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Private Credit Cockroaches Are On The Loose · The Financial Exchange Show

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Speaker 1: Zada and Mike Armstraw.
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Speaker 2: Chuck Mike Tucker with you here Friday, getting ready to
1:18
Speaker 2: wrap up the week. And we've got markets rallying today
1:22
Speaker 2: on the back of strong earnings from Amazon, mostly the
1:25
Speaker 2: Dow Jones Industrial average up eighty nine points, not too much,
1:29
Speaker 2: but the S and P five hundreds up forty points
1:31
Speaker 2: about point six percent, the NASDAK composite up two hundred
1:36
Speaker 2: and seventy nine points almost one point two percent. We've
1:40
Speaker 2: got the ten year US Treasury down two tenths of
1:42
Speaker 2: a basis point to four point zho nine to one,
1:44
Speaker 2: so pretty boring in bond Land after a little bit
1:47
Speaker 2: of excitement the last couple of days there. We've got
1:50
Speaker 2: the Dollar index up point to two percent today, so
1:54
Speaker 2: dollar continuing to show a little bit of recent strength.
1:57
Speaker 2: And we've got gold up fifteen seventy and hours to
2:00
Speaker 2: four thirty one dollars and sixty cents.
2:04
Speaker 3: On the crude.
2:05
Speaker 2: Oil side of things, West Texas Intermediate up thirty six
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Speaker 2: cents a barrel to sixty dollars and ninety three cents
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Speaker 2: in the triple A national average for gas prices up
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Speaker 2: two tens of a cent to three oh four. Also
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Speaker 2: taking OI at mortgage rates. They continue to rise yesterday
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Speaker 2: up another six hundredths of a percent to six point
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Speaker 2: three to three percent. So we've gone from six point
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Speaker 2: one to three to six point three to three in
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Speaker 2: the last two days, almost a quarter percent higher. Have
2:31
Speaker 2: to imagine that will impact the market at the margins
2:35
Speaker 2: over the next week or so.
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Speaker 3: Will be interesting to see what we.
2:39
Speaker 2: Get in terms of mortgage applications, in particular refinancing had
2:42
Speaker 2: a little bit of a boomlet going on over the
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Speaker 2: last few weeks. Does this take some of the edge
2:47
Speaker 2: off that. We'll see what happens on that side of things.
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Speaker 2: Speaking of boomlet, this is the bad kind, not the
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Speaker 2: good kind. Black Rock the big old asset manager. They
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Speaker 2: have a private credit investing arm like most asset managers
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Speaker 2: now and apparently they are currently accusing a company by
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Speaker 2: the name of Broadband Telecom in Bridge Voice run by Bonquim,
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Speaker 2: Bombrot or Brombot sorry, of a five hundred million dollar fraud. Basically,
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Speaker 2: the long stories short on this.
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Speaker 3: Is when you see one cockroach, there's usually more than one.
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Speaker 2: Is well again, I just I always like to dig
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Speaker 2: in on the specific frauds because it's it's it's interesting
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Speaker 2: to me to see how the frauds are perpetrated, just
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Speaker 2: to know, like, oh gee, this is something I should
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Speaker 2: look out for in the future. So I'll quote here
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Speaker 2: from the Wall Street Journal.
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Speaker 3: This is a WSJ exclusive.
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Speaker 2: The dispute centers on a kind of debt deal known
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Speaker 2: as asset based finance, in which the bar or post
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Speaker 2: is collateral a stream of revenue generated by specified businesses, equipment,
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Speaker 2: or customer receivables. Okay, so in this case is a telecomsiness,
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Speaker 2: and so they borrow and the lender says, if you
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Speaker 2: default on this, I get the receivables coming in from
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Speaker 2: whoever it might be.
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Speaker 3: So basically.
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Speaker 2: This company that operated in the telecom space. Maybe it's
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Speaker 2: unclear if they actually did. To be completely honest, and
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Speaker 2: they but they.
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Speaker 3: R in a brand named Carryouts in addition to the
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Speaker 3: two names that we mentioned.
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Speaker 2: Yeah, so they effectively these loans were underwritten by a
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Speaker 2: company that Blackrock bought earlier this year called HPS, and
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Speaker 2: HPS hired Deloitte to audit the financials and verify that
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Speaker 2: the assets actually existed. They also hired an accounting firm,
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Speaker 2: CBIZ to conduct annual asset checks as well.
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Speaker 3: So again thinking about what the asset is here is important.
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Speaker 3: The asset is the customers who are pay this company money.
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Speaker 3: And so again because the asset that was loaned against
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Speaker 3: was the future revenues that these customers will pay. And
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Speaker 3: so what do you do when you do something like this, Well,
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Speaker 3: sometimes you hire a company to go drive down to
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Speaker 3: the building and make sure that it's in good shape.
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Speaker 3: If you are an insurance company, you might do that.
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Speaker 3: If you are a mortgage company, you might go do that.
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Speaker 3: If you're lending somebody money for a home. In this case,
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Speaker 3: you need to verify that the revenue that they are
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Speaker 3: claiming exists and that you are lending against actually does
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Speaker 3: in fact exist. The customers are there.
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Speaker 2: So what they were doing HPS was reportedly emailing the
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Speaker 2: customers saying, hey, like just making sure, can you like
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Speaker 2: give us proof of contract? Things along those lines, And
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Speaker 2: apparently the company that was doing this auditing in July
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Speaker 2: noticed irregularities with the email addresses and basically said, actually,
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Speaker 2: I don't.
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Speaker 3: Believe it was the auditor. It was HPS. Oh HPS, yes,
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Speaker 3: meaning the asset man themselves rather than the companies hire
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Speaker 3: to check.
