1 00:00:06,440 --> 00:00:10,719 Speaker 1: Tonight, some local perspective on stock market volatility you might 2 00:00:10,800 --> 00:00:13,840 Speaker 1: not find anywhere else. You're listening to Simply Money, presented 3 00:00:13,840 --> 00:00:18,119 Speaker 1: by all Worth Financial on Bob Sponseller along with Brian James. Well, 4 00:00:18,200 --> 00:00:20,920 Speaker 1: how often have you been checking the headlines this week? 5 00:00:20,960 --> 00:00:25,520 Speaker 1: How about stock market numbers? How about consuming I don't know, 6 00:00:25,880 --> 00:00:29,960 Speaker 1: media pundits on television. If you're anything like me, you 7 00:00:30,000 --> 00:00:32,720 Speaker 1: can only take so much of that and then you 8 00:00:32,840 --> 00:00:35,199 Speaker 1: just got to turn your attention to something else. And 9 00:00:35,280 --> 00:00:39,440 Speaker 1: in my case, watching my thirty and oh Miami RedHawks 10 00:00:39,760 --> 00:00:42,839 Speaker 1: continue their undefeated season last night, Brian, it was a 11 00:00:42,920 --> 00:00:46,960 Speaker 1: nice diversion from all this war talk and pundits on 12 00:00:47,040 --> 00:00:47,680 Speaker 1: cable news. 13 00:00:48,159 --> 00:00:50,360 Speaker 2: Well, I hate to burst your bubble, Bob, but they 14 00:00:50,360 --> 00:00:55,240 Speaker 2: are now headed to Athens, Ohio to face my vaunted 15 00:00:55,280 --> 00:00:59,440 Speaker 2: fourteen and fifteen Bobcats, and we'll see about that perfect season, sir, Oh, 16 00:00:59,480 --> 00:01:00,160 Speaker 2: yes we will. 17 00:01:01,200 --> 00:01:05,640 Speaker 1: I've watched enough Max Sports in Miami and Ohio university 18 00:01:05,760 --> 00:01:08,560 Speaker 1: rivalry games over the year. It will not shock me 19 00:01:08,760 --> 00:01:12,160 Speaker 1: at all if your Bobcats go in there Friday night 20 00:01:12,240 --> 00:01:15,360 Speaker 1: and take them down. It'll be fun to watch, all. 21 00:01:15,360 --> 00:01:18,800 Speaker 2: Right, me a little bit, But I will be there 22 00:01:18,800 --> 00:01:19,880 Speaker 2: I will be there in person. 23 00:01:20,160 --> 00:01:20,840 Speaker 1: Here, are you really? 24 00:01:21,800 --> 00:01:22,760 Speaker 3: Yeah, we're gonna go. 25 00:01:23,000 --> 00:01:25,920 Speaker 2: My son is gonna be matriculating there in the fall, 26 00:01:25,959 --> 00:01:27,720 Speaker 2: and he's kind of gotten into the sports scene, so 27 00:01:28,080 --> 00:01:29,039 Speaker 2: we're gonna go check it out. 28 00:01:29,040 --> 00:01:30,360 Speaker 3: It'll be a good time there at the Convo. 29 00:01:30,400 --> 00:01:32,039 Speaker 2: I used to live in the Convo back in the day, 30 00:01:32,040 --> 00:01:33,280 Speaker 2: and this will be the first time I've been in 31 00:01:33,319 --> 00:01:35,120 Speaker 2: it since I graduated, so this's before. 32 00:01:34,880 --> 00:01:37,840 Speaker 1: Well, that'll be fun, especially being there with your son. Good. 33 00:01:38,080 --> 00:01:40,720 Speaker 1: That's good stuff. All right, back to reality on the 34 00:01:40,760 --> 00:01:44,000 Speaker 1: ground here. Let's remind you of exactly what is causing 35 00:01:44,040 --> 00:01:47,720 Speaker 1: all this volatility, and it's the fact that roughly twenty 36 00:01:47,760 --> 00:01:52,480 Speaker 1: percent of global oil and liquid natural gas flows through 37 00:01:52,520 --> 00:01:55,920 Speaker 1: that strait of horror moves adjacent to Iran where all 38 00:01:55,920 --> 00:01:59,160 Speaker 1: the bombing is taking place. And that's really you know, 39 00:01:59,200 --> 00:02:02,560 Speaker 1: the straight of Horror, who is constricted, you know, keeping 40 00:02:02,640 --> 00:02:05,600 Speaker 1: all that oil flow going through, And Brian, I have seen, 41 00:02:05,760 --> 00:02:08,840 Speaker 1: you know, one of the things, one of the causes, 42 00:02:08,880 --> 00:02:11,880 Speaker 1: among many is insurance companies. Let's face it, when you 43 00:02:11,960 --> 00:02:15,200 Speaker 1: try to take a ship, an oil liner through there, 44 00:02:15,560 --> 00:02:18,880 Speaker 1: you know we're talking about millions, if millions of dollars 45 00:02:18,919 --> 00:02:23,440 Speaker 1: worth of you know, property and contents and insurance companies 46 00:02:23,480 --> 00:02:26,079 Speaker 1: are basically saying we're not going to ensure the damage 47 00:02:26,080 --> 00:02:29,560 Speaker 1: is here while while bombs are being dropped. So you know, 48 00:02:29,760 --> 00:02:32,520 Speaker 1: that's that's the conundrum right now is when can we 49 00:02:32,600 --> 00:02:35,720 Speaker 1: get that straight of horn moves opened up. And obviously 50 00:02:35,720 --> 00:02:38,520 Speaker 1: if the shipping opens up quickly in the near term, 51 00:02:38,919 --> 00:02:43,600 Speaker 1: this is just likely going to be a little volatility blip. If, 52 00:02:43,639 --> 00:02:47,959 Speaker 1: on the other hand, hormves remains disrupted. Now we start 53 00:02:48,000 --> 00:02:52,680 Speaker 1: to shift, you know, what happens to inflation policy constraint, 54 00:02:52,720 --> 00:02:58,000 Speaker 1: perhaps by congress tighter financial conditions. In other words, sustained 55 00:02:58,320 --> 00:03:02,960 Speaker 1: high oil prices and gas prices can decrease global demand 56 00:03:03,320 --> 00:03:08,359 Speaker 1: and that starts to impact the US economy. Brian, take 57 00:03:08,440 --> 00:03:12,720 Speaker 1: us back to the early nineteen seventies where we had 58 00:03:13,000 --> 00:03:16,920 Speaker 1: a prolonged disruption in the supply of oil to the 59 00:03:17,000 --> 00:03:17,680 Speaker 1: United States. 60 00:03:18,440 --> 00:03:20,720 Speaker 2: Yeah, before we get into that, my fact checkers are 61 00:03:20,760 --> 00:03:23,320 Speaker 2: informing me that my ou bobcatch are actually fourteen and 62 00:03:23,400 --> 00:03:25,600 Speaker 2: sixteen now because they lost a U mass last night. 63 00:03:25,639 --> 00:03:27,800 Speaker 2: So there now that we've got everything up to date 64 00:03:27,919 --> 00:03:31,080 Speaker 2: last night. So anyway, Yeah, let's look over altat history. 65 00:03:31,080 --> 00:03:32,400 Speaker 2: You know, I love to look at the history what 66 00:03:33,760 --> 00:03:36,160 Speaker 2: looks kind of like what we're going through now, so 67 00:03:36,160 --> 00:03:37,800 Speaker 2: that we can get a feeling for what it might 68 00:03:37,840 --> 00:03:40,400 Speaker 2: look like. History doesn't always repeat, but it does kind 69 00:03:40,440 --> 00:03:44,320 Speaker 2: of rhyme sometimes, so worst case scenario actually occurred during 70 00:03:44,360 --> 00:03:47,320 Speaker 2: the seventies, you know, or at least what we've had 71 00:03:47,360 --> 00:03:50,480 Speaker 2: so far. Nineteen seventy three OPEC oil embargo. This was 72 00:03:50,520 --> 00:03:54,120 Speaker 2: Egypt in Syria launched a surprise attack on Israel. The 73 00:03:54,240 --> 00:03:56,160 Speaker 2: US came down on the side of Israel, similar to 74 00:03:56,240 --> 00:03:58,960 Speaker 2: what we're doing now, and that included military aid supplies 75 00:03:59,000 --> 00:04:02,520 Speaker 2: and so forth. And in response, OPEK, which was led 76 00:04:02,520 --> 00:04:05,040 Speaker 2: by Saudi Arabia at the time, decided to cut oil 77 00:04:05,080 --> 00:04:08,280 Speaker 2: production and ban oil exports to the US and whoever 78 00:04:08,400 --> 00:04:10,920 Speaker 2: was supporting Israel when this was also the Netherlands and 79 00:04:10,920 --> 00:04:13,680 Speaker 2: a few of the Western allies. Impact of that, again 80 00:04:14,120 --> 00:04:16,320 Speaker 2: was similar to what we might be seeing now. Oil 81 00:04:16,360 --> 00:04:18,520 Speaker 2: prices quadrupled in just a few months, and that was 82 00:04:18,560 --> 00:04:22,039 Speaker 2: followed by gas shortages. Lines formed at US gas stations. 83 00:04:22,040 --> 00:04:25,240 Speaker 2: Whenever you google what happened in the seventies to the economy, 84 00:04:25,279 --> 00:04:28,679 Speaker 2: you will see pictures of nineteen seventies cars all backed 85 00:04:28,720 --> 00:04:31,000 Speaker 2: up at gas stations with people standing outside of them 86 00:04:31,000 --> 00:04:34,200 Speaker 2: looking grumpy. That's the lasting image from the oil and 87 00:04:34,279 --> 00:04:37,360 Speaker 2: wargo back then. It lasted from October of seventy three 88 00:04:37,440 --> 00:04:39,960 Speaker 2: to March of nineteen seventy four, so that's a six 89 00:04:40,000 --> 00:04:42,160 Speaker 2: month period. I was born about three months after that, 90 00:04:42,200 --> 00:04:43,599 Speaker 2: so I can't say I have direct. 91 00:04:43,320 --> 00:04:44,160 Speaker 3: Experience with it. 92 00:04:45,120 --> 00:04:47,560 Speaker 2: But those price effects hung around for years, and then 93 00:04:47,600 --> 00:04:51,000 Speaker 2: of course that all led to inflation more commonly known 94 00:04:51,040 --> 00:04:53,600 Speaker 2: what we referred to back then as stagflation, because we 95 00:04:53,680 --> 00:04:58,040 Speaker 2: had inflation without a growing economy. The CPI with the 96 00:04:58,120 --> 00:05:01,040 Speaker 2: consumer price index hit about eleven percent in nineteen seventy four, 97 00:05:01,480 --> 00:05:04,000 Speaker 2: peaked at fourteen to fifteen percent in eighty. 