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Strong Jobs Report Shifts Fed Expectations as Rate Cut Hopes Fade · The Financial Exchange Show

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Speaker 2: Chuck, Mark and Tucker with you here and as we
1:15
Speaker 2: kick things off today, top story that we're gonna be
1:18
Speaker 2: talking about is the jobs report from this morning, which
1:21
Speaker 2: came in with one hundred and thirty thousand jobs created
1:26
Speaker 2: for the month of January. The unemployment rate dropped from
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Speaker 2: four point four to four point three percent, and quite honestly,
1:34
Speaker 2: when looking through this report, there's very little to be
1:38
Speaker 2: upset about. I think it is an incredibly solid report
1:43
Speaker 2: all around, especially given the questions that have been building
1:48
Speaker 2: surrounding the labor market and whether there's some weakening that
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Speaker 2: and whether the weakening that we've seen the last few
1:54
Speaker 2: years would continue January and on the whole now I
1:59
Speaker 2: think probably pointing towards the potential at least for some
2:02
Speaker 2: green shoots in the labor market, with this report being
2:04
Speaker 2: one of them. But ultimately, Mark, I think this is
2:08
Speaker 2: a really good report, albeit one that still needs confirmation
2:11
Speaker 2: in the coming months that it's not an outlier.
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Speaker 3: Yeah, there was probably too much cynicism or concern about
2:19
Speaker 3: the labor market given the economic growth backdrop, which was solid.
2:24
Speaker 3: I never fully understood the economic concerns given that the
2:28
Speaker 3: only thing that seemed to be sick. Well, there were
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Speaker 3: a couple of high level labor market indicators that seemed
2:34
Speaker 3: to be pointing toward weakening, but it wasn't clear that
2:36
Speaker 3: that wasn't just normalization. It's becoming a little clearer. I'm
2:40
Speaker 3: not going to say that that hypothesis, if you will,
2:44
Speaker 3: is confirmed by this. We need to see a little
2:46
Speaker 3: bit more you know data, as we always say, But
2:48
Speaker 3: labor market doesn't appear to be weak unemployed. If anybody
2:52
Speaker 3: told you ten years ago, twenty years ago, GE's word
2:55
Speaker 3: at four points something percent unemployment and everybody's worried, they
2:57
Speaker 3: would have said you were crazy. Strong economic growth, historically
3:02
Speaker 3: low unemployment, elevated inflation. Unclear to me why anybody would
3:07
Speaker 3: think we needed or need FED easing.
3:11
Speaker 2: So looking at this when we talk about the labor market,
3:14
Speaker 2: the reasons why, if we talk about the reasons why
3:16
Speaker 2: we've been concerned about it over the last you know,
3:20
Speaker 2: six to nine months. I know there's been sporadic concerns
3:22
Speaker 2: for the last several years now. Much of that the
3:25
Speaker 2: first couple of years of the labor market slowing, I
3:27
Speaker 2: think was clearly normalization. But I think that when we
3:30
Speaker 2: look at the last six months. The reason for concern
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Speaker 2: has there's been a few different items. The first is
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Speaker 2: just the pace of job growth has continued to drop
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Speaker 2: to you know, net net pretty close to zero on
3:42
Speaker 2: a monthly basis. Number two, job openings have continued to
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Speaker 2: drop down, such that when we look at the beverage curve,
3:50
Speaker 2: which relates the job opening's rate to the unemployment rate,
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Speaker 2: we started to get into some dangerous territory there, albeit
3:57
Speaker 2: you know, not one that actually showed any real problems
4:01
Speaker 2: in this cycle. Here other rates in the Jolts report,
4:04
Speaker 2: the higherst rate continue to tick down, the quits rate
4:07
Speaker 2: ticked down, and so it was this you know, consistent
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Speaker 2: message that we were getting that hiring was slowing, labor
4:14
Speaker 2: market mobility was slowing, and you know, that was becoming
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Speaker 2: problematic a lot of surveys, by the way, you know,
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Speaker 2: you ask people how they feel about the labor market,
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Speaker 2: and they're saying it's harder to get a job. So
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Speaker 2: I think that when we look at this the positive
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Speaker 2: signs that we've seen this month, by this month I
4:31
Speaker 2: really mean January, from the January data, we have seen
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Speaker 2: continuing unemployment claims go from rising four to six percent
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Speaker 2: year over year to being flat for the first few
4:42
Speaker 2: months of the year. We've seen indeed's job openings data
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Speaker 2: stabilize and start to maybe show a little bit of
4:49
Speaker 2: improvement over a short time period.
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Speaker 4: And now we've got this job's report.
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Speaker 2: So I think on the whole, you look at it
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Speaker 2: and it points to the January data being stro longer.
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Speaker 4: Here.
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Speaker 2: Is that enough to put any of those labor market
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Speaker 2: concerns to bed. I don't think completely, But this is
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Speaker 2: a fantastic report that at least for this month says, yeah,
5:12
Speaker 2: things may be getting better, and if we can see
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Speaker 2: some follow through, that will be a fantastic start to
5:17
Speaker 2: the year for a labor market that's had some questions.
5:22
Speaker 3: Yeah, you cited a bunch of economics statistics. From the
5:26
Speaker 3: Fed's point of view, I think there are a couple
5:28
Speaker 3: big things that matter and the models that they use.
