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GDP gets a tariff surprise · The Financial Exchange Show

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Speaker 2: Well, we are right in the middle of the most
1:15
Speaker 2: exciting week in markets. A lot going on, and things
1:19
Speaker 2: pretty quiet this morning as far as stock movements, largely
1:23
Speaker 2: because we need to see what the Fed does later today.
1:27
Speaker 2: But earlier today at eight thirty am Eastern time, we
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Speaker 2: received the GDP report for Q two first estimate. At
1:37
Speaker 2: least this will be revised twice at least before you
1:40
Speaker 2: know larger revisions that happened, you know, a couple of
1:42
Speaker 2: years down the road, but we're gonna get revisions over
1:45
Speaker 2: the next couple months on this. But the initial reading
1:48
Speaker 2: came in at a GDP growth rate of three percent.
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Speaker 2: Now to look at this, I think it's also informative
1:56
Speaker 2: to go back to Q one, where we saw GDP
1:59
Speaker 2: four by half a percent. And the reason why I
2:02
Speaker 2: think it's important to go back to Q one is
2:05
Speaker 2: because these are two quarters that show two sides of
2:10
Speaker 2: the same coin when it comes to the impact on
2:15
Speaker 2: GDP and its growth rates. So let's start with Q
2:19
Speaker 2: one and what we saw there. The big thing that
2:23
Speaker 2: held back GDP in the first quarter of this year,
2:27
Speaker 2: at least as it's measured and reported in this report,
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Speaker 2: was a significant rise in imports, which weighs against it,
2:37
Speaker 2: just based on how the GDP calculation works, So imports
2:41
Speaker 2: weighed against it. Inventories built, which helped it out a
2:44
Speaker 2: little bit, but ultimately you came in with that negative
2:46
Speaker 2: point half percent when it was all said and done,
2:50
Speaker 2: what we saw in the second quarter was the mirror image.
2:54
Speaker 2: Inventories were drawn down as companies started to use their
2:58
Speaker 2: pre tariff inventory, and imports dropped significantly, which made the
3:04
Speaker 2: second quarter look better than it otherwise would have been
3:07
Speaker 2: the same way that the first quarter looked worse than
3:09
Speaker 2: it otherwise would have been. Ultimately, mark where I tend
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Speaker 2: to land is let's not view these as two separate quarters.
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Speaker 2: Put them in, lump them in, and you could even
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Speaker 2: call them the first half of twenty twenty five, if
3:22
Speaker 2: if you will, if you're still with me, and what
3:25
Speaker 2: we saw is in the first half of twenty twenty five,
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Speaker 2: GDP rose at about a one point two to one
3:31
Speaker 2: point three percent rate based on the numbers that we
3:34
Speaker 2: have here. Is that a fair way of looking at
3:36
Speaker 2: this just in terms of the big picture.
3:39
Speaker 3: I guess if you want to make it depends on
3:41
Speaker 3: I think you're exactly right by caveating it the way
3:44
Speaker 3: you did it depends on the case you're trying to make.
3:47
Speaker 3: I took a go ahead, no go ahead.
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Speaker 2: The case I'm trying to make is that I don't
3:50
Speaker 2: think the US economy actually changed that much from Q
3:53
Speaker 2: one to Q two. It's just a matter of when
3:56
Speaker 2: did some stuff come into the country and when did
3:58
Speaker 2: it leave where?
3:59
Speaker 3: Exactly where I was going, it does come out in
4:01
Speaker 3: the wash. Can I put it in an even longer
4:02
Speaker 3: term perspective to underscore the point you've just made, which
4:05
Speaker 3: I think is exactly the right one. And I'm not
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Speaker 3: just saying that because I work for you. If you look,
4:10
Speaker 3: if you look at the night, look, we're all spoiled.
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Speaker 3: Those of us who grew up in the eighties, nineties
4:15
Speaker 3: or earlier are really spoiled. From nineteen fifty to nineteen
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Speaker 3: ninety nine, the real annual GDP growth rate gross domestic product,
4:23
Speaker 3: the variable Chuck was talking about, was three point four percent.
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Speaker 3: That may not mean anything to you without contact, let
4:29
Speaker 3: me give you some From two thousand to twenty twenty four,
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Speaker 3: the same growth rate was two percent. Also may not
4:38
Speaker 3: mean a lot to you other than that, you know,
4:39
Speaker 3: the three point four is four is bigger, is bigger
4:42
Speaker 3: than two. But what has that meant over the last
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Speaker 3: twenty five years. It means that if we had been
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Speaker 3: growing as and I am going to come back to
4:47
Speaker 3: your point, yes, I need to I need to make
4:49
Speaker 3: one more, if we'd been growing as fast as we
4:52
Speaker 3: did from the fifties to the nineties over the last
4:55
Speaker 3: twenty five years, growth would be bigger by a factor
4:59
Speaker 3: of two point three. Instead, it's bigger only by a
5:02
Speaker 3: factor of one point six'. Four said, differently we're about
5:06
Speaker 3: two thirds as wealthy as we otherwise would. Be even
5:10
Speaker 3: that lacks context BECAUSE i don't know what that means
5:13
Speaker 3: in terms of standard of, living purchasing goods and. Services
5:15
Speaker 3: but you know that you'd rather have one of something
5:18
Speaker 3: than two thirds of. Something it's actually quite a. Gap
5:21
Speaker 3: my point is that growth this entire century has been really,
5:24
Speaker 3: disappointing and it's not just The Great. Recession it was
5:27
Speaker 3: already slowing down prior to that due to demographic and other.
5:31
Speaker 3: Forces so chuck to wrap it up and bring it
5:33
Speaker 3: back to your. Point over the past four quarters, now
5:36
Speaker 3: bringing us to the PRESENT gdp growth has been about two,
5:39
Speaker 3: percent exactly in line with this, century so the next
5:43
Speaker 3: four may look, different might be lower than two. Percent
5:46
Speaker 3: most people think trend growth or potential growth is about two.
