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Why your electric bill keeps rising · The Financial Exchange Show

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Speaker 2: Good Mordan, welcome back to the Financial Exchange. It's at
1:13
Speaker 2: Tuesday here with Mike, Paul and Tucker. We've got markets
1:16
Speaker 2: in mixed territory, NASDAQ slightly up, down, SMP very slightly
1:21
Speaker 2: to the red. So we will keep you updated on
1:23
Speaker 2: where markets. And today we are staring down at government
1:27
Speaker 2: shut down in thirteen or so hours, assuming nothing gets
1:32
Speaker 2: dealt with between our elected officials. We released We got
1:39
Speaker 2: a release of jobs data this morning at ten am
1:42
Speaker 2: on the Joltz Report, the job openings labor Turnover survey
1:45
Speaker 2: that was about in line with expectations. And then we
1:48
Speaker 2: also received some consumer confidence data that was very slightly
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Speaker 2: below expectations. Any recap on the on the jobs data, Paul,
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Speaker 2: I mean, what do we need to know about the
2:00
Speaker 2: state of job, of hiring and openings right now? When
2:03
Speaker 2: it comes to labor market, what.
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Speaker 3: We're continuing to see is a very much a no hire,
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Speaker 3: no fire environment where we're not seeing a huge uptick
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Speaker 3: in layoffs or people being let go from their jobs.
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Speaker 3: But at the same point in time, there is a
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Speaker 3: tremendous amount of hiring and to that point, a lot
2:19
Speaker 3: of people are holding on to the jobs that they have.
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Speaker 3: We're not seeing a tremendous amount of mobility of people
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Speaker 3: quitting their job and taking a new position elsewhere.
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Speaker 2: So with that in mind, let's switch over to something
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Speaker 2: that people are pretty passionate about. I'm pretty upset about,
2:35
Speaker 2: which is electricity costs. Who's to blame what's actually happening here?
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Speaker 2: And we have two different pieces here. One says don't
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Speaker 2: blame AI or Trump. The other one says definitely blame AI.
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Speaker 2: So I guess let's kind of walk through each of
2:50
Speaker 2: the arguments because I kind of buy both. If you
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Speaker 2: want the real exact reason, why is your electricity price
2:58
Speaker 2: going up so dramatic grid right now? A big reason
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Speaker 2: is because of new demand from AI data centers. I
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Speaker 2: don't think there's much debate about that, right Like you
3:09
Speaker 2: are very quickly having a bunch of companies wanting more power. Yeah,
3:14
Speaker 2: our grid is set up in a way and our
3:15
Speaker 2: laws are set up in a way where you can't
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Speaker 2: quickly add supply to the grid, and so therefore prices
3:20
Speaker 2: are shooting through the roof. The author in the journal,
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Speaker 2: Mario Loyola, points out, Hey, a lot of this problem
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Speaker 2: with supply and why electricity costs so much in the
3:31
Speaker 2: first place is actually a result of policy, not of
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Speaker 2: practical you know, building requirements or the ability for us
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Speaker 2: to add generation. It has a lot to do with
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Speaker 2: the laws that are on the books. What does he
3:44
Speaker 2: highlight as a specific problem when it comes to supply
3:46
Speaker 2: side for electricity.
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Speaker 3: What's incredibly just hard to wrap your mind around is
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Speaker 3: just how difficult it is to expand out new supply
3:57
Speaker 3: side capacity. I mean the amount of red tape that
4:00
Speaker 3: is required to go through any expansion of the grid
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Speaker 3: in this country, and the way it's kind of regionally
4:06
Speaker 3: broken out. It's just extremely difficult. Where you're seeing a
4:10
Speaker 3: backlog and manufacturing of natural gas fire turbines with way
4:14
Speaker 3: times that are now extending three or more years.
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Speaker 1: And this is.
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Speaker 3: All really because of regulations that were put in place
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Speaker 3: to make it pretty difficult to kind of get these
4:25
Speaker 3: endeavors through.
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Speaker 1: Where you can.
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Speaker 2: It takes all different forms, right Like, some of these
4:28
Speaker 2: are red tape regulations on green energy requirements, you know
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Speaker 2: you have to have this much capacity here. Some of
4:35
Speaker 2: it is subsidies that exist, right we. I think even
4:38
Speaker 2: with the phase out of the solar subsidies, I think
4:43
Speaker 2: that they tied them in through twenty twenty seven because
4:45
Speaker 2: a bunch of Republican lawmakers wanted to see commercial projects
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Speaker 2: that have already been planned out get finished. So the
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Speaker 2: economics part of building new non renewable power generation is difficult.
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Speaker 2: I don't really know how to weigh that piece versus
5:01
Speaker 2: all of us continually voting down new power generation in
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Speaker 2: our area, but I think that also plays a really
5:08
Speaker 2: big role. Nobody wants high power, high capacity power lines
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Speaker 2: in their backyard. Nobody wants a nuclear power plant, or
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Speaker 2: a coal fired power plant, or any gas fire power
5:16
Speaker 2: plant right in their backyards. And so we end up
5:19
Speaker 2: with this incredibly complex system where the federal government kind
5:24
Speaker 2: of takes a backseat other than providing subsidies, and then
5:27
Speaker 2: each local city and state drafts up their own rules
5:32
Speaker 2: and regulations for how power gets regulated and built out
5:35
Speaker 2: in their areas. And it makes for the environment we
5:37
Speaker 2: have now, where supply demand is pretty elastic, demand demand
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Speaker 2: can switch quickly, and supply is very much constrained.
