WEBVTT - Focus on Consequences, Not Probabilities 0:00:08.840 --> 0:00:14.160 It's usually smarter to weigh consequences rather than chase probabilities. Hi, 0:00:14.160 --> 0:00:17.599 I'm Rob West. Whether you're building a portfolio or mulling 0:00:17.600 --> 0:00:21.560 over a new job prospect, checking the odds of success matters. 0:00:21.720 --> 0:00:24.840 But what if even a low odds failure could wipe 0:00:24.840 --> 0:00:27.920 you out? Today, Mark Behler joins us to talk through 0:00:27.920 --> 0:00:30.640 how to guard against the kinds of events that can 0:00:30.640 --> 0:00:33.080 ruin a financial plan and more. And then we'll take 0:00:33.080 --> 0:00:37.520 your phone calls at 800 525 7000. This is faith 0:00:37.520 --> 0:00:43.320 and finance live. Biblical wisdom for your financial journey. Well, 0:00:43.320 --> 0:00:45.959 Mark Miller is our guest today. He's executive editor at 0:00:45.960 --> 0:00:49.800 Sound Mind Investing. He's a regular contributor to this program, 0:00:49.800 --> 0:00:53.000 Sound Mind Investing. Of course, a long time underwriter of 0:00:53.000 --> 0:00:55.480 the program. And let me just mention Mark is here. 0:00:55.480 --> 0:00:58.560 He's always gracious with his time. And once again today 0:00:58.800 --> 0:01:02.310 he will be dedicating the entire broadcast to you. So 0:01:02.670 --> 0:01:05.069 this is the day. If you have a question on 0:01:05.069 --> 0:01:10.230 your portfolio, the market, how to think about heading into retirement, 0:01:10.230 --> 0:01:14.510 maybe on this topic of what about the probabilities and 0:01:14.550 --> 0:01:18.669 even the consequences. Perhaps more importantly, that might affect your 0:01:18.670 --> 0:01:22.310 portfolio depending on the decisions you make. Call right now 0:01:22.310 --> 0:01:26.390 800 525 7000. We'll be queuing those calls. We'll get 0:01:26.390 --> 0:01:28.630 to them in just a bit. Questions for Mark Biller 0:01:28.630 --> 0:01:33.149 today 800 525 7000. Mark always great to have you. 0:01:33.190 --> 0:01:33.950 Welcome back. 0:01:34.190 --> 0:01:36.550 Great to be here Rob. Thanks for having me back. 0:01:37.069 --> 0:01:41.030 Mark. You've got a terrific editorial called Focus on Consequences 0:01:41.030 --> 0:01:44.630 Not probabilities in the latest issue of Sound Mind Investing. 0:01:44.630 --> 0:01:47.510 So take us into this idea. What are you talking about? 0:01:47.510 --> 0:01:52.110 Yeah. Well, risk taking is inevitable when it comes to investing. 0:01:52.110 --> 0:01:55.150 It's just part of the deal. Risk taking is part 0:01:55.150 --> 0:01:58.750 of life as well. But you never want to take 0:01:58.750 --> 0:02:01.530 a risk that you don't have to take. So when 0:02:01.530 --> 0:02:07.130 we talk about probabilities versus consequences, probabilities deal with how 0:02:07.170 --> 0:02:11.890 likely something is to happen. But consequences deal with how 0:02:11.889 --> 0:02:15.530 bad it might be if that thing does happen. And 0:02:15.530 --> 0:02:18.330 that's a really important difference. You know, if somebody tells 0:02:18.330 --> 0:02:22.889 you there's a 99% chance you'll be successful at a 0:02:22.889 --> 0:02:26.570 particular thing, that's the probability. And that's great. In this case, 0:02:26.570 --> 0:02:29.489 that would be a very likely thing. But what if 0:02:29.490 --> 0:02:34.890 that 1% chance of failure means absolute ruin? Maybe you're 0:02:34.889 --> 0:02:39.170 dead if that 1% thing comes up, you know, 1% 0:02:39.169 --> 0:02:42.889 chance of ruin is still ruin. And so even though 0:02:42.889 --> 0:02:47.050 the probability may be really low, if the consequence is 0:02:47.050 --> 0:02:51.369 severe enough, that's got to weigh more heavily in our 0:02:51.370 --> 0:02:54.890 decision making than the high percentage chance of success. 0:02:55.330 --> 0:02:58.810 MM. Yeah. Well, that's pretty stark. Let's make it maybe 0:02:58.880 --> 0:03:02.960 even more practical. Um, what about crossing a busy street? 0:03:02.960 --> 0:03:05.600 I know you use that example. Walk us through that. 0:03:05.639 --> 0:03:08.280 Yeah, that's one that everybody can relate to and it 0:03:08.280 --> 0:03:10.840 makes the point pretty clear. So, you know, this is 0:03:10.840 --> 0:03:14.680 a great example of low probability but high consequence. You know, 0:03:14.720 --> 0:03:18.560 the probability of me getting run over by a truck 0:03:18.560 --> 0:03:21.400 when I cross the street is very low, but I'm 0:03:21.400 --> 0:03:24.960 still going to look both ways because the consequence of 0:03:24.960 --> 0:03:28.960 me getting run over by a truck is catastrophic. So 0:03:29.280 --> 0:03:34.480 in the same way as investors, we can't ignore a 0:03:34.520 --> 0:03:39.280 potential wipeout event, even if it's just a small probability 0:03:39.280 --> 0:03:41.720 or is statistically unlikely. 0:03:42.240 --> 0:03:46.280 MM. Yeah. Really helpful. What about from an investing standpoint? 0:03:46.320 --> 0:03:47.400 How does this apply. 0:03:47.440 --> 0:03:50.160 Yeah. Well, you know, I think that there are a 0:03:50.200 --> 0:03:54.400 lot of different applications of it. Um one example of 0:03:54.400 --> 0:03:58.750 this in history, a famous example was the failure of 0:03:58.750 --> 0:04:01.830 Long Term Capital Management, which was a famous hedge fund 0:04:01.830 --> 0:04:06.870 back in 1998. Super genius brain trust. In fact, they 0:04:06.870 --> 0:04:10.110 wrote a book about this episode after the fact that 0:04:10.110 --> 0:04:13.990 they titled When Genius Failed. And the bottom line of this, 0:04:13.990 --> 0:04:18.470 Rob was these were the smartest investing guys around. They 0:04:18.470 --> 0:04:22.750 built these amazing models, and those models would have worked 0:04:22.750 --> 0:04:27.950 almost every time. But almost every time isn't every time. 0:04:27.950 --> 0:04:32.070 And so the combination of leverage and the wrong set 0:04:32.070 --> 0:04:35.390 of circumstances ended up wiping out this hedge fund and 0:04:35.390 --> 0:04:38.790 almost taking down the whole financial system with them. So 0:04:38.790 --> 0:04:43.070 that was a classic example of low probability, high consequence. 0:04:43.350 --> 0:04:47.030 And honestly, those types of things happen too often in 0:04:47.029 --> 0:04:51.150 financial history, which has to make us humble about the 0:04:51.150 --> 0:04:54.230 actual probabilities of these types of failures. 0:04:54.630 --> 0:04:57.470 Yeah, that's exactly right. Well, there's a lot to apply 0:04:57.620 --> 0:05:01.179 here to your portfolio as you're listening to Mark Miller today. 0:05:01.220 --> 0:05:04.260 And we'll continue to do that route right around the corner. 0:05:04.260 --> 0:05:08.340 We'll talk about, among other things, something called a sequence 0:05:08.339 --> 0:05:12.100 of returns risk that is front and center for retirees. 0:05:12.100 --> 0:05:15.580 We'll also be taking your investing related questions for Mark today. 0:05:15.740 --> 0:05:17.620 Call right now. If you've got a question, we've got 0:05:17.620 --> 0:05:20.820 lines open. We'll begin taking these calls in the next segment. 