5:49
Speaker 3: Percent you really do need to smooth these, things is
5:51
Speaker 3: the Point i'm trying to. Make in the last twelve
5:54
Speaker 3: months have not been in a normally relative to this.
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Speaker 3: Century but to those of us who grew up in
5:58
Speaker 3: the last century and have very high expectations for, growth
6:01
Speaker 3: we continue to feel like something's. Wrong it's this nagging
6:04
Speaker 3: feeling you have in the back of your. MIND i
6:06
Speaker 3: think if you're of a certain, age And i'll just
6:09
Speaker 3: leave it at, THAT.
6:10
Speaker 4: I thought that was just me getting.
6:11
Speaker 1: Older, well, yeah.
6:13
Speaker 3: That's that's part of. It remember the halcyon days exactly
6:15
Speaker 3: of your, Youth, like why AM i not having fun
6:17
Speaker 3: all the time? Anymore why is the economy not growing
6:19
Speaker 3: as fast as it was? Anymore et, cetera et. Cetera
6:22
Speaker 3: and you're not wrong if you got this nagging feeling
6:24
Speaker 3: that something went off the rail of something actually, Not,
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Speaker 3: yes something very significant changed in the trend OF gdp.
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Speaker 2: Growth so in terms of where we go from, here
6:34
Speaker 2: what does this all mean for the second half of the. Year,
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Speaker 2: Uh the first thing, IS i don't know exactly which way,
6:45
Speaker 2: imports exports and trade or going to influence monthly or
6:49
Speaker 2: quarterly fluctuations IN. Gdp so, yeah quite, honestly the way
6:53
Speaker 2: That i'm looking AT gdp for the foreseeable, future take
6:57
Speaker 2: that out and don't worry about, it because it's gonna
6:59
Speaker 2: come out wash if one quarter has higher. Imports let's
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Speaker 2: say there are a bunch of imports that are happening
7:06
Speaker 2: right now to try to you, know beat This august first. Deadline,
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Speaker 2: okay AM i gonna you, know weigh down Q q
7:12
Speaker 2: three and, say, well it's bad because there were a
7:15
Speaker 2: lot of, imports you, know in the month Of.
7:16
Speaker 4: July, no like.
7:18
Speaker 2: It's gonna come out in the wash later. On So
7:20
Speaker 2: i'm kind of, saying, look let me not look at
7:23
Speaker 2: trade for a, minute and let me look at actual,
7:27
Speaker 2: consumption because consumption is what is what powers THE us,
7:31
Speaker 2: economy and not just consumption by, households but ALSO i,
7:35
Speaker 2: GUESS i GUESS i would say consumption and. Investment those
7:37
Speaker 2: are you, know the two vehicles effectively that we're looking.
7:40
Speaker 2: At and the nice thing is in THE gdp, report
7:44
Speaker 2: we have a measure that conveniently basically wraps all of this.
7:48
Speaker 2: Up it's called final sales to private domestic. Purchasers that's
7:53
Speaker 2: a fancy way of, saying, hey how much stuff did
7:57
Speaker 2: households buy in order to you, know, consume and how
8:01
Speaker 2: much stuff did businesses buy in order to invest in the.
8:05
Speaker 2: Country and here's the trend that's Concerning and this is
8:08
Speaker 2: the one to watch BECAUSE i think this is a good.
8:10
Speaker 2: Measure there's a reason why this statistic is often called
8:14
Speaker 2: CORE gdp is because it strips a lot of that
8:16
Speaker 2: other stuff out in the. Wash the reason why this
8:23
Speaker 2: matters is, ultimately again where consumption driven. Economy and here's
8:26
Speaker 2: the concerning piece on it, is here's the trend for
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Speaker 2: the last four. QUARTERS q three of last year three
8:32
Speaker 2: point four PERCENT q two of last year two point nine,
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Speaker 2: PERCENT q one of this year one point nine PERCENT
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Speaker 2: q two of this year one point Two it's been
8:42
Speaker 2: on a downward trend SINCE q three of last, year
8:45
Speaker 2: so ultimately the second half of the, year in my,
8:48
Speaker 2: opinion when it comes to WHERE gdp is going to,
8:52
Speaker 2: land it's gonna be about, this does that down trend
8:57
Speaker 2: continue or do we see it stabilized or even. Reverse
9:02
Speaker 2: and there are paths that you can believe for each
9:06
Speaker 2: of those. Outcomes it's something where any one of those
9:10
Speaker 2: three is, possible and we just need to see what
9:15
Speaker 2: comes of.
9:15
Speaker 4: It let's take a quick.
9:16
Speaker 2: Break when we come, BACK i want to discuss what
9:19
Speaker 2: those paths look, like WHERE gdp can start to ramp
9:23
Speaker 2: up again as we head into the second, half where it,
9:25
Speaker 2: stagnates or where it falls, off and then we've got some.
9:29
Speaker 2: Problems we'll discuss that when we.
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Speaker 2: Com all, right so we've been talking about The Good Public,
10:38
Speaker 2: report more commonly referred to AS, gdp and here's where we.
10:44
Speaker 2: Are first half of the, YEAR gdp grew at somewhere
10:48
Speaker 2: in the range of one and a quarter, percent with
10:49
Speaker 2: with the final revisions that will get maybe it's one,
10:52
Speaker 2: percent maybe it's one and a, half but low ones is.
10:54
Speaker 4: Where it looks.
10:55
Speaker 2: Like and so where does it go in the second
10:59
Speaker 2: half of the. Year there's three paths that you can, take, obviously,
11:01
Speaker 2: up sideways or. Down i'm not gonna say THAT i
11:05
Speaker 2: know which one it's going to, take But i'm going
11:07
Speaker 2: to lay out the paths THAT i see which in
11:09
Speaker 2: which it could possibly take any of these. Three the first,
11:14
Speaker 2: one how do? Things how does this get?
