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How long can the US economy keep holding strong? · The Financial Exchange Show

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1:04
Speaker 1: with Chuck Zada and Paul.
1:06
Speaker 3: Lane, Chuck, Paul, and Tucker with you today. And as
1:12
Speaker 3: we continue through a busy week, we continue.
1:15
Speaker 2: To get more and more economic data.
1:18
Speaker 3: We continue to see more and more companies reporting what
1:21
Speaker 3: they call earnings, and we're here to talk about that
1:25
Speaker 3: because that's our job. We're gonna start with a little
1:29
Speaker 3: bit of chatter about the CPI report yesterday, and overall,
1:35
Speaker 3: you look at the data that we saw, the headline
1:38
Speaker 3: number coming in at point three percent UH and the
1:42
Speaker 3: core number coming in at point two percent for the
1:46
Speaker 3: month of June, and you say, okay, like those are
1:50
Speaker 3: not not bad numbers. The headline number is higher than
1:54
Speaker 3: you'd like to see, obviously, if you're seeing you know,
1:56
Speaker 3: point three percent coming through. If you annualize that, you
1:59
Speaker 3: talk a little bit north of three and a half
2:01
Speaker 3: percent inflation on the core number. The unrounded one came
2:07
Speaker 3: out to zero point two to three percent, so getting
2:10
Speaker 3: annualized and you're looking at you know, about point about
2:13
Speaker 3: three percent annual inflation. So both of those a little
2:16
Speaker 3: bit hotter than you'd want to see, but certainly nowhere
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Speaker 3: near what we were seeing in the latter part of
2:23
Speaker 3: twenty twenty one. Through much of twenty two, when inflation
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Speaker 3: was running you know, four or five, six, seven, eight
2:28
Speaker 3: percent annually, it obviously was much hotter there. But we
2:31
Speaker 3: are starting to see signs, Paul, that inflation is making
2:36
Speaker 3: a rebound in some areas, and it surely looks like
2:41
Speaker 3: at least for the next few months, we are likely
2:44
Speaker 3: to see some higher inflation readings coming through that based
2:50
Speaker 3: on where it's showing up right now, at least, I
2:53
Speaker 3: think you can pretty conclusively say this is a tariff
2:56
Speaker 3: related phenomenon. It's it's not just random your thoughts.
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Speaker 4: It's interesting how the discussion on this has evolved because
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Speaker 4: Mike and I yesterday when we were breaking down the
3:08
Speaker 4: inflation report, we noted some of the items and we're
3:12
Speaker 4: gonna get into areas that are pretty pretty concentrated in
3:17
Speaker 4: terms of imports that furniture, clothing, kids, toys, these are
3:20
Speaker 4: things that often are important overseas. We did see pretty
3:24
Speaker 4: significant month over month upticks there, but our general sentiment
3:27
Speaker 4: was more jeez, this is perhaps one data point that
3:30
Speaker 4: points to that inflation could be getting hotter in these
3:33
Speaker 4: categories because of the impacts of terras. But with that
3:36
Speaker 4: same context that we usually have with these inflation reports, Hey,
3:39
Speaker 4: this is one month of data, and we need to
3:43
Speaker 4: see this persist over several months before we can attribute
3:46
Speaker 4: to be a trend.
3:48
Speaker 2: And that's sort of where I land.
3:49
Speaker 4: But it does seem like, just parsing through some of
3:52
Speaker 4: the pieces in our stack here, that the sentiment more
3:56
Speaker 4: And perhaps this is because the core data I believe
3:58
Speaker 4: came out later yesterday afternoon or some more inflammation death yeah,
4:03
Speaker 4: the median, yes, and perhaps that was the reason for
4:07
Speaker 4: the shift. It does seem that the sentiment more today.
4:10
Speaker 4: Is Okay, these this report that we just saw is
4:14
Speaker 4: you know, proof that there are indications that the tariff
4:17
Speaker 4: impact is coming through. I'm not arguing one way or another,
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Speaker 4: but it does seem like that's kind of the point
4:23
Speaker 4: of us being here. Well, okay, I will argue that, Hey,
4:26
Speaker 4: let's see it. Let's see it a couple more months
4:29
Speaker 4: before I'm willing to jump this far. There are a
4:32
Speaker 4: lot of factors that you could add to your case
4:35
Speaker 4: if you're saying that, hey, tariffs were announced in April.
4:38
Speaker 4: There has been a lot of back and forth on
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Speaker 4: how they take effect. But I believe it's according to
4:44
Speaker 4: the Yelle Budget Lab that the average effective tariff rate
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Speaker 4: that Americans are facing is about twenty percent today. That's
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Speaker 4: the highest since that we've seen since ninety ten. And
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Speaker 4: we've talked about that it's going to take some time
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Speaker 4: for the impact to be felt. Often we were saying
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Speaker 4: that perhaps it wouldn't be as early as the fall
5:01
Speaker 4: or late summer, and this could be indications this report
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Speaker 4: that we are seeing it, But to me, because it's
5:08
Speaker 4: been taking a little bit longer for it to show fruition,
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Speaker 4: I would like to see another inflationary report that has
5:15
Speaker 4: similar similar characteristics to to this one before I'm ready
5:19
Speaker 4: to make the leap on the full impact of terror.
5:23
Speaker 3: I think the big thing and the reason why I
5:25
Speaker 3: tend to think that we're starting to see it showing
5:27
Speaker 3: up is normally when we say, okay, we saw something
5:31
Speaker 3: in the data once, let's see if you know this continues,
5:35
Speaker 3: it's normally because there isn't some bright line dividing, you know,
5:40
Speaker 3: mark where you say something clearly changed before or after this. So,
5:44
Speaker 3: as an example, a few weeks ago, we started seeing
5:48
Speaker 3: weekly unemployment claims moving up, and we said at the time, look,
5:53
Speaker 3: this is something we've seen each of the last two years.
