait and see and get the daily
3:11
Speaker 2: reports of you know, yesterday Washington Post saying hey, it's
3:14
Speaker 2: gonna be or maybe it was Monday, it's gonna be
3:17
Speaker 2: a you know, more targeted tariff approach. Then you know,
3:20
Speaker 2: Trump comes out and says no, like the Washington Post
3:23
Speaker 2: knows nothing. Today you get CNN reporting, Hey, the Trump
3:26
Speaker 2: administration may pursue some kind of economic security measure to
3:32
Speaker 2: you know, be able to do this. No one knows anything.
3:35
Speaker 2: Everyone's just mindlessly speculating. And I prefer not to speculate
3:39
Speaker 2: other than hey, he's told us he's going to use tariffs.
3:43
Speaker 2: Believe him when he says it. And we don't know
3:45
Speaker 2: the exact implementation yet, and let's try not to panic,
3:49
Speaker 2: you know, with every story that comes out each and
3:53
Speaker 2: every day, your thoughts fall.
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Speaker 3: Yeah, I'm not gonna try to really parse through what
3:57
Speaker 3: went on off the markets. I think we've gotten into
3:59
Speaker 3: a cycle where it seems like we're always really eager
4:02
Speaker 3: to try and assess what happened yesterday. I mean, it
4:05
Speaker 3: was off one percent, and you know hate that that
4:07
Speaker 3: happens sometimes.
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Speaker 2: To me, it's you still.
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Speaker 3: Have a market year to date, that's what up, you know,
4:13
Speaker 3: zero point four to four percent. So it's kind of
4:15
Speaker 3: ebbed and flowed a little bit of weakness float over
4:18
Speaker 3: the course of three days. No the last month or so, okay,
4:20
Speaker 3: last month.
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Speaker 2: You know, it just.
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Speaker 3: Really hasn't been anything that is a huge takeaway that
4:27
Speaker 3: I have for any of the market activity. I am
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Speaker 3: interested to talk to you talk about the what's happened
4:32
Speaker 3: to the US ten year treasury because to me, that's
4:34
Speaker 3: been the most significant item of note, you know, year
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Speaker 3: to date. Obviously, like you said, let's go that many
4:38
Speaker 3: days into the year. But yeah, that's my biggest takeaway
4:41
Speaker 3: so far.
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Speaker 2: Let's go, let's go there, because there's some meat there
4:43
Speaker 2: and there's some really interesting stuff that I want to
4:46
Speaker 2: talk about. So tenure US treasury, if you look at
4:49
Speaker 2: where it sits right now at this very moment, it's
4:51
Speaker 2: at four point six eight three percent. Uh. Back in
4:55
Speaker 2: September when the Fed started cutting, it was a three
4:57
Speaker 2: point six o three. So we've now cleared a one
4:59
Speaker 2: percent rise in the US tenyure treasury since that point.
5:04
Speaker 3: Three four months.
5:05
Speaker 2: Yeah, and even you know, in late after the election,
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Speaker 2: you saw yields rise up to about four and a
5:11
Speaker 2: half and then they came back in down to around
5:13
Speaker 2: four point one. And now you've seen again kind of
5:15
Speaker 2: another you know, almost three quarters of a percent rise
5:19
Speaker 2: in the last four weeks now. And the interesting thing
5:23
Speaker 2: about this is everyone this is really an area where
5:28
Speaker 2: everyone likes to be like, well, I know exactly what's
5:32
Speaker 2: going on with with the bonds last year at around
5:37
Speaker 2: not last year, sorry, about fifteen months ago now. In
5:39
Speaker 2: October of twenty three, he had a case where the
5:42
Speaker 2: tenure treasury got up to right around five percent, and
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Speaker 2: everyone in their grandmother was saying, well, it's because the
5:48
Speaker 2: United States has too much debt and people are finally
5:50
Speaker 2: paying attention to YadA YadA and lo and behold over.
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Speaker 2: You know, the next nine months, the ten year treasury
5:56
Speaker 2: yield fell from five percent to three point six. Paul
5:59
Speaker 2: was that because of the US suddenly got its fiscal
6:01
Speaker 2: house in order and people said, hey, we've got to
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Speaker 2: do something about this deficit. I wish that was the case,
6:07
Speaker 2: but it's just not. And so like this is why
6:10
Speaker 2: some of the stories that people tell about the bond
6:12
Speaker 2: market are just pure poppycock, like it's just hot garbage.
6:15
Speaker 2: Now it's not say the US deficit doesn't matter, but
6:18
Speaker 2: just well, look if people were really selling US treasuries
6:22
Speaker 2: because they were concerned about the debt, well, when the
6:25
Speaker 2: deficit expanded by a couple trillion dollars last year, yield
6:29
Speaker 2: should have gone up higher than five percent, and instead
6:32
Speaker 2: they were at three point six as recently as September.
