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Tech Is Carrying the Market Again · The Financial Exchange Show

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  Speaker 1: is the Financial Exchange with Chuck Zotta and Mark Vandetti.
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  Speaker 2: It's Chuck, Mark, and Tucker with you here. And again,
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  Speaker 2: relatively quiet overall news day as far as scheduled releases.
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  Speaker 2: We get some EIA data coming out at around 10.30 a.m.
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  Speaker 2: That's going to tell us a little bit about what
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  Speaker 2: we're sitting on as far as crude oil products, things
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  Speaker 2: like that. It's something we've been monitoring all year because... Well,
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  Speaker 2: oil's kind of been important all year. Other than that,
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  Speaker 2: we get Fed minutes at 2 p.m. I can't imagine
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  Speaker 2: we're going to get anything shocking inside of them, but
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  Speaker 2: we'll see. And earnings, pretty quiet today. Tomorrow we start
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  Speaker 2: to kick into Q3 earnings. We got Pepsi, Progressive, and
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  Speaker 2: Delta reporting. BlackRock on Friday. But really, earnings aren't kicking
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  Speaker 2: off in earnest until... Not even next week. It's really
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  Speaker 2: the two weeks after that you kind of get into
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  Speaker 2: the heavier items. So I think overall, it's something where, yeah,
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  Speaker 2: it's a pretty quiet week as far as the schedule
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  Speaker 2: of things out there. But you still have markets that
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  Speaker 2: are moving quite a bit. In particular, what we're seeing
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  Speaker 2: in bonds is nothing short of.
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  Speaker 3: Concerning, I think.
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  Speaker 2: Equities down a little bit today as well. Again, I
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  Speaker 2: think that the piece on equities that is challenging right
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  Speaker 2: now is, it's exactly what this Wall Street Journal piece,
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  Speaker 2: the headline is, the S & P 500 hits a
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  Speaker 2: new record high powered by tech and not much else.
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  Speaker 2: And basically what you have, the S & P yesterday
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  Speaker 2: hit a new all-time high intraday. it closed at, I believe,
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  Speaker 2: a new all-time high as well. Or were we just
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  Speaker 2: shy of it? I can't remember. No, we closed at
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  Speaker 2: a new all-time high as well. And so you look
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  Speaker 2: at it and you're like, wow, this is a great market.
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  Speaker 2: But the average S & P 500 stock has not
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  Speaker 2: had a good run the last few months in particular.
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  Speaker 2: And even this year, it's been messy. You take a
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  Speaker 2: look just on a sector-by-sector basis. at how things have
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  Speaker 2: performed this year. And it's kind of been a tale of,
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  Speaker 2: I mean, honestly, it's been really a tale of like
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  Speaker 2: a couple different markets as far as what we've seen.
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  Speaker 2: I think kind of two markets. The first three, four
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  Speaker 2: months of the year, if you look through the end
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  Speaker 2: of March, I'm looking through March 30th, best performing sector
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  Speaker 2: for the first quarter, No surprise, it was energy, because
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  Speaker 2: energy was basically everything then. Energy was up 39%. Tech,
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  Speaker 2: on the other hand, was down 11% at that point
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  Speaker 2: for the year. And tech, by the way, at that
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  Speaker 2: point was the second worst performing sector. The only one
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  Speaker 2: that was worse at that point was consumer discretionary. So
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  Speaker 2: it was... Tech getting hammered, consumer discretionary, think of the
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  Speaker 2: biggest companies in there. And when you look at, you know,
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  Speaker 2: kind of who makes up that sector, biggest companies in there,
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  Speaker 2: Amazon and Tesla. So you can make it, you know,
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  Speaker 2: kind of a whole mag seven struggle to start the year.
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  Speaker 2: If you now go since, let's call it 4-1 of 2026,
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  Speaker 2: and look at how things have performed since then, the
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  Speaker 2: best performing sector in the last six months and a week,
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  Speaker 2: Tech up 50%. Now, most of that was concentrated in
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  Speaker 2: that April and May run-up of semiconductors. By the end
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  Speaker 2: of April, tech was up 45%, so it's basically flat
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  Speaker 2: with a slight upward twinge since then. And other than that,
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  Speaker 2: the next best performing sector is, let's see, what is
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  Speaker 2: the next best one here?
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  Speaker 3: Here we go.
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  Speaker 2: Next best performing one is healthcare up 14%. The only
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  Speaker 2: other one up more than 10% in the last six
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  Speaker 2: plus months is financials, which are up 10.01. So you
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  Speaker 2: look at the full year to date picture then to
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  Speaker 2: bring it all together. Energy is up about 45% for
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  Speaker 2: the year. Tech's up 40. And nothing else is up
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  Speaker 2: more than 12. And in fact, you have four sectors
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  Speaker 2: that are in the red for the year. Communication services
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  Speaker 2: down about 4%. You've got consumer discretionary still down about five.
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  Speaker 2: You've got utilities down about one and a half. And
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  Speaker 2: is that four? We've got communication services. Oh, I missed financials.
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  Speaker 2: Financials down a quarter percent. So it just is this
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  Speaker 2: market where the vast majority of stocks are doing okay
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  Speaker 2: to slightly up. But tech and energy have been ripping.
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  Speaker 2: Energy is such a small part of the market. And energy, remember,
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  Speaker 2: has been basically flat since the first quarter. So for
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  Speaker 2: the last six months, it's been tech and not much
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  Speaker 2: else driving the ship, which is why if you own
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  Speaker 2: anything else in this market, you look at it and
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  Speaker 2: you're like, man, I feel bad. Because in particular, if
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  Speaker 2: you take a look in the last, call it two months,
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  Speaker 2: let's say since the start of August, start of August,
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  Speaker 2: You have, nope, that is 1.8, not 8.1. We don't
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  Speaker 2: want to do that. Since the start of August, tech
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  Speaker 2: is up 15%. Energy is up 7%. You've got communication
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  Speaker 2: services and healthcare up 3%. Every other sector is negative
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  Speaker 2: in the last two months, which is why if you
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  Speaker 2: own stocks basically throughout the S & P 500 or
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  Speaker 2: a lot of stuff that isn't semiconductors and mag 7%,
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  Speaker 2: You probably feel like crap today. Now, if you just
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  Speaker 2: are an index buyer and you buy the index, you're like, hey,
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  Speaker 2: this is great. The S & P is up 14%
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  Speaker 2: almost year to date.