5:31
Speaker 3: One is unemployment, the other is vacancies. Vacancies have come down,
5:37
Speaker 3: the number of job openings that firms post have come down,
5:41
Speaker 3: but there's still a lot higher relative to the available
5:44
Speaker 3: pool of labor relative to unemployed people than they were
5:47
Speaker 3: prior to roughly twenty nineteen twenty eighteen, when something about
5:51
Speaker 3: that relationship changed. It's just not clear to me it
5:55
Speaker 3: hasn't been. It's still not clear whether this labor market
5:59
Speaker 3: is just sort of normal. Look, we never know what
6:02
Speaker 3: the right the so called natural, equivalently non inflationary rate
6:06
Speaker 3: of unemployment is. Is it four point five that'd be
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Speaker 3: very low historically speaking, is it five that'd be closer
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Speaker 3: to the ballpark historically speaking? That is an unemployment rate
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Speaker 3: that doesn't push up, that doesn't reflect too much demand
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Speaker 3: pushing against the productive limits of the economy, thus pushing
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Speaker 3: up inflation. As you know, as you could tell by
6:26
Speaker 3: my tone, and I don't, I don't, I don't want to.
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Speaker 3: I don't want to, like not share in your enthusiasm,
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Speaker 3: your your excitement. My word not maybe the one you
6:36
Speaker 3: would choose about this report. But I'm really concerned that
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Speaker 3: the FED has misread the economy, has overstimulated it. The
6:43
Speaker 3: recent rate cuts effect, by the way, hasn't even made
6:45
Speaker 3: its way through to the real economy yet.
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Speaker 4: Talk to me about that.
6:51
Speaker 2: Yeah, give me a little bit more detail in terms
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Speaker 2: of what you're seeing, because in look in the broad
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Speaker 2: scheme of things, when we look at twenty twenty five data,
7:01
Speaker 2: the unemployment rate moved up over the course of twenty
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Speaker 2: twenty five. It did, and on the inflation side of things,
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Speaker 2: we basically saw inflation inflect upward modestly, but mostly on
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Speaker 2: the good side. They could be explained away by tariff.
7:16
Speaker 2: So walk me through the concern that you have, just
7:19
Speaker 2: so our listeners can understand it better.
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Speaker 3: The way the way you think, the way economists think
7:24
Speaker 3: about the right policy rate for the FED is to
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Speaker 3: weigh unemployment and changes no unemployment against inflation. You could
7:35
Speaker 3: also you could substitute vacancies or GDP relative to potential GDP.
7:39
Speaker 3: You're trying to get it, is there slack in the economy,
7:42
Speaker 3: and notwithstanding last year's signs of stalling in the labor market,
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Speaker 3: there were few other signs of slack. Inflation did not
7:52
Speaker 3: fall dramatically GDP. There was a little hiccup the in
7:56
Speaker 3: the second quarter, but we've recovered, and that's an understatement,
7:59
Speaker 3: recovery dramatically. From that, financial conditions are loose, it's easy
8:04
Speaker 3: to get your hands on capital, and related to that,
8:08
Speaker 3: stocks are at all time highs. It seems very odd
8:12
Speaker 3: to me that anybody would be worried given that sort
8:15
Speaker 3: of constellation of facts and thinking about it through traditional
8:18
Speaker 3: economic lens. Seems odd to me that anybody would be
8:21
Speaker 3: thinking this economy needs stimulus, which is exactly what we're doing.
8:25
Speaker 3: Fiscal policy is loosening, tax rebates, tax cuts, Monetary policy
8:30
Speaker 3: is eased. I was going to say considerably, maybe modestly
8:33
Speaker 3: is a better term, but it's eased, and it's eased
8:36
Speaker 3: into elevated inflation and very low unemployment. All that strikes
8:40
Speaker 3: me is weird.
8:42
Speaker 2: I think weird is a fair characterization real Just again,
8:46
Speaker 2: it's this isn't economy that I do think it's hard
8:50
Speaker 2: to get a handle on it.
8:52
Speaker 4: And look, we clearly.
8:54
Speaker 2: Have different cross currents that are going on at the
8:58
Speaker 2: moment in the economy, and so I think that in
9:02
Speaker 2: trying to sort through, you know, what is actually happening here,
9:08
Speaker 2: given some of the policy shifts that we've seen in
9:09
Speaker 2: the last year, which are ones by the way that
9:12
Speaker 2: no living economists is seen during their lifetime, you know what,
9:17
Speaker 2: when when's the last time the United States had, you know,
9:21
Speaker 2: any kind of significant increase in tariff's mark?
9:26
Speaker 4: One hundred years ago? Yeah, you know, we're talking one
9:28
Speaker 4: hundred years ago.
9:29
Speaker 3: So that those were well studied. We may not have
9:32
Speaker 3: they might.
9:33
Speaker 2: It was a different world than though, you know, like
9:36
Speaker 2: it's yes, they were well studied for the time period,
9:38
Speaker 2: but the airplane didn't exist, you know, the Internet didn't exist.
9:42
Speaker 2: So the impacts can be different and they can show
9:44
Speaker 2: up differently with different delays in different you know, substitutions
9:48
Speaker 2: that can happen. I'm not saying that the research on
9:51
Speaker 2: those is inaccurate. I'm just saying it's a different world
9:55
Speaker 2: from them.
9:56
Speaker 3: I'd say price rigidity is price rigidity. I mean it
9:59
Speaker 3: all else equal tariffs push up prices full.
10:01
Speaker 4: Stop, which they have.
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Speaker 3: I'm not saying they have it, I know, and I'm
10:04
Speaker 3: not saying you say what what I'm what.
