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Markets Under Pressure · HPK Provident Advisors: The Weekly Bull

0:05
SPEAKER_00: Welcome to Friday Live.
0:07
SPEAKER_00: Today is March 20th, and every Friday the partners of HBK Provident get together and discuss what we're seeing going on in the markets, the economy, and going over some financial planning topics.
0:18
SPEAKER_00: So we have Mr.
0:18
SPEAKER_00: Brian Peluso with a bunch of letters after his name today.
0:21
SPEAKER_00: How are you doing?
0:23
SPEAKER_01: I have letters after my name all the time, but uh I'm doing good today.
0:26
SPEAKER_01: Thank you.
0:28
SPEAKER_00: So explain all these.
0:30
SPEAKER_00: I think we all know what the CFP is.
0:31
SPEAKER_00: C L U and R I C P.
0:34
SPEAKER_01: Yeah, certified financial planner, chartered life underwriter.
0:37
SPEAKER_01: That's an in-depth study of life insurance.
0:40
SPEAKER_01: And then RICP stands for Retirement Income Certified Professional.
0:45
SPEAKER_01: And so that's a designation that really digs into all the different ways to generate retirement income.
0:51
SPEAKER_00: Beautiful.
0:52
SPEAKER_00: And I'm gonna ask you later on, but I'll I'll give a little hint to the viewers now.
0:56
SPEAKER_00: I'm gonna ask you what the one biggest tip or secret is to not outliving your money in retirement.
1:02
SPEAKER_00: So give some thoughts of that throughout the I know it's tough to get down to just one.
1:06
SPEAKER_01: Yeah.
1:08
SPEAKER_00: But yeah, speaking of letters, I think I I think I might uh check off CMT level three at some point this year.
1:15
SPEAKER_00: And just uh I mean I've done the two levels, I just figured I've gone this far, I might as well get the designation too at this point.
1:23
SPEAKER_00: Well, Mike, what is the CMT?
1:25
SPEAKER_00: The CMT is the technical analysis version of the CFA.
1:29
SPEAKER_00: So it's looking at charge patterns, momentum indicators, all that good stuff.
1:34
SPEAKER_00: Level three, I did read the book once or twice, and it just didn't capture my interest.
1:39
SPEAKER_00: Um, it was a lot on quantitative models and like building them out, which is cool, but like I'm I don't see myself doing that at this point, at least.
1:47
SPEAKER_00: But I think it's worth just uh you know getting done with level three.
1:52
SPEAKER_01: Well, I think you know, ongoing education.
1:55
SPEAKER_01: I've always felt that uh that's important for any professional, and certainly for us.
2:01
SPEAKER_01: Uh things change, markets change, believe it or not.
2:04
SPEAKER_01: Uh tax laws change, the availability of solutions.
2:10
SPEAKER_01: Um, you know, whether it be investment structures or insurance um solutions that are available to us constantly change.
2:21
SPEAKER_01: And so uh that's very valuable to me.
2:24
SPEAKER_01: I know it's obviously very valuable to you, and um, you know, we do that certainly on behalf of our clients.
2:30
SPEAKER_01: Try to stay as update, uh up to date as possible on um all all the things that we can incorporate into their uh financial life for their benefit.
2:41
SPEAKER_00: So uh quick little little story that I I found funny.
2:48
SPEAKER_00: Obviously, the hair's a little shorter this week.
2:51
SPEAKER_00: So I I I decided I wanted a haircut because it was just getting too long.
2:55
SPEAKER_00: And I go to Great Clips, mistakenly, maybe, and I go in and she's like, Oh, what do we want to do today?
3:01
SPEAKER_00: I'm like, I don't know, I just wanted it a little shorter.
3:04
SPEAKER_00: Um, you have any ideas?
3:05
SPEAKER_00: And she's like, Oh, yeah, I have lots of ideas.
3:07
SPEAKER_00: And she just gave me like a buzz cut.
3:10
SPEAKER_01: Nice.
3:11
SPEAKER_01: Well, that certainly is one of the many ideas, I guess.
3:15
SPEAKER_00: Well, hair grows back, so I'm not too concerned about it, but well, maybe that'll be your style moving forward.
3:22
SPEAKER_00: Yeah, so well, uh, we'll get started with the markets and then the economy and go to some of our blog posts for the week.
3:29
SPEAKER_01: So I'm assuming the market, you know, the markets will be uh short.
3:32
SPEAKER_01: There's not much going on in the world right now.
3:34
SPEAKER_01: So we can really so as you can see, you can see my chart here, right?
3:40
SPEAKER_01: Yes.
3:41
SPEAKER_00: Um, so SP is in a a drawdown right now.
3:44
SPEAKER_00: Um, I would guess it's about six percent.
3:47
SPEAKER_00: We we're kind of at our short-term price target, uh, the November lows, and we did violate the 200-day moving average.
3:54
SPEAKER_00: I think if we get a bounce, I mean, we're not quite oversold on RSI yet.
3:58
SPEAKER_00: Um, so that could go a little further, but I would say this is the kind of level we'd expect to bounce.
