1 00:00:00,320 --> 00:00:03,840 Speaker 1: Shut down, reopen the garden, updates, nice Officeer is the 2 00:00:03,960 --> 00:00:06,640 Speaker 1: top of the hour hour by after on fifty five 3 00:00:06,720 --> 00:00:08,680 Speaker 1: krs the talk station. 4 00:00:15,440 --> 00:00:18,360 Speaker 2: Tonight a special treat. We've got one of the most 5 00:00:18,400 --> 00:00:23,280 Speaker 2: influential voices in American monetary policy on the show. Right now, 6 00:00:23,560 --> 00:00:26,000 Speaker 2: you're listening to Simply Money, presented by all Worth Financial 7 00:00:26,000 --> 00:00:29,680 Speaker 2: on Bob Sponseller along with Brian James. If you follow 8 00:00:29,720 --> 00:00:32,120 Speaker 2: the markets at all, or even just have a mortgage, 9 00:00:32,159 --> 00:00:34,879 Speaker 2: then you know that the Federal Reserve plays a massive 10 00:00:35,000 --> 00:00:38,640 Speaker 2: role in your financial life. But the conversations that happen 11 00:00:38,760 --> 00:00:42,839 Speaker 2: inside those closed door meetings in Washington, most of us 12 00:00:42,960 --> 00:00:45,919 Speaker 2: never get to hear from someone who was actually in 13 00:00:46,080 --> 00:00:46,560 Speaker 2: the room. 14 00:00:47,000 --> 00:00:48,760 Speaker 3: That's why tonight is so special. 15 00:00:49,240 --> 00:00:51,920 Speaker 2: Until the middle of last year, when her ten year 16 00:00:52,040 --> 00:00:56,639 Speaker 2: term concluded, Doctor Loretta Mester served as President and CEO 17 00:00:56,760 --> 00:01:00,000 Speaker 2: of the Federal Reserve back of Cleveland, where she actually 18 00:01:00,320 --> 00:01:03,800 Speaker 2: cast votes that directly shaped interest rates in the direction 19 00:01:03,960 --> 00:01:06,760 Speaker 2: of the US economy. And for those that don't know, 20 00:01:06,800 --> 00:01:10,600 Speaker 2: the Cleveland Fed has a branch right here in Cincinnati. 21 00:01:11,160 --> 00:01:14,640 Speaker 2: Doctor Mester currently is an adjunct professor of Finance at 22 00:01:14,640 --> 00:01:18,480 Speaker 2: the Wharton School of the University of Pennsylvania. Prior to 23 00:01:18,600 --> 00:01:22,440 Speaker 2: joining the Cleveland FED, she served at the Federal Federal 24 00:01:22,480 --> 00:01:26,119 Speaker 2: Reserve Bank of Philadelphia. And you know, as if she 25 00:01:26,160 --> 00:01:28,840 Speaker 2: does have any spare time. In her spare time, she 26 00:01:28,920 --> 00:01:32,480 Speaker 2: serves as a trustee of the Cleveland Clinic and of 27 00:01:32,560 --> 00:01:36,920 Speaker 2: the Musical Arts Association in Cleveland. Doctor Mester, it is 28 00:01:36,959 --> 00:01:38,880 Speaker 2: a real treat to have you with us. 29 00:01:39,000 --> 00:01:41,279 Speaker 3: Thank you so much for making time for us tonight. 30 00:01:42,440 --> 00:01:44,680 Speaker 4: Thanks for having me on. I'm really looking forward to 31 00:01:44,760 --> 00:01:45,480 Speaker 4: the conversation. 32 00:01:46,720 --> 00:01:47,039 Speaker 3: Great. 33 00:01:47,360 --> 00:01:49,680 Speaker 2: Well, Hey, the timing of your being with us could 34 00:01:49,680 --> 00:01:52,120 Speaker 2: not be much better. Is the Fed, as you well know, 35 00:01:52,320 --> 00:01:54,600 Speaker 2: just voted to lower interest rates by a quarter of 36 00:01:54,600 --> 00:01:56,760 Speaker 2: a percentage point yesterday. 37 00:01:57,120 --> 00:01:59,520 Speaker 3: Do you have any reaction to that move? Are we 38 00:01:59,560 --> 00:02:01,040 Speaker 3: on the right track here? 39 00:02:01,320 --> 00:02:04,440 Speaker 2: And more importantly, you know, and I've heard you interviewed 40 00:02:04,480 --> 00:02:07,520 Speaker 2: on this, you know, through other media, you know channels. 41 00:02:07,960 --> 00:02:10,600 Speaker 2: What what give us a taste of your sense of 42 00:02:10,639 --> 00:02:13,320 Speaker 2: the balance that the Fed is trying to strike here 43 00:02:13,800 --> 00:02:17,040 Speaker 2: between getting inflation back down to that two percent target 44 00:02:17,280 --> 00:02:20,440 Speaker 2: and balancing that with the health or lack thereof of 45 00:02:20,480 --> 00:02:21,320 Speaker 2: the labor market. 46 00:02:22,639 --> 00:02:25,160 Speaker 4: Well, you're exactly right. I mean, the Fed does have 47 00:02:25,200 --> 00:02:28,960 Speaker 4: a dual mandate goal so called that the Congress has 48 00:02:29,000 --> 00:02:32,200 Speaker 4: given it. It has to hit price de vility, which 49 00:02:32,200 --> 00:02:35,280 Speaker 4: it defines the two percent inflation, and it has to 50 00:02:35,320 --> 00:02:40,080 Speaker 4: set policy also to support getting from accell unemployment, and 51 00:02:40,160 --> 00:02:43,400 Speaker 4: so balancing those at times can be challenging, and this 52 00:02:43,440 --> 00:02:47,080 Speaker 4: is one of those times because, as you pointed out, 53 00:02:47,160 --> 00:02:51,519 Speaker 4: the labor market, it's in a balance. I would call 54 00:02:51,560 --> 00:02:54,880 Speaker 4: it an easy balance in that there isn't a lot 55 00:02:54,919 --> 00:02:58,079 Speaker 4: of firing going on, but there also isn't a lot 56 00:02:58,080 --> 00:03:00,480 Speaker 4: of hiring going on, and so you have sort of 57 00:03:00,520 --> 00:03:05,560 Speaker 4: an equibrium there for businesses where they just don't add 58 00:03:05,600 --> 00:03:07,880 Speaker 4: a lot of people to their payrolls because they don't 59 00:03:07,880 --> 00:03:09,960 Speaker 4: want they get caught out with too many if the 60 00:03:10,000 --> 00:03:13,000 Speaker 4: economy takes a turn. On the other hand, you also 61 00:03:13,080 --> 00:03:18,200 Speaker 4: have inflation that after the surge after the pandemics, you know, 62 00:03:18,200 --> 00:03:21,200 Speaker 4: when the inflation went up really really high to high 63 00:03:21,280 --> 00:03:25,520 Speaker 4: levels over seven percent, hasn't ever come back down to 64 00:03:25,600 --> 00:03:27,880 Speaker 4: the goal of two percent, and the saied's been working 65 00:03:27,919 --> 00:03:30,400 Speaker 4: hard to try to get that to come down. So 66 00:03:30,440 --> 00:03:33,720 Speaker 4: they have to have both of those goals in their site, 67 00:03:34,000 --> 00:03:36,640 Speaker 4: and that's what they've been trying to do. They last 68 00:03:36,760 --> 00:03:43,200 Speaker 4: meeting in September, they started to reduce interest rate, their 69 00:03:43,240 --> 00:03:46,760 Speaker 4: policy rate, and they followed through with another rate cut 70 00:03:47,080 --> 00:03:51,880 Speaker 4: this week yesterday, just yesterday, And so you know, they're 71 00:03:51,880 --> 00:03:54,760 Speaker 4: trying to take out some insurance on the labor side 72 00:03:55,360 --> 00:03:58,680 Speaker 4: of their mandate while at the same time keeping some 73 00:04:00,280 --> 00:04:03,640 Speaker 4: pressure to get inflation back down. And that's hard to 74 00:04:03,760 --> 00:04:07,040 Speaker 4: do when you have the economy performing as it is. 75 00:04:07,200 --> 00:04:09,680 Speaker 4: But so far, you know, that's what they're trying to do. 76 00:04:10,640 --> 00:04:13,840 Speaker 4: And as the chair said yesterday and his press conference, 77 00:04:14,000 --> 00:04:17,960 Speaker 4: chair Pal, they're they're not sure what they're all do 78 00:04:18,080 --> 00:04:20,200 Speaker 4: in December now, you know, they'll have to wait and 79 00:04:20,240 --> 00:04:22,560 Speaker 4: see how the economy evolves to see whether they need 80 00:04:22,600 --> 00:04:25,480 Speaker 4: to do more or whether they're going to stand pas. 81 00:04:25,360 --> 00:04:27,760 Speaker 5: Doctor Mesher, it seems like we've been stuck at three 82 00:04:28,000 --> 00:04:30,760 Speaker 5: ish percent inflation for a long time now, and it's 83 00:04:30,760 --> 00:04:34,040 Speaker 5: almost for an uneducated mind like myself, it almost feels 84 00:04:34,080 --> 00:04:36,840 Speaker 5: like three percent is the new floor, especially since we 85 00:04:36,920 --> 00:04:39,920 Speaker 5: decided to go ahead and start cutting interest rates. While 86 00:04:40,160 --> 00:04:42,440 Speaker 5: you know, before we got down to our preferred two percent, 87 00:04:42,680 --> 00:04:45,680 Speaker 5: why was it so much so much easier to get 88 00:04:45,720 --> 00:04:48,080 Speaker 5: down from the crazy nine percent down to three But 89 00:04:48,160 --> 00:04:49,760 Speaker 5: this last mile is so difficult. 90 00:04:49,760 --> 00:04:51,360 Speaker 3: What would you say is the biggest hurdle to. 91 00:04:51,320 --> 00:04:55,440 Speaker 4: That, Well, you're anxiety, right, and we have been sort 92 00:04:55,440 --> 00:05:00,479 Speaker 4: of very in some sense stuck at three. You know, 93 00:05:00,680 --> 00:05:04,359 Speaker 4: last year they started to bring the industry down because 94 00:05:04,360 --> 00:05:07,360 Speaker 4: they thought inflation was on its path down to two percent. 95 00:05:07,360 --> 00:05:09,320 Speaker 4: You don't want to wait until inflation gets to two 96 00:05:09,320 --> 00:05:13,560 Speaker 4: percent to move monetary policy into a more neutral stance, 97 00:05:13,560 --> 00:05:17,560 Speaker 4: because then you'll overshoot and have you know, inflation prices 98 00:05:17,600 --> 00:05:20,120 Speaker 4: go keep falling, and that isn't necessarily good for the 99 00:05:20,160 --> 00:05:24,760 Speaker 4: economy either. But you're right, and I have some concerns 100 00:05:24,760 --> 00:05:28,320 Speaker 4: about the inflation numbers that you know, they've been having 101 00:05:28,800 --> 00:05:32,440 Speaker 4: a view that, you know, most of it is teriffs, right, 102 00:05:32,600 --> 00:05:36,040 Speaker 4: so when firms have to face higher costs to bring 103 00:05:36,080 --> 00:05:40,160 Speaker 4: goods into the country, the increase their prices to consumers 104 00:05:40,200 --> 00:05:42,960 Speaker 4: to try and make up for some of that higher costs. 