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Are US taxes too high or too low? · The Financial Exchange Show

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Speaker 1: Zada and Mike Armstrong.
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Speaker 2: Kicking things off one hour two of the Financial Exchange, Chuck,
1:15
Speaker 2: Mike and Tucker with the and as we moved through
1:19
Speaker 2: the morning, the Dow is up one hundred and ninety
1:21
Speaker 2: eight points, the SMP is up six NASDAK actually down
1:26
Speaker 2: a quarter percent, that largely being dragged by in Vidia, Microsoft, Amazon,
1:32
Speaker 2: and Tesla, all of which are in negative territory at
1:35
Speaker 2: the moment. And that's what we've got going on in
1:38
Speaker 2: the major US and disease today. Bond's tenure Treasury selling
1:42
Speaker 2: off a little bit today, after dropping down below four
1:45
Speaker 2: point six percent for a couple of days, now back
1:47
Speaker 2: up another five point seven basis points to four point
1:50
Speaker 2: sixty five six as a result of what we saw yesterday,
1:55
Speaker 2: Mortgage News Daily had actually the thirty year fixed rate
1:59
Speaker 2: didn't move yes today, still at seven point eight percent nationally. Again,
2:03
Speaker 2: you can get different deals depending on the particular bank
2:06
Speaker 2: or lender that you're using, but that's just the national
2:08
Speaker 2: average of what they are seeing. When we take a
2:11
Speaker 2: look at energy markets, oil up twenty one cents a
2:14
Speaker 2: barrel to seventy five sixty five triple a national average
2:17
Speaker 2: for gas price is also continuing to rise just a
2:20
Speaker 2: little bit up six tenths of ascent to three thirteen
2:23
Speaker 2: and five tenths. And then we've got gold today down
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Speaker 2: nineteen seventy one ounce to twenty seven fifty one and
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Speaker 2: twenty cent. So those are the major things that we
2:36
Speaker 2: are seeing in markets today. When we take a look
2:41
Speaker 2: at there's a piece in uh, this is Bloomberg, right, yeah, yeah,
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Speaker 2: it's the bloomy Berg. It's from Justin Fox and it's
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Speaker 2: titled our US tax is too high or too low?
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Speaker 2: Choose your chart, And basically what it outlines here is
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Speaker 2: that when you look at federal revenue as a percentage
3:05
Speaker 2: of GDP last year, at least for the last fiscal year.
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Speaker 2: I don't know exactly when that ended, it's whenever. Uh,
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Speaker 2: last year, federal tax revenues were seventeen point one percent
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Speaker 2: of GDP. The post World War two average is seventeen
3:22
Speaker 2: point two. So basically what it's telling you is that, hey,
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Speaker 2: tax revenue is pretty much in line with the long
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Speaker 2: term average over the last eighty years. Spending, on the
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Speaker 2: other hand, came into twenty three point four percent, and
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Speaker 2: the post World War two average is nineteen point eight.
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Speaker 2: And this I think gets at what we are seeing
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Speaker 2: right now, which is, hey, we're running deficits of about
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Speaker 2: six percent, because twenty three point four minus seventeen one
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Speaker 2: is six point three. We checked the math, and historically,
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Speaker 2: if you were running, you know, more normal levels of
3:55
Speaker 2: spending nineteen point eight percent of GDP, you'd be at
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Speaker 2: about a two point six percent annual deficits. So that's
4:01
Speaker 2: that that kind of squares the circle and gets you
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Speaker 2: to where you want to be ideally. But when you
4:08
Speaker 2: look at total GDP, I'm sorry, total tax burden including
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Speaker 2: state and local tariffs, you know, anything else that is
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Speaker 2: out there. Total US government revenue so to again, States, Feds, everyone,
4:26
Speaker 2: is around twenty nine point nine percent of GDP. And
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Speaker 2: if you look at it relative to the OECD average
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Speaker 2: Organization for Economic Cooperation and Development, so basically the big
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Speaker 2: affluent countries that are out there, there are thirty eight
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Speaker 2: members in them, the OECD averages thirty three point nine.
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Speaker 2: So the US relative to again you're Canada's, France, UK, Japan, uh. Again,
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Speaker 2: like you go down the list, I could I could
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Speaker 2: pull you the full OECD list if you want to. Actually,
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Speaker 2: let's let's just go through a couple more in there,
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Speaker 2: just because again it's kind of worth just knowing who
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Speaker 2: we're comparing this to. Austria, Belgium, Canada, Denmark, France, Greece, Iceland, Ireland, Italy, Luxembourg,
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Speaker 2: the Netherlands, Norway, Portugal, Spain, Sweden, Switzerland, Turkey, the UK,
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Speaker 2: the United States. Who else is in here? Hungary, Latvia? Again,
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Speaker 2: you can you can go through you know, all these
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Speaker 2: all these different countries and get these numbers here, and
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Speaker 2: on the high end you have countries like Belgium where hey,
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Speaker 2: ultimately like fifty percent plus of GDP ends up going
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Speaker 2: to tax revenue. You then look at on the low
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Speaker 2: end countries like Switzerland and Mexico, where it's closer to
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Speaker 2: like twenty two to twenty three percent. But ultimately most
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Speaker 2: countries are somewhere, you know, kind of between twenty two
5:55
Speaker 2: and like fifty Most countries are like between like twenty
5:57
Speaker 2: three and like forty percent. So the US kind of
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Speaker 2: right in the middle overall. So the big takeaway on
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Speaker 2: this is that federal tax revenue is basically in line
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Speaker 2: with historical averages. If you want to bring annual deficits
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Speaker 2: closer to that three percent target, that Scott best At
6:20
Speaker 2: the incoming Treasury secretary. Has he been officially confirmed yet?