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Speaker 2: Yes, So HPS goes to Brombot and says, hey, like,
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Speaker 2: these email addresses don't like seem to match up. What
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Speaker 2: gives He says, there's nothing to worry about, and then
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Speaker 2: stops answering their phone calls.
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Speaker 3: Which is just like, it's good to hear that it's
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Speaker 3: not just gen Z that ghosts people. Not great. I'll
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Speaker 3: quote here.
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Speaker 2: On Wednesday morning, Brombot's office suite was locked and appeared vacant,
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Speaker 2: and an employee and adjacent tennant said she hadn't seen
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Speaker 2: anyone enter or leave the office recently. At the Garden
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Speaker 2: City house listed at Brombots as Brombot's residents, two BMW's,
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Speaker 2: a Porsche of Tesla and Audi were parked in the driveway,
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Speaker 2: and a package next to the front door was collecting dust.
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Speaker 3: So is the are they alleging that he's gone?
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Speaker 2: The Wall Street Journal is basically making the case he
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Speaker 2: ain't been here in a while. And after the HPS
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Speaker 2: employee flagged these irregularities, a law firm started to investigate
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Speaker 2: eight you know, hey, show me like some of these borrowers,
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Speaker 2: and they found that these email addresses didn't match up
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Speaker 2: with actual public web domains that were out there and
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Speaker 2: one of the customers, a Belgian telecom called BICS, said, look,
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Speaker 2: we don't have anything to do with these emails, like
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Speaker 2: we've never seen these before. And a security staffer from
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Speaker 2: there said, this is indeed a confirmed fraud attempt.
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Speaker 3: Is it really this easy to borrow half a billion
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Speaker 3: dollars or a third of a billion or whatever he borrowed.
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Speaker 3: Here's the thing.
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Speaker 2: So the private credit space is one that has scared
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Speaker 2: me for the last couple of years.
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Speaker 3: And the reason about this this guy set up a business,
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Speaker 3: allegedly created a bunch of fake customers and borrowed hundreds
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Speaker 3: half a billion dollars of millions of dollars.
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Speaker 2: Half a billion dollars. There's been so much excitement for
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Speaker 2: people trying to raise money in this space that the
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Speaker 2: concern that I've had out there is just like, Okay,
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Speaker 2: there's just so much out there and you don't really
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Speaker 2: know what any of this is. It all just gets
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Speaker 2: lumped under like private credit, and you know the stuff
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Speaker 2: that you get pitched on. This stuff, it's like, well,
8:13
Speaker 2: it doesn't move around, so it takes volatility, and it's like, no,
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Speaker 2: just because something is privately held doesn't mean the value
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Speaker 2: doesn't change, it just doesn't get marked to market on
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Speaker 2: the same frequency as public markets.
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Speaker 3: It's more than that too, though, because what I have
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Speaker 3: consistently heard from the industry is we are better at
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Speaker 3: assessing the risk. We use different tools.
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Speaker 2: We know these companies, we get to know them, blah
8:37
Speaker 2: blah blah.
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Speaker 3: We use different tools. You know, we're able to track
8:42
Speaker 3: this stuff via online trends and really get to the
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Speaker 3: bottom of the lending. And in okay, I shouldn't paint
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Speaker 3: with a broadbrush in a few specific instances here that
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Speaker 3: is being alleged to be boloney. It's no longer a
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Speaker 3: few specific instances. It's three or four.
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Speaker 2: It's three in a four week period that are all
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Speaker 2: pretty grim and no one knows what else is out there.
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Speaker 3: Okay, So like this one we didn't know was here
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Speaker 3: until this story was published. Right And by the way,
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Speaker 3: you know, suits have been filed back in August, and
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Speaker 3: we're hearing about it now. Why should the average person
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Speaker 3: listening care? That's that's a really important thing, right, Like
9:31
Speaker 3: most people out there are not managing money for insurance companies. Therefore,
9:35
Speaker 3: the average person might not have heard about private credit
9:39
Speaker 3: before the last six months.
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Speaker 2: So there are three reasons why the average person should care.
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Speaker 2: In my mind, the first is, as you noted, insurance
9:48
Speaker 2: companies have been big buyers of private credit because they
9:51
Speaker 2: like the high yield that you get. Typically anywhere from
9:54
Speaker 2: like nine to fifteen percent is what you see out
9:57
Speaker 2: there at this point. And if you're an insurance company
9:59
Speaker 2: who's trying to keep your you know, premiums down to
10:02
Speaker 2: be competitive in the marketplace, you say, if I can
10:04
Speaker 2: just earn more on my general account, I don't have
10:07
Speaker 2: to charge my customers as much. And so the concern
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Speaker 2: out here is, hey, if more of this turns out
10:13
Speaker 2: to be bad than you would think, insurance companies may
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Speaker 2: be left saying, oh, we don't actually have the money
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Speaker 2: set aside that we thought we did.
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Speaker 3: Who else is out there? Endowments, pension funds.
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Speaker 2: Endowments, pension funds. The other thing, Quite a lot of
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Speaker 2: high net worth individuals have brought up a bunch of
10:29
Speaker 2: this stuff in the last you know, few years. Sure,
10:32
Speaker 2: if you're not a high net worth individual doesn't own
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Speaker 2: this stuff, like that's not really your concern, but like, yeah,
10:37
Speaker 2: you could be you know someone who is in that situation.
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Speaker 3: Uh.
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Speaker 2: The other place where this is potentially a concern for people.