6:35
Speaker 2: So now you've got everyone saying, well, yields are moving
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Speaker 2: up because there's too much debt, and there's also concerns
6:41
Speaker 2: about terariff implementations that could push inflation higher. And ultimately
6:47
Speaker 2: I come back to hey, no one really knows why
6:51
Speaker 2: bonds move on any particular day, week, or whatever. Like, Yes,
6:54
Speaker 2: it could be this, that, or any of a million things,
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Speaker 2: and it's some of all those. Here's what I do
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Speaker 2: know is that long term, when you look at yields
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Speaker 2: on government bonds for countries that control their own currency,
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Speaker 2: the single greatest predictor of where those yields are going
7:14
Speaker 2: to go is nominal GDP and where GDP goes And
7:18
Speaker 2: so what I do find interesting about this recent move
7:22
Speaker 2: is back in or early December, GDP now, which is
7:28
Speaker 2: run by the Atlanta Fed, was projecting that Q three
7:31
Speaker 2: GDP was going to grow at three point four percent,
7:35
Speaker 2: and as of yesterday's update, that has fallen from three
7:39
Speaker 2: point four percent to two point seven. So, in effect,
7:41
Speaker 2: the data that we've gotten over the last month has
7:44
Speaker 2: shown a weaker growth pattern that we did over the
7:46
Speaker 2: previous part of Q four. So what's weird about this
7:51
Speaker 2: and where the disconnect is in my head? And what
7:54
Speaker 2: I find interesting in trying to unwrap this is the
7:57
Speaker 2: data we've been getting is showing growth slowing down a
8:00
Speaker 2: little bit, not a ton, not like recession. Like not
8:03
Speaker 2: everything has to be like recession or the best economy. Ever,
8:05
Speaker 2: sometimes it can just be okay. But the data has
8:07
Speaker 2: been worsening a little bit, and yet yields have been
8:10
Speaker 2: moving up, and that's not a relationship that you normally see.
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Speaker 2: And so I do find this interesting in terms of, well,
8:17
Speaker 2: it needs to resolve one way or the other. Either
8:20
Speaker 2: the growth data is gonna have to pick up or
8:24
Speaker 2: yields are gonna have to come down. Now, this might
8:26
Speaker 2: take like three to six months to play out. It's
8:29
Speaker 2: not saying it's gonna happen instantly, but these divergences don't
8:32
Speaker 2: last forever, and that's something that again, it's gonna have
8:35
Speaker 2: to resolve at some point.
8:36
Speaker 3: Yeah, I think that's a really good point to make.
8:38
Speaker 3: And to me, a point that I'd make is just
8:40
Speaker 3: the correlation between the equity markets and the bond yields.
8:43
Speaker 3: You know, like you said, we've seen bond yields tick
8:46
Speaker 3: up close to a full percent over the course of
8:48
Speaker 3: the last three or four months, and you've have an
8:50
Speaker 3: equity market that typically when you see interest rates rising
8:54
Speaker 3: like that on the US tenure you know, harken back
8:56
Speaker 3: to twenty twenty two, equity markets were being up significantly
8:59
Speaker 3: because you're typically when you're assessing an investment, always comparing
9:03
Speaker 3: the risk free yield of buying a US security, a
9:07
Speaker 3: ten year or two year security, whatever the case may be,
9:10
Speaker 3: versus the idea of the future cast flows of a
9:13
Speaker 3: particular company. And typically when you see interest rates rise
9:16
Speaker 3: the way that you have, you see a bit of
9:18
Speaker 3: a sell off on the equity markets. And while we
9:20
Speaker 3: may talk about it being down, you know, one percent yesterday,
9:23
Speaker 3: So over the course of the last couple months, there
9:25
Speaker 3: hasn't been a tremendous amount of market volatility, and we've
9:28
Speaker 3: had some really strong equity months in there.
9:31
Speaker 2: So it is.
9:32
Speaker 3: Interesting to monitor, and also you have the relationship between
9:35
Speaker 3: It's important for Chuck and I probably to contextualize that
9:38
Speaker 3: when we're speaking now, we're speaking about the US tenure Treasury,
9:41
Speaker 3: which the point check made before this idea, no one
9:43
Speaker 3: really knows exactly what is moving it. This is very
9:46
Speaker 3: different from the Federal Reserve, and when we talk about
9:48
Speaker 3: interest rate cycles and meetings and all that stuff, that
9:51
Speaker 3: is much more the shorter end of the curve that
9:54
Speaker 3: the Federal Reserve has control over, so important to separate
9:57
Speaker 3: those two concepts in our mind. The US tenure is
9:59
Speaker 3: just kind of free flowing as it goes. The US
10:02
Speaker 3: two year treasury is something that you can really at
10:05
Speaker 3: least see very strong correlation between what the Fed says
10:08
Speaker 3: and does and how that interacts. And what we've also
10:10
Speaker 3: seen on the relationship between the two year and the
10:12
Speaker 3: tenure is it was an inverted relationship, meaning that you
10:16
Speaker 3: could get a higher rate of interest on the two
10:18
Speaker 3: year versus the tenure. It now is at a point
10:20
Speaker 3: where we're sitting at about four point two eight percent
10:22
Speaker 3: on the two year and about four point seven on
10:25
Speaker 3: the ten years. So to me, it's just interesting to
10:27
Speaker 3: note what we've seen on the bond market, something that
10:29
Speaker 3: we probably haven't talked about a lot recently, but a
10:32
Speaker 3: subject that is worth revisiting as we head into twenty
10:35
Speaker 3: five here.
