From downtown Milwaukee,
welcome to Money talk with Bob.
Each week,
professional advisors from Land and company investments
discuss the latest financial developments
offering timely insight and long term perspective.
This is money talk for 07/26/2024.
Checking the calendar, the brewers are home this
weekend with Florida Marlin, and the brave. Remember
them. They're in town for 3 days.
And the sounds of Harley are everywhere for
the homecoming from the factory to the lake
front to the Brady Street Biker bash, keep
an eye out for those riders.
And we also have German fest underway at
the Summer fifth grounds, which is just like
the Harley homecoming, but with accordion.
And if that's not noisy enough a Thunderbird
here with the Aaron water show through the
weekend.
Today it's all animal stories all the time.
Let's start with c cocaine fueled sharks off
the coast of Brazil.
The media coverage of feeding frenzy ranges from
shark eating bales of cocaine from smugglers
with the men diminishing Jaws theme playing in
the background.
And then there are the news outlets that
are looking for younger audience
asking and using the annoying baby sharks on.
If you hear the baby shark song enough
times, you wanna be thrown into the ocean.
A man from New Jersey, who was just
trying to protect his daughter is facing animal
cruelty charges.
Father and daughter were at the Jersey shore
when a seagull swoop down and tried to
steal the daughter's French fries.
Dad wasn't having any of that.
So he grabbed the colony and he captivated
it.
I don't think us... I don't like a
stereotype people, but his name is Frankie and
he is from Jersey. So this may not
be his first capping.
And finally, a leftover nugget from last week's
convention.
Grind the dating and hook up amp.
Crashed
in Milwaukee because of unprecedented traffic during the
Rn c.
This reminds me of an old saying when
the cats away the mice will play.
Alright. And on the podcast today we have
Steve Gil, Joel Dr, Kendall Bauer and raven
up the week. Here's Kyle Tit. Well, thank
Max, a bit of a mixed week overall
for markets,
Nasdaq down 2.1
percent. Been in a bit of a slump
recently. The S and P down 8 tenths
of a percent, down 46 points this week,
But a positive week again, overall for the
dial up 7 tenths of a percent, 300
points after adding 654
on Friday.
For the year, starting to close the gap
a bit between Dow, S and P and
Nasdaq,
but still a pretty big divide than Nasdaq
up 18.1 in the year, the S and
p up 15.3,
and the Dow still pretty pretty
substantial positive 8 8 percent on the year
all including dividends.
You know, I think maybe Steve, the place
to start this week just some of the
volatility we've seen in stocks recently. At 1
point in time, Nasdaq,
almost 7, 7 and a half percent off
recent peaks, and I think a good reminder
of, why, you know, when we look at
our portfolios, we can't just pick the best
number we see and assume that's what things
are supposed to be worth. Yeah. You know,
kinda of, what a fantastic week to remind
investors not to try to time the market.
We got Whips saw that week with the
markets trading down earlier,
snapping back by the end of the week,
but still finishing a bit down on the
Nasdaq,
but but climbing back
into the green for the dow. The point
here is that have a strategy
stick to your strategy,
have a plan
and and trust that allocation moving forward through
thick thin. If you react to the market,
all you're gonna do is is make some
irr rev irr changes that you're not gonna
be able to undo
because of a trade may be brought on
by Fear agreed
and to
piggyback on that steve. I think,
sometimes down days like we've seen this week
or even last week.
With the big swings down can be a
bit deceiving. So for example, the S and
p,
you know, down,
intra day a little over 1 and a
half percent or 2 percent throughout the week.
But if you dive into the 500 companies
within the S and p.
There was a point in time,
this past week where the vast majority of
companies in the s and P were actually
positive,
the day that the P was still down.
So some of the you know, big tech
companies given, you know, some of the nice
returns back, but at the same time, you
know, some of the other parts of the
S and P still rallying the same day.
So,
you know, Kendall, there had been this expectation
that when we saw broadening of
participation in stock market returns when it wasn't
just
07:10,
whatever the number is, but certainly a lot
less than the 500 names in the S
and P
that you'd see things calmed down a little
bit and In some sense, we have, we
haven't seen,
you know, those 7 or 10 names up
30 percent in this stretch of, you know,
a couple of months.
At the same time, we have seen a
bit of a spike in the volatility index,
kind of the expectation for where stocks are
going forward. That doesn't mean downturn turns, it
just means investors are thinking that maybe things
get a little more rocky from here. They
bump around a little more. But also, I
think you start to see okay. There's more
people interested in and what's the direction? What's
happening with the economy? What's happening with earnings
in the middle of earning season? And of
course, I think you rightfully point out
if we were seeing a drastic shift in
kind of the overall sentiment on earnings, you'd
probably see the rest of those names
negative like the the big 7, the big
10. And on the other hand, what we
have seen is, hey, the earnings picture is
mostly shaking out the way we thought.