4:03
SPEAKER_00: Now, whether that turns into a counter trend um rally in an overall down market, we'll have to see how long this war goes on.
4:12
SPEAKER_00: Um, but it's really all a bit about um the impact the war is having on energy prices and in turn inflation.
4:21
SPEAKER_00: So that's clearly being reflected in bond yields.
4:24
SPEAKER_00: We had a spike today, it's down a little bit, but um, we're at the upper end of the range.
4:29
SPEAKER_00: Uh, same story if you go to uh the oil markets, still upper end of the range, mid to high 90s.
4:37
SPEAKER_00: Uh spreads are also starting to break out a little bit.
4:41
SPEAKER_00: This is the high yield spread index.
4:43
SPEAKER_00: Um, so any any level breakout above the 320, which we're we're pulling back to that today, um, you could see further upside.
4:52
SPEAKER_00: And and you you tend to get uh yield spreads increase when times are uncertain.
4:58
SPEAKER_00: Um it it just it weighs the chance of default um with high yield bonds.
5:03
SPEAKER_00: So it's just something I like to keep an eye on.
5:05
SPEAKER_00: Uh but yeah, so we're we're expecting maybe a short-term um rebound here in the near future, uh, but we're not really ruling out lower lows at this point.
5:16
SPEAKER_00: There's a lot of uncertainty going on.
5:18
SPEAKER_00: Uh we didn't get a lot of economic data this week, but the main thing I would say would be the PPI reading.
5:26
SPEAKER_00: And overall, that came in pretty hot.
5:29
SPEAKER_00: Um the let's see, the headline came in at 2.4% year over year, or sorry, 3.4% year over year.
5:38
SPEAKER_00: And more came in at 3.9%.
5:41
SPEAKER_00: So very elevated.
5:43
SPEAKER_00: I expect those readings to go up in coming months due to the energy prices.
5:47
SPEAKER_00: Uh, we did get a Fed meeting, which I mean, I don't know if you listened to it, but I didn't gain a lot of insights or surprises from it.
5:57
SPEAKER_00: It was pretty much the same rhetoric from the last time.
6:01
SPEAKER_00: You know, labor market's not terrible, inflation's too high.
6:06
SPEAKER_00: We just don't know what's going on with the war.
6:09
SPEAKER_00: He mentioned uncertainty like four different times.
6:12
SPEAKER_00: So they really don't know.
6:13
SPEAKER_00: Um but last time they just focused on, you know, labor market's fine, there's risk, upside risk to inflation.
6:21
SPEAKER_00: This side they also added that there was downside risk to the employment situation, which I personally agree with.
6:27
SPEAKER_00: Um, I mean, the labor market was pretty much flat last year in germ in terms of hiring, and this year's been a little mixed because of seasonality and different factors going on.
6:38
SPEAKER_00: One was a great reading in January, and one was a terrible reading in February.
6:42
SPEAKER_00: So let's see what March has to bring on that.
6:44
SPEAKER_00: But uh with anything, the war going on, PPI, um, it's likely to put further upside pressure on the Fed's preferred inflation measure, the core PCE.
6:55
SPEAKER_00: Now, in this meeting, there was only one dissent uh in favor of a cut.
7:00
SPEAKER_00: Last meeting there was a couple, and now the market's pricing in only one rate cut this year.
7:07
SPEAKER_00: Um yeah, before it was at least two.
7:10
SPEAKER_00: So, you know, that's it's really if the if this thing persists, it's really gonna put the Fed in handcuffs.
7:18
SPEAKER_00: Um, stagflationary economy kind of just keeps them on the sideline.
7:22
SPEAKER_00: And what I mean by stagflation is, and and he brought this up in his meeting.
7:26
SPEAKER_00: He's like, it's not stagflation.
7:28
SPEAKER_00: They brought up that term in the 80s when unemployment rate was up here and and inflation wasn't that high.
7:34
SPEAKER_00: But I mean, it's all relative.
7:36
SPEAKER_00: Like I judge a stagflationary economy as more direction than level.
7:41
SPEAKER_00: Um, so pretty much what I mean by that is just slowing growth and higher inflation.
7:47
SPEAKER_01: Well, that kind of sounds like we're we're or headed.
7:51
SPEAKER_00: Yep.
7:52
SPEAKER_00: So yeah, that's uh I mean we don't have we don't have much data coming out next week that is really gonna be market moving.
8:00
SPEAKER_00: Um got unit labor cost for the quarter, productivity numbers.
8:05
SPEAKER_00: Uh besides that, not not much going on.
8:08
SPEAKER_00: So it's just all gonna be around the what's going on with the war.
8:12
SPEAKER_00: Uh right now it seems like some oil is getting through the Strait of Hermoose um allies of Iran.
8:19
SPEAKER_00: So some oil's getting out, but it doesn't seem like there's any de-escalation in the near future, in my opinion.
8:26
SPEAKER_00: But I you know, we can could change that.
8:31
SPEAKER_01: Uh an hour could change that, a day can change that.
8:35
SPEAKER_01: So um, I you know, I've got that question a couple times.
8:39
SPEAKER_01: What do you think is gonna go on?
8:40
SPEAKER_01: The answer is clearly I've no idea.