0:05:20.820 --> 0:05:25.860 800 525 7000. Mark Miller here from Sound Mind Investing. 0:05:25.860 --> 0:05:26.739 We'll be right back. 0:05:33.140 --> 0:05:36.539 The opinions offered during this program represent the personal or 0:05:36.540 --> 0:05:41.380 professional opinions of the participants given for informational purposes only. 0:05:41.620 --> 0:05:45.180 Any information provided is not intended to replace advice from 0:05:45.180 --> 0:05:49.940 a financial, medical, legal or other professional who understands your 0:05:49.940 --> 0:05:51.380 specific situation. 0:05:56.620 --> 0:05:58.600 Well, it's always a good day when Mark Biller's here. 0:05:58.640 --> 0:06:01.119 He's our go to guy on the markets and your 0:06:01.120 --> 0:06:07.200 portfolio today we're talking about focusing on consequences, not probabilities. 0:06:07.279 --> 0:06:10.080 That's right. Whether you're building a portfolio or maybe thinking 0:06:10.080 --> 0:06:14.320 about a new job prospect, checking the odds of success matters. 0:06:14.320 --> 0:06:17.760 But what if even a low odds failure could wipe 0:06:17.760 --> 0:06:20.800 you out? That was the focus of the editorial and 0:06:20.800 --> 0:06:23.800 the Sound Mind Investing newsletter from Mark Biller. You can 0:06:23.800 --> 0:06:27.640 read it. It's called focus on consequences, not probabilities. When 0:06:27.640 --> 0:06:32.600 you head to Sound Mind investing dot ORG. I know 0:06:32.680 --> 0:06:37.240 the article leans heavily on the late Peter Bernstein's work Mark. 0:06:37.360 --> 0:06:38.760 What was his key insight? 0:06:38.800 --> 0:06:43.280 Yeah. Bernstein wrote one of the definitive books on the 0:06:43.279 --> 0:06:48.080 history of financial risk, and one of his key conclusions 0:06:48.080 --> 0:06:53.000 after reviewing all this financial history was that the consequences 0:06:53.000 --> 0:06:57.950 of being wrong are more Are important than the probabilities 0:06:57.950 --> 0:07:02.390 of being right. So he urged investors to ask. If 0:07:02.390 --> 0:07:05.910 it does go wrong, just how wrong could it go 0:07:06.230 --> 0:07:10.510 and how much will that matter? And that question really 0:07:10.510 --> 0:07:14.870 helps reframe risk from kind of a math question to 0:07:14.910 --> 0:07:16.950 more of a survival question. 0:07:17.470 --> 0:07:21.550 MM. Yeah. So taking this from the theoretical to the practical, 0:07:21.550 --> 0:07:25.630 then let's talk about something called margin of safety. How 0:07:25.630 --> 0:07:28.750 can an individual investor build that into their portfolio? 0:07:29.030 --> 0:07:31.630 Yeah. Well thankfully Rob, this is where we can start 0:07:31.630 --> 0:07:35.150 to lean on the timeless biblical principles that we talk 0:07:35.190 --> 0:07:39.230 about so frequently to help keep us safe. So we 0:07:39.230 --> 0:07:43.590 start out with the financial foundation. We often discuss, which 0:07:43.590 --> 0:07:46.870 we build by getting out of debt and establishing an 0:07:46.870 --> 0:07:52.230 emergency savings reserve. Ideally before we start putting large sums 0:07:52.230 --> 0:07:55.350 of money at risk in the markets. Once we get 0:07:55.420 --> 0:08:00.380 to the investing stage, we can use diversification across asset 0:08:00.380 --> 0:08:04.460 classes to help manage risk. Um, a couple other things. 0:08:04.460 --> 0:08:09.700 We want to avoid really concentrated bets and especially leverage, 0:08:09.700 --> 0:08:13.900 which can permanently impair our capital. Um, another one that 0:08:13.900 --> 0:08:16.500 we see a lot, Rob, is just, you know, when 0:08:16.500 --> 0:08:20.740 we get into financial planning, um, using modest assumptions in 0:08:20.740 --> 0:08:23.580 our planning, you know, you may know what the historical 0:08:23.580 --> 0:08:27.740 average of stocks or different asset class has been in 0:08:27.740 --> 0:08:31.380 terms of the performance, but maybe rerun that plan with 0:08:31.380 --> 0:08:34.620 a little bit more modest assumption. Um, there are lots 0:08:34.620 --> 0:08:39.059 of applications here, but bottom line, really maintaining a margin 0:08:39.100 --> 0:08:43.219 of safety is really about having the humility to acknowledge 0:08:43.420 --> 0:08:46.819 that we're fallible. We don't know what the future holds, 0:08:46.980 --> 0:08:51.020 and leaving some room for error instead of running every 0:08:51.020 --> 0:08:52.739 scenario at full throttle. 0:08:53.220 --> 0:08:56.050 MM. Yeah, that's well said. Mark Miller is here today. 0:08:56.050 --> 0:08:58.410 We're taking your questions. We'll do that. Now. We do 0:08:58.410 --> 0:09:01.490 have some lines open. If you have an investing related question, 0:09:01.530 --> 0:09:04.929 you're wondering what to do about your portfolio call right now. Mark, 0:09:04.929 --> 0:09:09.370 would love to tackle your question today at 800 525 7000. 0:09:09.370 --> 0:09:11.930 Let's go to Tennessee. Allen. You'll be our first caller. 0:09:11.970 --> 0:09:12.650 Go ahead sir. 0:09:13.650 --> 0:09:16.329 Thank you for your time. Uh, a number of years ago, 0:09:16.370 --> 0:09:18.930 my wife and I, along with our financial planner, sat 0:09:18.929 --> 0:09:21.809 down and looked at long term care costs as far 0:09:21.850 --> 0:09:24.330 as purchasing like a policy for that. And it was 0:09:24.330 --> 0:09:26.770 just to me when I did the math, it just 0:09:26.809 --> 0:09:30.410 didn't really add up to I didn't think it was 0:09:30.410 --> 0:09:34.130 the smartest approach and our financial investor was letting us lead. 0:09:34.130 --> 0:09:36.530 But he I said, what do you think? And he said, 0:09:36.530 --> 0:09:41.130 I kind of agree. So we're self-funding that. And I 0:09:41.170 --> 0:09:47.690 guess my question is, is, um, at what point do we, uh, 0:09:47.770 --> 0:09:49.690 definitely want to these are the Lord's money. So we 0:09:49.690 --> 0:09:52.730 don't want to hoard these. We don't necessarily want to 0:09:52.730 --> 0:09:55.630 leave a whole lot, although we're going to try to 0:09:55.670 --> 0:09:58.350 set up a legacy for some different ministries if there 0:09:58.350 --> 0:10:01.630 is monies left over. But how much should we allocate 0:10:01.670 --> 0:10:06.030 knowing that these costs go up pretty substantially every year? 0:10:06.670 --> 0:10:08.670 Yeah. I mean, you know, I think you need to 0:10:08.670 --> 0:10:11.910 be looking at the today's costs, you know, which could 0:10:11.910 --> 0:10:15.590 be 10,000 a month. We just had Nathan Sarno yesterday 0:10:15.590 --> 0:10:19.630 with us, the president of Master Care and LTC consumer.com. 0:10:19.630 --> 0:10:22.790 He was saying, you know, certainly 10,000 a month, you know, 0:10:22.830 --> 0:10:27.630 skilled in home care could run 25,000 a month. And, 0:10:27.670 --> 0:10:30.829 you know, you've got everything in between. Um, so, you know, 0:10:30.910 --> 0:10:33.910 is this a risk? Yes. It will affect, you know, 0:10:33.950 --> 0:10:37.750 more than half of 65 year old and older Americans 0:10:37.750 --> 0:10:40.790 at some point in their lives. And, you know, that 0:10:40.870 --> 0:10:44.910 need could be substantial. Um, you know, long term care 0:10:44.910 --> 0:10:47.870 insurance has come a long way. The policies, the older 0:10:47.870 --> 0:10:50.910 policies were really problematic because I think they were often 0:10:50.910 --> 0:10:54.940 priced in an environment where the carriers didn't understand how 0:10:54.940 --> 0:10:57.260 many people would use them, how long would they keep them? 0:10:57.260 --> 0:11:00.980 What about future costs? And so as a result, the 0:11:00.980 --> 0:11:03.620 industry has gotten a black eye because of the dramatic 0:11:03.620 --> 0:11:08.420 increases in premium. But today's policies are, you know, they 0:11:08.420 --> 0:11:11.180 know how to price them a lot better. Yes. They're expensive. 