10:36
Speaker 2: Now. Naturally, during something like this where again yields are
10:40
Speaker 2: going up and it's unclear exactly why, and people were
10:42
Speaker 2: talking about well, it's this. You naturally get the people
10:45
Speaker 2: coming out saying, hey, this is you know, a sign
10:48
Speaker 2: that people are finally losing faith in the US dollar.
10:52
Speaker 2: Let's take a quick break. When we come back, talk
10:55
Speaker 2: about whether or not that's actually happening.
10:58
Speaker 4: Well.
10:59
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12:10
Speaker 2: Talking about what's going on in the US bond market
12:13
Speaker 2: right now, yields have continued to move up on the
12:16
Speaker 2: long end of the yield curve, So your ten year,
12:18
Speaker 2: twenty or thirty year bond yields have continued to move up.
12:21
Speaker 2: The tenure right now is footing right around four point
12:24
Speaker 2: seven percent. And so one of the questions that comes
12:27
Speaker 2: up as part of this is, you know, people will say, hey,
12:30
Speaker 2: that's because you know, the US has too much debt,
12:32
Speaker 2: that's why yields are moving up, and people are scared,
12:35
Speaker 2: so they're moving away from you know, owning US debt
12:37
Speaker 2: and the US dollar. And quite honestly, that's not true
12:41
Speaker 2: in terms of what's happening right now. And there is
12:43
Speaker 2: a specific phenomenon that you do see where people really
12:46
Speaker 2: start to get concerned about a currency. But the concern
12:49
Speaker 2: that you have. And I'm gonna use the UK as
12:52
Speaker 2: as my counter example here, because the UK, in my opinion,
12:56
Speaker 2: is seeing some of these concerns and has previously. Uh, Tucker,
13:00
Speaker 2: can we get the time machine fired up? I know
13:03
Speaker 2: it takes a little while to get the fux capacitor going,
13:05
Speaker 2: but we're going to take a trip back to twenty
13:08
Speaker 2: twenty two. All right, We're all sitting here in twenty
13:14
Speaker 2: twenty two right now. Bill Belichick's still the head coach
13:18
Speaker 2: of the New England Patriots. The Celtics have yet to
13:21
Speaker 2: win their eighteenth world title, and Liz Truss is the
13:26
Speaker 2: Prime Minister of Great Britain. And Liz trust, if you remember,
13:29
Speaker 2: her government put out a budget that just got absolutely shredded.
13:34
Speaker 2: And what we saw UK government bonds, long term bonds,
13:37
Speaker 2: the ten year UK they call it the guilt. Gilt
13:41
Speaker 2: not guilt, spiked right around this time, from about two
13:46
Speaker 2: percent up to about four and a half percent. Now,
13:50
Speaker 2: normally when your bond yields are spiking, one of the
13:55
Speaker 2: things that you also see is that your currency tends
13:58
Speaker 2: to strengthen because higher yields investors from other parts of
14:02
Speaker 2: the world, and so their money flocks to your currency.
14:05
Speaker 2: So the general thing that you see is yields go
14:08
Speaker 2: up and your currency strengthens. The pound during this same
14:13
Speaker 2: time went from being a dollar twenty per pound to
14:19
Speaker 2: under a dollar ten, so the pound weekend versus the
14:22
Speaker 2: dollar by about ten percent at the same time that
14:25
Speaker 2: the currents that the bond yields were moving up. This
14:28
Speaker 2: is bad and this is what you see when there
14:30
Speaker 2: is more of a crisis of confidence. You're seeing the
14:33
Speaker 2: same thing. By the way, in the pound and UK
14:36
Speaker 2: bonds right now, not to the same magnitude. Tenure UK
14:40
Speaker 2: bond has gone from about a three point seventy five
14:43
Speaker 2: up to four point seventy five in the last few months.
14:47
Speaker 2: The pound has weakened from a dollar thirty five a
14:50
Speaker 2: pound down to a dollar twenty three, So again similar
14:54
Speaker 2: type of move here. Compare that to the US, where
14:58
Speaker 2: we talked in the first segment. Ten yere t over
15:00
Speaker 2: the last three months has gone from three sixty up
15:06
Speaker 2: to you know, four seventy identical moves, about a one
15:10
Speaker 2: percent move there. The dollar, on the other hand, and
15:14
Speaker 2: this is against like a weighted basket of currencies. It's
15:16
Speaker 2: called the US Dollar Index because it's measured against a
15:19
Speaker 2: whole bunch of currencies has gone from ninety nine and
15:22
Speaker 2: change to one oh nine and change, so the dollar
15:26
Speaker 2: has strengthened during this time. It's the exact opposite of
15:29
Speaker 2: what you're seeing in the UK, where yields are going
15:32
Speaker 2: up there and the pound is weakening. Here. You got
15:36
Speaker 2: yields up and dollar up. That's what you would expect
15:39
Speaker 2: to see, and it's actually a comforting thing that you
15:41
Speaker 2: do see that. If you saw what was going on
15:42
Speaker 2: in the UK, that's where you kind of sit there
15:45
Speaker 2: and say, hey, our yields are going up, but no
15:47
Speaker 2: one's buying our currency. What what's the problem here? What gives?