11:16
Speaker 4: Better how does it?
11:17
Speaker 2: Improve, okay you've got a little bit more tariff certainty,
11:20
Speaker 2: now even though you know later this week we may
11:23
Speaker 2: be getting some new tariff, rates so you know your
11:25
Speaker 2: mileage may, vary and so companies feel more confident investing
11:30
Speaker 2: at this point and spending. Money on top of, that
11:33
Speaker 2: The Reconciliation bill had a bunch of provisions in there
11:37
Speaker 2: for EXPENSING capex AND r AND d and things like,
11:41
Speaker 2: that and so companies may decide to utilize those provisions
11:45
Speaker 2: and get that money back into THE. Us maybe as
11:48
Speaker 2: a result of, that corporate travel picks back. Up people
11:51
Speaker 2: feel a little bit more solid on their, footing and
11:53
Speaker 2: so leisure travel picks. Up the tariff impacts are, absorbed
11:58
Speaker 2: and you kind of go from. THERE i, know by the,
12:00
Speaker 2: way there's THIS ai boom that's going on and that,
12:02
Speaker 2: continues you, know. Unabated that's the past two things getting
12:07
Speaker 2: better in the second half of this, year the path
12:10
Speaker 2: two things staying the. Same you, know load to mid
12:13
Speaker 2: one PERCENT gdp. Growth, hey all of that stuff related
12:17
Speaker 2: to you, KNOW capex AND r AND d is, nice
12:20
Speaker 2: but it takes a little while for companies to move
12:23
Speaker 2: because they don't just have these projects where they're you,
12:25
Speaker 2: know ready to go shovels in the ground, tomorrow and
12:27
Speaker 2: so maybe that doesn't come, until you, know next.
12:29
Speaker 4: Year a little bit.
12:30
Speaker 2: Later travel basically stays the same kind of what we've
12:34
Speaker 2: been hearing from all the travel, companies where the airlines
12:37
Speaker 2: and hotels pretty much said, yeah we saw you, know
12:39
Speaker 2: a negative impact to travel in the first part of the,
12:41
Speaker 2: year but we've stabilized at lower. Levels housing continues to
12:46
Speaker 2: be a modest drag on the economy because of lower
12:50
Speaker 2: overall activity. Levels but by the, way there's still THIS
12:53
Speaker 2: ai boom that's going, on and so, that you, know
12:55
Speaker 2: is kind of the thing that powers you forward even
12:57
Speaker 2: with the rest of the, economy you, know kind of
12:59
Speaker 2: try to figure out which cylinders to fire. On, okay
13:02
Speaker 2: you get you, know low one PERCENT gdp growth and
13:04
Speaker 2: there's no recession because of.
13:06
Speaker 4: That nothing you, know awful.
13:07
Speaker 2: Happens it's just one of these periods where you've got
13:09
Speaker 2: a little bit of slow growth before things you, know
13:11
Speaker 2: recover and move a little bit faster next. Year the
13:15
Speaker 2: path to things worsening. Again you don't really get any
13:19
Speaker 2: uh you know help from THE Uh Reconciliation. Bill tariff
13:23
Speaker 2: impact starts to really be felt in the third, quarter
13:25
Speaker 2: and by the, way now you have these higher tariffs
13:27
Speaker 2: that are going to be kicking, in you, know as
13:29
Speaker 2: we get into later in the, year and so companies
13:32
Speaker 2: are raising, prices wages don't keep, up and in, fact
13:36
Speaker 2: maybe you end up in a situation where companies start
13:38
Speaker 2: laying people off because higher prices without higher wages usually
13:43
Speaker 2: means lower sales, volumes and so companies say we got
13:46
Speaker 2: to get leaner in order to deal with, that and
13:49
Speaker 2: housing continues to, slide maybe, construction you, know drops, further
13:53
Speaker 2: which leads to layoffs, there and so you've got problems
13:56
Speaker 2: on that. End SO i think there are plausible paths
13:59
Speaker 2: to things going down any one of those three. Paths
14:04
Speaker 2: the waitings are probably not you, know a third a
14:06
Speaker 2: third a. THIRD i think they're probably a little bit
14:09
Speaker 2: skewed towards, stagnation not stagnation in terms, of you, know things,
14:16
Speaker 2: worsening BUT i think they're probably a little bit skewed
14:18
Speaker 2: towards pretty much things looking a lot like the first,
14:21
Speaker 2: half just BECAUSE i think the risks may, balance but
14:24
Speaker 2: there's some downside risk and you, KNOW i think upside
14:27
Speaker 2: in the next couple quarters might be tough to, find
14:30
Speaker 2: BUT i think there's undeniably because of the potential for
14:32
Speaker 2: increased business, capex some real upside as you look into
14:35
Speaker 2: next year as far as where things could. Go but
14:39
Speaker 2: these are the paths that we have FOR gdp And,
14:42
Speaker 2: ultimately we're gonna have to see how these next couple quarters,
14:45
Speaker 2: look BECAUSE i do think that there's still some uncertainty
14:49
Speaker 2: about exactly where it could.
14:50
Speaker 3: Go, YEAH i think absent any other special, knowledge WHICH
14:54
Speaker 3: i would argue none of us. Have your best guess
14:57
Speaker 3: of next QUARTER'S gdp is last. Quarters do you d
15:00
Speaker 3: you've ever heard the expression random? Walk that's what a
15:02
Speaker 3: random walk, is and that implies. Persistence that implies what
15:06
Speaker 3: happened last quarter effects what happened this, Quarter and if
15:09
Speaker 3: you to be, fancy iterate forward if you plug in
15:13
Speaker 3: the definition of last quarters being the previous, quarter of
15:15
Speaker 3: the previous quarters being the quarter before, that and so
15:17
Speaker 3: on and so, forth as a good researcher, would do
15:20
Speaker 3: you see there's persistence IN? Gdp said, Differently, well, No
15:24
Speaker 3: i'm gonna say it that. WAY gdp is a little bit.