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Speaker 2: I'm trying to say, Mark is actually living through something
10:09
Speaker 2: is different from reading about it. I can't actually the
10:14
Speaker 2: actually no, but the actual like impacts in terms of Hey,
10:19
Speaker 2: when we read about smoot Holly, we say, okay, it
10:23
Speaker 2: increased prices in X y Z fashion. Does that happen
10:27
Speaker 2: faster now because the world is more integrated and decisions
10:31
Speaker 2: can be made more quickly. Does that speed mean that
10:35
Speaker 2: it ends up having a larger or smaller impact than
10:40
Speaker 2: These are things that are fundamentally different because it's not
10:43
Speaker 2: the same world as.
10:44
Speaker 4: It was then.
10:44
Speaker 3: Well and it Yeah, but this was just one example. Yeah,
10:48
Speaker 3: it definitely never is.
10:49
Speaker 2: Again, I'm just trying to say, on the immigration side,
10:53
Speaker 2: when's the last time the US had negative immigration?
10:56
Speaker 3: Possibly probably the same period, the twenties.
10:59
Speaker 2: So again, haven't lived through something like this to know
11:03
Speaker 2: how it may directly?
11:05
Speaker 4: I see what true.
11:06
Speaker 3: So you're saying, Morley, it's not like you have to
11:07
Speaker 3: be there observing it because most people, myself included, are
11:10
Speaker 3: clueless when you're in the moment. But you're saying it doesn't.
11:13
Speaker 3: It's going to play out differently every time, so you can't.
11:16
Speaker 3: I mean, this is a version of what one economist
11:19
Speaker 3: Bob Lucas called the Lucas ended up being called the
11:21
Speaker 3: Lucas critique. You cannot take past estimates and apply them
11:25
Speaker 3: to say future activity, because agents expectations change. He said
11:30
Speaker 3: it with respect to policy, but you can apply it
11:32
Speaker 3: more broadly. Yeah, I see what you're saying.
11:35
Speaker 4: So let's take a quick break.
11:36
Speaker 2: When we return, let's talk a little bit about how
11:41
Speaker 2: this mark kind of alluded to it, how this job
11:44
Speaker 2: support may or may not impact FED policy looking forward.
11:49
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11:52
Speaker 1: the economy and the trends on Wall Street. This is
11:55
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Speaker 2: Market's talk a little bit about this job support in
12:43
Speaker 2: the context of future FED meetings. So the CME has
12:48
Speaker 2: their Fedwatch tool that basically allows us to see projected
12:52
Speaker 2: probabilities for future meetings and you know, compare it to
12:56
Speaker 2: what they were in the past. So, just as an
12:58
Speaker 2: example yesterday, if you look to the upcoming meeting for
13:02
Speaker 2: March eighteenth, there's a twenty percent chance of a rate
13:05
Speaker 2: cut happening, then seventy nine percent chance.
13:07
Speaker 4: Of no cut.
13:08
Speaker 2: Today, in light of this new data, only a six
13:11
Speaker 2: percent chance of a rate cut ninety four percent chance
13:15
Speaker 2: of no action if we go out further. Let's look
13:18
Speaker 2: at the July meeting, just as an example. At the
13:22
Speaker 2: if we looked yesterday, there was only a twenty i'm sorry,
13:26
Speaker 2: only a fifteen percent chance that rates were still where
13:28
Speaker 2: they were art are today. Now it's up to a
13:31
Speaker 2: twenty five percent chance that rates are still where they
13:34
Speaker 2: are today by the end of July. When we go
13:38
Speaker 2: to the December meeting. Previously, there was only a nineteen
13:41
Speaker 2: i'm sorry, a four point eight percent chance that rates
13:44
Speaker 2: were still where they are today. Now it's up to
13:47
Speaker 2: a seven point one. So overall, the what's being priced
13:52
Speaker 2: in here at this point is basically, hey, if there
13:55
Speaker 2: are going to be rate cuts. There's not a huge
13:57
Speaker 2: shift when you look at later in the year, but
14:00
Speaker 2: it's basically saying, hey, if there are to be rate cuts,
14:03
Speaker 2: they're gonna have to start later than originally projected.
14:07
Speaker 4: And you still do have.
14:09
Speaker 2: When you look at the probabilities and the aggregate two
14:12
Speaker 2: cuts being priced in this year. I will say I'm
14:16
Speaker 2: in complete agreement with you in that. Look, if we
14:18
Speaker 2: get more reports that show what we saw in this
14:22
Speaker 2: report here you are not seeing. I will go so
14:25
Speaker 2: far as to say you are not seeing rate cuts
14:27
Speaker 2: by the end of the year. You are seeing rate
14:28
Speaker 2: hikes by the end of the.
14:29
Speaker 3: I'd like to put a simple question to these people
14:31
Speaker 3: who think they're gonna be rate cuts this year, given
14:33
Speaker 3: what we know today, are you crazy?
14:36
Speaker 4: I don't know. No, Go ahead, listen. I don't think
14:40
Speaker 4: they're necessarily crazy.
14:41
Speaker 3: What are they But they're making assumptions about the future
14:44
Speaker 3: of the economy and ignoring what we know factually. What
14:49
Speaker 3: is concrete. What is concrete is that inflation is elevated.
14:51
Speaker 3: What is concrete is that unemployment is epically low by
14:55
Speaker 3: historical standards. What is concrete is that we're pouring a
14:58
Speaker 3: lot of fiscal and monet Harry, especially if you count
15:01
Speaker 3: those MBS's that the administration told its people over at
15:06
Speaker 3: Freddy to to buy. We're lavishing stimulus on the economy
15:12
Speaker 3: at a time of elevated inflation, very low unemployment, and
15:16
Speaker 3: massive deficits. You'd have to be predicting some something that
15:20
Speaker 3: the rest of us don't have the gifts to foresee,
15:23
Speaker 3: some kind of economic a calamity or unexpected dramatic slowdown.