8:43
SPEAKER_01: Um, you know, interestingly enough, in our prep profession, and I I don't think folks actually do it um consciously, but they really ask us to predict the future.
8:55
SPEAKER_01: Um and if we kind of go to the core of the question, what do you think the market's gonna do?
8:59
SPEAKER_01: What do you think is gonna happen with this war?
9:01
SPEAKER_01: You know, that kind of thing.
9:04
SPEAKER_00: I just told you what the market's gonna do.
9:05
SPEAKER_01: Well, that's a good point.
9:07
SPEAKER_00: Um my answer is well, I don't have a crystal ball.
9:10
SPEAKER_01: My yeah, my answer is let's call Mike.
9:12
SPEAKER_01: I have no idea.
9:13
SPEAKER_01: Um, and then there's some historical perspective you can overlay on these things and say, well, if you believe truly that history repeats itself or at least rhymes, uh maybe this is a possibility.
9:26
SPEAKER_01: Um and I certainly understand the origin of the question.
9:31
SPEAKER_01: It would be leading to, you know, my sense of that question is um not as much can you predict the future, but what are you gonna do?
9:39
SPEAKER_01: What could you do?
9:40
SPEAKER_01: What can we do together um if things unwind?
9:44
SPEAKER_01: I always see the origin of that question of, you know, what do you think the market's gonna do as um, you know, I paraphrase that um as if the market tanks, what's gonna happen?
9:56
SPEAKER_01: Am I gonna be okay?
9:57
SPEAKER_01: If the war is prolonged, what's gonna happen?
10:00
SPEAKER_01: And I'm am I gonna be okay?
10:01
SPEAKER_01: And that goes back to the financial planning, that goes back to the active management.
10:05
SPEAKER_00: Um portfolios and like we did make changes ahead of this.
10:11
SPEAKER_00: It's really financial planning, like you working with clients to make sure they're in an appropriate risk level uh for their unique circumstance.
10:21
SPEAKER_00: So if they are, and then you're there along the way to say, you know, these things happen.
10:27
SPEAKER_00: We have drawdowns, they're quite common.
10:29
SPEAKER_00: Um, your best course of action is to stay on the boat.
10:34
SPEAKER_01: Well, you know, stick to the plan.
10:36
SPEAKER_01: If there are major adjustments, you know, I'm gonna retire, uh, you know, I'm gonna receive an inheritance, I've got a windfall of some sort.
10:45
SPEAKER_01: Um you know, though those kind of things adjust the plan significantly.
10:51
SPEAKER_01: Um, you know, unless we have uh, you know, that date, say that retirement date, or hey, I know when this is coming to me, that kind of thing.
10:59
SPEAKER_01: You know, we can plan for that, but those are big plan adjustments that really don't matter what the market's doing right now, because there's a lot of other uh components to that.
11:08
SPEAKER_01: Um so no, can't predict the future.
11:11
SPEAKER_01: Uh no, no.
11:12
SPEAKER_01: And you know, it's kind of like taxes, uh, you know, the Roth conversions that we talk about, you know, quite a bit.
11:17
SPEAKER_01: So, you know, some of that decision analysis based on making some assumptions um as to what future tax rates are going to be.
11:24
SPEAKER_01: And I've studied that a great deal, and I've concluded I cannot determine future tax rates.
11:30
SPEAKER_01: I I can deal with what we have now.
11:32
SPEAKER_01: Um, but so uh it really comes down to the planning.
11:37
SPEAKER_01: And uh, you know, let's know what we have.
11:40
SPEAKER_01: Let's have uh, you know, a pretty good guess as to where we're going and what the time frames are, where you'd like to go to.
11:47
SPEAKER_01: Um and have we talk about this all the time, you know, have these buckets of money, have a great personal reserve, a very solid personal reserve.
11:56
SPEAKER_01: The people that we work with that have a very healthy personal reserve, uh whether it be for emergency or opportunity, uh, you know, emergency could be the roof blows off the house.
12:06
SPEAKER_01: Hey, I've got I've got money to cover that.
12:08
SPEAKER_01: I'm not dipping into long-term savings, I'm not dipping into retirement plans.
12:12
SPEAKER_00: So is that it?
12:13
SPEAKER_00: Is that the answer to my question?
12:14
SPEAKER_00: Your biggest tip for not outliving your money?
12:18
SPEAKER_00: Uh well.
12:22
SPEAKER_01: Well, the easiest way to not outlive your money is not live very long.
12:25
SPEAKER_01: But I don't like that.
12:26
SPEAKER_01: I don't like that from a financial planning perspective.
12:28
SPEAKER_01: That's not that's not really the uh uh yeah, the biggest tip for not outliving your money is to um uh is to understand, truly understand what you have, what your options are, and um um being sensible uh about your personal spending.
12:50
SPEAKER_01: And and I say sensible, you know, when I oftentimes in financial planning discussions, I I've said this many times, uh retirement is more dependent upon uh making sure that there are no major uncovered, no notice I say uncovered, uncovered health events and managing spending.