5:56
Speaker 3: We're gonna see like here are the levels that we
5:58
Speaker 3: want to see because basically, if it goes to those
6:00
Speaker 3: levels but doesn't exceed them, this is very similar to
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Speaker 3: the last couple of years in terms of it's probably
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Speaker 3: a bad seasonal adjustment that's been happening around this time
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Speaker 3: of year, and so we.
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Speaker 2: Need to see more data.
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Speaker 3: And sure enough, what we've seen the last three to
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Speaker 3: four weeks, unemployment claims at least you know, thus far
6:17
Speaker 3: have peaked, they've rolled over, and they're basically behaving the
6:21
Speaker 3: exact same way they did the last couple of years,
6:22
Speaker 3: which is why we say, yeah, let's see how a
6:24
Speaker 3: couple more of these play out, because there's a pretty
6:27
Speaker 3: good chance we know what's happening here. Another example is
6:32
Speaker 3: when unemployment was rising heading into last fall, you know,
6:36
Speaker 3: we said, okay, we've seen a couple months of rising
6:38
Speaker 3: unemployment here, we need to see more than that, because
6:41
Speaker 3: it wasn't clear that there was anything that happened last
6:44
Speaker 3: you know, May June July that would necessarily trigger a
6:48
Speaker 3: rise in unemployment. And sure enough, unemployment peaked and it
6:52
Speaker 3: was a non factor. The difference here is we have
6:55
Speaker 3: a clear policy change that said, hey, prices on imported
7:00
Speaker 3: goods for well, everything are going to move up. The
7:05
Speaker 3: amount will vary based on you know, autos or tariff
7:07
Speaker 3: high but everything else has this blanket ten percent that's
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Speaker 3: in there, and so you are going to see higher
7:14
Speaker 3: prices coming through.
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Speaker 2: And so I think, in my opinion, when I.
7:18
Speaker 3: Actually start to see higher prices here, I say, okay,
7:21
Speaker 3: like we already do have two data points. Really we
7:23
Speaker 3: have the imposition of tariffs, which is a clear cause,
7:28
Speaker 3: and now we have you know, these prices starting to
7:30
Speaker 3: move up. I think the interesting question to ask on
7:34
Speaker 3: this is, hey, how long do these prices move up
7:38
Speaker 3: and what's the continued magnitude of them Because just as
7:41
Speaker 3: an example, prices for linens, which I gotta tell you guys,
7:46
Speaker 3: I'm buying the linens left and right these days. Pilin
7:50
Speaker 3: the tariffs are killing me. The way these linens are
7:52
Speaker 3: going up in price. It's five point five percent for
7:55
Speaker 3: the month of June. I can't buy any more linens.
8:00
Speaker 3: I'm out. Five and a half percent for the month
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Speaker 3: of June. Is what we saw for linen inflation. You're
8:07
Speaker 3: not going to see five and a half percent on
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Speaker 3: linens each like the next six months like that.
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Speaker 2: That's not what you are going.
8:13
Speaker 3: To see because clearly, if you're imposing you know, a
8:17
Speaker 3: ten percent tariff on you know, imports from Thailand as
8:22
Speaker 3: an example, or Vietnam. Okay, Linen's prices aren't going to
8:26
Speaker 3: rise by more than the tariff, all else being equal.
8:31
Speaker 3: So you look at that and you say, okay, like
8:32
Speaker 3: that's probably going to start to taper off a little bit.
8:35
Speaker 3: But sporting equipment prices were up one point eight percent,
8:38
Speaker 3: audio equipment was up two point nine there still is
8:41
Speaker 3: room for those to continue to move, and so you say, okay,
8:45
Speaker 3: what are we going to see and how long does
8:46
Speaker 3: that continue there? This all gets compounded by the fact
8:51
Speaker 3: that we've had over the last couple of weeks now
8:54
Speaker 3: the different letters going out about the tariffs that are
8:57
Speaker 3: going to begin on August first, which again, if you
9:01
Speaker 3: look at you know, where audio equipment is imported from,
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Speaker 3: most of it's Southeast Asia, Japan, Vietnam, Thailand, like that's
9:10
Speaker 3: where you know a lot of it comes from South Korea.
9:13
Speaker 3: And so you sit there and say, okay, if the
9:15
Speaker 3: terif right on imports from those countries is going from
9:19
Speaker 3: ten percent up to anywhere from twenty to twenty five percent.
9:23
Speaker 3: Do we then see a second wave of price increases
9:27
Speaker 3: that has to end up happening as we get to
9:29
Speaker 3: later this year, and then what does that potentially do.
9:33
Speaker 3: The way this potentially becomes sticky is hey, once it
9:37
Speaker 3: broadens beyond just you know, people buying those those goods
9:40
Speaker 3: and instead it's well, you know what, I was starting
9:43
Speaker 3: a restaurant and the price of cook wears up, so
9:46
Speaker 3: now I got to raise my menu prices because pans
9:48
Speaker 3: are more expensive. Does this seep into CPI services as
9:53
Speaker 3: well and broaden out there? And then do people just say, well,
9:57
Speaker 3: we expect the cost of things are going to go up,
9:59
Speaker 3: and so it gets embedded in expectations and this becomes
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Speaker 3: a thing. I don't know if that's where we go.
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Speaker 3: There's a case to be made that tariffs could be
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Speaker 3: a one time price adjustment and we get through the
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Speaker 3: next six months or so and that's all we see.
