Financial Detox® Show

Jason and Alex kick off todays' show discussing a survey returned by Dimensional Funds that includes 13,000 investors and some of the important data that was derived from the survey.  Find out what is important to people with regards to their advisor relationships.

What attributes are most valued in a Financial Advisor:
1. Understand Financial Needs and Goals
2. Explains financial concepts in a manner that I can understand

What does sense of security and peace of mind mean to you:
1. Not running out of money (60% responded this way)
2. Being able to maintain lifestyle

In this show you will learn about:

- Strategies to extract value from your business while you are building and running it

- What tax strategies can you focus on to ensure that you are getting the most value out of owning your own business?

- How can an accountable reimbursement plan help you and your sales teams?

-What kind of company retirement plans exist to help owners extract value via retirement savings?

- Strategies to position your business for selling it

-What is EBOC and why does it matter?

-What role does net operating income, or profitability, play in getting the best valuation?

-What are acquirers looking for? How does this vary across industries?

-How to navigate the next phase after business ownership

In this show you will learn about:

-          Stats on Inflation:

o   Inflation still dominates much of the headlines in the news. Google searches for “Inflation” are up over 100% and has dominated company conference calls by and increase of 350% for S&P 500 companies 

o   More than half of the total increase in CPI over the past two months has been due to used cars, rental cars, hotels, and airfare. 

o   These large price jumps in these small categories are due to reopening and supply chain disruptions, HOWEVER both of these are temporary 

o   When looking back to historical data, the last 30 years have actually experienced very little volatility in CPI and lower than average levels of inflation, (the average being 2.9% since 1926) so we should expect an increase and look at it as a sort of rebalancing. Too low of inflation can also even be a bad thing. 

o   One thing to point out is how everyone talks about what’s been going up in price, however there are some key sectors that have actually gone down in price being health insurance, airline fares, tickets to sporting events 

o   Health care costs take out a large portion of most people's paychecks and this decrease in costs isn’t talked about enough 

o   All in all, inflation is looking to be more transitory than long term with lumber prices dropping 40% in June alone

-          Bonds

o   Why own them?

o   The current status of the bond market

o   10-year Treasury yields have dropped significantly since late May, which at the time were at almost 1.75 to almost 1.2 as of late July (roughly a 30% drop) ○ This leads to the continued push and pull between Growth and Value stocks, however we maintain our barbell approach and direct exposure to Developed Market value stocks

-          Real Estate

o   What is causing the massive increase in prices locally?

o   What are some of the best ways to incorporate real estate into your overall investment strategy given the current market conditions?

-          Commodities

-          Equities

-          Alternative Investments

Welcome to Financial Detox, where host Jason Labrum and co-host Alex Klingensmith simplify the complex, share industry secrets and provide proven strategies designed to take you from financial insecurity to financial independence. Today’s episode begins with an introduction to Jason and Alex and how they began this podcast. The world of financial advisory can feel convoluted and overwhelming, but this show aims to educate listeners and clarify fundamental concepts that will help you achieve financial success and peace of mind. 

Our hosts dive right into some fascinating topics, beginning with Cryptocurrency and Blockchain technology, and how it will change the way we think of and use money over the next ten years. They discuss the role of government regulation in currency, China’s refusal to accept Bitcoin due to their inability to manipulate it as a medium of exchange, and why socialism always fails as an experiment. You’ll also hear about the importance of allowing free market capitalism to play out, having a diversified portfolio, and investing in Cryptocurrency only if you are comfortable with a higher degree of volatility.

Jason and Alex then move on to the very real topic of inflation. Warren Buffett recently stated that we are seeing substantial inflation and higher prices, but Jason and Alex explain that there are ways to adjust your portfolio to prepare for this. Certain assets perform better in inflationary environments, such as inflation protected bonds, real estate, stocks, and commodities. 

They also break down the four main components of a proposed tax increase under the current administration: Doubling capital gains tax rate; increasing corporate tax rate; increasing state tax rate and decreasing the exemption amount; and changing or eliminating step-up in basis. They explain why increasing corporate tax rates will be prohibitive for business owners, forcing them to spend less on innovation, computers, and hiring employees. Changes in state tax will also involve an estate tax, meaning people will have to pay even more tax on their hard earned income after they pass away, leaving less than 30% for their heirs. Eliminating the step-up in basis also means that those heirs will have to pay significantly more tax on the dividends of their inheritance as time goes on. And doubling capital gains tax simply punishes people for investing, and prevents them from using those gains to invest in local businesses, create jobs, and feed more families. There are certain strategies you can use to mitigate the effects of these possible tax increases, however, so be sure to ask your advisor about incorporating these tactics into your financial plan moving forward.