13:09
SPEAKER_01: I I you know if you got a you know a billion dollars or you got a thousand dollars, that concept remains the same, is that long-term in a retirement plan, you want to make sure that you have good health coverage for no major medical that is uncovered.
13:26
SPEAKER_01: You know, that will ruin a financial plan 100% of the time if it's not covered uh in in some capacity.
13:33
SPEAKER_01: Um and then just outspending what you have.
13:35
SPEAKER_01: You know, again, if you got a billion dollars and you're spending$250 million a month, well, it's not gonna last.
13:43
SPEAKER_01: Um so you know, so what what what is the one tip is to one, uh, understand what you have and don't outspend it.
13:53
SPEAKER_01: I I I I I think that's you know the major tip.
13:56
SPEAKER_00: Yeah.
14:01
SPEAKER_00: When they're a little unsure whether they can retire this year or not.
14:04
SPEAKER_00: And it's really cool, the the program you work with, and just saying, oh, okay, well, this is your spending, this is what the market's likely to do, this is worst-case scenario.
14:14
SPEAKER_00: Um, this is your travel fund here.
14:17
SPEAKER_00: Like this is maybe you have annual one-time special things of 10,000.
14:23
SPEAKER_00: Maybe you're buying a new car in five years, 50,000.
14:27
SPEAKER_00: Weddings, and they're all interactive, and you plug them in and change the dials and see how it changes with outcome.
14:32
SPEAKER_00: And it really, it really gives the client a good sense of whether they can retire or not.
14:37
SPEAKER_00: And it what I've seen is they they often feel like a lot more relief and and appreciation that they can.
14:45
SPEAKER_01: And we and I and I say this in pretty much all the financial planning meetings, the way we approach it is plan for the worst, hope for the best, and somewhere in between is going to be your reality.
14:54
SPEAKER_01: So we kind of put these bans.
14:56
SPEAKER_01: We uh we don't put bands, we don't do budgeting.
14:59
SPEAKER_01: We don't sit down with people and say, well, hey, Mike, you overspend.
15:02
SPEAKER_01: You don't want to dinner too many times.
15:03
SPEAKER_01: We don't do budgeting.
15:04
SPEAKER_01: We kind of do bands, you know.
15:05
SPEAKER_01: Hey, if you if your average spending is this, market does this, you know, we make some assumptions and put some return parameters in there.
15:13
SPEAKER_01: And if your spending's this, and then this might be the you know, kind of the the path we're on.
15:19
SPEAKER_01: And of course, like any other planet's very dynamic, but this is the path we're on right now.
15:23
SPEAKER_01: And then there's a lower limit.
15:25
SPEAKER_01: Hey, if your spending's this, you know, you're gonna end up with a lot left over.
15:28
SPEAKER_01: And, you know, we got to kind of consider that and then make that decision point.
15:32
SPEAKER_01: Some people say, I want to have a lot left over.
15:33
SPEAKER_01: I want to, you know, give it to others when I'm not here or later in my life.
15:39
SPEAKER_01: Other people say I want to spend my last nickel on my last day.
15:42
SPEAKER_01: And all of those are great.
15:44
SPEAKER_01: Uh, but that's why financial planning becomes so personalized, and it's very difficult, even with the magical AI, it's very difficult to go onto a computer and say, tell me what to do.
15:54
SPEAKER_01: Uh, because everybody's different.
15:56
SPEAKER_01: You know, um, you know, you look at anything online, they're speaking of averages, and none of us are really average.
16:02
SPEAKER_01: Uh, you know, parts of our life are average, right?
16:04
SPEAKER_01: I got 2.3 kids and 1.5 cars in the driveway and that kind of thing.
16:08
SPEAKER_01: Um, so you could be around the average, but you know, your personal goals, really what you want to accomplish um individually.
16:17
SPEAKER_01: And uh, you know, your health profile and you know, longevity of your family and all of those kind of other things are really hard to glean from that.
16:25
SPEAKER_01: So, but when I get into that spending conversation, invariably what folks will say is, oh, wait a minute.
16:30
SPEAKER_01: So you're saying I, you know, I shouldn't go out to dinner.
16:32
SPEAKER_01: No, not that at all.
16:33
SPEAKER_01: It's just understanding what you have and kind of being sensible uh uh about spending.
16:40
SPEAKER_01: It's certainly not uh don't spend.
16:42
SPEAKER_01: Um I happen to be a big fan of people utilizing their resources, right?
16:48
SPEAKER_01: The retirement is really going from using your physical and your intellectual capital to bring in money uh to support your lifestyle.
16:55
SPEAKER_01: Retirement is about now your monetary capital and much less so of your physical and mental capital are going to support you.
17:05
SPEAKER_01: And um, you know, in the beginning, that is a uh defined resource.
17:11
SPEAKER_01: Like this is what I have.
17:13
SPEAKER_01: I'm retiring right now, and this is what I've got to live on.
17:15
SPEAKER_01: Here's my social security and that kind of thing.
17:17
SPEAKER_01: Now, hopefully we can make it grow, you know, um have that resource, that uh capital resource money uh grow for you in time, and understand what that is, and then understand, you know, kind of what the upper and lower parameters are.