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Speaker 2: Is the mechanism for all of this as a as
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Speaker 2: a as a way to generate economic growth is these
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Speaker 2: small to mid sized companies tap these private credit markets
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Speaker 2: in order to get access to funds, which grows the economy,
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Speaker 2: which causes these private credit firms to loan more money,
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Speaker 2: which grows the economy more. If the private credit firms
11:09
Speaker 2: suddenly say, gee, we need to you know, slow down
11:13
Speaker 2: or pause new issuance, it has an impact on the
11:16
Speaker 2: US economy because that money is not going in the
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Speaker 2: comparable in twenty two thousand and six, two thousand and seven, hey,
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Speaker 2: as you started to see subprime loans going under, companies
11:26
Speaker 2: pulled back from some prime lending, which then made it
11:29
Speaker 2: harder for real estate prices to move up, which in
11:32
Speaker 2: turn made more loans go under, which in turn ended
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Speaker 2: up blowing the whole thing up. This case, the problem,
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Speaker 2: like the center of this, if it develops into a problem,
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Speaker 2: would be small to mid sized companies in the US,
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Speaker 2: not housing.
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Speaker 3: Yep. And that's the point here is Okay, there's been
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Speaker 3: a few cases of fraud. Is it incredibly widespread? Is
11:53
Speaker 3: it all over the place? I don't no, one knows
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Speaker 3: quila's got any idea.
11:57
Speaker 2: Anyone who says like this is going to be this
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Speaker 2: or this is going to be that doesn't know right now.
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Speaker 3: But whether it's widespread or not, the logical thing to
12:07
Speaker 3: do if you're one of the companies that owns this
12:08
Speaker 3: stuff or is one of the ones originating the loans,
12:12
Speaker 3: is to scrutinize it a heck of a lot more
12:14
Speaker 3: than you did this time last year.
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Speaker 2: You finally start asking the question, hey, what's in my portfolio?
12:20
Speaker 2: And it's not just that it's that market for you know,
12:23
Speaker 2: packaging this and selling it off. The people buying it
12:26
Speaker 2: from you are now saying, hey, how do I know
12:29
Speaker 2: that you don't have some of this stuff in here?
12:32
Speaker 2: Can you securitize it and get it off your balance
12:34
Speaker 2: sheet quickly enough? That's, you know, a potential issue. And
12:38
Speaker 2: the third place where this potentially matters to people is
12:41
Speaker 2: in public markets. There are companies in the S and
12:43
Speaker 2: P five hundred where this is their main business model.
12:46
Speaker 2: And look at how heavily financials have traded over the
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Speaker 2: last month or two since this started coming out, even
12:52
Speaker 2: with the S and P five hundred making new all
12:54
Speaker 2: time highs, even with strong quarterly earnings from a lot
12:57
Speaker 2: of the big banks. Financials as a whole, in particular
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Speaker 2: the regional banks and the asset managers can't really get
13:03
Speaker 2: off the mat right now. So again, does this develop
13:07
Speaker 2: into a problem?
13:08
Speaker 3: Maybe maybe not.
13:10
Speaker 2: Like I'm not one to sit here and say like
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Speaker 2: it's going to be this or that. But since you know,
13:15
Speaker 2: early September I started saying, hey, something kind of smells here,
13:19
Speaker 2: the smell's grown. And now we're gonna find out in
13:21
Speaker 2: probably the next six to nine months, is there anything
13:24
Speaker 2: worse coming or not.
13:25
Speaker 3: There may be, there may not. We don't know right now.
13:28
Speaker 2: And that's about as much as anyone I think can
13:30
Speaker 2: conclusively say, because the people who do know, the people
13:33
Speaker 2: that actually own this stuff, they're not talking. They're trying
13:36
Speaker 2: to either get it off their books if it's not
13:39
Speaker 2: worth the paper it's printed on, or buy more of
13:41
Speaker 2: it if they think it's at a discount based on
13:43
Speaker 2: what they're seeing, right. But those people are not talking.
13:46
Speaker 2: Quick break here when we come back, we've got trivia
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Speaker 2: right after this.
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15:27
Speaker 4: for the Financial Exchange Show, Wall Street Journal piece Too
15:31
Speaker 4: much experience hurts you. In today's tough job market, the
15:35
Speaker 4: subatter overqualified job applicants are scaring off cost conscious businesses.
15:40
Speaker 3: Your thoughts, all, right, So we've got young college grads
15:45
Speaker 3: who can't get jobs. Yes, the twenty five to thirty
15:48
Speaker 3: five domb So the under experienced can't find jobs, and
15:51
Speaker 3: the over experienced can't find jobs. You have to we
15:54
Speaker 3: can find jobs goldilocks the experienced, so not too not
15:59
Speaker 3: too little.
15:59
Speaker 2: You've got to be forty one years old, interested in
16:04
Speaker 2: exploring what AI can do for your career.
16:07
Speaker 3: Yeah, and willing to take a small salary. But you
16:13
Speaker 3: also know how a copier works. Yeah, Okay, Like that's
16:17
Speaker 3: the ideal job Canada. I'm just wondering, like, can it
16:20
Speaker 3: really be all of these things at once? And I
16:22
Speaker 3: suppose it can. But we're what we're getting to is
16:25
Speaker 3: just describing a bad labor market, and the story is
16:30
Speaker 3: about who it's bad for. Are becoming less relevant. I
16:33
Speaker 3: guess broadly speaking, I think the answer is it's bad
16:36
Speaker 3: for white collar workers. Yeah, yeah, that that feel right
16:43
Speaker 3: to you, because I not just white.
16:44
Speaker 2: Call it like you talk about what's going on in
16:46
Speaker 2: housing and it, you know, talk to any anyone who
16:50
Speaker 2: works as a contractor. Yeah, and like I know people
16:53
Speaker 2: in you know, drywall and they're you know, they're like, yeah, like,
16:56
Speaker 2: you know, things are a little bit slow right now.