6:24
Speaker 2: I do not believe so. Yeah, it was last week.
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Speaker 2: I don't think he was confirmed. I don't know if
6:30
Speaker 2: he's officially been confirmed yet. We'll have to get some
6:33
Speaker 2: Tucker will effort that to see what we can get. No,
6:35
Speaker 2: it's next week, next week, okay. So Beston said, Look,
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Speaker 2: I want to get to a three percent you know,
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Speaker 2: deficit effectively. The only way that you can actually do
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Speaker 2: that is you have to have significant cuts to basically
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Speaker 2: everything other than Social Security and Medicare. And by significant
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Speaker 2: you're talking again depending on the source, you're talking like
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Speaker 2: between thirty five and forty five percent of all other
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Speaker 2: you know, discretionary spending budgets, or you've got to you know,
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Speaker 2: make some reforms to Social Security and Medicare, or you've
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Speaker 2: got to raise taxes. There's no easy way to get
7:16
Speaker 2: to a three percent deficit from where we stand today,
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Speaker 2: right and quite honestly, running a six percent one probably
7:25
Speaker 2: not what you want to do for the long term.
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Speaker 2: It's not great, no, I mean what it eventually, especially
7:30
Speaker 2: by the way, this is with the United States at
7:33
Speaker 2: full employment, right, you know, the economy is chugging right now,
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Speaker 2: and you're seeing these types of things, right, This is
7:38
Speaker 2: the kind of thing. If you see a recession, your
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Speaker 2: deficit quickly goes from six percent to ten percent of GDP.
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Speaker 2: So are taxes too low or too high? I think
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Speaker 2: the answer pretty clearly is that taxes are around where
7:52
Speaker 2: they have been on average since World War Two.
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Speaker 3: The problem is that our spending is nowhere near that average.
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Speaker 3: It has moved up tremendously. And so it remains a
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Speaker 3: question of are you willing to cut some of those
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Speaker 3: benefits because you're not gonna find it in efficiency?
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Speaker 2: Sorry, Like that's you're not actually going to cut forty
8:17
Speaker 2: percent of all discretionary government spending and just because Congress
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Speaker 2: won't appropriate that way.
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Speaker 3: Right, And so it remains this question of, yeah, that
8:24
Speaker 3: might have been historically the effect of tax rate where
8:26
Speaker 3: we were historically, but the government didn't provide nearly as
8:29
Speaker 3: many services back in nineteen sixty, specifically because there just
8:33
Speaker 3: weren't as many old people in the United States back
8:35
Speaker 3: in nineteen sixty.
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Speaker 2: If you want the biggest thing, it's social security and medicare, Like,
8:41
Speaker 2: that's what it is. And again, you've got a couple
8:44
Speaker 2: options to figure out how to manage this, and the
8:46
Speaker 2: best solution is usually like a combination of these because everyone,
8:50
Speaker 2: no one ever wants to give anything up. I'm not
8:53
Speaker 2: saying I'm not sitting here being like, hey, seniors, take
8:56
Speaker 2: one for the team, Like, no, that's not what I'm saying.
8:59
Speaker 2: But it's much more. Okay, what you're doing here is
9:03
Speaker 2: really not sustainable at this point. You have to find
9:08
Speaker 2: a way to probably both raise more revenue for Social Security,
9:14
Speaker 2: so probably raising the payroll tax or broadening it either one,
9:19
Speaker 2: and changing the benefit structures so that those who are
9:24
Speaker 2: starting to receive benefits fifteen years from now, you know,
9:28
Speaker 2: someone who's fifty years old and has time to plan
9:30
Speaker 2: for an adjustment, Yeah, has a different way that their
9:33
Speaker 2: benefits calculated in the long term. Right, that's probably where
9:36
Speaker 2: you're going. And you can do this. You can fix it.
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Speaker 2: If you have a little willpower, you can do it.
9:43
Speaker 2: But let's not pretend that you can just like be like, hey,
9:46
Speaker 2: we're gonna get rid of funding for you know, shrimp
9:50
Speaker 2: testing and water. That's not gonna do it. Now.
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Speaker 3: We can agree on the fact that long term and
9:59
Speaker 3: even maybe intermediate term, should you continue to run deficits
10:02
Speaker 3: of six percent. There will be eventually those institutions, individuals,
10:08
Speaker 3: and countries who say, you know, I'm just not willing
10:11
Speaker 3: to loan this money to the United States.
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Speaker 2: And not willing it's hey, there's not enough money out
10:15
Speaker 2: there to be loan to the US governments.
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Speaker 3: And so this eventually does become a real problem. But
10:23
Speaker 3: conclusively saying that the Trump administration is the one that
10:25
Speaker 3: ends up dealing with it, I think I'd be being disingenuous.
10:29
Speaker 3: My best bet is that you don't see deficits come
10:32
Speaker 3: in around three percent, they continue to run between five
10:36
Speaker 3: and seven percent over the next three to four years.
10:39
Speaker 3: See and it might be somebody else's problem down the road,
10:41
Speaker 3: because honestly, that's been the easiest solution for the last
10:44
Speaker 3: few decades.
10:45
Speaker 2: It's hard to deal with these problems. Ever since Clinton,
10:51
Speaker 2: no one has wanted to deal seriously with the deficit,
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Speaker 2: regardless of party.