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  Speaker 4: Great.
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  Speaker 2: It's a pretty good year. But if you own stuff
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  Speaker 2: under the hood, it hasn't been a pretty ride.
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  Speaker 5: Yeah, the point about stocks hitting an all-time high, that's
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  Speaker 5: not impressive. Stocks trend up because earnings trend up because
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  Speaker 5: economic growth trends up. You could put a broomstick in
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  Speaker 5: the White House or at the Fed if they just
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  Speaker 5: followed a simple rule, a monetarist might say. And you would,
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  Speaker 5: assuming you didn't really screw things up, you wouldn't mess
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  Speaker 5: with the trend. Think about the very different presidents we've had,
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  Speaker 5: the very different monetary policy regimes we've had. The 70s
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  Speaker 5: were a disaster for monetary policy, most people agree, at
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  Speaker 5: least in retrospect. The trend in growth didn't change in
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  Speaker 5: the 70s. Well, productivity, I shouldn't say that. Productivity went down.
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  Speaker 5: That did bring growth down. But otherwise, and that was
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  Speaker 5: due to factors way beyond policy, very little in trend
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  Speaker 5: growth has changed in, I'm going to say, the last
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  Speaker 5: 80 years, post-war period, roughly. Therefore, very little, don't get
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  Speaker 5: me wrong, there have been exceptional decades for equities, most
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  Speaker 5: of the 80s, most of the 90s. There have been
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  Speaker 5: disappointing decades for equities. But a trend is, by definition,
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  Speaker 5: a longer span. Under every president, under every Fed chair,
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  Speaker 5: stocks have gone up. So on any given day, you
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  Speaker 5: drop yourself in the middle of any decade, in any era,
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  Speaker 5: and you would be safe in guessing that stocks are
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  Speaker 5: hitting all-time highs today. I'm not saying we shouldn't be
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  Speaker 5: grateful for that. We should. Economic growth is a miracle
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  Speaker 5: because for centuries, as you know, it did not happen.
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  Speaker 5: You basically lived on a subsistence.
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  Speaker 1: Level.
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  Speaker 5: Yet thank you levels yeah thank you uh... that was
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  Speaker 5: the story of mankind for eons so i'm not downplaying
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  Speaker 5: the miracle of economic growth the industrial revolution center but
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  Speaker 5: it's just not at the media we says that it
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  Speaker 5: is you could tell it it gets to me a
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  Speaker 5: little bit because yet guys that's what it that's what
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  Speaker 5: upward trend looks like it should on average stocks go
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  Speaker 5: up every day gain is small of the the the advantage.
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  Speaker 2: Of but on a on average stocks don't go up
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  Speaker 2: every day.
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  Speaker 5: The average return to equities better.
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  Speaker 2: Way of phrasing that makes it sounds like stocks go
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  Speaker 2: up every day.
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  Speaker 5: They they don't okay well what i said was typically
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  Speaker 5: go up.
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  Speaker 2: About 50 of the days yeah but it just happens
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  Speaker 2: to be that the gains tend to be a little
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  Speaker 2: bit bigger than the.
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  Speaker 5: Loss like 50.01 yeah i would call that yeah i'm
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  Speaker 5: sorry i was i was uh playing fast and loose
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  Speaker 5: with the english language but Yeah, okay. So stocks go
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  Speaker 5: up a little bit more often than they go down
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  Speaker 5: on a daily basis, quite a bit more often on
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  Speaker 5: a monthly basis, though it's not a slam dunk, and
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  Speaker 5: a lot more often on an annual basis. That is
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  Speaker 5: a miracle, but getting excited over new trends, over new,
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  Speaker 5: excuse me, all-time highs, it's great because we all have 401ks,
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  Speaker 5: but it's a little misplaced.
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  Speaker 2: Mark, when we look at that, kind of that last,
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  Speaker 2: you know, 80-year period since World War II, or even
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  Speaker 2: the 100-year period since modern markets have existed, what types
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  Speaker 2: of things would cause that long-term growth trend to deviate?
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  Speaker 2: If I had the answer to that, boy. Let me
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  Speaker 2: ask you the other one. What caused... this to start
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  Speaker 2: like what are the.
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  Speaker 5: Fact the answer to that so i'm not being fled
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  Speaker 5: oh no i know but it's so we don't know
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  Speaker 5: because there are plenty of economies where this is not
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  Speaker 5: the case even even there are there are economic miracles
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  Speaker 5: growth miracles us uh... southeast asia we're actually we're no
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  Speaker 5: we're longer-term southeast asian cut uh... korea singapore taiwan these
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  Speaker 5: are growth miracles.
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  Speaker 2: Even those are, you know, a few decades in the making,
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  Speaker 2: not a hundred years.
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  Speaker 5: Explosive growth, mid-single-digit real growth for decades. What caused that?
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  Speaker 5: Researchers don't agree. It seems to be more capital-driven there, investment-driven,
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  Speaker 5: than it was here. Most economists would agree, though, and
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  Speaker 5: the guy who won the Nobel Prize a couple years ago,
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  Speaker 5: the guys, and I use that term literally, they happen
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  Speaker 5: to be men, they point out that there's a very
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  Speaker 5: high correlation between institutions that favor things like rule of law,
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  Speaker 5: a government that doesn't play favorites, I mean.