5:47
Speaker 3: Exactly, and what ultimately you'd like to see, and this
5:50
Speaker 3: isn't something that's going to happen immediately, is more of
5:53
Speaker 3: a free market system in order to increase that supply
5:56
Speaker 3: so that you can meet what is more and more
5:59
Speaker 3: look like a huge uptick in demand. And so hopefully
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Speaker 3: I don't really see anything on the near term horizon.
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Speaker 3: There could be some undoing of some of this red
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Speaker 3: tape to meet some of these needs. Nuclear something that
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Speaker 3: gets brought up a lot, but again there are challenges
6:17
Speaker 3: with expanding that. It's almost reversing course. A lot of
6:20
Speaker 3: nucle pants were being set to be sut down. Some
6:23
Speaker 3: of those endeavors have resumed, but it's taking a long time.
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Speaker 2: Yeah, I think the optimist in me says, you know
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Speaker 2: what we are going to ten years from now, we
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Speaker 2: are going to have an incredibly competitive and resilient grid
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Speaker 2: with a bunch of nuclear power plants and you know,
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Speaker 2: something that is really scalable and flexible and capable of
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Speaker 2: supporting all of the demands. The problem is to get there.
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Speaker 2: I think we're going to have a decade of really
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Speaker 2: messy stuff and that includes huge increases in power bills.
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Speaker 2: I mean, there's been a number of pieces written about
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Speaker 2: this and what is it Bloomberg today that has the
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Speaker 2: visual piece of it. Yeah, Bloomberg has a pretty good
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Speaker 2: visual of it. But you know, energy bills across the
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Speaker 2: country are fifty to one hundred percent higher than they
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Speaker 2: were five years ago, right, And I don't really see
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Speaker 2: that slowing any point in the near future because Google
7:20
Speaker 2: will pay whatever they have to pay for that electricity,
7:23
Speaker 2: so they're setting the rate yep. And so I also
7:27
Speaker 2: think there's gonna be a patchwork of bad policy out there, like, Okay,
7:30
Speaker 2: we're locking in rates for individual homeowners, or we're providing
7:34
Speaker 2: subsidies for electricity for homeowners because the demand side of
7:38
Speaker 2: the equation has been so mucked up. But that's the
7:41
Speaker 2: reality is. There are some limitations, but generally speaking, Google
7:45
Speaker 2: and Microsoft will pay whatever they have to pay for
7:47
Speaker 2: power because they see this as such an extraordinary opportunity
7:51
Speaker 2: and that leaves the rest of us basically have to
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Speaker 2: follow along and say, Okay, well, if Google's willing to
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Speaker 2: pay this, then I'm gonna have to pay that because
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Speaker 2: there's a limited supply, and so that's that's the deal.
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Speaker 3: It's it's tricky. What we're gonna need is a lot
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Speaker 3: of investment and a lot of change to some of
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Speaker 3: the regulatory and permitting process, and it's going to take time.
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Speaker 2: But I would also just go back to I think
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Speaker 2: the blame is on all of us, right, Like, the
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Speaker 2: reason that supply cannot dramatically increase is because we the
8:17
Speaker 2: voters have either voted directly for or put in politicians
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Speaker 2: who create a whole bunch of regulation on power and
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Speaker 2: not allow the free market to operate. Sure, And so
8:28
Speaker 2: again I go back to, now we find ourselves in
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Speaker 2: this situation that would have been difficult to predict ten
8:34
Speaker 2: years ago.
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Speaker 4: Right.
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Speaker 2: I don't think anybody knew that AI was going to
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Speaker 2: be the thing that increased power generation, but we've all
8:40
Speaker 2: been talking about it, like we all have known for
8:43
Speaker 2: a decade or more that Okay, whether it's EVS or
8:46
Speaker 2: whether it's AI or some new technological tool, there's only
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Speaker 2: one direction where power consumption was going ten years ago,
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Speaker 2: and it's just happened to hit this mountain of demand.
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Speaker 2: I was trying to think of the opposite of a cliff,
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Speaker 2: a mountain of demand. That's for electricity. And the price
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Speaker 2: changes that we've seen have just occurred a lot faster
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Speaker 2: than I think any of us were anticipating. Let's take
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Speaker 2: quick break when we come back. Jessica Caldwell from Edmonds
9:14
Speaker 2: join us to talk about their third quarter Newcar Forecast.
9:17
Speaker 2: We've seen a lot going on in the auto industry
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Speaker 2: just over the course of the last few weeks. Interested
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Speaker 2: to talk to Jessica soon about what they are seeing
9:24
Speaker 2: as we head into the fourth quarter. Now in the
9:28
Speaker 2: Auto Industry quick break, we'll be right back.
9:31
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10:38
Speaker 3: We are joined by Jessica Caldwell from Edmunds to talk
10:41
Speaker 3: about Q three New Car Forecast. Jessica, thanks so much
10:45
Speaker 3: for joining us today.
10:47
Speaker 5: Oh happy to be here. Thank you for having me.
10:49
Speaker 3: So it's been an interesting year for the vehicle market.
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Speaker 3: Certainly Q two it seemed as if there was sort
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Speaker 3: of a front loading of purchases for consumers who are
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Speaker 3: concerned about the impact of tariffs. Talk to us a
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Speaker 3: little bit about what we anticipate for Q three and
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Speaker 3: Q four and just what the auto vehicle market has
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Speaker 3: looked like this year through twenty twenty five, which has
11:10
Speaker 3: been an interesting year to stay the least.