10:14
Speaker 3: I'm open to that as an idea. Sure, I'm also
10:17
Speaker 3: open to the fact that they could become stickier and potentially,
10:21
Speaker 3: you know, become more problematic, and we're gonna have to
10:23
Speaker 3: see what the data shows over the next six months
10:26
Speaker 3: or so.
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Speaker 2: But I do think I.
10:29
Speaker 3: Suspect that at least the next few months, we're gonna
10:32
Speaker 3: see some hotter inflation readings that start to come through,
10:35
Speaker 3: not you know, eight percent nine percent annualized, But do
10:40
Speaker 3: we see CPI take up from you know, the mid
10:43
Speaker 3: two is where it's been into the mid threes.
10:46
Speaker 2: I think that's a possibility.
10:49
Speaker 4: Can't rule it out.
10:50
Speaker 3: I know that's not you know, as dramatic as saying
10:52
Speaker 3: nothing's wrong or everything's wrong, But sometimes things are just
10:55
Speaker 3: a little wrong, and we'll have to see how it goes.
10:57
Speaker 2: Let's take a quick break.
10:59
Speaker 3: When we come back, we will touch on this piece
11:02
Speaker 3: from the New York Times. Despite dire warnings, the economy
11:05
Speaker 3: is holding up. Kenneth's last talk about that.
11:08
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12:14
Speaker 3: Piece here in the New York Times despite dire warnings,
12:16
Speaker 3: the economy is holding up?
12:18
Speaker 2: Can that last?
12:19
Speaker 3: And the piece kind of goes through, you know, a
12:21
Speaker 3: bunch of different data and says, well, we're not sure.
12:24
Speaker 3: There are some signs that tear related inflation may be
12:27
Speaker 3: starting to show up. There some signs that the labor
12:30
Speaker 3: market is a little bit weaker. And ultimately, I'm gonna
12:34
Speaker 3: put a ticking clock on this, just like we did
12:35
Speaker 3: with the idea of a soft landing, like you can't
12:38
Speaker 3: be watching to see if the soft landing breaks down,
12:40
Speaker 3: you know, until twenty forty, we basically said, look if
12:43
Speaker 3: unemployment and inflation haven't you know, gone up meaningfully by
12:46
Speaker 3: the end of last year, the FED can take a
12:48
Speaker 3: victory lap on the soft landing, and I think that
12:51
Speaker 3: stands up likewise, Hey, if you don't see either any
12:57
Speaker 3: kind of large scale layoff recession, economic weakness, or any
13:03
Speaker 3: huge jump in prices by the end of this year,
13:07
Speaker 3: I think you can put the whole tariff thing to
13:09
Speaker 3: bed as well. So I think there's a ticking clock
13:10
Speaker 3: where yeah, there's still some questions as to what the
13:13
Speaker 3: tariff impact is going to be, but I think if
13:17
Speaker 3: they haven't been answered negatively by the end of this year,
13:22
Speaker 3: it's not tariffs that are causing whatever's happening, right.
13:24
Speaker 4: They mentioned this piece here. Goldman Sachs did the study
13:27
Speaker 4: last week that initially it was they indicated that consumers
13:31
Speaker 4: were picking up ten percent of the tariff related increases
13:35
Speaker 4: on prices. Now they're seeing that at forty percent within
13:40
Speaker 4: that three month sort of period that we've had tariffs
13:43
Speaker 4: in place for not.
13:44
Speaker 2: Forty percent price increases, but.
13:48
Speaker 4: Absorbing the percentage of the cost yees. So important distinction
13:51
Speaker 4: to make. But really what we've seen here is the
13:54
Speaker 4: feedback from retailers anecdotally is this significant reluctance to to
13:59
Speaker 4: raise prices. And so to further your point on this
14:01
Speaker 4: idea that Okay, let's set sort of a deadline for this.
14:04
Speaker 4: We can't just sit here in October and November and
14:08
Speaker 4: if we don't have an uptick in inflation, don't have
14:10
Speaker 4: a slow down in economic growth or earunemployment and say
14:14
Speaker 4: we're still still waiting Chuck, you know, a couple more months.
14:17
Speaker 4: You can't do that. You can't do that anymore. You
14:18
Speaker 4: have to because then heck, at that point will be
14:22
Speaker 4: over six to eight months into sort of tears being
14:25
Speaker 4: in place. There has to be sort of a conclusive
14:28
Speaker 4: point that you can finally draw from this, and that's
14:31
Speaker 4: really where we sat initially. A lot of the feedback
14:34
Speaker 4: was negative consumer confidence after all the initial announcements, a
14:38
Speaker 4: lot of uncertainty from businesses. Now over the course of
14:43
Speaker 4: the next couple months, August first, I guess, being the
14:45
Speaker 4: next deadline that we're going to keep our eyes on.
14:47
Speaker 4: There should be an end to what the policies are
14:52
Speaker 4: going to look like. And then by the fall into
14:54
Speaker 4: the winter, we're gonna know how America has sort of
14:58
Speaker 4: digested all of the impact act from tariffs. And to
15:01
Speaker 4: this point, though we talked earlier in the show about
15:04
Speaker 4: the impacts of the inflation report we just saw it
15:07
Speaker 4: has been inconclusive, and so that is the question for
15:11
Speaker 4: the next call it two to three months, is is
15:14
Speaker 4: it muted and this just passes through and we're onto
15:17
Speaker 4: focusing about the next concern with the economy or is
15:20
Speaker 4: this something that will we'll sel things down that's what
15:22
Speaker 4: we need to follow.