15:26
Speaker 3: Persistent so unless you have a very strong view about
15:30
Speaker 3: this quarter's growth being due to one offs and last
15:33
Speaker 3: quarter's growth through and you may by the way last
15:36
Speaker 3: quarter's growth through to being one, off's your best guess
15:38
Speaker 3: is what happened last? Quarter or maybe you maybe you
15:42
Speaker 3: accumulate as you, did you add the two divide by
15:45
Speaker 3: two and say we're on a slower trajectory than we
15:49
Speaker 3: were previously TREND, gdp which is a term researchers use
15:55
Speaker 3: for the potential growth in the, economy or MAYBE i
16:00
Speaker 3: should reverse that? Potential is the definition of is a
16:02
Speaker 3: proxy for? Trend is probably closer to. Two so it
16:06
Speaker 3: looks like under the, hood decomposing it as you, Did,
16:09
Speaker 3: chuck we're growing at a little below. Potential question is
16:13
Speaker 3: does that portend further deceleration into the clinical recession as
16:22
Speaker 3: the folks AT nb are label abroad slow down or
16:26
Speaker 3: does the economy pick back? Up say, differently is this
16:29
Speaker 3: just a growth? Slowdown or is it you just have
16:32
Speaker 3: a cold or do you have a serious? Illness right
16:34
Speaker 3: speaking of the economy here, Obviously and.
16:37
Speaker 2: When we get a little bit more, granular like where
16:39
Speaker 2: where did the growth actually come? FROM i know, that you,
16:41
Speaker 2: KNOW i kind of use that final sales to private
16:43
Speaker 2: domestic purchasers as the be, all end, All but when
16:45
Speaker 2: you break it, down like what's actually? Happening so IN q,
16:48
Speaker 2: two good spending increased at a two point two percent annualized, pace,
16:53
Speaker 2: okay in line with, Trend like there's there's nothing there
16:57
Speaker 2: where you look at that and say, yeah that's crazy
17:00
Speaker 2: high or. Low like you could realistically, say, okay that
17:02
Speaker 2: can probably, continue and that's you, know it's, possible but
17:06
Speaker 2: that there's nothing crazy. There services spend increased at one
17:10
Speaker 2: point one. Percent, okay it's slower than the last couple of.
17:13
Speaker 2: YEARS i could see the reasons why that might have
17:15
Speaker 2: been the. Case you can make a case for improvement
17:18
Speaker 2: on that. Side so, okay that's the way THE gdp
17:21
Speaker 2: could get. Better gross private domestic investment fell at a
17:26
Speaker 2: clip of fifteen point six percent on an annualized. Basis but,
17:31
Speaker 2: again this is one of those areas that's heavily skewed
17:33
Speaker 2: because of how it's calculated and what goes into. It
17:35
Speaker 2: because IN q one it rose to twenty three point
17:37
Speaker 2: eight percent. Clip, obviously like like those two things didn't
17:42
Speaker 2: change in that. Fashion so let's look at the big
17:45
Speaker 2: thing that we see there THAT i do think is
17:48
Speaker 2: going to continue to be a, drag and that is residential,
17:51
Speaker 2: spending which declined at a rate of four point five,
17:54
Speaker 2: percent accelerating down over the last two. Quarters residential spend
18:00
Speaker 2: is declining because home prices are falling and builders don't
18:02
Speaker 2: know how to make. Money with falling home, prices there
18:06
Speaker 2: is no change in that. Trend in, fact it's. Worsening
18:08
Speaker 2: home prices in much of the country are now moving
18:11
Speaker 2: down at a quicker rate than they were in the
18:15
Speaker 2: prior couple of. Months so that's something THAT i expect to.
18:18
Speaker 2: Worsen on the other side of, things investment in non
18:23
Speaker 2: residential structures declined over the first two quarters of this. Year,
18:28
Speaker 2: okay this gets. It you know business capex and tentions
18:31
Speaker 2: and things like, that which still are pointing in a negative.
18:34
Speaker 4: Direction is it that? NEGATIVE i don't know about that.
18:37
Speaker 2: Side SO i think you look at that and you, say,
18:42
Speaker 2: okay there's a case that. This you know that the
18:44
Speaker 2: one big beautiful bill could spur you, know some additional.
18:47
Speaker 2: Capex but does it happen next? Quarter you, know how
18:49
Speaker 2: quickly do those plans? Turn this is kind of the
18:53
Speaker 2: ballgame that we're looking at. Here so there's a lot
18:56
Speaker 2: to look at as far as where this economy can.
18:59
Speaker 2: Go but, ULTIMATELY i think households have a little bit
19:03
Speaker 2: of room to pick up spending actually in the. AGGREGATE
19:05
Speaker 2: i know a lot of you listening might be, Saying,
19:07
Speaker 2: CHUCK i don't have any room to pick up spending
19:08
Speaker 2: them stretched thin as it, is SO i think there's
19:11
Speaker 2: a little bit of room on that. Side housing is
19:14
Speaker 2: very likely to continue to, worsen which could be some additional,
19:17
Speaker 2: drag and so the question is going to be how
19:21
Speaker 2: does this all end up balancing? Out where do we
19:23
Speaker 2: get To that's the big one for the second half
19:26
Speaker 2: of the. Year quick Break here we Got Wall Street
19:28
Speaker 2: watch and Ask todd is?
19:30
Speaker 1: Next like us On facebook and follow us On twitter
19:43
Speaker 1: AT tfe. Show breaking business news is always first right
19:47
Speaker 1: here on The Financial Exchange Radio. Network time now For
19:52
Speaker 1: Wall Street watch a complete look at what's moving markets
19:55
Speaker 1: so far today right here on The Financial Exchange Radio
19:59
Speaker 1: network On Wall.