You know, I think the other big piece
of news kendall we've transitioned to this week
is this Fed pivot. And
for... It feels like ever now, but certainly
for the last few quarters, we've been talking
about wins the Fed coulda cut, what would
it take.
All of a sudden, the last month or
so.
Investors have really gotten on board with this
idea that comes September, the Fed is finally
gonna make that cut. We've got a Fed
meeting on tap next week. You'll hear from
you know, some of the the the major
players of the Federal Reserve,
it's seeming more and more, like, potentially they
have the cover they're gonna need.
To make that first cut comp September. Yeah.
And I think, you know, seen a few
positive
reports coming through this week in the past
few weeks on an inflation front. Showing inflation,
the rate of inflation coming back down.
2 years ago when we hit, you know,
roughly, we hit that 9 percent number.
And now we've subsequently come back down right
around 3, maybe a little bit, you know,
below that.
So get to a point where I think,
you know, they're comfortable to
to proceed with, you know, beginning that rate.
Beginning to cut interest rates.
The interesting part 2 is you look at
the Gdp report that came out and not
to jump ahead. We're certainly gonna cover that
in a little bit. But
you know, for a while, we were talking
about how stronger economy
was almost a bad thing. Right? But we're
seeing potentially a an environment where
inflation has come down and yet Gdp still,
you know, remains on track and and even
surprising, I think pretty good number here this
last quarter. Yeah. Jewel. Let's dive into that
Gdp number because you know, I think a
lot of mixed news we've been talking about
economically. And when you look at gross domestic
product, it's the 1 piece that tries to
sum it all up. It's the 1 piece
that says okay. When you look at Aggregate,
what's that activity look like and we got
a reading on the second quarter here this
week. And looking at it in aggregate like
that, Kyle means that they're looking at a
lot of different numbers, and that's why they
they update this twice. The the report that
came out this week was their first look
at it and there's usually an adjustment between
those. It's also old data when you think
about it, I mean, they're talking about, you
know, what happened in the second quarter of
this year and we're already,
you know, 1 month into the the third
quarter.
But that said, I mean, like Kendall said,
it was it was a strong report. It
was 2.8 percent annual
rate of growth, and that's twice what it
was in the first quarter. That's that's a
pretty good clip. And, you know, you sent
a a note out earlier today, and and
you said that the economy isn't weak, but
it's weaker. And so that's a sign. I
mean, it it's it's a sign that the
economy isn't weak at 2.8 percent growth. But
if you start looking at some smooth the
numbers and even the numbers within their report,
consumer sentiment numbers came out today. They're weaker.
The job claims, for weeks now, the job
claims have been going up 6 out of
the last 7 weeks.
We're we're 13 percent
greater
initial job claims than we had going into
the the Covid recession.
Housing.
Both existing housing and new housing, the sales
are going down.
So we're seeing, you know, greater weakness there.
And
within that report on the Gdp is the
inflation number. The inflation number is going down
and inflation is a sign of of how
much we're growing. And that's the the good
number of, I mean, if there's a good
cholesterol bad cholesterol. This is the this is
the good cholesterol draw that when it's going
down, it means good things for the account.
And remind me is that the Hdl or
is that the Ldl, maybe some of our
physicians listening can call in
you know, I think the the fun part
about,
being in an economy that's still is
stable as this 1 is is that you
can look at all these data points and
go, yeah. But. And when you look at
consumption and the consumer which we talk about
as
depending on which 1 of us you'll listen
to 2 thirds or 70 percent of our
economic output, that Gdp number that we were
just talking about,
you know, there's plenty of headlines recently that
have pointed to cracks in the foundation, whether
it's
deli rates on credit cards and autos that
have reached 12 year highs, the headline I
saw this week, which when I went back
to find the headline, the headline had changed
because of how poorly written it was,
was that credit card deli had reached an
all time high,
and then buried in the article was a
note that said that that particular data point
had begun in 2012,
which as we all know
is after the great financial crisis in which
credit card rates it spiked through the roof.
