More Knowledge, More Wealth - EP 157: "Tax Planning, Inflation, and the Stock Market"
More Knowledge More Wealth 158
[00:00:00] Gabriel: Good afternoon. This is Gabriel Shahin certified financial planner, and your host of more knowledge, more wealth here on every weekend. Talking about all important topics of personal finance. Our 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, and one of our colleagues here at Falcon wealth planning.
[00:00:17] Our phone number is (855) 963-2526. That's 8 5 5 96. Falcon like the bird, or visit our website at Falcon wealth, planning.com. That's Falcon wp.com for short. Now I'm a principal here at Falcon wealth planning. We are a fee only, not fee based, but a fee only financial planning firm. We do investment management as well, but folks, we specialize in everything that involves a dollar.
[00:00:45] That goes over where you are today. How retirement looks like, talk about taxes, investments, business planning, social security, estate planning, folks who name it, anything that involves a dollar sign. We can help you with take advantage of a free financial assessment that we have. that we can really help relate this show to your specific situation.
[00:01:04] And we got offices all across the country and we can help folks. We help people all across doesn't matter where you are. Give us a call. Our phone number is eight five five nine six three twenty five. 26 that's 8 50, 5 96, Falcon like the bird. Now folks, we are entering the political midterm season. We have rising inflation costs.
[00:01:28] We have high interest rates yet. Again, our fed chair, Jerome Powell, increased rates by 75 basis points. So we are yes. Seeing historical times right now. We've seen it before, during the Jimmy Carter years in the eighties. This isn't uncommon territory. So I'm gonna explain to you cuz a lot of you, number one, weren't around or number two, don't remember, or it didn't have as enough assets or nearing retirement where it mattered of what to expect during times like this.
[00:01:57] And these are where you need to be. Pro-active folks. It's extremely important to take a look at your situation and say what you should be doing. Cuz it seems like every asset class is losing what happens to bonds. When interest rates go up, bonds drop in value. That's what's happening. Stock markets.
[00:02:14] Don't like it in the short term as well. Those have dropped in value down about 20% for the year. What else is doing bad? Well, cryptocurrency, if we even want to utilize that as a real asset class, real estate is hurting. Now. We are seeing consistent price drops about 6% drop nationwide per red. Analysis.
[00:02:33] So a lot of things have been dropping well. That's why you sit in cash, right? Well, cash. If inflation is on track for 10% this year, the a hundred thousand you have in the bank is gonna be worth 90,000. By the end of the year, that's also down 10%. So literally, what are we talking about? Here is everything dropped in goal prices and silver and copper, all commodities.
[00:02:56] Haven't really done much. okay. Gabriel, are you missing anything? I mean, is that's enough? I don't need to hear anymore. Assets in general has dropped yet. The prices of everything is going up. Interesting. Right? So what should you be doing? What is our federal government doing with this as well? With this information, one side of the chain says things are fine.
[00:03:20] The other side, the chain says you're crazy. Things are not. . And so with this, you have to understand there is one asset class that is actually doing well, and that is the United States treasury you now, typically the way it works is, and it's just like a CD. If you do a five year CD, you get paid more on that 5% CD.
[00:03:39] The interest rate might be 2% versus if you did a one year CD, it might be 1%. So it'd be lower doing a one year CD versus a two year CD. And I'll give you it's like that in. And so if 30 year mortgage right now is 6%. If you did a 15 year mortgage, it would be 5%. It's lower. The shorter term that you go right now, the United States, 30 year treasury is roughly three and a half percent.
[00:04:06] Our 10 year treasury is roughly three and a half percent. Hmm. That seems a little weird. Why would you do a 30 year? If you can get the same rate as a. check this out. A two year treasury is almost 4% depending on the day. Wow. So you can get more in a two year treasury. Let's call it a CD better than a CD.