20:00
Speaker 5: Street with A fed decision on interest, rates do OUT
20:02
Speaker 5: a two followed by a press conference FROM Fed Chairman
20:05
Speaker 5: Drome polla two. Thirty while rates are expected to remain,
20:09
Speaker 5: steady there will be more attention at this meeting to
20:11
Speaker 5: see if there are potential dissenters AMONG fed governors in
20:15
Speaker 5: favor of cutting. Rates investors also digesting a second QUARTER
20:19
Speaker 5: gdp reading which showed the economy grew three percent in
20:22
Speaker 5: the previous, quarter above forecasts of two point three. Percent right,
20:27
Speaker 5: now The dow is up by two tenths of one,
20:30
Speaker 5: percent eighty seven points. HIGHER smp five hundred also up
20:33
Speaker 5: two tenths of one. Percent nasdaq is up four tenths
20:36
Speaker 5: of one percent or eighty one. Points russell two thousand
20:39
Speaker 5: is up just over half a. Percent ten Year treasure
20:42
Speaker 5: reeled up three basis points at four point three six four,
20:45
Speaker 5: percent and crude oil up about half a percent, higher
20:48
Speaker 5: trading at sixty nine dollars and fifty eight cents a.
20:51
Speaker 5: Barrel Palo Alto networks has agreed to acquire identity security
20:56
Speaker 5: provider Cyber arc and a deal valued at about twenty
20:59
Speaker 5: five billion. Dollars Palo alto stock is down seven percent
21:03
Speaker 5: on the, news while Cyber arc shares are down by one. Percent,
21:06
Speaker 5: Meanwhile starbucks shares down by about one percent AFTER Ceo
21:10
Speaker 5: Brian nichols said the coffee chains turnaround plan was ahead of.
21:14
Speaker 5: Schedule the company also said it would move away from
21:17
Speaker 5: operating stores that only accept mobile orders for pickup. Elsewhere
21:21
Speaker 5: The Wall Street journals reporting That amazon will Pay The
21:24
Speaker 5: New York times between twenty and twenty five million dollars
21:27
Speaker 5: per year to license its content to TRAIN ai models
21:31
Speaker 5: and Feature times excerpts and its. Products amazon stock is
21:35
Speaker 5: dipping after its double digit slide yesterday to a cut
21:38
Speaker 5: to its full year. Guidance Novo nordis shares down another
21:42
Speaker 5: six percent, today and after today's close we'll see more
21:46
Speaker 5: mag seven earnings From microsoft to Meta, Qualcom, Armholdings ford
21:51
Speaker 5: And robinhood will report their results as. Well I'm Tucker.
21:55
Speaker 5: Silvan that Is Wall Street.
21:56
Speaker 1: Watch this Is Ask time on The Financial Exchange Radio.
22:01
Speaker 1: Network if you have an existing estate plan or in
22:04
Speaker 1: the market for, One Todd letsky is here to answer
22:07
Speaker 1: your questions and help you plan for a later. Life
22:09
Speaker 1: Ask todd is presented By cushing And, dolan Serving massachusetts
22:13
Speaker 1: And New england for more than thirty five, years helping
22:15
Speaker 1: families with a state and tax, planning medicaid, planning and probate.
22:19
Speaker 1: Law Visit cushingdolan dot. Com now Here's Todd lutsky.
22:25
Speaker 2: And we've Got Todd lotski here in studio to help
22:29
Speaker 2: answer your estate planning. Questions phone lines are open eight
22:34
Speaker 2: eight eight to zero five two two sixty. Three that
22:38
Speaker 2: is the number to call To Ask todd your estate planning.
22:40
Speaker 2: QUESTIONS a, reminder we do have limited space on those,
22:44
Speaker 2: lines so get calling early and often if you want
22:47
Speaker 2: to get some time With todd. Again eight eight eight
22:51
Speaker 2: two zero five two two six three is the number
22:53
Speaker 2: to call to ask your state planning questions live on
22:56
Speaker 2: air right, now one last. Time that is eight eight
23:01
Speaker 2: eight two zero five two two six. Three Mister, lutsky
23:06
Speaker 2: how are you doing?
23:07
Speaker 4: Today never? Better? Chuck how you? Doing i'm? GOOD i.
23:10
Speaker 4: UH i was at a bar the other, night a.
23:13
Speaker 4: Bar this cowboy walked. In oh, yeah he had a paper.
23:17
Speaker 4: Towel he was used as a.
23:18
Speaker 2: Bandana, okay that's when the bartender, goes, hey you can't
23:21
Speaker 2: come in.
23:22
Speaker 4: Here you got a bounty on your. Head that's that's.
23:26
Speaker 4: Good and he. Left he.
23:28
Speaker 2: Left, TODD i want to talk to you about last
23:31
Speaker 2: minute planning to try to qualify For. Medicaid, OBVIOUSLY i
23:36
Speaker 2: know it's preferred by you and probably most of the state
23:39
Speaker 2: planning attorneys to plan, ahead but, listen we're. Human sometimes
23:42
Speaker 2: we don't plan, ahead.
23:44
Speaker 4: Or things just happen. Correct accidents happen, unexpected they.
23:47
Speaker 2: Expected if someone you know or you has a situation
23:54
Speaker 2: with long term care that is, imminent either you're already
23:57
Speaker 2: going through it or you're going to in the next
23:59
Speaker 2: couple of. Weeks, yeah what are the tools available at
24:02
Speaker 2: this point to help deal with?