0:11:11.179 --> 0:11:14.500 I think, you know, a typical policy could be, you know, 0:11:14.540 --> 0:11:18.330 $250 a month, probably up to, you know, 7 or 0:11:18.330 --> 0:11:23.579 800 a month and everything in between. And again, you know, 0:11:23.620 --> 0:11:25.860 you've got to buy the policy that's right for you. 0:11:25.900 --> 0:11:28.620 Typically between, you know, 55 is probably when you want 0:11:28.660 --> 0:11:33.020 to start looking at it, but you can also self-insure. Mark, 0:11:33.020 --> 0:11:34.579 I'd love for you to weigh in on how do 0:11:34.580 --> 0:11:38.260 you think about positioning your portfolio if you are going 0:11:38.260 --> 0:11:42.339 to self-insure against the risk of perhaps needing a substantial 0:11:42.340 --> 0:11:45.100 income stream down the road to be able to fund 0:11:45.100 --> 0:11:45.980 long term care? 0:11:46.020 --> 0:11:50.140 Yeah, it's it's absolutely a question that's on everybody's mind 0:11:50.140 --> 0:11:53.650 as they get into the planning process. And I would 0:11:53.650 --> 0:11:55.970 just add to what you just said, Rob, which was 0:11:55.970 --> 0:11:59.770 all excellent. We did a deep dive on on all 0:11:59.770 --> 0:12:02.729 of this about a year ago, and the SMI newsletter. 0:12:02.730 --> 0:12:04.650 And one thing that a lot of people are not 0:12:04.650 --> 0:12:09.370 aware of is there has been kind of a new, uh, 0:12:09.850 --> 0:12:12.930 part of this industry that's popped up because of all 0:12:12.929 --> 0:12:16.770 the challenges on the long term care insurance. There's a 0:12:16.809 --> 0:12:19.730 short term care insurance option now that a lot of 0:12:19.730 --> 0:12:23.250 people don't know about, with the primary difference being that 0:12:23.250 --> 0:12:27.890 those policies are targeted to a shorter period. Thus the 0:12:27.890 --> 0:12:31.530 short term care. So those typically will run out in 0:12:31.570 --> 0:12:34.490 about a year, which sounds like well, that may not 0:12:34.490 --> 0:12:36.689 be that helpful if I have a big problem. But 0:12:36.690 --> 0:12:39.569 when you look at the statistics, a lot of people 0:12:39.570 --> 0:12:43.490 end up in situations where they need that care for 0:12:43.490 --> 0:12:46.650 a shorter period of time. And by having that time 0:12:46.650 --> 0:12:50.490 limit on it, that makes them much, much more affordable. Um, 0:12:50.490 --> 0:12:53.600 but back to your original question there, Rob. You know, 0:12:54.320 --> 0:12:58.160 there isn't so much that you can do, um, with your, 0:12:58.200 --> 0:13:04.439 your overall investing portfolio planning, um, other than to recognize 0:13:04.640 --> 0:13:07.400 that there is this, this looming need and try to 0:13:07.440 --> 0:13:13.240 build that into your projection of what, uh, what kind of, um, 0:13:13.320 --> 0:13:17.400 dollar figure nest egg you're, you're likely to need. And 0:13:17.400 --> 0:13:20.040 I think that, you know, the one thing we talk 0:13:20.080 --> 0:13:23.320 about from time to time here on these programs is 0:13:23.320 --> 0:13:26.040 that some folks, you know, feel like they're in good 0:13:26.040 --> 0:13:29.360 shape when they hit retirement. And so they really hit 0:13:29.360 --> 0:13:33.640 the brakes and get really conservative with their portfolios because 0:13:33.640 --> 0:13:36.960 they don't want to take unnecessary risk. And this is 0:13:36.960 --> 0:13:40.880 one of those risks that because it's so undefined, um, 0:13:41.120 --> 0:13:42.679 you know, you kind of have to keep an eye 0:13:42.679 --> 0:13:45.559 on it. And that's a reason to keep that portfolio 0:13:45.720 --> 0:13:48.960 growing at a little bit higher clip if you can. 0:13:49.520 --> 0:13:52.380 Yeah, I think that's right. And, and not going to 0:13:52.420 --> 0:13:56.100 light on stocks for this very reason, because you can 0:13:56.140 --> 0:13:59.140 outlive your money. You could also have a major expense 0:13:59.380 --> 0:14:03.580 that enters the equation in this season of life that 0:14:03.620 --> 0:14:06.900 is unexpected. So Allen, hope that helps. If you did 0:14:06.900 --> 0:14:09.500 want to check it out, perhaps some of these other 0:14:09.500 --> 0:14:13.179 newer policies, uh, even just to shoulder a portion of 0:14:13.179 --> 0:14:17.140 this LTC consumer.com is a great resource, not only a 0:14:17.140 --> 0:14:20.300 search engine for actual policies, but a great resource for 0:14:20.300 --> 0:14:23.700 education and then sound mind investing.org as well. We'll be 0:14:23.700 --> 0:14:30.660 right back. Thanks for joining us today on Faith and 0:14:30.660 --> 0:14:33.540 Finance Live. I'm Rob West, Mark Billers here today. We're 0:14:33.540 --> 0:14:39.220 talking about focusing on not probabilities but consequences. That was 0:14:39.220 --> 0:14:42.180 the focus of his editorial in the latest Sound Mind 0:14:42.180 --> 0:14:45.420 Investing newsletter. You can check it out. Sound mind investing 0:14:45.420 --> 0:14:49.380 dot ORG. That's sound mind investing.org. While you're there, check 0:14:49.380 --> 0:14:53.450 out the SMI newsletter, you know, for more than 30 years. 0:14:53.690 --> 0:14:57.250 Do it yourself. Investors have relied on SMI for proven 0:14:57.250 --> 0:15:00.810 strategies and trustworthy guidance. They also have the private client 0:15:00.810 --> 0:15:03.450 group for those that want to delegate to Mark and 0:15:03.450 --> 0:15:07.130 his team to manage those assets directly. Mark's taking your 0:15:07.130 --> 0:15:10.050 questions today on investing. If you have a question, call 0:15:10.090 --> 0:15:14.290 right now 800 525 7000. The lines are filling up, 0:15:14.290 --> 0:15:17.090 but still a few lines open at the moment. Let's 0:15:17.090 --> 0:15:18.970 go to Ohio. Connie, how can we help you? 0:15:19.010 --> 0:15:24.770 Yes. Hi, I was wondering. Hold on. I have an 0:15:24.770 --> 0:15:27.810 annuity and I was wondering, can I use part of 0:15:27.850 --> 0:15:32.490 that as part of that, um interest as an RMD? 0:15:33.410 --> 0:15:38.530 Yeah. Is this, uh, an IRA annuity as they're often 0:15:38.530 --> 0:15:40.410 referred to? Is it pre-tax money? 0:15:40.410 --> 0:15:40.930 No. 0:15:41.290 --> 0:15:44.890 So it's a, it's not a what's called a qualified annuity. 0:15:44.930 --> 0:15:47.090 It's after tax annuity money. 