98 00:05:04,600 --> 00:05:06,599 Speaker 3: That wasn't a spike. It hung around for a long time. 99 00:05:06,640 --> 00:05:09,560 Speaker 2: It was embedded by the oil shocks and also some 100 00:05:09,680 --> 00:05:12,520 Speaker 2: looser monetary policy earlier in the decade. That was triggered 101 00:05:12,520 --> 00:05:15,320 Speaker 2: by President Nixon wanting all the voters to be happy 102 00:05:15,760 --> 00:05:17,960 Speaker 2: in the run up to the campaign, and that led 103 00:05:18,000 --> 00:05:22,080 Speaker 2: to what we now call stagflation. The answer to that 104 00:05:22,160 --> 00:05:25,000 Speaker 2: was some extreme fed policy. We often hear the name 105 00:05:25,080 --> 00:05:27,920 Speaker 2: of Paul Vulker and the Vulgar Rule and so forth. Well, 106 00:05:27,960 --> 00:05:30,479 Speaker 2: this was his time to shine, so he dramatically raised 107 00:05:30,480 --> 00:05:33,240 Speaker 2: interest rates in nineteen seventy nine. That got the federal 108 00:05:33,240 --> 00:05:35,800 Speaker 2: funds rate near twenty percent eighty or eighty one. 109 00:05:35,880 --> 00:05:37,159 Speaker 3: You might remember your own. 110 00:05:37,040 --> 00:05:40,000 Speaker 2: Mortgage or your parents' mortgage being somewhere in the ballpark 111 00:05:40,040 --> 00:05:42,839 Speaker 2: of sixteen to eighteen percent something like that. 112 00:05:42,839 --> 00:05:45,800 Speaker 1: That was that I was at high school exackly more, Bryant, 113 00:05:46,000 --> 00:05:47,720 Speaker 1: I was in high school back then, and I can 114 00:05:47,800 --> 00:05:50,479 Speaker 1: remember my dad being very grumpy during that time. But 115 00:05:50,560 --> 00:05:54,200 Speaker 1: please continue now, and I saw I wasn't around, of 116 00:05:54,240 --> 00:05:55,520 Speaker 1: course at this point, but I do. 117 00:05:55,800 --> 00:05:58,920 Speaker 2: But I've had clients talk about it, and that the 118 00:05:59,040 --> 00:06:01,200 Speaker 2: interesting thing that I always bring up is they always 119 00:06:01,240 --> 00:06:04,240 Speaker 2: talk about how they wish they had bought CDs and 120 00:06:04,279 --> 00:06:06,040 Speaker 2: things back then, because yes, you could get a CD 121 00:06:06,120 --> 00:06:09,640 Speaker 2: for fifteen sixteen percent guaranteed by the federal government. However, 122 00:06:09,680 --> 00:06:11,640 Speaker 2: nobody had the money left over to do that because 123 00:06:11,640 --> 00:06:13,599 Speaker 2: of the inflation and because of what they had to 124 00:06:13,600 --> 00:06:14,440 Speaker 2: pay for mortgages. 125 00:06:14,520 --> 00:06:17,120 Speaker 3: So it's interesting we kind of remember the you know, 126 00:06:17,920 --> 00:06:18,920 Speaker 3: we remember. 127 00:06:18,560 --> 00:06:21,880 Speaker 2: The painful stuff and not necessarily the good stuff. 128 00:06:22,360 --> 00:06:24,920 Speaker 1: Yeah, and that's kind of a worst case scenario. And 129 00:06:25,240 --> 00:06:28,280 Speaker 1: I was looking back, Brian at how much oil was 130 00:06:28,960 --> 00:06:31,880 Speaker 1: domestically produced here in the US back in the early 131 00:06:31,960 --> 00:06:35,640 Speaker 1: seventies versus today. You know, we throw around the term 132 00:06:35,800 --> 00:06:38,719 Speaker 1: energy independent all the time. I mean, the US is 133 00:06:38,839 --> 00:06:43,279 Speaker 1: not one hundred percent energy independent. We still do import 134 00:06:43,360 --> 00:06:46,040 Speaker 1: quite a bit of oil from the Middle East and 135 00:06:46,080 --> 00:06:48,400 Speaker 1: those OPEC nations. But we, on the other hand, we 136 00:06:48,520 --> 00:06:52,159 Speaker 1: produce a whole lot more oil domestically than we did 137 00:06:52,200 --> 00:06:55,200 Speaker 1: back in the early seventies. This is a good time 138 00:06:55,240 --> 00:06:58,320 Speaker 1: to remind folks that a majority of these Middle East 139 00:06:58,360 --> 00:07:01,320 Speaker 1: events or conflicts do not end up with these worst 140 00:07:01,320 --> 00:07:04,359 Speaker 1: case scenarios. Case in point, going back to the Gulf 141 00:07:04,480 --> 00:07:06,800 Speaker 1: War in nineteen ninety one, the s and P five 142 00:07:06,880 --> 00:07:10,920 Speaker 1: hundred was up thirty two percent over the next twelve months. 143 00:07:11,240 --> 00:07:14,600 Speaker 1: When Russia invaded Ukraine, the SMP was down about six 144 00:07:14,640 --> 00:07:18,320 Speaker 1: percent over the next twelve months. But on average, the 145 00:07:18,400 --> 00:07:22,080 Speaker 1: average intra year drop, and we do talk about this 146 00:07:22,200 --> 00:07:25,600 Speaker 1: all the time Brian is about fourteen percent on the 147 00:07:25,720 --> 00:07:29,160 Speaker 1: SMP even in good years like what we had last year. 148 00:07:29,880 --> 00:07:33,000 Speaker 1: So a ten to fifteen percent drop during the year 149 00:07:33,120 --> 00:07:37,280 Speaker 1: intra year is very common, and the market usually finishes 150 00:07:37,360 --> 00:07:40,400 Speaker 1: positives in most of those years. When we have that, 151 00:07:40,920 --> 00:07:44,320 Speaker 1: you know inter year drop. So I don't know about you, Brian, 152 00:07:44,320 --> 00:07:46,160 Speaker 1: And this is where I am not going to get 153 00:07:46,160 --> 00:07:49,000 Speaker 1: into the guessing game. You think. You think guessing the 154 00:07:49,320 --> 00:07:52,600 Speaker 1: short term direction of interest rates is hard, try guessing 155 00:07:53,480 --> 00:07:58,680 Speaker 1: when Middle Eastern conflict is gonna end. I think, on 156 00:07:58,720 --> 00:08:01,560 Speaker 1: the one hand, this is not gonna be of Venezuela 157 00:08:01,640 --> 00:08:04,880 Speaker 1: two point zero, where we just rolled into Venezuela in 158 00:08:04,920 --> 00:08:08,760 Speaker 1: a few days, took out the leader, and oil started moving, 159 00:08:08,880 --> 00:08:11,640 Speaker 1: and you know, it's kind of yesterday's news at this point. 160 00:08:12,160 --> 00:08:14,400 Speaker 1: You know, over there in Iran, you know, it's very 161 00:08:14,440 --> 00:08:18,400 Speaker 1: easy to just start dropping bombs and blowing things up everywhere. 162 00:08:18,440 --> 00:08:22,480 Speaker 1: The United States historically has been very good at doing that. 163 00:08:23,040 --> 00:08:25,320 Speaker 1: The key is going to be how do the pieces 164 00:08:25,360 --> 00:08:28,000 Speaker 1: get put back together and how long does it take? 165 00:08:28,360 --> 00:08:30,720 Speaker 1: And I think it's going to be a complex situation. 166 00:08:31,600 --> 00:08:33,640 Speaker 1: On the one hand, one thing I think we can 167 00:08:33,679 --> 00:08:37,200 Speaker 1: all agree on is pretty much everybody in the world 168 00:08:37,280 --> 00:08:40,920 Speaker 1: right now except Iran. Once that strait of horror moves 169 00:08:41,080 --> 00:08:44,680 Speaker 1: opened up in the oil flowing most of all China, 170 00:08:45,320 --> 00:08:48,480 Speaker 1: they had they had been getting seventeen percent of their 171 00:08:48,559 --> 00:08:54,200 Speaker 1: oil from a combination of Venezuela and Iran. You know, 172 00:08:54,280 --> 00:08:57,160 Speaker 1: we had sanctioned that, you know what out of Iranian oil. 173 00:08:57,240 --> 00:09:00,000 Speaker 1: In ninety five percent of that oil that was flowing 174 00:09:00,880 --> 00:09:03,800 Speaker 1: was going to China. So you know, we're in one 175 00:09:03,840 --> 00:09:07,440 Speaker 1: of these rare situations where everybody wants the oil to 176 00:09:07,520 --> 00:09:10,480 Speaker 1: flow through that straight of Hormeus and natural gas too, 177 00:09:10,880 --> 00:09:15,319 Speaker 1: including our biggest enemy China. So now how long it's 178 00:09:15,360 --> 00:09:17,880 Speaker 1: gonna take to be able to get that done, who knows. 179 00:09:18,000 --> 00:09:20,840 Speaker 1: I don't think this is gonna be over in three 180 00:09:20,920 --> 00:09:24,720 Speaker 1: days or one week or three weeks. It's just gonna 181 00:09:24,760 --> 00:09:25,760 Speaker 1: be interesting to watch. 182 00:09:26,720 --> 00:09:28,520 Speaker 3: Yeah, So let's talk a little let's pivot a little bit. 183 00:09:28,559 --> 00:09:29,920 Speaker 3: So what should you do now? 184 00:09:29,960 --> 00:09:31,360 Speaker 2: Now, I don't think it's gonna come as a shock 185 00:09:31,400 --> 00:09:33,680 Speaker 2: to everybody, to anybody that neither Bob nor Brian is 186 00:09:33,679 --> 00:09:36,080 Speaker 2: gonna say you should run outside and uh, you know, 187 00:09:36,120 --> 00:09:37,760 Speaker 2: look up the sky, wait for it to fall, and 188 00:09:37,840 --> 00:09:41,080 Speaker 2: run around in a circle with your hands over your head, screaming. Well, 189 00:09:41,120 --> 00:09:43,440 Speaker 2: we want to make sure that this is why you 190 00:09:43,520 --> 00:09:45,720 Speaker 2: would have done some of the stuff that we always recommend, 191 00:09:45,720 --> 00:09:47,640 Speaker 2: which is, you know, did you take care of things, 192 00:09:47,640 --> 00:09:51,320 Speaker 2: did you arrange this, did you prepare for craziness before 193 00:09:51,400 --> 00:09:53,199 Speaker 2: this kind of stuff happened. Now, the market isn't down 194 00:09:53,320 --> 00:09:55,120 Speaker 2: very much so far. We're just we're just saying that 195 00:09:55,160 --> 00:09:57,400 Speaker 2: if this does hang around and people get a little 196 00:09:57,440 --> 00:09:59,360 Speaker 2: more panicky, we could be in for a bumpy ride 197 00:09:59,400 --> 00:10:01,720 Speaker 2: if we're not all right. We saw this, you know, 198 00:10:01,800 --> 00:10:04,000 Speaker 2: a last April, just under a year ago, with the 199 00:10:04,040 --> 00:10:06,880 Speaker 2: initial panic over the tariffs, the market dropped about twenty percent, 200 00:10:07,120 --> 00:10:09,280 Speaker 2: and that hurt and it was scary. Then we got 201 00:10:09,360 --> 00:10:10,760 Speaker 2: used to the news and we kind of moved on 202 00:10:10,800 --> 00:10:12,560 Speaker 2: from it, and that is usually what happened what I 203 00:10:12,600 --> 00:10:14,360 Speaker 2: described earlier, Bob, You're exactly right. 