24:03
Speaker 6: That So i'm going to start off by, saying please
24:07
Speaker 6: just call an elder law, attorney because that's the first. Step,
24:12
Speaker 6: really it seems, silly but it is because so many
24:16
Speaker 6: people will just think on their own that there's NOTHING
24:20
Speaker 6: i can, do and the nursing home will certainly tell
24:23
Speaker 6: you that you, know it costs fifteen sixteen thousand a
24:27
Speaker 6: month and can you please just write the? Check and
24:31
Speaker 6: lots of times people unaware that there's things that can be,
24:35
Speaker 6: done we'll, just you, know just comply because remember that's
24:38
Speaker 6: a really emotional time right. Then you, know you're dealing
24:40
Speaker 6: with some real heavy emotional, situation so they'll just. Comply
24:45
Speaker 6: so first step is don't do. That, second once you
24:50
Speaker 6: get a hold of somebody who knows there are things
24:52
Speaker 6: that you can. Do there's you, know are you, Married
24:56
Speaker 6: if you have a spouse at, home you have a
24:59
Speaker 6: lot more option perhaps than you do if you're. Single
25:02
Speaker 6: doesn't mean if you're single you don't have any there
25:04
Speaker 6: are you, know assets that you're going to have to look.
25:07
Speaker 6: At you're going to have to look at your your
25:09
Speaker 6: whole asset list and say, Well i've got a, Home
25:13
Speaker 6: i've got a rental, property And i've got an investment.
25:15
Speaker 6: Portfolio you, know, well, assets the kind of assets you
25:19
Speaker 6: have are treated differently from what we call a countable
25:24
Speaker 6: versus a non countable. Status so there are some assets,
25:27
Speaker 6: that believe it or, not when you're going into the nursing,
25:29
Speaker 6: home are non. Countable and the one that most people
25:34
Speaker 6: have is a, home and most people have that home
25:38
Speaker 6: as their most valuable.
25:39
Speaker 4: Asset and so good.
25:41
Speaker 6: News single or, married the house at least is non.
25:47
Speaker 6: Countable now if you're, married and again different treatment of
25:52
Speaker 6: assets for different. Situations if you're, married it's not only non,
25:58
Speaker 6: countable there's no value you limitation and it's non. Leanable
26:02
Speaker 6: it's just not. Available.
26:05
Speaker 4: Beautiful it's not the way to go, though but at
26:07
Speaker 4: least it'll help save the.
26:08
Speaker 6: Asset if you're, single you have to check a box
26:11
Speaker 6: that SAYS i intend to return home on the application
26:13
Speaker 6: and it'll be non countable but, leanable but you'll be on,
26:17
Speaker 6: medicaid which is better than not being on. Medicaid and,
26:21
Speaker 6: lastly there is a value. Limitation with a single, person
26:24
Speaker 6: the house can't be worth more than actually that's. Changing
26:28
Speaker 6: you heard about you heard about THE. Bbba so for
26:31
Speaker 6: single people used to be here In massachusetts it was
26:34
Speaker 6: like a. Million One i'm going to say right around that.
26:36
Speaker 6: Value if it was more than, that you were just annied.
26:39
Speaker 6: Medicaid now across the country it's going to level out
26:43
Speaker 6: at one million for. Everybody SO i, UNFORTUNATELY i think
26:47
Speaker 6: it's still some things that need to be cleared up
26:49
Speaker 6: in this, bill but the way it reads is that's
26:52
Speaker 6: going to fall. Back so In massachusetts we actually have
26:54
Speaker 6: to go back to a million dollar valuation limitation on a.
26:57
Speaker 4: House but things can be done.
26:58
Speaker 2: Though talking With Todd lotsky From cushing And, dolan we've
27:01
Speaker 2: still got room on the phone. Lines if you have
27:04
Speaker 2: a state planning questions to ask, him this is your.
27:08
Speaker 2: Chance todd's gonna be answering questions live on air right.
27:11
Speaker 2: Now phone numbers eight eight eight to zero five two
27:16
Speaker 2: two six. Three we do still have a little bit
27:18
Speaker 2: of room on those. Lines so again eight eight eight
27:21
Speaker 2: to zero five two two sixty, three but call, quickly
27:24
Speaker 2: just because again there's only so many people that we
27:27
Speaker 2: can get. To we're going to take a quick break
27:29
Speaker 2: now when we're back right to your calls With. Todd
27:32
Speaker 2: that number again is eight eight eight to zero five
27:36
Speaker 2: two two six y.
27:37
Speaker 1: Three Ask todd With Todd lutsky Every wednesday at ten
27:41
Speaker 1: thirty only here on The Financial Exchange Radio. Network you're
27:47
Speaker 1: listening To Ask todd With Todd lutsky on The Financial
27:50
Speaker 1: Exchange Radio. Network all, right right to.
28:02
Speaker 2: Your questions with Mister. Lutsky first, up we've Got donna In. Mashpeede,
28:08
Speaker 2: donna you are on With Todd.
28:09
Speaker 4: Lutsky, hi good, Morning thank.
28:12
Speaker 1: You go.
28:12
Speaker 7: Ahead i'll try to keep this uncomplicated as it is
28:17
Speaker 7: for a. Year. NOW i have set UP i have
28:20
Speaker 7: a credit shelter trust and a state tax plant with
28:24
Speaker 7: tax planning. Provisions so it's split my husband AND. I
28:29
Speaker 7: all assets are fifty to. Fifty the house is fifty to.
28:32
Speaker 7: Fifty our assets for fifty to.
28:35
Speaker 6: Fifty so you have a husband.
28:37
Speaker 4: And wife trust and they're. Revocable, correct they're.
28:42
Speaker 7: Revocable that's right for now till the first. Passes, correct
28:46
Speaker 7: when the first, passes that is split into an exempt
28:50
Speaker 7: and there it all.
28:51
Speaker 4: Correct it's a marital share and a remainder. Share got,
28:54
Speaker 4: It but.