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  Speaker 1: Sure. More or less.
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  Speaker 5: And stability. Countries that have adopted institutions like that, not
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  Speaker 5: necessarily because they did it consciously. Some were endowed with it.
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  Speaker 5: The northern colonies here in the U.S. were endowed with
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  Speaker 5: good institutions. The southern colonies in the U.S. were not
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  Speaker 5: endowed with good institutions. institutions they were more flavor of
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  Speaker 5: the more favorable to holding enslaved people and forcing them
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  Speaker 5: to labor for you and stuff like that the south
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  Speaker 5: had used to have a reputation it doesn't anymore is
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  Speaker 5: being backwards short this may be even before you're we're
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  Speaker 5: not that far apart sir generation upon age were far
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  Speaker 5: enough apart that when i was going up the south
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  Speaker 5: was backwards It no longer is. Now Charlotte is a
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  Speaker 5: gleaming Charlotte, Atlanta.
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  Speaker 2: I mean, you look at like a lot of the
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  Speaker 2: fastest growing parts of the country. It's the southeast and southwest.
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  Speaker 5: There's a word for it. Convergence is the word there
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  Speaker 5: because our institutions converged. But for years, the south was
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  Speaker 5: viewed as backwards because they had crappy institutions. So institutions matter, Chuck.
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  Speaker 5: Beyond that, economists have a hard time agreeing.
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  Speaker 2: Let's take a quick break here. When we return. Let's
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  Speaker 2: talk a little bit about what's going on in energy markets. Also,
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  Speaker 2: we've got a nice, well, I don't know if it's nice.
• 12:13
  Speaker 2: We've got a piece from the Wall Street Journal about
• 12:16
  Speaker 2: Treasury Secretary Scott Besson that, well, isn't actually the nicest piece,
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  Speaker 2: but we'll discuss after this.
• 12:23
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• 13:16
  Speaker 2: I had a nice little training run yesterday, might I add.
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  Speaker 3: Yeah. I did.
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  Speaker 6: You going to break your record or what?
• 13:24
  Speaker 2: I'm working on it. I did six minutes or whatever.
• 13:26
  Speaker 2: So last year I did and I was I was
• 13:28
  Speaker 2: 1928 last year.
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  Speaker 3: That's my one.
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  Speaker 2: It's a 616 pace this year. I'm looking to go 1830,
• 13:31
  Speaker 2: which is a 557 pace. So we're at it. We're
• 13:41
  Speaker 2: going to try to move it a little bit, but
• 13:46
  Speaker 2: we'll see what happens. So a couple of things I
• 13:49
  Speaker 2: want to talk about. First, quick things. Diesel prices are
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  Speaker 2: causing problems for farmers. We know this. This is not
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  Speaker 2: anything new. The piece that I do want to add
• 14:00
  Speaker 2: that is new and worth watching, there is a tropical
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  Speaker 2: storm that is now formed in the Gulf of Mexico
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  Speaker 2: that is hanging out right off the camp.
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  Speaker 5: What's the name of that storm? It's an exotic name.
• 14:12
  Speaker 2: Isaias. I think that's how it's pronounced. Or maybe it's Isaias.
• 14:16
  Speaker 5: I wasn't going to attempt it. Okay, thank you. So
• 14:20
  Speaker 5: we're going to hear that name potentially.
• 14:21
  Speaker 2: Yes, I believe it's Isaias. It's I-S-I-A-I-S-A-I-A-S.
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  Speaker 1: Okay.
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  Speaker 4: Thanks.
• 14:27
  Speaker 2: I'm working with it.
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  Speaker 5: I didn't mean to put you on the spot, but
• 14:30
  Speaker 5: we're going to be hearing it.
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  Speaker 2: No, it's fine. So here's the deal. Earlier this week
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  Speaker 2: on Monday, it was looking like there was a 70%
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  Speaker 2: chance it was going to turn into a tropical storm.
• 14:39
  Speaker 2: It subsequently has. We're now at a point where, after
• 14:43
  Speaker 2: its initial formation, it was, okay, maybe this thing will
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  Speaker 2: get up to like Cat 1, and it basically is
• 14:49
  Speaker 2: tracking right towards New Orleans originally. which would be bad
• 14:53
  Speaker 2: because there's a ton of refining capacity right around New Orleans.
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  Speaker 2: What we've seen overnight is that it's now tracking to
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  Speaker 2: be a stronger storm potentially, maybe getting up into the
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  Speaker 2: Cat 2 or 3 range, but is pushing a little
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  Speaker 2: bit east, which would be for energy prices a break
• 15:12
  Speaker 2: because if this refining capacity gets hit, you've got all
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  Speaker 2: kinds of problems with inventories as tight as they are.
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  Speaker 2: But it still is a few days out. This is
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  Speaker 2: going to likely make landfall somewhere in the Friday night,
• 15:24
  Speaker 2: Saturday morning range is what it looks like. And so
• 15:27
  Speaker 2: the next 24 to 48 hours are going to be
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  Speaker 2: big in terms of determining what happens to U.S. energy markets.
• 15:32
  Speaker 2: Here's the problem. Diesel inventories are really low. So much
• 15:36
  Speaker 2: to the point when ExxonMobil's Joliet, Illinois refinery went offline
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  Speaker 2: for five days a couple weeks ago, diesel prices in
• 15:43
  Speaker 2: the Midwest spiked 40 to 50 cents across Midwest states.
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  Speaker 2: They've subsequently reversed. that refinery is 250,000 barrels a day,
• 15:54
  Speaker 2: that Joliet, Illinois one. The refining capacity in and around
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  Speaker 2: New Orleans is, depending on the source you look at,
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  Speaker 2: between two and a half and three million barrels a day.