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Speaker 5: Yeah, I mean it's been a lot of ups and downs,
11:16
Speaker 5: I guess you can say. I mean, what we saw
11:18
Speaker 5: on in March, especially when tariffs were announced, I think
11:20
Speaker 5: the predictions were really dire that auto sales would just
11:23
Speaker 5: continue to plummet because prices would go up. If you
11:26
Speaker 5: probably remember that time, there were these wild predictions saying
11:29
Speaker 5: that vehicle prices by the summer would go up five, ten, fifteen.
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Speaker 5: I think I even saw someone that said twenty thousand dollars,
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Speaker 5: which is a bit out there considering the average price
11:39
Speaker 5: of a new vehicle is about forty eight thousand dollars.
11:41
Speaker 5: So I mean that's already high as itself. And we
11:45
Speaker 5: know what we saw was that prices didn't necessarily go up.
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Speaker 5: So we saw kind of that rush in Q two
11:50
Speaker 5: of people thinking, okay, let me get my vehicle before
11:53
Speaker 5: tariffs are implemented. And in Q three, what we saw
11:57
Speaker 5: was that that, you know what, with prices kind of
12:00
Speaker 5: remaining somewhat similar to as they have all year in
12:03
Speaker 5: incentive programs still on the vehicle that we really didn't see.
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Speaker 5: We didn't really still sells drop. In fact, we saw
12:10
Speaker 5: actually sales go up, which is just not something we
12:13
Speaker 5: necessarily expected six months ago.
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Speaker 3: Does it seem like some of the recent rate cuts,
12:19
Speaker 3: the most recent one that we had, and perhaps to
12:22
Speaker 3: looming through the end of the year, that could spur
12:24
Speaker 3: some more demand here, Jessica on the vehicle purchase side
12:28
Speaker 3: of things.
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Speaker 5: Well, what we think is that people are looking for
12:31
Speaker 5: those signals to buy, and we know people are holding
12:35
Speaker 5: on to their cars for a longer period of time
12:36
Speaker 5: because if you look at the past five years, it's
12:38
Speaker 5: been pretty tumultuous, and those folks that have been holding out,
12:42
Speaker 5: they are paying a lot in repairs probably at this point,
12:44
Speaker 5: so they're just thinking to themselves, they just need that
12:46
Speaker 5: signal to buy, and although the FED rate cuts, they're
12:49
Speaker 5: you know, a quarter point isn't going to make a
12:50
Speaker 5: massive difference, you know, on your monthly payment, you know
12:53
Speaker 5: at this point in time. But what it does help
12:55
Speaker 5: with is the consumer psyche and kind of giving them
12:57
Speaker 5: that buy now message, and then especially you combine that
13:00
Speaker 5: with you know, model your cell down end of summer,
13:03
Speaker 5: Black Friday, end of year, like those type of deal messages.
13:07
Speaker 5: It gets people in the mood to at least start shopping.
13:10
Speaker 5: And then once you start shopping, you know how it is,
13:11
Speaker 5: you find something, you fall in love and you know,
13:13
Speaker 5: you start sending out inquiries about it.
13:15
Speaker 3: Yeah, what would you recommend to some of our listeners
13:17
Speaker 3: here in terms of timing on a vehicle purchase. If
13:19
Speaker 3: they're sitting there thinking that they may be primed for
13:23
Speaker 3: a new car, is there a particular time of the year,
13:27
Speaker 3: the last couple of months that we have remaining that
13:28
Speaker 3: you would recommend taking a look at purchasing.
13:32
Speaker 5: I mean, at this point, I would if you need
13:33
Speaker 5: a car, do the shopping and buy one soon. Because
13:36
Speaker 5: what we can say is that it's been unpredictable, right
13:39
Speaker 5: like especially with like the semiconductor shortage and COVID, you
13:42
Speaker 5: just know, you just feel like you don't know what's
13:43
Speaker 5: around the corner, and right now as as good as
13:45
Speaker 5: time as any to buy a vehicle. So whether that's used,
13:48
Speaker 5: whether that's new, whether that's certified pre own, do the shopping,
13:51
Speaker 5: see what it works out for you. Look at the
13:53
Speaker 5: different interest rates available, because a lot of times on
13:55
Speaker 5: the new vehicles we're still seeing low interest APR offers,
13:59
Speaker 5: and that that's the case, it may make more sense
14:01
Speaker 5: for you to buy new versus used, even though they
14:03
Speaker 5: used initially is going to be less money. So kind
14:06
Speaker 5: of look at those different factors, and as we go
14:08
Speaker 5: towards the end of the year, you will see a
14:09
Speaker 5: lot of buying messages, a lot of sale messages, and
14:12
Speaker 5: you know, just kind of put your feelers out as
14:14
Speaker 5: to what that looks like. But you know, there's really
14:17
Speaker 5: not a reason, I would say, just to hold out
14:19
Speaker 5: on your vehicle purchase. As we've seen prices go up
14:22
Speaker 5: every year, and not just an auto has been in everything.
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Speaker 5: So would it be great to wait a few more years?
14:28
Speaker 5: Likely not.
14:29
Speaker 3: Yeah, certainly would have thought that prices would have gone
14:31
Speaker 3: up more this summer, but that's what keeps this interesting.
14:33
Speaker 3: Jessica Caldwell from Edmunds Jessica, thanks so much for the
14:37
Speaker 3: time today. We appreciate it.
14:38
Speaker 5: Yeah, anytime, Thank you so much.
14:40
Speaker 6: All right, time for ture to you here in the
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Speaker 6: Financial Exchange and on this day. Back in nineteen sixty
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Speaker 6: to Flintstones premiered on ABC. The Flintstones was the first
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Speaker 6: animated series with the primetime slot on TV, as well
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15:32
Speaker 2: It's a good it's a good reference right at nineteen
15:35
Speaker 2: Wait was the question about a year?