204 00:10:14,440 --> 00:10:16,520 Speaker 3: What I described earlier was worst case scenario. 205 00:10:16,600 --> 00:10:19,160 Speaker 2: Most of the time, these Middle East conflicts come and 206 00:10:19,200 --> 00:10:23,360 Speaker 2: they go, and there isn't a very long lasting economic impact. 207 00:10:23,400 --> 00:10:26,040 Speaker 2: So let's focus on the history there that doesn't work 208 00:10:26,080 --> 00:10:29,040 Speaker 2: that way. But regardless, if you are wanting to react 209 00:10:29,040 --> 00:10:31,080 Speaker 2: to this, hopefully you've already taken these steps. If not, 210 00:10:31,360 --> 00:10:32,840 Speaker 2: it might be time to take a look at it again. 211 00:10:33,160 --> 00:10:35,079 Speaker 2: If you're you know, let's say you're spending three hundred 212 00:10:35,120 --> 00:10:37,040 Speaker 2: thousand dollars a year or something like that, do you 213 00:10:37,120 --> 00:10:39,880 Speaker 2: have a couple three years of cash or short short 214 00:10:39,960 --> 00:10:42,960 Speaker 2: term bods set to the side that way, we've already 215 00:10:43,000 --> 00:10:45,280 Speaker 2: prepared the bills that we know are coming do let's 216 00:10:45,320 --> 00:10:47,560 Speaker 2: make sure we've got that money set aside so that 217 00:10:47,720 --> 00:10:50,679 Speaker 2: your ability to pay those bills is not hindered by 218 00:10:50,720 --> 00:10:52,760 Speaker 2: whatever the market's doing and your emotions that are going 219 00:10:52,800 --> 00:10:53,840 Speaker 2: to be happening at that time. 220 00:10:54,160 --> 00:10:56,600 Speaker 3: So these are the kind of things that you know. 221 00:10:56,920 --> 00:10:59,280 Speaker 2: Then once you've done that, then you're free to really 222 00:10:59,360 --> 00:11:01,680 Speaker 2: worry a lot less about the market. So, for example, 223 00:11:01,840 --> 00:11:03,640 Speaker 2: you know, if you're sitting in eighty percent s and 224 00:11:03,679 --> 00:11:06,680 Speaker 2: P five hundred index funds, well, that's not diversification. That's 225 00:11:06,679 --> 00:11:10,640 Speaker 2: basically huge concentration in large cap growth stocks. When underneath 226 00:11:10,679 --> 00:11:14,679 Speaker 2: that bigger concentration in technology stocks, you want to make 227 00:11:14,720 --> 00:11:17,160 Speaker 2: sure that you've got some international and emerging market stocks 228 00:11:17,160 --> 00:11:19,720 Speaker 2: out there. Those have both been trouncing the US markets 229 00:11:19,720 --> 00:11:21,560 Speaker 2: for the last couple of years now, and I would 230 00:11:21,640 --> 00:11:23,680 Speaker 2: envision that continuing as long as we're going to maintain 231 00:11:23,720 --> 00:11:26,560 Speaker 2: this current stance of kind of smacking our customer base 232 00:11:26,600 --> 00:11:27,280 Speaker 2: around a little bit. 233 00:11:27,559 --> 00:11:28,520 Speaker 3: Doesn't mean the world's going to. 234 00:11:28,600 --> 00:11:30,400 Speaker 2: End, but it does mean that investors are looking in 235 00:11:30,440 --> 00:11:34,360 Speaker 2: different spaces than we have done in the past for returns. 236 00:11:35,480 --> 00:11:38,080 Speaker 1: Yeah, Brian, excellent point, and I think that's really the 237 00:11:38,120 --> 00:11:41,840 Speaker 1: point we need to focus on tonight. Because volatility has 238 00:11:41,960 --> 00:11:46,240 Speaker 1: always happened, it always will happen. What we don't know 239 00:11:46,480 --> 00:11:49,600 Speaker 1: is the source that's going to trigger the volatility, whether 240 00:11:49,720 --> 00:11:53,480 Speaker 1: it's a Middle Eastern conflict, or a blip in large 241 00:11:53,480 --> 00:11:57,760 Speaker 1: cap tech earnings, or federal reserve policy or you know 242 00:11:57,880 --> 00:12:01,360 Speaker 1: any or COVID know a virus, you know, so there's 243 00:12:01,440 --> 00:12:04,839 Speaker 1: always things that can trip up the market and cause volatility. 244 00:12:05,200 --> 00:12:07,560 Speaker 1: And to the excellent point you already made, you want 245 00:12:07,600 --> 00:12:10,800 Speaker 1: to you want to prepare yourself in advance for not 246 00:12:11,360 --> 00:12:14,440 Speaker 1: you know if, but when volatility occurs, and make sure 247 00:12:14,559 --> 00:12:17,240 Speaker 1: you've got your financial you know, ducks in order. Here's 248 00:12:17,240 --> 00:12:20,160 Speaker 1: the all Worth advice. Build your financial boat in calm 249 00:12:20,200 --> 00:12:24,360 Speaker 1: waters so when the storm inevitably comes you don't have 250 00:12:24,480 --> 00:12:28,120 Speaker 1: to panic, and then redesign it, you know, while the 251 00:12:28,720 --> 00:12:32,199 Speaker 1: waves are flowing wildly at sea. Coming up next, a 252 00:12:32,280 --> 00:12:35,680 Speaker 1: surprise move from a major insurer and a century long 253 00:12:35,760 --> 00:12:39,320 Speaker 1: bet from big tech. What it all means for your money. Next, 254 00:12:39,360 --> 00:12:41,680 Speaker 1: you're listening to Simply Money, presented by all Worth Financial 255 00:12:41,720 --> 00:12:48,959 Speaker 1: on fifty five KRC the talk station. You're listening to 256 00:12:49,000 --> 00:12:51,920 Speaker 1: Simply Money, presented by all Worth Financial on Bob Sponseeller 257 00:12:51,920 --> 00:12:54,880 Speaker 1: along with Brian James. If you can't listen to Simply 258 00:12:54,920 --> 00:12:58,960 Speaker 1: Money live every night, subscribe and get our daily podcasts. 259 00:12:59,000 --> 00:13:02,520 Speaker 1: Just start Simply Money Money on the iHeart app or 260 00:13:02,559 --> 00:13:06,800 Speaker 1: wherever you find your podcasts. What if your income tends 261 00:13:06,840 --> 00:13:10,280 Speaker 1: to swing from month to month, how much emergency cash 262 00:13:10,440 --> 00:13:13,600 Speaker 1: is really enough to keep on hand? And if markets 263 00:13:13,600 --> 00:13:17,200 Speaker 1: are strong early in retirement, should you lock in those 264 00:13:17,320 --> 00:13:20,640 Speaker 1: gains or just let them ride? Well answer those questions 265 00:13:20,679 --> 00:13:25,160 Speaker 1: and more straight ahead. Well, State Farm, the largest auto 266 00:13:25,240 --> 00:13:28,000 Speaker 1: insurer in the United States, just announced it will return 267 00:13:28,120 --> 00:13:32,920 Speaker 1: a historic five billion dollars to its auto insurance customers 268 00:13:33,320 --> 00:13:37,040 Speaker 1: this summer. Brian, that is welcome news. 269 00:13:37,440 --> 00:13:41,000 Speaker 2: Why is this happening, Well, this is a State Farm 270 00:13:41,120 --> 00:13:44,400 Speaker 2: is a dividend paying an insurance company, and this is 271 00:13:44,440 --> 00:13:46,720 Speaker 2: the largest policyholder dividend they've ever paid. 272 00:13:46,720 --> 00:13:49,040 Speaker 3: As you mentioned, than they're more than one hundred years. 273 00:13:49,559 --> 00:13:52,000 Speaker 2: This is because their auto business was pretty strong and 274 00:13:52,120 --> 00:13:54,600 Speaker 2: lots stronger results in twenty twenty five than expect it. 275 00:13:54,600 --> 00:13:57,520 Speaker 2: In other words, quit differently, they might they may have 276 00:13:57,640 --> 00:14:00,600 Speaker 2: overshot on the preview of the jars, so we're starting 277 00:14:00,600 --> 00:14:03,760 Speaker 2: with this money come from. Yeah, so average payout I 278 00:14:03,800 --> 00:14:05,960 Speaker 2: expected to be about one hundred bucks per vehicle. So 279 00:14:05,960 --> 00:14:07,760 Speaker 2: if you got multiple cars out there and a state 280 00:14:07,840 --> 00:14:09,600 Speaker 2: farm policy, then you might be looking at a nice 281 00:14:09,679 --> 00:14:11,800 Speaker 2: check in the mail here soon. Exact amount THO is 282 00:14:11,840 --> 00:14:13,800 Speaker 2: going to vary, of course, by state, because the rules 283 00:14:14,080 --> 00:14:16,560 Speaker 2: change depending on where you are and how much you 284 00:14:16,640 --> 00:14:18,080 Speaker 2: paid in those premiums. 285 00:14:19,400 --> 00:14:23,640 Speaker 1: All right, Alphabet, which is Google's parent company, is making 286 00:14:23,640 --> 00:14:26,960 Speaker 1: a statement about how long it believes it will dominate 287 00:14:27,080 --> 00:14:31,960 Speaker 1: the future of artificial intelligence. That's a pretty bold statement, Brian. 288 00:14:32,840 --> 00:14:35,720 Speaker 2: Yeah, so Google is known for being bold, and they 289 00:14:35,720 --> 00:14:39,280 Speaker 2: don't seem to have any concerns about their future viability. 