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  Speaker 2: So it's 10 to 12 times the scale of that
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  Speaker 2: Joliet one. And so if you were to see that
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  Speaker 2: capacity disrupted for any period of time, you're talking about
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  Speaker 2: potentially huge impacts on the price of diesel simply because
• 16:21
  Speaker 2: you have a ton of capacity coming offline then. So
• 16:24
  Speaker 2: we'll see how this develops. The ideal thing, there's a
• 16:28
  Speaker 2: ton of wind shear in the northern Gulf right now
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  Speaker 2: that could end up weakening this storm before it gets
• 16:34
  Speaker 2: to the coast, which would be ideal. Otherwise, from an
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  Speaker 2: energy perspective, you want to see this thing drift east,
• 16:42
  Speaker 2: There's no place where a hurricane impact is good for anyone.
• 16:46
  Speaker 2: But if you're trying to minimize the energy impact, you
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  Speaker 2: want this thing drifting more towards the panhandle and less
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  Speaker 2: towards the New Orleans side of things and then towards Houston.
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  Speaker 2: The worst case would be if this thing hit halfway
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  Speaker 2: between New Orleans and Houston and all those refineries end
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  Speaker 2: up impacted. But we'll see how things develop there. So
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  Speaker 2: watch this over the next couple days. Again, it's concerning.
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  Speaker 2: but it's not necessarily guaranteed to, you know, be a
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  Speaker 2: huge issue for energy prices. We'll see what happens. Peace
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  Speaker 2: in the wall street journal day inside Besson's treasury, tension, turnover,
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  Speaker 2: and unmet economic goals. Uh, it's a whole bunch of
• 17:23
  Speaker 2: things about how Scott Besson, uh, has, you know, said
• 17:26
  Speaker 2: he wanted to do things X, Y, and Z and hasn't.
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  Speaker 2: And then it's a bunch of stories about him yelling
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  Speaker 2: at people and being unhappy about what's going on. Um,
• 17:37
  Speaker 2: I generally discount the actual happenings in a lot of
• 17:40
  Speaker 2: these stories just because I'm pretty sure if you look
• 17:43
  Speaker 2: at most people who operate at the highest levels of anything,
• 17:47
  Speaker 2: whether it's in government, in business, in sports, they're all
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  Speaker 2: kind of nuts. You have to be in order to, like,
• 17:53
  Speaker 2: you have to live not a very nice lifestyle to
• 17:58
  Speaker 2: get to that point. I mean, think about the things that,
• 17:59
  Speaker 2: you know, come out about, like, Michael Jordan and how
• 18:01
  Speaker 2: competitive he was and, you know, Tom Brady. Like, it's, like,
• 18:05
  Speaker 2: These are people that are kind of singularly focused on
• 18:08
  Speaker 2: one thing and doesn't make them inherently nice people. So
• 18:11
  Speaker 2: I generally believe that when you look at people at
• 18:13
  Speaker 2: the top of any food chain out there in the world,
• 18:17
  Speaker 2: I don't really expect them to be nice. I wish
• 18:20
  Speaker 2: that it were different, but it's just kind of how
• 18:22
  Speaker 2: it is. So I kind of discount a lot of
• 18:25
  Speaker 2: these things because I think that you'd probably find this
• 18:28
  Speaker 2: just about anywhere at the top levels of just about anything.
• 18:32
  Speaker 2: Not saying it's good, I'm just saying that it is.
• 18:34
  Speaker 2: What I do find interesting is this is the second piece,
• 18:36
  Speaker 2: one in Bloomberg and now this in the Wall Street
• 18:38
  Speaker 2: Journal this week, talking about how Besson hasn't done a
• 18:40
  Speaker 2: good job on his key things in making him look bad.
• 18:43
  Speaker 2: And I do wonder, why are these coming out now? Like,
• 18:47
  Speaker 2: what's the reason for these today? The other piece that
• 18:50
  Speaker 2: I just need to read, because I find this kind
• 18:51
  Speaker 2: of funny. When hecklers from the liberal group Code Pink
• 18:55
  Speaker 2: interrupted the Treasury Secretary at a Washington restaurant in December...
• 18:58
  Speaker 2: and criticized the Trump administration's economic sanctions policies, Besson called
• 19:02
  Speaker 2: them ignorant and erupted at the owner of the restaurant
• 19:04
  Speaker 2: for not removing them. According to the owner, and also
• 19:08
  Speaker 2: a nearby diner, so this is, you know, multiple sources,
• 19:11
  Speaker 2: Besson then spit in his own food before leaving. That'll
• 19:16
  Speaker 2: show them. Why would you spit in your own food
• 19:19
  Speaker 2: and then leave? I was gonna eat that. They weren't
• 19:22
  Speaker 2: gonna reuse it for someone anyways.
• 19:27
  Speaker 3: I don't know.
• 19:28
  Speaker 2: Let's take a quick break. When we come back, Todd
• 19:30
  Speaker 2: Lutzky joins us for Ask Todd.
• 19:39
  Speaker 1: Like us on Facebook and follow us on Twitter at
• 19:42
  Speaker 1: TFE Show. Breaking business news is always first, right here
• 19:47
  Speaker 1: on the Financial Exchange Radio Network. Time now for Wall
• 19:52
  Speaker 1: Street Watch, tracking the stocks, the data, and the headlines
• 19:55
  Speaker 1: driving markets so far today, right here on the Financial
• 19:58
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• 19:59
  Speaker 6: Markets pulling back from yesterday's record highs after the 10-year
• 20:02
  Speaker 6: and 30-year Treasury yields rose to their highest level since 2002,
• 20:05
  Speaker 6: ahead of the Fed meeting minutes due out this afternoon
• 20:09
  Speaker 6: at 2 o'clock. Right now, the Dow is down 1%
• 20:11
  Speaker 6: or 512 points lower. S & P 500 is down
• 20:16
  Speaker 6: about two-thirds of a percent. NASDAQ down three-quarters of a
• 20:19
  Speaker 6: percent or 203 points off. Russell 2000 is down about 1.2%.
