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What Is the K-Shaped Economy, And Why Is It a Problem? · The Financial Exchange Show

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Speaker 2: Good morning, Happy Friday, Welcome back to the Financial Exchange.
1:16
Speaker 2: It's Mike, Paul and Tucker with you on a Friday
1:21
Speaker 2: where markets are not seemingly known exactly what to do
1:24
Speaker 2: with themselves. Here, we've got the Dow off about three
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Speaker 2: quarters of a percent. It was off about one point
1:30
Speaker 2: two at its worst from what I saw, the SMP
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Speaker 2: off about a tenth of a percent of the NASDAC
1:35
Speaker 2: barely holding on to gains right now. In terms of
1:38
Speaker 2: that Dow, I'm just taking a look to see if
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Speaker 2: there's anything in particular that's dragging it. Uh. Yeah, you
1:44
Speaker 2: got United Health down three and a quartered, Nike down
1:46
Speaker 2: two and three quarters, of AMX down one point nine,
1:49
Speaker 2: Visa down one and a half. There's been some reporting
1:52
Speaker 2: this morning about a maybe weaker than expected holiday sales season.
1:55
Speaker 2: I wonder if that has some contributing factor. But look
1:59
Speaker 2: at the last several weeks at least, the only thing
2:02
Speaker 2: that any financial reporter has wanted to talk about has
2:05
Speaker 2: been artificial intelligence and the changing sentiment to it. It's
2:08
Speaker 2: been announcements from Michael Berry's firm that they're closing up
2:12
Speaker 2: shop and you know, placing bets against the AI trade.
2:15
Speaker 2: It's been big CEOs from banks talking about a possible correction,
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Speaker 2: and none of it has really signified much of anything
2:23
Speaker 2: other than a specific turn in the narrative about AI
2:29
Speaker 2: and the promises that it may bring in the future.
2:32
Speaker 2: And I think that has that's been a significant shift
2:34
Speaker 2: at least in sentiment, but not a significant shift shift
2:37
Speaker 2: in markets. And like we were talking about before, right,
2:39
Speaker 2: we've got in video earnings coming out next Wednesday. We
2:42
Speaker 2: have got all sorts of data that was delayed due
2:45
Speaker 2: to the government shutdown that we think is going to
2:48
Speaker 2: get released at some point. We know that, for instance,
2:51
Speaker 2: the December or the November jobs report will be released
2:53
Speaker 2: in early December. But there's a few different pieces here
2:56
Speaker 2: that we're going to be diving through on the financial
2:58
Speaker 2: exchange that could shift that narrative again when it comes
3:02
Speaker 2: to both the AI trade, the profits that these companies
3:06
Speaker 2: are making, and where you know, where the puck is
3:10
Speaker 2: going on this overall economy. So a lot more to
3:13
Speaker 2: break down over the course the next few weeks where
3:17
Speaker 2: the what is going skate, where the puck is go?
3:20
Speaker 1: Okay, sorry but.
3:23
Speaker 2: It's an ice hockey analogy. Yeah, yeah, I've i only
3:28
Speaker 2: have one. I only have one set of sports analogies.
3:31
Speaker 2: Otherwise I'm in I'm in big trouble.
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Speaker 3: Uh.
3:35
Speaker 2: The piece from who is this from Today? Barons Today
3:39
Speaker 2: is about the K shaped economy. I think this was
3:43
Speaker 2: first coined right during COVID. Actually it was.
3:45
Speaker 1: It was.
3:46
Speaker 2: It's not an old term. It was coined during COVID
3:49
Speaker 2: by some economists that I've heard interviewed before, and it
3:52
Speaker 2: describes the idea that we have had tremendous amounts of
3:56
Speaker 2: wealth creation over the course of the last few years,
4:00
Speaker 2: as well as another group of consumers who have been struggling.
4:03
Speaker 2: And initially, you know, initially, when it was created during COVID,
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Speaker 2: it was referring more to the kind of divergence between
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Speaker 2: society of Hey, if you're a white collar worker who
4:15
Speaker 2: you know, used to go into the office every day,
4:16
Speaker 2: you still had your job during COVID, you were doing
4:18
Speaker 2: it from home, you were saving money on commuting, and
4:22
Speaker 2: you were doing fairly well because you were able to
4:24
Speaker 2: save a lot of money. You might have gotten some
4:26
Speaker 2: stimulus payments, and you're doing all right. Whereas if you
4:29
Speaker 2: worked retail, if you worked, as you know, somebody in
4:33
Speaker 2: a hospital or another industry that could not be done remotely.
4:37
Speaker 2: You either lost your job or were forced to work
4:39
Speaker 2: throughout the pandemic. And we're at a very different position
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Speaker 2: than those who worked frankly like you and me, Paul,
4:46
Speaker 2: where yeah, we could do this radio program remotely, we
4:49
Speaker 2: could do financial advice remotely, and you know, continue to
4:53
Speaker 2: stay employed and do quite well. It's it's morph just's
4:58
Speaker 2: taken on a different meaning now to describe, you know,
5:00
Speaker 2: the wealth inequality since COVID. But why do they point
5:04
Speaker 2: out that it is in fact a problem Because from
5:07
Speaker 2: a big picture perspective, I might not like the results,
5:13
Speaker 2: I might not like what it means for society, but
5:16
Speaker 2: we have not seen a dip in consumer spending, We've
5:18
Speaker 2: not seen a dip in retail sales. Inflation continues to
5:21
Speaker 2: remain robust, and most of the companies that support those
5:25
Speaker 2: sectors are doing just fine. You know, there's been scares
5:29
Speaker 2: because of tariffs and scares because of other things, but
5:32
Speaker 2: the big publicly traded companies, at least by and large,
5:35
Speaker 2: unless they're screwing things up on their own, are still
5:37
Speaker 2: seeing their customers come in and spend money and are
5:40
Speaker 2: doing all right. So what are the points that they
5:42
Speaker 2: bring up about the K shaped Kase shaped economy.