28:55
Speaker 7: My, Question and it's funded up to two million there
28:58
Speaker 7: will not be two million in. That And i'm wondering
29:01
Speaker 7: if the text tails wagging the, dog and if there's
29:04
Speaker 7: no two million in the, first why can't we just
29:07
Speaker 7: wait until the second. Passes the first, passes a second
29:13
Speaker 7: makes those. Decisions and the other part, IS i have
29:17
Speaker 7: two trusts for each. Daughter one is special needs and
29:22
Speaker 7: the other is a just a credit shelter for. Her
29:26
Speaker 7: and when the first, dies both of those girls plans are.
29:32
Speaker 7: Irrevocable and we're feeling like our hands are tied right
29:36
Speaker 7: now with those dicest.
29:38
Speaker 4: Me let me ask you a year.
29:39
Speaker 6: Ago let me ask you a couple of questions, first
29:41
Speaker 6: because this is not so. So these two trusts that
29:44
Speaker 6: you talk about for the, kids those shouldn't come into
29:46
Speaker 6: play until you're both.
29:48
Speaker 4: Dead is that? Correct Those, no that's not.
29:50
Speaker 7: The way it's. Written it's written when the first spouse,
29:53
Speaker 7: passes those trusts become. Irrevocable.
29:58
Speaker 6: Okay, No i'm asking a separate. Question SO i know
30:00
Speaker 6: you have a husband. TRUST i know you have a wife.
30:02
Speaker 6: Trust and then you said there's trust for your. Kids
30:05
Speaker 6: are those separate documents right? Now or or do those?
30:09
Speaker 4: Trusts?
30:10
Speaker 6: Okay, so first of, all those should be. Empty AND
30:12
Speaker 6: i don't think you need separate trust documents for your.
30:15
Speaker 4: Kids that's first and. Foremost something's wrong.
30:18
Speaker 7: There special needs Different, No.
30:21
Speaker 4: NO i get the special.
30:23
Speaker 6: Needs i'm going to And i'm still going to stick
30:25
Speaker 6: with my comment unless you want to put money into
30:29
Speaker 6: that special needs trust for your kid right, now WHICH
30:32
Speaker 6: i don't think you need to, do because you could
30:34
Speaker 6: take care of your. CHILD i would think on your
30:36
Speaker 6: own and and SO i. WOULD i would not have.
30:40
Speaker 6: That only time you have a special needs trust set
30:43
Speaker 6: up when you're both alive for your for your child
30:47
Speaker 6: is if you have other family members who might want
30:49
Speaker 6: to contribute to your child's well. Being, now other than,
30:53
Speaker 6: that the special needs language should be built into your
30:57
Speaker 6: husband and wife family trusts that get funded when you both. Die, okay,
31:02
Speaker 6: now BEFORE i address your husband and wife family, trusts
31:07
Speaker 6: are you guys worth more than four million dollars.
31:12
Speaker 7: With total with, house, iris, everything, everything, quote it's just.
31:16
Speaker 7: Close it's probably three point five.
31:19
Speaker 4: Good so if your trust is let's call it three
31:22
Speaker 4: five perfect? Answer if your.
31:24
Speaker 6: Trusts if you have two revocable trusts in place right,
31:28
Speaker 6: now first of all with three point five, million depending
31:31
Speaker 6: on how old you ARE i would be, asking you,
31:33
Speaker 6: know are you concerned about protecting assets from the nursing.
31:35
Speaker 4: Home is that a concern of? Yours, well we were.
31:39
Speaker 7: Told if we put the house in irrevocable that'd be,
31:42
Speaker 7: protected but we don't want even want our hands tied with.
31:44
Speaker 6: That, Well i'm just asking the question deep, write is
31:47
Speaker 6: it important to you to protect from the nursing home
31:50
Speaker 6: if you?
31:50
Speaker 7: Could, NO i don't think, so because we want the
31:55
Speaker 7: freedom of having our.
31:56
Speaker 4: MONEY i understand.
31:57
Speaker 6: That but these revocable trusts have explained, right you can
32:00
Speaker 6: get a lot of control and, protection but leave, that
32:02
Speaker 6: leave that off for. Now so then with revocable, trusts
32:06
Speaker 6: AND i get. It you already have two trusts and you.
32:09
Speaker 6: Shouldn't you should have. One you need a revocable joint.
32:13
Speaker 6: Trust so that to your. Point your main point is
32:15
Speaker 6: that two million dollar bucket going into the remainder, Share
32:19
Speaker 6: and you were, Right. Todd what if we don't have
32:20
Speaker 6: two million to shelter because we split the assets between
32:24
Speaker 6: the two. Trusts SO i have you, know one point
32:27
Speaker 6: seventy five in each. Bucket, well that's not going to
32:29
Speaker 6: help or depending on how much YOUR ira. Is but
32:33
Speaker 6: what you do with a joint revocable trust is you
32:35
Speaker 6: put everything in and, now on the first, death everything
32:39
Speaker 6: that's in that trust will be able to be transferred
32:42
Speaker 6: between the remainder share and the marital. Share and the
32:45
Speaker 6: reason you cannot wait is because on the first, DEATH
32:50
Speaker 6: i want to be able to shelter whatever amount we.
32:53
Speaker 6: Can if it's two, million, great if it's a million five.
32:56
Speaker 6: Great why because on the second, death if you don't
33:01
Speaker 6: shelter on the first, death the survivor will be worth
33:05
Speaker 6: more than the estate tax exemption and you will pay. Taxes, example,
33:10
Speaker 6: quickly if you're worth three point five and you do
33:13
Speaker 6: what you were, asking, well why CAN'T i just let
33:15
Speaker 6: everything go to me and Then i'll make the decisions
33:18
Speaker 6: WHEN i, die because three point five is bigger than
33:21
Speaker 6: The massachusetts two million dollar, exemption and now your kids
33:24
Speaker 6: will unnecessarily pay a state tax on the amount over two.