• 20:21
  Speaker 6: Ten-year Treasury yield is up four basis points at 5.316%.
• 20:23
  Speaker 6: Crude oil is up half a percent, trading at $ 89,
• 20:25
  Speaker 6: while Brent is at $ 101 a barrel. SpaceX shares are
• 20:37
  Speaker 6: down 2%, following reports that the rocket and AI company
• 20:40
  Speaker 6: was looking to raise $ 40 billion to buy chips from NVIDIA. Meanwhile,
• 20:45
  Speaker 6: Constellation Brands is slightly dipping after the beer maker logged
• 20:49
  Speaker 6: a higher profit and revenue in the previous quarter, driven
• 20:52
  Speaker 6: by strong beer sales at bars and restaurants amid slower
• 20:55
  Speaker 6: sales in grocery and liquor stores. However, beer depletions declined
• 20:59
  Speaker 6: in the quarter, causing worries about underlying demand. Elsewhere, LG
• 21:03
  Speaker 6: Electronics said plunged more than 10% after it warned that
• 21:07
  Speaker 6: third quarter profit would come in well below forecast. FanDuel
• 21:10
  Speaker 6: parent company Flutter Entertainment was upgraded by Citi to buy
• 21:14
  Speaker 6: from Neutral, citing overblown concerns. Shares are down by 1%
• 21:18
  Speaker 6: and jean maker Levi Strauss will report earnings after today's
• 21:25
  Speaker 6: closing bell. I'm Tucker Silva and that is Wall Street Watch.
• 21:31
  Speaker 1: This is Ask Todd on the Financial Exchange Radio Network.
• 21:35
  Speaker 1: If you have an existing estate plan or are in
• 21:37
  Speaker 1: the market for one, Todd Lutzke is here to answer
• 21:39
  Speaker 1: your questions and help you plan for a later life.
• 21:42
  Speaker 1: Ask Todd is presented by Cushing and Dolan, serving Massachusetts
• 21:45
  Speaker 1: and New England for more than 35 years, helping families
• 21:48
  Speaker 1: with estate and tax planning, Medicaid planning, and probate law.
• 21:52
  Speaker 1: Visit CushingDolan.com. Now, here's Todd Lutzke.
• 21:58
  Speaker 2: As promised, we are now joined by Todd Lutzke from
• 22:01
  Speaker 2: the law firm of Cushing and Dolan. We got the
• 22:04
  Speaker 2: phone lines cleared because Ask Todd is your chance to
• 22:09
  Speaker 2: ask Todd your questions. 888-205-2263. That is the number to
• 22:16
  Speaker 2: call for your estate planning questions to be answered by Todd. Again,
• 22:21
  Speaker 2: that number is 888-205-2263. 888-205-2263. We can normally get through
• 22:27
  Speaker 2: maybe two or three of your questions. If we really hustle,
• 22:31
  Speaker 2: we can do four, but we got to really push
• 22:33
  Speaker 2: it to do that. So get calling early to make
• 22:35
  Speaker 2: sure we get to you. 888-205-2263 is the number.
• 22:37
  Speaker 3: Again, 888-205-2263.
• 22:38
  Speaker 6: Mr.
• 22:38
  Speaker 2: Lutzky, how are you doing today? I am never better today.
• 22:42
  Speaker 2: How are you doing? I'm pretty good.
• 22:43
  Speaker 6: Oh.
• 22:53
  Speaker 2: I'm pretty good.
• 22:54
  Speaker 3: Well, pretty good's not bad.
• 22:56
  Speaker 2: Maybe it's the spooky season that's here, but I've been
• 23:01
  Speaker 2: seeing lots of spiders lately.
• 23:03
  Speaker 3: You have?
• 23:04
  Speaker 2: What do you call a spider with ten eyes?
• 23:07
  Speaker 3: I have no idea.
• 23:09
  Speaker 2: A spider.
• 23:13
  Speaker 3: Oh, funny.
• 23:15
  Speaker 2: Todd, let's talk a little bit about gifting. Because we
• 23:20
  Speaker 2: are at the point of time where people start thinking
• 23:22
  Speaker 2: about holiday gifting plans and things like that. And sometimes
• 23:27
  Speaker 2: people say, hey, look, I want to gift an asset
• 23:30
  Speaker 2: to a child because of reasons. What problems can people
• 23:37
  Speaker 2: run into when making gifts of assets?
• 23:41
  Speaker 3: You know, the show would have to be like a
• 23:44
  Speaker 3: 10-hour show.
• 23:45
  Speaker 2: We can't do that.
• 23:46
  Speaker 3: No one would listen.
• 23:46
  Speaker 7: That's true. But just to make the point, because it's
• 23:50
  Speaker 7: a simple question, Chuck, I get it.
• 23:52
  Speaker 4: Yeah.
• 23:53
  Speaker 7: But it's amazing what's wrapped up in that question when
• 23:57
  Speaker 7: you know the things that I know, what I'm thinking about,
• 24:00
  Speaker 7: what could be wrapped up in it. There's so much
• 24:02
  Speaker 7: to think about, right? When we say gifting assets, my
• 24:04
  Speaker 7: first question is what kind of asset? Is it going
• 24:06
  Speaker 7: to be a house, a rental property, a vacation home?
• 24:08
  Speaker 7: Or is it going to be a stock portfolio?
• 24:10
  Speaker 3: Or is it going to be cash? Cash.
• 24:12
  Speaker 7: I mean, all of those things matter when you gift
• 24:16
  Speaker 7: from a tax perspective. But maybe the easier answer is,
• 24:19
  Speaker 7: and I think your question was, you know, what could
• 24:21
  Speaker 7: go wrong with that? Certainly there's plenty of tax things
• 24:27
  Speaker 7: that could go wrong with that. But let's forget the
• 24:31
  Speaker 7: tax things for a minute. Remember, when you give assets away,
• 24:35
  Speaker 7: if you give them away outright to a child, which
• 24:39
  Speaker 7: I think you're suggesting, what could go wrong? Well, One,
• 24:43
  Speaker 7: you don't own it anymore. You don't control it anymore.