5:45
Speaker 4: Anytime you're being overly reliant upon the population of the
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Speaker 4: country who let's say makes over two hundred thousand in
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Speaker 4: terms of household income. There's been different ranges that have
5:55
Speaker 4: been quoted, but they are accounting for a more significant
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Speaker 4: percentage of spending than they were, call it thirty years
6:01
Speaker 4: ago or so, if you're more reliant on that population
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Speaker 4: who earns over two hundred thousand, that typically has the
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Speaker 4: highest concentration the people in that earning income range of
6:11
Speaker 4: stock ownership in this country, they are usually the ones
6:14
Speaker 4: who invest, whether it be in their four own k
6:17
Speaker 4: but then even in regular investment accounts. And so if
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Speaker 4: there are changes in asset prices or if the market
6:24
Speaker 4: is to significantly decline, to me, we are at a
6:28
Speaker 4: point in time where it seems as if the market
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Speaker 4: is even more tethered to the overall well being of
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Speaker 4: the economy because we're so reliant on those higher income
6:38
Speaker 4: consumers then we were previously. That it can just leave
6:42
Speaker 4: you in an unstable place where you're really more subject
6:45
Speaker 4: to the woes the ups and downs of the market
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Speaker 4: versus the pure brass tax income growth leading to more
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Speaker 4: stimulation of economic activity in the country. And Jared Bernstein,
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Speaker 4: who's the chair, who was the chair Council of Economic
7:01
Speaker 4: Advisors back for Biden, had mentioned this point with that
7:05
Speaker 4: one dollar decline in the stock market could equate to
7:09
Speaker 4: two to three cents in less spend in the country,
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Speaker 4: and so that just kind of puts some context perhaps
7:15
Speaker 4: behind perhaps what could be.
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Speaker 2: The problem there. Yeah, I think there is that piece
7:20
Speaker 2: of concentration. And so yeah, if you have the wealth
7:22
Speaker 2: effect reverse itself in some meaningful way because of a
7:25
Speaker 2: stock market that you know, the bubble explodes and suddenly
7:28
Speaker 2: you have people feeling less wealthy, I think there's a
7:30
Speaker 2: specific risk to that economy there. The other piece is
7:33
Speaker 2: much more it's a lot more nuance in a much
7:37
Speaker 2: more difficult to put your finger on exactly. But I
7:40
Speaker 2: think everyone would agree that having ten percent of the
7:43
Speaker 2: population do like half of the spending just doesn't sound
7:47
Speaker 2: great for society. No, And I think we can you know,
7:53
Speaker 2: all acknowledge for a second that, yeah, if you're feeling
7:57
Speaker 2: left out of the economic moment, if you're feeling as though, hey,
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Speaker 2: the rest of the world is moving forward, and here
8:05
Speaker 2: in my part of the world. I am falling behind
8:08
Speaker 2: because my job doesn't involve AI and I don't have
8:10
Speaker 2: a four oh one K and I don't know my home,
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Speaker 2: then you're going to be more inclined to vote for
8:17
Speaker 2: I think significant change. And so I think about this
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Speaker 2: in its role in a democracy, and it just doesn't well,
8:24
Speaker 2: I guess, let me put it this way, if you're
8:25
Speaker 2: comfortable with the status quo, it probably doesn't spell great things.
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Speaker 2: If you have this severe K shaped economy where a
8:31
Speaker 2: large portion of the population feels left behind. It's not
8:34
Speaker 2: to say that they you know, I'm not saying that
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Speaker 2: we're going to have societal collapse, but I'm saying that,
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Speaker 2: you know, when people are feeling crummy about the state
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Speaker 2: of things, they're going to vote to change it, and
8:43
Speaker 2: they might vote to change it significantly. And we saw
8:45
Speaker 2: that with the mayor in New York right Like, I'm
8:49
Speaker 2: not saying that these two things are directly tied together,
8:53
Speaker 2: but you can kind of see how some of this
8:57
Speaker 2: stuff plays out. And so that's that's part of the
8:59
Speaker 2: piece that concerns me is I think there will as
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Speaker 2: a result of this, I would expect a lot less
9:04
Speaker 2: voting for the middle and a lot more voting for
9:08
Speaker 2: who do I think is going to change things the most,
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Speaker 2: And so I don't know. I think I see some
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Speaker 2: evidence of that here and there, and I wouldn't be
9:18
Speaker 2: surprised to see more of it directly as a result
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Speaker 2: of these K shaped divergences in our in wealth, in
9:27
Speaker 2: our society.
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Speaker 4: Yeah, it could erode at the core belief of the country.
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Speaker 4: From an economic perspective of capitalism, it starts to erode
9:33
Speaker 4: that belief. You know, if you'll continue to work hard,
9:35
Speaker 4: you can continue to earn more and be able to
9:39
Speaker 4: kind of take your place in the country from an
9:41
Speaker 4: economic standpoint. If all of a sudden that people in
9:44
Speaker 4: the middle or lower cautious feel like that is totally
9:47
Speaker 4: out of reach, and some people may already feel that
9:49
Speaker 4: way today, then it doesn't spell great for the overall economy.
9:54
Speaker 4: Hard to quantify all that.
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Speaker 2: When you feel the system isn't working for you, you vote
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Speaker 2: to change the system.
9:59
Speaker 1: Right.