15:52
Speaker 2: That's the kind of stuff that makes you know, governments
15:55
Speaker 2: very nervous and makes them concerned about how they're going
15:58
Speaker 2: to pay their bills in the future and stuff like that.
16:00
Speaker 2: This is exactly what you would want to see if
16:03
Speaker 2: yields are rising. So no, my answer is, hey, hey,
16:06
Speaker 2: this isn't you know, some kind of US dollar death spire. No,
16:11
Speaker 2: there's nothing of that sort. In fact, it's the opposite.
16:14
Speaker 2: You're seeing flows in two dollars from other currencies while
16:18
Speaker 2: yields have been moving up. Whether yields continue to move
16:21
Speaker 2: up or reverse. Again, we've talked about it. Hey, no
16:24
Speaker 2: one exactly knows, but this is what's going on here
16:28
Speaker 2: right now in terms of some of these questions, Paul,
16:30
Speaker 2: you want to talk energy, stocks, housing or providence. Let's
16:38
Speaker 2: talk stocks, Okay? Is the US stock market in bubble territory?
16:42
Speaker 2: That's the question posed by the Financial Times? How do
16:45
Speaker 2: they answer that? In about two and a half pages.
16:49
Speaker 3: Basically, this particular author goes on to say that he
16:55
Speaker 3: doesn't he what's the name of this gentleman, Yeah, Howard
16:58
Speaker 3: Mark's here that he doesn't from Howard Marks.
17:00
Speaker 2: By the way, smart guy runs a big old hedge
17:03
Speaker 2: fund and has made himself a whole lot of money
17:04
Speaker 2: in his career.
17:05
Speaker 3: Right, he is more focused on looking for highly irrational
17:09
Speaker 3: exuberance rather than scrutinizing the valuation parmeers that we talk
17:13
Speaker 3: about so frequent on the show. Whether it's price to
17:15
Speaker 3: earnings we were talking about the inversion of that yesterday,
17:19
Speaker 3: the earnings yield in the S and P five frontred.
17:21
Speaker 3: However you look at them. We've talked about this a
17:23
Speaker 3: million times. The market looks expensive. But what's laid out
17:26
Speaker 3: here is this idea that anytime you're looking for investors
17:32
Speaker 3: who are just saying there's no price too high. That's
17:34
Speaker 3: when you know bubble's become concerning. Ultimately, what's different this time,
17:40
Speaker 3: which is used so frequently in these conversations, is that
17:43
Speaker 3: you know there are earnings and revenue that substantiates some
17:47
Speaker 3: of the increase on the Magnificent seven that get talked
17:50
Speaker 3: about so frequently. Here, there's certainly some cautionary signs out
17:53
Speaker 3: there today with some of the optimism behind the enthusiasm
17:57
Speaker 3: for AI. But ultimately, from a valuation perspective, we know
18:02
Speaker 3: the market is rich at this point.
18:04
Speaker 2: Yeah, I think that's all you could say. And rich
18:06
Speaker 2: markets can continue to get richer in a number of cases,
18:10
Speaker 2: most notably the Internet bubble, I mean the irrational exuberance
18:14
Speaker 2: speech from what that was his name, Greenspan. It's back
18:18
Speaker 2: in nineteen ninety seven. Markets went out a rally for
18:21
Speaker 2: another three years before they finally went splat. And I
18:26
Speaker 2: don't know if we're in nineteen ninety seven right now.
18:27
Speaker 2: I don't know if we're in two thousand. I don't
18:29
Speaker 2: know if we're in nineteen ninety two. We took the
18:32
Speaker 2: time machine back to twenty twenty two. But who knows
18:34
Speaker 2: where we are now, we're kind of just hopping all
18:35
Speaker 2: around time. I guess Exxon predicting a seven hundred million
18:39
Speaker 2: dollar hit to profits from lower oil prices, and they're
18:43
Speaker 2: not the only ones talking about this. Shell also warning
18:46
Speaker 2: of lower integrated gas earnings and cutting their production guidance
18:50
Speaker 2: as well.
18:51
Speaker 3: Yeah, Shell also had an issue where they were dealing
18:54
Speaker 3: with a one point three billion dollar hit due to
18:56
Speaker 3: some emission permit payments in Germany in the US that's
19:00
Speaker 3: going to negatively impact their upcoming Q four numbers. Exceon
19:03
Speaker 3: on the news was trading I believe off about two
19:06
Speaker 3: percent at the moment percent and a half. It's been
19:10
Speaker 3: a tough last quarter or so for the energy sector. Here,
19:13
Speaker 3: let's take.
19:14
Speaker 2: A quick break here when we come back, a couple
19:18
Speaker 2: things coming up. First, we got Wall Street Watch, and
19:21
Speaker 2: then after that we are joined by Todd Lutsky for
19:24
Speaker 2: his first appearance of twenty twenty five. Your chance to
19:28
Speaker 2: ask Todd your state planning questions is coming up after this.
19:43
Speaker 1: Like us on Facebook and follow us on Twitter at
19:45
Speaker 1: TFE show. Breaking business news is always first right here
19:50
Speaker 1: on the Financial Exchange Radio Network. Time Now for Wall
19:55
Speaker 1: Street watch a complete look at what's moving market so
19:59
Speaker 1: far today right here on the Financial Exchange Radio network.