290 00:14:39,280 --> 00:14:41,120 Speaker 2: So what we're talking about here is they have issued 291 00:14:41,120 --> 00:14:43,520 Speaker 2: a one hundred year bond, which is known as a 292 00:14:43,520 --> 00:14:46,920 Speaker 2: century bond go figure, and that locks in their borrowing 293 00:14:47,000 --> 00:14:50,520 Speaker 2: costs for an entire century. Investors who buy it, of course, 294 00:14:50,520 --> 00:14:52,280 Speaker 2: aren't going to get their principle back until the year 295 00:14:52,320 --> 00:14:54,440 Speaker 2: twenty one to twenty six. This isn't a five year notes, 296 00:14:54,480 --> 00:14:56,960 Speaker 2: not a ten year note, not even a thirty year treasury. 297 00:14:57,240 --> 00:15:00,040 Speaker 2: This is Google basically saying we're confident that we're so 298 00:15:00,040 --> 00:15:02,520 Speaker 2: so confident in the long term future, especially in AI, 299 00:15:02,960 --> 00:15:04,920 Speaker 2: that we are comfortable locking in our debt for the 300 00:15:04,920 --> 00:15:07,320 Speaker 2: next one hundred years. Can you picture Bob being so 301 00:15:07,360 --> 00:15:10,480 Speaker 2: confident in your financial situation that you are that you 302 00:15:10,560 --> 00:15:12,760 Speaker 2: are going to mortgage your house for a century. 303 00:15:12,760 --> 00:15:16,240 Speaker 3: That's effectively what they're doing. These have happened before. 304 00:15:16,280 --> 00:15:18,360 Speaker 2: This is you know, century bonds do happen out there, 305 00:15:18,360 --> 00:15:20,640 Speaker 2: but it's ultra stable. The oldest of the old, biggest 306 00:15:20,640 --> 00:15:23,360 Speaker 2: of the big government's blue chip type companies who just 307 00:15:23,640 --> 00:15:25,560 Speaker 2: who have reason to believe they're going to be around 308 00:15:25,600 --> 00:15:27,920 Speaker 2: for generations. It wouldn't shock us, you know if some 309 00:15:27,960 --> 00:15:30,080 Speaker 2: of the old school companies that have done this. This 310 00:15:30,160 --> 00:15:31,600 Speaker 2: is one of the first ones to do it in 311 00:15:31,600 --> 00:15:34,240 Speaker 2: the in the technology space, which of course is well 312 00:15:34,320 --> 00:15:38,680 Speaker 2: established but still fairly new according to according to history. 313 00:15:39,720 --> 00:15:42,200 Speaker 1: Well, hey, good for Google for issuing one hundred year 314 00:15:42,280 --> 00:15:44,640 Speaker 1: bond and locking in rates at you know, locking in 315 00:15:44,720 --> 00:15:47,440 Speaker 1: debt at current rates. That's great. I got no problem 316 00:15:47,480 --> 00:15:50,160 Speaker 1: with that. My question to you, Brian is would you 317 00:15:50,240 --> 00:15:52,560 Speaker 1: have a client buy one of these things? Because my 318 00:15:53,160 --> 00:15:56,960 Speaker 1: answer to that is no. I want to be much 319 00:15:57,000 --> 00:16:00,280 Speaker 1: more nimble than having one hundred year bond in the portfolio. 320 00:16:00,800 --> 00:16:03,760 Speaker 1: Have you seen any indication of what kind of demand 321 00:16:03,800 --> 00:16:07,640 Speaker 1: there is out there institutionally and otherwise from buyers of 322 00:16:07,680 --> 00:16:09,000 Speaker 1: these hundred year bonds. 323 00:16:09,600 --> 00:16:11,520 Speaker 2: This isn't something that's going to be marketed to the 324 00:16:11,520 --> 00:16:14,320 Speaker 2: general public anyway, although there's really nothing stopping anybody from 325 00:16:14,320 --> 00:16:16,720 Speaker 2: getting involved. But they're not looking for the retail investor 326 00:16:16,760 --> 00:16:19,200 Speaker 2: on this type of stuff. They're looking for other you know, 327 00:16:19,320 --> 00:16:23,160 Speaker 2: generations skipping type of trusts, things that dynasty trust, things 328 00:16:23,160 --> 00:16:23,840 Speaker 2: that are going to. 329 00:16:23,760 --> 00:16:26,440 Speaker 3: Be around forever because they were designed to be that. 330 00:16:27,240 --> 00:16:29,280 Speaker 2: So yeah, don't don't look at the look for this 331 00:16:29,360 --> 00:16:31,280 Speaker 2: at a at a bank or brokers near you. 332 00:16:31,680 --> 00:16:34,920 Speaker 1: All right, let's move on to topics that are probably 333 00:16:35,000 --> 00:16:38,360 Speaker 1: more relevant for us and our listeners. We've told you 334 00:16:38,440 --> 00:16:41,440 Speaker 1: time and time again that Social Security could face a 335 00:16:41,560 --> 00:16:45,360 Speaker 1: significant cut in benefits as soon as the year, you know, 336 00:16:45,400 --> 00:16:49,400 Speaker 1: as soon as early twenty thirties, say, thirty three, twenty 337 00:16:49,440 --> 00:16:55,160 Speaker 1: thirty four, unless Congress acts. But apparently most Americans don't 338 00:16:55,160 --> 00:16:59,480 Speaker 1: even realize that this scenario is headed toward them in 339 00:17:00,040 --> 00:17:01,360 Speaker 1: you know, under ten years now. 340 00:17:02,560 --> 00:17:04,520 Speaker 2: So yeah, and I would say, I want, I want 341 00:17:04,520 --> 00:17:06,560 Speaker 2: to push back on this a little bit. Well, maybe 342 00:17:06,600 --> 00:17:08,719 Speaker 2: redirect a little bit, so maybe. So what the survey 343 00:17:08,800 --> 00:17:11,680 Speaker 2: is saying one in five Americans are aware that there's 344 00:17:11,720 --> 00:17:14,080 Speaker 2: a looming reduction in socialecurity or that changes are afoot, 345 00:17:14,320 --> 00:17:16,440 Speaker 2: I would say there's a lot of people out there 346 00:17:17,119 --> 00:17:19,639 Speaker 2: who think that it's going away entirely. So it seems 347 00:17:19,680 --> 00:17:22,760 Speaker 2: like either we're completely unaware or we're convinced that the 348 00:17:22,880 --> 00:17:25,000 Speaker 2: absolutely armygeddon is going to happen. 349 00:17:25,040 --> 00:17:26,879 Speaker 3: So let's talk about the reality here. 350 00:17:26,920 --> 00:17:27,200 Speaker 1: First. 351 00:17:27,800 --> 00:17:30,640 Speaker 2: The only way for social Security to completely one percent 352 00:17:30,720 --> 00:17:34,000 Speaker 2: go away is for Congress to eliminate FIKA taxes, which 353 00:17:34,000 --> 00:17:36,200 Speaker 2: are happy which happened on the top half of everyone's 354 00:17:36,200 --> 00:17:38,399 Speaker 2: paced up yours mind, everybody who goes to work on 355 00:17:38,400 --> 00:17:42,360 Speaker 2: a daily basis. I do not anticipate that happening anytime soon. 356 00:17:42,560 --> 00:17:45,280 Speaker 2: They're going to continue to collect payroll taxes to fund 357 00:17:45,280 --> 00:17:48,080 Speaker 2: Social Security and Medicare, so that means those aren't going 358 00:17:48,119 --> 00:17:49,080 Speaker 2: away entirely. 359 00:17:49,680 --> 00:17:52,040 Speaker 3: But what the the issue is the way that. 360 00:17:52,200 --> 00:17:54,639 Speaker 2: The demographics are working out and the way the different 361 00:17:54,680 --> 00:17:56,600 Speaker 2: generations are aging and dying off. 362 00:17:56,840 --> 00:17:57,840 Speaker 3: The problem in. 363 00:17:57,800 --> 00:17:59,719 Speaker 2: The early twenty thirties will be that we don't have 364 00:17:59,800 --> 00:18:02,040 Speaker 2: as much flowing in as we used to. Right now 365 00:18:02,080 --> 00:18:04,639 Speaker 2: as we're sitting here, there's a surplus. There's more flowing 366 00:18:04,640 --> 00:18:07,919 Speaker 2: into the system than needs to flow out. That gap 367 00:18:07,960 --> 00:18:11,000 Speaker 2: closes just a little bit every year, and it's impacted 368 00:18:11,000 --> 00:18:13,239 Speaker 2: by the decisions we make, the fiscal policies. We have 369 00:18:13,320 --> 00:18:16,760 Speaker 2: the deficit, all those other kinds of things. So if 370 00:18:16,800 --> 00:18:19,879 Speaker 2: nothing changes, then what we've been recommending people for a 371 00:18:19,880 --> 00:18:25,440 Speaker 2: long time, anticipate your Social Security report, whatever that number 372 00:18:25,520 --> 00:18:27,480 Speaker 2: is on there for your full retirement age, knock off 373 00:18:27,520 --> 00:18:28,800 Speaker 2: twenty maybe thirty percent. 374 00:18:29,359 --> 00:18:31,920 Speaker 3: If you drop it by that much, that's roughly what. 375 00:18:31,880 --> 00:18:35,640 Speaker 2: Will be available from then current payroll taxes being pulled 376 00:18:35,640 --> 00:18:38,400 Speaker 2: out of paychecks to pay the beneficiaries of Social Security, 377 00:18:38,440 --> 00:18:40,800 Speaker 2: which is very, very very different than zero. 378 00:18:42,119 --> 00:18:44,600 Speaker 1: Brian, wouldn't you agree that this is just another stress 379 00:18:44,640 --> 00:18:47,159 Speaker 1: test to run for your long term financial plan. I mean, 380 00:18:47,200 --> 00:18:51,720 Speaker 1: we stress test volatility on inflation rates all the time, 381 00:18:52,040 --> 00:18:55,880 Speaker 1: We stress test volatility of investment returns, and I think, 382 00:18:55,920 --> 00:18:58,000 Speaker 1: now this is just another one where you run a 383 00:18:58,040 --> 00:19:02,080 Speaker 1: couple scenarios stress testing what if what happens if your 384 00:19:02,080 --> 00:19:05,800 Speaker 1: Social Security benefits drop by ten, twenty thirty percent? How 385 00:19:05,840 --> 00:19:09,399 Speaker 1: will your long term plan work under that scenario? Not 386 00:19:09,520 --> 00:19:11,919 Speaker 1: that we're predicting it's going to happen. But to give 387 00:19:12,000 --> 00:19:14,480 Speaker 1: people peace of mind that do want a plan and 388 00:19:14,480 --> 00:19:16,760 Speaker 1: get out in front of this. It's just another stress 389 00:19:16,840 --> 00:19:19,399 Speaker 1: test that we can run in a financial plan. That's 390 00:19:19,440 --> 00:19:21,880 Speaker 1: pretty much how you're haling it with your clients, right. 