105 00:05:43,400 --> 00:05:45,880 Speaker 4: And so they've been saying that they think most of 106 00:05:45,920 --> 00:05:49,920 Speaker 4: the inflation has been this care for later inflation, and 107 00:05:50,360 --> 00:05:54,120 Speaker 4: they view that as being sort of a temporary phenomenon 108 00:05:54,279 --> 00:05:57,559 Speaker 4: that that'll go away. However, I think if you delve 109 00:05:57,640 --> 00:06:01,440 Speaker 4: under the hood, you see that it's not just tariffs 110 00:06:01,600 --> 00:06:06,400 Speaker 4: that it serves crisis, especially to take on housing crisis, 111 00:06:06,520 --> 00:06:08,520 Speaker 4: which are starting to move back down, and so I 112 00:06:08,560 --> 00:06:11,760 Speaker 4: think they do need to be very watchful of that 113 00:06:12,560 --> 00:06:15,159 Speaker 4: and not go too far on their rate cuts because 114 00:06:15,200 --> 00:06:18,599 Speaker 4: then you go em bed that inflation in the economy, 115 00:06:18,640 --> 00:06:21,480 Speaker 4: and as you point out, it's already been you know, 116 00:06:21,600 --> 00:06:24,480 Speaker 4: four and a half years since we've gotten inflation back down. 117 00:06:24,560 --> 00:06:26,760 Speaker 4: That too, you know, has been at two percent. So 118 00:06:27,240 --> 00:06:32,040 Speaker 4: again there is a difficult row to hoe, and they 119 00:06:32,040 --> 00:06:33,960 Speaker 4: have a challenge in front of them, and so that's 120 00:06:34,000 --> 00:06:36,440 Speaker 4: why I think they really need to be focused on 121 00:06:36,520 --> 00:06:42,400 Speaker 4: inflation and the labor market, not just some one of 122 00:06:42,480 --> 00:06:46,760 Speaker 4: those two calls. They need to heat both. On their site, you're. 123 00:06:46,560 --> 00:06:48,800 Speaker 2: Listening to Simply Money, presented by all Worth Financial on 124 00:06:48,920 --> 00:06:52,640 Speaker 2: Bob Sponseller along with Brian James, joined by doctor Loretta Mester, 125 00:06:53,200 --> 00:06:56,400 Speaker 2: the former president and CEO of the Federal Reserve Bank 126 00:06:56,480 --> 00:06:59,520 Speaker 2: of Cleveland. Doctor Mester, we want to get into a 127 00:06:59,520 --> 00:07:02,640 Speaker 2: little bit of your you know, actual time serving on 128 00:07:02,680 --> 00:07:04,680 Speaker 2: the FED. I mean, let's face it, you served on 129 00:07:04,720 --> 00:07:07,279 Speaker 2: the FED, you know, as president of the Cleveland FED 130 00:07:07,360 --> 00:07:10,320 Speaker 2: during some interesting times. You served during most of the 131 00:07:10,360 --> 00:07:16,000 Speaker 2: Obama administration, the first Trump administration, then almost all of 132 00:07:16,080 --> 00:07:20,720 Speaker 2: the Biden administrations, so uh, pretty pretty interesting times to 133 00:07:20,800 --> 00:07:24,320 Speaker 2: say the least, and among the most interesting times you 134 00:07:24,400 --> 00:07:27,720 Speaker 2: were on the Federal Reserve helping us guide the country 135 00:07:27,800 --> 00:07:31,280 Speaker 2: through COVID, one of the most historic, you know, periods 136 00:07:31,280 --> 00:07:34,120 Speaker 2: in history and certainly a gut punch to the economy. 137 00:07:34,760 --> 00:07:36,160 Speaker 3: Take us behind the scenes of. 138 00:07:36,120 --> 00:07:39,520 Speaker 2: How you tried and your colleagues operated during a time 139 00:07:39,600 --> 00:07:42,080 Speaker 2: when you know, let's face it, we weren't sure what 140 00:07:42,320 --> 00:07:45,000 Speaker 2: was going to be going on here with this you know, pandemic. 141 00:07:46,320 --> 00:07:49,920 Speaker 4: Well, you're exactly right. It certainly was nothing than any 142 00:07:49,960 --> 00:07:55,120 Speaker 4: of us it experience, and it was very uncertained. I mean, 143 00:07:55,600 --> 00:07:58,360 Speaker 4: I think people sometimes forget, you know, that were you know, 144 00:07:58,880 --> 00:08:03,440 Speaker 4: now five you know, years beyond how inserted it really was, 145 00:08:03,760 --> 00:08:08,160 Speaker 4: and we didn't really understand what was what was going on, 146 00:08:08,280 --> 00:08:10,840 Speaker 4: especially in the beginning. I remember sitting at a conference 147 00:08:11,080 --> 00:08:14,560 Speaker 4: in New York after having gotten back from London early 148 00:08:14,600 --> 00:08:18,120 Speaker 4: in March, and we were like stardines in a can 149 00:08:18,240 --> 00:08:21,640 Speaker 4: and I'm thinking like, now, wow, that was pretty really thing, 150 00:08:22,960 --> 00:08:24,960 Speaker 4: but you didn't know at the time, and so that 151 00:08:25,160 --> 00:08:29,160 Speaker 4: was you know, we said, all of the policymakers and 152 00:08:29,200 --> 00:08:31,800 Speaker 4: all the staff of the SAID really hunkered down to 153 00:08:31,960 --> 00:08:35,000 Speaker 4: really try to understand what was happening to the economy 154 00:08:35,040 --> 00:08:37,160 Speaker 4: because we wanted to do what we could with our 155 00:08:38,080 --> 00:08:41,199 Speaker 4: policy tools to support the economy as best we could. 156 00:08:41,840 --> 00:08:45,520 Speaker 4: And I had to give credit to all the business 157 00:08:45,520 --> 00:08:49,440 Speaker 4: people that I talked to during those times, because we 158 00:08:49,520 --> 00:08:51,760 Speaker 4: really didn't have a clue about what was having it 159 00:08:51,800 --> 00:08:56,240 Speaker 4: was really important for us to gather that information and 160 00:08:56,600 --> 00:08:59,400 Speaker 4: from bankers and business people and labor market leaders and 161 00:08:59,440 --> 00:09:02,160 Speaker 4: in our distion, you know, which includes Cincinnati of course, 162 00:09:02,200 --> 00:09:04,079 Speaker 4: as you as you mentioned, you have a branch that 163 00:09:04,960 --> 00:09:08,040 Speaker 4: people were so generous, you know, they were worried about 164 00:09:08,040 --> 00:09:10,480 Speaker 4: their own business, their own families, and yet they were 165 00:09:10,520 --> 00:09:14,720 Speaker 4: incredibly you know, generous with their time and intel and 166 00:09:14,880 --> 00:09:18,360 Speaker 4: telling us what they were seeing out there. And I 167 00:09:18,400 --> 00:09:23,360 Speaker 4: actually had the opportunity to serve on a nonpartisan, apolitical 168 00:09:24,760 --> 00:09:28,560 Speaker 4: council that Governors of Line put together because he wanted 169 00:09:28,600 --> 00:09:33,000 Speaker 4: to gather people who were really in the understanding trying 170 00:09:33,040 --> 00:09:37,120 Speaker 4: to understand what was happening in the economy in Ohio. 171 00:09:37,200 --> 00:09:39,360 Speaker 4: And that was also I felt like I could provide 172 00:09:39,360 --> 00:09:42,240 Speaker 4: at least our insights from the SAID side in terms 173 00:09:42,240 --> 00:09:45,040 Speaker 4: of what we were seeing the economy but also hearing 174 00:09:45,080 --> 00:09:47,840 Speaker 4: from the business people on that. So it was a 175 00:09:48,040 --> 00:09:52,360 Speaker 4: very uncertain time, I would say, But I mean, one 176 00:09:52,480 --> 00:09:55,360 Speaker 4: thing about the said is that we're everyone at the 177 00:09:55,640 --> 00:09:59,679 Speaker 4: is very dedicated to doing what he or she can 178 00:09:59,840 --> 00:10:05,400 Speaker 4: do to support the economy. And you know, as you 179 00:10:05,440 --> 00:10:09,000 Speaker 4: saw yesterday's meeting, not everyone has the same view necessarily 180 00:10:09,040 --> 00:10:14,160 Speaker 4: want best what is the best path, but everyone brings 181 00:10:14,200 --> 00:10:16,880 Speaker 4: their ideas to the table and then they discussed. And 182 00:10:17,000 --> 00:10:20,680 Speaker 4: so that was what we tried to do during the pandemic. 183 00:10:20,760 --> 00:10:23,720 Speaker 4: You know, as you know, you know, the Center Reserve banks, 184 00:10:23,760 --> 00:10:29,280 Speaker 4: including the branch in Cincinnati, stayed open because we had 185 00:10:29,280 --> 00:10:32,560 Speaker 4: to move cash. It was very important that people have 186 00:10:32,679 --> 00:10:36,640 Speaker 4: access to cash during uncertain times and impact demand for passion. 187 00:10:36,760 --> 00:10:39,160 Speaker 4: A lot of people go around today not having cash 188 00:10:39,240 --> 00:10:41,280 Speaker 4: in their pocket. They don't have dollar bills in their pocket. 189 00:10:41,280 --> 00:10:44,400 Speaker 4: They use their phone or you know, credit cards or 190 00:10:44,480 --> 00:10:48,040 Speaker 4: debit cards. But during those kind of uncertain times, people 191 00:10:48,080 --> 00:10:51,240 Speaker 4: want cash and want to physically have something in their hand, 192 00:10:51,320 --> 00:10:54,439 Speaker 4: and so that was really important. In all the workers 193 00:10:54,440 --> 00:10:58,960 Speaker 4: in our cash operations, they were dedicated coming in even 194 00:10:59,000 --> 00:11:01,400 Speaker 4: though they were scared for their our own family, you know, 195 00:11:01,440 --> 00:11:04,640 Speaker 4: they were, you know, really dedicated to making sure that 196 00:11:06,280 --> 00:11:10,720 Speaker 4: the financial system stayed upload in the payment system. 