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Speaker 2: That's about as political as I'm willing to get on
10:02
Speaker 2: a Friday, or generally, let's take a quick break. When
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12:05
Speaker 2: Paul we covered yesterday that Michael Burry's hedge fund was
12:09
Speaker 2: closing down and just kind of the significance of that,
12:13
Speaker 2: which frankly, there isn't much. It was one hundred and
12:15
Speaker 2: fifty five million dollar hedge fund. It was not all
12:19
Speaker 2: that substantial. And yet, man, we're getting a lot of
12:22
Speaker 2: press about it, and I you know, Jonathan Levine from
12:26
Speaker 2: Bloomberg asked the question, and there's reason to be fascinated
12:31
Speaker 2: with Michael Burry. You know, if you're a Christian Bale fan,
12:34
Speaker 2: there might be a reason to be fascinated based on
12:36
Speaker 2: the twenty fifteen Big short movie. But what does it
12:40
Speaker 2: say about markets or society right now that we're so
12:44
Speaker 2: obsessed with the guy who made a killing off of
12:47
Speaker 2: betting against the US economy? We like, well, the US,
12:50
Speaker 2: I don't. Yeah, that's fair to say. They bet against
12:54
Speaker 2: the state of the housing market and the stock market
12:57
Speaker 2: leading up to the Great Financial Crisis.
12:58
Speaker 4: We are fascinated with a story such as that where
13:02
Speaker 4: you have a maverick or someone who goes against the
13:04
Speaker 4: grain and makes a big bet to go in the
13:07
Speaker 4: other directions of everyone else and then cashes in on
13:11
Speaker 4: it big time. It's a fascinating story to fall and
13:15
Speaker 4: why they made the movie on it, because you just
13:18
Speaker 4: have this one person who is just stepping out from
13:21
Speaker 4: the norm. But I am so glad that Jonathan Levian
13:24
Speaker 4: wrote this piece because in the years that have followed since,
13:28
Speaker 4: to be clear, you know, one hundred and fifty five
13:30
Speaker 4: million in the hedge fund world, is penat is a joke.
13:32
Speaker 4: Is tiny, is not a very big hedge fund, And
13:35
Speaker 4: he still gets the notoriety as if he's Warren Buffett
13:39
Speaker 4: for short sellers out there like he is this just
13:42
Speaker 4: you know, esteemed investor, and he deserves all the credit
13:46
Speaker 4: in the world for a tremendous call back in two
13:48
Speaker 4: thousand and eight, but there have been other instances, And
13:50
Speaker 4: when his news story came out this week, I started
13:53
Speaker 4: scratching my head and I'm glad Levian wrote this piece
13:55
Speaker 4: because I said, haven't he hasn't he done this before?
13:57
Speaker 4: Hasn't he made this call? And thankfully John Finily caught
14:00
Speaker 4: me up to speed. Yes he has. For example, in
14:03
Speaker 4: September of twenty twenty two, many listeners may remember, the
14:06
Speaker 4: market was down about eighteen percent for the calendar year
14:08
Speaker 4: twenty twenty two. September, we were pretty low at that point.
14:12
Speaker 4: He was quoted as saying, no, we have not hit
14:13
Speaker 4: a bottom yet. Technically he was right. We got to
14:16
Speaker 4: the bottom a couple weeks later. But then from then
14:18
Speaker 4: on out it's been an upward swing. And in fact,
14:21
Speaker 4: in January of twenty twenty three, three or four months later,
14:24
Speaker 4: he just tweeted out to his followers sell and we
14:27
Speaker 4: didn't really know what else he was mentioning there, but
14:30
Speaker 4: presumably he was saying, sell everything, or sell all the stocks,
14:33
Speaker 4: and guess what the S and P five hundred has
14:35
Speaker 4: done seventy five percent incance. So I'm so glad that
14:37
Speaker 4: he wrote this to point out that while maybe he
14:41
Speaker 4: has some valid points on the depreciation of some of
14:43
Speaker 4: these capital expenditures on it, the point that.
14:46
Speaker 2: He has been making is that if the big companies
14:49
Speaker 2: of today were using the accounting methods of the dot
14:52
Speaker 2: com era, they'd be looking far worse than they are
14:55
Speaker 2: right now.
14:56
Speaker 4: Yeah, they've stretched out some of these expenses to a
14:58
Speaker 4: five year, six year schedule. We don't need to get
15:00
Speaker 4: down that reb hill. But I'm just glad that someone
15:02
Speaker 4: wrote the piece to call out that, Hey, tremendous call
15:05
Speaker 4: that he made, but he set some other cars recently too,
15:09
Speaker 4: or I don't know if you want to call him
15:10
Speaker 4: calls or not, but cries for attention that really haven't
15:14
Speaker 4: gone his way necessarily.
15:16
Speaker 2: I don't know how to interpret his moves right now.
15:19
Speaker 2: They're certainly getting more attention, but it is important to
15:23
Speaker 2: contextualize that it is not as though Michael Burry shorted
15:27
Speaker 2: the Great Financial Crisis, made a bunch of money and
15:29
Speaker 2: then was silent until now. And I feel like that's
15:32
Speaker 2: kind of the narrative that's being created, is, oh, look out,
15:34
Speaker 2: the guy that was only noisy one other time right
15:37
Speaker 2: before the Great financial crisis is now out there talking
15:41
Speaker 2: again about markets. It's not the case. He's been shorty
15:43
Speaker 2: markets pretty consistently here and there for the last fifteen
15:46
Speaker 2: years and has been wrong plenty of times. It had
15:49
Speaker 2: been on the wrong side of trades plenty of times.
15:51
Speaker 2: And so yeah, take the commentary with what you will.