391 00:19:22,320 --> 00:19:26,000 Speaker 2: Absolutely, it's just another resource we have to What we 392 00:19:26,080 --> 00:19:28,280 Speaker 2: normally do is let's run the hunky doory outcome, which 393 00:19:28,320 --> 00:19:30,760 Speaker 2: means everything I'm doing right now never changes, nothing bad 394 00:19:30,800 --> 00:19:33,480 Speaker 2: ever happens again. Now, let's do it again, and let's 395 00:19:33,480 --> 00:19:36,320 Speaker 2: eliminate a source of income or reduce it. Maybe we 396 00:19:36,359 --> 00:19:38,680 Speaker 2: pretend that our piles of money get take a hit, 397 00:19:38,720 --> 00:19:41,240 Speaker 2: you know, the what if the market drops twenty percent 398 00:19:41,280 --> 00:19:43,560 Speaker 2: and my first year of retirement. That's a rare event, 399 00:19:43,600 --> 00:19:45,840 Speaker 2: but it does occur. Happen to anybody who retired in 400 00:19:45,880 --> 00:19:49,040 Speaker 2: twenty twenty one. That's very important to take those actions 401 00:19:49,080 --> 00:19:51,680 Speaker 2: to stress tests and make sure your ship can still 402 00:19:51,680 --> 00:19:53,199 Speaker 2: float after it takes a few shots. 403 00:19:54,680 --> 00:19:57,639 Speaker 1: All right, spring is almost here. It certainly doesn't feel 404 00:19:57,680 --> 00:20:00,520 Speaker 1: like you're looking out the window this week, but it 405 00:20:00,560 --> 00:20:02,760 Speaker 1: is right around the corner. Is now the time to 406 00:20:02,800 --> 00:20:05,040 Speaker 1: put your house on the market. We'll talk about that 407 00:20:05,200 --> 00:20:08,560 Speaker 1: next you're listening to Simply Money presented by Allworth Financial 408 00:20:08,600 --> 00:20:17,159 Speaker 1: on fifty five KRC, the talk station. You're listening to 409 00:20:17,200 --> 00:20:20,600 Speaker 1: Simply Money presented by Allworth Financial on Bob Sponseller along 410 00:20:20,640 --> 00:20:23,679 Speaker 1: with Brian James. Joined tonight by our good friend and 411 00:20:23,800 --> 00:20:28,440 Speaker 1: real estate expert Michelle Sloan, owner of Remax Time. Michelle, 412 00:20:28,480 --> 00:20:31,000 Speaker 1: it's always great to spend some time with you and 413 00:20:31,119 --> 00:20:34,960 Speaker 1: Hey with gray skies out there in a rainy week. 414 00:20:35,720 --> 00:20:38,320 Speaker 1: I could tell already by talking to you before we 415 00:20:38,400 --> 00:20:41,440 Speaker 1: went on the air, you're super pumped about the real 416 00:20:41,560 --> 00:20:43,639 Speaker 1: estate market. We could all use a little bit of 417 00:20:43,680 --> 00:20:47,399 Speaker 1: excitement today on a Wednesday. Give us an update on 418 00:20:47,480 --> 00:20:51,399 Speaker 1: the local real estate market in Greater Cincinnati. It sounds 419 00:20:51,400 --> 00:20:52,880 Speaker 1: like spring is almost here. 420 00:20:53,240 --> 00:20:56,800 Speaker 4: No, spring is absolutely here. And I have a giant 421 00:20:56,920 --> 00:21:00,840 Speaker 4: smile on my face because the real estate market has 422 00:21:00,960 --> 00:21:04,399 Speaker 4: opened up wide over this past weekend. You know, March 423 00:21:04,480 --> 00:21:08,520 Speaker 4: first must have been a day of reckoning in the 424 00:21:08,560 --> 00:21:12,359 Speaker 4: real estate market because I hosted an open house and 425 00:21:12,400 --> 00:21:15,800 Speaker 4: I had real buyers walking in the door getting excited 426 00:21:16,000 --> 00:21:19,400 Speaker 4: about their home search. And so a lot of buyers 427 00:21:19,440 --> 00:21:23,320 Speaker 4: are just starting their home search. But I'm happy to see, 428 00:21:23,920 --> 00:21:27,280 Speaker 4: you know, people out there getting excited looking at properties. 429 00:21:27,760 --> 00:21:31,080 Speaker 4: I mean, it's what I live for, so I'm very 430 00:21:31,200 --> 00:21:36,040 Speaker 4: very happy about that. Plus I have an extra added bonus. 431 00:21:36,640 --> 00:21:41,520 Speaker 4: Mortgage rates have dipped below six percent, so not much below, 432 00:21:41,560 --> 00:21:44,879 Speaker 4: and it's sort of fluctuating right around six percent, but 433 00:21:45,000 --> 00:21:48,159 Speaker 4: we we hit a five point nine to eight this 434 00:21:48,359 --> 00:21:52,240 Speaker 4: week for a thirty year fixed, the lowest level since 435 00:21:52,320 --> 00:21:56,040 Speaker 4: two thousand and twenty two. So a lot to be 436 00:21:56,160 --> 00:21:58,600 Speaker 4: happy about in my world. 437 00:21:59,040 --> 00:22:01,200 Speaker 3: Great to hear. Hey, I'm curious, Michelle, what kind of 438 00:22:01,240 --> 00:22:02,639 Speaker 3: stories are you hearing? Are you? Are you? 439 00:22:02,640 --> 00:22:04,280 Speaker 2: I mean when people call you and say, hey, we 440 00:22:04,320 --> 00:22:05,879 Speaker 2: want to look at such and such property, what kind 441 00:22:05,920 --> 00:22:06,880 Speaker 2: of stories are you hearing? 442 00:22:06,920 --> 00:22:07,800 Speaker 3: Have they been pent up? 443 00:22:07,880 --> 00:22:10,119 Speaker 2: Are they waiting to pull the trigger now all of 444 00:22:10,119 --> 00:22:12,720 Speaker 2: a sudden it's time, or why why are the floodgates 445 00:22:12,720 --> 00:22:13,280 Speaker 2: opening now? 446 00:22:13,680 --> 00:22:16,280 Speaker 3: Yeah, it's interesting. It's just people, you know. 447 00:22:16,640 --> 00:22:19,000 Speaker 4: I'm just gonna take for example, because I'm not gonna 448 00:22:19,080 --> 00:22:24,600 Speaker 4: name names or anything like that, but one person has 449 00:22:25,000 --> 00:22:29,040 Speaker 4: lived in the area since twenty twenty one and it's 450 00:22:29,040 --> 00:22:32,679 Speaker 4: sort of been looking on and off, but now his 451 00:22:32,760 --> 00:22:35,760 Speaker 4: wife is pregnant and they already have a little one, 452 00:22:36,000 --> 00:22:39,320 Speaker 4: so they're out growing the rental that they're living in 453 00:22:39,400 --> 00:22:42,080 Speaker 4: and they want to buy a home. So, you know, 454 00:22:42,520 --> 00:22:48,399 Speaker 4: lifestyle and life changes always has a little bit of 455 00:22:48,440 --> 00:22:51,800 Speaker 4: a push in the real estate market. The second people 456 00:22:51,800 --> 00:22:55,520 Speaker 4: that came into my open house, they had two little girls, 457 00:22:55,600 --> 00:22:59,240 Speaker 4: just adorable, and then they had twin babies on their 458 00:22:59,359 --> 00:23:03,639 Speaker 4: arms and they that we need more space. So again, 459 00:23:03,880 --> 00:23:08,679 Speaker 4: really exciting situations, and it's always situational. Now people don't 460 00:23:08,680 --> 00:23:12,640 Speaker 4: move just to move anymore. People are moving because there's 461 00:23:12,640 --> 00:23:15,879 Speaker 4: a reason for it, whether it's a job change, a 462 00:23:15,920 --> 00:23:20,119 Speaker 4: family change. Either you know, maybe you downsize because there's 463 00:23:20,680 --> 00:23:23,359 Speaker 4: a death in the family, or you just are to 464 00:23:23,480 --> 00:23:25,960 Speaker 4: the age that you just don't need as much space. 465 00:23:26,520 --> 00:23:29,000 Speaker 4: And I talked to so many people in their sixties 466 00:23:29,160 --> 00:23:32,800 Speaker 4: early seventies, going, I don't need this huge two story home. 467 00:23:33,560 --> 00:23:35,800 Speaker 4: Let's take a look and see what's out there and 468 00:23:35,800 --> 00:23:39,679 Speaker 4: what's available to me, and let's get the process started. 469 00:23:39,840 --> 00:23:41,719 Speaker 4: So I do think there's a ton of pent up 470 00:23:41,760 --> 00:23:46,520 Speaker 4: demand and now is the time to get yourself started. 471 00:23:47,240 --> 00:23:51,360 Speaker 4: Spring market is here, and don't miss out because things 472 00:23:51,480 --> 00:23:55,680 Speaker 4: will change very rapidly, and before you know it, it'll 473 00:23:55,720 --> 00:24:00,520 Speaker 4: be July and you know that that primetime season will 474 00:24:00,560 --> 00:24:03,760 Speaker 4: be ending, So now's the time to get on board. 475 00:24:04,480 --> 00:24:06,840 Speaker 1: All right, melt Michelle. Last time we had you on 476 00:24:07,160 --> 00:24:09,600 Speaker 1: you talked a little bit, you know, correct me if 477 00:24:09,640 --> 00:24:13,160 Speaker 1: I'm wrong. There was a little bit of a different 478 00:24:13,240 --> 00:24:16,879 Speaker 1: demand for let's say the starter home market, maybe the 479 00:24:16,920 --> 00:24:21,760 Speaker 1: two to three hundred thousand dollars market, and the above 480 00:24:21,880 --> 00:24:24,399 Speaker 1: five hundred to six hundred thousand dollars homes were not 481 00:24:24,640 --> 00:24:27,840 Speaker 1: moving as quickly. Now that we're getting into the spring, 482 00:24:27,880 --> 00:24:31,120 Speaker 1: are you seeing any change in the in the way 483 00:24:31,160 --> 00:24:34,840 Speaker 1: of demand for certain you know, price points in the market. 484 00:24:35,520 --> 00:24:36,120 Speaker 3: A little bit. 485 00:24:36,280 --> 00:24:39,000 Speaker 4: I do think because the open house that I had 486 00:24:39,000 --> 00:24:42,400 Speaker 4: this weekend and some of the homes that I am 487 00:24:42,520 --> 00:24:45,679 Speaker 4: listing in my office and other agents that I've talked to, 488 00:24:46,200 --> 00:24:50,040 Speaker 4: we are seeing more showings. I think we are really 489 00:24:50,320 --> 00:24:53,560 Speaker 4: coming out of in Cincinnati. We're coming out of the winter. 