17:32
SPEAKER_01: So uh that's a very long uh way of saying um, you know, my two keys really are make sure you have um health coverage of some in some capacity and uh your spending.
17:47
SPEAKER_01: That's the key.
17:48
SPEAKER_01: That's the key.
17:49
SPEAKER_00: Well said.
17:50
SPEAKER_00: I agree.
17:51
SPEAKER_00: So and that's the biggest risk I'd say in these downturns.
17:54
SPEAKER_00: Is it's the retirees that are spending beyond an appropriate level.
18:00
SPEAKER_00: So they're taking out six to twelve percent annually.
18:04
SPEAKER_00: And if the the threat is if the drawdown lasts a while, then you're starting to cut into principal.
18:10
SPEAKER_01: That's right.
18:10
SPEAKER_01: Well, you're cutting into principle and you're selling good investments at low prices that no longer have an opportunity to uh grow into the future.
18:20
SPEAKER_01: So if you think about, you know, you have a share of an investment and it's worth$100, and every month, you know, you're you've got many shares, but every month you're selling some of those shares.
18:30
SPEAKER_01: Well, it's great when the shares are, you know, go 100, 110.
18:33
SPEAKER_01: You sell some of that, oh, that's great.
18:35
SPEAKER_01: I have a bunch of other shares at 110.
18:38
SPEAKER_01: You know, those shares go down to 80.
18:40
SPEAKER_01: Now you're selling those shares because you're withdrawing a higher percentage of that portfolio at 80, and they're gone at 80 because you went out and spent them to buy gas.
18:50
SPEAKER_01: Um and they don't, those shares that are gone at 80, you sold them at 80, that's what you got for them.
18:56
SPEAKER_01: They don't have the chance to get back to 100 and 110 and that kind of thing.
19:00
SPEAKER_01: So the the that is an unnecessarily detailed way of saying uh drawing money out of a portfolio that is gone going down has a much larger long-term effect than drawing money on the upside.
19:12
SPEAKER_00: It makes that recovery in an upmarket, once the market does turn that much harder.
19:16
SPEAKER_00: Um, it's hard enough with the way relative returns work.
19:19
SPEAKER_00: If a portfolio is down 50%, you need 100% return to get back to even.
19:25
SPEAKER_00: So if you're also drawing down, that's just more upside you need to capture.
19:30
SPEAKER_01: So yeah, I mean, you you you know, you absolutely do need to be conscious of one, of those high withdrawal rates, and certainly the higher withdrawal rates uh during market downturns.
19:42
SPEAKER_01: Um, you know, just you know, again, because now you've got less shares that you sold lower, the less shares that have the opportunity to grow in time.
19:49
SPEAKER_01: Um, we we throw that all into the financial plan.
19:52
SPEAKER_01: We have a lot of the worst-case scenario stuff.
19:54
SPEAKER_01: You know, if you do this consistent withdrawal, whether it be a dollar or percentage, and you know, the market tanks for the first three years of your retirement, what does that mean in 20 years?
20:04
SPEAKER_01: Uh the numbers are dramatic.
20:07
SPEAKER_01: If, you know, if you got a, I don't know, let's make a dramatic crazy number.
20:11
SPEAKER_01: If you're doing a 10% withdrawal rate, right?
20:14
SPEAKER_01: You got a million dollars, you're taking out$100,000 a year, you're at a 10% withdrawal rate.
20:19
SPEAKER_01: And the market in the first three years of of that withdrawal time period, say I'm gonna retire today, I'm gonna start withdrawing 10%, which we never recommend.
20:29
SPEAKER_01: Uh, I'm gonna start retarding with 10%, and the first three years the market's down.
20:34
SPEAKER_01: Um you know, oftentimes, you know, that type of portfolio is going to run out.
20:41
SPEAKER_01: Um, so there's a couple things you can do.
20:43
SPEAKER_01: You know, you can um can't control the market, um, but you can uh adjust that withdrawal percentage, you know, adjust what you're spending or how you're spending.
20:53
SPEAKER_01: Uh, or, you know, if you've got that big healthy cash reserve, you say, you know what, I'm going to, I'm gonna dip into the cash reserve.
20:59
SPEAKER_01: It's it's kind of stable money, um, you know, depending on what you put in that personal reserve.
21:04
SPEAKER_01: Uh so I'm I'm gonna dip into that and we're gonna see how it plays out.
21:08
SPEAKER_01: I'm gonna, you know, the my long-term money, I understand it's going down right now.
21:11
SPEAKER_01: I looked at the statements, I'm not happy about that, but the shares are still there.
21:15
SPEAKER_01: And, you know, we're gonna uh hopefully grow that in time.
21:18
SPEAKER_00: Sounds good, Brian.
21:22
SPEAKER_00: Love it.
21:24
SPEAKER_01: All right, we got some well, you know what we do is uh we usually talk about this at the beginning.
21:28
SPEAKER_01: So Friday Live is about summarizing really uh a lot of the social posts that we do.
21:33
SPEAKER_01: So we've got Market Monday, and Mike talked about the market.
21:36
SPEAKER_01: We got Tax Tuesday, uh Wealth Building Wednesday.