15:55
Speaker 2: I'm not saying his points are invalid or incorrect or inaccurate.
15:59
Speaker 2: Plenty of them raise interesting questions. But take it in context,
16:05
Speaker 2: which is this guy's been making these points for years.
16:09
Speaker 2: He's been, you know, talking about this up and been
16:12
Speaker 2: wrong about this market a couple of times, and his
16:15
Speaker 2: stuff is getting a little bit more play right now.
16:18
Speaker 2: Fewer burritos, more bargains. We've had a few kind of
16:22
Speaker 2: flashes about concerns about the holiday shopping season. I covered
16:25
Speaker 2: one a couple of weeks ago regarding corrugated box sales,
16:30
Speaker 2: and you know, kind of a decline that we are
16:32
Speaker 2: seeing there in the US. What are we getting in
16:37
Speaker 2: terms of hints about the holiday shopping season, Paul, Because
16:40
Speaker 2: I don't know from what I'm feeling right now, I'm
16:44
Speaker 2: guessing low single digit increases. I'm not expecting a horrible
16:47
Speaker 2: holiday shopping season. I think there are gonna be deals
16:50
Speaker 2: to be had out there. I think, generally speaking, so
16:52
Speaker 2: long as we don't see a massive uptickt unemployment, people
16:56
Speaker 2: are going to be buying those deals, and I think
16:58
Speaker 2: we're going to see a fairly success full holiday season
17:01
Speaker 2: for most retailers.
17:03
Speaker 4: That's I'm right there with you, Mike. I'm not as
17:06
Speaker 4: concerned as this piece lays out where they mentioned that
17:09
Speaker 4: higher income consumers we talked about early in the show,
17:11
Speaker 4: they're carrying a lot of weight that they're trading down
17:14
Speaker 4: and looking for deals, or gen Z is spending less
17:17
Speaker 4: and we've got lower income shoppers struggling. I don't have
17:22
Speaker 4: the same takeaway or prediction that this is going to
17:25
Speaker 4: mean a bleak holiday season. I still think that the
17:28
Speaker 4: growth of three percent year over year is attainable. Last
17:32
Speaker 4: year we saw four point three percent in terms of increase.
17:36
Speaker 2: I'm gonna quote a stat here that I have seen
17:38
Speaker 2: proven wrong over and over and over again, consulting from
17:41
Speaker 2: Alvarez and marshl I don't know anything about them. I
17:44
Speaker 2: have not seen this company cited before. But they conducted
17:47
Speaker 2: a consumer sentiment survey that pulled over two thousand shoppers.
17:50
Speaker 2: They found twenty four percent of respondents earning one hundred
17:53
Speaker 2: thousand dollars or more a year or planning to spend
17:56
Speaker 2: less this holiday season. Every time I have heard about
18:00
Speaker 2: some companies saying, yeah, you know, this is the year
18:02
Speaker 2: that I'm gonna really pinch pennies and get my financial
18:05
Speaker 2: house in order, it has been proving horribly wrong moments later.
18:10
Speaker 2: And so any survey out there telling me that, yeah,
18:13
Speaker 2: consumers are really pinching pennies this time around, and they're
18:17
Speaker 2: worried about the state of things and they're going to
18:19
Speaker 2: pull back their spending plans, treat it with a high
18:22
Speaker 2: degree of skepticism because it's just not happened until until
18:27
Speaker 2: they literally can't spend right, credit card gets maxed out,
18:30
Speaker 2: they don't have a job. Those are the scenarios where
18:34
Speaker 2: we do actually see consumer spending pull back, but so
18:38
Speaker 2: long as there is a credit card available to max out,
18:42
Speaker 2: we tend to do it. And I'll tell you, I'm
18:44
Speaker 2: hearing a heck of a lot more repeats of the
18:47
Speaker 2: Yolo book that trip type mentality, like we're hearing back
18:51
Speaker 2: in twenty twenty one than I have for the last
18:53
Speaker 2: several years. So I don't know I'm just not buying it.
18:56
Speaker 4: I'm someone who's pretty locked into their months a month budget.
19:00
Speaker 4: But I've never looked back to see if the holiday spending.
19:03
Speaker 4: Like where I've been on the holiday spending standpoint, I'm
19:05
Speaker 4: sure it's gone up every single year, but I don't
19:07
Speaker 4: know who would even know if they're spending less than
19:10
Speaker 4: they were last year.
19:11
Speaker 2: Maybe there are some people out there, but I are
19:13
Speaker 2: actually good at vertag. Let's take Hey, I'm good. Let's
19:17
Speaker 2: take a quick break where we come back. We've got
19:19
Speaker 2: some Wall Street Watch, also the trivia winner next year
19:22
Speaker 2: on the Financial Exchange.
19:39
Speaker 1: Bringing the latest financial news straight to your radio every day.
19:43
Speaker 1: It's the Financial Exchange on the Financial Exchange Radio Network.
19:49
Speaker 1: Time now for Wall Street Watch. A complete look at
19:53
Speaker 1: what's moving market so far today right here on the
19:56
Speaker 1: Financial Exchange Radio Network. Now.
19:58
Speaker 5: I was seeing a little bit of a reversal in
19:59
Speaker 5: mark get since some dip buying occurring following yesterday's steep
20:03
Speaker 5: tech selloff. That did carry over to today's open. But
20:07
Speaker 5: right now the Dow is down by four tenths of
20:10
Speaker 5: a percent, or two hundred and thirteen points. SMP five
20:13
Speaker 5: hundred is now up a quarter percent or seventeen points.