15:38
Speaker 3: Well, it was about the two creators.
15:40
Speaker 2: Okay, nineteen sixty Jetson's met the Flintstones and they did
15:45
Speaker 2: a crossover show, a crossover made for TV movie. I
15:49
Speaker 2: remember that distinctly. I didn't see it in nineteen eighty seven.
15:52
Speaker 2: But Jetson's Meet the Flintstones. And now that that all
15:55
Speaker 2: makes sense, Tucker, thank you General Motors. It's actually wall.
15:59
Speaker 2: Should you ask the question why General Motors boss Mary
16:02
Speaker 2: Bearra is slamming the brakes on lofty EV ambitions and
16:06
Speaker 2: is this honestly a mystery to anyone. She's slamming the
16:12
Speaker 2: brakes on this for two reasons. One, demand was way
16:16
Speaker 2: below what anyone forecast. Two, the current administration is rolling
16:20
Speaker 2: back any and all subsidies and taking a very critical
16:23
Speaker 2: eye at companies who are pushing this stuff. And so
16:26
Speaker 2: of course she's reversing course. It is a little bit
16:31
Speaker 2: it's a little bit funny when you go and look
16:32
Speaker 2: at her quotes. I funny would be a kind of
16:34
Speaker 2: innocent word. Here's her quote from twenty twenty two. We
16:37
Speaker 2: have an opportunity and frankly, a responsibility to create a
16:40
Speaker 2: better future. This was when she was promising EV production.
16:44
Speaker 2: She promised to launch thirty electric vehicle models globally within
16:47
Speaker 2: a few years, and then soon after convert more than
16:50
Speaker 2: half of GM's North America plans to EV production and
16:53
Speaker 2: took actual steps to try and do so. These days,
16:58
Speaker 2: she is moved to General Motors, being one of the
17:02
Speaker 2: biggest opponents of more stringent emissions requirements. She played a
17:08
Speaker 2: role in California's losing the court case on setting their
17:12
Speaker 2: own emission standards and has completely reversed course on this,
17:16
Speaker 2: which again I think is good for the stock price.
17:20
Speaker 2: My question is this is such a hot button political
17:24
Speaker 2: issue these days. It seems like, do you really think
17:26
Speaker 2: that this is not going to swing right back in
17:28
Speaker 2: the other direction if a Democrat gets elected, Because I
17:31
Speaker 2: don't know. I don't think the consumer demand piece will
17:33
Speaker 2: swing back, but I'm quite certain that all the regulations
17:36
Speaker 2: are going to get talked about once again, and all
17:38
Speaker 2: the emission standards and all of the EV requirements are
17:41
Speaker 2: going to get pushed by the next Democrat elected president too,
17:44
Speaker 2: And then Mary Barr is going to find herself in
17:46
Speaker 2: the exact same place here once again trying to play
17:50
Speaker 2: to the whims of elected officials when it comes to
17:52
Speaker 2: car production.
17:52
Speaker 3: That's the problem with this whole sentiment in general, is
17:55
Speaker 3: it's too influenced by political direction. It seems like the
17:59
Speaker 3: strategic moves behind GM. Ultimately, your customer and demand should
18:04
Speaker 3: drive the endeavors that you focus on as a company,
18:07
Speaker 3: and renewable energy or environmental concern should be a backseat,
18:12
Speaker 3: because ultimately your job as a CEO of the company
18:15
Speaker 3: is to return value to shareholders and you have not.
18:17
Speaker 2: To create a better future for the world.
18:20
Speaker 3: No, that was the cool thing to say in twenty
18:23
Speaker 3: one or twenty two, and you can argue is to
18:26
Speaker 3: maybe that is the right direction to take it. I
18:28
Speaker 3: don't really I don't really know, you know what direction
18:31
Speaker 3: it could should be in. But ultimately I know as
18:33
Speaker 3: a GM shareholder what I would be most focused on
18:36
Speaker 3: if I sat in that seat is how can you
18:38
Speaker 3: generate the most profitable returns to us as shareholders? And
18:41
Speaker 3: what she correctly learned by reversing courses, it is those
18:45
Speaker 3: trucks and SUVs that are the most profitable ones, and
18:47
Speaker 3: they focus more in that area, in that lane. But
18:51
Speaker 3: the commentary, I remember it when it came out in
18:54
Speaker 3: twenty two. It was just so overly ambitious.
18:56
Speaker 2: It's not posterous, it's not you don't call that out
18:59
Speaker 2: at the time as never going down.
19:01
Speaker 3: Toyota caught crossfire from that. Just what were they doing
19:04
Speaker 3: sitting there not focusing on it? And she was critical
19:08
Speaker 3: of others who didn't put enough emphasis on it. And
19:10
Speaker 3: it's just the market dynamics turned down really quickly on her.
19:13
Speaker 3: You got to be careful going out too far in
19:15
Speaker 3: a limb with that kind of stuff.
19:16
Speaker 2: Toyota like at the time was criticized and five years
19:20
Speaker 2: later is now kind of the model far how you
19:23
Speaker 2: should you should have looked at all this quick break.
19:25
Speaker 2: Wall Street Watch is coming up next.
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.