0:15:47.890 --> 0:15:53.360 Um, I'm not really sure it might be. I'm not sure. Okay. Yeah. 0:15:53.400 --> 0:15:55.360 All I know is it's an annuity, and it has 0:15:55.360 --> 0:15:57.560 a lot of. It has a lot of interest in it. 0:15:58.000 --> 0:15:59.000 Yes. Okay. 0:15:59.040 --> 0:16:01.560 I don't I'm not I'm not taxed at the end 0:16:01.560 --> 0:16:05.640 of the year. So I guess when I pull it 0:16:05.640 --> 0:16:08.600 out then I'm taxed on that. 0:16:09.120 --> 0:16:12.800 Yes. Okay. Very good. Yeah. Mark, would you want to 0:16:12.800 --> 0:16:13.520 weigh in on that? 0:16:14.120 --> 0:16:16.680 Yeah. I, I think, Connie, you're going to have to 0:16:16.720 --> 0:16:21.120 probably speak with, with somebody at the annuity company to 0:16:21.160 --> 0:16:25.200 find out exactly, um, the terms of the annuity and, 0:16:25.200 --> 0:16:28.680 and exactly how that is going to be taxed and 0:16:28.680 --> 0:16:32.680 whether that would qualify as, as a, you know, required 0:16:32.680 --> 0:16:37.640 minimum distribution. Um, I'm not sure without getting that information 0:16:37.640 --> 0:16:41.640 directly from them how you would know that otherwise. 0:16:42.600 --> 0:16:45.360 Yeah. Yeah. I think that's a great point. It's always 0:16:45.360 --> 0:16:48.640 good to revisit the details. I would just say, you know, 0:16:48.750 --> 0:16:51.990 Sometimes this can be done. If the qualified annuity is 0:16:51.990 --> 0:16:56.510 held inside a traditional IRA, then that distribution from the 0:16:56.510 --> 0:17:00.470 IRA annuity could be used to satisfy, you know, RMDs 0:17:00.470 --> 0:17:04.790 for the other IRAs. Um, so you could potentially, let's 0:17:04.790 --> 0:17:08.670 say you had, you know, IRA one had a $4,000 RMD, 0:17:08.710 --> 0:17:12.230 IRA two had three, the IRA annuity had five, a 0:17:12.230 --> 0:17:15.590 total was 12. You could take the entire 12 from 0:17:15.590 --> 0:17:19.350 the IRA annuity rather than taking separate withdrawals from all 0:17:19.350 --> 0:17:25.990 three accounts. Uh, assuming the annuity contract permits the distribution, um, 0:17:26.310 --> 0:17:28.389 if you have for one KS and so forth, it 0:17:28.390 --> 0:17:32.750 gets complicated because the aggregation rules differ by account type. 0:17:33.150 --> 0:17:36.990 But you do need to Mark's point to check with the, uh, 0:17:36.990 --> 0:17:39.670 the insurance company just to find out exactly what can 0:17:39.670 --> 0:17:43.710 be done. But the direction you're headed is certainly possible. Uh, 0:17:43.710 --> 0:17:46.389 I would just do a bit more investigation. Thanks for 0:17:46.390 --> 0:17:49.210 your call today. Uh, to Chattanooga CC. How can we 0:17:49.250 --> 0:17:49.730 help you? 0:17:50.770 --> 0:17:54.169 Yes I have. I invest some of my. I do 0:17:54.210 --> 0:17:57.210 my own investments with Truist Bank. They charge me $60 0:17:57.210 --> 0:17:59.130 a year to do that, but I just. I had 0:17:59.130 --> 0:18:02.170 my son put it through an AI thing that told 0:18:02.170 --> 0:18:05.370 him that I have, um, a lot of the same 0:18:05.369 --> 0:18:07.969 stocks and mutual funds doing the same job. And so, 0:18:08.010 --> 0:18:10.930 for example, AI is a little part of a lot 0:18:10.930 --> 0:18:14.570 of the mutual funds or, and, and, and so if, 0:18:14.690 --> 0:18:17.330 if AI goes down, then I'll have a whole lot 0:18:17.330 --> 0:18:21.090 of mine. Everything will drop and I need to diversify better. Um, 0:18:21.090 --> 0:18:23.530 so I didn't know how to, if there was a 0:18:23.530 --> 0:18:26.570 class or a book or something I could that would 0:18:26.570 --> 0:18:30.650 help me with diversifying better. Um, what are your thoughts 0:18:30.650 --> 0:18:31.209 on that? 0:18:32.250 --> 0:18:34.169 Yeah. Mark your thoughts. 0:18:34.410 --> 0:18:39.410 Yeah. Um, this is, this is definitely in the wheelhouse 0:18:39.410 --> 0:18:42.890 of what SMI does and what we're all about. Um, 0:18:42.930 --> 0:18:47.570 so a really easy, um, you know, way to start 0:18:47.570 --> 0:18:52.000 on That might be to just roll around the SMI 0:18:52.040 --> 0:18:56.280 website a little bit. Our SMI handbook, um, is, uh, 0:18:56.280 --> 0:19:00.160 a good one stop, you know, guide to breaking down 0:19:00.160 --> 0:19:04.480 different types of mutual funds. Um, the strategies that we 0:19:04.480 --> 0:19:09.120 provide are designed to do a lot of exactly what 0:19:09.119 --> 0:19:11.520 you're talking about, which is to make sure that you're 0:19:11.520 --> 0:19:16.200 well diversified, not just between, say, stocks and bonds, but 0:19:16.200 --> 0:19:20.520 different types of stocks. Um, you know, generally speaking, you're 0:19:20.520 --> 0:19:25.080 going to want to divide your stock investments, uh, to 0:19:25.119 --> 0:19:30.480 diversify along two different, uh, poles so you can diversify 0:19:30.520 --> 0:19:34.840 by the size of companies so large, medium and small. 0:19:35.040 --> 0:19:39.960 And then the most general, uh, other type of diversification 0:19:39.960 --> 0:19:44.080 is between growth investments and value investments. So if you 0:19:44.080 --> 0:19:49.950 think about those two different Are poles of diversification. You 0:19:49.990 --> 0:19:53.790 can start to move away from, as you were saying, like, 0:19:53.830 --> 0:19:57.590 it sounds like you have a very growth heavy portfolio, 0:19:57.630 --> 0:20:01.190 a lot of AI investments, a lot of technology companies 0:20:01.190 --> 0:20:04.950 and that sort of thing. And so to diversify that, 0:20:05.510 --> 0:20:07.270 you wouldn't have to get rid of all of that, 0:20:07.270 --> 0:20:09.830 but you might take some of that money and look 0:20:09.830 --> 0:20:15.870 specifically for some more value oriented investments and our strategies. 0:20:15.869 --> 0:20:20.990 We have some that are clearly laid out, the specific funds. So, 0:20:21.150 --> 0:20:23.830 you know, that would be one way to kind of 0:20:23.869 --> 0:20:26.070 get the cheat sheet would be to just sign up 0:20:26.070 --> 0:20:28.510 for a month, look at the strategies and see which 0:20:28.510 --> 0:20:32.830 value funds we're currently recommending. Um, and that that would 0:20:32.830 --> 0:20:35.150 be a quick way to do it. Or you can 0:20:35.150 --> 0:20:37.830 do a little more research on your own and kind 0:20:37.869 --> 0:20:40.390 of build your own type of grid so that you 0:20:40.390 --> 0:20:45.790 have some growth, some value, some large and ideally some small. 0:20:45.990 --> 0:20:48.859 And then if you want to also add some foreign 0:20:48.900 --> 0:20:53.460 stock diversification. Um, we've talked we've had a few programs 0:20:53.460 --> 0:20:57.260 about the advantages of investing in foreign stocks. I think 0:20:57.260 --> 0:20:59.780 it's a great idea to have some of that exposure 0:20:59.780 --> 0:21:03.780 as well. So that's kind of a quick overview of 0:21:03.780 --> 0:21:06.260 how to diversify a stock portfolio. 