197 00:11:11,160 --> 00:11:12,880 Speaker 5: Tax mescher, I want to ask you about about something 198 00:11:12,880 --> 00:11:15,840 Speaker 5: a little more recent this had this happened after your turn, 199 00:11:15,920 --> 00:11:18,520 Speaker 5: but just a few months ago, Erica mcintar, for the 200 00:11:18,520 --> 00:11:21,480 Speaker 5: Commissioner of the Bureau Labor Statistics, was let go from 201 00:11:21,480 --> 00:11:25,040 Speaker 5: her position after a less than desirable July employment report, 202 00:11:25,240 --> 00:11:28,600 Speaker 5: which isn't necessarily attributed to any one person, but might might. 203 00:11:28,679 --> 00:11:30,560 Speaker 5: And then then some other changes with regard to how 204 00:11:30,600 --> 00:11:33,200 Speaker 5: we collect outa how we distributed. So you weren't in 205 00:11:33,240 --> 00:11:35,319 Speaker 5: the role, of course at the time, But what were 206 00:11:35,360 --> 00:11:37,200 Speaker 5: your thoughts when you started to hear the news about 207 00:11:37,200 --> 00:11:39,600 Speaker 5: how we were changing the information that people such as 208 00:11:39,679 --> 00:11:41,960 Speaker 5: yourself were going to have in order to make decisions. 209 00:11:41,960 --> 00:11:44,120 Speaker 5: What are the biggest things that you thought, Oh my gosh, 210 00:11:44,120 --> 00:11:46,120 Speaker 5: how are they going to function without this kind of thing. 211 00:11:47,360 --> 00:11:52,800 Speaker 4: Well, it is certainly true that the government's economic statistics 212 00:11:52,880 --> 00:11:57,080 Speaker 4: would be zero. Labor statistics, you know, have published both 213 00:11:57,120 --> 00:12:02,840 Speaker 4: inflation data and employment data. Those reports are you know, 214 00:12:03,120 --> 00:12:06,360 Speaker 4: top notch reports on the US economy. They give you 215 00:12:06,400 --> 00:12:09,800 Speaker 4: a very good picture on what's happening in the economy. 216 00:12:10,559 --> 00:12:14,760 Speaker 4: And you know, not to have that data does is 217 00:12:14,800 --> 00:12:17,360 Speaker 4: a disadvantage. Now, on the other hand, there are other 218 00:12:17,440 --> 00:12:21,480 Speaker 4: data sources that the SAID has available to them. Some 219 00:12:21,520 --> 00:12:25,040 Speaker 4: of them are private sector data that are available to everyone. 220 00:12:25,120 --> 00:12:28,720 Speaker 4: And also the SAID collects its own data. So you know, 221 00:12:28,840 --> 00:12:35,240 Speaker 4: before every every you know, meeting on interest rate, the 222 00:12:35,320 --> 00:12:38,200 Speaker 4: SET actually publishes what it calls the Beige Book. I'm 223 00:12:38,200 --> 00:12:42,560 Speaker 4: sure you have seen that before and many of your listeners, colleague, 224 00:12:42,679 --> 00:12:46,280 Speaker 4: seen it. And it's really a summary from every reserve 225 00:12:46,320 --> 00:12:51,240 Speaker 4: bank of what they're seeing and hearing from contact in 226 00:12:51,280 --> 00:12:53,880 Speaker 4: the district, and it's the summary of the economy and 227 00:12:54,120 --> 00:12:56,600 Speaker 4: we put that out. That SAID puts that out before 228 00:12:56,760 --> 00:13:00,719 Speaker 4: the home seates are everyone can can share. I am 229 00:12:59,840 --> 00:13:05,720 Speaker 4: sure that the reserve banks have really stepped up those 230 00:13:05,760 --> 00:13:10,000 Speaker 4: efforts given they don't have the goal standard of data 231 00:13:10,160 --> 00:13:13,440 Speaker 4: from the federal government and a lot of the centerl reserves, 232 00:13:13,480 --> 00:13:16,440 Speaker 4: including the Cleveland said, you know, our own kind of 233 00:13:16,559 --> 00:13:21,400 Speaker 4: surveying of businesses and then evaluate them into indicators and 234 00:13:21,440 --> 00:13:23,640 Speaker 4: put them out to look to see as well. So 235 00:13:24,200 --> 00:13:27,880 Speaker 4: I'm sure there's a very big effort going into sort 236 00:13:27,880 --> 00:13:32,000 Speaker 4: of collecting that intel so that they do have a 237 00:13:32,160 --> 00:13:37,600 Speaker 4: basis or understanding what's happening in the economy and also 238 00:13:37,760 --> 00:13:40,600 Speaker 4: what is happening what they can expect that happen in 239 00:13:40,640 --> 00:13:44,000 Speaker 4: the future. And that's where the boards of directors of 240 00:13:44,120 --> 00:13:49,240 Speaker 4: the centeral Reserve banks and the business advisory councils. You know, 241 00:13:49,280 --> 00:13:51,040 Speaker 4: when I was at the Cleveland said we ran a 242 00:13:51,080 --> 00:13:56,320 Speaker 4: lot of business advisory councils that are geographically or industry focused, 243 00:13:56,360 --> 00:13:58,600 Speaker 4: so that we would have those contacts to be able 244 00:13:58,679 --> 00:14:01,280 Speaker 4: to ask people, Hey, what are you planning to do 245 00:14:01,320 --> 00:14:04,240 Speaker 4: with your crisis? You know, you know you're facing higher carts, 246 00:14:04,240 --> 00:14:07,000 Speaker 4: so are you planning to you know, pay for some 247 00:14:07,080 --> 00:14:09,280 Speaker 4: of that and you're you know, by reducing your margins. 248 00:14:09,559 --> 00:14:11,320 Speaker 4: You know, do you have that money to do that 249 00:14:11,440 --> 00:14:15,000 Speaker 4: or are you planning to pass them on to your customers? 250 00:14:15,040 --> 00:14:16,800 Speaker 4: And do you think you'll be able to do that? Well, 251 00:14:16,840 --> 00:14:20,000 Speaker 4: customers demand space for your product, and so you have 252 00:14:20,160 --> 00:14:24,440 Speaker 4: that as a real avenue for gathering information that can 253 00:14:24,440 --> 00:14:25,880 Speaker 4: be very use local policy. 254 00:14:26,600 --> 00:14:28,840 Speaker 3: All right, doctor Mester, we got to take a short break. 255 00:14:28,880 --> 00:14:30,200 Speaker 2: I know you're going to hang with us for a 256 00:14:30,240 --> 00:14:33,160 Speaker 2: few more minutes, which we really appreciate you're listening to 257 00:14:33,200 --> 00:14:36,240 Speaker 2: simply money presented by all Worth Financial on fifty five KRC, 258 00:14:36,680 --> 00:14:41,680 Speaker 2: the talk station, The Shumer shutdown, Trump shutdown, The events 259 00:14:41,720 --> 00:14:43,720 Speaker 2: of the day Portland on. 260 00:14:43,720 --> 00:14:47,680 Speaker 5: Five is a cleared war from Chicago are heard every day. 261 00:14:47,760 --> 00:14:50,640 Speaker 6: Peace deal is closer than every is real Peace fifty 262 00:14:50,680 --> 00:14:52,920 Speaker 6: five KRS the talk station. 263 00:14:53,280 --> 00:14:57,120 Speaker 7: All Worth Financial a registered investment advisory firm. Any ideas 264 00:14:57,160 --> 00:14:59,960 Speaker 7: presented during this program are not intended to provide specif 265 00:15:00,320 --> 00:15:04,280 Speaker 7: financial advice. You should consult your own financial advisor, tax consultant, 266 00:15:04,440 --> 00:15:07,520 Speaker 7: or a state planning attorney to conduct your own due diligence. 267 00:15:11,720 --> 00:15:14,160 Speaker 2: You're listening to Simply Money, presented by all Worth Financial 268 00:15:14,160 --> 00:15:17,480 Speaker 2: on Bob Sponseller along with Brian James. If you can't 269 00:15:17,520 --> 00:15:20,200 Speaker 2: listen to Simply Money every night, subscribe and get our 270 00:15:20,280 --> 00:15:23,800 Speaker 2: daily podcasts. Just search Simply Money on the iHeart app 271 00:15:24,120 --> 00:15:27,160 Speaker 2: or wherever you find your podcast. We are back in 272 00:15:27,240 --> 00:15:31,000 Speaker 2: continuing our conversation with doctor Loretta Mester, who served as 273 00:15:31,080 --> 00:15:34,359 Speaker 2: President and CEO of the Federal Reserve Bank of Cleveland 274 00:15:34,800 --> 00:15:38,440 Speaker 2: from June of twenty fourteen through June of twenty twenty 275 00:15:38,480 --> 00:15:41,760 Speaker 2: four Doctor Mester, I've got a question I'm dying to 276 00:15:41,760 --> 00:15:45,880 Speaker 2: hear your answer to You know, obviously in the current environment. 277 00:15:45,920 --> 00:15:48,520 Speaker 2: And as we've already talked about, you've served under three 278 00:15:48,560 --> 00:15:53,400 Speaker 2: different administrations. Now we have the second Trump administration where 279 00:15:54,000 --> 00:15:56,600 Speaker 2: he is wanted to kind of try to, for lack 280 00:15:56,640 --> 00:16:02,560 Speaker 2: of a better term, direct FED direction on social give 281 00:16:02,640 --> 00:16:05,720 Speaker 2: us the real answer on how this actually works behind 282 00:16:05,720 --> 00:16:09,880 Speaker 2: the scenes, how the FED governors actually communicate. Are you 283 00:16:09,960 --> 00:16:13,600 Speaker 2: guys actually influenced at all by all this noise out there? 284 00:16:13,640 --> 00:16:15,120 Speaker 3: How does it really work? 285 00:16:15,160 --> 00:16:17,600 Speaker 2: I mean, you gave us a lot of reassurance about 286 00:16:17,880 --> 00:16:19,720 Speaker 2: how the FED operated during COVID. 287 00:16:19,800 --> 00:16:21,600 Speaker 3: Talk about what it's really. 288 00:16:21,360 --> 00:16:24,240 Speaker 2: Like here when all this you know what I'll say, 289 00:16:24,840 --> 00:16:28,080 Speaker 2: rhetoric is flying around. Is that just noise that you 290 00:16:28,160 --> 00:16:30,400 Speaker 2: all just tune out when you're actually doing your job. 291 00:16:31,360 --> 00:16:34,240 Speaker 4: Certainly you truly tune all that out. 292 00:16:34,400 --> 00:16:34,640 Speaker 6: I am. 293 00:16:34,840 --> 00:16:40,240 Speaker 4: I am very confident that when each policy maker enters 294 00:16:40,280 --> 00:16:43,080 Speaker 4: that room where they sit around and able to deliberate 295 00:16:43,240 --> 00:16:47,680 Speaker 4: what's the best path or monetary policy, none of the 296 00:16:47,720 --> 00:16:53,240 Speaker 4: outside influences affect how they're going about making their decisions. 