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Speaker 3: Yep, and I see no real indication that this administration
10:58
Speaker 3: wants to either.
10:59
Speaker 2: No, Bush did not want to, Obama did not want to.
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Speaker 2: Trump in his first term did not want to, Biden
11:07
Speaker 2: did not want to, and Trump in his second term
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Speaker 2: is an open question. Well, like what we're gonna have
11:11
Speaker 2: to see. But to this point, the trend for the
11:14
Speaker 2: last twenty years has been towards larger deficits. And the
11:21
Speaker 2: fascinating thing is the three presidents before Reagan raised taxes.
11:27
Speaker 2: No one likes to talk about it, but Reagan did
11:29
Speaker 2: raise taxes. Reform so Security raised taxes. George H. W.
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Speaker 2: Bush raise taxes, probably cost him the ninety two election.
11:36
Speaker 2: Read my lips. No new taxes. Clinton raise taxes, all
11:41
Speaker 2: three of them. Not not in terms of you know,
11:43
Speaker 2: some giant move or anything like that, but if you
11:48
Speaker 2: look at, you know, federal receipts as a percentage of
11:54
Speaker 2: GDP and say, okay, like how did this stuff move
11:59
Speaker 2: during the ten years? Just as an example, Reagan came
12:02
Speaker 2: into office and again you like, you look at where
12:06
Speaker 2: things moved. Tax revenue at the start of Reagan's term
12:09
Speaker 2: was high. It was about eighteen percent of GDP eighteen
12:11
Speaker 2: point six, peaked out in eighty one because of stuff
12:14
Speaker 2: that Carter had put in previous to him. It then
12:16
Speaker 2: went down to sixteen point two. By the end of
12:19
Speaker 2: Reagan's term it was back up to seventeen point five.
12:22
Speaker 2: So again, like Reagan was like, yeah, I'm gonna cut X, Y,
12:25
Speaker 2: and Z, but I also have to raise taxes to
12:26
Speaker 2: make this make sense.
12:29
Speaker 1: Uh.
12:29
Speaker 2: Bush. Again, he saw federal tax revenues declining during his time,
12:32
Speaker 2: and so it was like, I have to raise taxes
12:34
Speaker 2: because I can't get the deficit in order. Clinton raised, Like,
12:38
Speaker 2: I'm not saying that I want to see higher taxes.
12:41
Speaker 2: I'm saying no president ever wants to raise taxes. But
12:46
Speaker 2: the three of them recognized the necessity and they did,
12:48
Speaker 2: and everyone since then has simply noted out they just
12:52
Speaker 2: have not like that's just where it is.
12:54
Speaker 3: Well, and frankly in part because of the important lesson
12:57
Speaker 3: that these presidents seemed to receive, which was if you
12:59
Speaker 3: raise tax as, you get.
13:00
Speaker 2: Voted well, not true. Reagan and Gregan did not. Right now,
13:04
Speaker 2: Clinton did make some big pivots, but I don't want
13:06
Speaker 2: to get into like the politics of like what he did.
13:09
Speaker 2: But again, like you can manage things fiscally and make
13:14
Speaker 2: things work. It's just we've decided in the last twenty
13:17
Speaker 2: years we'll do with it later. We'll be fine. Come on,
13:23
Speaker 2: let's take a quick break here. When we come back,
13:26
Speaker 2: let's talk a little bit about what do I want
13:30
Speaker 2: to cover here. Uh well, actually, let's do trivia when
13:34
Speaker 2: we get back.
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14:04
Speaker 4: Time for trivia here on the Financial Exchange On this
14:07
Speaker 4: day in twenty twenty one, longtime talk show host Larry
14:10
Speaker 4: King passed away at the age of eighty seven. King
14:13
Speaker 4: parlatest successful radio career into becoming a long time late
14:18
Speaker 4: night talk show host on CNN. Chriviy question today, how
14:22
Speaker 4: many years did Larry King host a talk show on CNN?
14:27
Speaker 4: Once again, how many years did Larry King host a
14:30
Speaker 4: talk show on CNN? Be the seventh person today to
14:35
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14:38
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Speaker 2: Once again.
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Speaker 4: The seventh correct response to text us at six one
14:46
Speaker 4: seven three six two thirteen eighty five, We'll get that
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Speaker 4: T shirt. See complete contest rules at Financial Exchange Show Dot.
14:53
Speaker 2: Com earnings beats happen all the time. Why stocks love
14:58
Speaker 2: the latest results. That's the just be clear inanimate objects,
15:03
Speaker 2: Well maybe yours are, but my stocks got a heart results.
15:14
Speaker 3: So here's what they mean by it happens all the time.
15:17
Speaker 3: On average, over the last decade, about three quarters of
15:21
Speaker 3: companies managed to beat their earnings expectations. So this is
15:25
Speaker 3: a fun game we play where companies come out with
15:28
Speaker 3: expectations that are intentionally below what they actually believe they
15:30
Speaker 3: will do, and then they get to tell their analysts,
15:34
Speaker 3: shareholders and all other people that they beat those you know,
15:41
Speaker 3: expected earnings that are frankly you know, lives to the downside,
15:45
Speaker 3: but something that they consistently do. So far, in terms
15:49
Speaker 3: of the very small number of companies that have reported
15:51
Speaker 3: earning so far, eighty percent have been beating, which is
15:54
Speaker 3: better than the seventy five. The question is, do Netflix, JP, Morgan, Chase,
15:59
Speaker 3: and Procter and Game will actually resemble the rest of
16:02
Speaker 3: the S and P five hundred.