16:58
Speaker 2: You talk to your plumbers and they're like, yeah, there's
17:00
Speaker 2: more renovations, but you know, new constructions dried up a
17:03
Speaker 2: little bit, you know it.
17:05
Speaker 3: Talk to truckers.
17:06
Speaker 2: They'll tell you, look, I'm not as busy, like I'm
17:08
Speaker 2: not able to you know, stay as busy as I
17:10
Speaker 2: want to be. So here's the thing that's wild to
17:14
Speaker 2: me is like that you try to find like who
17:18
Speaker 2: says that, you know, their particular job is booming right now,
17:22
Speaker 2: and it's kind of hard to And yet the the
17:24
Speaker 2: overall economic data that we get is like, yeah, the
17:28
Speaker 2: economy is pretty good aside from the labor market.
17:30
Speaker 3: Do you remember in twenty thirteen and twenty fourteen when
17:35
Speaker 3: oil prices were around one hundred bucks a barrel and
17:37
Speaker 3: you could move to like North Dakota with no skills
17:41
Speaker 3: and get one hundred thousand dollars a year job.
17:43
Speaker 2: Not like you can move to like pipelines in Alaska
17:45
Speaker 2: and get like three hundred thousand dollars year jobs.
17:47
Speaker 3: I think we're gonna get there with data center construction.
17:49
Speaker 2: No, no, okay, just because I think you're just repurposing
17:56
Speaker 2: excess capacity from elsewhere.
17:58
Speaker 3: It's like the electricians. It's not the same.
18:00
Speaker 2: But if you are, you know, if you're one of
18:04
Speaker 2: the contractors that is putting that together, like the GC
18:06
Speaker 2: for a data center, you're going out to all your
18:09
Speaker 2: subs and you're saying, hey, give me your best bids
18:11
Speaker 2: in order to do this work. Yeah, and those subs, now,
18:14
Speaker 2: if you're in Texas, you know they're saying, okay, we're
18:17
Speaker 2: building you know, Stargate and Abilene. Hey, all the guys
18:21
Speaker 2: who were you know, working and doing electrical work for
18:23
Speaker 2: all the housing in austin the last few years, guys
18:25
Speaker 2: come down here for the year and help work on Stargate.
18:28
Speaker 3: Yeah. I just wonder, right, because there's it's going to
18:31
Speaker 3: be concentrated in a few areas, And that's the piece
18:34
Speaker 3: that reminds me of that period of time, because it's
18:36
Speaker 3: not going to be construction in the Northeast, and there's
18:38
Speaker 3: a bunch of people with those skills that are here
18:40
Speaker 3: in the Northeast, And so do you have that shift
18:42
Speaker 3: to say, yeah, I'm gonna go take a job out
18:44
Speaker 3: in Wisconsin. Maybe that's where all the construction is. I
18:47
Speaker 3: take your point there, you're probably not getting that same. Hey,
18:50
Speaker 3: I can move there and become a chef and make
18:52
Speaker 3: seventy five thousand dollars like you could in North But
18:54
Speaker 3: it's just wild to me.
18:55
Speaker 2: Like the economic data that we're getting, aside from the
18:59
Speaker 2: labor is still pretty darn good.
19:01
Speaker 3: It is.
19:02
Speaker 2: And yet you talk to people and they're like, yeah,
19:04
Speaker 2: my personal like my personal business is not Like, is
19:07
Speaker 2: not how I want to see it.
19:10
Speaker 3: I can't reconcile it.
19:11
Speaker 2: But it is the case like consumer spending, like all
19:14
Speaker 2: the banks are telling you consumer spending growth is.
19:17
Speaker 3: Still fine, and.
19:20
Speaker 2: It's it's just it's different from what we've seen before.
19:23
Speaker 2: It just is quick break. When we come back, we've
19:27
Speaker 2: got Wall Street watch the trivia answer, and then we're
19:30
Speaker 2: joined by Todd Lutsky from Cushing and Dolan.
19:39
Speaker 1: Bringing the latest financial news straight to your radio. Every day.
19:44
Speaker 1: It's the Financial Exchange on the Financial Exchange Radio Network.
19:50
Speaker 1: Time now for Wall Street watch a complete look at
19:53
Speaker 1: what's moving markets so far today right here on the
19:56
Speaker 1: Financial Exchange Radio Network.
19:58
Speaker 4: Market's currently in positive territory on the heels of more
20:02
Speaker 4: impressive big tech earnings from the likes of Amazon and Apple.
20:07
Speaker 4: Right now, the Dow is up about a tenth of
20:10
Speaker 4: a percent or seventy four points. Hire S and P
20:12
Speaker 4: five hundred, up over half a percent or thirty six points.
20:16
Speaker 4: NASDAC up two hundred and sixty points over one percent higher.
20:19
Speaker 4: Russell two thousand is up a half a percent. Tenure
20:22
Speaker 4: Treasure reeled flat at four point zero nine seven percent.
20:26
Speaker 4: Dan crude oil up two thirds of a percent, rating
20:29
Speaker 4: just below sixty one dollars a barrel. Amazon among the
20:33
Speaker 4: big winners on the day after the e commerce in
20:36
Speaker 4: web services Giant b third quarter earnings and revenue expectations,
20:40
Speaker 4: where revenue from AWS jumped twenty percent during the period.