297 00:16:53,600 --> 00:16:57,560 Speaker 4: That's said, I think it's very unfortunate that you know, 298 00:16:57,640 --> 00:16:59,720 Speaker 4: even that you had to ask me that question, just 299 00:16:59,760 --> 00:17:05,119 Speaker 4: show how unfortunate a situation we're in because it's you know, 300 00:17:05,600 --> 00:17:07,960 Speaker 4: it's the past. You know, presidents haven't tried to influence 301 00:17:08,000 --> 00:17:10,919 Speaker 4: the SAID. Typically it happens during election years where they 302 00:17:11,000 --> 00:17:13,320 Speaker 4: want to get up the economy and they would love 303 00:17:13,359 --> 00:17:15,399 Speaker 4: to have these sort of the economy growing as they 304 00:17:15,520 --> 00:17:19,000 Speaker 4: enter an election, and you know, then then there will 305 00:17:19,080 --> 00:17:22,800 Speaker 4: let's worried about inflation because that comes later. And that 306 00:17:22,840 --> 00:17:26,400 Speaker 4: has happened in the past under other presidents in history. 307 00:17:27,000 --> 00:17:29,520 Speaker 4: But what's different this time is that it's so in 308 00:17:29,560 --> 00:17:36,600 Speaker 4: the open, it's so unrelenting, and it's so vitriolic. And 309 00:17:36,720 --> 00:17:42,000 Speaker 4: so this is an unfortunate situation because it does lead 310 00:17:42,240 --> 00:17:46,040 Speaker 4: to skepticism about habits that actually goes about making decisions. 311 00:17:46,359 --> 00:17:49,280 Speaker 4: But I know in that room, none of that enters. 312 00:17:49,400 --> 00:17:52,439 Speaker 4: This is really about sitting down the table, deliberating what 313 00:17:52,480 --> 00:17:55,359 Speaker 4: they're seeing in the economy in their various districts and 314 00:17:55,640 --> 00:18:00,120 Speaker 4: for the nation, and what they believe with their tools 315 00:18:00,560 --> 00:18:03,879 Speaker 4: is the best path for them to set that industry. 316 00:18:04,080 --> 00:18:09,080 Speaker 4: And so again it's an unfortunate situation. You want the 317 00:18:09,200 --> 00:18:11,919 Speaker 4: SAID to be able to make its decisions independent of 318 00:18:11,960 --> 00:18:15,560 Speaker 4: all these short run political considerations because it actually leads 319 00:18:15,560 --> 00:18:19,479 Speaker 4: to better monetary policy. There's lots of work in various 320 00:18:19,480 --> 00:18:22,400 Speaker 4: countries that basically show and in the US as well, 321 00:18:22,440 --> 00:18:27,840 Speaker 4: that when the central bank can make decisions based on 322 00:18:28,000 --> 00:18:32,680 Speaker 4: what that's achieving priceability and maximum employment, if that's part 323 00:18:32,680 --> 00:18:37,359 Speaker 4: of their goal, you actually get lower inflation and you 324 00:18:37,400 --> 00:18:40,560 Speaker 4: don't have to pay a price into having more volatility 325 00:18:40,720 --> 00:18:46,280 Speaker 4: or business typle you know, fluctuations on growth or unemployment. 326 00:18:46,320 --> 00:18:49,200 Speaker 4: You actually get better outcomes to the public. And so 327 00:18:49,240 --> 00:18:51,680 Speaker 4: that's why you really want to have to said, to 328 00:18:51,680 --> 00:18:57,200 Speaker 4: be able to make its decisions without this influence attempt, 329 00:18:58,119 --> 00:19:00,680 Speaker 4: and that's the so it's going to distract that isn't 330 00:19:00,720 --> 00:19:01,680 Speaker 4: help one anyway. 331 00:19:02,320 --> 00:19:04,320 Speaker 5: Doctor Mesher, you spent a lot of time in Ohio 332 00:19:04,359 --> 00:19:06,240 Speaker 5: and then of course you were responsible for a lot 333 00:19:06,240 --> 00:19:08,520 Speaker 5: of the Midwest in your role. What do you see 334 00:19:08,560 --> 00:19:11,879 Speaker 5: currently about this area in terms of opportunities, threats and 335 00:19:11,920 --> 00:19:15,159 Speaker 5: those kinds of things. Is Ohio specifically a well positioned 336 00:19:15,200 --> 00:19:18,720 Speaker 5: to navigate all this economically or do you see challenges here? 337 00:19:19,880 --> 00:19:22,240 Speaker 4: Well, Ohio you know has a lot going for it. 338 00:19:22,280 --> 00:19:26,480 Speaker 4: I mean, it was more manufacturing base than other parts 339 00:19:26,560 --> 00:19:31,199 Speaker 4: of the country and you know certainly has more ties 340 00:19:31,480 --> 00:19:33,800 Speaker 4: also to the auto industry. But on the other hand, 341 00:19:33,840 --> 00:19:40,400 Speaker 4: it also has a very important service sector, including education 342 00:19:41,240 --> 00:19:45,040 Speaker 4: and including healthcare. You know the Cleveland Clinic. Of course, 343 00:19:45,560 --> 00:19:48,240 Speaker 4: I'm on their board, and you know there there certainly 344 00:19:48,280 --> 00:19:51,200 Speaker 4: are at a forefront in the nation of the world 345 00:19:51,200 --> 00:19:55,320 Speaker 4: on healthcare. So that's great about the district in Ohio, 346 00:19:56,800 --> 00:19:59,760 Speaker 4: it's really that it is a very diverse economy. And 347 00:20:00,000 --> 00:20:03,120 Speaker 4: diversity of your economy is what you want because then 348 00:20:03,240 --> 00:20:07,479 Speaker 4: you can get through periods where you know, maybe you know, 349 00:20:07,600 --> 00:20:11,159 Speaker 4: the tariffs are challenging some manufacturing firms, but on the 350 00:20:11,160 --> 00:20:15,239 Speaker 4: other hand, healthcare, you know it is still you know, 351 00:20:15,400 --> 00:20:18,440 Speaker 4: going to be in demand. So again, having diversity is 352 00:20:18,560 --> 00:20:23,800 Speaker 4: very important. That's what Ohio has. The educational part of 353 00:20:23,800 --> 00:20:27,440 Speaker 4: Ohio is also very important because it's creating the workers 354 00:20:27,440 --> 00:20:31,200 Speaker 4: of the future, and that's very important. On the other hand, 355 00:20:31,240 --> 00:20:33,719 Speaker 4: there are a lot of businesses doing a lot in 356 00:20:33,800 --> 00:20:38,080 Speaker 4: terms of internship programs of apprenticeship programs, so that we 357 00:20:38,160 --> 00:20:41,439 Speaker 4: have sort of the workforce right they can do a 358 00:20:41,480 --> 00:20:44,280 Speaker 4: lot of the jobs that are going to be necessary 359 00:20:44,840 --> 00:20:46,800 Speaker 4: as the economy involved in the future. 360 00:20:47,080 --> 00:20:49,360 Speaker 2: It has been a huge week for company earnings. We're 361 00:20:49,359 --> 00:20:52,280 Speaker 2: going to talk about that and later. Take your questions 362 00:20:52,320 --> 00:20:54,800 Speaker 2: you're listening to simply Money presented by all Worth Financial 363 00:20:54,800 --> 00:20:57,439 Speaker 2: on fifty five KRC the talk station. 364 00:20:58,480 --> 00:21:01,480 Speaker 6: Some people only hear what they want to hear in 365 00:21:01,560 --> 00:21:04,240 Speaker 6: the no twenty four hours a day, we only. 366 00:21:04,040 --> 00:21:06,679 Speaker 1: Deal in what you need to hear. These days, you 367 00:21:06,760 --> 00:21:14,480 Speaker 1: need to keep an open mind. Fifty five KRCD talkstation. 368 00:21:14,960 --> 00:21:16,720 Speaker 1: More than a few of our patients. This is fifty 369 00:21:16,720 --> 00:21:19,320 Speaker 1: five KRC and iHeartRadio station. 370 00:21:25,080 --> 00:21:27,720 Speaker 2: You're listening to Simply Money presented by all Worth Financial 371 00:21:27,720 --> 00:21:29,960 Speaker 2: on Bob Sponseller along with Brian James. 372 00:21:30,760 --> 00:21:33,360 Speaker 3: When the companies that make up a third of the S. 373 00:21:33,320 --> 00:21:38,040 Speaker 2: And P five hundred's total capitalization make earnings announcements, it's 374 00:21:38,080 --> 00:21:40,919 Speaker 2: a pretty big deal. Good news will drive the market 375 00:21:41,000 --> 00:21:44,600 Speaker 2: and the reverse can happen as well. So let's delve 376 00:21:44,640 --> 00:21:47,440 Speaker 2: into some of these actual companies, Brian, because we are 377 00:21:47,520 --> 00:21:50,439 Speaker 2: getting some earnings news, you know, coming out, you know 378 00:21:50,560 --> 00:21:54,200 Speaker 2: as we speak, and we've gotten earnings you know, over 379 00:21:54,200 --> 00:21:56,480 Speaker 2: the last couple of days from some of these big 380 00:21:56,560 --> 00:21:57,320 Speaker 2: tech giants. 381 00:21:57,480 --> 00:22:00,480 Speaker 5: Yeah, the big companies are producing their report cards here. 382 00:22:00,520 --> 00:22:04,040 Speaker 5: So let's start with Microsoft. Microsoft reported better than expected 383 00:22:04,080 --> 00:22:07,280 Speaker 5: results for the fiscal first quarter. Revenue in the company's 384 00:22:07,320 --> 00:22:09,679 Speaker 5: Azure cloud business jumped about forty percent. 385 00:22:09,760 --> 00:22:11,800 Speaker 3: That's obviously a pretty good run, and. 386 00:22:11,800 --> 00:22:15,040 Speaker 5: They're heavily involved in the AI revolution using Azure as 387 00:22:15,040 --> 00:22:17,760 Speaker 5: well as open ai, which is the company behind chatch Ept, 388 00:22:18,200 --> 00:22:21,080 Speaker 5: which itself is making rumblings about going public and being 389 00:22:21,080 --> 00:22:23,000 Speaker 5: spun off on its own. That was a headline from 390 00:22:23,000 --> 00:22:26,600 Speaker 5: earlier this week. Major enterprise software player is Microsoft and 391 00:22:26,640 --> 00:22:29,040 Speaker 5: when they beat earnings, what that signals is that corporate 392 00:22:29,040 --> 00:22:31,560 Speaker 5: IT spending is really strong, and that means growth. 