For more podcasts and information, visit FinancialDetox.com. You can also call  (877) 707-8889 with questions, comments, or feedback. Thank you for listening.

In this show you will learn about:

-Cryptocurrency and government regulation of currency

-Impending inflation

-Proposed tax increases under the current administration

Links:

Financial Detox website

Show Description: 

Jason and Alex start off the show addressing a question that has been asked by more than one private client over the past couple of weeks. Given the US National Debt equal to 28.2 Trillion and the Federal Deficit at $4.5 Trillion and tack on all the recent stimulus money and Federal spending, what will be the effects on the market in the next 12 to 18 months? The topic for today’s show is based on the Federal debt, government spending and the effects it will have on the markets. 

Alex shares his perspective on stimulus money and the concept that stimulus money will make its way back into the market through the purchasing of goods and services. Jason interjects with adding that the real question is when does this artificial stimulus approach end? When will the country get back to making the economy work for itself? Alex reminds Jason that pre pandemic the economy was healthy, maybe the best economy we have ever experienced. Jason adds that the unemployment rates were the lowest across all ethnicities pre pandemic. 

After the first commercial break Jason and Alex respond to the question with optimism and more detail, stating that the public typically does not care about the current US National Debt, more interested in how much are they able to buy and spend. So, stimulus money will be positive in the short term. However, at some point taxes will have to increase. Jason and Alex spend some time discussing taxes and who pays for what currently and the effects it is having on further dividing our country. Will the current tax structure work to reduce the deficit?  Jason brings up the question where is the government getting money? Besides printing money and with interest rates at all-time lows will servicing the existing debt become an issue. Alex adds that if the government becomes crippled by debt service it will hurt us in other ways. Things that we rely on the government to maintain like infrastructures, national defense, and education.  

If the government can borrow money at an incredibly low rate of 1.7% for 10 years, should they borrow a bunch of money and invest it ways to grow a higher rate of return. Alex responds that yes; with the first part of stimulus money, it is a bet on the people. A bet that the people will spend, and companies will invest, increasing the GDP growth. Jason brings to the conversation that free money tends to create laziness amongst many, further debilitating strong work ethic within the U.S.

Jason and Alex close the question and show with a strong Intelligence Driven Advisers belief that trying to predict or time the market does not work. Creating a globally diversified investment portfolio that is designed to weather changes within the economy and other unknown events is the best solution to continued success with capital market investing.  

In this show you will learn about:

- Government Spending

- Interest Rates

- Investment Diversification

Show Description: 

Jason and Alex started the show by taking a step back and reminding listeners and themselves why IDA’s team does not pick individual stocks and try to time the market. There are always unpredictable events that will happen with individual companies, such as Cox communication’s internet going down for multiple days unexpectedly. One of the biggest questions that clients and prospective clients have been asking is “What are you going to do to fight back against inflation?” Jason explained one of the main reasons that people are getting nervous about inflation is because the 10-year Treasury yield rose from approximately 0.5% up to around 1.7% in just a few months. 

Jason and Alex discussed the amount of debt in the U.S. that has grown to over $28 Trillion after the latest stimulus package. They explained how inflation is a general increase in prices and a fall in the purchasing value of money. A few examples of items that would be negatively affected would be food, gas, travel, real estate, etc. Jason talked about the crippling effect of shifting back to a country that is dependent upon other countries for oil and gas production, and this will really hurt the trucking industry and other workers that rely upon affordable gas prices to provide for their families at a sustainable level.  

Alex asked a good question to find out what investments perform well during periods of higher inflation. This is a crucial aspect of the financial planning process to ensure IDA’s clients are able to keep pace with the purchasing power through the strategic allocation of their investment strategy. Jason explained how gold and broad commodities, natural resources, hard (tangible) assets such as real estate, and certain types of inflation protected bonds historically have performed much better during inflationary periods. Jason even touched on Bitcoin or cryptocurrencies in general being a good potential inflationary hedge in the coming years. This is still a speculative asset class to an extent, but it could become a more important piece of the overall portfolio in the near future. Jason also explained that now more than ever it is crucial to be careful with the types of bonds to own because we have been in a great 40-year period of bond performance while interest rates have been coming down and have remained low historically. Alex and Jason talked about the importance of not only being well diversified on the stock side of the portfolio, but also being well diversified on the fixed income or bond side of the portfolio.