20:04
Speaker 5: Well markets are extending their losses from yesterday's steep decline
20:10
Speaker 5: in the tech sector as investors monitor rising bond yields
20:13
Speaker 5: and also wait FED meeting minutes due out this afternoon
20:16
Speaker 5: at two o'clock. Right now, the Dow is off by
20:19
Speaker 5: about a third of a percent, or one hundred and
20:21
Speaker 5: forty eight points, SMP five hundred is down by three
20:24
Speaker 5: tenths of a percent or seventeen points, and the Nasdaq
20:27
Speaker 5: is down by three tenths of a percent as well,
20:29
Speaker 5: fifty nine points, Russell two thousand selling off by one
20:32
Speaker 5: and two thirds of a percent. Ten Yere treasureeled is
20:35
Speaker 5: flat at the moment a four point six eight percent,
20:38
Speaker 5: and crude oil dipping into negative territory trading just above
20:42
Speaker 5: seventy four dollars a barrel. Some news out of the
20:46
Speaker 5: energy sector this morning, after Exon Moibiles said it expects
20:49
Speaker 5: falling oil prices to drag on fourth quarter earnings. Shell
20:53
Speaker 5: also warned of significantly lower earnings in its gas division
20:56
Speaker 5: and cut production guidance across its oil and gas units.
21:00
Speaker 5: Exon Mobile down by one and a half percent, while
21:03
Speaker 5: Shell shares are down by two percent meanwhile after its
21:08
Speaker 5: six percent skid yesterday, and the tech sell off and
21:10
Speaker 5: video shares are edging by about a quarter percent higher. Elsewhere,
21:15
Speaker 5: Nova Nordisk was upgraded to buy from neutral at ubs,
21:18
Speaker 5: where the firm said it was well placed to continue
21:21
Speaker 5: to benefit from the high demand for its weight management
21:23
Speaker 5: medications near term. That stock up by two percent. Shares
21:27
Speaker 5: in the country's largest egg producer, Calmaine Foods up by
21:31
Speaker 5: over six percent after the company posted a stronger than
21:34
Speaker 5: expected quarterly profit. The bird flu outbreak resulted in higher
21:38
Speaker 5: egg prices, and shares in FanDuel parent company Flutter Entertainment
21:43
Speaker 5: up by one percent after the sports gambling company lowered
21:47
Speaker 5: its financial estimates for twenty twenty four, saying the NFL
21:50
Speaker 5: season saw the highest rate of favorites winning in nearly
21:55
Speaker 5: twenty years. I'm Tucker Silva and that's Wall Street.
21:57
Speaker 1: Watch is Ask Todd on the Financial Exchange Radio Network.
22:03
Speaker 1: If you have an existing estate plan or in the
22:05
Speaker 1: market for one, Todd Letsky is here to answer your
22:08
Speaker 1: questions and help you plan for a later life. Ask
22:10
Speaker 1: Todd is presented by Cushing and Dolan, serving Massachusetts and
22:14
Speaker 1: New England for more than thirty five years, helping families
22:17
Speaker 1: with a state and tax planning, Medicaid planning, and probate law.
22:20
Speaker 1: Visit Cushingdolan dot com. Now here's Todd Lutsky.
22:25
Speaker 2: Todd Lotsky from the law firm of Kushigan Dolan joins
22:28
Speaker 2: us now on the show for Ask Todd. This is
22:31
Speaker 2: your chance to ask Todd your estate planning questions. First
22:35
Speaker 2: one of these that we've done in twenty twenty five.
22:38
Speaker 2: So we got the phone line open for you eight
22:41
Speaker 2: eight eight to zero five two two sixty three. Get
22:44
Speaker 2: calin if you've gotten a state planning question for Todd. Again,
22:47
Speaker 2: we've got limited time to be able to actually take
22:50
Speaker 2: those calls, so make sure you get in line early
22:52
Speaker 2: at eight eight eight to zero five two two six three.
22:56
Speaker 2: That number again is eight eight eight two zero row
23:00
Speaker 2: five two two six three. Mister Lutsky, how are you
23:04
Speaker 2: doing today?
23:05
Speaker 6: I am doing great. Hope you're enjoying the new year.
23:08
Speaker 2: How are you doing fantastic as well? I saw someone
23:11
Speaker 2: Did you see the story about the guy who got
23:13
Speaker 2: arrested for stealing the balloons?
23:16
Speaker 6: Arrested for stealing balloons. No, what happened to.
23:19
Speaker 2: Well, police held him for a while and then let
23:21
Speaker 2: him go. So what are you gonna do? But in
23:25
Speaker 2: any case, Todd, let's talk a little bit about planning
23:28
Speaker 2: as it relates to long term care costs. Specifically, I
23:32
Speaker 2: want to talk about the five year lookback period. When
23:36
Speaker 2: did that five year lookback period for Medicaid planning go
23:40
Speaker 2: into effect? Originally?
23:42
Speaker 6: Oh, it's just this really takes us back a while.
23:46
Speaker 6: It initially was three years, and many people remember it
23:49
Speaker 6: as three years, but there was always some confusion with DA.