0:21:06.820 --> 0:21:08.780 Very good. I'd love to send you a copy of 0:21:08.820 --> 0:21:11.300 that book that Mark mentioned. It's called the Sound Mind 0:21:11.300 --> 0:21:15.100 Investing Handbook. CC will send that as our gift to you. 0:21:15.140 --> 0:21:17.660 Stay on the line. The team will get your information 0:21:17.660 --> 0:21:19.340 and we'll get it right out to you. It's going 0:21:19.340 --> 0:21:21.260 to give you a nice primer of a lot of 0:21:21.260 --> 0:21:24.060 the things Mark was talking about and a whole lot more. 0:21:24.220 --> 0:21:27.820 And again, sound mind investing.org could be a great resource, 0:21:27.820 --> 0:21:31.540 including the Sound Mind Investing newsletter, but we'll get the 0:21:31.540 --> 0:21:34.340 handbook right out to you. Thanks for your call today. Well, 0:21:34.340 --> 0:21:36.660 when we come back, we'll continue to take your questions. 0:21:36.660 --> 0:21:40.180 We'll head to North Carolina, to Florida, to Texas, and 0:21:40.180 --> 0:21:44.900 we'll talk more about Mark's article focused on consequences, not probabilities. 0:21:44.900 --> 0:21:55.160 We'll be right back. Helping you live as a faithful steward. 0:21:55.160 --> 0:21:57.640 This is faith and finance live. I'm Rob West, he's 0:21:57.640 --> 0:22:02.680 Marc Biller. We're talking about investing today focusing on consequences, 0:22:02.680 --> 0:22:06.919 not probabilities. That was the focus of Mark's recent editorial 0:22:06.920 --> 0:22:09.760 in the Sound Mind Investing newsletter. Check out the article 0:22:09.760 --> 0:22:13.040 when you go to Sound Mind investing.org. We're going to 0:22:13.040 --> 0:22:14.439 head right back to the phones in a moment. We 0:22:14.440 --> 0:22:16.760 have room for a few more questions today. If you 0:22:16.760 --> 0:22:23.040 have a question on investing your portfolio, call right now (800) 525-7000. 0:22:23.080 --> 0:22:26.280 Mark would love to tackle those questions. First, Mark, you 0:22:26.280 --> 0:22:30.560 mentioned in the article something called sequence of returns risk. 0:22:30.960 --> 0:22:34.440 And this is particularly of interest to retirees. Tell us 0:22:34.440 --> 0:22:36.400 what that is and how we should think about it. 0:22:36.400 --> 0:22:40.280 Yeah. It's a fancy term for a very real problem 0:22:40.280 --> 0:22:45.550 that retirees face, and that is that losses early in 0:22:45.590 --> 0:22:50.670 a person's retirement, because you're also withdrawing from the account 0:22:50.670 --> 0:22:54.870 to meet your your living expenses. If you get losses 0:22:54.869 --> 0:22:59.350 early on and they're severe enough, your portfolio can get 0:22:59.350 --> 0:23:03.990 depleted so quickly that even if you have stronger market 0:23:03.990 --> 0:23:07.430 returns later on, your portfolio really has a hard time 0:23:07.430 --> 0:23:11.190 recovering from that. And that's kind of a weird idea because, 0:23:11.230 --> 0:23:14.830 you know, we learn in an early math that it 0:23:14.830 --> 0:23:19.950 doesn't matter what sequence, uh, you know, uh, numbers come 0:23:19.950 --> 0:23:22.510 in when they're multiplied. If you have one times, two 0:23:22.550 --> 0:23:25.670 times three, it's the same as three times two times one. 0:23:26.030 --> 0:23:28.950 The difference, of course, Rob, is that when you're actually 0:23:28.950 --> 0:23:32.990 taking money out of the account as you go, then 0:23:32.990 --> 0:23:37.070 the sequence does matter in terms of how that plays out. 0:23:37.310 --> 0:23:39.790 And so, you know, there are a few things that 0:23:39.790 --> 0:23:43.030 we can do to try to counteract this specific risk, 0:23:43.030 --> 0:23:46.459 which is a very big deal for retirees. One is 0:23:46.460 --> 0:23:51.980 simple diversification. We diversify so that our whole portfolio isn't 0:23:51.980 --> 0:23:55.699 exposed to that stock market risk. And then there are 0:23:55.700 --> 0:24:00.060 other strategies as well. Like, uh, one popular one is 0:24:00.060 --> 0:24:04.379 to hold a few years worth of your spending in 0:24:04.380 --> 0:24:09.580 very low risk cash or bonds specifically, so that if 0:24:09.619 --> 0:24:12.859 you're one of the unlucky few who do have a 0:24:12.859 --> 0:24:17.260 big market drawdown early on in your retirement, you can 0:24:17.260 --> 0:24:20.940 take your living expenses from the cash and the bonds, 0:24:21.140 --> 0:24:24.500 leave the stock investments alone so that they have time 0:24:24.500 --> 0:24:28.060 to recover from the downturn. And that way, a big 0:24:28.060 --> 0:24:31.859 early decline isn't going to sabotage your whole long term 0:24:31.859 --> 0:24:33.060 retirement plan. 0:24:33.500 --> 0:24:36.940 Yeah. Really helpful. Mark, thanks for sharing that. Uh, all right, 0:24:36.940 --> 0:24:38.459 let's head back to the phones. We're going to head 0:24:38.460 --> 0:24:41.220 out to North Carolina. William, thanks for your patience. Go ahead. 0:24:41.900 --> 0:24:45.010 Yes, hello. Thank you. Appreciate the wisdom that you provide 0:24:45.050 --> 0:24:49.250 on a daily basis. My question is, my wife is 68, 0:24:49.250 --> 0:24:52.930 and we found out that she has like three different 0:24:53.090 --> 0:24:57.690 retirement accounts, and we understand we'll avoid the penalty, but 0:24:58.170 --> 0:25:00.889 the taxes that come with that. So the question is 0:25:01.410 --> 0:25:04.450 what are the recommendations on when we do get ready 0:25:04.450 --> 0:25:09.490 to access that? Um what are our options? We're trying 0:25:09.490 --> 0:25:14.330 to take it and then changing our tax liability or bracket. 0:25:15.090 --> 0:25:15.810 Yeah. Mark. 0:25:16.050 --> 0:25:19.250 Yeah. Great. Well, and well, I guess the, uh, the 0:25:19.290 --> 0:25:22.650 silver lining there is finding out you have extra retirement 0:25:22.650 --> 0:25:26.570 accounts is always, always a good thing. Um, you know, 0:25:26.570 --> 0:25:28.850 I think you're wise to keep an eye on the, 0:25:28.850 --> 0:25:31.330 the tax side of this. And there are a couple 0:25:31.410 --> 0:25:36.010 of things that you can do for sure. One is to, um, 0:25:36.369 --> 0:25:41.290 find out exactly where the tax brackets, um, where the 0:25:41.290 --> 0:25:45.550 tax rates change, how where the brackets are. The limits 0:25:45.550 --> 0:25:49.629 are the dollar limits around your income level. And the 0:25:49.630 --> 0:25:53.350 reason that's so important is a lot of times, um, 0:25:53.590 --> 0:25:56.830 you know, if you have, uh, a certain amount of, 0:25:56.950 --> 0:26:01.630 of dollars available above your current income before you get 0:26:01.630 --> 0:26:05.550 up to the next tax bracket and the, the tax 0:26:05.550 --> 0:26:08.510 rate changes, you know, that can give you a little 0:26:08.550 --> 0:26:12.710 bit of leeway to potentially, uh, take a little bit 0:26:12.710 --> 0:26:16.870 larger withdrawal in a particular year. Or you might see 0:26:16.869 --> 0:26:19.510 that you're right up against the top of your current 0:26:19.550 --> 0:26:22.510 tax bracket, in which case you might take a, a 0:26:22.790 --> 0:26:26.110 lesser withdrawal in a particular year, so you can manage 0:26:26.109 --> 0:26:31.790 your tax liability that way. Um, you also have some ability. 