20:45
Speaker 4: Amazon also reported aggressive plans to grow data data center
20:49
Speaker 4: capacity shares a rallying eleven percent. Meanwhile, Apple also b
20:54
Speaker 4: quarterly expectations, with the iPhone maker offered an optimistic forecast
20:58
Speaker 4: for the holiday quarter due to strong demand from customers
21:02
Speaker 4: seeking to upgrade to the iPhone seventeen. Applestock is currently
21:06
Speaker 4: dipping and Netflix announced a ten for one stock split
21:10
Speaker 4: to make it stock more affordable for its employees. Netflix
21:14
Speaker 4: shares are up nearly four percent. I'm Tucker Silva and
21:17
Speaker 4: that is Wall Street Watch and in the previous segment
21:19
Speaker 4: we ask the trivia question which famous Halloween movie features
21:22
Speaker 4: the line do you like scary movies? That would of
21:25
Speaker 4: course be scream. Jim from Teamsborough Mass is our winner
21:29
Speaker 4: today taking on the Financial Looks Shange Show t shirt.
21:31
Speaker 4: Congrats to Jim, and we play trivia every day here
21:34
Speaker 4: on the Financial Looks Change See complete contest rules at
21:37
Speaker 4: Financial Looks Change show dot com.
21:39
Speaker 3: Joining us now is Todd. Let'sket from the law firm
21:41
Speaker 3: of Cushing and Dolan talk to us a little bit
21:43
Speaker 3: today about gifting. Todd, thanks for joining us here on Halloween.
21:47
Speaker 5: Oh, thank you. Always scary to have me.
21:50
Speaker 3: On so Todd, there is some misunderstanding when it comes
21:54
Speaker 3: to gifting and gift taxes, and I wanted to ask
21:57
Speaker 3: you about that because I know that there's an amount
22:00
Speaker 3: you can give to somebody where you're under that gift
22:05
Speaker 3: tax limit, but what happens? I guess where is that limit?
22:09
Speaker 3: And what happens if I go over it?
22:11
Speaker 5: Yeah? Great question, And I know it's funny about gifting,
22:14
Speaker 5: And then we talk about scariness and Halloween is you
22:16
Speaker 5: think about gifting and taxes involved in it, and you
22:19
Speaker 5: wouldn't think that it would be the giver that has
22:21
Speaker 5: to pay the tax. But unfortunately, no good deed goes unpunished.
22:25
Speaker 5: I guess. So nineteen thousand dollars is the amount you
22:30
Speaker 5: can gift per person per year to anybody, and there
22:35
Speaker 5: is no filing required and no tax return, no tax
22:40
Speaker 5: is due. It's complete freebe Okay, got it. But a
22:43
Speaker 5: lot of people say, you know what, I got to
22:46
Speaker 5: get more out of my estate faster, and I know
22:48
Speaker 5: I can gift thirteen point nine million, right, So if
22:51
Speaker 5: I go over that number, there's another number you can
22:55
Speaker 5: look at. And so if I gave away one hundred
22:59
Speaker 5: and nineteen thousand dollars, let's say the nineteen thousand would
23:03
Speaker 5: be your freebie. But because you went over the nineteen
23:05
Speaker 5: you've now created a taxable gift situation and you need
23:10
Speaker 5: to report it on a Form seven oh nine. And
23:13
Speaker 5: that one hundred thousand dollars increment is the taxable gift part,
23:19
Speaker 5: and so technically the giver would have to pay the tax. However,
23:24
Speaker 5: on the gift tax return that you file, you would
23:27
Speaker 5: simply reduce your thirteen point nine million dollar gift tax exemption,
23:32
Speaker 5: which we all have to once in a lifetime exemption,
23:35
Speaker 5: by one hundred thousand dollars. So now I can only
23:38
Speaker 5: give away thirteen point eight million, but I pay no
23:41
Speaker 5: tax on that seven oh nine. So even though there
23:44
Speaker 5: is a gift tax, oftentimes there's no gift tax due
23:48
Speaker 5: depending on how you make sure you follow those those parameters.
23:51
Speaker 3: So I'm going to try and translate some of this
23:53
Speaker 3: into English, which I feel like I do best. Todd,
23:56
Speaker 3: If I want to give away a bunch of money
23:58
Speaker 3: and I go over that nineteen thousand dollar limit, what
24:01
Speaker 3: you're saying is that unless I'm worth, unless I end
24:04
Speaker 3: up dying being worth, you know, tens of millions of dollars,
24:08
Speaker 3: I may not actually owe any taxes on those gifts,
24:11
Speaker 3: even though the name of it seems to imply that
24:13
Speaker 3: I would owe taxes. That is that generally correct? Or
24:16
Speaker 3: am I missing something?
24:18
Speaker 5: No? That that is correct? And I think where we're
24:20
Speaker 5: headed is not only will you will you not owe
24:23
Speaker 5: the gift tax on the amount you give. I think
24:26
Speaker 5: you are also noticing or implement inquiring about whether or
24:30
Speaker 5: not that federal exemption falls down as well. So if
24:34
Speaker 5: you give away let's say ten thirteen, Let's say you
24:39
Speaker 5: give away three million, and you're left with thirty with
24:42
Speaker 5: ten million dollars of exemption, so you have ten million
24:45
Speaker 5: dollars of assets left, you would not have not only
24:47
Speaker 5: not paid any gift tax, you're still not going to
24:50
Speaker 5: pay any federal estate tax because you're still under what
24:53
Speaker 5: would be left is your ten million dollar exemption. So
24:56
Speaker 5: it can get confusing sometimes. But keeping those two together,
25:00
Speaker 5: whether you can, you can win on the gift taxing
25:02
Speaker 5: front and on the estate taxing front. But you got
25:05
Speaker 5: to learn how to make the gifts, and that's the problem.
25:08
Speaker 5: Or by the way, maybe you don't make the gift
25:10
Speaker 5: at all. Just because you can doesn't mean you should.
