Ep 180: Fed's Raising Rates. What Does It Mean? - More Knowledge, More Wealth

  📍 Good day. This is Gabriel Shane, certified financial planner and your host of More Knowledge, more Wealth here on every weekend, talking about all important topics of personal finance. My goal is to give you the knowledge you need to increase your wealth Now to the listener, you can always reach out to myself or any one of our colleagues here at Falcon Wealth Planning.

Our phone number is eight five. And 9 6 3 25 26. That's 8 5 5 96. Falcon like the Bird, or visit our website@falconwealthplanning.com. That's falcon wp.com. First short. Now I'm the president of Falcon Wealth Planning. We are a fee only, non-commissioned true fiduciary. We are an independent registered investment advisory firm.

we have no broker dealer affiliation. What does that mean? That we don't work for, uh, Morgan Stanley and Edward Jones, a ubs a Charles Schwab. We don't work for them. We are independent, which means we can offer unbiased advice, not just on the wealth management side, but on everything that involves a dollar sign.

Folks, we are true financial planners. We help you. Our job is to increase your overall net worth. So that is where you are today. Taking a look at that, your current situ. What retirement looks like. If you should buy a house, if you should lease a house, if you should rent a car, or if you should buy a car, whatever involves a dollar sign, folks.

Taxes, investments, insurance, estate planning, folks, you name it. Like I said, anything that involves a dollar sign. Now folks, we are offering a free financial assessment where we'll give you one to two meetings, one to two hours of our time. Folks, at no cost. Folks, give us a call. We would love to. Our phone number is (855) 963-2526.

That's 8 5 5 96 Falcon like the Bird. We'll love to put together a personal confidential assessment really to help relate this show to your specific situation. Now, so much to talk to you about today. Now, currently earlier this week, we had our fed chair, Jerome Powell, talk about how he envisions if necessary interest rates will continue to go up.

By the way, the Fed chairs already said they're gonna continue to raise rates, the Q2 to Q3 of this year. I mentioned this before, folks, but what does this mean in general? Now what this means is, number one, borrowing costs are gonna be higher, so purchasing of items and goods are gonna get more expensive.

Businesses now have a higher operating cost as a lot of them are on debt. They have liabilities. Lines of credits are very. , my 4% home equity line of credit is over 8%. Now you get what I'm saying? That's double the cost of interest of what I was paying before. That's substantial. When your cost doubles, not everybody can afford to, number one, continue making those payments, and number two, Afford to take on new debt.

This can affect expansion. So let's think how, what this means on the stock market, you may not be as comfortable, whether it's you and your business that you're looking to start, you're not as comfortable to now expand that business because now the debt and operating costs are too high. This leads and a trickle effect leads to increased cost of rent, increased cost.

Operating business, increased cost, gas, increased cost, milk, bread, you name it. , this is why you're seeing inflation coming in. This is, uh, one of the indicators, one of the reasons of a triggering factor of inflation. So yet again, you are seeing this effect and let's make things even worse. Your current bank, I don't care where you bank, whether it's Wells Fargo, bank of America, uh, JP Morgan Chase, whatever, it doesn't matter.

Your bank is now be being even greedier than before. Let me explain. So the way it works is banks have. Factor. They're allowed to multiply, to lend you money. Let me give you an example. If you deposited a million dollars at the bank, that million dollars, they can lend up to $10 million based on your 1 million deposit.

If their average, if their average lending rate is, let's just say 10%, they can make up to $1 million per year deposit. If it's five. Well, that's $500,000. These are for profit companies, folks. That's why Wells Fargo, who got fined billions of dollars for inappropriately opening unnecessary accounts and charging unnecessary fees for their clients, still netted billions of dollars on a quarterly basis even after their fees.

You get what I'm saying? These people are for profit as it comes. Now, if they're gonna go into trouble to lend you, let's say a mortgage or a car, at five, six, 7%. Okay? Let's just say they were to go through that trouble and lend you that money. You know, right now they can take their own money that they have, that they could lend you and put it in a risk-free, I don't want to say investment, but investment that United States Treasury is considered a risk-free return.

Why? Because the government can easily pay you back. You know what they do? They pull this lever in the back office. That's just prints money. That's why it's. Risk free. Now, by the way, folks, if you're just joining me, you're listening to Gabriel Shane, certified financial planner and your host, more Knowledge, more Wealth here on every weekend, talking about all important topics of personal finance.

And today I'm just talking to you about the banking just in general of how it operates. My whole point is you go to the bank and you're trying to get a loan, and whether it's a home or a car loan and they're trying to charge you 5, 6, 7, They can go through the hassle, they can go through the underwriting, they can go through the cost of getting you that loan and all for what, five, six, 7% rate of return that the bank gets.