[00:04:28] It's guaranteed by the us government. They ever need to pay you back. They just pull the lever and pay you back. Paying higher than a 10 and 30. Hmm, get this a one year treasury is paying over 4%. Where could you get a 4% CD right now? Nowhere is the answer to that question. So what are you doing to be proactive about this?
[00:04:52] Are you going out and selling and taking advantage of the Bo? I'm not telling you to do it, but my goodness, depending on your situation, you should be having an allocation towards the us treasury. Where else are you gonna get a 4% yield for one, 2%. Versus keep it in bonds where you're losing money. Are you doing this is your advisor is doing this because you do need some stability in your account.
[00:05:18] I mean, naturally right? But the problem is people are not doing that. They're so just fixated on what they've done and always done. Yes. Markets are gonna recover. You're gonna make money over time. I have a high probability in the next 10 years, you're gonna have more money to in 10 years than you do today.
[00:05:35] Very high degree of confidence, how much, but my net worth on the line for it. So what does that mean for you? Are you gonna consistently do what you've been doing? This whole time. I know it's worked out in the past, but times have changed. Now times are different with this rising interest rate environment.
[00:05:55] This is where you have to take a look at your allocation, that your portfolio, what you have and make sure that you're not still trying to chase yield with these long-term bonds, because those are down over 20% more than the S and P 500 bonds that are supposed to be safe are down almost 30% for the.
[00:06:16] almost more than the NASDAQ. Definitely more than the S and P 500 that's down about 20% for the year 50%. It's down almost 50% more lost almost 10% more than the S and P 500, but people still don't feel change is necessary. Some people are stuck in their 20, 30 funds, 2035 funds, 2040 funds and thinking that's adequate and that's.
[00:06:40] folks, those do not get professionally managed in a matter where they're taken advantage of this. They have set targets, which is why they call it target date, return of how they're supposed to be invested. They are not being proactive in selling out of corporate bonds or any other type of bonds to get into United States, treasuries.
[00:07:00] And where else you're gonna see this in two years from now. You're not gonna see a one year treasury paying over 4%, because right now they're trying to stabilize the yield curve. Right? We're hitting into an anomaly of a situation where that this instance happens only because of the rising rates in inflation.
[00:07:21] My question to you is what are you doing about it by the way, folks, if you're just joining me, you're listening to Gabriel, Shahin certified financial planner and president of Falcon wealth planning. And we are here talking about all important topics. Personal finance really is helping to relate this show to your situation.
[00:07:36] And so we are talking about the United States treasury right now, and the rates that it is paying. And what does that mean for you? This is our government's way to try to stabilize and put a calming down of inflation. Cause instead of your money losing by 10% a year, at least you can get a 4% treasury for a year.
[00:07:53] So you're only losing my six . So at least it puts you a place to park your money. You know, you got IBOs paying about 10. As well. I mean, so there are ways you can put your money to work. Now, IBOs, you can only limit yourself to $10,000. Now, if you have spouse, that's 20,000. If you have three kids, that's 10,000 a kid, you can put $50,000 for a 10% yield.
[00:08:17] I bond those reset every six months. So I'm very curious to see what they are coming up. My point for you is, are you being told what to. Are you being told how to do it more importantly, are you being told that it could be executed on your behalf? What I've seen for a lot of people they're just complacent.
[00:08:34] And the problem with that is you get passed up because the thing that you buy today might not be good tomorrow. And I know like these tech companies that that've been doing great for so long, they're gonna start seeing a repricing. We've already seen it when it's dropped over 30% year to date and on top of.
[00:08:51] With higher interest rates, those affect tech companies, cuz they rely heavily on outside funding and debt. Cuz most of the time they're not profitable. I mean, Tesla was the perfect storm. You had arguably the world's best marketer in Elon Musk and a proven track record with Elon Musk. Not only was he good at marketing, but he has proven track record.
[00:09:12] And then he started the company during a, one of the lowest interest rate environments we've ever seen in us. . I mean, this is crucial for you to understand that because it could not have been done. He could not have received investor money, kicked out bonds, junk bonds, only paying 5% or under. And so the storm was perfect for a company like Tesla that was on the brink of bankruptcy many times so much so that he almost sold it to apple.