19:58
Speaker 6: Market slightly in the red, with all sis pointing toward
20:00
Speaker 6: a government shutdown pending a last minute deal. A shutdown
20:04
Speaker 6: would delay the jobs report, which is slated to be
20:08
Speaker 6: released on Friday morning. Right now, the Dow is down
20:12
Speaker 6: by a third of a percent, SMP five hundred down
20:14
Speaker 6: nearly two tenths of one percent. Nasdaq also down two
20:17
Speaker 6: tenths one percent, or thirty eight points lower. Rust thousands
20:20
Speaker 6: down seven tents and one percent, Tenure, Treasurerail flat at
20:24
Speaker 6: four point one three three percent, and crude oil down
20:28
Speaker 6: one and a half percent lower, trading at sixty two
20:30
Speaker 6: dollars and forty nine cents a barrel. Some breaking news
20:34
Speaker 6: last hour after The Wall Street Journal reported the White
20:36
Speaker 6: House is planning to unveil a direct to consumer website
20:39
Speaker 6: for Americans to buy drugs dubbed Trump Rx, as well
20:43
Speaker 6: as announced that Pfizer plans to lower prices on several
20:46
Speaker 6: of its medications in the US. Pfizer shares are climbing
20:49
Speaker 6: over three percent. Meanwhile, Spotify's Daniel Eck stepping down from
20:53
Speaker 6: his role as CEO after founding the company nearly two
20:56
Speaker 6: decades ago. He will remain on as executive chairman. Spotify
21:02
Speaker 6: shares are down nearly five percent. Elsewhere, Corp We've jumping
21:06
Speaker 6: twelve percent after the company agreed to a multi year
21:08
Speaker 6: deal with Meta, where Core We've will provide Meta with
21:12
Speaker 6: fourteen point two billion dollars of AI cloud infrastructure. Amazon
21:16
Speaker 6: unveiled a slew of new smart speakers and voice activated
21:19
Speaker 6: displays that are revamped with Alexa Plus, it's personal assistant
21:23
Speaker 6: that's powered by Generative AI. Theecho Dot Max will cost
21:27
Speaker 6: ninety nine dollars in ninety nine cents. Amazon down over
21:31
Speaker 6: one percent. In after today's closing bell, we'll see earnings
21:34
Speaker 6: from Nike. I'm Tucker Silva and that is Wall Street Watch.
21:38
Speaker 2: Joining us now is Todd Lutsky from the law firm
21:40
Speaker 2: of Christian Dolnut to talk to us about their new
21:43
Speaker 2: guide out for the month of September. Todd, thanks for
21:45
Speaker 2: joining us.
21:46
Speaker 4: Always pleasure, Thank you. So.
21:48
Speaker 2: I always like a piece that completely goes against what
21:52
Speaker 2: I previously understood it, and this month's guy, it does
21:56
Speaker 2: that in a big way. Here's my take. When I
21:59
Speaker 2: think about it state planning, when I think about hiring
22:01
Speaker 2: an attorney to do this stuff, one of the key
22:03
Speaker 2: goals that comes to mind is avoiding the probate process.
22:06
Speaker 2: That's why a lot of people do this sort of
22:09
Speaker 2: Thing's fun trust, et cetera. This guy's all about intentionally
22:12
Speaker 2: going through probate, it seems so, what's the story. Why
22:16
Speaker 2: would anyone want to leave their IRA through the probate process?
22:21
Speaker 4: You know, it's funny. I thought you were going to
22:23
Speaker 4: say it goes against your instincts as a financial advisor
22:28
Speaker 4: in two fronts?
22:29
Speaker 2: Does that a little bit too.
22:31
Speaker 4: Why we're going to probit is one instinct. The other
22:33
Speaker 4: instinct is todd I was always told never to name
22:36
Speaker 4: my estate the beneficiary of an IRA, and that is
22:40
Speaker 4: true in general. You're absolutely right on both fronts. But
22:43
Speaker 4: in this situation, if you're interested in avoiding, if you're
22:47
Speaker 4: interested in protecting assets from a nursing home, reducing estate
22:51
Speaker 4: taxes and doing it without avoiding, without causing and era
22:55
Speaker 4: a problem on the income tax front, and you're over
22:59
Speaker 4: seventy three or at least seventy three, so I know
23:01
Speaker 4: there's some restrictions that that's what iras do. They restrict you,
23:05
Speaker 4: but this idea allows you to do that. It's so
23:09
Speaker 4: hard to prevent, so hard to protect an IRA from
23:15
Speaker 4: the nursing home, right, but this gives you an opportunity
23:18
Speaker 4: to do that. Remember, normally, changing an IRA to a
23:21
Speaker 4: trust creates a taxable event, so you can't do it
23:25
Speaker 4: during life. But you know what, to take one item
23:28
Speaker 4: through the probate process is not that horrific for the
23:32
Speaker 4: benefits that you get in doing it in terms of
23:36
Speaker 4: the protection from the nursing home and the tax savings
23:39
Speaker 4: that go with it.
23:39
Speaker 2: Okay, so big picture, this seems complicated, tod I'm sure
23:42
Speaker 2: it's not just quite as simple as you know, naming
23:46
Speaker 2: the estates my beneficiary. Who should consider this, who definitely
23:51
Speaker 2: should not consider doing something like this. Who is this
23:54
Speaker 2: really targeted for if you're going to use this strategy,
23:56
Speaker 2: And what do people need to do ahead of time
23:58
Speaker 2: if they're going to go do it?
24:00
Speaker 4: Yeah? Yeah, great question. Again. I would say most people
24:02
Speaker 4: are probably somewhere around you know, sixty sixty five and
24:06
Speaker 4: up number one, number two. They have concerns about the
24:10
Speaker 4: cost of long term care. So you know, you, you know,
24:12
Speaker 4: you're you don't think you have enough assets to private
24:15
Speaker 4: pay and you're afraid of them taking your assets. So
24:18
Speaker 4: I'm a little concerned about that. And of course you
24:21
Speaker 4: might have enough assets that are more than that two
24:23
Speaker 4: million dollar exemption, but by the way, it could be
24:25
Speaker 4: less as well. That doesn't matter. But you know, so
24:28
Speaker 4: you're concerned about Massachusetts a state tax at a bare minimum,
24:31
Speaker 4: and those would be the people. And then I would say,
24:34
Speaker 4: you know, if you're not over seventy three or seventy
24:38
Speaker 4: three and over, you still can do it, you just don't.