16:04
Speaker 2: I have no idea either, you know, I don't know
16:06
Speaker 2: what we're going to see over the next two weeks
16:07
Speaker 2: because most of the earnings the bulk of S and
16:09
Speaker 2: P five hundred innings happen next week in the week after,
16:12
Speaker 2: so we're gonna see in pretty short order you know
16:14
Speaker 2: what they're telling us. But to this point again, the
16:18
Speaker 2: reason why when we get economic data releases, the reason
16:22
Speaker 2: why we care about them on our show is twofold.
16:26
Speaker 2: The first is it can help us to tell you
16:28
Speaker 2: a little bit about, you know, what we think might
16:29
Speaker 2: be happening economically, so that as you're listening you can say, Okay,
16:33
Speaker 2: I'm informed about this, and I can, you know, hopefully
16:35
Speaker 2: make better financial decisions. But the other one is, hey,
16:38
Speaker 2: it matters for markets because ultimately what drives the stock
16:41
Speaker 2: market is company's ability to generate profits, and profits become
16:46
Speaker 2: harder to come by during recessions. Because you have less demand,
16:50
Speaker 2: companies sell fewer goods, they have to cut prices, and
16:53
Speaker 2: as a result of that, because companies still have fixed costs,
16:56
Speaker 2: their profits drop significantly. A three three percent drop in
17:00
Speaker 2: sales does not just mean, hey, earnings drop by three percent.
17:03
Speaker 2: It often might mean that earnings drop by twenty percent
17:07
Speaker 2: because your fixed costs don't budge, and you've had to
17:10
Speaker 2: go to a bunch of discounts, and so your margins
17:12
Speaker 2: get eaten into and so your earnings drop from you know,
17:16
Speaker 2: twelve percent of sales to five percent, and now you're like, okay,
17:22
Speaker 2: what do we do. Our earnings is dropped by fifty percent.
17:25
Speaker 2: That's not how it works with every company, but there's
17:27
Speaker 2: a reason why. In recessions, earnings typically drop across the
17:30
Speaker 2: S and P five hundred depending on the recession. Anywhere
17:33
Speaker 2: from like ten to twenty five percent is kind of
17:35
Speaker 2: the range that you see. So I think the overall
17:39
Speaker 2: story here is don't get too excited.
17:40
Speaker 3: We don't know anything yet. Only twelve percent of companies
17:43
Speaker 3: have reported thus far, very early. But I think the
17:46
Speaker 3: one thing to keep in mind is one thing that
17:48
Speaker 3: we have just driven home over and over again. Expectations
17:53
Speaker 3: from investors are pretty lofty. They want to see fourteen
17:58
Speaker 3: percent earnings growth. Those are really high expectations for what
18:02
Speaker 3: markets are going to do. And it's a not insurmountable
18:06
Speaker 3: hurdle to pass, but it's a big one. And if
18:08
Speaker 3: it fails to do so, then that's the danger of
18:10
Speaker 3: a market that is expensive and has as lofty expectations
18:14
Speaker 3: as this one does.
18:15
Speaker 2: A Wall Street Journal exclusive Walmart is increasing compensation for
18:19
Speaker 2: regional store managers with top performers now able to earn
18:23
Speaker 2: over six hundred thousand dollars annually. Quite honestly, running a
18:29
Speaker 2: Walmart is probably really really hard.
18:32
Speaker 3: Well, And to be clear, I mean, this responsibility that
18:35
Speaker 3: these regional store.
18:36
Speaker 2: Managers have is probably more than some small company CEOs
18:40
Speaker 2: like yeah, they're almost undoubtedly more responsibility than my job.
18:45
Speaker 2: This is something where they are running maybe ten to
18:47
Speaker 2: twelve different Walmart stores around.
18:50
Speaker 3: A pretty broad geographic location. I don't know other than
18:54
Speaker 3: obviously managing hundreds of employees what this job entails in
18:58
Speaker 3: terms of do you run marketing, do you run other
19:01
Speaker 3: things for you for these regional stores. But this is
19:04
Speaker 3: not some small, small gig where somebody's coming in from
19:08
Speaker 3: nine to five every day.
19:09
Speaker 2: No, the average store at Walmart has around three hundred workers,
19:13
Speaker 2: and if you're managing ten of them, you're effectively running
19:16
Speaker 2: an organization with three thousand employees. And it's oftentimes you know,
19:22
Speaker 2: employees who are part time, they have other things going on.
19:26
Speaker 2: Some of them are really young, so there, you know,
19:27
Speaker 2: there can be a little dodgy. Sometimes it's a tough gig,
19:32
Speaker 2: but Walmart uh wages going up there for regional managers.
19:36
Speaker 2: Quick break trivia answers.
19:37
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20:08
Speaker 4: Trivia question today was how many years did Larry King
20:12
Speaker 4: host a talk show on CNN?
20:14
Speaker 2: That will be twenty five years.
20:15
Speaker 4: King began hosting The Larry King Show on CNN back
20:19
Speaker 4: in nineteen eighty five. King concluded his run on CNN
20:23
Speaker 4: in twenty ten when he left to host a show
20:26
Speaker 4: on Hulu. Winner today of the Financial Exchange Show tea
20:30
Speaker 4: shirt was Mike from Fall River, Mass. Congrats to Mike,
20:33
Speaker 4: and we play trivia every day here on the Financial Exchange.