20:16
Speaker 5: NASDAC up six tenths of one percent, or one hundred
20:19
Speaker 5: and thirty four points higher. Russell two thousand is up
20:22
Speaker 5: two tenths of a percent. Tenure Treasure wheeled up one
20:25
Speaker 5: basis point at four point one two nine percent. Crude
20:29
Speaker 5: oil up nearly three percent higher, trading right above sixty dollars.
20:34
Speaker 5: A barrel breaking news from Walmart this morning after the
20:37
Speaker 5: retail giant said CEO Doug McMillan is retiring early next year.
20:41
Speaker 5: McMillan has served as Walmart's CEO since twenty fourteen. John
20:46
Speaker 5: Ferner will take over the role and has been the
20:49
Speaker 5: CEO of Walmart's US business since twenty nineteen. He started
20:53
Speaker 5: with Walmart in nineteen ninety three as an hourly associate.
20:57
Speaker 5: Walmart stock is down one percent. Meanwhile, Applied Materials reported
21:01
Speaker 5: better than expected quarterly results driven by the AI boom. However,
21:05
Speaker 5: the semiconductor maker gave a disappointing outlook for next year,
21:09
Speaker 5: including modest full year revenue guidance. Shares are now edging higher,
21:14
Speaker 5: and according to the Wall Street Journal, Paramount, Comcast and
21:17
Speaker 5: Netflix are preparing bids for Warner Brothers Discovery. The report
21:21
Speaker 5: also said Warner Brothers Discovery has an initial deadline for
21:24
Speaker 5: first round bids at or On November twentieth, Warner shares
21:29
Speaker 5: are up over three percent. I'm Tucker Silva and that
21:33
Speaker 5: is Wall Street Watch. And in the previous segment, we
21:35
Speaker 5: asked you the trivia question what year was bitcoin created?
21:38
Speaker 5: That would be two thousand and nine. John from Franklin,
21:42
Speaker 5: Mass is our winner today, taking on my Financial Exchange
21:45
Speaker 5: Show t shirt. We played trivia every day here in
21:48
Speaker 5: the Financial Exchange. See complete contest rules at Financial Exchange
21:52
Speaker 5: Show dot com.
21:54
Speaker 2: Paul. A few stories regarding retirement kind of came across
21:57
Speaker 2: our desk the last couple of days. One Verizon announcing
22:00
Speaker 2: that they plan to cut about fifteen thousand jobs in
22:05
Speaker 2: their company under the leadership of their new CEO. The
22:08
Speaker 2: other being that the new contribution limits for four oh
22:11
Speaker 2: one ks came out. And I know those don't seem interconnected,
22:14
Speaker 2: because if you're not working for Verizon, you're likely not
22:16
Speaker 2: contributing to retirement. But it does bring up the subject of, Okay,
22:20
Speaker 2: what am I allowed to do and then what happens
22:22
Speaker 2: with these accounts once I job change retire? What are
22:26
Speaker 2: my options? How does it all work. So let's start
22:28
Speaker 2: off with the there's a bunch of changes to retirement
22:32
Speaker 2: plan compensation and how it works and what you're allowed
22:36
Speaker 2: to do. I'm just going to mention a few of
22:37
Speaker 2: them that are most relevant to people. One, if you
22:42
Speaker 2: are contributing to a traditional four oh one K or
22:46
Speaker 2: ROTH four O one K or four h three B
22:49
Speaker 2: last year or twenty twenty five, you could do up
22:51
Speaker 2: to twenty three thousand, five hundred. That's getting one thousand
22:53
Speaker 2: dollars bump. You can now do twenty four thousand, five
22:56
Speaker 2: hundred dollars in twenty twenty six if you are are
23:00
Speaker 2: making more than one hundred and fifty thousand dollars And
23:02
Speaker 2: I don't understand how they're going to do this yet,
23:04
Speaker 2: so more to come on this subject. But if you
23:06
Speaker 2: make more than one hundred fifty grand and your employer
23:09
Speaker 2: is making contributions, is making matching contributions for you, then
23:15
Speaker 2: those what was the story there? Those are required to
23:18
Speaker 2: now go into the WROTH. I believe it is correct. Yeah, again,
23:23
Speaker 2: making it so that you have to pay the taxes
23:25
Speaker 2: upfront on some of these items your catch up contributions.
23:29
Speaker 2: So if you're over the age of fifty, you're gonna
23:31
Speaker 2: be able to do an extra eight thousand dollars a year,
23:33
Speaker 2: So that's bringing your annual contribution if you're over the
23:36
Speaker 2: age of fifty to thirty two thousand and five hundred,
23:40
Speaker 2: and then the old super catch up if you are
23:45
Speaker 2: specifically between the ages of sixty and sixty three, you
23:48
Speaker 2: can do another eleven two hundred and fifty dollars. On
23:51
Speaker 2: top of all of that, the traditional irays and wroth
23:55
Speaker 2: irays also got bumps, so you're gonna be able to
23:58
Speaker 2: do a little bit more to your IRA or to
23:59
Speaker 2: your off. The catch up there got bumped up as well.
24:03
Speaker 2: That's now index to inflation, or an extra eleven hundred
24:06
Speaker 2: dollars if you're contributing to the irarais. But this does
24:09
Speaker 2: affect just about everybody out there in terms of these
24:12
Speaker 2: limits of what you can and cannot do, and so
24:14
Speaker 2: it's an important thing to review. I would say, more
24:17
Speaker 2: important and more complex than this are two other factors though.
24:20
Speaker 2: Paul one I was meeting with somebody the other day.
24:25
Speaker 2: His wife had contributed to a ROTH account when she
24:30
Speaker 2: was younger. Last five years has been sitting at a
24:32
Speaker 2: bank because they kind of left it there and didn't
24:36
Speaker 2: know what to do with it and didn't know the rules.