21:40
SPEAKER_01: So these are the five kind of financial planning concepts, and then think ahead Thursday.
21:43
SPEAKER_01: Think ahead Thursdays are, you know, often ideas that may or may not be applicable to you.
21:49
SPEAKER_01: You should be knowledgeable of in case it does become applicable to you.
21:52
SPEAKER_01: So that's kind of think ahead uh in the sense that probably not something you're gonna take action on immediately, but thoughtful.
22:00
SPEAKER_01: Kind of ideas.
22:00
SPEAKER_01: And then on Fridays, either one, two, or three of the partners get together and and uh we kind of summarize those.
22:06
SPEAKER_01: And then uh as you have discovered at this point and in other points in time, if you watch Friday Live, is we go on tangents as well.
22:14
SPEAKER_01: So it it's not really Monday, Tuesday, Wednesday, Thursday.
22:17
SPEAKER_01: We're done.
22:18
SPEAKER_01: So anyway.
22:19
SPEAKER_00: And I think uh I think this week we had market Monday, Tax Tuesday, Tax Wednesday, and tax Thursday.
22:26
SPEAKER_00: Well, you know, it's tax season.
22:28
SPEAKER_00: I think that's appropriate with uh the tax season going on.
22:32
SPEAKER_01: Well, it really is.
22:33
SPEAKER_01: You know, it is top of mind for everybody.
22:36
SPEAKER_01: And uh, you know, one thing I want to point out is um interesting.
22:40
SPEAKER_01: So I I've I've really been observing, had a ton of questions, a ton of questions about taxes.
22:46
SPEAKER_01: And I will tell you the questions that we get at this time of year are tax preparation questions.
22:52
SPEAKER_01: Where's my form?
22:54
SPEAKER_01: Um please send me a statement from the second quarter so I can show that I took out this amount of money or whatever.
23:01
SPEAKER_01: Those are tax preparation questions.
23:03
SPEAKER_01: We don't prepare taxes.
23:04
SPEAKER_00: Retirement contributions.
23:06
SPEAKER_01: Yeah, what was my retirement contribution?
23:09
SPEAKER_01: Uh, you know, what time of the year was it?
23:11
SPEAKER_01: Did I, you know, uh, did I max out, you know, those kind of things.
23:15
SPEAKER_01: Um, and so this time of year, we we end up with a lot of tax preparation.
23:19
SPEAKER_01: I'm preparing my taxes right now, and I need the information on what happened in the past.
23:25
SPEAKER_01: Uh, we don't prepare taxes, we don't give tax or legal advice.
23:29
SPEAKER_01: What we do through the financial planning is really more tax planning, um, which is um, you know, more of really what what I enjoy doing.
23:42
SPEAKER_01: Um, so you know, a lot of a lot of the posts that we're putting out recognize that are more about tax planning concepts.
23:51
SPEAKER_01: How can I affect what we're gonna talk about in the beginning of 2027?
23:56
SPEAKER_01: And much less, hey, I want to make sure I memorialize for the IRS what already happened.
24:03
SPEAKER_01: That's tax preparation.
24:04
SPEAKER_01: We look at, you know, kind of the tax planning.
24:06
SPEAKER_01: Here's what the tax landscape is, here's what your landscape is.
24:10
SPEAKER_01: What things could be done proactively now to make our conversations in January, February, March of next year more pleasant, if you will.
24:20
SPEAKER_01: So now, uh so the tax tips for St.
24:24
SPEAKER_01: Patrick's Day, I will be very candid with you, were uh they were not particularly impactful.
24:29
SPEAKER_01: Um, I just wanted to put out something kind of fun and entertaining.
24:32
SPEAKER_01: You know, I'm in the Pittsburgh.
24:34
SPEAKER_01: No, no pots of gold.
24:36
SPEAKER_01: Uh, you know, in Pittsburgh, we have a huge uh, I think we're one of the top five St.
24:41
SPEAKER_01: Patrick's Day celebrations in in the country.
24:43
SPEAKER_01: So I wanted to put out something kind of lighthearted and entertaining.
24:47
SPEAKER_01: Um I I I did not expect that anybody was gonna look at this and say, oh my, that was really wonderful.
24:53
SPEAKER_01: This I mean, I've got to do this right now.
24:55
SPEAKER_01: So I that's my full disclosure on that one.
24:58
SPEAKER_01: So yeah, the overpaying on taxes one.
25:02
SPEAKER_01: Now that you know, this is this is this one.
25:05
SPEAKER_01: Uh I'm gonna uh, Mike, let me add a full version of that to the stage.
25:10
SPEAKER_01: So I'm gonna remove this one.
25:12
SPEAKER_01: I'm actually gonna go with a fuller version of that.
25:14
SPEAKER_01: So this is you know the summary of of um uh of the post that was on uh Tuesday.
25:20
SPEAKER_01: So I'll go through a couple of those.
25:22
SPEAKER_01: And uh, you know, how are you overpaying on taxes?
25:24
SPEAKER_01: Selling investments too soon, um capital gains, short-term capital gains held less than one year, taxed at ordinary income higher rates.