Okay, let's, let's focus on that a little bit. That you put your money at Wells Fargo, they're not even gonna pay you 1%. They'll even pay you maybe 0.1 to 0.5% If you're lucky, then they lend it back to you at five 67%. You can see why they're profitable, right? They're $1 million in deposit. They can lend up to 10 times that.

Well, now you gotta look at the current interest rate environment and where the bank's position is. Why would I lend you that money? Okay, at a five, six, 7% when I can right now put the money that they would lend to you for a guaranteed 5.2% United States Treasury for one year. You get my point? You understand why underwriting is even more difficult now than it was before?

That's my point. It's even more difficult now to get a loan on top of it being higher rates. It's more difficult because the risk for the bank is much more an all for what? An extra one to 2% headache of you potentially missing your payments. You potentially doing something inappropriate with the funds you totaling the car you foreclosing on your home.

God forbid. The point is, is you now have to look at other alternatives. You have to take a look at your situation and see what options you have. A lot of people aren't aware if you're still working, you can take it up into $50,000 from your 401k and you pay yourself back interest, and that is tax free.

and so there's other alternatives you can look at as line of credits on your home. You could look at potentially a cash out refinance, especially if you have substantial equity in the property. Times like this, I see a lot of more people doing reverse mortgages, folks, and that literally for multiple reasons is something you should heavily.

try to avoid because there is a reason that the government forces somebody, if you are considering a reverse mortgage, they force you to go to a class so that you actually know what you're getting. They charge those fees included in that. A bunch of costs associated with that. There's interest associated with that.

So there's fees every month as the money is accumulating to take the equity of your home. And on top of that, there was extreme initiation costs. None of those are a write-off. So what's my point? Why are you spending so much time to pay off your mortgage? That is a write-off. That's guaranteed rate only to go back and take it out on a reverse mortgage.

This is my point. The advice that you get is unbiased. You go to the bank and ask for investment advice. You're working for an employee of the bank. You're looking at 'em, and that's who they're working for. And they're only gonna sell you what they offer and what they make the most on commission. You go to a car dealership, they only get paid if you buy the.

You ask for life insurance, you're only gonna get paid if you buy life insurance. You get what I'm saying? These people that you are getting advice from, Only get paid if you buy from them. That is not unbiased yet. I see people doing this all the time, and it's crazy to me that nobody gets a second opinion when you date somebody before they marry 'em.

Some people will go to their friends and say, what do you think? Other people may go to their family, their parents, their siblings, and say, how do you like. The point is, is you get advice even on medical and even dental work, when they try to say, you need $10,000 worth of crown work in your mouth. You get.

A second opinion. Same thing with medical. Everything that is out there you get a second opinion on, but with your finances you don't. Things you're gonna spend money on, you don't. A subscription service that you signed up for that you really didn't need, that you probably maybe can't even afford. You don't even get a second opinion on it.

It makes no sense, and I see it all the time. Frustrating when people complain about their finances. What we're offering is a free financial assessment. Folks, to take a look at everything in your situation and see if it can be enhanced by a third party, an unbiased third party. We'll give you one to two meetings, one to two hours of our time at no.

Cost folks, and listen, the only way that we get paid is if you decide to hire us. And we're not the firm to say, you know, we found all these great ways to save you money, but we're not gonna give 'em to you unless you hire us. No, no, no. Part of the reason of our success. and part of the reason of our substantial reviews, our awards, our recognition, our fast growth is because of our honest way of working.

It's amazing if you just give the information to the prospect and just trusted them to make the right decision. That right decision sometimes is we call our good deed of the day. We just give 'em the information and say, go ahead and do this. Come back to us when you've achieved steps. 1, 2, 3, 4. Come back to us after step four because guess what?

That road to financial security maybe is a 10 step. . It's crazy that people are doing things and getting advice from people that only get paid when you buy. Think about what I'm saying here, folks, and it's insane that a lot of people don't understand that concept. Here at Falcon Wealth Planning, we are fee only non-commissioned true fiduciaries.

We get paid directly from the clients. So we have a way we can help. We'll quote a fee and if you want help implementing it, we'll do it for you. We'll quote a fee. Some clients like us managing their money, whatever the case is. My point to you is please get that second opinion. I can't tell you how many people we had, maybe about 750 people call in last month alone.

And we are blessed, one of the largest registered investment advisory firms in Southern California in the nation. And our whole point is we are able to help with your situation. We have the bandwidth to do that. Our offices are here in Southern California. We got offices in multiple other states and regions, and we help all across the country.

Folks give us a call. We would love to help. Our phone number is (855) 963-2526. That's 8 5 5 96. Like the bird. We'll be happy to put a personal assessment for you to help relate this show to your specific situation. Now folks, we're gonna go on a quick break and we'll be right back after a few words.