24:41
Speaker 4: You set up the Testamentary Trust, which is a trust
24:44
Speaker 4: built into your will prior to being seventy three and
24:48
Speaker 4: then change the beneficiaries at seventy three. But certainly if
24:50
Speaker 4: you're seventy three or over, it makes the most sense.
24:53
Speaker 4: So you know that age group concerned about protecting assets
24:58
Speaker 4: from the nursing home and reducing a state taxes and
25:01
Speaker 4: not causing an adverse income tax consequence, those are the
25:04
Speaker 4: folks that should be thinking about this situation. Folks. It's
25:09
Speaker 4: definitely something in the guide that it's something that, as
25:13
Speaker 4: you could hear from our discussion here with Mike, that
25:15
Speaker 4: it's not so easy. You do need to learn about it,
25:18
Speaker 4: but it does offer a tremendous amount of benefits. Calling
25:21
Speaker 4: it the guide, it's the end of the month. It's
25:24
Speaker 4: pretty new, it's only been around since twenty twenty two
25:26
Speaker 4: in terms of how to do this, why naming your
25:29
Speaker 4: estate and ir IRA beneficiary and by the way, also
25:32
Speaker 4: for life insurance you can do the same thing eight
25:35
Speaker 4: six six eight four eight five six ninety nine or
25:39
Speaker 4: Legal Exchange Show dot com. Again the end of the month, folks,
25:43
Speaker 4: it's going away eight six six eight four eight five
25:47
Speaker 4: six nine nine or Legal Exchange Show dot com.
25:50
Speaker 2: Todd always appreciate really interesting conversation. Thanks so much, and
25:54
Speaker 2: we'll talk to you soon.
25:55
Speaker 4: Thank you.
25:56
Speaker 1: Taking the proceeding was paid for in the music exprest
25:58
Speaker 1: are solely those of Kushian Dolan, Cushing and Dolan, and
26:01
Speaker 1: or Armstrong Advisory may contact you offering legal or investment services.
26:04
Speaker 1: Cushing and Armstrong did not endorse each other and are
26:06
Speaker 1: not affiliated.
26:08
Speaker 6: The trivia question we asked in the prior segment was
26:11
Speaker 6: which animation duo created the Flintstones. That would be Hannah Barbera.
26:15
Speaker 6: Stephen from Hope, Rhode Island is our winner today, taking
26:19
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26:22
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26:24
Speaker 6: e Xchange. See complete contest rules at Financial Exchange Show
26:27
Speaker 6: dot com.
26:29
Speaker 2: Two pieces on markets right now. Wall Street Journal has
26:32
Speaker 2: one on investors fretting about valuations in the stock market rally.
26:35
Speaker 2: The other of the S and P five hundred index
26:37
Speaker 2: very pricey. This is from Bloomberg. And look, more and
26:42
Speaker 2: more of these pieces are getting written. More and more
26:44
Speaker 2: comparisons are being made to the dot com bubble. I
26:47
Speaker 2: myself have made the same comparisons. The question always comes
26:51
Speaker 2: back to okay, and so what what do I do
26:55
Speaker 2: about all this? And that's really tough, that's the toughest
26:59
Speaker 2: piece to answer, But I don't know. Part of me, Paul,
27:01
Speaker 2: the fact that everyone and their mother is now writing
27:03
Speaker 2: about stock market valuations and how the rally is getting
27:06
Speaker 2: a little bit long in the tooth, and all the
27:07
Speaker 2: comparisons between AI and the dot com bubble. When everyone's
27:12
Speaker 2: so hyper vigilant and aware of this sort of thing,
27:14
Speaker 2: it kind of, in my mind, reduces the likelihood of
27:18
Speaker 2: that outcome happening. What has been justifying these valuations, at
27:24
Speaker 2: least in part, is that, look, the earnings growth is
27:28
Speaker 2: still there. We've continued to get surprise beats on the
27:31
Speaker 2: upside when it comes to earnings. You're continuing to see
27:35
Speaker 2: high single digit or low double digit earnings growth on
27:37
Speaker 2: a year over year basis. And to me, that's the
27:41
Speaker 2: piece that has to break before all the rest of
27:43
Speaker 2: this comes crashing down. Right When it's no longer possible
27:47
Speaker 2: to justify these super rich valuations that you are paying
27:51
Speaker 2: for in stocks, that's when you have a real problem
27:54
Speaker 2: with folks questioning, Okay, what precisely are we doing here?
27:58
Speaker 3: Yeah, Nvidia's kind of been the head of this of
28:00
Speaker 3: this rally that we've seen in AI companies this year,
28:03
Speaker 3: and they have delivered in the sense that they have
28:06
Speaker 3: continued to have great revenue growth. Now it wasn't as
28:09
Speaker 3: tremendous as it's been in years prior, but it still
28:12
Speaker 3: continues to grow. And I think those types of companies,
28:16
Speaker 3: if we are to see plateauing of revenue growth or
28:19
Speaker 3: any dent to the story on AI from a demand perspective,
28:23
Speaker 3: those would be the ones that could potentially bring this down.