25:14
Speaker 5: So getting the guide, it's the end of the month,
25:16
Speaker 5: it's the last time we're giving it away. Making the
25:19
Speaker 5: most of gifting assets. Do I give away the asset
25:22
Speaker 5: at all? Do I give it to kids in an
25:25
Speaker 5: irrevocable trust. I don't want them to have it? Can
25:27
Speaker 5: I control it when I give it away? If I'm
25:30
Speaker 5: giving away bigger assets, I might want to still enjoy
25:32
Speaker 5: what I give away. Well, maybe spouse a lifetime access
25:35
Speaker 5: trust for the way to go for those. So there's
25:37
Speaker 5: many things to think about when you're giving how to
25:40
Speaker 5: give them. Both income and gift taxes and estate taxes
25:44
Speaker 5: have to be considered, and lastly, whether I should even
25:48
Speaker 5: give it all? Which might be the best answer. Call
25:51
Speaker 5: and get the guide guy. Folks, it's the end of
25:52
Speaker 5: the month making the most of gifting assets eight sixty
25:56
Speaker 5: six eight four eight five six nine nine or Legal
26:00
Speaker 5: Exchange Show dot com again end of the month eight
26:03
Speaker 5: six six eight four eight five six nine nine or
26:06
Speaker 5: Legal Exchange Show dot com.
26:08
Speaker 3: Todd, thanks so much for joining us. You managed to
26:10
Speaker 3: do all that without making it too spooky for us
26:13
Speaker 3: here on a Halloween Friday. So appreciate being here and
26:15
Speaker 3: we'll talk to you again soon. Thank you, Todd Lusky
26:18
Speaker 3: from the law firm of Cushing and Dolan.
26:20
Speaker 1: The proceeding was paid for and the music express are
26:22
Speaker 1: slowly those of Cushing and Dolan, Cushing and Dolan and
26:24
Speaker 1: or Armstrong advisory may contact you offering legal or investment services.
26:27
Speaker 1: Cushing and Armstrong did not endorse each other and are
26:29
Speaker 1: not affiliated.
26:31
Speaker 3: Todd didn't make it that spooky, did he. No, No,
26:34
Speaker 3: it's usually some scary stuff. And I didn't once get
26:37
Speaker 3: afraid of what he had to say. Do you know
26:39
Speaker 3: why the zombies suit his employer? He wanted to get
26:43
Speaker 3: out of his dead end job. It's all I don't know. Yeah,
26:49
Speaker 3: it's fine, Yeah, thank you.
26:52
Speaker 2: Uh, cities across the US are putting robots to work finally,
26:59
Speaker 2: So okay, I mean I'm.
27:02
Speaker 3: Not all that impressed, to be quite honest. No, the
27:04
Speaker 3: stuff that firefighting robot actually kind of looks cool. It
27:08
Speaker 3: looks like a batman a batmobile hooked up to a
27:11
Speaker 3: couple hoses.
27:12
Speaker 2: So there are some places where I think this stuff
27:14
Speaker 2: can be useful, and like this is one of them
27:16
Speaker 2: where it's like, hey, if you've got you know, a
27:18
Speaker 2: dangerous fire that you don't want to put firefighters' lives
27:22
Speaker 2: at risk, you know, in but you still want to
27:25
Speaker 2: try to do more than you can otherwise. Stuff like
27:29
Speaker 2: this is really interesting to me and also is probably
27:32
Speaker 2: going to you know, be controlled by a firefighter who's
27:35
Speaker 2: trained and you know what to do, and so it's
27:37
Speaker 2: something where you're not talking about losing jobs, but just hey,
27:40
Speaker 2: instead of that firefighter needing to you know, get as
27:43
Speaker 2: close as he may have previously gotten to said fire
27:46
Speaker 2: or dangerous building, they can maintain more distance and the
27:50
Speaker 2: job becomes less dangerous. Sure, this is great when you have,
27:55
Speaker 2: you know stuff some of the other stuff that's being
27:58
Speaker 2: talked about in here where okay, Like are robots that
28:03
Speaker 2: are measuring the angle of curb ramps to help, you know,
28:09
Speaker 2: determine where to where you need to make changes so
28:13
Speaker 2: that they're up to you know, city code. Like I
28:18
Speaker 2: just I don't really know that that's useful because again,
28:22
Speaker 2: in this case, you have someone who's controlling them. They're
28:25
Speaker 2: not doing it autonomously, and so it's just, well, why
28:29
Speaker 2: can't that person be out there with a level getting
28:32
Speaker 2: the angle of the ramps and measuring it.
28:35
Speaker 3: Yeah, sometimes it feels like we roll out solutions to
28:37
Speaker 3: problems when you know it would work just as well.
28:40
Speaker 3: In this case, are really easy to use app that
28:44
Speaker 3: the city rolls out where people can report this stuff
28:47
Speaker 3: to the city. Sure, Like, Hey, I'm in a wheelchair
28:50
Speaker 3: and this curb does not allow me to get on
28:53
Speaker 3: top of it. You're gonna report that to the town
28:54
Speaker 3: and they can go figure that out on their own.
28:56
Speaker 3: They don't need a seventy five thousand dollars robot to
28:58
Speaker 3: figure that out. Now, My guess what I will say,
29:01
Speaker 3: Where I keep hitting the same darn pothole on the
29:04
Speaker 3: entrance to ninety five and if I hit it again,
29:06
Speaker 3: my axle is gonna break again. You know, a good
29:09
Speaker 3: useful app that I can report that to the city
29:11
Speaker 3: would be useful.
29:12
Speaker 2: What I will say The place that I think markets
29:14
Speaker 2: are still under pricing is humanoid robots becoming more useful
29:18
Speaker 2: and more normal over the next five.