15:23
Speaker 3: Yeah, it's it's something where the effects are going to
15:27
Speaker 3: show up somewhere. It's just a question of are they
15:30
Speaker 3: big enough to matter and can the market and can
15:36
Speaker 3: companies look through them. So as an example, you had
15:40
Speaker 3: to think, again, you're running at this point, it's about
15:43
Speaker 3: a three hundred to four hundred billion dollar annual run
15:46
Speaker 3: rate for tariff collection. That's what we saw from the
15:49
Speaker 3: latest data for June. And so if you look at that,
15:52
Speaker 3: you say, okay, so this is an additional cost that's being.
15:55
Speaker 2: Paid by US importers.
15:58
Speaker 3: If they can absorb of that and just say okay,
16:01
Speaker 3: our margins are going to be not great for now,
16:04
Speaker 3: but you know, we'll figure out how to deal with this.
16:07
Speaker 3: Maybe the market can end up looking through that. And
16:08
Speaker 3: that margin compression is you know, a one time thing
16:11
Speaker 3: and it goes away, or maybe consumers, as you mentioned, hey,
16:15
Speaker 3: they're paying some of this and they don't really like it.
16:17
Speaker 3: But all that happens is they spend less on air travel,
16:20
Speaker 3: which is what we're seeing, and maybe they buy a
16:22
Speaker 3: little bit less. But you know, you end up kind
16:25
Speaker 3: of weaseling your way through. If you see, you know,
16:30
Speaker 3: bigger changes start to happen in the coming months, then
16:34
Speaker 3: you kind of say, okay, this was you know, too
16:36
Speaker 3: big to absorb, and now you're kind of seeing you know,
16:39
Speaker 3: the economy falter as a result of that. But again,
16:43
Speaker 3: if you look at the data that we have, which
16:45
Speaker 3: is you know, largely through Q two at this point,
16:48
Speaker 3: there are still a few things that we're missing. We're
16:49
Speaker 3: gonna get some retail sales data that comes out later
16:52
Speaker 3: this week. We're still waiting on you know, some some
16:55
Speaker 3: late housing data and stuff like that. But I think
16:57
Speaker 3: we have a pretty good picture of what Q two
16:59
Speaker 3: looks like right now. And the Atlanta Fed runs their
17:03
Speaker 3: GDP now now cast of Q of GDP growth and
17:07
Speaker 3: they've got Q two GDP growth running at two point
17:09
Speaker 3: six percent at the moment, which is fine. It's not
17:15
Speaker 3: great given Hey, you had a decline in Q one,
17:18
Speaker 3: and so if you'll get the first half is kind
17:19
Speaker 3: of one chunk based on you know the fact that
17:22
Speaker 3: imports and exports were really skewed across those couple of quarters,
17:26
Speaker 3: you say, okay, so GDP growth ends up running somewhere
17:29
Speaker 3: around like one to one and a half percent. It's
17:32
Speaker 3: not great, but it's it's also something where we've had
17:35
Speaker 3: plenty of you know, halves of years where that happens,
17:38
Speaker 3: and you just kind of muddle through when you're on
17:39
Speaker 3: to the next one and you go from there. So
17:43
Speaker 3: I think overall, the take that I have right now
17:46
Speaker 3: on the US economy is, yeah, there are definitely some
17:49
Speaker 3: areas to be concerned about housing in the labor market,
17:51
Speaker 3: I think are the two biggest ones. But to this
17:54
Speaker 3: point there hasn't been a breakdown in either of them.
17:56
Speaker 3: They've just kind of slowed and aren't great, but are
18:00
Speaker 3: hanging out there and you know, chopping around doing their thing.
18:05
Speaker 3: There is the potential that things accelerate and things get
18:08
Speaker 3: better in the second half. I think you could make
18:10
Speaker 3: a case for that, given the potential for you know,
18:13
Speaker 3: increased business investment, if tariffs become a little bit more certain,
18:17
Speaker 3: some of the changes to fixed investment in the way
18:21
Speaker 3: it's treated from a tax perspective in the reconciliation package
18:25
Speaker 3: that happened. You know that has some potentially positive influence
18:28
Speaker 3: on construction in the US. There's also the case that
18:31
Speaker 3: things could get worse if the tariff impact is just
18:34
Speaker 3: really delayed and now it starts to show up in
18:36
Speaker 3: Q three, you could see a meaningful worstening. But by
18:41
Speaker 3: the end of this year, we're gonna put this question
18:43
Speaker 3: to bed one way or another, Like we're not gonna
18:45
Speaker 3: be talking at the end of this year, Hey, are
18:48
Speaker 3: tariffs causing an impact or not. We're going to have
18:51
Speaker 3: enough data to be able to say yes they did
18:53
Speaker 3: or no they didn't, and then we can move on.
18:57
Speaker 4: Yeah, you had mentioned the parallels earlier to last fall
18:59
Speaker 4: and labor market. The sam rule was something that we
19:02
Speaker 4: talked about on the show, the idea that if you
19:04
Speaker 4: were to see a half percent increase in unemployment over
19:07
Speaker 4: a trailing three month period, that could indicate that the
19:10
Speaker 4: labor market's slowing down. And what I learned from that
19:12
Speaker 4: is just the point that you're making earlier, is that
19:14
Speaker 4: just because you have a data trend, you have to
19:17
Speaker 4: see it sort of really fall through. And that's what
19:20
Speaker 4: the next three months or four months are about, is
19:22
Speaker 4: seeing if we continue to see continued impact.
19:25
Speaker 2: We're going to take a quick little break through right now.
19:28
Speaker 2: But when we come.
19:29
Speaker 3: Back, we got Wall Street Watch, and then Toddlatsky from
19:32
Speaker 3: Cushing and Cushing and Dolan joins us after this.