23:53
Speaker 6: Even back in two thousand and six, I believe the
23:57
Speaker 6: Deficit Reduction Act came out and made every transfer five years. Now.
24:03
Speaker 6: Remember what people didn't realize was before two thousand and six,
24:08
Speaker 6: the look back period for transferring assets directly to family
24:14
Speaker 6: members individuals was three years, but it was always five
24:19
Speaker 6: years transferring assets to a trust. Now, since two thousand
24:23
Speaker 6: and six, it's five years whether you transfer the asset
24:27
Speaker 6: directly to an individual or to a trust. That was
24:31
Speaker 6: really the big change. But you know, we always got
24:34
Speaker 6: to keep in mind that five years is five years.
24:36
Speaker 6: And now again, I never thought it was a great
24:39
Speaker 6: idea to just give things to a child anyway. So
24:43
Speaker 6: I would never have done it to avoid the five
24:46
Speaker 6: year waiting period, even when you could and it was
24:48
Speaker 6: three years, just because there's so many negatives from taxes
24:53
Speaker 6: to control to you know, just overall probate issues, nursing homes.
25:01
Speaker 6: I wouldn't do it. Then I would use a trust.
25:05
Speaker 6: So I would have used a trust all the time.
25:06
Speaker 6: So there's the difference between the five and the three
25:09
Speaker 6: and what has changed over.
25:11
Speaker 2: Time doud In talking about that and how it's evolved
25:14
Speaker 2: over time. Is there any sense that that look back
25:17
Speaker 2: period may evolve further to you know, will it get
25:21
Speaker 2: shorter or longer? Is that not really something that is
25:24
Speaker 2: being discussed as any kind of legislation at this point.
25:27
Speaker 6: So the good news is that I haven't seen really
25:32
Speaker 6: any new legislation, even you know, committees discussing the change,
25:38
Speaker 6: so that that is a positive. I think I did
25:43
Speaker 6: see a while back where they were thinking about making
25:46
Speaker 6: it seven years, although it hasn't really gone anywhere. But
25:50
Speaker 6: that said, I want people to understand, you know, sort
25:54
Speaker 6: of how it works too, because many people will say, well,
25:58
Speaker 6: what if I do it now and then they change
26:03
Speaker 6: it later. Am I grandfathered in. That's sort of a
26:07
Speaker 6: follow up question. You get all the time right and
26:10
Speaker 6: the good news and history as our guide. Of course,
26:13
Speaker 6: you never really know what the government will do or
26:17
Speaker 6: can do, but history as our guide anyway, No, get
26:22
Speaker 6: your clock running now, lock in your five year waiting period,
26:27
Speaker 6: and not worry about the change because the change that
26:30
Speaker 6: has occurred has always been proactive, not retroactive. And I
26:37
Speaker 6: can go back to the twenty sixteen, twenty I'm sorry,
26:42
Speaker 6: twenty twenty six, twenty I'm sorry, two thousand and six
26:48
Speaker 6: law change. When the Deficit Reduction Act did change from
26:52
Speaker 6: three years to five years, I can tell you how
26:55
Speaker 6: busy we were, you know, getting things done before the
26:59
Speaker 6: law change. Why because the people who did it were
27:02
Speaker 6: grandfathered in with the three when it went to five.
27:06
Speaker 6: So if you do your five now and lock it
27:08
Speaker 6: in and they change it to seven or ten down
27:11
Speaker 6: the road, you will have grandfathered yourself in, or likely
27:14
Speaker 6: will have. So that's a little history and points on
27:19
Speaker 6: the five year look back.
27:20
Speaker 2: To take a quick break here when we come back
27:23
Speaker 2: right to your questions with Todd Lutsky. That phone number
27:25
Speaker 2: again to call into the show and ask Todd your
27:27
Speaker 2: questions is eight eight eight to zero five two two
27:31
Speaker 2: six three. One more time. That's eight eight eight two
27:35
Speaker 2: zero five two two six three. Your questions with Todd
27:39
Speaker 2: are next.
27:40
Speaker 1: Ask Todd with Todd Lutsky every Wednesday at ten thirty
27:44
Speaker 1: only here on the Financial Exchange Radio Network. Todd Letsky
27:50
Speaker 1: answers your questions about a state and elder life planning
27:52
Speaker 1: every Wednesday at ten thirty right here on the Financial
27:56
Speaker 1: Exchange Radio Network.
28:01
Speaker 2: All right, time for your questions with Todd. We still
28:03
Speaker 2: do have a little bit more room on the phone line,
28:05
Speaker 2: so give us call it eight eight eight to zero
28:08
Speaker 2: five two two six three. If you've got a question
28:10
Speaker 2: for Todd again, that is eight eight eight to zero
28:13
Speaker 2: five two two sixty three. Let's go to Mary in Salem. Mary,
28:19
Speaker 2: you are on with Todd Lutsky.
28:22
Speaker 4: Good morning, Tod. I'm kind of in a pickle. My
28:27
Speaker 4: husband has dementia. He currently is in the hospital, and
28:32
Speaker 4: he's rapidly declined within the last three months or so.