29:20
Speaker 3: To six years.
29:22
Speaker 2: Have either of you guys seen the videos out there
29:25
Speaker 2: over the last couple of days for the Neo No,
29:31
Speaker 2: this is new this week. It's a humanoid robot that
29:34
Speaker 2: lives in your home. Weigs about sixty pounds. It's the
29:37
Speaker 2: size of mic so it's not too big. And they
29:39
Speaker 2: made it like by the way, so that like if
29:41
Speaker 2: the thing falls on you, you don't know.
29:42
Speaker 4: I think the Wall Street Journal did something with this.
29:44
Speaker 2: Yeah, and right now they're rolling it out for beta testing,
29:47
Speaker 2: which is basically, look, you're gonna pay four hundred dollars
29:49
Speaker 2: a month. Someone in our home office is going to
29:52
Speaker 2: control it, but that's going to train it on how
29:54
Speaker 2: to actually do the stuff that you wanted to eventually
29:57
Speaker 2: do autonomously.
29:58
Speaker 3: Well, let fold by laundry, yes, not particularly well right now.
30:02
Speaker 2: The big thing is that you know, people are poop
30:05
Speaker 2: pooing it, being like, oh, like this is you know,
30:07
Speaker 2: this is useless. Like, guys, this is the first iteration.
30:11
Speaker 2: I'm telling you humanoid robots are going to come for
30:16
Speaker 2: human jobs in the next three to five years, and
30:18
Speaker 2: we are not prepared for it. I'm not saying this
30:22
Speaker 2: is good or bad. Actually, I am saying if you
30:25
Speaker 2: are in a job that requires manual labor, it may
30:27
Speaker 2: end up being bad for you. If you're in a
30:30
Speaker 2: job that pays for manual labor, or if you're a
30:34
Speaker 2: person who pays for manual labor, this may end.
30:36
Speaker 3: Up being good. But societally, we are not prepared for this,
30:40
Speaker 3: and that is bad. Yeah, I can agree with that.
30:43
Speaker 3: Quick break here. Paul Monica from Baron's joins us.
30:45
Speaker 1: After this, find daily interviews and full shows of the
30:49
Speaker 1: Financial Exchange on now our YouTube page. Subscribe to our
30:52
Speaker 1: page and get caught up on anything and everything you
30:55
Speaker 1: might have missed. This is the Financial Exchange Radio Network.
31:00
Speaker 1: The Financial Exchange is now available every day from eleven
31:03
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31:06
Speaker 1: Stay informed about the latest from Wall Street, fiscal policy,
31:10
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31:17
Speaker 1: This is the Financial Exchange Radio Network. Ladies and gentlemen
31:22
Speaker 1: the weekend.
31:31
Speaker 3: As promised.
31:31
Speaker 2: Joining us now is Paul the Monica from Barons, just
31:36
Speaker 2: as he does every single Friday.
31:38
Speaker 3: Mister Lamonica, how are you doing?
31:41
Speaker 6: I'm good. How are you guys doing?
31:43
Speaker 2: Doing well? You got a piece that's out this week.
31:45
Speaker 2: It's titled this ret yields nine percent and isn't worried
31:48
Speaker 2: about Zoron Mandanmi. Paul, what is the rut that you're
31:52
Speaker 2: talking about? And why would AT be worried about? Why
31:57
Speaker 2: would a RT be worried about Mamdani?
32:00
Speaker 3: Yeah, no, it's a great question.
32:01
Speaker 6: So the read is Rhythm Capital, which, again, as we
32:05
Speaker 6: point out in the headline, pays dividend more than nine percent.
32:09
Speaker 6: What's interesting about Rhythm is that it is a company
32:14
Speaker 6: that is in the process of making an acquisition for
32:18
Speaker 6: another office rut named Paramount, not to be confused with
32:24
Speaker 6: the media company, and Paramount owns what they claim are
32:28
Speaker 6: you know, flagship a quality type buildings in New York
32:32
Speaker 6: and San Francisco. So one point six billion dollar deal.
32:36
Speaker 6: And the bet is that despite the fact that I'm
32:40
Speaker 6: sitting at home right now doing this interview while working
32:44
Speaker 6: a lot of people in New York and San Francisco,
32:46
Speaker 6: particularly in the financial services and tech communities, are being
32:51
Speaker 6: pushed to go back to the office five days a week.
32:54
Speaker 6: So Rhythm Capital is making this bet with Paramount Group
32:58
Speaker 6: that you know, they will benefit from potentially higher rents
33:02
Speaker 6: and higher occupancies.
33:04
Speaker 2: When we look at the overall you know, tenor of
33:08
Speaker 2: the office market in those areas, does it match up
33:12
Speaker 2: with their optimism right now? Where is this you know,
33:15
Speaker 2: kind of out of not out a character, but not
33:17
Speaker 2: matching up with the data and more, Hey, we think
33:20
Speaker 2: we're buying low.
33:22
Speaker 6: Well it's a combination of both. I spoke to the
33:24
Speaker 6: CEO of Rhythm and he thinks that they are buying low,
33:27
Speaker 6: but he is optimistic that you are going to see
33:32
Speaker 6: more and more people in New York and San Francisco
33:35
Speaker 6: in particular return to the office, and then that headline
33:38
Speaker 6: about Mamdani why he's not worried even though there are
33:43
Speaker 6: some people in the financial services community who've been expressing
33:46
Speaker 6: concerns about the proposed policies of Mamdani, who you know,
33:52
Speaker 6: seems likely to be elected the next mayor of New
33:55
Speaker 6: York and does lean socialist that you know that will
33:59
Speaker 6: be maybe a bigger issue for apartment owners, multifamily, you know,
34:05
Speaker 6: companies that could get hit by rent stabilization. This person,
34:10
Speaker 6: the CEO of Rhythm, He doesn't think that companies are
34:14
Speaker 6: going to suddenly flee New York City because of Mamdani.