• 24:45
  Speaker 7: You've now subjected it to that kid's creditors. You've subjected
• 24:49
  Speaker 7: it to that kid's divorce if that comes along down
• 24:52
  Speaker 7: the line. It's now going to be included in that
• 24:56
  Speaker 7: kid's estate for estate tax purposes.
• 24:58
  Speaker 3: You've lost a step up in basis.
• 25:00
  Speaker 7: I know that's a tax piece. I didn't mean to
• 25:01
  Speaker 7: switch that in there, but you've lost that. It's growing
• 25:06
  Speaker 7: inside their estate. So, I mean, those are things that
• 25:10
  Speaker 7: I think could go wrong and maybe there's a better
• 25:12
  Speaker 7: way to give away. Again, forget what kind of asset.
• 25:16
  Speaker 7: That's a whole song for another day. But if you've
• 25:19
  Speaker 7: decided you want to make the gift, I hesitate to
• 25:24
  Speaker 7: just dump it in the kid's name. Why not set
• 25:27
  Speaker 7: up a gifting trust where you can control it for
• 25:30
  Speaker 7: the kid and grandkids and have generation-skipping tax benefits, have
• 25:35
  Speaker 7: it grow estate tax-free from those kids, protect it from
• 25:38
  Speaker 7: their creditors. I mean, way better ways to make gifts
• 25:42
  Speaker 7: of whatever asset you want to give than just outright.
• 25:48
  Speaker 1: Interesting.
• 25:49
  Speaker 2: Again, Todd is available to answer your questions live on
• 25:53
  Speaker 2: air right now. 888-205-2263 is the number. Again, usually we
• 26:00
  Speaker 2: can get through a couple of these questions, so make
• 26:02
  Speaker 2: sure you get calling so we can get to you.
• 26:04
  Speaker 3: 888-205-2263.
• 26:05
  Speaker 2: We're going to take a quick break, but when we
• 26:09
  Speaker 2: come back, we are going to get right to your
• 26:12
  Speaker 2: questions with Todd. That phone number again is 888-205-2263. One
• 26:15
  Speaker 2: more time, it's 888-205-2263.
• 26:24
  Speaker 1: Ask Todd with Todd Lutzke, every Wednesday at 10.30, only
• 26:28
  Speaker 1: here on the Financial Exchange Radio Network. You're listening to
• 26:34
  Speaker 1: Ask Todd with Todd Lutzke on the Financial Exchange Radio Network.
• 26:46
  Speaker 2: Still a bit of room on the phone lines for
• 26:48
  Speaker 2: your estate planning questions for Todd Lutzky. That phone number
• 26:51
  Speaker 2: is 888-205-2263. Again, that phone number is 888-205-2263. So you
• 26:54
  Speaker 2: can ask Todd your estate planning questions right now.
• 26:58
  Speaker 4: 888-205-2263.
• 26:58
  Speaker 2: Let's go to Steve in Falmouth. Steve, what's your question
• 27:02
  Speaker 2: for Todd Lutzky? Hi, Todd.
• 27:13
  Speaker 4: I have an irrevocable trust with the ability to change
• 27:17
  Speaker 4: the trustee. Actually, you did it for me. And I'm
• 27:20
  Speaker 4: a resident of Massachusetts, but I'm going to change my
• 27:22
  Speaker 4: residency to Florida. Okay. Do I have to change the trust?
• 27:27
  Speaker 3: So, great question, folks. A lot of people do this.
• 27:32
  Speaker 7: I mean, I probably kicked more people out of the
• 27:34
  Speaker 7: state than I'm aware of, and just mainly because of
• 27:36
  Speaker 7: tax purposes lots of times.
• 27:38
  Speaker 3: But nowadays, it's a little better.
• 27:39
  Speaker 6: So.
• 27:40
  Speaker 7: The fact that you did this irrevocable trust in Massachusetts,
• 27:44
  Speaker 7: number one, means you can move to Florida.
• 27:47
  Speaker 3: You do not need to change the trust. The trust
• 27:51
  Speaker 3: can go with you.
• 27:53
  Speaker 7: The situs of the trust says it's governed by the
• 27:57
  Speaker 7: laws of Massachusetts, which is fine. I mean, could you
• 27:59
  Speaker 7: change the situs to be governed by the laws of Florida?
• 28:02
  Speaker 3: You could. I don't know that it's required or needed.
• 28:07
  Speaker 3: And the nice part.
• 28:08
  Speaker 7: About you being able to move there and knowing you've
• 28:11
  Speaker 7: done this irrevocable trust, so let me ask you this.
• 28:13
  Speaker 7: How long ago did you do it?
• 28:16
  Speaker 4: Oh, boy, about eight, nine years ago.
• 28:19
  Speaker 3: Yeah, so here's the real benefit, right?
• 28:21
  Speaker 7: What's in that trust is already completely sort of protected
• 28:26
  Speaker 7: or cooked from the cost of long-term care, right? It's
• 28:29
  Speaker 7: beyond the five years. So moving, you would want to
• 28:34
  Speaker 7: make sure... that you don't have to reset the clock
• 28:38
  Speaker 7: when you move. And you don't because you don't have
• 28:42
  Speaker 7: to change the trust. You're not going to take anything
• 28:44
  Speaker 7: in and out. Now, having said that, I assume, are
• 28:49
  Speaker 7: you married?
• 28:51
  Speaker 5: Yes.
• 28:53
  Speaker 7: And are you guys worth, do you have any other
• 28:56
  Speaker 7: assets in Massachusetts, like any real estate assets?