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Speaker 4: See complete contest rules at Financial Exchange Show.
20:40
Speaker 2: Dot com, PC and CNBC. Now is the ideal time
20:44
Speaker 2: to reassess your retirement savings, according to an expert. What
20:48
Speaker 2: kind of tips do they have here? Mike?
20:51
Speaker 3: Two basic ones Assess how much you can afford to
20:54
Speaker 3: put into your four oh one K if you have
20:55
Speaker 3: one and you still have time to fund an IRA
21:00
Speaker 3: for last year if you didn't, which is a reasonable tip.
21:03
Speaker 3: I don't know that January of twenty twenty five is
21:06
Speaker 3: any more ideal of a time to assess your retirement
21:09
Speaker 3: readiness than any other. But hey, the weather's crappy, it's
21:11
Speaker 3: cold out. If you're finding yourself indoors a little bit,
21:14
Speaker 3: then yeah, it can be a nice time to sit
21:16
Speaker 3: down and set some goals for twenty twenty five. I think,
21:19
Speaker 3: for whatever reason, maybe because it's associated with their employer,
21:24
Speaker 3: or a lot of other reasons, I hear a lot
21:26
Speaker 3: of people pooh pooing retirement plans that they have offered
21:29
Speaker 3: through work and saying, you know, I'll get the match,
21:31
Speaker 3: but I don't want to do a whole lot more.
21:32
Speaker 3: I just don't trust my employer, or I don't like
21:34
Speaker 3: my employer, I don't want to be there for a
21:36
Speaker 3: long time. Those are all bad reasons in terms of
21:40
Speaker 3: not using a retirement plan. And to be really clear,
21:43
Speaker 3: the tax benefits afforded to you by using what the
21:47
Speaker 3: government provides in terms of a four to oh one
21:49
Speaker 3: K or four H three B, either through the tax
21:53
Speaker 3: deferral of that in your higher earnings years or the
21:56
Speaker 3: tax free benefits that you can literally get nowhere else. Right,
22:00
Speaker 3: you can get it through a ROTH IRA, but the
22:02
Speaker 3: limits are much much lower. There's nowhere else you can
22:05
Speaker 3: get the benefits of a WROTH savings plan other than
22:08
Speaker 3: through this government offered vehicle. And so I think people
22:12
Speaker 3: need to, I guess, start with that premise, which is,
22:15
Speaker 3: for most working adults, the very best place that they
22:19
Speaker 3: can save for their future is through their employered sponsored plan.
22:23
Speaker 3: And if you're hearing otherwise, like hey, check out this
22:26
Speaker 3: really great life insurance policy that's going to pay you
22:28
Speaker 3: dividends in retirement, I'm not saying that that's universally wrong.
22:32
Speaker 3: I am saying you should treat it with a high
22:34
Speaker 3: degree of skepticism. If somebody's telling you that they have
22:37
Speaker 3: a better savings vehicle for you then your employer sponsored
22:41
Speaker 3: retirement plan.
22:42
Speaker 2: And I think on any of this, make sure you
22:45
Speaker 2: understand the ins and outs of how they all work.
22:47
Speaker 3: Yeah, I'm not saying these are perfect too. And by
22:48
Speaker 3: the way, like I will say that for whatever reason,
22:51
Speaker 3: I cannot explain why, but when I look at folks
22:56
Speaker 3: retirement plans pretty consistently, teachers seem to have the worst
23:01
Speaker 3: options consistently in terms of their employer sponsored retirement plans,
23:05
Speaker 3: and I don't know why, and I'm sorry if you
23:07
Speaker 3: work in this space and sponsor some of these. It's
23:10
Speaker 3: not to say they're universally all bad, but consistently higher
23:13
Speaker 3: cost than average, consistently tricky insurance products that you have
23:17
Speaker 3: to navigate. So for a lot of folks, it's pretty easy.
23:21
Speaker 3: Right You've got one plan offered through your employer. You
23:24
Speaker 3: have a selection of maybe twenty funds to choose from.
23:27
Speaker 3: Even that does get complicated because you have to look
23:30
Speaker 3: at expenses and what they actually invest in in a
23:32
Speaker 3: number of different things. But my main takeaway for most
23:36
Speaker 3: people is that that retirement plan, there's very little that
23:41
Speaker 3: can compete with it in terms of the best tools
23:44
Speaker 3: to use to fund your future. If you are maybe
23:49
Speaker 3: in that retirement stage, maybe you are in that position of, hey,
23:53
Speaker 3: I'm trying to side where I save the next dollar.
23:56
Speaker 3: Maybe you've already a little bit past that and you've
23:58
Speaker 3: fully funded that retirement plan and you're trying.
24:00
Speaker 2: To figure out what do I do next?
24:02
Speaker 3: Right, you know, maybe I'm approaching retirement and I feel
24:06
Speaker 3: like I need some decisions that have to be made
24:09
Speaker 3: pretty soon, and you're not sure how to address them,
24:11
Speaker 3: because honestly, closing in on retirement, that's where some of
24:15
Speaker 3: these questions get really tricky. How will my expenses change
24:20
Speaker 3: in regard to my retirement plan after I'm retired? Does
24:23
Speaker 3: it work the same way once I'm no longer working there?
24:26
Speaker 3: Do I have to look through that massive plan document
24:28
Speaker 3: and really understand the ins and outs. If you're trying
24:31
Speaker 3: to address questions like that, I understand that they're complicated.