28:27
Speaker 3: But I think you make a fair point into this
28:30
Speaker 3: question of so what so what do I do? And
28:33
Speaker 3: there are some solutions that are mentioned of looking at
28:36
Speaker 3: companies that have these extended valuations and potentially trimming exposure
28:41
Speaker 3: to certain sectors. But ultimately, what it comes back to
28:45
Speaker 3: is a client's allocation or any an individual's allocation. That's
28:49
Speaker 3: what you rest your laurels on. And it's really dangerous
28:52
Speaker 3: to play into patterns or trends on valuations just because
28:56
Speaker 3: they can be so fleeting and hard to gauge. Like
29:00
Speaker 3: I think of one that we covered at the beginning
29:01
Speaker 3: of this month is September historically has been the worst
29:04
Speaker 3: month for stocks since nineteen twenty nine. We're about ten
29:08
Speaker 3: September today, and we are looking at a market that's
29:12
Speaker 3: been up three point six or three point seven percent
29:15
Speaker 3: through the close of business yesterday. We'll see how we
29:17
Speaker 3: close today. On average, what you've seen from September is
29:21
Speaker 3: it's been a decline of one point two percent since
29:24
Speaker 3: nineteen twenty eight, the S and P five hundred. So
29:26
Speaker 3: we had led that story with the beginning of this month.
29:29
Speaker 3: And it's just the advice we always give is you
29:32
Speaker 3: just can't lean too heavy into these patterns or trends.
29:36
Speaker 3: The same thing applies with valuations, but making sure you're
29:39
Speaker 3: not overextended in one air of your portfolio. That's really
29:42
Speaker 3: the best way you could do it.
29:43
Speaker 2: I think the important thing to ask yourself if you're
29:46
Speaker 2: managing your own money or managing somebody else's money, is
29:49
Speaker 2: take what you believe to be about markets, and ask yourself,
29:52
Speaker 2: what if I'm wrong? What happens if I am wrong
29:56
Speaker 2: about this? If I am all in on AI and
29:59
Speaker 2: tech and I think that it is going to be
30:02
Speaker 2: the technology that revolutionizes markets and makes a whole bunch
30:06
Speaker 2: of profitable, hugely profitable companies, what if I'm misreading the situation.
30:10
Speaker 2: What if it's more like the dot com bubble? Then
30:12
Speaker 2: I'm realizing if I am fully avoiding the stock market
30:15
Speaker 2: right now because I am firmly in the camp that
30:17
Speaker 2: this is all a bubble and it's all going to
30:19
Speaker 2: implode in on itself. What if I'm wrong and it
30:22
Speaker 2: does end up continuing for another six years to appreciate
30:25
Speaker 2: in the stock market? How will I be left in
30:27
Speaker 2: those circumstances? Those are the important questions to ask rather
30:31
Speaker 2: than obsessing over Am I picking the right thing at
30:34
Speaker 2: the right moment? Am I entering markets at the peak
30:37
Speaker 2: that are about to come crashing down? Nobody knows. Don't
30:40
Speaker 2: try and answer that question, but ask yourself, am I
30:44
Speaker 2: financially prepared if my narrative about markets turns out to
30:47
Speaker 2: be wrong? Because even the best in the world are
30:51
Speaker 2: right fifty three or fifty four percent of the time
30:54
Speaker 2: on this stuff. Quick break when we come back. Stack
30:57
Speaker 2: Roulette is coming up next.
31:00
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32:13
Speaker 2: Time for a bit of stack roulette. What do you
32:15
Speaker 2: have for us?
32:15
Speaker 3: Paul Mike McDonald's is bringing back monopoly after a decade,
32:22
Speaker 3: and I feel like this is a little too soon
32:25
Speaker 3: because I'm still rattling around my head that twenty twenty
32:28
Speaker 3: documentary that was done on It was called mcmillions on HBO. Fantastic.
32:32
Speaker 3: I'd recommend anyone go back and watch it because the
32:34
Speaker 3: last time they did Monopoly, from nineteen eighty nine to
32:38
Speaker 3: two thousand and one, there was a employee of a
32:42
Speaker 3: security company that stole over twenty four million in prizes
32:46
Speaker 3: and there was an FBI scandal which led to the
32:49
Speaker 3: conviction of more than fifty people. So that's still rendered.
32:52
Speaker 2: When did they end it last time? Oh one from.
32:56
Speaker 3: Uh, no, they've done it. No, they've done it after that,
32:58
Speaker 3: but the scandal went on for more than a decade
33:03
Speaker 3: where it was Uncle Jerry or this guy Jerome Jacobson.
33:06
Speaker 3: Really recommend watching mcmillion's HBO documentary on it where basically
33:10
Speaker 3: he had access to the game winning million dollar prizes
33:13
Speaker 3: and he would charge a fifty thousand dollars fee and
33:15
Speaker 3: sell it to all these associates. Good deal that he
33:18
Speaker 3: had unlocked. But for today's standards, Monopoly will be offered
33:22
Speaker 3: for all of the loyalty members on McDonald's platform, where
33:26
Speaker 3: it's a loyalty so I have to like, you gotta
33:29
Speaker 3: be ass it's a it's all digital, you'll be able
33:31
Speaker 3: to be not.
33:32
Speaker 2: Fun, right, I like the stickers right to put them
33:35
Speaker 2: on the board.
33:36
Speaker 3: You can peel them off the box, but you got
33:38
Speaker 3: to scan them in to your digital app. McDonald's has
33:41
Speaker 3: a goal of getting two hundred and fifty million active
33:45
Speaker 3: loyalty users by the end of twenty twenty seven. They've
33:47
Speaker 3: got about one hundred and eighty five million globally on
33:51
Speaker 3: their loyalty platform. That accounts for about a quarter of
33:54
Speaker 3: their business in the US, so it clearly focus.