📍 Welcome back folks. This is Gabriel Sheen, certified financial planner and your host of More Knowledge, more Wealth here on every weekend, talking about all important topics of personal finance. Now, today we're just talking about what's going on with the rates and the trickle effect that has on purchasing.

Power, the trickling effect that has on the banks and how they're not as likely to lend you money. Here is how the government really takes control of monetary and fiscal policy, and they control inflationary and deflationary periods. Something as simple as interest rate movements up, people can't afford as much.

The affordability of the index is one of the largest levels in the past 30, 40 years, and when you take a look at people trying to buy a house right now, it's more expensive. For two main reasons. Homes are still higher than they. A year or two ago. That's number one. Number two is that the interest rates are higher.

Let's just say your region of this country, it dropped in value. Well, now the interest rates are so high. The interest rates went from two and a half percent to six and a half percent, even seven in some instances. Okay. Well, if your real estate dropped 10% in your region, you're still, it's not the same.

You are still paying more on a monthly basis. The affordability index has gotten. So the point of all this is that's a trickle effect. And the trickle effect goes to businesses as well, that leads to the stock market. Companies that were heavily leveraged are making and earning less because they're paying more interest and that interest that they're paying more in now, that has doubled from two years ago.

is substantially affecting their p and l. So this is also why when, earlier this week, I think it was Tuesday, Jerome Powell, our fed chair, said interest rates are likely to continue going up if it won't be, is warranted. Why the stock market reacted negatively because it understands this concept and I was talking to earlier about banks and how banks are gonna continue to be tighter with their money.

Sure, they can lend up to 10 times, right. Every single person, whether it's at Bank of America, chase, Wells Fargo, US Bank, whoever. If they were to go in there, everybody all at once, it said, gimme my money. The banks would not be able to give you their money. They call that the run on the bank. It's just not.

able to be fulfilled. And so the, I'm not trying to scare you folks. I mean it's, this is the reality of it. F D I C, that could take months to happen. The goal is not to scare you because quite frankly, there's nothing to be scared about is that the banks are taking that money that they can lend up to 10 times that some of those banks I listed have trillions of dollars of assets.

They can lend up to 10 x on that and by doing, Think about it, how profitable they're becoming, and now they don't need to lend it to you to pay five, 6%. They got United States treasuries paying that you got a US Treasury paying 5.2%. My point is, if institutions are doing this with their money, what are you doing with yours?

Are you still stuck in that total bond market index fund? Are you still in Ag a G? Are you still with your advisor portfolio That hasn't made any changes in the past few years with the market being so volatile with interest rates going so high. Has there been a swap? Have you looked at. Debt. Have you looked at any inflation protected securities?

Have you looked at not going so long-term in your debt, avoiding high yields, which oh by the way, is junk bonds. Have you looked at staying short-term, high quality? Have you looked at other alternatives? Have you got away from US growth that's been getting destroyed? Have you looked into value? Companies that typically do extremely well during times like this, which, oh, by the way, last year outperformed growth by 30%.

Are you re analyzing the portfolio or are you just blindly like Humpty Dumpty walking along down the road saying everything's gonna be all right. . This is what I often see, folks. This is why we're offering a free financial assessment and take a look at your situation, your situation from three months ago.

If you haven't met with your advisor in the past three to four months, this is crucial. So much has changed, so much has happened. You need to analyze your situation and make sure you're not just, if you're not happy with your portfolio, that's a problem, folks. If you're not being explained of what's going on, what you're invested in, why that's happening, then there is a.

Issue. You have an advisor that is reactive. They're just reacting to what's going on out there, and they're explaining it to you, versus being proactive, making the changes, getting us treasuries direct in your portfolio, looking at other forms of fixed income, not annuities, not selling you insurance, not saying it's guaranteed you can't lose.

Garbage. I'm saying take a look at other items that are there that can yield you something that is hedged against inflation. It could be a private debt for all we know. My point to you is get a second opinion. We are offering one to two meetings, one to two hours of our time, folks at no cost. Our phone number is (855) 963-2526.

That's 8 55 96 f. Like the bird, or visit our website@falconwealthplanning.com. That's Falcon WP dot. For short. By the way, folks, if you're just joining us, you're listening to Gabriel Shaheen, certified Financial Planner and your host of More Knowledge, more Wealth here on every weekend, talking about all important topics of personal finance.

And we are talking today just about the simple concept of what are you doing with your money. You have the banks that are repossessing their assets in their portfolio where it used to be. It's weird. A bank is different when they give a loan out to them. It's an. right now you, you owe money, so it's a liability.

But imagine if you were the bank. I've been seeing a lot more people out there that are buying real estate and asking the seller, saying, Hey, would you like to hold the debt? What does that mean? You literally ask 'em, Hey, you sell your house and I'll pay you. How about I give you 10% down, heck, even 20% down, and you carry the debt and I pay you six, seven.