[00:09:42] If they would've just picked up the phone for 40 billion, which oh, by the way is worth almost a trillion today. What's my point with all. is you got other companies let's look at the competitors with Tesla, whether it's Nicola, whether it's Neo, whether it's Rian, whatever it is, all these companies that are coming out, how are they gonna be able to sustain that in a rising interest rate environment?
[00:10:04] They're not gonna be able just to get funding like they've done in the past times have changed. And you've seen that when the IPOs have come out and they've dropped substantially for more, they were, some of these companies are down 70, 80, 90% from its. But people don't seem to be phased by that. People don't seem to understand that what was good yesterday may not be good today and is very bad in the future.
[00:10:31] This is why it's important to talk to a financial professional. And this is why we're offering a free financial assessment. This is your future. This is your life here. Don't worry about getting sold to we're fee. non-commission, there is no products. We sell, we sell brain. We sell our advice and we will give you one to two meetings.
[00:10:49] One to two hours of our time at no costume. No, we're not gonna withhold information and say, don't, you're not gonna, we're not gonna give you the information unless you hire us. That's not how we work. We're gonna give it to you. because if you're a DIY and do it yourself, well, hopefully you pass a good word to somebody around you that could use our services.
[00:11:07] That's how we operate folks. And we would love to help give us the opportunity for that. Our phone number is (855) 963-2526. That's 8 55 96, Falcon like the bird, or visit our website@falconwealthplanning.com. That's Falcon wp.com for. Folks. So we're gonna go on a quick break. And when we come back, we're gonna talk more about what's going on in these markets right now and understand more about these treasuries and how it works and how you should be aware of purchasing these.
[00:11:38] If it's something that you're looking into, but we be right back after a few words.
[00:11:48] welcome back folks. This is Gabriel, Shahin certified financial planner, and your host of more knowledge, more wealth here, and every weekend talking about all important topics of personal finance. And today we are discussing the treasury rates and how interest rates have gone up another 75 basis points of stock market seem mixed emotions about it going up and down left and right.
[00:12:12] So really discussing with you. What does that mean for you? We discussed how the United States treasury currently on a 10 year treasury is three and a half. historically speaking. If you were to get a two year treasury, you didn't get as a good of a three and a half percent. It should be lower, but the reality is you can actually get almost 4% with the two year treasury and get this with a one year treasury.
[00:12:34] You can get over 4% as we speak. Now, these are all subject to change. You asked me in a year or two from now, I would be shocked if you get 2% on these one to two year treasuries, but the point is this, you can get 'em now, how come you're not hearing about this? How come nobody's talking about this? You know why cuz institutions, people like us at FA north climbing that are buying this for our clients are being aware of this.
[00:12:58] And that's the thing. Sometimes you just can't afford to not have a profess. Do this, because if you had a professional, they'd be doing this on your behalf because most people don't even know to buy this. It's not like you buy a stock. You can't just put it in an order and buy the treasuries. You have to go through a bond desk.
[00:13:17] And the problem is, if you go through a retail bond desk, they're gonna charge you more. Then what the price is getting. So you're gonna have to pay more than what it's worth. Why is that important? Because you might not yield 4%, but yield three and a half, depending on the situation, but 3.75. So you have to see, be aware of the opportunities that are out there.
[00:13:39] There's still good purchases there. And listen, I'm not here slinging bonds. We don't make commissions. When we buy these for our clients, we are the only financial planning firm. We're just saying this makes sense as part of the portfolio, instead of maybe long term bonds, intermediate term bonds, or short, even short term bonds, because as interest rates rise, bonds get punched in the face and we're seeing.
[00:13:59] Where you have 20 year plus treasuries down almost 30% for the year intermediate term bonds down over 10% for the year. Heck short term, bonds are down three to 4% for the year. All bonds are down, but you might need it in your portfolio. And that target date fund that you have, or the portfolio that you have may not have it because most firms out there charge commissions and are limited and, or are limited to what's available to them or on the shelf of the company that they work.