490 00:24:55,119 --> 00:24:58,840 Speaker 4: It's just been such a tough winter with the cold 491 00:24:58,880 --> 00:25:02,160 Speaker 4: and the snow, and everybody's thawing out and getting ready 492 00:25:02,200 --> 00:25:05,119 Speaker 4: and tired of being cooped up in the same old house. 493 00:25:05,840 --> 00:25:07,800 Speaker 4: And I do think that we are going to see, 494 00:25:08,400 --> 00:25:11,760 Speaker 4: especially with the lower mortgage rates, We're going to see 495 00:25:11,760 --> 00:25:14,600 Speaker 4: some of those higher priced homes start to move as well. 496 00:25:15,280 --> 00:25:18,280 Speaker 2: So, Michelle, the thing that's been a challenge for you know, 497 00:25:18,320 --> 00:25:20,240 Speaker 2: the better part of a decade now, if not longer 498 00:25:20,280 --> 00:25:22,479 Speaker 2: than that. It's just the just the overall not only 499 00:25:22,560 --> 00:25:24,880 Speaker 2: the price of homes, but higher interest rates, just putting 500 00:25:24,960 --> 00:25:28,200 Speaker 2: you know, younger, newer buyers in a situation that hasn't 501 00:25:28,240 --> 00:25:30,320 Speaker 2: been seen in a very, very long time. I mean 502 00:25:30,320 --> 00:25:32,360 Speaker 2: there are a couple of generations got to avoid that. 503 00:25:32,400 --> 00:25:33,920 Speaker 2: You have to go back to the seventies to see 504 00:25:33,960 --> 00:25:37,000 Speaker 2: the challenges that people have right now. So what kind 505 00:25:37,040 --> 00:25:38,760 Speaker 2: of things are you hearing as to how people have 506 00:25:38,840 --> 00:25:41,240 Speaker 2: overcome that and are back in the back in the saddle, 507 00:25:41,280 --> 00:25:44,280 Speaker 2: able to buy and less impacted by these things. Is 508 00:25:44,280 --> 00:25:46,160 Speaker 2: it really Is it different from the last couple of years. 509 00:25:46,720 --> 00:25:47,240 Speaker 1: Not really. 510 00:25:47,320 --> 00:25:50,400 Speaker 4: I mean, affordability is always an issue, and it has 511 00:25:50,480 --> 00:25:53,000 Speaker 4: been an issue and it will continue to be an issue. 512 00:25:53,400 --> 00:25:59,600 Speaker 4: Affordability for younger buyers is very, very difficult because having 513 00:25:59,640 --> 00:26:03,119 Speaker 4: some for a down payment, you know, having twenty percent 514 00:26:03,280 --> 00:26:06,320 Speaker 4: down payment on a home is difficult for a lot 515 00:26:06,320 --> 00:26:07,280 Speaker 4: of younger buyers. 516 00:26:07,800 --> 00:26:09,159 Speaker 3: So how we see that. 517 00:26:09,160 --> 00:26:13,600 Speaker 4: Change is first time home buyers are older than they 518 00:26:13,600 --> 00:26:18,120 Speaker 4: have ever been before the average age of a first 519 00:26:18,119 --> 00:26:20,919 Speaker 4: time home buyer is in their early thirties rather than 520 00:26:20,960 --> 00:26:25,000 Speaker 4: their late twenties. So we're seeing, you know, certainly the 521 00:26:25,119 --> 00:26:28,200 Speaker 4: skew of the number of people able to buy being 522 00:26:28,240 --> 00:26:28,919 Speaker 4: a little. 523 00:26:28,680 --> 00:26:30,840 Speaker 3: Bit older, a little bit older. 524 00:26:31,119 --> 00:26:34,240 Speaker 4: As we move from year to year because of affordability, 525 00:26:34,520 --> 00:26:40,280 Speaker 4: because of the availability of saving money. Uh, and you know, 526 00:26:40,359 --> 00:26:45,320 Speaker 4: the debt, the debt to income ratio, meaning the amount 527 00:26:45,359 --> 00:26:47,560 Speaker 4: of money that you have to spend on a home. 528 00:26:48,400 --> 00:26:51,600 Speaker 4: It takes longer to build that up. So I don't 529 00:26:51,600 --> 00:26:54,119 Speaker 4: think that's going to change anytime soon. I think the 530 00:26:54,240 --> 00:26:59,320 Speaker 4: change is really age and time and those kinds of 531 00:26:59,359 --> 00:27:02,080 Speaker 4: things are really impacting our industry. 532 00:27:03,119 --> 00:27:05,600 Speaker 1: Michelle, from where you sit, what would you say are 533 00:27:05,640 --> 00:27:08,919 Speaker 1: the reasons why this affordability is an issue? You know, 534 00:27:09,000 --> 00:27:11,720 Speaker 1: we know that this generation of first time home buyers, 535 00:27:11,840 --> 00:27:15,640 Speaker 1: unlike prior generations, is you know, saddled in a lot 536 00:27:15,640 --> 00:27:18,359 Speaker 1: of cases with a ton of student loan debt. Is 537 00:27:18,400 --> 00:27:21,919 Speaker 1: it that or is it more just you know, the 538 00:27:22,040 --> 00:27:25,119 Speaker 1: overall inflation rate in general, you know, coming out of 539 00:27:25,160 --> 00:27:27,800 Speaker 1: the COVID crisis or is it a combination of the two. 540 00:27:28,280 --> 00:27:31,600 Speaker 4: I definitely think it's a combination, and that is it's 541 00:27:31,640 --> 00:27:34,760 Speaker 4: what every person who wants to buy a home has 542 00:27:34,840 --> 00:27:37,119 Speaker 4: to deal with They have to deal with, you know, 543 00:27:37,200 --> 00:27:39,080 Speaker 4: how much money do I make? How much money do 544 00:27:39,160 --> 00:27:42,040 Speaker 4: I want to put into a home. Do I want 545 00:27:42,080 --> 00:27:46,320 Speaker 4: the maintenance that comes with buying a home in addition 546 00:27:46,400 --> 00:27:49,640 Speaker 4: to you know, utilities and upkeeping all of those things. 547 00:27:49,880 --> 00:27:54,840 Speaker 4: The smart buyers are taking everything into account and that's 548 00:27:54,840 --> 00:27:58,800 Speaker 4: where the affordability really is a challenge. Plus, we've seen 549 00:27:58,880 --> 00:28:03,840 Speaker 4: since COVID the numbers go up. The value of homes 550 00:28:04,000 --> 00:28:08,520 Speaker 4: has increased so dramatically it's almost impossible for a young 551 00:28:08,600 --> 00:28:12,720 Speaker 4: person to keep up. If you're seeing anywhere between five 552 00:28:12,960 --> 00:28:19,080 Speaker 4: ten fifteen percent markup on these homes since COVID, you 553 00:28:19,119 --> 00:28:21,879 Speaker 4: know you're not making that much more to be able 554 00:28:21,920 --> 00:28:22,640 Speaker 4: to keep up. 555 00:28:22,720 --> 00:28:24,520 Speaker 3: So it's a lot. 556 00:28:24,320 --> 00:28:28,200 Speaker 4: Of it's a combination of things, pricing, and we don't 557 00:28:28,240 --> 00:28:30,840 Speaker 4: expect pricing to go down really anytime soon. 558 00:28:31,560 --> 00:28:34,719 Speaker 1: All Right, great perspective as always from our real estate expert, 559 00:28:34,800 --> 00:28:37,320 Speaker 1: Michelle Sloan. You're listening to Simply Money presented by all 560 00:28:37,320 --> 00:28:45,760 Speaker 1: Worth Financial on fifty five KRC the talk station. You're 561 00:28:45,760 --> 00:28:48,240 Speaker 1: listening to Simply Money presented by all Worth Financial on 562 00:28:48,360 --> 00:28:51,360 Speaker 1: Bob Sponseller along with Brian James, Do you have a 563 00:28:51,360 --> 00:28:53,880 Speaker 1: financial question you'd like for us to answer. There's a 564 00:28:53,920 --> 00:28:56,320 Speaker 1: red button you can click while you're listening to the show. 565 00:28:56,720 --> 00:28:59,960 Speaker 1: If you're listening on the iHeart app, simply we're core 566 00:29:00,160 --> 00:29:03,800 Speaker 1: your question and it will come straight to us. Brian 567 00:29:03,880 --> 00:29:07,040 Speaker 1: get ready for another Brian who lives in the East End. 568 00:29:07,120 --> 00:29:09,560 Speaker 1: He says, Hey, I figure this situation in the Middle 569 00:29:09,600 --> 00:29:12,040 Speaker 1: East is going to last for a while, so I'm 570 00:29:12,080 --> 00:29:15,479 Speaker 1: thinking I should adjust my wrisk tolerance from seventy percent 571 00:29:15,520 --> 00:29:20,040 Speaker 1: in stocks to maybe down to sixty percent. Sixty percent 572 00:29:20,040 --> 00:29:21,959 Speaker 1: in stocks. What are your thoughts on that? 573 00:29:22,920 --> 00:29:24,560 Speaker 2: Well, I mean, but the first all I would say, 574 00:29:25,360 --> 00:29:27,840 Speaker 2: you're reacting in a very human way, which is there 575 00:29:27,920 --> 00:29:29,680 Speaker 2: you know, there are bad things out there. I should 576 00:29:29,720 --> 00:29:32,480 Speaker 2: probably do something to put myself in a better position. 577 00:29:32,560 --> 00:29:35,240 Speaker 2: Right stop touching the hot stove because it hurts. That 578 00:29:35,320 --> 00:29:37,320 Speaker 2: is normally good advice. But when it comes to the market, 579 00:29:37,360 --> 00:29:40,520 Speaker 2: usually by the time it becomes real, you know, the 580 00:29:41,240 --> 00:29:45,120 Speaker 2: market tends to take it away before you have time 581 00:29:45,120 --> 00:29:46,400 Speaker 2: to really do much of anything about it. 582 00:29:46,400 --> 00:29:47,920 Speaker 3: Now, we're not at that stage right now as we're 583 00:29:47,960 --> 00:29:48,480 Speaker 3: sitting here. 584 00:29:48,840 --> 00:29:51,080 Speaker 2: But the problem is, remember this is always going to 585 00:29:51,120 --> 00:29:54,040 Speaker 2: be a two part decision. It's not should I get 586 00:29:54,080 --> 00:29:56,080 Speaker 2: conservative now, it's going to be am I? Am I 587 00:29:56,080 --> 00:29:57,840 Speaker 2: going to get conservative now? And then the second part 588 00:29:57,880 --> 00:30:00,680 Speaker 2: is when do I get aggressive again? So, you know, 589 00:30:01,240 --> 00:30:02,800 Speaker 2: let's just go through a little of history. Markets have 590 00:30:02,800 --> 00:30:07,280 Speaker 2: survived wars, oil embargos, terror attacks, financial crises, regional conflicts, 591 00:30:07,280 --> 00:30:09,680 Speaker 2: and all this other stuff. You know, the initial reaction 592 00:30:09,800 --> 00:30:11,640 Speaker 2: is usually sharp and short term, and I would assign 593 00:30:11,640 --> 00:30:13,280 Speaker 2: that to everything that's not just a war thing. Whenever 594 00:30:13,280 --> 00:30:15,960 Speaker 2: there's crazy news, some kind of catalysts, the herd tends 595 00:30:16,000 --> 00:30:20,400 Speaker 2: to stampede. It gets spooked, and then over time market tip. 596 00:30:20,440 --> 00:30:23,920 Speaker 2: Markets will typically refocus on earnings, interest rates, economic growth, 597 00:30:24,000 --> 00:30:24,920 Speaker 2: what is underlying this. 598 00:30:25,040 --> 00:30:27,040 Speaker 3: You can even look at the World War two years. 