24:38
Speaker 2: What are your options with your retirement accounts if you
24:42
Speaker 2: started one on your own and are now working for
24:44
Speaker 2: an employee that offers one, or if you leave your employer,
24:47
Speaker 2: like what can you do with those three?
24:49
Speaker 4: Three options you can usually consider. One is you can
24:53
Speaker 4: usually for the most part, roll a former retirement plan
24:56
Speaker 4: into your new employer plan. You have to check to
24:59
Speaker 4: make sure it were in all cases, but for the
25:01
Speaker 4: most part you could do that. The second option is
25:03
Speaker 4: you could roll it into an IRA or roth IRA
25:05
Speaker 4: to be managed at any brokerage firm out there you
25:09
Speaker 4: pick your place. Or the third is you cash them out,
25:12
Speaker 4: but you have to be very careful obviously with that.
25:14
Speaker 2: You can also sometimes leave them there, right, Or you could.
25:16
Speaker 4: Just leave it behind, right yea, I'm just talking about
25:18
Speaker 4: alternatives to leaving it there. Yeah, Or you can cash
25:22
Speaker 4: it out obviously, like I was mentioned, but you just
25:23
Speaker 4: got to make sure you're aware of penalties there. But
25:26
Speaker 4: it is important, Mike, because you alluded to instances where
25:29
Speaker 4: you've seen accounts left behind that are not being properly
25:34
Speaker 4: invested in. Yeah, they may be smaller sums, but it
25:36
Speaker 4: is so important that they are participating in the market
25:40
Speaker 4: and be invested. I can think of one example where
25:42
Speaker 4: I had a client who was working at craft Hinds
25:45
Speaker 4: in a portion of his four one K plan was
25:48
Speaker 4: in the stock of the company. You can look up
25:50
Speaker 4: Craft Hinds and how they've performed over the last five
25:53
Speaker 4: six years. It hasn't been great. And we had at
25:56
Speaker 4: least scrutinized and said, hey, ten percent of your four
25:58
Speaker 4: one K is in this position, and ultimately we ended
26:01
Speaker 4: up rolling it out and not having that exposure. But
26:02
Speaker 4: if you had just left it there, it was a
26:04
Speaker 4: pretty significant portion of his four to one K that
26:06
Speaker 4: wouldn't have fared that well, or at least wouldn't have
26:09
Speaker 4: been looked at.
26:09
Speaker 2: Yeah, the other piece that I frankly see often and
26:12
Speaker 2: get worried about. Believe it or not. I know this
26:14
Speaker 2: sounds ridiculous to people that pay close attention to their finances,
26:18
Speaker 2: but you would not believe the number of people who
26:20
Speaker 2: just leave their accounts behind. Then they happen to move
26:24
Speaker 2: because you'll move a lot when you're in your twenties,
26:26
Speaker 2: you lose track of it. You don't have the log
26:29
Speaker 2: in anymore, and frankly, it can even become abandoned property.
26:33
Speaker 2: In some cases, it does happen here and there, and
26:37
Speaker 2: so you need to know your options. When it comes
26:40
Speaker 2: to funding your own retirement, it gets way more complicated
26:44
Speaker 2: than Paul and I have even laid out. You mentioned
26:46
Speaker 2: the case of company stock within a four oh one K.
26:49
Speaker 2: That's an entire industry on its own of specialization about
26:54
Speaker 2: what to do with your company stock within your four
26:56
Speaker 2: oh one K. There is a lot that you need
27:00
Speaker 2: to do on the checklist, especially when you are changing
27:03
Speaker 2: jobs when it comes to retirement. If you have questions
27:06
Speaker 2: about it, if you are facing down retirement, or if
27:08
Speaker 2: you're decades away from it but you're considering a job change,
27:12
Speaker 2: talk to the folks at Armstrong so we can give
27:14
Speaker 2: you guidance on how to handle these different big changes.
27:17
Speaker 2: It affects everything from your insurance coverage to your retirement
27:21
Speaker 2: and more. The numbers eight hundred three nine three for
27:24
Speaker 2: zero zero one. We offer free consultations throughout New England. Again,
27:28
Speaker 2: that number to book yours or at least request a
27:31
Speaker 2: call back is eight hundred three nine three for zero
27:34
Speaker 2: zero one.
27:36
Speaker 1: The proceeding was paid for by Armstrong Advisory Group a
27:38
Speaker 1: registered investment advisor. Nothing in the ad or in any
27:41
Speaker 1: Armstrong guide a specific financial, legal, or tax advice. Consult
27:44
Speaker 1: your own financial, tax, and estate planning advisors before making
27:46
Speaker 1: any investment decisions. Armstrong may contact you to offer investment
27:50
Speaker 1: advisory services.
27:51
Speaker 2: We have to cover this story. Tucker sent it to
27:53
Speaker 2: us yesterday during the program. But here's how Robinhood will
27:58
Speaker 2: deliver bags of cash to your doorstep safely. That is
28:02
Speaker 2: a huge presumption that robin Hood will in fact deliver
28:06
Speaker 2: bags of cash to your doorsteps safely. But let's talk
28:11
Speaker 2: about what's happening. I guess before I run in and
28:13
Speaker 2: criticize why this needs to exist, because I don't believe
28:18
Speaker 2: it does. Let's talk about what they are actually proposing
28:21
Speaker 2: doing here. Because robin Hood does in fact want to
28:24
Speaker 2: be able to have a service where they can deliver
28:26
Speaker 2: you cash money to your door.