15:29
Speaker 2: Isn't the thing that they could be predicting. Again, hear
15:34
Speaker 2: me out on this, because I'm one of the PEPs.
15:35
Speaker 2: I don't expect I was this year. I know, I know,
15:39
Speaker 2: But in the context of let's look at the unemployment rate,
15:43
Speaker 2: and specifically the unemployment rate over the last year or so,
15:48
Speaker 2: if we go back to January of January of twenty
15:55
Speaker 2: five and we say, okay, like, where was unemployment, then
16:00
Speaker 2: we were at four point I'm sorry, four percent. Even
16:03
Speaker 2: we then rose, okay, to get up to four point
16:07
Speaker 2: six percent with that November report. Initially that's subsequently been
16:10
Speaker 2: revised down to four point.
16:11
Speaker 4: Five with the updates that we've seen.
16:14
Speaker 2: But you saw unemployment rise by half a percent last year,
16:19
Speaker 2: given the continued weakness that we'd seen in the labor
16:22
Speaker 2: market and the fact that until the last month of data,
16:26
Speaker 2: there didn't seem to be any meaningful turn that could
16:29
Speaker 2: be happening, and even this it's still early, in my opinion,
16:33
Speaker 2: Is it something where someone could reasonably say unemployment's gone
16:37
Speaker 2: up by half a percent. We're getting into the dangerous
16:40
Speaker 2: part of the beverage curve, where unemployment starts to ratchet
16:43
Speaker 2: up more rapidly and more exponential fashion. And as such,
16:47
Speaker 2: rate cuts in the fall were warranted, you.
16:51
Speaker 3: Because unapployment to say that, because.
16:55
Speaker 2: With the dual mandate, unemployment was moving up more rapidly
16:58
Speaker 2: than inflation one, and so the Fed could make a
17:01
Speaker 2: judgment call to say, yes, inflation is a problem, but
17:04
Speaker 2: unemployment is the more urgent, more imminent one, and so
17:07
Speaker 2: let's try to address that.
17:08
Speaker 3: Before looking at this, you would have to explain why
17:10
Speaker 3: your estimate of the natural rate is outside the bounds
17:14
Speaker 3: of virtually every all historical experience. You would have to,
17:18
Speaker 3: And I know there are plenty of widely respected economists
17:21
Speaker 3: far more accomplished than say I am. You know, PhD
17:24
Speaker 3: academics and people who thought rates needed to come down.
17:27
Speaker 3: I respectfully, using in some cases the textbooks and papers
17:31
Speaker 3: that they wrote in my reasoning, came to the conclusion
17:34
Speaker 3: that wait a minute, you might be wrong about your
17:36
Speaker 3: estimate of the natural rate. You don't and sometimes we
17:38
Speaker 3: throw around the term natural rate. We're referring to GDP
17:41
Speaker 3: potential GDP sometimes we're referring to the rate that the
17:44
Speaker 3: Fed should set the Fed funds rate at. I'm referring
17:47
Speaker 3: here to the rate of unemployment that is consistent with
17:50
Speaker 3: stable inflation. That's one way to define it and good
17:53
Speaker 3: for our purposes. How do you know that it should
17:55
Speaker 3: be four point five? You've got to make a case
17:58
Speaker 3: for that, And don't give me some ai productivity story,
18:02
Speaker 3: perhaps tariffs and all the restructuring of the economy that's
18:04
Speaker 3: going on under this new administration. And you may like it,
18:08
Speaker 3: you may hate it, but you can't deny there's been
18:10
Speaker 3: some pretty dramatic and it's ongoing economic restructuring. If we're
18:13
Speaker 3: gonna look more like the economy of the fifties and sixties,
18:16
Speaker 3: the natural rate should probably be closer to what it
18:19
Speaker 3: was then than where it was in the late nineties
18:21
Speaker 3: and even more recently, which suggests to me somewhere in
18:24
Speaker 3: the five to six percent range if you want non
18:27
Speaker 3: inflationary unemployment. I'm not saying i'd hang my hat on that,
18:30
Speaker 3: but I don't get why, maybe because it's maybe they're
18:33
Speaker 3: just commentators throwing something out there. They're not thinking rigorously
18:37
Speaker 3: if you think it through.
18:39
Speaker 2: And if you want the evidence that inflation could potentially
18:46
Speaker 2: evolve into the bigger problem.
18:49
Speaker 4: As we go through this year.
18:52
Speaker 2: Take a look at the wage growth data from the
18:54
Speaker 2: last three months. Two of the last three months now
18:57
Speaker 2: printing point seven percent month over month average weekly earnings gains.
19:01
Speaker 2: That's an eight and a half percent annualized clip. That
19:05
Speaker 2: is freaking hot.
19:07
Speaker 4: Now.
19:08
Speaker 2: The other one did show a modest decline. But if
19:11
Speaker 2: you start seeing anything that looks like that, you've got problems,
19:15
Speaker 2: because then employers need to raise their prices in order
19:17
Speaker 2: to cover those wage gains, and that is something to
19:20
Speaker 2: watch out for if this continues. Quick Break Wall Street
19:24
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19:47
Speaker 5: Market's pulling back after opening the day in positive territories.