599 00:30:27,080 --> 00:30:29,360 Speaker 2: It might be a good, good, good exercise for people 600 00:30:29,400 --> 00:30:32,120 Speaker 2: to understand what the market did during World War two, 601 00:30:32,760 --> 00:30:35,720 Speaker 2: which which is a good example of what happens when 602 00:30:35,720 --> 00:30:38,040 Speaker 2: a country changes its you know, kind of changes its 603 00:30:38,080 --> 00:30:40,920 Speaker 2: goals for the short term. The market doesn't stop being 604 00:30:40,960 --> 00:30:43,200 Speaker 2: the market just because there's something crazy happening out there. 605 00:30:43,240 --> 00:30:45,160 Speaker 3: People go to work, products are bought and sold. 606 00:30:45,920 --> 00:30:48,760 Speaker 2: The wheels keep turning, and that means the stock market 607 00:30:48,800 --> 00:30:51,200 Speaker 2: and the economy can still exist. It just exists a 608 00:30:51,240 --> 00:30:53,120 Speaker 2: little bit differently than what we might be accustomed to. 609 00:30:53,360 --> 00:30:54,920 Speaker 2: So just make sure you understand. 610 00:30:54,640 --> 00:30:56,720 Speaker 3: What that is. And I would also say, there's not 611 00:30:56,760 --> 00:30:57,680 Speaker 3: going to be I'm glad you're not. 612 00:30:57,840 --> 00:31:00,200 Speaker 2: You're not talking about going from seventy percent stot to 613 00:31:00,280 --> 00:31:02,520 Speaker 2: zero percent stocks. That's a little different. You're simply turning 614 00:31:02,560 --> 00:31:04,680 Speaker 2: down the dial. I would say, though, that you're going 615 00:31:04,720 --> 00:31:08,560 Speaker 2: to be far more worried about the headlines. Then then 616 00:31:08,640 --> 00:31:11,080 Speaker 2: you will notice the difference in a seventy percent stock 617 00:31:11,120 --> 00:31:12,840 Speaker 2: portfolio versus a sixty percent. 618 00:31:12,640 --> 00:31:15,760 Speaker 3: Stock portfolio, and the bumpiness it's gonna be there. You'll 619 00:31:15,800 --> 00:31:16,960 Speaker 3: it'll be bumping no matter what. 620 00:31:17,320 --> 00:31:19,800 Speaker 2: I'd say, let it ride and just make sure that 621 00:31:19,840 --> 00:31:21,760 Speaker 2: you've got your your needs covered in the short run 622 00:31:21,760 --> 00:31:23,800 Speaker 2: so that the dollars you've exposed are not the ones 623 00:31:23,840 --> 00:31:25,920 Speaker 2: you're gonna be paying your bills with in the short run. Anyway, 624 00:31:26,480 --> 00:31:29,120 Speaker 2: Hope that helps Laura and East Walnut Hills. So Laura 625 00:31:29,320 --> 00:31:32,320 Speaker 2: is similar lines to what I just hinted at. She's asking, 626 00:31:32,360 --> 00:31:34,280 Speaker 2: how do we know how much emergency cash to have 627 00:31:34,400 --> 00:31:37,320 Speaker 2: on hand? If our monthly income can change dramatically for 628 00:31:37,400 --> 00:31:39,160 Speaker 2: months to month, how do you calculate that, Bob. 629 00:31:40,200 --> 00:31:42,280 Speaker 1: Well, first of all, Laura, good for you for even 630 00:31:42,360 --> 00:31:44,360 Speaker 1: thinking about this and getting out in front of it, 631 00:31:44,400 --> 00:31:47,160 Speaker 1: which leads to me to believe you probably keep pretty 632 00:31:47,160 --> 00:31:50,760 Speaker 1: good records on what your actual monthly spending of your 633 00:31:50,760 --> 00:31:53,960 Speaker 1: household is. I'm going to make that assumption, so I 634 00:31:54,000 --> 00:31:56,080 Speaker 1: would first go back and look at that even with 635 00:31:56,120 --> 00:31:59,240 Speaker 1: a volatile income stream in terms of earned income, what 636 00:31:59,360 --> 00:32:01,520 Speaker 1: you can do is go back and look maybe over 637 00:32:01,560 --> 00:32:04,000 Speaker 1: the last one, two, three, four years and say, what 638 00:32:04,200 --> 00:32:06,920 Speaker 1: is the monthly nut that we have to cover in 639 00:32:06,960 --> 00:32:10,520 Speaker 1: our household, you know, to make make make the trains 640 00:32:10,600 --> 00:32:13,720 Speaker 1: run on time, you know, irrespective of what our current 641 00:32:13,800 --> 00:32:16,160 Speaker 1: income is. So once you got that number, you know 642 00:32:16,200 --> 00:32:19,840 Speaker 1: the bottom line answer is when you have a non 643 00:32:19,960 --> 00:32:23,480 Speaker 1: regular income stream from earn earn earned income, you do 644 00:32:23,560 --> 00:32:26,600 Speaker 1: want to up your emergency cash balance a little bit 645 00:32:26,680 --> 00:32:28,320 Speaker 1: because you want to You want to make sure you 646 00:32:28,360 --> 00:32:31,000 Speaker 1: do two things. You want to avoid being in a 647 00:32:31,080 --> 00:32:34,479 Speaker 1: situation where you're paying twenty five to twenty eight percent 648 00:32:34,920 --> 00:32:38,680 Speaker 1: interest rates on a short term credit card balance. Always always, 649 00:32:38,720 --> 00:32:42,360 Speaker 1: always keep yourself out of that situation. And then, secondly, 650 00:32:42,440 --> 00:32:44,560 Speaker 1: because of what we're dealing with right now with some 651 00:32:44,600 --> 00:32:48,280 Speaker 1: potential short term volatility in the markets, you don't want 652 00:32:48,280 --> 00:32:51,560 Speaker 1: to use your stock or investment portfolio as a as 653 00:32:51,600 --> 00:32:55,520 Speaker 1: an ATM machine to supplement the income needs that you're 654 00:32:55,520 --> 00:32:59,360 Speaker 1: gonna have to buy, you know, groceries next week. So uh, 655 00:32:59,440 --> 00:33:03,160 Speaker 1: I would say, calculate that number and then make sure 656 00:33:03,360 --> 00:33:06,040 Speaker 1: that you have enough emergency cash to cover you know, 657 00:33:06,360 --> 00:33:09,960 Speaker 1: as a business owner, I'm again assuming you are you 658 00:33:10,040 --> 00:33:12,320 Speaker 1: want to be different from somebody who has a regular 659 00:33:12,360 --> 00:33:15,480 Speaker 1: paycheck coming in and up that emergency cash balance to 660 00:33:15,560 --> 00:33:19,680 Speaker 1: make sure you've got maybe twelve months worth of reliable, 661 00:33:20,280 --> 00:33:23,600 Speaker 1: non volatile cash on hand to get you through, you know, 662 00:33:23,680 --> 00:33:26,440 Speaker 1: any uncertainty that would come up in your business or 663 00:33:26,480 --> 00:33:29,360 Speaker 1: in the economy at large. Hope that helps, Laura, and 664 00:33:29,440 --> 00:33:31,160 Speaker 1: good on you for getting out in front of it, 665 00:33:31,680 --> 00:33:34,719 Speaker 1: Gregan mount Adams. He says, he, Hey, if markets are 666 00:33:34,760 --> 00:33:38,360 Speaker 1: strong early in retirement, should we be locking in those 667 00:33:38,400 --> 00:33:41,640 Speaker 1: gains somehow after we get the Knights run or just 668 00:33:41,840 --> 00:33:42,480 Speaker 1: let it ride? 669 00:33:42,520 --> 00:33:45,920 Speaker 3: Brian, that so it sounds like you're in a good situation. 670 00:33:46,000 --> 00:33:47,840 Speaker 2: I'm gonna I'm gonna go out on a limb and 671 00:33:47,840 --> 00:33:49,960 Speaker 2: guess maybe that you retired two or three years ago 672 00:33:50,080 --> 00:33:52,640 Speaker 2: and the markets have been, of course really strong ever 673 00:33:52,680 --> 00:33:54,719 Speaker 2: since the dip we took in twenty twenty two. 674 00:33:55,400 --> 00:33:57,520 Speaker 3: So what you're referring to there a sequence. 675 00:33:57,080 --> 00:33:59,680 Speaker 2: Of returns risk when do the good markets happen and 676 00:33:59,720 --> 00:34:02,720 Speaker 2: when the bad markets happen. So, and that really is 677 00:34:02,760 --> 00:34:05,200 Speaker 2: the biggest structural threat in the first five to ten 678 00:34:05,280 --> 00:34:07,160 Speaker 2: years of retirement. When when Bob and I and all 679 00:34:07,200 --> 00:34:10,560 Speaker 2: of our other advisors do financial plans for clients, that's 680 00:34:10,600 --> 00:34:12,800 Speaker 2: the scariest part, right. So we can come up with 681 00:34:12,840 --> 00:34:15,520 Speaker 2: a plan that just works like clockwork, runs like a 682 00:34:15,560 --> 00:34:18,440 Speaker 2: well oiled machine, but then we have to make sure 683 00:34:18,520 --> 00:34:21,239 Speaker 2: it can still do that when the market decides to 684 00:34:21,280 --> 00:34:22,120 Speaker 2: go the wrong direction. 