24:34
Speaker 3: If the Armstrong advisoryup can help guide you through that process,
24:37
Speaker 3: I can tell you firsthand that it leads to just
24:40
Speaker 3: a lot of destressing on the part of clients that
24:43
Speaker 3: I've worked with personally. If you could use some of
24:46
Speaker 3: that distressing regarding your own retirement and want to have
24:49
Speaker 3: a free consultation with the folks at Armstrong, please give
24:52
Speaker 3: us a call at eight hundred three nine three four
24:55
Speaker 3: zero zero one. Again, that's the number four the Armstrong
24:58
Speaker 3: Advisory Group and the phone number is eight hundred three
25:02
Speaker 3: nine three four zero zero one.
25:04
Speaker 1: The proceeding was paid for by Armstrong Advisory Group, a
25:07
Speaker 1: registered investment advisor. Nothing in the ad or in any
25:09
Speaker 1: Armstrong guide a specific financial, legal, or tax advice consult
25:12
Speaker 1: your own financial, tax, and estate planning advisors before making
25:15
Speaker 1: any investment decisions. Armstrong may contact you to offer investment
25:18
Speaker 1: advisory services.
25:20
Speaker 2: So a few years back, there was a change in
25:24
Speaker 2: how inherited irays for most non spouse inheritors were treated. Yeah,
25:30
Speaker 2: and it moved to what's called the ten year rule. Basically,
25:34
Speaker 2: you used to have the ability to if you were
25:37
Speaker 2: inheriting an iray from a parent or a sibling, basically
25:42
Speaker 2: anyone you're not married to, you had the ability to
25:45
Speaker 2: take a required distribution each year, but you could do
25:48
Speaker 2: that over the course of your life and never fully
25:50
Speaker 2: empty the account. True with the It was secure two
25:54
Speaker 2: point zero that put this into Effector was it the
25:56
Speaker 2: first one? I can't remember.
25:57
Speaker 3: Two point zero in twenty nineteen, Troy twenty was when
26:00
Speaker 3: it passed.
26:01
Speaker 2: Yeah, so that was the first one. The second one
26:02
Speaker 2: was in twenty twenty two. Okay, then maybe it was
26:05
Speaker 2: one point now either way they passed these rules. Yeah,
26:08
Speaker 2: it was the first one. They passed a rules saying
26:09
Speaker 2: you have to take the you have to withdraw the
26:12
Speaker 2: entire inherited i array from a non spouse within ten
26:15
Speaker 2: years unless you're a certain qualified individual. There are a
26:18
Speaker 2: few exceptions, and then the IRS took four years to
26:20
Speaker 2: interpret what that means because they went back, well, no,
26:24
Speaker 2: they said, we think it means that you also have
26:28
Speaker 2: to take an RMD from it each year. Yeah, but
26:32
Speaker 2: we're gonna wave any penalties. We're gonna wave it for
26:34
Speaker 2: this year just because it's it's still confusing, and so
26:37
Speaker 2: we're gonna if you didn't take anything, you're fine. Yep.
26:40
Speaker 2: What they are now saying for this year, they finally
26:42
Speaker 2: issued the final guidance on this, and the guidance is
26:47
Speaker 2: that the IRS is now enforcing penalties for missed rmds
26:52
Speaker 2: on inherited I rays that are within the ten year rules.
26:55
Speaker 2: So what does that mean, Chuck, Like, I have to
26:56
Speaker 2: take a tenth of it out every year. No, you
26:59
Speaker 2: might have to take that if that's your RMD, but
27:01
Speaker 2: you have to go and look at the IRS's uniform
27:03
Speaker 2: life tables for this stuff and figure out how much
27:08
Speaker 2: of it you have to pull out, which might be
27:10
Speaker 2: much smaller than ten percent. But then you still have
27:13
Speaker 2: to exhaust the whole thing within ten years. All right.
27:17
Speaker 3: So somebody dies, yep, I then have ten year trigger
27:21
Speaker 3: from the year after they're dead to empty their retirement account.
27:27
Speaker 3: But at the same time, I also must take a
27:30
Speaker 3: small amount that could be more or less than one
27:34
Speaker 3: tenth of the account every year, depending on whether it's
27:38
Speaker 3: a traditional or a wrath, and depending on how old
27:41
Speaker 3: I am, how old the person was when they passed,
27:44
Speaker 3: and whether or not we were married at the time.
27:47
Speaker 3: That basically summed up usually. Yeah, yeah, I've said this
27:54
Speaker 3: before jokingly, and I'll continue to make the same joke.
27:57
Speaker 3: The IRS and Congress just keeps passing law that make
28:00
Speaker 3: it so that people like myself have permanent job security,
28:04
Speaker 3: and every accountant out there has just decades worth of
28:07
Speaker 3: job security. By making this stuff as complicated as humanly possible.
28:12
Speaker 2: It's a mess. And this is before This is before
28:15
Speaker 2: you even get into the stuff on the super Ketchup
28:17
Speaker 2: contribution for this year for you know, four to one k's.
28:21
Speaker 2: But yeah, yeah, this stuff is just pure silliness. It's
28:26
Speaker 2: you couldn't make it more complicated. Actually, you could make
28:28
Speaker 2: it more complicated if you tried. Yeah you could, but
28:30
Speaker 2: not much. You'd have to really do some work though. Yeah,
28:33
Speaker 2: let's take a quick break here. When we come back,
28:35
Speaker 2: we'll do a little bit of stack roulette.
28:38
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29:50
Speaker 2: Mike, what do you got for me? For stack Rue?