19:41
Speaker 1: Like us on Facebook and follow us on Twitter at
19:44
Speaker 1: TFE show. Breaking business news is always first right here
19:48
Speaker 1: on the Financial Exchange Radio Network. Time now for Wall
19:54
Speaker 1: Street Watch a complete look at what's moving market so
19:57
Speaker 1: far today right here on the Financial Exchange Radio Network.
20:01
Speaker 5: Well earning season continues to chug along with more banks
20:05
Speaker 5: reporting this morning. In addition to Johnston Johnson, Wall Street's
20:08
Speaker 5: also reacting to the Producer Price Index, where producer prices
20:12
Speaker 5: rose two point three percent annually, softer than forecasts of
20:17
Speaker 5: two point five percent. Markets are mostly quiet at the moment.
20:21
Speaker 5: Dow is up by a tenth of one percent, or
20:23
Speaker 5: sixty seven points, SMP five hundred is up by only
20:28
Speaker 5: four points, and the Nasdaq is up merely ten points.
20:31
Speaker 5: Rustle two thousand is up over half a percent, or
20:33
Speaker 5: twelve points. Ten year treasure yield is down by four
20:36
Speaker 5: basis points today a four point four to four percent,
20:40
Speaker 5: and crude oil is off one percent today, trading at
20:44
Speaker 5: sixty five dollars in eighty cents a barrel. Bank of
20:47
Speaker 5: America shares down by over half a percent after it
20:50
Speaker 5: posted higher than expected earnings while it's revenue fell short
20:53
Speaker 5: of forecasts. Morgan Stanley beats second quarter earnings and revenue estimates, however,
20:58
Speaker 5: that stock is pulling back over two percent, and Goldman
21:01
Speaker 5: Sach stock is down nearly one percent, despite the bank
21:05
Speaker 5: reporting a stronger than expected quarterly profit driven by a
21:09
Speaker 5: pickup in deal making and surging trading outside of banks.
21:13
Speaker 5: Johnson and Johnson beat second quarter earning xen revenue forecast,
21:17
Speaker 5: where the pharmaceutical giant also raised its full year guidance
21:20
Speaker 5: for several metrics. That stock now up over four percent. Meanwhile,
21:25
Speaker 5: ASML warned it may see no growth in twenty twenty
21:28
Speaker 5: six due to increasing uncertainty from tariffs, sending shares in
21:32
Speaker 5: the semiconductor maker down by ten percent. And tomorrow morning,
21:37
Speaker 5: ahead of the opening bell, we'll see second quarter results
21:40
Speaker 5: from Taiwan Semiconductor, ge Aerospace, Novardes, Abbott Labs, and Pepsi.
21:47
Speaker 5: I'm Tucker Silva and that is Wall Street Watch.
21:51
Speaker 1: This is Asked Todd on the Financial Exchange Radio Network.
21:55
Speaker 1: If you have an existing estate plan or in the
21:57
Speaker 1: market for one, Tod Letsky is here to answer your
22:00
Speaker 1: questions and help you plan for a later life. Ask
22:02
Speaker 1: Todd is presented by Cushing and Dolan, serving Massachusetts and
22:06
Speaker 1: New England for more than thirty five years, helping families
22:09
Speaker 1: with a state and tax planning, Medicaid planning, and probate law.
22:12
Speaker 1: Visit Cushingdolan dot com. Now here's Todd Lutsky.
22:18
Speaker 3: And we are now joined by Todd Lotski from the
22:21
Speaker 3: law firm of Cushing and Dolan. We got the phone
22:24
Speaker 3: lines open because the segment is Ask Todd, where you
22:27
Speaker 3: get to ask Todd your estate planning questions live on air.
22:31
Speaker 2: Right now. Eight eight eight.
22:33
Speaker 3: Two zero five two two sixty three is the number.
22:36
Speaker 3: We do have limited space on the phone. In fact,
22:39
Speaker 3: we got someone calling right now, so if you got
22:42
Speaker 3: a question for Todd, get in line by calling eight
22:45
Speaker 3: eight eight to zero five two two sixty three so
22:48
Speaker 3: we can get to your estate planning questions. That number
22:52
Speaker 3: again is eight eight eight to zero five two two
22:56
Speaker 3: six three. Mister Lootsky, How are you doing today?
23:00
Speaker 6: I'm good. I'm afraid to ask you though.
23:03
Speaker 2: I'm doing great.
23:03
Speaker 3: Actually, I finally got I got a new side hustle.
23:08
Speaker 6: Oh yeah, side gig.
23:09
Speaker 3: I'm getting paid to do a sleep study. Oh yeah,
23:12
Speaker 3: it's actually my dream job, I would think. So, yeah,
23:15
Speaker 3: that's pretty good, Todd. I want to talk a little
23:17
Speaker 3: bit about last minute medicaid situations or I guess qualifying
23:23
Speaker 3: for medicaid in kind of a last minute situation.
23:25
Speaker 6: Sure, I would.
23:26
Speaker 3: Say someone is heading into a nursing home. Is there
23:31
Speaker 3: anything that can be done in order to protect real
23:34
Speaker 3: estate assets in that type of emergency situation?
23:38
Speaker 7: So do you want to talk about any real estate
23:40
Speaker 7: or do you want to talk because there's different you know,
23:42
Speaker 7: vac on.
23:43
Speaker 3: My list here, I had primary, vacation, and rental, all
23:46
Speaker 3: with question marks after them.
23:48
Speaker 6: Okay, so should we pick one?
23:50
Speaker 2: Let's start with primary residence.