And when you look at related data that
goes back to
the 19 nineties
every data point since the financial crisis has
been so far below anything you saw pre
great financial crisis. That we're still talking about
high watermark marks that look nothing like what
things look like before because generally speaking, consumers
have been better behaved. Banks have been better
behaved. And so The trend is always a
concern. If consumers have less to spend, if
they are stressed by higher prices as so
many are
if the rates with which we are paying
back loans start to take a little bit
of a dip, What's that mean for the
system more broadly,
But it isn't at a place in which
we've seen the kinds of concerns we saw
in the past that might be a little
more alarming. Well, I think that that sort
of lends to this whole idea that we're
all victims of our most recent perceptions. Right,
Kyle. And if we're looking at data that
says, he, credit card debt is as high
as it's ever been, but we're only been
tracking it for 12 years. I mean, I
love reminding clients that, you know for the
last 50 years, inflation has averaged 3.8
percent. I mean, when I bought my house
in the early 2 thousands I was thrilled
to get a mortgage for a 30 year
fixed in the single digits, you know, like
8 and a quarter percent.
And and I have clients at tell me
stories when they were buying houses in the
in the seventies and eighties. And they were
thrilled to get something in the low double
digits.
So we're always victims of our most recent
perceptions. And I think that we have been
somewhat spoiled in the last decade with respect
to where inflation has been.
Because rates have been so low. And a
lot of what's happening is this either unwinding
or or returning to normal if you will,
from the overall economic data points 30000 feet
up. Oh, even more so because of Covid,
we entered an environment in which she couldn't
spend money where you wanted spend it, then
you started getting money from the government and
from other sources.
And so I think we may finally be
entering
a post Covid economy. It's weird to say
because there's still hold overs all over the
place when you look at post Covid meaning
return to pre Covid normalcy? I don't know
that it's a
financial crisis normalcy. I don't know that it's
either. I think it's a return to whatever
the new normal is going to be. And
I think it's fair to say that the
economy
going forward doesn't have to look the way
it looked.
5 years ago, it doesn't have to way
the looked the way it did 15 years
ago because clearly things have evolved,
but I do think when you look at
auto deli, credit card deli delinquent these. Rates
of consumer spending maybe dipping a little in
some areas.
Personal savings taking a little bit of a
fall. It's just a reflection of the fact
that some of those numbers look so rosy
for so many years coming out of Covid
that this isn't
a period of time in which again, Joel
as you you mentioned, I I wrote in
my kind of pre show notes. This isn't
a period in time in which the economy
is weak. It's just weaker than what was
a great economy. And and sometimes, Kyle, I
mean, a lot of the times when I
look at these numbers, I compare them to
to February of 20 20.
Just before the Covid pandemic. And, so a
couple of those numbers you just mentioned, credit
card deli.
It's 3.1 per 6 6 percent now.
And just before Covid, it was 2.66
percent. So it's a little higher.
But since 19 91, that's been 3.73
percent. So it's lower than, you know, the
the long term average. The savings rate, we
just found out today is was 3.4
percent in June,
in February of 20 20. It was 7.7
percent. And 1 of the reasons that I
look at
February of 20 20 is, we had a
pretty good economy that. I mean, if if
you think about it. I mean, we were
talking about Gee, this looks pretty good. We
should be expecting a recession soon
because we're overdue, but things seem to be
humming along. If it weren't for that 1
thing, who knows where we'd be. There's always
that 1 thing. We we had to adapt.
Yeah. We had to adapt. And so when
I look at kind of where we are,
and I look at how smoothly.
We've been able to navigate the last few
years. Yeah. There were absolutely some bumps along
the way. A big spike at inflation candle
that you mentioned,
the fact that when you see the personal
spending number this week, Joel and it shows
a core Pc,
Oh, and a headline Pc that... Yeah, It's
not back to the Fed's target, but it's
a much better number. I think again, it
speaks to
we're finally returning to whatever normal is supposed
to be now. You can't blame the pandemic
anymore for
Well,
inflation is high because there's all this excess
cash. Yeah. There's there's some out there still,
But a lot of it's made its way
off the books and we should be starting
to think about
How are we gonna create the support we
need for this economy? What's gonna be the
foundation of what comes next?
There also has to be the realization that
there's always that
1 thing out there that we don't know
about that that could disrupt us again. I
think that's fair. We talk about soft landing.
We talk about is inflation gonna make it
to 2? And then you go, okay, but
are we gonna start another trade war? Are
we gonna see another pandemic is that meter
from space gonna get here. And so, yeah.
It's... It's it's the unknown unknowns that ultimately
lead to that concern and, you know, Kendall,
maybe a big
selling point for the need to look at
opportunities to take gains right now.
Yeah.
Absolutely. I think if you're somebody that
has to take a required minimum
distribution, that plans to do charitable gifting.