28:37
Speaker 4: He's always been manageable. I don't have an estate I
28:41
Speaker 4: don't have an estate plan. Is there anything that I
28:45
Speaker 4: can do at this point to protect my house? We
28:49
Speaker 4: have a two family with a mortgage and I just
28:56
Speaker 4: don't know where to turn.
28:59
Speaker 6: Let me ask you a couple of follow up questions.
29:02
Speaker 6: So one, you've got the two family, and is there
29:06
Speaker 6: other like a lot of like IRA money or investment
29:10
Speaker 6: money or bank money kicking.
29:12
Speaker 4: Around about one hundred and twenty thousand.
29:16
Speaker 6: In total dollars?
29:19
Speaker 4: Correct?
29:20
Speaker 6: Okay, So the two assets are one hundred and twenty
29:24
Speaker 6: and the two family, and again no advanced planning was done.
29:30
Speaker 6: My final question is and again it sounds like he
29:33
Speaker 6: is perhaps declining rapidly and maybe you're not able to
29:37
Speaker 6: handle him anymore. When you made the comment not able
29:40
Speaker 6: to handle him anymore, do you mean that when he
29:43
Speaker 6: gets discharged from the hospital, do you think he's coming
29:47
Speaker 6: home or do you think he's going to end up
29:49
Speaker 6: in a long term care facility?
29:52
Speaker 4: Well, I don't have the funds for a long term
29:56
Speaker 4: care facility.
29:58
Speaker 6: That is what I asked, though, do you do you
30:00
Speaker 6: think home? But but if and so, the way I'm
30:06
Speaker 6: sort of asking this is if it's not safe for
30:11
Speaker 6: him to come home and not easy for you to
30:14
Speaker 6: deal with him, because again, they could get violent, they
30:16
Speaker 6: could I understand the different things that happen when they
30:19
Speaker 6: get the dementia. You know, if it's technically not safe
30:24
Speaker 6: for him to come home and he had to go
30:26
Speaker 6: to a nursing home. If he's qualified for a nursing
30:30
Speaker 6: home now meaning he's old enough, I mean, he's sick
30:33
Speaker 6: enough to go to a nursing home, you don't have
30:36
Speaker 6: to worry about pain. That's why you're calling, right, So
30:39
Speaker 6: don't worry about the cost because looking at the assets
30:44
Speaker 6: you have, he would be eligible for Medicaid right away
30:49
Speaker 6: and you wouldn't have to pay. So that said, do
30:53
Speaker 6: you think the nursing home is the family decision the
30:56
Speaker 6: right thing for him or is he still coming home?
31:01
Speaker 4: Well, that's still to be determined by the doctors. I
31:04
Speaker 4: guess at this point they are good. I thought of
31:10
Speaker 4: long term care, and I hadn't because I didn't think
31:14
Speaker 4: that he would do well.
31:16
Speaker 6: So okay, So once you decide the family, the doctors,
31:20
Speaker 6: your health decisions are are played out, and if it
31:25
Speaker 6: becomes the best interest for him is a nursing home
31:31
Speaker 6: for him, the family, for everybody, and that's the recommendation,
31:35
Speaker 6: then yes we can do last minute planning, which is
31:39
Speaker 6: really what this guide is all about, right, It's all
31:41
Speaker 6: about people like yourself that end up facing a nursing
31:45
Speaker 6: home admission and really haven't done much planning. And so
31:49
Speaker 6: in your case, you have a primary residence that you
31:53
Speaker 6: live in, correct, Is that correct?
31:58
Speaker 4: With the most that's correct?
32:00
Speaker 6: With the mortgage, that's fine, no problem. You are allowed
32:05
Speaker 6: to keep your primary residence as long as you live there.
32:09
Speaker 6: There's no value limitation and there's no lean that will
32:13
Speaker 6: be attached to it, and you can continue to pay
32:18
Speaker 6: all your bills. That leaves US one hundred and twenty
32:21
Speaker 6: thousand dollars. In order to become eligible for medicaid, you
32:26
Speaker 6: are not allowed to have more than approximately one hundred
32:29
Speaker 6: and fifty thousand dollars and he's not allowed to have
32:32
Speaker 6: more than two Wow. Home run you only have one
32:36
Speaker 6: hundred and twenty. So you are now financially and if
32:41
Speaker 6: he's medically eligible for Medicaid right away naturally just because
32:48
Speaker 6: of the type of assets that you happen to have. Now,
32:51
Speaker 6: this doesn't obviously doesn't work for everybody, but it works
32:54
Speaker 6: for you. So you still need to go through the
32:58
Speaker 6: Medicaid application process. You still need to figure out, you know,
33:01
Speaker 6: go through that whole process, which I would not do alone.