23:51
Speaker 7: So primary residence is the most important one. Most people
23:56
Speaker 7: have it, after all, and it's treated differently for a
24:00
Speaker 7: married couple versus single people. So quite frankly, for a
24:05
Speaker 7: married couple, if you have gotten sick and you're faced
24:08
Speaker 7: with one spouse going in the nursing home. As long
24:11
Speaker 7: as the healthy spouse is living in that home and
24:17
Speaker 7: it is the primary residence.
24:19
Speaker 6: Of the healthy spouse.
24:21
Speaker 7: And it is located in Massachusetts, then it is considered
24:26
Speaker 7: non countable period hard stop. You do not need to
24:31
Speaker 7: show it as an asset, and it is non leanable,
24:35
Speaker 7: meaning doesn't matter how long your spouse stays in the
24:38
Speaker 7: nursing home, when that spouse passes away, assuming of course
24:42
Speaker 7: they pass away, in order that there'll be no estate
24:46
Speaker 7: recovery for the state to get paid back. Now, you
24:52
Speaker 7: don't want to leave the house that way. So if
24:53
Speaker 7: that was the only asset and you got eligible for
24:55
Speaker 7: medicaid after making that the house was probably own joint right,
25:00
Speaker 7: don't leave it that way because if you die out
25:03
Speaker 7: of order, then that jointly held house would end up
25:06
Speaker 7: in the hands of these six spouse who's in the
25:08
Speaker 7: nursing home. And that's different. So we don't love that.
25:11
Speaker 7: So change it, put it in the healthy spouse's name
25:14
Speaker 7: on their own, and then of course do planning for
25:17
Speaker 7: the healthy spouse after eligibility. I promised you that we
25:21
Speaker 7: talk about it also for a single person. If you're single,
25:25
Speaker 7: it's a little different. Primary residents located in Massachusetts, and
25:29
Speaker 7: you had been living there before you went to the
25:30
Speaker 7: nursing home, and you went directly to the nursing home
25:33
Speaker 7: from the house, then you need to check a box.
25:38
Speaker 7: Believe it or not, that the house is someplace you
25:40
Speaker 7: intend to return home to, even though you may never
25:44
Speaker 7: be able to do. That doesn't matter. It's a subjective intent.
25:49
Speaker 7: Then it would be non countable, provided, however, that it
25:53
Speaker 7: is not exceeding this dollar amount, which by the way,
25:56
Speaker 7: is changing under the new BBB Act, but for now
26:01
Speaker 7: it's approximately one million, thirty three thousand dollars in Massachusetts,
26:07
Speaker 7: and it seems to be index for inflation. If it
26:11
Speaker 7: exceeds that value, then you're denied Medicaid hard stop. If
26:15
Speaker 7: it doesn't, then you're gonna be non countable. So you
26:18
Speaker 7: can get on Medicaid, which is great, much lower rate,
26:22
Speaker 7: but it's leanable, so when you die there'll be a
26:25
Speaker 7: payback to the state, but at a much lower rate.
26:29
Speaker 6: So it's still a win better than right. In the
26:32
Speaker 6: big check.
26:33
Speaker 3: Talk with Todd Lotski from the law firm of Kushingan Dolan,
26:36
Speaker 3: we do still have room on the phone lines at
26:38
Speaker 3: eight eight eight to zero five two two sixty three.
26:41
Speaker 3: So if you've got questions about estate planning, this is
26:45
Speaker 3: your chance to ask them. That phone number again is
26:48
Speaker 3: eight eight eight to zero five two two six three.
26:53
Speaker 3: We're gonna take a quick break here, but when we
26:55
Speaker 3: come back, it's gonna be right to your questions with Todd.
26:58
Speaker 2: Again.
26:58
Speaker 3: We still have just a little bit of room, so
27:00
Speaker 3: get calling so you can ask Todd your questions. That
27:02
Speaker 3: number is eight eight eight to zero five two two
27:06
Speaker 3: six three. One more time, eight eight eight to zero
27:10
Speaker 3: five two two sixty three.
27:12
Speaker 1: Ask Todd with Todd Lutsky every Wednesday at ten thirty
27:16
Speaker 1: only here on the Financial Exchange Radio Network. You're listening
27:21
Speaker 1: to Ask Todd with Todd Lutsky on the Financial Exchange
27:25
Speaker 1: Radio Network.
27:36
Speaker 3: All right, let's get right to your questions with Todd Lotsky.
27:40
Speaker 3: First up, we got Gene in Medway.
27:42
Speaker 2: Gene. You're on with Todd.
27:44
Speaker 8: Hello, Thank you very much, Hi Todd, Hi jee. About
27:49
Speaker 8: ten years ago, you helped my husband and me set
27:52
Speaker 8: up two irrevocable trust We put our assets in those.
27:57
Speaker 8: My husband died in twenty twenty, and you helped me
28:02
Speaker 8: again to do the legal work required and my husband's
28:06
Speaker 8: trust then became remainders share. Yes, now we're selling the
28:12
Speaker 8: property in Virginia.
28:15
Speaker 6: Okay.
28:16
Speaker 8: It's been a rental for over forty years and we're
28:19
Speaker 8: now so we're selling it. My son is the trustee,
28:23
Speaker 8: so he's handling everything for me. We have a buyer,
28:27
Speaker 8: we have a settlement date. I had never changed the
28:31
Speaker 8: deed to read that the trust was a remainder share.
28:36
Speaker 8: Does that matter.
28:38
Speaker 7: It's not going to prevent the sale. Let's put it
28:41
Speaker 7: that way. It's not going to prevent the sale. But
28:43
Speaker 7: you know, it may or may not depending on the
28:46
Speaker 7: size of the estate, which I cannot answer without pulling
28:48
Speaker 7: your file and looking at it. It may or may
28:50
Speaker 7: not matter. Have you ever rented this property over the
28:53
Speaker 7: year since twenty twenty.