0:26:31.869 --> 0:26:35.750 You said you're, uh, 68 years old or your wife is, um, 0:26:35.750 --> 0:26:40.070 so you have some ability here before required minimum distributions 0:26:40.070 --> 0:26:44.460 kick in to use that same idea of eyeballing these 0:26:44.460 --> 0:26:48.739 tax brackets and how much room you have before you 0:26:48.780 --> 0:26:53.340 hit the next higher tax level, uh, to potentially do 0:26:53.340 --> 0:26:57.820 some Roth conversions if you're dealing with some traditional IRAs. 0:26:58.060 --> 0:27:01.940 That's one way that you can manage your tax liability 0:27:02.060 --> 0:27:06.380 by potentially paying a little more tax now, but with 0:27:06.380 --> 0:27:11.220 the benefit that when you're required, minimum distributions kick in, uh, 0:27:11.260 --> 0:27:14.900 several years from now, you're not going to be required 0:27:14.900 --> 0:27:18.859 to take distributions that are larger than you want. And 0:27:18.859 --> 0:27:22.580 that would potentially bump you into higher tax rates. I 0:27:22.619 --> 0:27:25.460 guess the last idea, William, that I'll leave you with 0:27:25.500 --> 0:27:29.700 is if you guys do any charitable giving, a great 0:27:29.700 --> 0:27:33.020 way to manage your tax liability is to use a 0:27:33.020 --> 0:27:37.220 qualified charitable distribution, which is a way you can take 0:27:37.220 --> 0:27:40.980 some of your required minimum distributions out of an IRA. 0:27:41.420 --> 0:27:45.450 It goes directly to the charity that you designate, which 0:27:45.450 --> 0:27:49.250 can be your local church or a different charity. And 0:27:49.250 --> 0:27:54.290 if you do that with that QCD, that qualified charitable distribution, 0:27:54.290 --> 0:27:58.650 it completely bypasses your tax return, which means you don't 0:27:58.650 --> 0:28:02.370 have to worry about the income, uh, impacting your Social 0:28:02.369 --> 0:28:07.690 Security or Medicare, uh, either. So those are a few ideas. William. Rob, 0:28:07.690 --> 0:28:09.050 I don't know if you have any others. 0:28:09.369 --> 0:28:11.649 I love those. Yeah. I mean, this idea of filling 0:28:11.650 --> 0:28:13.770 up the buckets is a big one where you fill 0:28:13.770 --> 0:28:18.169 up the lower brackets, brackets without spilling unnecessarily into a 0:28:18.170 --> 0:28:22.729 higher bracket. Uh, and this window that you have for 0:28:22.730 --> 0:28:27.410 tax planning after you retire, where you have lower earned income, 0:28:27.650 --> 0:28:30.850 where Social Security may not have started. And you certainly 0:28:30.850 --> 0:28:34.929 don't have RMDs yet, gives you a nice window to 0:28:34.970 --> 0:28:37.290 be able to go ahead and pay some tax at, 0:28:37.330 --> 0:28:40.690 you know, the ten or the 12% bracket shy of 0:28:40.690 --> 0:28:44.600 the 22%. And, you know, get some of that money 0:28:44.600 --> 0:28:47.360 out or convert it to Mark's point, to Roth. Does 0:28:47.360 --> 0:28:48.280 that make sense, though? 0:28:48.520 --> 0:28:52.400 It does. That is extremely helpful. Very much. 0:28:53.160 --> 0:28:56.640 Excellent. Well, thanks for your call today, sir, and appreciate 0:28:56.640 --> 0:28:58.560 you being on the program. Stay on the line. We'll 0:28:58.560 --> 0:29:01.760 send you a copy of Mark's book, The Handbook. The 0:29:01.800 --> 0:29:04.719 Sound Mind Investing Handbook is our gift to you quickly 0:29:04.720 --> 0:29:07.360 to Florida. Alberto, thanks for calling today. Go ahead. 0:29:07.640 --> 0:29:10.880 Long time listener. Rob. I got a question. Um, have 0:29:10.880 --> 0:29:15.880 you ever heard of this company? Um, why refi investment? Mhm. 0:29:16.120 --> 0:29:20.280 Yeah. Yes, I'm familiar with it. Essentially, it's a private 0:29:20.280 --> 0:29:24.520 investment that involves a promissory note tied to their business. 0:29:24.560 --> 0:29:30.000 Why refi? Uh, with their businesses refinancing distress or defaulted 0:29:30.000 --> 0:29:33.920 private student loans. Um, here's, here's what I would say. 0:29:34.160 --> 0:29:38.680 It's substantially higher risk than anything like a CD or 0:29:38.720 --> 0:29:43.660 a treasury, for sure. It's certainly not FDIC insured. Um, 0:29:43.660 --> 0:29:47.580 you know, essentially think about it like, you know, the 10.25%, 0:29:47.780 --> 0:29:51.220 you know, you're lending money to a private company. And 0:29:51.220 --> 0:29:54.820 with that higher rate comes the additional credit and liquidity 0:29:54.860 --> 0:30:00.020 risk because these investments are very illiquid. There's no secondary market. 0:30:00.140 --> 0:30:03.500 So although you can request an early redemption, they can 0:30:03.500 --> 0:30:07.780 approve or decline or delay it. Um there's also credit 0:30:07.780 --> 0:30:11.380 and business risk because the underlying business involves borrowers who 0:30:11.380 --> 0:30:17.620 previously have, have had distress or defaulted private student loans. Um, and, 0:30:17.660 --> 0:30:21.060 you know, there's just, uh, you know, a higher overall 0:30:21.060 --> 0:30:23.860 risk because of, uh, you know, these are not insured 0:30:23.860 --> 0:30:27.660 in any way. So I would just be careful, uh, 0:30:27.700 --> 0:30:30.580 about something like this personally, I would stay away from it. 0:30:30.580 --> 0:30:33.700 But I appreciate you asking. Alberto, thanks for your call today. 0:30:33.940 --> 0:30:36.459 Mark Miller is here today. Back with our final segment 0:30:36.460 --> 0:30:46.450 after this call with questions 805 525 7000. Mark Miller 0:30:46.450 --> 0:30:49.450 is here today. We're talking about his article that you 0:30:49.450 --> 0:30:54.490 can read it sound mind investing.org. It's called focus on Consequences, 0:30:54.490 --> 0:30:59.330 not probabilities. And it's a really insightful article. Mark, before 0:30:59.330 --> 0:31:01.209 we head back to the phones, I'd love for you 0:31:01.210 --> 0:31:04.170 to comment on what's going on in the in the 0:31:04.170 --> 0:31:10.050 Treasury market. Obviously, we've got long term yields up dramatically. 0:31:10.090 --> 0:31:15.330 I know the Treasury Secretary moving to double the buyback 0:31:15.330 --> 0:31:20.690 which temporarily provided some relief. Yields back up today. I 0:31:20.690 --> 0:31:23.730 know the secretary saying that he was just trying to 0:31:23.770 --> 0:31:27.410 provide liquidity not necessarily get involved in the yield. And 0:31:27.410 --> 0:31:30.490 he's got a big toolbox at his disposal. But just 0:31:30.490 --> 0:31:32.690 kind of give us some sense of what's going on. 0:31:32.690 --> 0:31:34.330 And is there some concern here? 0:31:34.370 --> 0:31:36.970 Yeah, I mean, there is some concern, Rob. You know, 0:31:37.010 --> 0:31:42.160 we saw a few years ago, uh, in 2022, the 0:31:42.160 --> 0:31:46.760 impact that rapidly rising interest rates can have, not just 0:31:46.800 --> 0:31:49.520 on bond prices, which are always going to go down 0:31:49.520 --> 0:31:53.760 as interest rates go up. But in 2022, when bond 0:31:53.760 --> 0:31:57.680 yields went up, the stock market really reacted poorly to 0:31:57.720 --> 0:32:00.560 that as well. Um, and so it's been an issue 0:32:00.600 --> 0:32:03.880 that investors have been watching on and off for the 0:32:03.880 --> 0:32:08.120 last probably, you know, four years or so. And whenever 0:32:08.120 --> 0:32:14.120 interest rates do climb, uh, treasury yields climb towards, you know, 5% 0:32:14.120 --> 0:32:17.680 or so on the ten year, especially, um, the stock 0:32:17.680 --> 0:32:23.000 market tends to get pretty skittish and investors get nervous. So, 0:32:23.040 --> 0:32:25.280 you know, as we look at what's happened here in 0:32:25.280 --> 0:32:28.960 the last week or two, there have actually been two interventions. 