19:51
Speaker 5: Wall Street reacts to a stronger than expected January jobs report,
19:54
Speaker 5: where one hundred and thirty thousand jobs were added last month,
19:57
Speaker 5: above expectations of sixty five thousand. The unemployment rate also
20:02
Speaker 5: ticked lower to four point three percent. Right now, the
20:05
Speaker 5: Dow is off about a third of a percent, SMB
20:08
Speaker 5: five hundred down about a quarter percent, NASDAC down just
20:11
Speaker 5: over half a percent, Russell two thousand selling off about
20:15
Speaker 5: nine tenths of one percent. Tenure Treasure yield is up
20:19
Speaker 5: two basis points at four point one six eight percent,
20:23
Speaker 5: and crude oil up over one and a half percent higher,
20:26
Speaker 5: trading above sixty five dollars.
20:29
Speaker 4: A barrow.
20:30
Speaker 5: Craft Hens announced this morning it is pausing work on
20:32
Speaker 5: a previously announced plan to split the company, stating that
20:36
Speaker 5: many of the company's issues are fixable and within its control.
20:40
Speaker 5: Shares and craft Hines are flat at the moment. Meanwhile,
20:43
Speaker 5: shares a Warner Brothers Discovery edging higher after The Wall
20:46
Speaker 5: Street Journal reported that activist investor and Kora built a
20:49
Speaker 5: near two hundred million dollars stake in Warner and plans
20:53
Speaker 5: to oppose its deal with Netflix, saying Warner failed to
20:57
Speaker 5: adequately engage with paramounts rival offer. Netflix shares down two
21:02
Speaker 5: percent elsewhere, Maderna falling eleven percent following news that the
21:08
Speaker 5: FDA refused to review the drugmaker's application to sell a
21:12
Speaker 5: new seasonal flu vaccine. Humanics stock down two percent despite
21:17
Speaker 5: the health insurance company beating on both profit and revenue
21:20
Speaker 5: forecast for its most recent quarter. Zillow sinking seventeen percent
21:25
Speaker 5: after the home listing platform reported a lower than expected
21:28
Speaker 5: ebit arrange for the first quarter, and shares and toy
21:31
Speaker 5: manufacturer Mattel plunging twenty five percent after it missed earnings
21:36
Speaker 5: in revenue expectations for the fourth quarter. Both City Group
21:40
Speaker 5: and JP morgan Chase also downgraded the stock. I'm Tucker
21:45
Speaker 5: Silva and that is Waltree.
21:47
Speaker 1: Watch. This is Asked Todd on the Financial Exchange Radio Network.
21:52
Speaker 1: If you have an existing estate plan or in the
21:55
Speaker 1: market for one, Tod Letsky is here to answer your
21:57
Speaker 1: questions and help you plan for a later life. Todd
22:00
Speaker 1: is presented by Cushing and Dolan, serving Massachusetts and New
22:03
Speaker 1: England for more than thirty five years, helping families with
22:06
Speaker 1: a state and tax planning, Medicaid planning, and probate law.
22:10
Speaker 1: Visit Cushingdolan dot com. Now here's Todd Lutsky.
22:16
Speaker 2: And we are now joined by Todd Lutsky for Ask
22:20
Speaker 2: Todd Get your Estate planning questions ready, because this is
22:24
Speaker 2: your chance to ask them to Todd live on air
22:27
Speaker 2: right now.
22:28
Speaker 4: Phone lines are open at eight eight eight.
22:31
Speaker 2: To zero five two two six three, So get calling
22:36
Speaker 2: early and often because we can usually get through two
22:39
Speaker 2: or three questions once we start getting into four or
22:42
Speaker 2: five then and so, boy, I don't know if we
22:44
Speaker 2: can handle that. So again, the number is eight eight
22:47
Speaker 2: eight to zero five two two six three. You got
22:51
Speaker 2: a state planning questions? Todd Lutsky is going to try
22:53
Speaker 2: to answer him right now.
22:55
Speaker 4: Again.
22:55
Speaker 2: That phone number is eight eight eight to zero five six'.
23:00
Speaker 2: Three Mister, Lutsky how are you? DOING i am never
23:03
Speaker 2: better in you? GOOD i was at the circus the other.
23:06
Speaker 2: Day yeah you like? That not a great, Show the
23:10
Speaker 2: Lion ate the Tightrope. Walker oh, yeah it was a
23:14
Speaker 2: well balanced. MEAL i bet so not.
23:17
Speaker 4: Good not, Good todd want to talk to.
23:19
Speaker 2: You let's say that someone has not done any estate,
23:22
Speaker 2: Planning they've never met with an. Attorney they're, like, NO
23:25
Speaker 2: i didn't need, IT i don't need. It but WELL
23:28
Speaker 2: i GUESS i do need, it because everyone at some
23:30
Speaker 2: point needs an. Attorney, yeah what should someone expect as
23:36
Speaker 2: they go through the estate planning, process like what are
23:39
Speaker 2: the things that the boxes that you want to see
23:41
Speaker 2: that estate planning attorney check as they're going.
23:43
Speaker 6: Through, yeah this is really. Important the whole IDEA i
23:47
Speaker 6: think behind this, Question, chuck IF i, may is you,
23:50
Speaker 6: know how DO i get? Started how DO i kick
23:54
Speaker 6: off my estate? Planning? Right what DO i think? About
23:57
Speaker 6: what are the? Checklists if you? Will so couple of.
24:00
Speaker 6: Things you, first you, know talk about how old AM
24:03
Speaker 6: i because age could impact the type of plan that we. Do,
24:07
Speaker 6: Right so if WE'RE i just throw out like sixty and,
24:10
Speaker 6: OVER i might, say, well you KNOW i want the.
24:14
Speaker 6: Basics of, course you, know, taxes, probate bloodline. Planning those
24:18
Speaker 6: are always important because you, know everybody, dies but not
24:21
Speaker 6: everybody goes to a nursing. Home but If i'm sixty and,
24:24
Speaker 6: OVER i might add that to my checklist BEFORE i get. Started, so,
24:28
Speaker 6: OKAY i got to think about. That next versus let's
24:32
Speaker 6: Say I'm i'm you, know thirty five with young. Kids,
24:35
Speaker 6: well probably nursing home planning is not on the to do.