28:56
Speaker 8: It's still rented?
28:57
Speaker 6: Yes, okay, so.
28:58
Speaker 8: The rental contract ends at the July.
29:01
Speaker 2: Yeah, so you know it.
29:03
Speaker 7: It's probably not going to be an issue number one.
29:06
Speaker 7: It's just that you might want to just retitle it
29:09
Speaker 7: now to the remainder share and then dad it out
29:11
Speaker 7: of the remainder share or sell it, you know, from
29:14
Speaker 7: the remainder share, so you could deposit the money into
29:17
Speaker 7: the remainder share under a new tax ID number which
29:20
Speaker 7: if we opened up the remainder share, we would have
29:22
Speaker 7: got you that new tax ID number long ago, because
29:25
Speaker 7: you've probably been receiving the rent and depositing it in
29:28
Speaker 7: a bank account in that trust.
29:29
Speaker 6: Right, correct, Yeah, so you're probably.
29:31
Speaker 2: Doing everything right. You have to understand.
29:33
Speaker 7: Without the file in front of me, it sounds like
29:35
Speaker 7: you're doing it right and it's definitely going to be
29:38
Speaker 7: able to be sold. But you might want to just
29:40
Speaker 7: call in and just talk to me off air a
29:43
Speaker 7: little bit so I can have the details of exactly
29:46
Speaker 7: what you're doing in front of me. But it does
29:47
Speaker 7: sound like it'll be okay, all right, So I hope
29:50
Speaker 7: that helps a little and give us a ring. Thanks
29:53
Speaker 7: for that call, and I'm glad to see And folks,
29:55
Speaker 7: that does show you how flexible these trusts are. They
29:57
Speaker 7: live on and they work really well, but lots of
30:00
Speaker 7: times people don't have time to do planning and they're
30:04
Speaker 7: stuck with this last minute situation where they enter a
30:06
Speaker 7: nursing home. That's what this guide is about this month.
30:10
Speaker 7: It's all about taking care of assets last minute, whether
30:14
Speaker 7: it's a house that we talked about earlier with Chuck
30:16
Speaker 7: or a piece of rental property. Or a vacation home.
30:19
Speaker 7: They're treated differently life insurance four to oh one. K's
30:23
Speaker 7: bank accounts that are jointly held, whether a spouse or
30:26
Speaker 7: a non spouse, how are they treated versus investment accounts?
30:31
Speaker 7: All these answers are in the guide Last Minute countable
30:35
Speaker 7: non countable assets, and even how to avoid the five
30:38
Speaker 7: year waiting period for certain limited situations. My question, my
30:43
Speaker 7: comment to you, is just don't write the check.
30:46
Speaker 6: Folks.
30:47
Speaker 7: If you're faced with nursing home care, get this guide.
30:50
Speaker 7: Learn what you can do last minute to protect these
30:52
Speaker 7: assets before you write the check eight six six eight
30:57
Speaker 7: four eight five six or Legal Exchange Show dot com
31:02
Speaker 7: again eight six six eight four eight five six nine
31:06
Speaker 7: nine or Legal Exchange Show dot com and you can
31:09
Speaker 7: download the guide right there.
31:11
Speaker 3: Todd, we get another one here for you. Let's go
31:13
Speaker 3: to Eric in Springfield. Eric, what's your question for Tom Lunsky?
31:17
Speaker 9: Good morning, guys. My mother is going to be giving
31:20
Speaker 9: me my wife twenty thousand dollars to help pay I
31:23
Speaker 9: my son's school. Is she going to be on the
31:26
Speaker 9: hook if she goes in a nursing home for that
31:28
Speaker 9: five year look back?
31:31
Speaker 2: Yeah?
31:31
Speaker 6: Yeah.
31:32
Speaker 7: Anytime you make a gift. And this is what the
31:35
Speaker 7: rule really says, is any time you'd make a disqualifying
31:40
Speaker 7: transfer right now, What the heck is that a disqualifying
31:43
Speaker 7: transfer that creates a five year waiting period? Is anytime
31:47
Speaker 7: you take an asset like twenty grand that was available
31:53
Speaker 7: for the nursing home and put it somewhere where it's
31:56
Speaker 7: no longer available for the nursing home and not take
32:00
Speaker 7: back fair market value for what you gave away, you
32:05
Speaker 7: have a disqualifying transfer for five years. So, unfortunately the
32:08
Speaker 7: answer is yes, each and every time those gifts were made,
32:12
Speaker 7: they will be a five year waiting period associated with
32:15
Speaker 7: each gift. That does not mean that there's not last
32:18
Speaker 7: minute things we can do to fix that problem if
32:22
Speaker 7: you find her or she finds herself faced with nursing
32:25
Speaker 7: home care.
32:26
Speaker 6: So hopefully that that helped a little.
32:28
Speaker 3: Todd, I got another four you let's go to Dan
32:30
Speaker 3: in New Hampshire. Dan, you're on with Todd a Lutski.
32:35
Speaker 10: Thanks for taking the time, Todd. Todd, I've got a
32:39
Speaker 10: purchase going on of some property. It's going to be
32:42
Speaker 10: a cash deal. I currently have a revocable trust. Can
32:47
Speaker 10: that go into that revocable trust? Or is there a
32:49
Speaker 10: process and it's a revocable trust of like two thousand
32:53
Speaker 10: and eight.
32:53
Speaker 6: How is this property owned currently? Is it in your name?
32:59
Speaker 6: Is it in your knowing your wife's name?
33:03
Speaker 1: Oh?