• 28:59
  Speaker 4: I have two houses in Massachusetts, and the house in
• 29:03
  Speaker 4: Florida I had put in the trust about three years ago.
• 29:06
  Speaker 2: Beautiful.
• 29:07
  Speaker 4: I don't know if that matters.
• 29:08
  Speaker 7: No, that's great. I'm glad it's in there. And so
• 29:12
  Speaker 7: that will be protected in another couple years. But the
• 29:14
  Speaker 7: homes that are in mass that are owned in the trust.
• 29:17
  Speaker 3: Are you keeping them?
• 29:21
  Speaker 4: Yes, I'm keeping them, yes.
• 29:22
  Speaker 7: And do you plan on becoming a Florida resident, you said, right?
• 29:26
  Speaker 7: You're going to move and actually try to be six
• 29:28
  Speaker 7: months and a day in Florida.
• 29:30
  Speaker 4: Exactly, yeah.
• 29:31
  Speaker 7: So there's a lot to think about when you change
• 29:33
  Speaker 7: your residency. I remember the seminar I did once called
• 29:36
  Speaker 7: So You Think You Changed Your Residency. Well, it's not
• 29:40
  Speaker 7: always that easy. So let me just ask you, round numbers.
• 29:44
  Speaker 7: You said you're married. Is your estate, how much are
• 29:47
  Speaker 7: these homes worth?
• 29:48
  Speaker 4: Total, a little over $ 2 million, I'd say.
• 29:53
  Speaker 3: The homes, right?
• 29:54
  Speaker 7: Yes. So here's the issue. Let's say you move. You
• 30:00
  Speaker 7: spend your six months and a day in Florida.
• 30:04
  Speaker 2: Good.
• 30:05
  Speaker 7: You change your voter registration. You change your driver's license.
• 30:09
  Speaker 7: You file your income tax returns using your Florida address.
• 30:14
  Speaker 7: If you don't have any mass source income, you stop
• 30:17
  Speaker 7: filing in mass. Or if you do, you file a
• 30:19
  Speaker 7: non-resident return in mass. These are all arrows in the
• 30:24
  Speaker 7: quiver to help you support your decision and your intent
• 30:29
  Speaker 7: to that you are a Florida resident, not a mass resident.
• 30:33
  Speaker 7: And by the way, you only need to be in Florida.
• 30:36
  Speaker 7: You only need to be out of Massachusetts six months
• 30:39
  Speaker 7: in a day. You don't need to be in Florida
• 30:42
  Speaker 7: six months in a day, just, just not, not here.
• 30:45
  Speaker 7: So that's helpful. One of the other things that you
• 30:48
  Speaker 7: should do, while I said earlier, you don't need to
• 30:51
  Speaker 7: change your irrevocable trust.
• 30:54
  Speaker 3: One thing you should.
• 30:55
  Speaker 7: Do is update your basic documents, the will, the health
• 31:00
  Speaker 7: care proxy, the power of attorney.
• 31:03
  Speaker 3: Those are state-specific.
• 31:05
  Speaker 7: And so we should probably get you new Florida documents,
• 31:09
  Speaker 7: which we can do, and get them set up so, again,
• 31:14
  Speaker 7: another arrow in the quiver to make you a Florida resident. Now,
• 31:18
  Speaker 7: all of that said, you also want to make sure
• 31:21
  Speaker 7: you avoid mass estate taxes.
• 31:23
  Speaker 3: Why not? I get it.
• 31:26
  Speaker 7: Well, if you own Massachusetts real estate, here's a little
• 31:31
  Speaker 7: trick not everybody knows. Massachusetts can tax non-residents.
• 31:38
  Speaker 3: Let me start.
• 31:39
  Speaker 7: Massachusetts can tax residents on tangible and intangible assets. So
• 31:46
  Speaker 7: that would be money and real estate. Massachusetts can tax non-residents, i.e. you,
• 31:58
  Speaker 7: not on intangible, but on tangible property.
• 32:02
  Speaker 3: What's that? Real estate.
• 32:04
  Speaker 7: So you have two pieces of property still in Massachusetts.
• 32:08
  Speaker 7: They would tax you on that in mass, unless we
• 32:12
  Speaker 7: put it into an LLC. By transferring this real estate
• 32:17
  Speaker 7: in mass into an LLC, which means it would come
• 32:20
  Speaker 7: out of the trust into an LLC and the shares
• 32:24
  Speaker 7: would come back into the LLC. So we don't disrupt
• 32:27
  Speaker 7: your five year waiting period. It's still protected from the
• 32:31
  Speaker 7: nursing home, but now you've converted a tangible item, real
• 32:37
  Speaker 7: estate into stock, which is now intangible and no longer
• 32:42
  Speaker 7: taxable in mass. So that's a little something extra to
• 32:44
  Speaker 7: think about. You probably got way more than you were expecting.
• 32:48
  Speaker 7: But folks, that's a great question, not only for you,
• 32:53
  Speaker 7: but also for everybody else that's listening, that's thinking, you know,
• 32:57
  Speaker 7: am I in Florida? Not a bad place to retire. Folks,
• 33:03
  Speaker 7: that's a great planning question. But when we're doing our planning,
• 33:06
  Speaker 7: lots of times we run into gifting and whether or
• 33:10
  Speaker 7: not gifting should be a part of our estate plan.
• 33:14
  Speaker 7: Seems like an easy thing to do. It's probably one
• 33:17
  Speaker 7: of the most complicated. You need to think about what
• 33:20
  Speaker 7: to gift, how to gift it. Do I want to
• 33:23
  Speaker 7: put it in kids' names? Do I want to set
• 33:24
  Speaker 7: up irrevocable trust? Hey, do I want to give away
• 33:28
  Speaker 7: stuff and still enjoy what I gave away? Is there
• 33:31
  Speaker 7: a way to do that? I mean, that seems like
• 33:33
  Speaker 7: a win-win.
• 33:34
  Speaker 3: It can be.