25:32
SPEAKER_01: Uh, if you hold on to those investments for a year or more, that's a long-term capital gain, and there's a different bracket for that.
25:39
SPEAKER_01: That's zero, 15, or 20, effectively.
25:42
SPEAKER_01: So uh be mindful of uh you know selling investments too quickly uh because the tax impact could be uh a little higher on those.
25:52
SPEAKER_01: Uh tax advantage.
25:54
SPEAKER_01: Well, there's no doubt.
25:55
SPEAKER_01: That's right.
25:56
SPEAKER_01: Uh so going back to the CMT, right?
26:00
SPEAKER_01: Uh technical trend is your friend.
26:02
SPEAKER_01: Uh tax advantage plans.
26:04
SPEAKER_01: This is uh you know, 401ks, 403Bs, um IRAs, you know, all of those types of things.
26:11
SPEAKER_01: Uh, take advantage of those as much as you possibly can.
26:14
SPEAKER_01: And whether you should do that on a traditional basis, take the deduction now, have it grow tax protected, and then pay taxes later, or whether you don't need the deduction now, have it grow tax protected, and hopefully at some point uh take it out tax-free is a financial planning discussion.
26:29
SPEAKER_01: Uh question.
26:30
SPEAKER_01: Municipal bonds.
26:31
SPEAKER_01: Uh, you know, uh municipal bonds, these are bonds that are issued by states and municipalities and um uh, you know, think of school districts.
26:41
SPEAKER_01: A lot of school districts have municipal bonds, water systems, you know, that kind of thing, uh often pay um income that is tax favored.
26:53
SPEAKER_01: So you can get state and or federal tax exemption of that income.
26:58
SPEAKER_01: Now, the you know, the the flip side of that is the percentage that you're getting, you know, if you have a municipal bond investment, you might get 3.2%.
27:07
SPEAKER_01: If you have a taxable investment, it might be paying five.
27:10
SPEAKER_01: You say, well, why would I do that?
27:12
SPEAKER_01: Well, if you get 3.2% without having to pay taxes and you get five and you're paying taxes, which one is better?
27:18
SPEAKER_01: And there's a break-even point that depends really on what your tax bracket is.
27:21
SPEAKER_01: So municipal bonds, um, historically, don't know the future.
27:26
SPEAKER_01: Historically, you know, they're not very exciting.
27:28
SPEAKER_01: They don't grow uh uh a ton.
27:31
SPEAKER_01: They didn't grow like stocks, historically speaking.
27:35
SPEAKER_01: Uh, but for, you know, folks, uh, as part of that personal reserve, you're tiering it, you know, you got money available immediately.
27:43
SPEAKER_01: And you know, maybe have some of these short-term municipal bonds in there that aren't increasing uh your taxable income because they're paying tax-free interest.
27:51
SPEAKER_01: So that's something we can look at.
27:52
SPEAKER_01: And we do use those uh quite a bit in the right.
27:55
SPEAKER_00: And as a general rule, uh what they say is uh what you can expect from your fixed income portfolio is essentially uh three to five years out what the current yield is today.
28:07
unknown: Yeah.
28:08
SPEAKER_00: Annualized return.
28:09
SPEAKER_01: Obviously, that doesn't always play out that way, but and then we got a changing interest rate environment, although they didn't change it this year.
28:18
SPEAKER_01: Uh unplanned capital gains.
28:20
SPEAKER_01: I had covered this in a prior post.
28:21
SPEAKER_01: You know, oftentimes mutual funds will pay capital gains even if you don't sell the shares.
28:27
SPEAKER_01: Uh so we saw we saw that the last couple of years, huge capital gains payouts.
28:31
SPEAKER_01: People say, wait a minute, you know, is there buying or selling going on in my shares?
28:35
SPEAKER_01: No.
28:36
SPEAKER_01: But you own a collective of investments called a mutual fund.
28:40
SPEAKER_01: And when there are capital gains from that portfolio managers are buying and selling throughout the year, everybody pays a piece of those capital gains.
28:46
SPEAKER_01: They distribute them out of the mutual fund, and you get a piece of that.
28:49
SPEAKER_01: And so a lot of people say, Wait, I I didn't take any shares of my mutual fund, and I have to pay capital gains.
28:55
SPEAKER_01: Yes, uh, there are ways to uh to manage that.
29:00
SPEAKER_01: Uh historically, exchange traded funds, similar but different than mutual funds, uh, don't have those large-term capital gains.
29:08
SPEAKER_01: Um, so there are things that we can look at, and those are a little bit of a surprise.
29:12
SPEAKER_01: Uh coordination between professionals, and we covered that last week.
29:15
SPEAKER_01: Of course, you know, what is the partnership between the tax preparer, the uh financial planner, and the uh the attorney?
29:22
SPEAKER_01: You know, if you if all of those people are in sync, you're you're probably gonna have uh more favorable outcomes.
29:29
SPEAKER_01: Does that mean your portfolio goes up more?
29:31
SPEAKER_01: No, more favorable financial planning outcomes, right?
29:34
SPEAKER_01: I know what's gonna happen.
29:36
SPEAKER_01: Um, I kind of have a better idea as to what my tax scenario is gonna be now and when I'm not here.