33:03
Speaker 7: I see, so you're going to be buying the property.
33:05
Speaker 7: I'm sorry I missed that. Okay, So you're going to
33:07
Speaker 7: be buying the property. So you can do one of
33:10
Speaker 7: two things if you've set it up right. You can
33:13
Speaker 7: make the purchase that you can make the purchaser the
33:18
Speaker 7: revocable trust. Are you borrowing money to buy this? No,
33:23
Speaker 7: So you can make the purchaser on the p and
33:25
Speaker 7: s us trustee of the revocable trust. In that way,
33:29
Speaker 7: the deed from the seller will be deeded directly into
33:33
Speaker 7: the trust. Many people don't do this. Many people don't
33:36
Speaker 7: remember or think about it. That's just an option. If
33:39
Speaker 7: you've not done it that way, you can simply close
33:43
Speaker 7: the deal and get the deed in your own name
33:46
Speaker 7: and then go to your estate planning attorney and have
33:48
Speaker 7: another deed prepared transferring the property from you to the
33:53
Speaker 7: revocable trust, and then it will be in there. So
33:55
Speaker 7: it's either two steps or one step. But you are
33:58
Speaker 7: absolutely right. It belongs in your revocable trust for sure.
34:03
Speaker 3: Tod, I got one more for you here we got
34:05
Speaker 3: Philip on the Cape. Philip, what is your question for
34:09
Speaker 3: Todd Lutsky?
34:12
Speaker 11: Hi, Tod, I seven years ago you did an irrevocable
34:17
Speaker 11: trust for me for the properties, and I'm asking, now,
34:21
Speaker 11: can I swap one of the properties in Massachusetts for
34:25
Speaker 11: a property in Florida? And but it does it go
34:30
Speaker 11: in the irrevocable trust?
34:33
Speaker 7: So when you say swap, I don't. I don't understand that.
34:35
Speaker 7: Whates What does that mean?
34:36
Speaker 6: Swap?
34:37
Speaker 7: Are they are these properties already in the trust? Or
34:39
Speaker 7: are you buying selling and buying a new one?
34:42
Speaker 11: Selling and buying a new one?
34:43
Speaker 1: Oh?
34:43
Speaker 7: Okay, So the answer is going to be a quick yes,
34:46
Speaker 7: but let me explain it. So if it's in the
34:50
Speaker 7: trust already, which it is and I seven years ago,
34:53
Speaker 7: By the way, that's very important for all the listeners
34:55
Speaker 7: in general. Seven years ago means that these properties are
35:00
Speaker 7: beyond that five year waiting period that we just heard
35:03
Speaker 7: about when Eric asked the question. So these are already
35:08
Speaker 7: protected from the nursing home. So now the question is
35:11
Speaker 7: I want to sell my mass property and buy Florida property?
35:14
Speaker 6: Perfectly okay, So what.
35:15
Speaker 7: Will happen is you'll prepare a P and S, the
35:18
Speaker 7: trustee of the trust will sign it. Property will then
35:21
Speaker 7: go out of the trust to the buyer, and the
35:26
Speaker 7: buyer will cut a check to the trustee of the
35:29
Speaker 7: trust and deposit it in the trust bank account. Do
35:32
Speaker 7: not put it in your personal name even for one second.
35:37
Speaker 7: It needs to go directly into the irrevocable trust. Now
35:43
Speaker 7: the money's in the irrevocable trust that you're going to
35:45
Speaker 7: use I suspect to buy this new Florida property. So
35:49
Speaker 7: now out will go the money to the seller, and
35:54
Speaker 7: in will come the new property you're buying into the trust,
35:59
Speaker 7: again directly into the trust. If you do that transaction,
36:05
Speaker 7: there will be no resetting of the five year waiting
36:09
Speaker 7: period because remember, folks, nothing new went in. All we
36:14
Speaker 7: did was change what was in there from one investment
36:19
Speaker 7: to another. So now you continue to have all these
36:22
Speaker 7: assets fully protected from the nursing home. And since these
36:27
Speaker 7: trusts are grant or trust for income tax purposes, your
36:32
Speaker 7: capital gains tax liability is exactly the same as it
36:37
Speaker 7: would have been had you sold the property not in
36:41
Speaker 7: these trusts. Just to say in case, this is your
36:44
Speaker 7: primary residence. What I mean by that is, if it's
36:46
Speaker 7: your primary residence and you had used it for two
36:50
Speaker 7: of the last five years, you'll get your two fifty exclusion,
36:54
Speaker 7: or if you're married, your five hundred thousand dollars exclusion.
36:58
Speaker 7: So I hope that helps and answers the question for.
37:01
Speaker 2: You, mister Wutsky. As always, we appreciate you joining us today.
37:05
Speaker 6: Thanks so much, always pleasure.
37:07
Speaker 1: This has been asked Todd on the Financial Exchange Radio network.
37:11
Speaker 1: Ask Todd with Todd. Lutsky has been presented by Cushing
37:14
Speaker 1: and Dolan, serving Massachusetts and New England for more than
37:16
Speaker 1: thirty years, helping families with the state and tax planning,
37:19
Speaker 1: Medicaid planning, and probate law. Call eight hundred three nine
37:22
Speaker 1: three four thousand and one or visit Cushingdolan dot com.
37:26
Speaker 1: The views expressed in this segment are solely those of
37:28
Speaker 1: Cushing and Dolan. Armstrong Advisory does not provide any legal
37:31
Speaker 1: or tax advice. Please consult with your legal or tax
37:33
Speaker 1: advisor on such matters. Cushing and Armstrong do not endorse
37:35
Speaker 1: each other and are not affiliated