• 33:35
  Speaker 7: And that's the kind of trust that you would use
• 33:38
  Speaker 7: for that. Do I want to put my kid's name
• 33:41
  Speaker 7: on a house? How to joint held properties work? What
• 33:45
  Speaker 7: are the income and gift tax events associated with this,
• 33:50
  Speaker 7: not just the estate tax events? Folks, lots to understand,
• 33:54
  Speaker 7: and this guide is packed with information. Call and get it,
• 33:58
  Speaker 7: Making the Most of Gifting Assets, 866-848-5699, or LegalExchangeShow.com.
• 34:02
  Speaker 4: Again, 866-848-5699.
• 34:12
  Speaker 7: Or LegalExchangeShow.com, and you can even go to our Instagram page, CushingDolanPC,
• 34:17
  Speaker 7: for more information.
• 34:19
  Speaker 2: Todd, we were talking last segment about the problems with
• 34:24
  Speaker 2: gifting assets.
• 34:25
  Speaker 4: Yeah.
• 34:27
  Speaker 2: You said it would be an awfully lengthy conversation to
• 34:29
  Speaker 2: go through all of them, and I spared our listeners
• 34:32
  Speaker 2: from that lengthiness, which may or may not.
• 34:35
  Speaker 1: Be a word.
• 34:37
  Speaker 2: In what situations does it make sense to actually utilize
• 34:41
  Speaker 2: gifting as part of a comprehensive estate plan? Like when
• 34:45
  Speaker 2: does it become something that should be considered and how
• 34:49
  Speaker 2: should it be approached?
• 34:51
  Speaker 3: So again, long, long answer, but well, you've got two minutes.
• 34:56
  Speaker 3: That's great. Well, I'm going to, I'm going to run
• 34:58
  Speaker 3: through it's the fastest two minutes in football, I guess. Um,
• 35:01
  Speaker 3: so how do we do this?
• 35:03
  Speaker 7: Well, One, you got to start by looking at the
• 35:05
  Speaker 7: size of your estate, right? I mean, if you're in
• 35:07
  Speaker 7: Massachusetts and you're, you know, 5 million, and even though
• 35:10
  Speaker 7: you're slightly over the mass exemption of 4 million, I
• 35:13
  Speaker 7: say 4 million, but assuming you're married and you do it,
• 35:17
  Speaker 7: you can shelter up to 4 million with planning. If
• 35:20
  Speaker 7: you're single, you can only shelter 2 million. So, you know,
• 35:23
  Speaker 7: think about whether or not we want to make gifts.
• 35:25
  Speaker 7: I'm probably not jumping up and down about making gifts
• 35:29
  Speaker 7: just to save Massachusetts estate tax. Depending on how much
• 35:33
  Speaker 7: it is, I'm saving, of course. So the size of
• 35:35
  Speaker 7: the estate is where you need to begin.
• 35:37
  Speaker 3: It matters. Again, married versus single, look at the size
• 35:40
  Speaker 3: of the estate. It doesn't matter.
• 35:42
  Speaker 7: It's just that if you're married, understand that your exemption
• 35:45
  Speaker 7: can be doubled. So again, coming from a federal standpoint,
• 35:49
  Speaker 7: if I can shelter $ 30 million today, 15 each as
• 35:53
  Speaker 7: a married couple, 15 if I'm single, and I'm worth
• 35:58
  Speaker 7: $ 10 million, Well, maybe I'm not jumping up and down
• 36:01
  Speaker 7: about gifting assets for federal estate tax savings purposes, right?
• 36:06
  Speaker 7: That's a 40% haircut that I already am not paying
• 36:11
  Speaker 7: simply because I don't have enough assets. So that takes
• 36:14
  Speaker 7: a lot of us out of the equation. And again,
• 36:17
  Speaker 7: keep an eye on that. But another way of looking
• 36:20
  Speaker 7: at it is, you know, if I'm worth... 10, 12
• 36:25
  Speaker 7: million and I'm 60 and my assets could double multiple
• 36:27
  Speaker 7: times over the next 20 years, maybe, and I have
• 36:30
  Speaker 7: kids and grandkids, maybe I do want to set up
• 36:33
  Speaker 7: one of those gifting trusts that we talked about earlier.
• 36:35
  Speaker 7: And maybe I don't need to gift aggressively right now,
• 36:38
  Speaker 7: but I can move assets slowly into a gifting trust
• 36:41
  Speaker 7: over time using my $ 19, 000 present interest exclusion amount. and
• 36:46
  Speaker 7: let that build up over time and grow outside my
• 36:49
  Speaker 7: estate over time without disrupting my own overall estate plan.
• 36:52
  Speaker 3: So there's so many things to think about. That would
• 36:55
  Speaker 3: be a good reason to make a gift.
• 36:57
  Speaker 2: Mr. Lutzky, we appreciate you joining us. Thank you so much.
• 37:00
  Speaker 2: Always a pleasure.
• 37:01
  Speaker 3: Thank you.
• 37:02
  Speaker 1: This has been Ask Todd on the Financial Exchange Radio Network.
• 37:06
  Speaker 1: Ask Todd with Todd Lutzke has been presented by Cushing
• 37:08
  Speaker 1: & Dolan, serving Massachusetts and New England for more than
• 37:11
  Speaker 1: 30 years, helping families with estate and tax planning, Medicaid planning,
• 37:15
  Speaker 1: and probate law. Call 800-393-4001 or visit CushingDolan.com. The views
• 37:21
  Speaker 1: expressed in this segment are solely those of Cushing & Dolan.
• 37:23
  Speaker 1: Armstrong Advisory does not provide any legal or tax advice.
• 37:26
  Speaker 1: Please consult with your legal or tax advisor on such matters.
• 37:28
  Speaker 1: Cushing & Armstrong do not endorse each other and are
• 37:30
  Speaker 1: not affiliated.