28:29
Speaker 4: Yes, so what their service would look like. This is
28:32
Speaker 4: just you got to scratch your head to see how
28:34
Speaker 4: this is going to work out. But is the same
28:36
Speaker 4: day delivery of cash to your door for a fee
28:39
Speaker 4: of anywhere from two ninety nine to six ninety nine,
28:42
Speaker 4: which they say is comparable to out of network ATM
28:45
Speaker 4: charges six ninety nine is definitely on the higher end
28:48
Speaker 4: side of that. I haven't seen any of that out there,
28:50
Speaker 4: unless you're probably talking about a casino ATM that really
28:53
Speaker 4: would rake you over the coals. But for customers that
28:56
Speaker 4: have over one hundred thousand assets, they would be eligible
29:00
Speaker 4: for this program. Robinhood and go Puff are teaming up
29:03
Speaker 4: for this, and all I can think about, what.
29:05
Speaker 2: Is the average age of a Robinhood customer.
29:07
Speaker 4: They skew much more into the thirty to forty five demographic.
29:12
Speaker 2: Their average age thirty five, thirty five. There we go,
29:17
Speaker 2: What is a thirty five year old need with a
29:19
Speaker 2: bag of cash?
29:20
Speaker 5: I have one dollar in my wallet.
29:21
Speaker 2: The only thing that I get. The only thing that
29:23
Speaker 2: I can think of is you need to do something illegal,
29:26
Speaker 2: so you need cash.
29:27
Speaker 4: There's this bagel place that I go to that's that's
29:29
Speaker 4: cash only, And that's the only reason that I end
29:32
Speaker 4: up taking out cash is for the weekend bagel runs
29:34
Speaker 4: to pick up breakfast sandwiches.
29:36
Speaker 2: I pay the guy that I skate with for my
29:39
Speaker 2: pickup hockey in twenty dollars bills. So once a month
29:43
Speaker 2: I go to the bank and get a bunch of twenties,
29:45
Speaker 2: and that's how I my pickup basket pick up literally
29:48
Speaker 2: my only cash the same way too. Yeah, I don't
29:51
Speaker 2: understand why this business needs to exist. The only real
29:54
Speaker 2: reason I can think of is because Robinhood customers need
29:59
Speaker 2: to do something that requires cash, which might be not legal,
30:04
Speaker 2: and thirty five year olds don't use cash. They just don't.
30:09
Speaker 2: I don't understand this partnership at all. I don't see
30:11
Speaker 2: the reason for it. By the way, I don't know
30:13
Speaker 2: about robin Hood, but at Schwab at Fidelity, you can
30:16
Speaker 2: literally get a debit card right on your brokerage account
30:19
Speaker 2: and withdraw cash from your account at any ATM. And
30:22
Speaker 2: by the way, at least Fidelity and Schwab I know,
30:25
Speaker 2: I'm pretty sure they still do will reimburse you the
30:27
Speaker 2: ATM fees that you get charged. That Robinhood is comparing
30:30
Speaker 2: these two because they don't operate their own network of
30:32
Speaker 2: ATM so they just say screw it. And that seems
30:36
Speaker 2: a lot safer than having some delivery guy from what company,
30:38
Speaker 2: gopuff distribution centers. I mean, give me a wad of cash.
30:43
Speaker 5: I wouldn't want to do this if I was a
30:44
Speaker 5: courier of gopuff Oh, because people would.
30:47
Speaker 4: Just be that's all I could think.
30:48
Speaker 5: People would just stake out gopuff is courier working them
30:52
Speaker 5: to the house.
30:52
Speaker 2: Job.
30:53
Speaker 5: You're just give me all the money you got there.
30:55
Speaker 2: I don't know who your target customers are. I don't
30:58
Speaker 2: think it's going to work. I don't think it's going
31:01
Speaker 2: to ruin your business. But I see no reason for
31:03
Speaker 2: this entire model. No one's gotta do it.
31:05
Speaker 4: Can you imagine a town movie version of them just
31:07
Speaker 4: going after goprough drivers out there instead of them going
31:11
Speaker 4: after the guy in the brinkstruck. They're like, there he is,
31:14
Speaker 4: we got we got to go, man, we gotta go
31:16
Speaker 4: get him.
31:17
Speaker 2: Is that a Corolla? We gotta take a quick break
31:20
Speaker 2: when we come back, come back. Paula Monica from Barons
31:24
Speaker 2: joins us next.
31:26
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Speaker 5: This segment of the Financial Exchange is brought to you
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32:38
Speaker 2: Join us now is Paul Lamonica from Barons and Paul,
32:42
Speaker 2: I'm glad you're here because quite honestly, all of my
32:44
Speaker 2: attention has been sucked into the AI trade and you know,
32:48
Speaker 2: private credit over the last several months. But it's worth
32:50
Speaker 2: pointing out that bitcoin back in early October reached I
32:54
Speaker 2: think an all time high of one hundred and twenty
32:56
Speaker 2: five thousand dollars per coin has since fallen. I think
32:59
Speaker 2: today was below night twenty five thousand dollars. Briefly, talk
33:02
Speaker 2: to us about some of the big events recently in
33:06
Speaker 2: companies surrounding crypto. Circle is one that reported earnings recently,
33:10
Speaker 2: and you wrote about Yeah.
33:12
Speaker 3: Circle the stable coin company, So they are the firm
33:17
Speaker 3: behind usd coin peg to the US dollar. Their earnings,
33:24
Speaker 3: you know, I think, are you know, raising some concerns
33:27
Speaker 3: that you know, this is a high growth market, but
33:32
Speaker 3: you know, there's just a lot of hype right now.
33:35
Speaker 3: And this is a company that went public a few
33:38
Speaker 3: months ago and their lock up period has now expired.