393 00:22:31,640 --> 00:22:31,800 Speaker 3: Right. 394 00:22:32,280 --> 00:22:34,720 Speaker 5: If big companies are looking to spend on their infrastructure, 395 00:22:34,720 --> 00:22:36,600 Speaker 5: their networks and all that, they're not doing that for fun. 396 00:22:36,800 --> 00:22:39,280 Speaker 5: They're doing that because they somehow sense an opportunity to 397 00:22:39,280 --> 00:22:42,080 Speaker 5: make more money with the core products and services that 398 00:22:42,119 --> 00:22:45,480 Speaker 5: they sell. That has ripple effects across the economy. So 399 00:22:45,520 --> 00:22:47,040 Speaker 5: let's talk about OpenAI a little bit more. 400 00:22:47,080 --> 00:22:50,400 Speaker 3: So. Open ai is giving its Microsoft. Microsoft is not. 401 00:22:50,400 --> 00:22:53,320 Speaker 5: The only owner, it doesn't own a open ai entirely, 402 00:22:53,359 --> 00:22:55,960 Speaker 5: but it is a large shareholder. Open ai is going 403 00:22:56,000 --> 00:22:59,080 Speaker 5: to give Microsoft a twenty seven percent ownership stake part 404 00:22:59,119 --> 00:23:01,680 Speaker 5: of this restructuring plan, and they've been negotiating for about 405 00:23:01,680 --> 00:23:04,119 Speaker 5: a year and that's kind of that kind of removes 406 00:23:04,160 --> 00:23:05,640 Speaker 5: one of the big obstacles one of the big question 407 00:23:05,680 --> 00:23:07,520 Speaker 5: marks we had out there for both sides, and it 408 00:23:07,560 --> 00:23:09,840 Speaker 5: clears the path for the chat GPT to become a 409 00:23:09,840 --> 00:23:13,000 Speaker 5: for profit business on its very own. So there's one 410 00:23:13,000 --> 00:23:14,800 Speaker 5: good story happening in the economy of bib What else 411 00:23:14,800 --> 00:23:15,520 Speaker 5: do you see out there? 412 00:23:16,200 --> 00:23:18,320 Speaker 2: Well, just to just to go back on this whole 413 00:23:18,320 --> 00:23:21,480 Speaker 2: open Ai chat GPT you know story. I mean, just 414 00:23:21,520 --> 00:23:23,879 Speaker 2: as a reminder, you mentioned it. They're trying to become 415 00:23:23,920 --> 00:23:27,679 Speaker 2: a for profit business. They have extremely innovative technology, but 416 00:23:27,720 --> 00:23:30,280 Speaker 2: they've yet to make a profit. So you know what 417 00:23:30,359 --> 00:23:32,800 Speaker 2: I'm hearing talked about in some of these analyst calls 418 00:23:32,840 --> 00:23:35,800 Speaker 2: and all that is, you know, these companies are going 419 00:23:35,960 --> 00:23:40,680 Speaker 2: up because of the tremendous spend on AI infrastructure, and 420 00:23:40,880 --> 00:23:43,200 Speaker 2: you know, the chip stocks and everything else are following 421 00:23:43,359 --> 00:23:46,320 Speaker 2: right along. But I think the question mark heading into 422 00:23:46,400 --> 00:23:48,880 Speaker 2: next year is going to be, all right, you guys 423 00:23:48,920 --> 00:23:51,760 Speaker 2: are spending all this money. You obviously have smart people 424 00:23:51,880 --> 00:23:55,240 Speaker 2: running these companies, and you're monitoring profit and loss and 425 00:23:55,280 --> 00:23:58,040 Speaker 2: expenses on a regular basis. We got to make sure 426 00:23:58,119 --> 00:24:01,520 Speaker 2: these you know, trillions of dollars of spending on open 427 00:24:01,560 --> 00:24:06,480 Speaker 2: AI infrastructure actually yields some benefits in terms of continued 428 00:24:06,520 --> 00:24:09,720 Speaker 2: growth and that's the real question, you know, going into 429 00:24:10,080 --> 00:24:13,800 Speaker 2: twenty twenty six. But we will will move on to 430 00:24:13,880 --> 00:24:14,600 Speaker 2: the next company. 431 00:24:14,640 --> 00:24:16,840 Speaker 3: Meta. They reported third quarter sales of. 432 00:24:16,880 --> 00:24:20,600 Speaker 2: Fifty one point two billion, which beat the average estimates 433 00:24:20,600 --> 00:24:24,800 Speaker 2: from analysts. They've used profits from their advertising business to 434 00:24:25,000 --> 00:24:29,560 Speaker 2: fuel their AI ambitions, leading to some anxiety among investors 435 00:24:29,920 --> 00:24:32,080 Speaker 2: who were waiting to see, Like we just talked about, 436 00:24:32,160 --> 00:24:35,600 Speaker 2: how much profits are actually coming and more in the 437 00:24:35,680 --> 00:24:40,119 Speaker 2: near term, how much holiday quarter sales would help offset 438 00:24:40,200 --> 00:24:41,160 Speaker 2: some of that spending. 439 00:24:42,880 --> 00:24:44,520 Speaker 3: They were once just Facebook. 440 00:24:44,640 --> 00:24:48,120 Speaker 2: Now they let's face it, they're a trillion dollar ad giant. 441 00:24:48,240 --> 00:24:51,159 Speaker 2: So if Meta is doing well, it tells us companies 442 00:24:51,200 --> 00:24:55,560 Speaker 2: are confident enough to spend big on digital advertising. That's 443 00:24:55,600 --> 00:24:59,480 Speaker 2: a good indicator of business sentiment. Their user numbers also 444 00:24:59,680 --> 00:25:03,600 Speaker 2: hint where attention and engagement are shifting, because let's face it, 445 00:25:04,200 --> 00:25:08,400 Speaker 2: advertising is shifting to you know, podcasts and digital and 446 00:25:08,480 --> 00:25:11,480 Speaker 2: you know all that in a way from traditional media. 447 00:25:11,520 --> 00:25:15,800 Speaker 2: It's a fascinating evolution to watch unfold in real time. 448 00:25:16,560 --> 00:25:19,520 Speaker 5: And not to be outdone the Artists formerly known as 449 00:25:19,640 --> 00:25:24,680 Speaker 5: Google Alphabet Incorporated. They reported quarterly sales, again also ahead 450 00:25:24,680 --> 00:25:25,520 Speaker 5: of analyst estimates. 451 00:25:25,640 --> 00:25:27,400 Speaker 3: Remember that's all we care about, folks. We care. 452 00:25:27,400 --> 00:25:29,359 Speaker 5: We don't care what the innings actually were. We just 453 00:25:29,400 --> 00:25:31,360 Speaker 5: care that it was better than what the analyst said 454 00:25:31,359 --> 00:25:33,680 Speaker 5: it was going to be. But anyway, that came from 455 00:25:33,920 --> 00:25:37,320 Speaker 5: the cloud units within Google and Alphabet that is growing 456 00:25:37,400 --> 00:25:40,959 Speaker 5: artificial intelligence startups. So think Google's Gemini and that kind 457 00:25:41,000 --> 00:25:43,560 Speaker 5: of thing. All these big companies have their own AI 458 00:25:43,680 --> 00:25:46,560 Speaker 5: type of tools out there, similar to Meta. Google of 459 00:25:46,600 --> 00:25:49,080 Speaker 5: course makes its money off of based off of the ads, 460 00:25:49,080 --> 00:25:51,600 Speaker 5: but that also tells us an awful lot about search trends. 461 00:25:52,119 --> 00:25:54,800 Speaker 5: How are people engaging with each other over YouTube? And 462 00:25:54,840 --> 00:25:57,679 Speaker 5: therefore where's the profits to be found there? Cloud infrastructure 463 00:25:57,720 --> 00:26:00,760 Speaker 5: through Google Cloud, and then of course Google, Google, they're 464 00:26:00,760 --> 00:26:03,040 Speaker 5: a huge player in the AI race, just like these 465 00:26:03,080 --> 00:26:05,720 Speaker 5: other companies, so they're investing record amounts to try to 466 00:26:05,760 --> 00:26:08,560 Speaker 5: really really push AI to its limits and to get 467 00:26:08,600 --> 00:26:10,119 Speaker 5: it to be a profitable business. I think there's a 468 00:26:10,160 --> 00:26:12,720 Speaker 5: ways to go before this is truly profitable. But we 469 00:26:12,760 --> 00:26:15,000 Speaker 5: once said that about Amazon as well, and they turned 470 00:26:15,000 --> 00:26:15,880 Speaker 5: out okay. 471 00:26:16,840 --> 00:26:20,159 Speaker 2: Yeah, And then this discussion wouldn't be complete without at 472 00:26:20,240 --> 00:26:23,520 Speaker 2: least mentioning the big kid on the block, Navidia. I 473 00:26:23,520 --> 00:26:25,960 Speaker 2: mean that stock price is through the roof. It's done 474 00:26:26,040 --> 00:26:28,560 Speaker 2: so so well, and many investors are wondering, you know, 475 00:26:28,640 --> 00:26:32,000 Speaker 2: can this momentum continue? Believe it or not, Brian, When 476 00:26:32,080 --> 00:26:34,359 Speaker 2: you look at the valuation of this stock, you know, 477 00:26:34,400 --> 00:26:36,840 Speaker 2: when you look at their actual earnings and sales growth, 478 00:26:37,320 --> 00:26:40,040 Speaker 2: it you can make a very good argument that is 479 00:26:40,200 --> 00:26:43,400 Speaker 2: not priced very expensive relative to some of their peers. 480 00:26:43,480 --> 00:26:46,440 Speaker 2: But you know, I'm just one guy looking at data. 481 00:26:46,520 --> 00:26:50,359 Speaker 2: You know, the market will tell the tale. And it's uh, 482 00:26:50,800 --> 00:26:54,439 Speaker 2: you know again, it's fascinating to watch if and how 483 00:26:54,480 --> 00:26:58,040 Speaker 2: this whole AI thing is going to impact the overall economy. 484 00:26:58,560 --> 00:27:01,359 Speaker 2: I mean, just listening to doctor Mester talk in the 485 00:27:01,359 --> 00:27:04,879 Speaker 2: FED trying to balance labor with inflation. You know, a 486 00:27:04,880 --> 00:27:07,359 Speaker 2: lot of people are worried that AI is going to 487 00:27:07,359 --> 00:27:10,760 Speaker 2: start replacing jobs that are never coming back. Others make 488 00:27:10,800 --> 00:27:14,960 Speaker 2: the argument, if you look at any other technological innovation 489 00:27:15,119 --> 00:27:18,440 Speaker 2: in this country, it's always created a bunch of jobs, 490 00:27:18,520 --> 00:27:22,040 Speaker 2: just different jobs that people never even knew, you know, 491 00:27:22,200 --> 00:27:25,760 Speaker 2: existed or never expected to exist. So it's going to 492 00:27:25,800 --> 00:27:28,320 Speaker 2: be real fun to watch this all unfold in twenty 493 00:27:28,359 --> 00:27:29,439 Speaker 2: twenty six and beyond. 