33:57
Speaker 2: We do Friday lunches here at the Army Group for
34:01
Speaker 2: all employees, So I guess I know what we're doing
34:03
Speaker 2: for the next How long are they running this? Two years?
34:05
Speaker 3: Probably the next decade. We'll see how many prizes get stolen.
34:08
Speaker 2: Everyone here is gonna put on twenty pounds in our
34:11
Speaker 2: health insurance premiums are gonna go through the roof. But
34:14
Speaker 2: we're gonna win some money on this McDonald's monopoly game.
34:17
Speaker 2: If I if I have.
34:18
Speaker 3: My Hamburglar, be damned well.
34:19
Speaker 2: Paul was mentioning fraud of one sort. I'm gonna bring
34:22
Speaker 2: up a different type of fraud. Charlie Javis has been
34:25
Speaker 2: sent us to eighty five months in prison. If you
34:28
Speaker 2: haven't heard of miss Javis. She is the one who
34:32
Speaker 2: created a company called Frank Frank. Seemed like it was
34:36
Speaker 2: a fairly helpful company that people would probably pay for.
34:41
Speaker 2: It was meant to help students fill out for their
34:43
Speaker 2: financial aid forms, and she did have quite a few customers.
34:46
Speaker 2: I think there were actually something like a couple hundred
34:48
Speaker 2: thousand customers. The problem occurred when JP morgan Chase started,
34:54
Speaker 2: you know, expressing some interest in maybe buying this company,
34:57
Speaker 2: ended up buying it for one hundred and seventy five
35:00
Speaker 2: million dollars, partly based on miss Javis's representations that there
35:04
Speaker 2: were to the tune of four million subscribers to this service.
35:10
Speaker 2: So should I not have done that?
35:12
Speaker 1: Yeah? So was that wrong with me?
35:15
Speaker 2: Yeah? It seemed that way because then she, after realizing
35:20
Speaker 2: or all the long knowing that that wasn't going to
35:22
Speaker 2: be happening, she said about creating synthetic data to add
35:27
Speaker 2: millions of customers, with the help of a associate professor
35:30
Speaker 2: of mathematics at Queen's College, who of course had no
35:33
Speaker 2: idea why he was doing this and wasn't at all
35:35
Speaker 2: privy to what was going on, was just there to
35:37
Speaker 2: help her create the synthetic data. Here's to me. I mean, okay,
35:43
Speaker 2: so miss Javis is going to federal prison for going
35:47
Speaker 2: to prison for eighty five months, she deserves to be there.
35:50
Speaker 2: She's the perpetuator of the fraud. She lied to the investors,
35:54
Speaker 2: misrepresented everything. She's going to jail. She should be. We
35:58
Speaker 2: always talk about JP Morgan, she as having the best
36:01
Speaker 2: risk management out there and granted one hundred and seventy
36:04
Speaker 2: five million dollars. Dropping the bucket not a big deal
36:07
Speaker 2: for them. It's not going to shrink, it's not going
36:09
Speaker 2: to hurt their bank in any meaningful way. They'll probably
36:12
Speaker 2: recover a lot of this in a civil suit that
36:14
Speaker 2: they've filed. But they really missed the boat on this, like,
36:19
Speaker 2: you know, you created a fake customer list, and again
36:23
Speaker 2: you hired a professor to do it, and so allegedly
36:25
Speaker 2: they know not allegedly it's been proven now because she's
36:28
Speaker 2: guilty in court that they used real people's names to
36:32
Speaker 2: create this customer list, and you know, use data to
36:35
Speaker 2: make it look that way. But if I'm paying one
36:39
Speaker 2: hundred and seventy five million dollars for this, you're not
36:41
Speaker 2: calling one of those millions of customers prior to sending
36:44
Speaker 2: that check. I like, because presumably if you had done so,
36:50
Speaker 2: any one of them would have been gonna tell you.
36:52
Speaker 2: I have no idea what you're talking about. What is
36:54
Speaker 2: frank right?
36:55
Speaker 3: Because if we're saying two to three hundred thousand of
36:58
Speaker 3: them were actually real of the four million chance or more,
37:03
Speaker 3: that you're probably going to call someone who, yeah, actually
37:06
Speaker 3: isn't an active customer.
37:08
Speaker 2: So again, miss Javis is to blame here, She's going
37:11
Speaker 2: to prison for it. Kind of embarrassing for JP Morgan Chase.
37:15
Speaker 2: Not something that you see written about them every day
37:18
Speaker 2: as they completely screwed up an acquisition and bought a
37:20
Speaker 2: company that was defrauding them of one hundred more than
37:24
Speaker 2: one hundred million dollars. Pretty impressive screw up. Also, missus Javis,
37:29
Speaker 2: did you think they weren't going to find out eventually?
37:31
Speaker 3: That was my other thing.
37:32
Speaker 1: It's just these greed.
37:34
Speaker 2: Things always just completely just confuse me because there's so
37:41
Speaker 2: much what circumstance. Did you think they weren't going to
37:44
Speaker 2: someday find out that you were creating fake customers representing
37:48
Speaker 2: that they were ninety percent of your users? That is
37:53
Speaker 2: has a very clear endgame. I the delusion on some
37:58
Speaker 2: of these greed and fraud odds is just is just
38:02
Speaker 2: fascinating to me, but would be crazy to prison. Markets
38:06
Speaker 2: are all in negative territory now. We've got the Dow
38:08
Speaker 2: leading the way down, off about a quarter of a percent.
38:12
Speaker 2: We've got quite possible government shutdown looming in twelve hours.
38:15
Speaker 2: We'll cover it all and more tomorrow here on the
38:18
Speaker 2: Financial Exchange