24:38
Speaker 1: List.
24:39
Speaker 6: Now, next valuation how large is my?
24:43
Speaker 3: Estate?
24:43
Speaker 6: Right and WHEN i say, valuation it's not just, valuation
24:46
Speaker 6: but maybe at the same time you're thinking of, valuation
24:49
Speaker 6: you think about what's included in my? Estate what DO
24:53
Speaker 6: i have to? Value so things like real, estate rental,
24:57
Speaker 6: properties vacation, Homes, yes life insurance you don't think about. That,
25:02
Speaker 6: yes iras and wroth iras and four oh one k's
25:06
Speaker 6: and investment. Accounts so all of these things you need
25:09
Speaker 6: to really think about as WHAT i need to, value
25:12
Speaker 6: then value. It and, again If i'm you, know way up,
25:15
Speaker 6: THERE i have that fifteen million is the federal estate
25:18
Speaker 6: tax exemption or thirty, Million, well NOW i Know i'm
25:21
Speaker 6: in revocable trust world and maybe even gifting trust. World
25:25
Speaker 6: thinking about things like. That If i'm somewhere between the
25:28
Speaker 6: three and five million dollar, range you, know which there's
25:31
Speaker 6: a lot more of those. People, well Now i'm, thinking you,
25:33
Speaker 6: know based on my, age what kind of planning revocable or,
25:36
Speaker 6: irrevocable but more of a basic estate. Planning you, know
25:39
Speaker 6: DO i have minor? Children DO i have? Children DO
25:43
Speaker 6: i have a family dynamic? Problem AM i a second?
25:45
Speaker 6: Marriage so those are all things you need to think,
25:48
Speaker 6: about you, know in terms of the, planning especially second marriage.
25:52
Speaker 6: Folks if you're a second marriage or in a relationship
25:56
Speaker 6: and you're not, married you, know think about how you
25:59
Speaker 6: want to leave things and how you want to take
26:01
Speaker 6: care of each. Other so those are all basically items
26:05
Speaker 6: to put on a checklist when you're getting.
26:06
Speaker 2: Started talk With Todd lutsky from the law firm Of
26:10
Speaker 2: cushing And. Dolan, again we've got space on the phone
26:13
Speaker 2: lines at eight eight eight to zero five two two sixty.
26:17
Speaker 2: Three that is the number to call to Ask todd
26:19
Speaker 2: your estate planning questions live on air right now eight
26:25
Speaker 2: eight eight.
26:25
Speaker 4: To zero five two two six.
26:28
Speaker 2: Three we're gonna take a break, here but when we come,
26:30
Speaker 2: back we're gonna get right to your questions With todd.
26:34
Speaker 2: Again eight eight eight two zero five two two sixty
26:38
Speaker 2: three is the. Number quick break in your calls when we.
26:41
Speaker 4: Return Ask todd.
26:43
Speaker 1: With Todd lutsky Every wednesday at ten thirty only here
26:46
Speaker 1: on The Financial Exchange Radio. Network you're listening To Ask
26:52
Speaker 1: todd With Todd lutsky on The Financial Exchange Radio.
26:56
Speaker 4: Network talk With Todd.
27:06
Speaker 2: Lutsky, here still room on the phone lines for your
27:08
Speaker 2: estate planning questions at eight eight eight two zero five
27:13
Speaker 2: two two six. Three that number again is eight eight
27:16
Speaker 2: eight to zero five two two sixty, Three, Todd let's
27:21
Speaker 2: go with first caller, Here steven East. Bridgewater, steve what's
27:25
Speaker 2: your question For Todd, Lutsky.
27:28
Speaker 7: Hi, guys thanks for taking my. QUESTION i was wondering
27:31
Speaker 7: about the difference between The Social security number and A
27:34
Speaker 7: ei in number for a. Trust is there any advantages
27:39
Speaker 7: to using an ei in number over a Social.
27:43
Speaker 6: So it's not about, advantages it's about, Need. Okay so
27:47
Speaker 6: unfortunately it's a great question because people get. Confused even
27:50
Speaker 6: accountants can get confused by. This so you're still it
27:56
Speaker 6: could be a tax. Difference but let's start with social.
27:59
Speaker 6: Security if you're setting up a revocable, trust, okay revocable,
28:06
Speaker 6: trust that by the very nature of the fact that
28:09
Speaker 6: it's revocable means that it's a grant or trust for
28:14
Speaker 6: income tax, purposes and it means that you do not
28:18
Speaker 6: need a TAX id.
28:20
Speaker 4: Number.
28:21
Speaker 6: Okay you simply would take your brokerage, account your bank,
28:25
Speaker 6: account and let's say retitle it like to what call
28:28
Speaker 6: it the you, know The Steve Family trust or whatever
28:31
Speaker 6: you're calling. It that would be the name on the,
28:34
Speaker 6: account and you would use Your Social security, number and
28:38
Speaker 6: you would file no tax return for that. Trust everything
28:43
Speaker 6: is picked up on your ten. Forty, if on the other,
28:46
Speaker 6: hand you're doing like a medicaid irrevocable, trust or even
28:51
Speaker 6: a gifting type, trust an irrevocable gifting trust of sorts
28:56
Speaker 6: or espousal lifetime access, trust which is, irrevocable then generally
29:03
Speaker 6: we try to draft those or design those as grand or.