33:28
Speaker 6: Million but IF i can shelter something on the first
33:32
Speaker 6: death in a remainder, share now let's SAY i sheltered
33:36
Speaker 6: even a million, five while on the surviving spouse's, death
33:40
Speaker 6: there won't be any tax to Because i'll be less
33:43
Speaker 6: than two. Million so lots to think about. HERE i
33:46
Speaker 6: think you might need a second. Opinion not excited about
33:49
Speaker 6: the way you your plan is necessarily set. Up but
33:53
Speaker 6: you know, what, folks that's exactly why you call to
33:55
Speaker 6: learn about these, things and that's why you get the
33:57
Speaker 6: guide we're giving away this, month which is last Minute
34:00
Speaker 6: medicaid eligibility. Planning it is a guide that tells, you
34:04
Speaker 6: last minute what you can do. Now Great donna is
34:07
Speaker 6: trying to do planning in, advance WHICH i, love but
34:10
Speaker 6: there are people who end up facing these situations last.
34:13
Speaker 6: Minute don't write the, check get the. Guide learn about
34:17
Speaker 6: how countable and non countable assets are. Treated learn how
34:20
Speaker 6: things are. Treated learn even how you can avoid the
34:23
Speaker 6: five year waiting period sometimes last. Minute get the guide
34:29
Speaker 6: eight six six eight four eight five six nine nine
34:33
Speaker 6: Or Legal Exchange show dot com again eight six six
34:38
Speaker 6: eight four eight five six nine nine Or Legal Exchange
34:42
Speaker 6: show dot.
34:43
Speaker 4: Com, TODD i got another one q'ed up for.
34:45
Speaker 2: You. Here let's go To steve In East. Bridgewater, steve
34:48
Speaker 2: what's your question For?
34:49
Speaker 1: Todd, yeah thanks.
34:51
Speaker 8: For taking my.
34:51
Speaker 3: Question, sure.
34:53
Speaker 7: Our VEHICLES i am a?
34:55
Speaker 8: Trust is it worth putting a vehicle like a con? Truck?
34:59
Speaker 8: Whatever smoke into the?
35:01
Speaker 4: Trust is your? Trust. Revocable, no, yeah so.
35:06
Speaker 6: Irrevocable so either, WAY i just asked that to clarify
35:09
Speaker 6: for everybody else either.
35:11
Speaker 4: Way, no we almost never do.
35:13
Speaker 6: That so there's really no reason to be putting a
35:16
Speaker 6: car in a trust that's a depreciating. Asset it it
35:19
Speaker 6: just doesn't really doesn't really do much and it's very
35:21
Speaker 6: easily transferred at the. Registry they have forms on, that
35:24
Speaker 6: SO i WOULD i would say no on, That.
35:28
Speaker 2: Todd we got one more for you, Here let's see
35:30
Speaker 2: if we can get. Through we got Another, steve this
35:32
Speaker 2: One stephen And. Franklin, steven you got about a minute or.
35:35
Speaker 4: So what's your question For?
35:36
Speaker 8: Todd, Hi, tod just kind a quick. Question it's kind
35:40
Speaker 8: of a general. Thing i've never trusted a. Will i'm
35:43
Speaker 8: looking to maybe do a will my. Wife that's a
35:46
Speaker 8: couple of, businesses we have a second, house So i'm
35:49
Speaker 8: just trying to maybe meet with someone and baby just
35:52
Speaker 8: establish all.
35:53
Speaker 6: This SO i WHENEVER i hear people say they want
35:57
Speaker 6: a will to, me that's that's the lay person. SAYING
35:59
Speaker 6: i wanted to say plan because a, Will although we
36:02
Speaker 6: do them and there are part of your overall quote estate,
36:05
Speaker 6: plan they're really the least important document in the estate planning.
36:09
Speaker 6: File all, RIGHT i want very little to be addressed
36:12
Speaker 6: by the will because it goes to probate if it's
36:14
Speaker 6: addressed by a. Will so for, you a trust would
36:18
Speaker 6: be the bigger piece of the estate planning. Pie and
36:22
Speaker 6: as you, said there's a couple of. Businesses you own
36:24
Speaker 6: a second, house which leads me to believe you must
36:27
Speaker 6: own a first. House and you start adding up everything,
36:29
Speaker 6: again LIKE i asked the other, caller are all your
36:32
Speaker 6: assets when you add them together north of four million or?
36:35
Speaker 4: Under which is the mass? Exemption probably around? There and
36:40
Speaker 4: how old are?
36:41
Speaker 8: You i'm, fifty, yeah SO i.
36:45
Speaker 6: Would say you're in the right category to do basic estate.
36:49
Speaker 6: PLANNING i don't think you need a lot more than,
36:51
Speaker 6: that BUT i do think you should sit down with
36:52
Speaker 6: someone and learn how these probably either revocable or irrevocable trust,
36:57
Speaker 6: works probably revocable trust in your, situation how they work
37:01
Speaker 6: to avoid probate and reduce the estate taxes.
37:03
Speaker 4: And take care of the. Family so hope that, helps Mister.
37:06
Speaker 4: Lutsky thank you so much for joining us. Today always a.
37:09
Speaker 1: Pleasure this has been Asked todd on The Financial Exchange
37:13
Speaker 1: Radio Network Aske todd With Todd lutsky has been presented
37:16
Speaker 1: By cushing And, dolan Serving massachusetts And New england for
37:19
Speaker 1: more than thirty, years helping families with estate and tax,
37:22
Speaker 1: Planning medicaid, planning and probate. Law call eight hundred three
37:25
Speaker 1: nine three four thousand and one or Visit cushingdolan dot.
37:28
Speaker 1: Com the views expressed in this segment are solely those
37:31
Speaker 1: Of cushing And. Dolan Armstrong advisory does not provide any
37:33
Speaker 1: legal or tax. Advice please consult with your illegal or
37:35
Speaker 1: tax advisor on such. Matters cushing And armstrong do not
37:38
Speaker 1: endorse each other and are not affiliated