[00:14:29] if you have a John Hancock, if you have a Prudential, if you have a Lincoln, if you have a, even a Vanguard, even though we like Vanguard, if they are limited mayor Lynch, Morgan Stanley, ever Jones, UBS, JP Morgan, Wells Fargo, they are limited by the broker dealer of what they can offer you. They can't just offer you everything in the investment world.
[00:14:51] They're limited to what they're allowed to offer you. And because they are commission based C. And a lot of the revenue is based on what they're selling you, the products, the funds that they're selling you, they're only gonna offer you what they can get paid from. It's natural. It's like going to afford car dealership.
[00:15:11] What are they gonna sell? You afford you can't ask for a Toyota. And by the way, nothing's wrong with a four. They have the best pickup in the world. But at the end of the day, you can't ask for a Toyota, even though it may be more economical and last longer, and maybe more suited for what you. so the benefit of working with a fee only advisor, or at least talking to a fee only advisor is they'll tell you about everything that's available to you.
[00:15:34] That makes sense for you. That's in your best interest in the whole investment universe. And what we've seen is people just aren't aware. They don't know what they don't know. And this is why we are offering that pre-financial assessment. Just to have you take advantage majority, if not all of our clients have Falcon wealth.
[00:15:52] Have taken advantage of this, where we have thousands upon thousands of different accounts, where we are helping our clients achieve their financial goals. And they've all done the free financial assessment, and we're gonna give it to you an exactly straight shooting of what you need to do. We help people all across the country.
[00:16:08] Our headquarters is here in Southern California, and we would love to help. Our phone number is eight five five nine six three. 25 26 that's 8 5, 5 96, Falcon like the bird we would love to help relate the show to your situation, because right now it's unstable. Nobody is knowing exactly what's gonna happen.
[00:16:29] So you have to be prepared. This is where you have to be proactive. Here's what we do know inflation is rising. Here's what we do know interest rates are rising in our fed chair. Just raise rates by 75 basis points and still plans to do it up until Q2 of next year. So what are you waiting? I mean, if you're still gonna hold your investments the way they are and not make any changes, that seems like madness, withdraw the money and spend it because it sounds like you're gonna be losing money in value.
[00:16:57] Now I'm being frivolous here and I'm being a bit extreme. I'm not telling you, you know, spend the money, but I mean, this is not a good situation. If you are in long term bonds and. You have to be able to get some type of stability in your portfolio. That can number one, maintain its principle value because as interest rates drop, what happens to bonds?
[00:17:16] Yeah. They drop in value and get you a solid yield. Cause right now the yields are minuscule. And then you compound that with the stock market where most people were heavily invested in tech and it's getting punched in the face value companies have actually been doing very. and what historically does well after recessions small caps and mid-caps, and I bet you, you don't have a lot of those.
[00:17:40] Why? Because they haven't done as well. In 20 19, 20 and 21 as large caps companies have been doing. , these are the things that we're trying to tell you, trying to keep you aware of, to protect you of what's out there, by the way, folks, if you're just joining us, you're listening to Gabriel, Shahin certified financial planner and your host of more knowledge, more wealth.
[00:18:01] You're an every weekend talking about all important topics of personal finance. And today you just have to be aware of your portfolio and what it's doing. And the worst thing you can do is sit on the sideline because okay, you got it right. If you're on the sideline, you got it. The market dropped Bravo.
[00:18:18] What are you waiting for? Get in, get back into the market after it's job 20 to 30% in value. How come I don't see people doing that? I mean, it's CRA. Oh no, I'm still gonna wait. Wait for what the rebound and to miss it. I see people Wal time with seven figure salary or seven figure. Excuse me. With seven figure portfolios.