33:42
Speaker 3: It said in their SEC filing that two days after
33:45
Speaker 3: they report third quarter earnings would be when certain insiders
33:49
Speaker 3: would be able to sell shares. So I think some
33:51
Speaker 3: people might have been getting ahead of that. But you know,
33:54
Speaker 3: it's a little more encouraging I think for Circle than
33:57
Speaker 3: other companies in the crypto a sphere, if you will,
34:01
Speaker 3: because this is a company that generates, you know, a profit.
34:05
Speaker 3: There are concerns about maybe the net interesting income declining
34:10
Speaker 3: going forward if the FED is cutting short term rates
34:14
Speaker 3: because you know, they hold a lot of reserves in
34:18
Speaker 3: assets on their balance sheet tied to your short term rates.
34:23
Speaker 3: But you know, there are some analysts that have come
34:25
Speaker 3: out and defended the stock, and it looks like Kathy
34:27
Speaker 3: Wood at ARC has also bought a little bit more
34:30
Speaker 3: on the dip this week. So I wouldn't be too
34:32
Speaker 3: worried about Circle for the long term. But you know,
34:34
Speaker 3: crypto remains voluable. This everyone talks about it being digital gold.
34:38
Speaker 3: Gold doesn't fall, rise and fall this much.
34:41
Speaker 2: Can you talk me a little bit about bitcoin credit cards.
34:43
Speaker 2: I think a lot of people listening would be pretty
34:45
Speaker 2: surprised to know they even exist. How does the bitcoin
34:48
Speaker 2: credit card operate and who are the companies involved in it?
34:51
Speaker 3: Yeah, so Gemini is the primary company that people will
34:56
Speaker 3: probably recognize. It's the firm that went public this summer,
35:00
Speaker 3: you know, run by Cameron and Tyler Winklevoss of early
35:04
Speaker 3: Facebook fame, and they have credit cards that allow users
35:08
Speaker 3: to get rewards in bitcoin, ether, you know, XRP, Solana,
35:13
Speaker 3: some of the other top cryptocurrencies, and the companies using
35:17
Speaker 3: that as a way to try and get you know,
35:20
Speaker 3: people who may want these cards to also trade crypto
35:24
Speaker 3: on their platform. It's I think an interesting strategy. The
35:30
Speaker 3: problem is that, like many young companies, they are spending
35:34
Speaker 3: very aggressively on marketing and that's one of the things
35:38
Speaker 3: that's eating into their profits. And you know, investors, I think,
35:41
Speaker 3: are you know, a little worried about how much red
35:44
Speaker 3: ink Gemini is bleeding right now? So will that company
35:49
Speaker 3: eventually rebound, you know, as we know Facebook for example.
35:55
Speaker 3: To bring it back to the Winklevoss Twins was a
35:57
Speaker 3: company that was not a great performer initially but is
36:01
Speaker 3: obviously now one of the world's you know, most valuable companies.
36:04
Speaker 3: Not suggesting at all that Gemini becomes the Facebook of crypto,
36:08
Speaker 3: but it may be too early to write.
36:10
Speaker 2: Them off entire So there's been a fair bit of
36:12
Speaker 2: pressure obviously over the last couple of months. We have
36:14
Speaker 2: grey Scale Investments, one of the big investment firms offering
36:18
Speaker 2: you know, financial products around crypto, going public fairly soon. Here,
36:23
Speaker 2: how big a test is it for just the crypto
36:26
Speaker 2: market in twenty twenty five.
36:29
Speaker 3: Yeah, I think it's going to be very interesting to
36:30
Speaker 3: see if Grayscale does well when they go public, because
36:36
Speaker 3: you know, this is a top company in the you know,
36:41
Speaker 3: the crypto trading ecosystem, but like many other companies with
36:46
Speaker 3: ties to crypto, their financials, their revenue and profits were hit,
36:52
Speaker 3: you know, in the earlier part of this year because
36:54
Speaker 3: of all that crypto volatility. They haven't obviously reported any
36:58
Speaker 3: numbers for fourth quarter, you have, We're still in the
37:00
Speaker 3: midst of the fourth quarter, but you would have to
37:02
Speaker 3: think that the big price decline of crypto in the
37:05
Speaker 3: last couple of weeks is not going to be great
37:07
Speaker 3: for their financials. Hence we're seeing you know, big stock
37:10
Speaker 3: market slides for Coinbase, as well as Robinhood, which is
37:14
Speaker 3: a very big in the in the crypto world as well.
37:17
Speaker 3: So you know, I think Grayscale, who would have a
37:19
Speaker 3: lot of demand when it goes public. But just look
37:22
Speaker 3: at other companies. I mentioned Gemini Bullish, a crypto exchange
37:26
Speaker 3: that went public earlier this year. Their stock has fallen
37:29
Speaker 3: pretty sharply from its highes. So this is going to
37:32
Speaker 3: remain an incredibly volatile part of the stock market because
37:37
Speaker 3: cryptos are by their nature still incredibly lolible.
37:41
Speaker 2: Paul A Monica from Baron's joined us this day to
37:43
Speaker 2: talk about the state of companies surrounding the crypto market. Paul,
37:46
Speaker 2: appreciate you educating us this week, and we'll talk to
37:49
Speaker 2: you again soon.
37:50
Speaker 3: Thanks. I'm a good weekend, guess.
37:52
Speaker 2: Markets in mixed territory. As we close in on the
37:55
Speaker 2: noon hour here, NASDAC up three quarters of one percent,
37:58
Speaker 2: the SMP up four tenths percent. Now currently off one
38:02
Speaker 2: third of a percent. That's all the time we have
38:04
Speaker 2: for this week. Have a fantastic weekend. We'll be right
38:06
Speaker 2: back at it on Monday. Folks, have a great weekend.