685 00:34:22,239 --> 00:34:23,480 Speaker 3: So here's how to think about it. 686 00:34:23,520 --> 00:34:25,360 Speaker 2: When this when the good part of it happens, right, 687 00:34:25,360 --> 00:34:27,319 Speaker 2: Because sometimes, like you just ask, we can have good 688 00:34:27,320 --> 00:34:29,880 Speaker 2: markets at the beginning too. Well, does that change anything? Well, 689 00:34:29,920 --> 00:34:32,400 Speaker 2: the first thing I would say is rebalance. Don't speculate. 690 00:34:32,440 --> 00:34:35,719 Speaker 2: If stock surge and suddenly your seventy thirty portfolio is 691 00:34:35,760 --> 00:34:38,480 Speaker 2: now more like eighty twenty, Well you've already got a 692 00:34:38,480 --> 00:34:41,560 Speaker 2: built in mechanism to lock in the gains. Just rebalance them. Right, 693 00:34:41,560 --> 00:34:43,839 Speaker 2: If you just stick to your original allocation. You're doing 694 00:34:43,880 --> 00:34:46,600 Speaker 2: exactly what you asked, rebalance that back to the target, 695 00:34:46,760 --> 00:34:49,959 Speaker 2: and now you're selling off off stocks that have gone 696 00:34:50,000 --> 00:34:52,400 Speaker 2: a little higher and you're buying things with the proceeds 697 00:34:52,560 --> 00:34:54,640 Speaker 2: that haven't done as much. That is not market timing 698 00:34:54,680 --> 00:34:57,680 Speaker 2: at all. It's simply risk control. Also, use this time 699 00:34:57,719 --> 00:35:00,200 Speaker 2: to refill your safety assets. We talk all the time, 700 00:35:00,239 --> 00:35:03,080 Speaker 2: and we've done it today about make sure you've got 701 00:35:03,400 --> 00:35:06,239 Speaker 2: money in the bank to cover the assets that cover 702 00:35:06,320 --> 00:35:08,120 Speaker 2: the bills that you've got coming do. And this is 703 00:35:08,160 --> 00:35:09,520 Speaker 2: a great time to do it when the market's doing 704 00:35:09,600 --> 00:35:11,160 Speaker 2: really well. If you take those couple of steps, I think 705 00:35:11,160 --> 00:35:12,000 Speaker 2: you could be a happy person. 706 00:35:12,920 --> 00:35:16,200 Speaker 1: Coming up next, Brian has his bottom line on potentially 707 00:35:16,320 --> 00:35:20,600 Speaker 1: taking advantage of opportunity zones. You're listening to Simply Money 708 00:35:20,600 --> 00:35:23,759 Speaker 1: presented by all Worth Financial on fifty five KRC the 709 00:35:24,080 --> 00:35:30,320 Speaker 1: talk station. Look at this moment, you're listening to Simply 710 00:35:30,360 --> 00:35:33,360 Speaker 1: Money presented by all Worth Financial on Bob Sponsorller along 711 00:35:33,360 --> 00:35:36,640 Speaker 1: with Brian James and tonight in Brian's bottom line, he 712 00:35:36,719 --> 00:35:39,200 Speaker 1: wants to educate us a little bit on how to 713 00:35:39,200 --> 00:35:42,440 Speaker 1: potentially take advantage of opportunity zones. 714 00:35:43,040 --> 00:35:47,200 Speaker 2: We're talking about Qualified Opportunity Zones BOB or qozs. These 715 00:35:47,200 --> 00:35:49,480 Speaker 2: are the one of the more misunderstood tax incentives that 716 00:35:49,520 --> 00:35:52,160 Speaker 2: exist in the US code. They were created under the 717 00:35:52,160 --> 00:35:55,000 Speaker 2: Tax Cuts and Jobs Act of twenty seventeen, so you know, 718 00:35:55,040 --> 00:35:57,680 Speaker 2: almost nine years, almost a decade ago now, during the 719 00:35:57,680 --> 00:35:59,799 Speaker 2: first Trump administration, it was pretty straightforward. 720 00:36:00,000 --> 00:36:01,600 Speaker 3: I want to encourage long term. 721 00:36:01,360 --> 00:36:06,040 Speaker 2: Investments in economically distressed communities by offering capital gain tax benefits. 722 00:36:06,200 --> 00:36:08,440 Speaker 2: This is not a deduction, it's not a credit. It's 723 00:36:08,440 --> 00:36:11,919 Speaker 2: a capital gains deferral and exclusion strategy really only works 724 00:36:11,920 --> 00:36:14,560 Speaker 2: if you've already realized a gain. So here's what happens. 725 00:36:14,719 --> 00:36:17,200 Speaker 2: First step, you sell an asset. This could be anything 726 00:36:17,239 --> 00:36:19,720 Speaker 2: with a capital gain. Can be a portfolio of stocks, 727 00:36:19,719 --> 00:36:22,680 Speaker 2: it can be a business, real estate, maybe it's crypto boom. 728 00:36:22,719 --> 00:36:24,520 Speaker 3: You've triggered a capital gain. You got to pay taxes 729 00:36:24,560 --> 00:36:24,799 Speaker 3: on it. 730 00:36:24,960 --> 00:36:27,160 Speaker 2: Second step, now you've got one hundred and eighty days 731 00:36:27,200 --> 00:36:30,080 Speaker 2: to roll that gain, not the full proceeds, just the 732 00:36:30,160 --> 00:36:34,680 Speaker 2: gain into a qualified opportunity fund or a specific investment. 733 00:36:34,719 --> 00:36:35,440 Speaker 3: There are ways to do this. 734 00:36:35,480 --> 00:36:37,719 Speaker 2: You can do one individual specific investment where there are 735 00:36:37,800 --> 00:36:40,040 Speaker 2: funds out there that will do this as well, that 736 00:36:40,080 --> 00:36:42,399 Speaker 2: fund then invests in those types of projects that are 737 00:36:42,440 --> 00:36:45,440 Speaker 2: designated as opportunities owned properties or businesses. 738 00:36:45,440 --> 00:36:46,880 Speaker 3: These are not publicly. 739 00:36:46,400 --> 00:36:50,720 Speaker 2: Traded things that you're literally looking at a ticker symbol 740 00:36:50,719 --> 00:36:52,360 Speaker 2: and just click and buy a few shares. This is 741 00:36:52,520 --> 00:36:54,480 Speaker 2: very different, so it's a lot more complicated than that. 742 00:36:54,960 --> 00:36:57,759 Speaker 2: But there are over eighty seven hundred census tracks in 743 00:36:57,800 --> 00:37:01,160 Speaker 2: the US, so there are maps out there created by 744 00:37:01,239 --> 00:37:03,480 Speaker 2: Housing in Urban Development to tell you exactly where these 745 00:37:03,520 --> 00:37:06,279 Speaker 2: opportunity zones are, and they can be areas in urban 746 00:37:06,320 --> 00:37:09,120 Speaker 2: cores out there in rural communities. But again, the whole point, 747 00:37:09,320 --> 00:37:12,480 Speaker 2: the original point of this was to defer the capital gain. 748 00:37:12,560 --> 00:37:15,600 Speaker 2: I sold something to raise the assets to make this investment, 749 00:37:15,640 --> 00:37:17,960 Speaker 2: so therefore I have a capital gain. But if I'm 750 00:37:17,960 --> 00:37:21,000 Speaker 2: going to reinvest it in something that qualifies, and I 751 00:37:21,120 --> 00:37:23,879 Speaker 2: hold that business or whatever that is for at least 752 00:37:23,920 --> 00:37:27,160 Speaker 2: five to seven years, I'm going to defer my original 753 00:37:27,160 --> 00:37:30,600 Speaker 2: capital gain and I don't have to pay taxes on 754 00:37:30,640 --> 00:37:31,920 Speaker 2: it in the year that I sold it from that 755 00:37:32,000 --> 00:37:33,080 Speaker 2: original fundraiser. 756 00:37:33,920 --> 00:37:35,560 Speaker 3: I will wait until maybe. 757 00:37:35,280 --> 00:37:38,239 Speaker 2: Five to seven years if that's the life of the 758 00:37:38,280 --> 00:37:41,600 Speaker 2: next one, or it's a permanent exclusion of the new 759 00:37:41,640 --> 00:37:43,520 Speaker 2: gains if I hold it for more than ten years. 760 00:37:43,640 --> 00:37:45,960 Speaker 2: So this can be a way to defer gains on 761 00:37:46,000 --> 00:37:49,280 Speaker 2: assets you're sitting on right now, and also potentially avoid 762 00:37:49,320 --> 00:37:53,360 Speaker 2: capital gains entirely if you hold that new investment for 763 00:37:53,400 --> 00:37:54,400 Speaker 2: at least ten years. 764 00:37:54,560 --> 00:37:56,719 Speaker 3: So you know, that's really the big thing. 765 00:37:56,960 --> 00:37:59,920 Speaker 2: Any appreciation on that new investment is completely tax free 766 00:38:00,080 --> 00:38:02,680 Speaker 2: at the federal level. Right, So again we're not talking 767 00:38:02,719 --> 00:38:04,680 Speaker 2: mutual fund stocks, bonds, that kind of thing. These are 768 00:38:04,719 --> 00:38:07,800 Speaker 2: actual opportunity because the goal of this is to generate 769 00:38:07,880 --> 00:38:11,719 Speaker 2: economic activity, lasting economic impact in areas that need it. 770 00:38:11,760 --> 00:38:13,200 Speaker 2: So if you're willing to put your money into those 771 00:38:13,239 --> 00:38:16,400 Speaker 2: types of places, then there are powerful, really really strong 772 00:38:16,719 --> 00:38:17,879 Speaker 2: tax benefits to be had. 773 00:38:18,800 --> 00:38:21,200 Speaker 1: Brian, I have to ask, is this something you're thinking 774 00:38:21,239 --> 00:38:24,680 Speaker 1: about in Athens, Ohio? Because after all, the home of 775 00:38:24,719 --> 00:38:28,280 Speaker 1: the Ohio University, Bobcats, you know, by default, is already 776 00:38:28,360 --> 00:38:32,040 Speaker 1: an economically depressed area, but. 777 00:38:32,120 --> 00:38:35,360 Speaker 2: A beautiful economically depressed area and one of my favorite 778 00:38:35,360 --> 00:38:40,560 Speaker 2: places on Earth, Ohio Oasis. It's in a sea of nothingness. 779 00:38:40,600 --> 00:38:42,680 Speaker 2: So yes, can't wait to get there in a couple 780 00:38:42,680 --> 00:38:43,240 Speaker 2: of days. 781 00:38:43,600 --> 00:38:46,839 Speaker 1: All right, thanks for listening tonight, Go Bobcats. You've been 782 00:38:46,880 --> 00:38:49,960 Speaker 1: listening to Simply Money, presented by all Worth Financial fifty 783 00:38:50,000 --> 00:38:52,000 Speaker 1: five KRC, the talk station