494 00:27:30,119 --> 00:27:31,320 Speaker 3: Yeah, and it is. That's good. 495 00:27:31,359 --> 00:27:33,480 Speaker 5: That's a fascinating area to look at, and I think 496 00:27:33,480 --> 00:27:35,359 Speaker 5: you're right. I mean, I remember when the Internet was 497 00:27:35,440 --> 00:27:37,760 Speaker 5: first a thing thirty years ago, how many jobs were 498 00:27:37,800 --> 00:27:38,359 Speaker 5: going to be lost? 499 00:27:38,400 --> 00:27:39,040 Speaker 3: Well, it was. 500 00:27:39,080 --> 00:27:41,440 Speaker 5: It ended up being the opposite, because we wound up 501 00:27:41,880 --> 00:27:44,080 Speaker 5: creating a bunch of jobs we hadn't thought of before 502 00:27:44,119 --> 00:27:47,040 Speaker 5: as the Internet provided new opportunities to make profit. So 503 00:27:47,040 --> 00:27:48,400 Speaker 5: I think at this point that's the way we should 504 00:27:48,440 --> 00:27:51,000 Speaker 5: be thinking about AI, not being overly afraid that it's 505 00:27:51,040 --> 00:27:52,879 Speaker 5: going to wipe out everybody's job and we will all 506 00:27:52,920 --> 00:27:54,760 Speaker 5: simply sit at home and wait for computers to bring 507 00:27:54,840 --> 00:27:55,639 Speaker 5: us everything we need. 508 00:27:56,320 --> 00:27:59,440 Speaker 2: Here's the all Worth Advice. Earning season isn't just noise. 509 00:28:00,200 --> 00:28:02,960 Speaker 2: Insight and the biggest tech names give us the clearest 510 00:28:03,000 --> 00:28:06,639 Speaker 2: signal on where the economy and the markets might be 511 00:28:06,680 --> 00:28:11,040 Speaker 2: heading next. Coming up next, we tackle some real listener questions, 512 00:28:11,040 --> 00:28:14,480 Speaker 2: from the tax surprise after selling mutual funds, to the 513 00:28:14,560 --> 00:28:18,760 Speaker 2: confusion around tax drag and whether investing through an LLC 514 00:28:19,080 --> 00:28:22,120 Speaker 2: can really make some sense. You're listening to Simply Money, 515 00:28:22,119 --> 00:28:25,159 Speaker 2: presented by all Worth Financial on fifty five KRC, the 516 00:28:25,520 --> 00:28:26,040 Speaker 2: talk station. 517 00:28:27,280 --> 00:28:30,440 Speaker 1: Some people only hear what they want to hear these days, 518 00:28:30,480 --> 00:28:32,920 Speaker 1: you need to keep an open mind. We only deal 519 00:28:32,960 --> 00:28:34,520 Speaker 1: in what you need to hear. 520 00:28:34,680 --> 00:28:36,280 Speaker 3: Everybody needs the truth of the facts. 521 00:28:36,440 --> 00:28:39,239 Speaker 1: You need the information that matters. We need to know 522 00:28:39,600 --> 00:28:41,160 Speaker 1: if there were warning signs. 523 00:28:41,280 --> 00:28:44,200 Speaker 6: You need it around the clock, today, tomorrow, and for 524 00:28:44,240 --> 00:28:46,520 Speaker 6: the rest of life. In the no twenty four hours 525 00:28:46,520 --> 00:28:48,960 Speaker 6: a day. You don't need to go anywhere else. And 526 00:28:49,000 --> 00:28:56,000 Speaker 6: that's something that people already know. For certainly, fifty five. 527 00:28:55,880 --> 00:28:59,719 Speaker 1: KRS the talk station, his Ryan Tummas here for four 528 00:29:00,040 --> 00:29:01,560 Speaker 1: onions are welcome to here. 529 00:29:01,720 --> 00:29:03,840 Speaker 3: I do think he is too old to run. 530 00:29:04,000 --> 00:29:04,960 Speaker 4: In twenty twenty. 531 00:29:04,760 --> 00:29:08,239 Speaker 1: Four, fifty five KRC the talkstation. 532 00:29:12,200 --> 00:29:13,360 Speaker 3: You're listening to simply money. 533 00:29:13,440 --> 00:29:15,920 Speaker 2: There's not a buy all Worth financial I'm Bob sponsorer 534 00:29:15,960 --> 00:29:19,080 Speaker 2: along with Brian James. Do you have a financial question 535 00:29:19,160 --> 00:29:21,400 Speaker 2: you'd like for us to answer. There's a red button 536 00:29:21,440 --> 00:29:23,800 Speaker 2: you can click while you're listening to the show. If 537 00:29:23,840 --> 00:29:26,800 Speaker 2: you're listening to the show on the iHeart app, simply 538 00:29:26,840 --> 00:29:29,760 Speaker 2: record your question and it will come straight to us. 539 00:29:30,560 --> 00:29:32,440 Speaker 3: John and Blue Ash leads us off tonight. 540 00:29:32,440 --> 00:29:36,000 Speaker 2: Brian he says, I've heard that as rates fall, muni 541 00:29:36,080 --> 00:29:39,880 Speaker 2: bonds could actually create phantom income for tax purposes. 542 00:29:40,560 --> 00:29:43,040 Speaker 3: Is that true? Brian, and how do you plan ahead 543 00:29:43,080 --> 00:29:43,360 Speaker 3: for it? 544 00:29:43,960 --> 00:29:46,440 Speaker 5: Well, it is Halloween's is the season to talk about 545 00:29:46,480 --> 00:29:49,360 Speaker 5: phantom stuff that shows up on spreadsheets and tax returns. 546 00:29:49,520 --> 00:29:52,040 Speaker 5: So yeah, let's talk about phantom income. This is a 547 00:29:52,080 --> 00:29:55,200 Speaker 5: real thing. So here's an example. Let's say you buy this. 548 00:29:55,200 --> 00:29:58,080 Speaker 5: This happens for some municipal bond investors sometimes. Let's say 549 00:29:58,080 --> 00:30:00,200 Speaker 5: you buy a muni bond at a discount, maybe nine 550 00:30:00,240 --> 00:30:02,920 Speaker 5: hundred dollars instead of its face value of a thousand, 551 00:30:03,160 --> 00:30:05,840 Speaker 5: and as rates drop. The IRS assumes you know the 552 00:30:05,840 --> 00:30:07,800 Speaker 5: bonds will go up as rates drop. There's an inverse 553 00:30:07,800 --> 00:30:10,520 Speaker 5: relationship there. The IRS assumes part of that gain every 554 00:30:10,600 --> 00:30:13,360 Speaker 5: year is interest you earned, even though you haven't actually 555 00:30:13,440 --> 00:30:14,200 Speaker 5: received a dying yet. 556 00:30:14,240 --> 00:30:15,120 Speaker 3: It's just on paper. 557 00:30:15,360 --> 00:30:17,880 Speaker 5: That's called original issue discount, and it can show up 558 00:30:17,920 --> 00:30:20,320 Speaker 5: as taxable income even when your muni is re labeled 559 00:30:20,320 --> 00:30:22,760 Speaker 5: as tax free, because that's kind of a capital gain 560 00:30:22,800 --> 00:30:25,880 Speaker 5: in a roundabout way. Most likely affects people holding individual 561 00:30:25,960 --> 00:30:29,280 Speaker 5: muni bonds in taxable accounts, not those in iras, which, 562 00:30:29,320 --> 00:30:31,280 Speaker 5: if you've done that, you're doing it wrong. Don't own 563 00:30:31,400 --> 00:30:34,200 Speaker 5: unibonds in iras or bond funds, which will handle that 564 00:30:34,240 --> 00:30:36,560 Speaker 5: accounting internally, All this stuff filters through on your ten 565 00:30:36,640 --> 00:30:38,240 Speaker 5: ninety nine, so you don't need to sort it out. 566 00:30:38,360 --> 00:30:40,480 Speaker 5: But if you see a funny looking number on your 567 00:30:40,640 --> 00:30:42,680 Speaker 5: ten ninety nine, talk to your CPA, talk to your 568 00:30:42,720 --> 00:30:43,440 Speaker 5: advisor about it. 569 00:30:43,440 --> 00:30:46,160 Speaker 3: But it may be phantom income. Boo Bob. 570 00:30:46,520 --> 00:30:50,400 Speaker 5: All right, let's move on to with unus very timely 571 00:30:50,560 --> 00:30:53,280 Speaker 5: questions today. Let's see how Kathy and Loveland is going 572 00:30:53,360 --> 00:30:56,400 Speaker 5: to scare the Bejesus out of us. So Cathy says 573 00:30:56,400 --> 00:30:59,000 Speaker 5: her tax bill jumped. Okay, that is scary. Tax bill 574 00:30:59,080 --> 00:31:02,440 Speaker 5: jumped after selling mutual funds, and so she's wondering, how 575 00:31:02,440 --> 00:31:04,600 Speaker 5: do these capital gains distributions sneak up. 576 00:31:04,480 --> 00:31:05,880 Speaker 3: Even when you don't sell anything. 577 00:31:06,960 --> 00:31:09,400 Speaker 2: Well, Kathy, I'm sure you've lived through this, but for 578 00:31:09,440 --> 00:31:11,719 Speaker 2: those that haven't, you know, they sneak up. 579 00:31:12,400 --> 00:31:13,400 Speaker 3: They sneak up on you. 580 00:31:13,440 --> 00:31:16,040 Speaker 2: Through these distributions that come out in the fourth quarter 581 00:31:16,080 --> 00:31:18,440 Speaker 2: of every year. And Brian and I talk about this 582 00:31:18,560 --> 00:31:20,920 Speaker 2: all the time on the show. This kind of relates 583 00:31:20,960 --> 00:31:25,280 Speaker 2: to the evolution of the whole investment industry over the 584 00:31:25,360 --> 00:31:28,280 Speaker 2: last ten, fifteen, twenty years. You know, where people are 585 00:31:28,280 --> 00:31:30,480 Speaker 2: getting taxed on these mutual funds and they might be 586 00:31:30,640 --> 00:31:34,480 Speaker 2: fantastic mutual funds that you've owned for decades, but you 587 00:31:34,560 --> 00:31:37,920 Speaker 2: don't have any control. You don't have absolute control from 588 00:31:37,920 --> 00:31:40,960 Speaker 2: a tax standpoint, meaning you know, depending on how long 589 00:31:41,000 --> 00:31:43,120 Speaker 2: you've owned them or when you bought them, you might 590 00:31:43,160 --> 00:31:45,680 Speaker 2: get handed a tax bill in the fourth quarter every 591 00:31:45,760 --> 00:31:48,719 Speaker 2: year for games that you didn't even participate in. And 592 00:31:48,720 --> 00:31:51,920 Speaker 2: that's just a function of how mutual funds work. You know, 593 00:31:52,240 --> 00:31:56,360 Speaker 2: highlight the word mutual. And this is why ETFs. You know, 594 00:31:56,160 --> 00:32:00,920 Speaker 2: your situation is individualized to you when you own an ETF, 595 00:32:00,960 --> 00:32:02,880 Speaker 2: so you have much more tax control. 