29:07
Speaker 6: Trusts but because they're irrevocable and oftentimes the donor and
29:12
Speaker 6: the trustee are different, people then you need to get
29:16
Speaker 6: a TAX id number and when you open up the
29:19
Speaker 6: account again might be called The Steve Family Irrevocable. Trust,
29:24
Speaker 6: well you can still retitle your bank account or your
29:28
Speaker 6: brokerage account into that that, trust but then you would
29:32
Speaker 6: use AN ei in number to set up that. Account
29:37
Speaker 6: why because now that trust will have to file its
29:41
Speaker 6: own income tax return under THAT ei in, number and
29:45
Speaker 6: that's a form ten forty. One but as you, said
29:48
Speaker 6: is one better than. Another, well in this, case as
29:51
Speaker 6: long as the irrevocable, trust even though using THE ei
29:55
Speaker 6: in number is a grand or, trust it means that
29:59
Speaker 6: you the don't Or steve, is are treated as the
30:03
Speaker 6: owner for income tax, purposes and therefore you're still going
30:07
Speaker 6: to pick up all of that income interest dividends. Rent
30:12
Speaker 6: if you put a rental property in, there you will
30:14
Speaker 6: pick up that income on your personal ten. Forty the
30:18
Speaker 6: only difference is the trust needs to file a ten
30:21
Speaker 6: forty one to pick up the, numbers but then it
30:24
Speaker 6: kicks out a letter to you with all those numbers
30:28
Speaker 6: on it saying it gets picked up on your return
30:32
Speaker 6: and the tax basic the tax at the trust level is,
30:35
Speaker 6: zero so it doesn't necessarily change the amount of taxes you're.
30:39
Speaker 6: Paying it just changes the way you file. It and
30:43
Speaker 6: you also file it because we want to respect the
30:45
Speaker 6: entity when it's irrevocable for nursing home purposes and the.
30:49
Speaker 6: Like so seemingly a simple, question but definitely long winded,
30:53
Speaker 6: answer but you needed to understand the difference between the.
30:57
Speaker 6: Two hope that helped. Folks that's part of. It when
31:00
Speaker 6: you're doing your, Planning that's what the guide is. About
31:03
Speaker 6: back to the. Basics one of the things in the
31:05
Speaker 6: guide is it helps you kick off your idea of
31:08
Speaker 6: getting an estate plan. Done but it talks about these.
31:11
Speaker 6: Things it talks about what to look, for like we talked,
31:14
Speaker 6: earlier age, value types of, assets family, dynamics and then
31:19
Speaker 6: it talks about basic documents, will, healthcare power of, attorney
31:23
Speaker 6: little things that you need to know. About then it
31:25
Speaker 6: talks about how an Irrevocable medicaid trust, works getting THE id,
31:29
Speaker 6: number setting up the, accounts what happens when you, die
31:33
Speaker 6: how it works when you're. Alive it's basically an estate
31:36
Speaker 6: planning engagement letter for a, client and all the assets
31:39
Speaker 6: are listed on. Here you could just put your assets
31:42
Speaker 6: in and see if this plan works for. You if it,
31:45
Speaker 6: doesn't at least it helps you get started in your
31:48
Speaker 6: estate planning. World back to the basics eight six six
31:52
Speaker 6: eight four eight five six nine nine Or Legal Exchange
31:56
Speaker 6: show dot com again eight six six four eight five
32:01
Speaker 6: six nine nine Or Legal Exchange show dot Com and
32:04
Speaker 6: for more information visit Our instagram. Page Cushing DOLAN.
32:08
Speaker 2: Pc todd got another one for you. Here let's go
32:11
Speaker 2: To shannon In Beltzer. Town, shannon you're on With Todd. Lotski, Hi,
32:18
Speaker 2: hello how can we?
32:20
Speaker 7: Help i'm just curious as how much all this would
32:25
Speaker 7: cost to.
32:25
Speaker 5: Start setting all this?
32:26
Speaker 6: Up so, again, well it's kind of hard to say
32:30
Speaker 6: BECAUSE i don't know what we're doing. RIGHT i work
32:33
Speaker 6: anyway on a flat, fee AND i HOPE i can
32:35
Speaker 6: tell you that when you go to other, attorneys try
32:39
Speaker 6: to make sure that at least you're gonna get a
32:41
Speaker 6: flat fee quoted for. You and at the end of
32:43
Speaker 6: our initial meeting for everybody, listening ONCE i know what we're,
32:47
Speaker 6: doing THEN i can give you that flat fee. Number,
32:50
Speaker 6: like you, know are we doing a, will a healthcare,
32:52
Speaker 6: proxy a power of? Attorney are we doing one revocable
32:55
Speaker 6: trust or? Two are we doing an irrevocable medicaid? Trust you?
32:58
Speaker 6: Know are we doing gifting? Trust, unfortunately all of those
33:01
Speaker 6: things result in a different. Cost SO i think the
33:05
Speaker 6: best thing to do is go, in get that free
33:08
Speaker 6: consultation and then get a flat, fee and then you'll
33:12
Speaker 6: have a good idea of not only what you, need
33:15
Speaker 6: but how much it. Costs SO i hope that helps a,
33:17
Speaker 6: little just a little hard to answer an open ended
33:19
Speaker 6: question like, That.
33:21
Speaker 4: Todd have one more for you. Here let's go To
33:23
Speaker 4: rick In. Foulmouth, rick what is your question For Tod? Lutsky,
33:28
Speaker 4: hey good, Morning, todd good.
33:29
Speaker 8: Morning two years ago you set up an irrevocable trust
33:33
Speaker 8: for my wife AND, i which is, Great, okay thank.