0:32:28.960 --> 0:32:32.320 One of them just flew right past most people's radar 0:32:32.320 --> 0:32:36.840 because it involved the Japanese yen. And if you look 0:32:36.880 --> 0:32:41.270 at that one closely. Our intervention in the. The yen 0:32:41.590 --> 0:32:47.150 carry trade, which gets very technical, was largely considered to 0:32:47.150 --> 0:32:52.750 be an effort by the U.S. Treasury to keep Japan 0:32:52.750 --> 0:32:57.590 from selling their U.S. treasuries in order to raise dollars 0:32:57.590 --> 0:33:01.030 to protect the value of their currency. And so we 0:33:01.030 --> 0:33:05.230 intervene to try to keep them from selling U.S. Treasury bonds. 0:33:05.470 --> 0:33:09.670 Then yesterday, as you mentioned, Rob, the Treasury intervened again 0:33:09.670 --> 0:33:12.710 in the Treasury market by increasing the size of this 0:33:12.710 --> 0:33:18.070 buyback of older treasuries. Now, there's some technical things around 0:33:18.070 --> 0:33:22.030 that that make that probably a good move, because what 0:33:22.030 --> 0:33:26.030 can happen is old treasuries can become kind of a liquid. 0:33:26.030 --> 0:33:29.910 So treasury bonds, longer term bonds that were issued back 0:33:29.910 --> 0:33:35.110 in 20 2021 when rates were much lower. Nobody wants those. 0:33:35.150 --> 0:33:38.370 And so they're largely a liquid. They're stuck on balance 0:33:38.370 --> 0:33:42.690 sheets of institutions and banks and things. So the Treasury 0:33:42.690 --> 0:33:45.570 coming in and saying, hey, we're going to issue some 0:33:45.570 --> 0:33:49.890 new short term bonds to to create money to buy 0:33:49.890 --> 0:33:54.090 back some of those illiquid long term bonds. That's probably 0:33:54.090 --> 0:33:57.530 a good thing. But behind all of this, Rob, I 0:33:57.530 --> 0:33:59.290 think you have to keep your eye on the ball 0:33:59.290 --> 0:34:03.770 here and not get lost in the technical forest. And 0:34:03.770 --> 0:34:08.370 the big picture here is that we're trying to wallpaper 0:34:08.410 --> 0:34:12.530 over a much bigger problem. The much bigger problem is 0:34:12.690 --> 0:34:16.290 we're six years out from Covid, and the federal government 0:34:16.290 --> 0:34:21.570 is still running annual deficits that are 6% of GDP. 0:34:21.890 --> 0:34:27.170 So these are huge deficits. We're issuing massive amounts of 0:34:27.170 --> 0:34:31.090 debt year after year after year, really at a level 0:34:31.090 --> 0:34:34.969 that historically we would only run this type of deficit 0:34:34.969 --> 0:34:38.440 if we were in the middle of a deep recession. Um, 0:34:38.480 --> 0:34:43.360 and so just like a household goes through different phases where, 0:34:43.400 --> 0:34:47.200 you know, things are going really well, so most reasonable 0:34:47.200 --> 0:34:50.560 people would pay down their debt, you know, would save 0:34:50.560 --> 0:34:53.600 some extra to get ready for a rainy day down 0:34:53.600 --> 0:34:57.880 the road. Well, that's what we should be doing right now. 0:34:57.920 --> 0:35:01.879 We've got a good economy. Unemployment is low. We know 0:35:01.880 --> 0:35:06.120 that someday those conditions will change. We'll have a recession, 0:35:06.120 --> 0:35:09.480 and the government will need to spend more and borrow 0:35:09.520 --> 0:35:13.560 more to help us get through and out of that recession. 0:35:13.760 --> 0:35:16.759 But we don't have that today, and we're still borrowing 0:35:16.760 --> 0:35:19.840 all this and creating all this new debt. So that's 0:35:19.840 --> 0:35:23.759 really the the problem that the bond market and investors 0:35:23.960 --> 0:35:29.120 are kind of looking through these actions, these interventions and saying, 0:35:29.160 --> 0:35:33.040 you know, that's all great. That might help today, tomorrow, 0:35:33.040 --> 0:35:37.790 next month. But, you know, longer term, we want to 0:35:37.790 --> 0:35:40.430 be paid more if we're going to take the risk 0:35:40.430 --> 0:35:45.989 of lending this government money, lending the U.S. government money 0:35:45.989 --> 0:35:49.830 at these longer terms, you know, ten years, 20 years, 0:35:49.830 --> 0:35:55.350 30 years. We don't trust that they're going to be responsible. And, 0:35:55.390 --> 0:35:58.310 you know, there's there's more risk. That's really what it 0:35:58.350 --> 0:36:02.109 boils down to. More risk equals higher rates. And that's 0:36:02.110 --> 0:36:05.830 what we're seeing in the bond market. These rates pushing 0:36:05.830 --> 0:36:09.109 up on the long end. Now I would say the 0:36:09.110 --> 0:36:12.549 biggest takeaway from what's happened here in the last couple 0:36:12.590 --> 0:36:17.150 of weeks in this action yesterday is the Treasury, if 0:36:17.190 --> 0:36:20.910 you read between the lines, is basically saying we're not 0:36:20.910 --> 0:36:25.590 comfortable letting interest, long term interest rates go higher than 0:36:25.590 --> 0:36:29.790 they are right now. And if they're going to play 0:36:29.790 --> 0:36:35.229 that game of trying to kind of artificially cap rates here, well, 0:36:35.340 --> 0:36:37.940 it's kind of like when you squeeze a water balloon, 0:36:37.940 --> 0:36:40.100 you know, you can put pressure on one part of 0:36:40.100 --> 0:36:43.500 the balloon, but it's just going to bulge out somewhere else. 0:36:43.739 --> 0:36:47.299 And so what we saw yesterday was what are the 0:36:47.300 --> 0:36:50.260 bond alternatives? If you're going to cap the interest rates 0:36:50.260 --> 0:36:54.580 on the bonds, investors immediately say to themselves, well, where 0:36:54.580 --> 0:36:57.300 where else can I go? And what we saw yesterday 0:36:57.300 --> 0:37:01.580 was gold shot up by like 4%. So that's kind 0:37:01.620 --> 0:37:05.899 of your insurance against these types of policy actions. Um, 0:37:05.940 --> 0:37:09.460 so we're kind of circling back to some of that 0:37:09.460 --> 0:37:12.899 dollar debasement trade stuff that we were talking about at 0:37:12.900 --> 0:37:17.060 the beginning of the year on those programs where if 0:37:17.060 --> 0:37:19.980 we can't trust the interest rates on the bonds, maybe 0:37:20.020 --> 0:37:21.940 we take some of that money and put it into 0:37:21.940 --> 0:37:28.180 things like gold and other precious metals as an alternative. Um, 0:37:28.180 --> 0:37:30.299 and so I think you saw a big response to 0:37:30.340 --> 0:37:33.259 that yesterday there, you know, the dollar fell quite a 0:37:33.260 --> 0:37:37.879 bit against foreign currencies. Um, another thing we've talked about in, 0:37:37.880 --> 0:37:41.080 in the last year or two, uh, with a falling 0:37:41.080 --> 0:37:45.520 dollar is international stocks tend to do really well when 0:37:45.520 --> 0:37:49.439 the U.S. dollar is falling. Uh, commodities, things that are 0:37:49.440 --> 0:37:52.239 priced in dollars tend to go up in price, like 0:37:52.239 --> 0:37:57.240 with gold. So commodities, foreign stocks, gold, all those things 0:37:57.239 --> 0:38:00.400 get a bid in this type of environment. 