[00:18:39] All the. And they're over here, timing markets, and they're so proud of themselves. And when I do a calculation, if they would just put their money in the S and P 500 with as much money as they made and contributed over the time, they wouldn't have 1.2 million, they would have 3.7 million. It, they brag about how they missed the 2008 drop.
[00:18:59] But if you would've just spot and hold or rode the wave and stayed disciplined, this isn't even tied, taken advantage of market drops and market volatility with rebalancing the portfolio, let alone relocating the portfolio. They would've had almost three times more. I can't tell you how many times I see that, but no people wanna be in control.
[00:19:21] You. I say this. When I started making over $25 an hour, I let somebody else do the oil change on my car, gave up control, same thing with my yard. I actually like gardening, but I don't have the time for it anymore. Okay. I didn't like doing the oil change. I just did it to save money, but now it actually made more money for me to have somebody else do the oil change.
[00:19:44] And because I don't like, or don't have the time to do the gardening, somebody else does it. I mean, if you like it and don't have the time, that's a problem. if you don't know how to do it, that's a bigger problem thinking, you know how to do it. And really don't know how to do that is the biggest problem.
[00:20:02] This is why we recommend talking to a professional. If nothing else just validate what you're doing is correct. If nothing else, even if you're set for retirement, you're playing on the earnings and you don't even need the money. I think outta the respect of money, you should know if what you're doing is.
[00:20:20] because unfortunately I see a lot of people mess it up. And my recommendation to you is just get that second opinion. It's no skin off your nose. There's no reason not to think about it like that. And it doesn't take much time. It's one to two meetings, one to two hours at no cost folks. Cuz I just, it bothers me when I see so many people make mistakes because when you're losing money, other people are making it.
[00:20:43] I promise you, other people are making it. So my comment to you is. get and seek if nothing else, a second opinion, we would love to be that second opinion. Our phone number is (855) 963-2526. That's 8 5, 5 96. Falcon like the bird we can help you all across the country have offices in multiple states. We would love to help.
[00:21:07] Our website is Falcon wealth, planning.com. That's Falcon, WP dot. For sure would love to help put a personal confidential assessment for you to help relate this show to your specific situation. Especially as the year is coming to an end, especially entering a political season through midterms, especially entering a season where the inflation is still rising.
[00:21:31] I mean, heck gas prices went down substantially about 20% nationwide and still inflation went up by 0.1%. Ooh, that's a little scary. And we feel it. I went to a, a restaurant the other day of drive through fast food. Wasn't even a restaurant. It was a fast food restaurant and I got a number two. I'm not gonna tell you where I went and it was $18 and 31 cents.
[00:21:55] That's crazy that wasn't even in LA county, that was in San Bernardino county. and it was $18 and 31 cents for a number two. I could not believe it. I told my wife, I called her before I even paid them. Right. Cuz you put in the order first to tell you how much it's gonna be. They review your order and then you go pay it.
[00:22:13] The next window I called her right away. I said, you know that two for 25 at Applebee's doesn't sound so bad anymore. That's inflation folks. So if you have any questions, we'd love to help. Our phone number is eight five. 9 6 3 25, 26. That's 8 55 96, Falcon like the bird here in Southern California. The weather's been changing up and down left and right.
[00:22:37] I got a little allergies here. So for those watching the video cast and you're seeing me itch, my nose looks like allergies are creeping up on me on the radio. Hopefully you done. uh, get to experience any disruption there, but folks, this was a fast, fast show. I appreciate you staying with us this 30 minute period.
[00:22:55] You could always reach out to myself or any one of our colleagues here at Falcon wealth planning. Our phone number is eight five five. 9 6 3 25, 26 that's 8 5, 5 96. Falcon like the bird, feel free to visit our website at Falcon wealth, planning.com. That's Falcon wp.com. For sure, we have a knowledge center where you can get access to this podcast.
[00:23:18] Uh videocast and a lot of other helpful information to give you knowledge. You need to increase your wealth. I want to thank you for tuning in with us, you guys have a great week, have a great. And God bless.