Given where markets are again, Kyle pointed out
at beginning of the show S and p
closing the week a little over 15 percent
Nasdaq, 16 percent. Dow
almost 9 percent.
And we're halfway through the year. I think
it's a fantastic time to, you know, talk
to your adviser,
revisit your allocation in your portfolio.
But maybe consider taking some gains off the
table.
As we approach a point in the year
where
it's not to say that we feel there's
gonna be a pullback but you say, okay,
you look at the rally stocks have been
on the last 7 to 8 months, and
then you look at the likelihood
of
a slowdown
as we approach, you know, the election where
we know there will be more volatility due
to the uncertainty.
I just think that's a great a great
idea. Be. I would rather be a little
bit early
and take some gains and use it for
things that you may need to,
then, you know, try to do it later
in the year when things could be, you
know, jumping all over the place. Makes sense.
Steve, secure Act of 20 20, created these
wonderful rules
that then took the Irs 4 years to
come out with clear language on what they
meant.
We don't need to go 2 into depth
on the 260
pages of Irs guidance that came out.
Over the last couple of weeks. But I
do wanna touch on a question that comes
up quite a bit with
Ira owners with respect to what happens to
their accounts for beneficiaries.
The big change we'd all been waiting on
is
what's gonna be the requirement for withdrawals.
And the Irs is finally clarified the guidance
on what's supposed to happen with Ira beneficiaries.
Yeah. I think it's a very important
final
here, we... That we have been waiting for.
And as a reminder, to our listeners,
we're talking about inheriting monies
from a non spouse,
Ira owner.
Obviously, if you're the spouse and you're the
beneficiary, you take over that Ira
with no tax consequences, whatsoever, you just assume
it as though it's always been your own,
you can roll it into your own Ira.
But if you're non spouse beneficiary, a child,
a sister, a brother,
an nephew.
There are some certain rules that you have
to follow
in a nutshell,
if the
original owner had already begun taking their required
minimum
distributions, which right now is age 73 or
above,
then the inherit
must continue to take a required minimum distribution
each year, and they have 10 years to
draw out the entire account.
If you inherit an Ira
from the original owner who had not yet
attained the age of 73.
You do not have to take an annual
required distribution, but you still have to draw
the account within
10 years.
Obviously, with whatever the situation, you should
consult your,
accounting consult to your financial planner,
to make sure that the decision you make
is right for your personal tax situation
because the money that comes out of those
Ira accounts is taxable and does get added
to your income. I think such a critical
reminder how important it is to revisit those
beneficiary designations to make sure that
your
intentions are clear to make sure that the
people you name or the entities that you
name
are done in a way that says tax
advantageous as possible that doesn't
burden someone else with a tax liability that
could better go to some other place. And
so it's a conversation I have in every
client meeting? Is this really what you want
Is this still what you want? Is there
anything else you might wanna add here, and
we have been given Rep reprieve for 20
24 from the Irs on those annual
distributions.
Same thing we saw in 23, 22, 21.
But I do think coming 20 25, those
annual distributions that Steve you were talking about
are gonna back on the table. Seems unlikely
now that the official guidance is out 4
years in,
that we get another delay in that. And
so if you are a an inherited Ira
owner,
probably wanna start to plan. Okay. What's next
year you're gonna look like Adam Yeah. And
and just to piggyback on that, Kyle, if
I'm
understanding the way the passage of the law
was written.
If you inherited an Ira iran 20 21,
and you're under the 10 year rules, but
you've not yet taken the Rm d's because
the Irs hadn't decided.
It's not like you get the 10 year
window beginning next year in 20 25. You
still have to draw that countdown down.
Before 20 31, which would be 10 years
from the time at which you originally inherited
it. You just got a pass on having
to take out the required minimum those first
couple of years. Yeah. You got it.
Plenty of news to come. I'm sure some
more clarity on sec secure act. 2, probably
in the works at this point, now that
they've finalized
the original secure act. 1 thing to clarify
this may kinda be obvious here, but this
only applies to inherited Ira after the start
of 20 20. If I'm not correct. So
if you're somebody that's had 1 for years,
this does not affect you to this is
specifically for those that inherited, you know, non
spouse beneficiary that inherited an Ira after 20
20. Yeah. Just throwing that in. Thank you
for that clarification. Ken. I have plenty of
beneficiaries,
pre the
implementation of Sec secure act. Thank that, can
continue on with the plan as as they
have.
With that, we enjoy doing the program for
you
we will talk to you again next week.
Thank you for listening to money talk with
Bob Land.
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