0:38:00.800 --> 0:38:03.960 Yeah, really helpful analysis, Mark. Thanks for that. All right. 0:38:03.960 --> 0:38:05.919 Let's try to sneak in 1 to 2 more phone 0:38:05.920 --> 0:38:08.640 calls here before we close out for the day. Rachel 0:38:08.640 --> 0:38:11.040 in Texas, thanks for your patience. How can we help you? 0:38:11.600 --> 0:38:14.000 Well, I just wanted to find out how I could 0:38:14.000 --> 0:38:17.719 invest some of my money. I have I have no 0:38:17.719 --> 0:38:20.280 investments or anything like that. I don't have a debt. 0:38:20.280 --> 0:38:23.759 So I just wanted to find out about that. Yes. 0:38:23.840 --> 0:38:25.160 Thinking about it lately. 0:38:26.080 --> 0:38:29.320 Okay. Yeah. Very good. Can I ask a couple of questions? 0:38:29.760 --> 0:38:30.240 Sure. 0:38:30.640 --> 0:38:34.270 Okay. Uh, approximately what amount of money do you have 0:38:34.270 --> 0:38:36.390 available that you would consider investing? 0:38:36.989 --> 0:38:41.509 Well, maybe, uh, 150,000. 0:38:41.550 --> 0:38:45.149 Okay. And would that be in addition to what I 0:38:45.190 --> 0:38:48.870 call an emergency fund, the savings that you need for 0:38:49.030 --> 0:38:50.150 the unexpected? 0:38:50.830 --> 0:38:53.469 Uh, no. No it doesn't. 0:38:53.790 --> 0:38:57.469 So this, the 150 includes your emergency fund? 0:38:57.510 --> 0:38:57.990 No. 0:38:58.030 --> 0:38:58.990 No. You have that separate. 0:38:59.030 --> 0:39:00.630 I have, I have yes. 0:39:01.070 --> 0:39:04.350 Okay. Very good. And what are your income sources? What 0:39:04.350 --> 0:39:05.270 are you living on? 0:39:05.630 --> 0:39:06.750 Social security. 0:39:07.150 --> 0:39:08.910 Okay. Social security alone? 0:39:09.030 --> 0:39:09.630 Yes. 0:39:09.830 --> 0:39:11.989 All right. And is that enough to cover your bills? 0:39:12.950 --> 0:39:17.030 Yes. Okay. I have an arrangement right now that I don't. 0:39:17.030 --> 0:39:20.270 I don't pay taxes because I didn't work. It was 0:39:20.310 --> 0:39:21.950 so secure. Came from my husband. 0:39:22.350 --> 0:39:22.910 I see. 0:39:23.270 --> 0:39:26.109 Uh. Yes, ma'am. About three years. A little bit at 0:39:26.110 --> 0:39:29.029 a time. I've been able to make this little nest 0:39:29.030 --> 0:39:30.069 egg for myself. 0:39:30.310 --> 0:39:34.300 Yeah. Excellent. Well done. And the 150 or so thousand. 0:39:34.340 --> 0:39:36.340 Is that just in a savings account right now? 0:39:36.380 --> 0:39:37.020 Yes. 0:39:37.060 --> 0:39:39.340 Okay. And if you don't mind me asking last question, 0:39:39.340 --> 0:39:40.220 what is your age? 0:39:40.900 --> 0:39:42.740 80. I'm going to be 89. 0:39:43.300 --> 0:39:48.260 Wow. Incredible. Uh, Mark, uh, thoughts on, uh, how Rachel 0:39:48.260 --> 0:39:50.260 can think about this 150,000? 0:39:50.300 --> 0:39:54.060 Yeah. So, Rachel, you know, the biggest question, uh, that 0:39:54.060 --> 0:39:56.900 you'll have to, to deal with in making this decision 0:39:56.900 --> 0:39:58.980 is how much risk do you want to take with 0:39:58.980 --> 0:40:02.020 that money? So you've got it in a savings account 0:40:02.060 --> 0:40:07.460 right now. So the, the smallest step up in risk 0:40:07.460 --> 0:40:11.299 would be to go to something like, uh, CD, uh, 0:40:11.300 --> 0:40:13.900 maybe a little bit longer term CD that's going to 0:40:13.900 --> 0:40:17.220 pay you a little bit more interest. Uh, beyond that, 0:40:17.219 --> 0:40:21.260 you could go into some very low risk, um, bond 0:40:21.260 --> 0:40:25.339 type investments. And then at the very farthest end of 0:40:25.340 --> 0:40:28.740 the risk spectrum, you'd be talking about like stock market 0:40:28.780 --> 0:40:33.049 type investments. Um, but, you know, with stock market investments. 0:40:33.050 --> 0:40:36.250 We typically say, if you don't have at least a 0:40:36.250 --> 0:40:40.330 five year time horizon, you probably want to steer clear 0:40:40.330 --> 0:40:44.529 of stocks. So that may incline you towards, you know, 0:40:44.570 --> 0:40:48.050 looking at some of the, the different bond investment type 0:40:48.090 --> 0:40:51.450 options that are out there. They're all different types of 0:40:51.450 --> 0:40:56.290 bond funds, um, and ways to invest in bonds. Um, 0:40:57.050 --> 0:41:00.450 so that could be a conversation that you could even 0:41:00.450 --> 0:41:02.850 start at your local bank to see what kind of 0:41:02.850 --> 0:41:06.730 options they have. Um, otherwise, you know, you can certainly 0:41:06.730 --> 0:41:11.210 open a brokerage account with a company like Schwab or 0:41:11.210 --> 0:41:15.890 fidelity or there are many others. And just look for, um, 0:41:16.410 --> 0:41:21.169 you know, low risk bond fund investments as an option. Um, 0:41:21.170 --> 0:41:23.250 but that would probably be where to start. 0:41:23.610 --> 0:41:26.370 Yeah. I think that's great advice, Rachel. The other option, 0:41:26.370 --> 0:41:29.370 in addition to what Mark shared, and I would agree wholeheartedly, 0:41:29.610 --> 0:41:33.350 is to connect with a certified Kingdom advisor there in Texas. 0:41:33.550 --> 0:41:36.070 Somebody who could help you think about how to build 0:41:36.070 --> 0:41:39.629 the kind of portfolio Mark was describing, where maybe and 0:41:39.630 --> 0:41:41.710 this would be entirely up to you. Maybe you have 0:41:41.710 --> 0:41:45.950 10 or 20%. So 15 to 30 000 that goes 0:41:45.950 --> 0:41:48.710 into stocks to give you a little bit of growth. 0:41:48.830 --> 0:41:52.910 And then the rest nine, you know, 80 to 90% 0:41:52.910 --> 0:41:57.430 of that 150,000 is in those CDs and money market 0:41:57.430 --> 0:42:00.390 and bonds that Mark was talking about, where you're still 0:42:00.430 --> 0:42:03.469 on the more conservative end of the spectrum, but you 0:42:03.469 --> 0:42:05.709 have the ability to earn a little bit more on 0:42:05.710 --> 0:42:08.630 this nest egg that you've been so diligent to save. 0:42:08.670 --> 0:42:10.430 I'm going to ask you to hold the line. My 0:42:10.430 --> 0:42:12.910 team will get your information. I'll have somebody from Kingdom 0:42:12.910 --> 0:42:16.230 Advisors call you in the event you want to connect 0:42:16.230 --> 0:42:19.190 with the Certified Kingdom Advisor, they can find one for 0:42:19.190 --> 0:42:21.910 you in your area. Just hold the line. Mark, thanks 0:42:21.910 --> 0:42:22.790 for being here today. 0:42:23.110 --> 0:42:24.670 Always my pleasure. Rob. 0:42:24.910 --> 0:42:28.190 Folks, check out Sound Mind Investing, the newsletter, the private 0:42:28.190 --> 0:42:30.430 client group, and the article we've been talking about at 0:42:30.430 --> 0:42:32.109 Sound Mind investing.org.