596 00:32:03,160 --> 00:32:04,440 Speaker 3: So how do you handle this? 597 00:32:04,520 --> 00:32:06,960 Speaker 2: I think you sit down with a good fiduciary advisor 598 00:32:07,040 --> 00:32:09,720 Speaker 2: and a good CPA and you map out a strategy. 599 00:32:10,040 --> 00:32:14,080 Speaker 2: Does it make sense for us to gradually transition into 600 00:32:14,120 --> 00:32:18,239 Speaker 2: a more tax efficient operation here moving forward, whether that 601 00:32:18,320 --> 00:32:22,480 Speaker 2: means direct indexing, ETFs, a mixture of both, with some 602 00:32:22,560 --> 00:32:26,880 Speaker 2: good tax loss harvesting working in the background, things really 603 00:32:26,920 --> 00:32:31,320 Speaker 2: have evolved to the place where, again, gradually transitioning, you 604 00:32:31,360 --> 00:32:33,880 Speaker 2: can put yourself in a much better position from a 605 00:32:33,880 --> 00:32:35,720 Speaker 2: tax standpoint moving forward. 606 00:32:35,800 --> 00:32:37,800 Speaker 3: Kathy Hope, that helps, all right. 607 00:32:37,840 --> 00:32:41,760 Speaker 2: Brian Tom in Westchester says, we've got multiple layers of insurance, 608 00:32:41,880 --> 00:32:45,440 Speaker 2: umbrella insurance, life insurance, long term care insurance. How do 609 00:32:45,480 --> 00:32:48,880 Speaker 2: you coordinate all those policies so they actually work together. 610 00:32:49,520 --> 00:32:51,400 Speaker 5: Yeah, So a lot of people build up their insurance 611 00:32:51,440 --> 00:32:54,000 Speaker 5: coverage this way, one piece at a time, triggered by 612 00:32:54,000 --> 00:32:54,640 Speaker 5: when they need it. 613 00:32:54,680 --> 00:32:55,960 Speaker 3: So maybe there's a you know, we. 614 00:32:55,920 --> 00:32:58,680 Speaker 5: Start off with life insurance and there's an umbrella policy 615 00:32:58,680 --> 00:32:59,920 Speaker 5: all of a sudden a little bit later in the 616 00:33:00,080 --> 00:33:02,400 Speaker 5: long term care, much later on. So the problem is 617 00:33:02,400 --> 00:33:04,760 Speaker 5: if you haven't coordinated all these different layers, you might 618 00:33:04,800 --> 00:33:07,000 Speaker 5: wind and wind up overpaying. 619 00:33:06,400 --> 00:33:07,640 Speaker 3: Because these things overlap. 620 00:33:08,280 --> 00:33:10,360 Speaker 5: You're paying for things twice, or you're not paying for 621 00:33:10,400 --> 00:33:12,320 Speaker 5: things at all because there's a gap between them. 622 00:33:12,480 --> 00:33:15,120 Speaker 3: So you're gonna want to start off with just an inventory. 623 00:33:14,640 --> 00:33:17,000 Speaker 5: What do you have, What does each policy cover, and 624 00:33:17,080 --> 00:33:19,760 Speaker 5: bullet that out when does it pay off, what triggers 625 00:33:19,800 --> 00:33:22,920 Speaker 5: the coverage, and how much protection does it actually provide. So, 626 00:33:22,960 --> 00:33:25,320 Speaker 5: for example, your umbrella policy should be on top of 627 00:33:25,360 --> 00:33:27,520 Speaker 5: your home and auto limits, but only if those limits 628 00:33:27,520 --> 00:33:29,240 Speaker 5: are high enough to trigger it. Right, make sure that's 629 00:33:29,280 --> 00:33:32,640 Speaker 5: coordinated life insurance. There's really three things you're trying to 630 00:33:32,640 --> 00:33:35,120 Speaker 5: cover there. You probably want to pay off any debt 631 00:33:35,160 --> 00:33:38,680 Speaker 5: in the event of your untimely death, provide some liquidity immediately, 632 00:33:38,720 --> 00:33:41,280 Speaker 5: and those numbers are relatively easy to get to. The 633 00:33:41,360 --> 00:33:43,880 Speaker 5: harder one is the third, which is income replacement for 634 00:33:43,960 --> 00:33:46,120 Speaker 5: your family. That's going to depend on what does the 635 00:33:46,120 --> 00:33:48,120 Speaker 5: family spend and how much time do they need to 636 00:33:48,120 --> 00:33:51,840 Speaker 5: cover those expenses, coordinated with whatever income sources they will 637 00:33:51,880 --> 00:33:54,400 Speaker 5: still have. But what they didn't say is a fat 638 00:33:54,480 --> 00:33:56,520 Speaker 5: round number from a long time ago. Make sure there's 639 00:33:56,520 --> 00:33:59,320 Speaker 5: some logic behind this. And finally, long term care insurance 640 00:33:59,320 --> 00:34:02,200 Speaker 5: that interacts with both your retirement plan and your estate plan. 641 00:34:02,480 --> 00:34:04,680 Speaker 5: You have a life policy, it may have a long 642 00:34:04,760 --> 00:34:07,200 Speaker 5: term writer on it, a long term care writer. Double 643 00:34:07,280 --> 00:34:09,040 Speaker 5: check and see if that's already there before you go 644 00:34:09,080 --> 00:34:10,560 Speaker 5: out and buy a standalone policy. 645 00:34:11,000 --> 00:34:11,959 Speaker 3: So I hope that helps. 646 00:34:12,000 --> 00:34:14,239 Speaker 5: There's a few steps there, but that that is a 647 00:34:14,320 --> 00:34:16,759 Speaker 5: complicated puzzle to put together sometimes and hopefully you've got 648 00:34:16,920 --> 00:34:19,040 Speaker 5: an advisor out there available to help you figure it out. 649 00:34:19,840 --> 00:34:21,000 Speaker 3: Mark and Lebanon. 650 00:34:21,160 --> 00:34:25,240 Speaker 5: Mark's considering investing through an LLC for privacy and liability reasons, 651 00:34:25,440 --> 00:34:27,200 Speaker 5: and he's wanting to know what the tax trade offs 652 00:34:27,239 --> 00:34:30,200 Speaker 5: are they're compared to just investing personally without the layer 653 00:34:30,239 --> 00:34:30,759 Speaker 5: of the LLC. 654 00:34:31,040 --> 00:34:34,759 Speaker 2: Bob, all right, Mark, this is a loaded question, and 655 00:34:35,160 --> 00:34:37,080 Speaker 2: I will say right off the bat, this is this 656 00:34:37,120 --> 00:34:40,200 Speaker 2: is another situation. This is not a do it yourself proposition. 657 00:34:40,600 --> 00:34:42,960 Speaker 2: This is not something you want to decide on yourself 658 00:34:43,000 --> 00:34:45,759 Speaker 2: and just work this through turbo tax. You really do 659 00:34:45,840 --> 00:34:49,000 Speaker 2: need to have a good CPA involved to help you 660 00:34:49,120 --> 00:34:52,719 Speaker 2: evaluate these decisions. So I think start, you know, if 661 00:34:52,760 --> 00:34:54,920 Speaker 2: you sit down with your advisor in your CPA, I 662 00:34:54,920 --> 00:34:57,600 Speaker 2: think the important thing, like everything else, we talk about 663 00:34:57,800 --> 00:35:00,640 Speaker 2: what are your true objectives here? So you know, there 664 00:35:00,680 --> 00:35:04,200 Speaker 2: are single member LLCs which basically get treated from a 665 00:35:04,239 --> 00:35:08,400 Speaker 2: tax standpoint just as though you invested personally. So pretty simple, 666 00:35:09,239 --> 00:35:11,279 Speaker 2: you know, depending on what you're trying to accomplish here, 667 00:35:11,400 --> 00:35:14,200 Speaker 2: you know, if you have a multi member LLC, well, 668 00:35:14,239 --> 00:35:17,319 Speaker 2: now you're getting into the situation where a K one 669 00:35:17,400 --> 00:35:20,240 Speaker 2: has to be issued every every year, and that can 670 00:35:20,800 --> 00:35:23,840 Speaker 2: present delays for some of the participants. Some people don't 671 00:35:23,920 --> 00:35:26,399 Speaker 2: like K one. So I've had people tell me, Bob, 672 00:35:26,440 --> 00:35:28,799 Speaker 2: put me in any kind of investment you want, but 673 00:35:28,880 --> 00:35:30,920 Speaker 2: as long as I never receive a K one for 674 00:35:31,000 --> 00:35:31,799 Speaker 2: the rest of my life. 675 00:35:33,360 --> 00:35:35,879 Speaker 3: Now there are some potential advantages to. 676 00:35:35,920 --> 00:35:38,960 Speaker 2: Investing in an LLC, which means you can elect to 677 00:35:39,040 --> 00:35:42,759 Speaker 2: be taxed as a C corporation or an S corporation 678 00:35:43,280 --> 00:35:46,080 Speaker 2: in an LLC. So again, it depends on what you're 679 00:35:46,080 --> 00:35:48,600 Speaker 2: really trying to accomplish here. And that's why I say 680 00:35:48,920 --> 00:35:52,040 Speaker 2: sit down with a good CPA and hopefully your advisor 681 00:35:52,160 --> 00:35:54,560 Speaker 2: and just really put things on the table on what 682 00:35:54,600 --> 00:35:57,319 Speaker 2: you're trying to accomplish, and then you'll come up with 683 00:35:57,360 --> 00:35:59,640 Speaker 2: the right tax structure to make it happen. 684 00:36:00,719 --> 00:36:01,080 Speaker 3: All right. 685 00:36:01,160 --> 00:36:04,279 Speaker 2: Coming up next, Brian has his bottom line where he's 686 00:36:04,320 --> 00:36:08,080 Speaker 2: going to eliminate some of the confusion that's out there 687 00:36:08,200 --> 00:36:13,040 Speaker 2: between how does the Federal Reserve operate versus the Treasury Department. 688 00:36:13,760 --> 00:36:16,440 Speaker 2: You're listening to Simply Money presented by Allworth Financial on 689 00:36:16,520 --> 00:36:18,840 Speaker 2: fifty five KRST the talk station. 690 00:36:20,239 --> 00:36:24,400 Speaker 5: Absolutely reliable information and of course not just one sided 691 00:36:24,560 --> 00:36:25,400 Speaker 5: view news. 692 00:36:25,239 --> 00:36:27,239 Speaker 1: That affects you at the top end to bottom of 693 00:36:27,280 --> 00:36:30,600 Speaker 1: the hour fifty five KRZ the talk station. 