29:53
Speaker 3: Let's a little story of every man has his price.
29:56
Speaker 3: Berkshire Hathaway has invested in new holdings which I had
29:59
Speaker 3: not been familiar with prior to this article. They're a
30:02
Speaker 3: Brazilian digital banking company that has its own cryptocurrency platform
30:05
Speaker 3: and supports the cryptocurrency market. Company initially invested five hundred
30:10
Speaker 3: million dollars in a Series G funding round back in
30:12
Speaker 3: twenty one, followed by another two hundred and fifty million,
30:14
Speaker 3: according to that company. This is interesting because of Warren
30:19
Speaker 3: Buffett's previous comments about the cryptocurrency industry in general. In
30:24
Speaker 3: twenty eighteen, at a shareholder meeting, Buffett called the digital
30:27
Speaker 3: currency bitcoin probably rat poison squared, then went on to
30:31
Speaker 3: say in a separate interview, quote in terms of cryptocurrencies, generally,
30:35
Speaker 3: I can say with almost certainty that we will come
30:38
Speaker 3: that they will come to a bad ending.
30:41
Speaker 2: Quote. We don't own any, we're not short any. We'll
30:44
Speaker 2: never have a position in them. Now. To be fair
30:47
Speaker 2: to his previous comments, the company does not have a
30:49
Speaker 2: stake in bitcoin specifically, that is not what's been disclosed here,
30:54
Speaker 2: but your bank roll in a bank that has a
30:57
Speaker 2: pretty big interest in the crypt do currency industry generally,
31:01
Speaker 2: and so clearly some form of pivot on all of this. Yeah,
31:08
Speaker 2: I think that's fair. I'm going to talk about this
31:10
Speaker 2: piece from the New York Times, will dress shirts return
31:12
Speaker 2: to the office? Well, so here's the point that it
31:17
Speaker 2: makes is that even for people that are in office now,
31:23
Speaker 2: dress codes have gotten a little bit more casual. I
31:26
Speaker 2: can speak to it like myself. I'm sitting here right
31:28
Speaker 2: now wearing, you know, a sweater with a golf shirt
31:31
Speaker 2: underneath and flowers on it.
31:33
Speaker 3: Yeah, closing in on Valentine's dass post, Jack, let's justifiable.
31:40
Speaker 2: I yeah, it's it's all about what's the month of love? Man?
31:45
Speaker 2: And so look, the question is, hey, are you going
31:49
Speaker 2: to see the pendulum swing in the other direction where
31:53
Speaker 2: businesses start getting more dress Cody? My guess on this
31:59
Speaker 2: is no for two reasons. The first is that the
32:03
Speaker 2: long term, we are in a long term secular trend
32:07
Speaker 2: for casualization. You know, you're headed by you look at
32:13
Speaker 2: it suck. No, Like Mike, this this started two hundred
32:18
Speaker 2: and fifty years ago. Okay, if you and I were
32:22
Speaker 2: having this conversation back in seventeen seventy six, which, by
32:25
Speaker 2: the way, two hundred anniversary coming up in how many years?
32:28
Speaker 2: Two hundred and fifteth rather one year? Is that going
32:31
Speaker 2: to be exciting? Yeah, two hundred and fifty years of
32:33
Speaker 2: you know, quarter of a millennium. Yeah, it's kind of wild. Uh, yeah,
32:36
Speaker 2: that's right, Yeah, I got it. So if you and
32:39
Speaker 2: I were sitting around back then, not only would we
32:42
Speaker 2: have to wear you know, three piece suit, the high socks,
32:46
Speaker 2: custom cobbled boots, we'd have wigs on, especially me. I
32:50
Speaker 2: mean I would need one very early on, but we
32:53
Speaker 2: we'd have powdered wigs on. Yeah. And you know, thankfully
32:55
Speaker 2: we've moved on from those days, but there's been a
32:57
Speaker 2: steadily encroaching asualization as we go. Now. One of the
33:02
Speaker 2: big reasons for this, quite honestly, do you guys know
33:05
Speaker 2: the biggest reason why overall attire has gotten less formal?
33:12
Speaker 2: I don't know.
33:12
Speaker 3: I know, I would imagine that all clothing has gotten
33:15
Speaker 3: outrageously cheaper over the last several decades, but I don't
33:18
Speaker 3: see not because of that explains why.
33:20
Speaker 2: Nope, that was just the pandemic heat and air conditioning.
33:25
Speaker 1: HM.