Are they getting six to 7% out there? Do they know how to get a US Treasury paying 5.2%? Probably not. Is your MA big bank right now paying anything over 3% on a cd? Probably not. And so, as the buyer, I've seen a lot of buyers and we've even recommended say, make interest only payments for five years, cuz maybe in five years interest rates will come down.

ask for 10 years. You can ask for whatever you want, folks, real estate is soft right now. It's not the best time to be a seller, so this could be a fantastic opportunity right now to ask. When you're putting an offer on a home, you should negotiate the interest rate. If you want to do a seller carryback, they can hold the note and you make the recommendation of.

Can you do it five year with a balloon at the end? Can you do it 10 years? Folks, if you are buying a house and in the short term, you're not gonna stay there forever, maybe you're only doing it for work, it may make sense to do a five to 10 year carryback, then you have to sell it, which you are gonna sell it anyway.

Hey, pay asking price, which is very difficult right now. Majority of the homes are selling five to 7% under asking price per Redfin. My point to you is now each reason is different. By the way. My point to you is pay asking price, but instead of you getting a loan at six, 7%, how about you get a loan at four, 5%?

Negotiate that. There are multiple ways. You can see how a firm like Falcon Wealth focuses on wealth accumulation. It's not just stocks and bonds, folks. It's not just making sure your investment account goes up in value. Don't get me wrong, we're damn good at it. We're fantastic. We do a great job. We've been recognized by multiple public.

We have multiple advisors that believe in what we're doing and you look at our, each individual holding, compare it to other colleagues and people in the industry. We're proud of it. So I get it. We're fantastic. And investment, guess what? And I'm gonna let the cat out of the bag. Investments are probably the easiest part of our job by far.

Actually the easiest part of our job because when you're an in. Registered investment advisor, you're, you're not working at a broker dealer. That broker dealer. It's act. It's like working at a car dealership. If you want to go to a Ford car dealership, are you allowed to ask for a Toyota? Nothing's wrong with Ford.

They arguably have the best pickups in the world. My point is, is they don't have the best in everything. But if you work at the Ford car dealership and somebody wants to sit sedan, you're gonna have to figure something out. Very limited options for. . Well, we have the whole world of investments to choose from, and because we don't get paid from the investments themselves, we end up getting the best.

How come? Some investments are the fee internal fees are 0.05%, and the others 1.5% because they're doing kickbacks To the advisors that aren't even disclosing it to you, they tell you they charge 1%, but there's another one and a half percent fee on top of that. They're not disclosing it to you, but a lot of people don't understand.

A lot of people are ignorant. They're naive. They're friends with their advisors. Maybe they're even family. Maybe they found 'em at church or at some religious organization. You know what though? It's what's in best interest for you. Don't discount yourself, and I see it all far too often. It's unfortunate that people get into a form of complacency.

My whole point is this, if you can't make those mortgage payments, are those advisors gonna make it for you? The answer is, If the friend that's managing the money is no even the family, if the answer is no, you have to look out what's best for you. This is your life, your financial situations. Mistakes are not an option.

Failure is not an option. You can't fail in life. . This is why we're offering a free financial assessment. We do a fantastic job. We do hundreds of these on a monthly basis, folks, and we are well equipped. Our advisors are certified financial planners. Folks, all of our financial planners are like that. We would love to help you out, folks.

We are offering one to two meetings, one to two hours of our time. Folks at no cost. Give us a. We would love to help, help relate this show to your specific situation. Our phone number is (855) 963-2526. That's 8 5 5 96 Falcon. Like the bird, we can help put together a personal assessment that really helps answer the questions that you have on your situation where you are.

Are you on track? Some people sometimes think they're embarrassed to come in. Folks, it doesn't matter what you have. It doesn't matter how far behind you are. It doesn't matter if you think you're. Doing amazing folks. We pride ourselves in taking an approach that can help increase your overall wealth situation, and a lot of that has to do with taxes.

Most firms out there says you have to consult with a tax advisor, or we are that tax advisor and we're able to add that value. We're able to help out. Most people have no idea. How to do this, and that's why we would like to continue with our services and offerings of our free financial assessment. Folks, give us a call.

We would love to help. Our phone number is (855) 963-2526. That's 8 5 5 96 Falcon like the Bird, or visit our website@falconwealthplanning.com. That's f. wp.com for a short. Folks, that was a fast, fast show. I wanna thank you for tuning in with us this weekend. If you have any questions, please reach out to myself or any one of my colleagues here at Falcon Wealth Planning.

Our phone number is (855) 963-2526. That's 8 5 5 96. Like the bird. We'll be happy to relate this show to your situation by giving you a confidential private consultation, a free assessment really to answer all the questions that you have. Folks, it's a pleasure talking to you this weekend. I want you to have a fantastic week.

Have a great rest of your weekend and God bless.