694 00:36:34,800 --> 00:36:37,280 Speaker 2: You're listening to Simply Money presented by all Worth Financial 695 00:36:37,320 --> 00:36:40,200 Speaker 2: on Bob's spondseller along with Brian James. And speaking of 696 00:36:40,239 --> 00:36:43,680 Speaker 2: Brian James, Brian has his bottom line for us tonight 697 00:36:44,200 --> 00:36:47,040 Speaker 2: where he's going to remove the confusion, because we get 698 00:36:47,120 --> 00:36:49,799 Speaker 2: questions all the time, Hey, what's the difference between what 699 00:36:49,880 --> 00:36:53,400 Speaker 2: the Federal Reserve does and what the Treasury Department does? 700 00:36:53,560 --> 00:36:55,040 Speaker 3: Brian enlighten us. 701 00:36:55,400 --> 00:36:57,400 Speaker 5: Yeah, well, I'm actually gonna I'm gonna push back on 702 00:36:57,440 --> 00:36:59,440 Speaker 5: that just a bit, Bob. And nobody ever asks the 703 00:36:59,520 --> 00:37:01,520 Speaker 5: question of difference between the Treasury and the fat I 704 00:37:01,560 --> 00:37:03,080 Speaker 5: think a lot of people who think about it don't 705 00:37:03,080 --> 00:37:06,560 Speaker 5: know that there is a difference between these two organizations. So, 706 00:37:07,040 --> 00:37:10,400 Speaker 5: and having just been honored by doctor Lorettamester visiting the 707 00:37:10,400 --> 00:37:12,640 Speaker 5: show for us to ask her some very pointed questions 708 00:37:12,680 --> 00:37:15,440 Speaker 5: and highly intelligent questions, I might add, Bob, I think 709 00:37:15,440 --> 00:37:17,440 Speaker 5: we did a good job there, but I thought we'd 710 00:37:17,440 --> 00:37:19,080 Speaker 5: go over a little bit of the history and what 711 00:37:19,120 --> 00:37:22,640 Speaker 5: these two organizations the roles that they serve. So the Treasury, 712 00:37:22,760 --> 00:37:25,959 Speaker 5: that's the federal government's finance and revenue arm. Its job 713 00:37:26,040 --> 00:37:29,160 Speaker 5: is to collect the taxes, issue the debt in printing 714 00:37:29,200 --> 00:37:32,720 Speaker 5: coins and notes physically via those bureaus, managing the government's 715 00:37:32,800 --> 00:37:36,000 Speaker 5: checking account basically also made pretty famous in a recent 716 00:37:36,120 --> 00:37:39,359 Speaker 5: musical called Hamilton. The Federal Reserve, on the other hand, 717 00:37:39,400 --> 00:37:41,000 Speaker 5: is not where the cool kids hang out, and has 718 00:37:41,040 --> 00:37:43,080 Speaker 5: not had a musical written about it. But its job 719 00:37:43,160 --> 00:37:45,319 Speaker 5: is to be the US Central Bank. It's been around 720 00:37:45,360 --> 00:37:49,319 Speaker 5: since nineteen thirteen, and its job is, as doctor Mester 721 00:37:49,360 --> 00:37:52,400 Speaker 5: would explain to us, as managing that mundy supply, supervising 722 00:37:52,440 --> 00:37:55,680 Speaker 5: the banks, setting short term interest rates, and promoting maximum 723 00:37:55,680 --> 00:37:59,279 Speaker 5: employment and stable prices. It's really they always call it 724 00:37:59,280 --> 00:38:04,080 Speaker 5: a split manned between maintaining inflation and promoting maximum employment. 725 00:38:04,080 --> 00:38:06,680 Speaker 5: That's really what the Federal Reserve is after. So really 726 00:38:07,000 --> 00:38:09,480 Speaker 5: the way they to these two organizations work together. The 727 00:38:09,520 --> 00:38:12,000 Speaker 5: Treasury is part of the Cabinet, led by the Secretary 728 00:38:12,000 --> 00:38:14,080 Speaker 5: of the Treasury, and it has to follow the fiscal 729 00:38:14,080 --> 00:38:16,640 Speaker 5: directions of Congress and the President. The Fed, on the 730 00:38:16,640 --> 00:38:18,880 Speaker 5: other hand, is much more independent, has a board of 731 00:38:18,920 --> 00:38:21,600 Speaker 5: governors on which she served. They report to Congress, but 732 00:38:21,600 --> 00:38:25,120 Speaker 5: they're insulated so far anyway from day to day politics, 733 00:38:25,200 --> 00:38:27,440 Speaker 5: and that allows them to focus a little longer term. 734 00:38:27,800 --> 00:38:30,160 Speaker 2: All right, Brian, if you could pick your dream job, 735 00:38:30,239 --> 00:38:34,040 Speaker 2: if you could be the Treasury Secretary of the United 736 00:38:34,120 --> 00:38:37,200 Speaker 2: States or the chairman of the Federal Reserve, which job 737 00:38:37,239 --> 00:38:39,600 Speaker 2: would you want and why? And I have a feeling 738 00:38:39,600 --> 00:38:40,840 Speaker 2: you're going to say neither. 739 00:38:41,000 --> 00:38:42,840 Speaker 3: Neither, Bob, you saw that coming, did you. 740 00:38:43,239 --> 00:38:45,920 Speaker 5: I like my job where it's to explain to people 741 00:38:46,040 --> 00:38:48,840 Speaker 5: what these two organizations do and why, what happens to 742 00:38:48,880 --> 00:38:51,120 Speaker 5: the why what the decisions that they make have an 743 00:38:51,160 --> 00:38:51,920 Speaker 5: impact on them. 744 00:38:51,960 --> 00:38:55,480 Speaker 3: So what is that? So the tools that are used. 745 00:38:55,480 --> 00:38:58,080 Speaker 5: The Treasury will issue debt and collects taxes, right, so 746 00:38:58,440 --> 00:39:00,279 Speaker 5: it has to determine how much the government going to 747 00:39:00,320 --> 00:39:02,880 Speaker 5: spend and borrow. The FED sets the target for the 748 00:39:02,960 --> 00:39:05,080 Speaker 5: federal funds rates. So, in other words, when the Treasury 749 00:39:05,120 --> 00:39:07,040 Speaker 5: decides we have to borrow this much money, that's going 750 00:39:07,120 --> 00:39:09,480 Speaker 5: to be impacted by whatever the FED just did, such 751 00:39:09,520 --> 00:39:11,319 Speaker 5: as the other day when we cut interest rates by 752 00:39:11,640 --> 00:39:13,200 Speaker 5: a quarter of a point and now that we're in 753 00:39:13,239 --> 00:39:15,640 Speaker 5: a declining rate environment. So why does this matter? Why 754 00:39:15,680 --> 00:39:17,560 Speaker 5: do we care about any of this? Well, here's the 755 00:39:17,600 --> 00:39:20,440 Speaker 5: impact on your wallet. When the treasury runs large deficits 756 00:39:20,480 --> 00:39:22,480 Speaker 5: or borrows a lot, which is we've pretty much been 757 00:39:22,520 --> 00:39:24,960 Speaker 5: in that mode for an awful long time. That influences 758 00:39:25,000 --> 00:39:28,480 Speaker 5: long term interest rates, influences the national debt, and therefore 759 00:39:28,520 --> 00:39:31,000 Speaker 5: how much tax or future burden households are going to 760 00:39:31,080 --> 00:39:33,040 Speaker 5: have to face. On the other hand, when the FED 761 00:39:33,239 --> 00:39:35,839 Speaker 5: raises or lowers those interest rates that will directly hit 762 00:39:35,880 --> 00:39:39,239 Speaker 5: your mortgage rate, your auto loan rates, savings yields, even 763 00:39:39,320 --> 00:39:41,920 Speaker 5: job market strength in your region. So these are all 764 00:39:41,920 --> 00:39:44,359 Speaker 5: things that have a strong impact on what we and 765 00:39:44,360 --> 00:39:47,920 Speaker 5: what we say and do. So these are boring organizations, however, 766 00:39:47,960 --> 00:39:50,000 Speaker 5: you have to realize that they do have a direct 767 00:39:50,040 --> 00:39:51,400 Speaker 5: impact on your lifestyle. 768 00:39:52,560 --> 00:39:55,360 Speaker 2: Well, all I'll say is up I ever become president 769 00:39:55,400 --> 00:39:58,040 Speaker 2: in the United States, which you know, the chances are slimming. 770 00:39:58,080 --> 00:40:01,040 Speaker 2: None that's ever going to happen. I will dominate doctor 771 00:40:01,280 --> 00:40:04,760 Speaker 2: Mester to be the FED chair. I found her interview 772 00:40:04,800 --> 00:40:08,799 Speaker 2: to be very refreshing. She's very smart, obviously, very articulate, 773 00:40:09,280 --> 00:40:12,960 Speaker 2: and she'd be great standing in front of the media 774 00:40:13,160 --> 00:40:16,440 Speaker 2: just putting things in plain English, unlike what some of 775 00:40:16,440 --> 00:40:19,640 Speaker 2: these current people do. I really love that interview and 776 00:40:19,719 --> 00:40:22,520 Speaker 2: really so much appreciate her. I wish she was still 777 00:40:22,560 --> 00:40:24,440 Speaker 2: surfing on the FED to be honest with you. 778 00:40:24,800 --> 00:40:25,560 Speaker 3: Thanks for listening. 779 00:40:25,560 --> 00:40:27,719 Speaker 2: You've been listening to Simply Money, presented by all Worth 780 00:40:27,719 --> 00:40:30,759 Speaker 2: Financial on fifty five KRC, the talk station. 781 00:40:31,800 --> 00:40:34,560 Speaker 6: Recent events has made me listen to the radio a 782 00:40:34,719 --> 00:40:40,040 Speaker 6: lot more, a lot more for every day weather, forecasts. 783 00:40:40,320 --> 00:40:41,840 Speaker 1: Do I wash my car today or not? 784 00:40:42,560 --> 00:40:45,360 Speaker 4: For every one Trafford report, so we have lots of 785 00:40:45,480 --> 00:40:48,720 Speaker 4: new construction every day is definitely listen. 786 00:40:48,880 --> 00:40:51,560 Speaker 1: Can I ride my motorcycle the word today for free? 787 00:40:51,640 --> 00:40:54,040 Speaker 1: I need the weather forecast on air and on the 788 00:40:54,080 --> 00:40:57,000 Speaker 1: iHeartRadio the talk shows, so I like my TV shows 789 00:40:57,200 --> 00:40:59,960 Speaker 1: on fifty five KRC the talk stage. 790 00:41:00,760 --> 00:41:02,720 Speaker 3: I'm at Evans, CEO of Consumer Cellular