33:36
Speaker 8: YOU i have a high yield savings account that is
33:40
Speaker 8: in the, trust AND i withdraw the interest that it
33:46
Speaker 8: generates and use that as.
33:48
Speaker 4: Income so great.
33:49
Speaker 6: Questions so these are these irrevocable trusts that we've talked
33:52
Speaker 6: about a lot on the. Air, folks everyone that needs
33:55
Speaker 6: to understand how this works in case they have. It
33:57
Speaker 6: so in this, case the answer is emphatically. Yes so
34:01
Speaker 6: these are actually called Irrevocable medicaid income only. Trusts and
34:07
Speaker 6: so what that means is any interest dividends or let's
34:13
Speaker 6: just say you happen to have a rental, property you
34:15
Speaker 6: put it in their rent. Income, normally if you read,
34:19
Speaker 6: it it says income shall be paid to the donor
34:23
Speaker 6: or the donor. Spouse that's, You rick and your spouse
34:27
Speaker 6: if you're. Married so so, yes the income would come
34:31
Speaker 6: out to. You AND i know you don't even have
34:33
Speaker 6: to deal with the. Trustees so if this is something
34:36
Speaker 6: that you're saying going, forward you, Know i've got a
34:38
Speaker 6: high yield savings Or i've got an investment account in,
34:42
Speaker 6: there and you know, what it's time THAT i want
34:44
Speaker 6: to start living on that income to supplement My Social
34:48
Speaker 6: security or my pension or whatever else is coming. In
34:51
Speaker 6: CAN i do?
34:51
Speaker 1: That?
34:52
Speaker 6: Yes and the way you can do it is talk
34:54
Speaker 6: with your bank or talk with your financial brokerage house
34:59
Speaker 6: and and say please set up the account as an automatic.
35:03
Speaker 6: Transfer SO i want every month the income to be
35:08
Speaker 6: automatically distributed from the trust account to my personal bank,
35:14
Speaker 6: account which you should have bank accounts outside the, trust
35:18
Speaker 6: generally ones that receive your social, security your, pension things like.
35:22
Speaker 6: That just have it automatically, transferred you. Know that way
35:26
Speaker 6: you don't need to bother the, trustee who likely is not,
35:29
Speaker 6: you so you, would you, know you just it'll just automatically.
35:32
Speaker 6: Happen so hope that. Helps and and folks just expand
35:38
Speaker 6: on that a little, bit, right because we have a
35:39
Speaker 6: little bit of time. Left what IF i have a
35:42
Speaker 6: rental property AND i put it in one of these,
35:44
Speaker 6: trusts because there might be clients that have done that
35:47
Speaker 6: or individuals who have done. That, well the rent makes
35:51
Speaker 6: sure that's being deposited into the bank account in the
35:55
Speaker 6: name of the trust to receive the, rent and then that's,
35:59
Speaker 6: income right just because it, left just because it came
36:02
Speaker 6: in as, rent it retains its character as. Income and
36:06
Speaker 6: so then that particular bank account receiving the rent can
36:10
Speaker 6: also be set up as an automatic, transfer so the
36:14
Speaker 6: rent comes in and automatically hits your personal bank. ACCOUNT
36:19
Speaker 6: i say this because a lot of times people, say,
36:20
Speaker 6: oh it's a lot more complicated WHEN i have my
36:23
Speaker 6: rental property in the. Trust when you back up and
36:26
Speaker 6: think about, it it's really not because you're still making
36:29
Speaker 6: only one.
36:30
Speaker 3: Deposit.
36:31
Speaker 6: Right if you didn't have the, trust you'd collect the
36:33
Speaker 6: rent put it in your bank. Account now you collect
36:37
Speaker 6: the rent deposited into a trust bank. Account one, deposit one,
36:41
Speaker 6: transaction and it automatically hits your personal bank. Account so
36:46
Speaker 6: definitely a good idea great, question and a lot of
36:49
Speaker 6: control for you over these irrevocable.
36:51
Speaker 4: Trusts Mister, leutsky appreciate you joining us. Today, yeah always a.
36:55
Speaker 6: Pleasure thank.
36:56
Speaker 1: You this has been asked on on The Financial Exchange radio.
37:00
Speaker 1: Network Ask tod With Todd lutsky has been presented By
37:03
Speaker 1: cushing And, dolan Serving massachusetts And New england for more
37:06
Speaker 1: than thirty, years helping families with the state and tax,
37:08
Speaker 1: Planning medicaid, planning and probate. Law call eight hundred three
37:12
Speaker 1: nine three four thousand and one or Visit cushingdolan dot.
37:15
Speaker 1: Com the views expressed in this segment are solely those
37:17
Speaker 1: Of cushing And. Dolan Armstrong advisory does not provide any
37:20
Speaker 1: legal or tax. Advice please consult with your illegal or
37:22
Speaker 1: tax advisor on such. Matters cushing And armstrong do not
37:24
Speaker 1: endorse each other and are not.
37:25
Speaker 2: Affiliated still a bunch to come as we head towards
37:29
Speaker 2: the second hour of the, show we'll talk about the
37:31
Speaker 2: latest companies getting torched by THE ai. Trade we'll talk
37:36
Speaker 2: a little bit about the state of the. Dollar also
37:39
Speaker 2: credit card. Debt how much Do americans have?
37:42
Speaker 4: Now is that? Good is that? Bad does it matter at?
37:44
Speaker 2: All we've got all that coming, up plus a whole
37:48
Speaker 2: lot more as we get into our number. Two so
37:53
Speaker 2: make sure you stick around because we're just getting started.
37:56
Speaker 1: Here