29:42
SPEAKER_01: So um refunds are misleading.
29:44
SPEAKER_01: This is one of my favorite.
29:45
SPEAKER_01: Always been one of my favorite, I got a big tax refund.
29:48
SPEAKER_01: That just means you paid more in taxes during the year.
29:51
SPEAKER_01: You prepaid more taxes than you needed to.
29:54
SPEAKER_01: Many people call that a tax-free loan to the government.
29:56
SPEAKER_01: Because if you're getting money back, the government's saying, you gave me too much throughout the year, so I'm giving you some back.
30:02
SPEAKER_01: And they give it back to you without interest.
30:04
SPEAKER_01: So hypothetically, let's say you pay a, you say, I'm gonna pay.
30:09
SPEAKER_01: Um, you know, a lot of people have to do quarterly estimates.
30:12
SPEAKER_01: Uh, I'm gonna pay a ton of quarterly estimates in January because I just don't want to have to, you know, owe taxes at the end of the year.
30:19
SPEAKER_01: So in January, you give the IRS a ton of money and say, ah, I'm gonna get some of this back because I'm gonna overpay in January.
30:25
SPEAKER_01: And then in April, you get the money back and you say, that's awesome.
30:28
SPEAKER_01: No, I got a tax refund.
30:30
SPEAKER_01: Well, the reality is uh from January through uh April 15th, uh that money that you prepaid too much to the IRS, you get it back.
30:40
SPEAKER_01: Uh, there was no interest on that.
30:42
SPEAKER_01: There was no potential progress.
30:43
SPEAKER_00: And it's funny how it always works in their favor.
30:45
SPEAKER_00: Do you remember during 2020 when international countries, many of them had negative interest rates?
30:50
SPEAKER_00: Oh, yeah.
30:51
SPEAKER_00: They actually penalized uh people that paid early because of the negative interest rates.
30:59
SPEAKER_01: Well, so the the point is, uh, you know, uh, you know, I'm all about paying my fair share of taxes.
31:07
SPEAKER_01: I don't want to pay more, and I don't particularly uh love the idea of a tax-free loan to the government throughout the year.
31:12
SPEAKER_01: Although on April 15th, for many people, uh many people recognize this and say, hey, I get it.
31:17
SPEAKER_01: I understand in your math, Brian.
31:19
SPEAKER_01: I understand what you're saying.
31:20
SPEAKER_01: But, you know, that's the way I've always done it.
31:22
SPEAKER_01: And April 15th, I get a little money back, and I, you know, and so I again that goes with back to the financial plan and just to understand what's going on and make you know decisions that are are are um in line with what you want to do.
31:35
SPEAKER_00: So well, I know you gotta get to uh a meeting here pretty soon, so I will flip on the disclosures and we'll get going unless you have anything else you want to add.
31:45
SPEAKER_01: Oh, Mike, you know, I always have stuff to add, but uh yeah, adjusted my schedule a little bit today, so I'm gonna run off to uh a couple meetings this afternoon.
31:55
SPEAKER_01: Uh thanks everybody for tuning in.
31:57
SPEAKER_01: The um viewership is way up, the subscribers are way up, and um, you know, kind of like we say to folks, whether um they hire us to be their financial professional or not, we want to make sure that each interaction in the Friday Live is uh in particular, we want to make sure each interaction you come away with something that is interesting, um, that you learned something, and it's something that you may be able to consider for your personal financial life.
32:27
SPEAKER_01: Um, so that's that's kind of what we're trying to accomplish here.
32:30
SPEAKER_00: I think we did if we have any particular if anyone has any particular topics or questions, um, just comment and we'll be glad to cover it on a future Friday live.
32:40
SPEAKER_01: Absolutely.
32:40
SPEAKER_01: We would be more than glad to.
32:42
SPEAKER_01: So thanks everybody.
32:43
SPEAKER_01: Have a great, great weekend.
32:45
SPEAKER_01: Security is offered through LPL Financial LLC, member FINRA and SIPC.org.
32:51
SPEAKER_01: Advisory services offered through LPL Financial LLC, a registered investment advisor.
32:56
SPEAKER_01: Brian Peluso, Michael Kutch, and David Harper are registered representatives of LPL Financial LLC.
33:03
SPEAKER_01: Content discussed is for informational purposes only and not intended as an offer or solicitation to buy or sell any security or investment strategy.
33:11
SPEAKER_01: Any opinions expressed are those of the authors and do not necessarily reflect the views of LPL Financial or its affiliates.
33:18
SPEAKER_01: All investments involve risk, including the possible loss of principal.
33:22
SPEAKER_01: This communication may include links or references to third-party websites.
33:26
SPEAKER_01: These links are provided as a convenience only.
33:28
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33:34
SPEAKER_01: Brian, Mike, and David and HBK Provident Advisors may only transact business in states where they are properly registered or exempt from registration.
33:43
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33:48
SPEAKER_01: Past performance is not indicative of future results.
33:52
SPEAKER_01: You should consult with your financial advisor, tax professional, and or attorney regarding your specific situation before making any investment decisions.