33:04
Speaker 6: I would hire a lawyer to do that. But at
33:07
Speaker 6: least if you have the lawyer, you now know the
33:10
Speaker 6: knowledge that that you're that he's immediately eligible for Medicaid
33:16
Speaker 6: even though no advanced planning was done, So that at
33:21
Speaker 6: least hopefully helps you understand that. You know, if the
33:25
Speaker 6: doctors come back and tell you, yeah, you know, we
33:27
Speaker 6: just don't think it's safe to return him home. You
33:30
Speaker 6: can obviously take him home against medical advice. You're allowed
33:33
Speaker 6: to do that. But if they come back and tell
33:36
Speaker 6: you that and they feel like and you agree that
33:38
Speaker 6: the best place for him is a long term care facility,
33:41
Speaker 6: please know you can do it, and you can afford
33:44
Speaker 6: it because you're not going to pay. So hopefully that
33:46
Speaker 6: helps a little. And if you if you need help,
33:49
Speaker 6: please don't go alone when you're applying for Medicaid. And folks,
33:53
Speaker 6: quite frankly, that's a lot. That's a call. That is
33:57
Speaker 6: exactly what this guy. This month brand new guide for
34:01
Speaker 6: the month that we're giving away is long term care
34:05
Speaker 6: planning for the procrastinator. And I say that, but you
34:10
Speaker 6: know what, it's also about people who have done planning
34:14
Speaker 6: but inevitably still have assets outside the trust, like large
34:17
Speaker 6: iras or money they left outside the trust or whatnot,
34:21
Speaker 6: so we can do things last minute for someone who's
34:24
Speaker 6: done no planning, or someone who's done planning but still
34:27
Speaker 6: has assets they need to protect when they're faced with
34:29
Speaker 6: going in a nursing home. So this guide really is
34:32
Speaker 6: for everyone in those situations. It helps you understand how
34:37
Speaker 6: to protect real estate, vacation homes, rental properties, you know,
34:42
Speaker 6: excess dollars. There's different rules for these different kinds of assets,
34:47
Speaker 6: So call and get the guide. Long Term Care Planning
34:51
Speaker 6: for Procrastinators eight six six eight four eight five six
34:56
Speaker 6: nine to nine or Legal Exchange Show dot com. Don't
35:00
Speaker 6: apply for medicaid on your own. It generally results in
35:05
Speaker 6: a loss of assets eight six six eight four eight
35:10
Speaker 6: five six nine nine or Legal Exchange Show dot com.
35:15
Speaker 2: Todd, I've got another one for you here. We got
35:16
Speaker 2: to be quick just because we're getting close to wrapping up,
35:19
Speaker 2: but we got Dan and Florida on the line. Dan,
35:21
Speaker 2: what's your question for Todd?
35:23
Speaker 7: Hey, Yeah, I have a revocable trust in my wife
35:27
Speaker 7: passed away. Should I get an arevocable trust or should
35:32
Speaker 7: I get an LLC? And I'm seventy.
35:34
Speaker 6: Four, so LLCs are really for rental properties and how
35:39
Speaker 6: much is how much are you worth in the trust
35:42
Speaker 6: and out of the trust?
35:45
Speaker 7: I don't know, probably three million. I own two other
35:49
Speaker 7: piece three other pieces of property other than.
35:52
Speaker 6: My own, Okay, so let's say three million in total, right, yeah,
35:58
Speaker 6: So if that that's the case, you know, you do
36:01
Speaker 6: want to take a look at the trust that you had,
36:03
Speaker 6: that your wife had, and technically some of those assets
36:07
Speaker 6: that are in there are probably protected from future estate taxes,
36:11
Speaker 6: so we don't want to disturb that, right, I would
36:14
Speaker 6: need to read the trust you going forward. You I
36:18
Speaker 6: assume you have your own revocable trust. Yes, yeah, yeah, yes,
36:24
Speaker 6: So LLCs are great for rental properties, so yes, i'd
36:28
Speaker 6: want to explore rental property protection for you with an LLC.
36:32
Speaker 6: But then at the same time, we would want to
36:34
Speaker 6: think about protecting assets from the nursing home. So if
36:36
Speaker 6: that's a concern for you at this point in seventy
36:39
Speaker 6: four is a great age you might want to, you know,
36:44
Speaker 6: change your trust the assets that you have and put
36:47
Speaker 6: them in an irrevocable medicaid trust and get it protected
36:51
Speaker 6: and potentially change the make a change to your wife's
36:56
Speaker 6: trust to protect those assets without involving screwing up the nursing,
37:02
Speaker 6: the estate, tax planning, lots to think about for you.
37:05
Speaker 6: I think you ought to reach out to an attorney
37:07
Speaker 6: and get some guidance, because I think, yes, some planning
37:11
Speaker 6: is in order for you going forward.
37:14
Speaker 2: Mister Lutsky, thank you so much for joining us today.
37:17
Speaker 6: Thank you, folks, always a pleasure.
37:20
Speaker 1: This has been Asked Odd on the Financial Exchange Radio Network.
37:23
Speaker 1: Asked Todd with Todd. Lutsky has been presented by Cushing
37:26
Speaker 1: and Dolan, serving Massachusetts and New England for more than
37:29
Speaker 1: thirty years, helping families with the state and tax planning,
37:32
Speaker 1: Medicaid planning, and probate law. Call eight hundred three nine
37:35
Speaker 1: three four thousand and one or visit Cushingdolan dot com.
37:38
Speaker 1: The views expressed in this segment are solely those of
37:40
Speaker 1: Cushing and Dolan Armstrong advisor. He does not provide any
37:43
Speaker 1: legal or tax advice. Please consult with your legal or
37:45
Speaker 1: tax advisor on such matters. Cushing and Armstrong do not
37:47
Speaker 1: endorse each other and are not affiliated