34:18
Speaker 6: And if anything, you're going to see big banks like
34:21
Speaker 6: JP Morgan Chase, despite some backlash, push workers to come
34:25
Speaker 6: back to the office more often, and that again should
34:29
Speaker 6: boost occupancies, demand and eventually rental rates.
34:33
Speaker 2: When we talk about reads, two potential crosswinds that can
34:36
Speaker 2: move things around are Hey, what are we seeing in
34:39
Speaker 2: the general economy and what's happening with interest rates? How
34:42
Speaker 2: do those ideas factor into this plan.
34:47
Speaker 6: Yeah, no, it's a great question, you know, the economy aspect,
34:51
Speaker 6: it's definitely a bit murkier even though the labor market
34:55
Speaker 6: is showing some softness, we seem to be stuck in this.
34:59
Speaker 6: Not too many people are getting fired, despite some of
35:01
Speaker 6: those high profile headlines you know, coming out of Amazon,
35:05
Speaker 6: you know, recently. But maybe it's more that people aren't
35:10
Speaker 6: getting hired as much, and that's been an issue for
35:13
Speaker 6: some of the other big office rates like Vernado, sl
35:16
Speaker 6: Green that have a big presence in New York. And
35:18
Speaker 6: then obviously the regional banks have been hit because of
35:21
Speaker 6: worries about real estate long portfolios maybe starting to go
35:25
Speaker 6: bad in light of the bankruptcies of things like you know,
35:29
Speaker 6: Tricolor and First Brands. But overall, despite JP Morgan, Chase City,
35:35
Speaker 6: you know, Jamie Diamond talking about cockroaches, you are starting
35:38
Speaker 6: to get a sense that maybe they are isolated incidents
35:41
Speaker 6: and not necessarily the start of a big economic crisis.
35:46
Speaker 6: So if that's the case, then you know, you could
35:49
Speaker 6: have your real estate in New York, San Francisco. Not
35:53
Speaker 6: every market, by any stretching the imagination, you know, start
35:56
Speaker 6: to rebound. And then obviously there are other areas, you know,
36:00
Speaker 6: particularly in the Sun Belt. You think of Nashville, and
36:02
Speaker 6: you think of you know, Phoenix and other places in
36:05
Speaker 6: warmer climates, they're really still doing well. This company doesn't
36:09
Speaker 6: have a presence there, but wouldn't shock me if they
36:12
Speaker 6: started to look at those types of markets as well.
36:15
Speaker 2: Very good, Paul, appreciate the time today. I hope you
36:17
Speaker 2: have a great weekend and we'll catch up with you soon.
36:21
Speaker 6: Thanks a lot. I have a good one, guys.
36:23
Speaker 2: That is Paul Monica from Baron's Mike. What else do
36:27
Speaker 2: we want to get to?
36:28
Speaker 3: Listener email? Tom sent in an email from Ludlow just
36:34
Speaker 3: listening to the segment on you sports. Couldn't agree more.
36:37
Speaker 3: My son was a Super seven two times Volleyball Hall
36:40
Speaker 3: of Fame All Star middle hitter. He's also an Eagle
36:43
Speaker 3: scout and guess which one served him more as an
36:46
Speaker 3: electrical engineer. He goes on, but the answer is the
36:48
Speaker 3: Eagle scouting, and he kind of talks about in his email.
36:54
Speaker 3: You know, every year more and more kids dropping out
36:56
Speaker 3: of scouting in favor because frankly, the sporting schedules don't
36:59
Speaker 3: allow for it. And uh yeah, it's a it's an
37:02
Speaker 3: interesting point.
37:03
Speaker 2: Yeah, and look, it's not to poo pooh like sports
37:07
Speaker 2: like I still play sports. I love playing sports. We
37:10
Speaker 2: got the dav five k coming up in about a week,
37:12
Speaker 2: and I'm hoping to run the pants off of most
37:15
Speaker 2: everyone there, except for like all the eighteen year olds
37:17
Speaker 2: that run faster than me.
37:18
Speaker 3: Because the literal college athletes that run cross country, yeah, the.
37:21
Speaker 2: Cross country runners generally beat me, but I want to
37:24
Speaker 2: try to beat everyone else because I'm competitive and I
37:26
Speaker 2: just love competing. So it's not to pooh poo participating
37:29
Speaker 2: in sports, but it's to understand do it for the
37:31
Speaker 2: right reasons, Like, don't push your kids into sports because
37:33
Speaker 2: you think they're gonna get a scholarship.
37:35
Speaker 3: They're not.
37:36
Speaker 2: Don't push them into sports because you want them to
37:38
Speaker 2: live the athletic life that you never could. They're just
37:41
Speaker 2: gonna resent you for it most likely. Like read about
37:44
Speaker 2: every kid whose parents like push them that hard, and
37:48
Speaker 2: they're generally like, yeah, like my relationship with my mom
37:51
Speaker 2: and dad are kind of strained because of it, and
37:53
Speaker 2: I would have preferred things to be a little different.
37:56
Speaker 2: So use sports participation is great, but your kid's not
38:02
Speaker 2: going to be that guy or that girl, and you
38:08
Speaker 2: can all just relax and if they're really that good
38:10
Speaker 2: at it, their natural talent will get them there. That's
38:14
Speaker 2: just kind of how it works. Let's take a quick
38:16
Speaker 2: break for the entire rest of the weekend. We're gonna
38:19
Speaker 2: see on Monday. Happy Halloween everyone,