33:26
Speaker 2: So you go back one hundred years ago and most
33:29
Speaker 2: homes didn't have any kind of central heat or central
33:32
Speaker 2: air of any kind. You had, you know, maybe fireplaces
33:34
Speaker 2: in each room, but it was generally kind of cold
33:36
Speaker 2: in the winter, and it was generally pretty darn warm
33:39
Speaker 2: in the summer, and so things that you used to have,
33:43
Speaker 2: things like house coats that you have to wear, and
33:46
Speaker 2: so you would you know, there's a reason why, like
33:48
Speaker 2: you had these big coats and everything was because you
33:50
Speaker 2: were typically kind of cold inside. And underneath that, you know,
33:53
Speaker 2: you were just wearing your clothes to and from work
33:56
Speaker 2: because most people didn't have a whole lot of money
33:58
Speaker 2: to spend on casual clothes and things like that. And
34:01
Speaker 2: so it was just this whole cycle that kind of
34:04
Speaker 2: built up as you have seen the move towards you know,
34:07
Speaker 2: the ability to have your own temperature combined with you know,
34:11
Speaker 2: just hey, society generally wanted to stick it to the man,
34:13
Speaker 2: which always approve of h. Yeah, you've had this trend
34:16
Speaker 2: towards casualization that's been going on as well. So I
34:19
Speaker 2: look at it and sure in certain industries I could see,
34:26
Speaker 2: you know, finance, maybe being like, hey, Jimmy, put a
34:30
Speaker 2: tie on today? What are you doing? But other than that,
34:33
Speaker 2: like do we really think tech bros Are gonna be
34:35
Speaker 2: sitting there going yes? You know, one of the things
34:38
Speaker 2: we'd like to do is we're returning to offices also
34:40
Speaker 2: instruct you as to page fourteen of the manual, which
34:44
Speaker 2: we've updated to include the new employee dress code. How's
34:48
Speaker 2: that gonna go? Probably not great? Not great, Bob. So,
34:51
Speaker 2: I think that this is something that, yeah, in certain
34:54
Speaker 2: niche industries, maybe you have this comeback. But I also
34:58
Speaker 2: think that every generation has its own norms as it
35:01
Speaker 2: relates to dress, and not just dress but facial Here,
35:04
Speaker 2: someone like me, who you know, has a beard right now,
35:07
Speaker 2: thirty years ago I would have come into the office,
35:09
Speaker 2: someone would have been like, get rid of that now,
35:12
Speaker 2: to take that animal off your face. Yankees do that still?
35:15
Speaker 2: I mean, I'll say I never played for them. Yeah
35:18
Speaker 2: that's why. Yeah, exactly, I'll say that.
35:20
Speaker 3: You know, I had a baby boomer client, younger baby
35:24
Speaker 3: boomer client who I think like a humor.
35:26
Speaker 2: Six years ago.
35:28
Speaker 3: I came in wearing a suit to our meeting and
35:30
Speaker 3: He's just like, you know, Mike, been clients for a while,
35:34
Speaker 3: what are you doing put a sweater on or something
35:36
Speaker 3: like that. You are way too formal for this meeting.
35:39
Speaker 3: And so I do think that even in client facing roles,
35:43
Speaker 3: standards have just shifted in terms of what the norm
35:46
Speaker 3: is for for casual dress in a reminder of Wow,
35:52
Speaker 3: that place is really different than the way we do
35:54
Speaker 3: things here. Chinese authorities have sought to boost the stock
35:57
Speaker 3: market and restore confidence in the world's second lart just economy.
36:01
Speaker 3: How are they doing it setting specific requirements for local
36:04
Speaker 3: insurance companies and mutual funds to invest more in domestic stocks.
36:08
Speaker 3: So it's not by making those stocks more attractive. Specifically,
36:12
Speaker 3: regulators have told state insurers to invest a minimum of
36:15
Speaker 3: thirty percent of their new policy premiums in local shares.
36:19
Speaker 3: Mutual funds have been told to increase these shareholdings by
36:21
Speaker 3: ten percent annually for the next three years.
36:25
Speaker 2: I don't really know what to.
36:27
Speaker 3: Do with any of that information other than to just
36:29
Speaker 3: remind folks if they're considering their investment portfolio and trying
36:35
Speaker 3: to understand how things work in different places, it's just
36:38
Speaker 3: a good reminder that, hey, the Chinese market does not
36:42
Speaker 3: operate anything like most of the rest of the world. No,
36:46
Speaker 3: because almost nowhere in the rest of the world do
36:49
Speaker 3: they have insurance companies and mutual funds with specific minimums
36:53
Speaker 3: that they must maintain. In the United States, there are
36:56
Speaker 3: rules that incentivize people to buy domestic companies, right you
37:00
Speaker 3: have tax preference, qualified dividends and things like that. But
37:05
Speaker 3: this is not that this is a specific quota quota
37:09
Speaker 3: do this or else. And I don't know what the
37:12
Speaker 3: or else is. I don't think any of us really do.
37:14
Speaker 3: But just a good reminder of just how different the
37:18
Speaker 3: Chinese equity markets are than those in the United States.
37:22
Speaker 2: I'm going to stay over in Asia just to give
37:25
Speaker 2: an update on what's going on in South Korea. You
37:26
Speaker 2: remember about a month or so ago there was the
37:30
Speaker 2: multiple calls of martial law and this and that. The
37:33
Speaker 2: South Korean president is now going through his impeachment trial
37:38
Speaker 2: and trying to defend you know, kind of what he did.
37:42
Speaker 2: The interesting thing I was talking to a buddy of mine.
37:44
Speaker 2: The the primary rival is someone by the name of
37:49
Speaker 2: Lee Jamie Young, and Lee lost the prior election by
37:54
Speaker 2: a very small margin to you, and who's currently being impeached.
37:57
Speaker 2: The interesting thing about Lee is the Lee currently has
38:00
Speaker 2: multiple criminal charges pending against him and is trying to
38:03
Speaker 2: speed the impeachment trial through in order to basically beat
38:08
Speaker 2: the police to his to being appointed. Also, apparently he
38:13
Speaker 2: was stabbed in the neck a year ago as well.
38:17
Speaker 2: Oh so things are wild over in Korea. I gotta
38:20
Speaker 2: tell you. We're gonna take a quick break here, we'll
38:24
Speaker 2: finish up. Actually we're done for the day, so long
38:27
Speaker 2: break here, but we'll see you tomorrow on the Financial
38:29
Speaker 2: Exchange