They stressed the importance of meeting with a Fiduciary adviser regularly, like the ones on the IDA team, especially at a time like this, to make sure that one’s financial plan is fully on track. Alex explained how now is not the time to have a large amount of cash in a client’s portfolio if a client’s main worry or risk is inflation.

In this show you will learn about:

- What should investors do to prepare for inflation?

- Impacts of inflation

- Types of investments that thrive in an inflationary period

- Stress testing an investment portfolio to prepare for inflation

Show Description: 

Jason kicks off the show with giving an overview of when to look towards the topic to today’s discussion, alternatives. Alternative Investments become a viable option for investing when the public markets start to look too high, and questions arise as to how long this market run up can continue. 

Alex joins the discussion with stating the reality for most, alternatives are difficult and can continue to stump even the most astute investors. So, Alex opens the discussion with a question for Jason; Who should look to alternatives as an investment vehicle and who should not? Jason responds with clarifying first, what alternative investments are. It is an investment that is not available in the traditional marketplace with traditional liquidity. Traditional meaning publicly traded stocks, bonds, cash, and CDs. Alex reminds listeners that our core investment philosophy at Intelligence Driven Advisers is based on investing in efficient markets, stocks, and bonds. So, Alex reiterates to Jason when do we dabble in alternatives and how do we do that with conviction? Alex confirms with Jason that alternatives are inefficient markets. Inefficient markets are defined as an investment opportunity where you are potentially able to capitalize on the inefficiencies of an investment. Jason adds, finding value where others do not and reminds listeners that with traditional investing, we at IDA believe that the markets are basically efficient, meaning that the price you pay for stock in a publicly traded company is fairly priced. 

After the break, Jason begins to answer Alex’s question as to why and when to use alternatives in a portfolio by describing non-correlated investments that have desirable return characteristics and how they add diversification to a correlated portfolio.  Shifting the efficient frontier. When to invest in alternatives tends to be hinged on government regulations. Alternative investments have investor qualification requirements based on the nature of the investment. For some alternative investments there is an accredited investor requirement and for “most” alternative investments there is a qualified investor requirement. To be a qualified investor, one must have 5 million dollars of investable assets not including your primary home.  Many alternative investments are illiquid for an extended period where you cannot gain access to your initial investment. The regulations are in place to protect the public. 

Alex circles the call back to crypto currency and asks if this is a poor man’s version of alternative investing. Jason responds as yes basically and reflects on the E*TRADE commercials where the baby is buying everything with the simple click of a button and ends up losing his investments. Point being, you need to do your due diligence on any investment, especially non-publicly traded investments. 

Jason spends some additional minutes on crypto currency and on the due diligence he has personally done. Gives his perspective on where the future may be for an alternative currency. 

Private equity has been a market in the alternatives space that Jason shares insight on. Stating that companies that in the past may have gone public quickly are staying as a private entity for longer than they ever had previously creating demand for private equity investors. Companies are changing ownership two even three times before going public, creating huge private equity capital gains events. 

Jason and Alex close this week’s show with reiterating the illiquidity of most alternatives and how important it is to be smart with your decisions do your due diligence if you plan to invest in alternatives. 

In this show you will learn about:

- Alternatives

- Crypto Currency

- Private Equity

Show Description: 

Jason and Alex started off the show by saying that we are not going to execute on any investment strategy or implement a philosophy unless they have a substantial amount of data to back this up. They discussed how too many investors implement an investment strategy that is driven and based off emotions, feelings, and news headlines. In an environment like we are in currently with so much uncertainty in the market, the global economy, and from an everyday life standpoint, it is easy to get wrapped up in the rapidly changing news headlines and get uneasy.

Jason talked about how one of the most repeated questions that he gets from clients is “what should we do now?”. He discussed how the answer to that question never changes no matter what is going on in the world around us. People should make sure that their financial plan is comprehensive in nature with specific goals being on track, and they have a solid, diversified investment strategy in place to accomplish those goals and ride through periods of volatility and uncertainty. Jason explained how the real question people should be asking themselves is if they should hire an adviser or not. They talked about how the market has continued to go up and for a lot of individuals it seems like it is easy to make a ton of money in the stock market, when this IS NOT the case over longer periods of time. They invited listeners to send their questions to [email protected] or call 877-707-8889, and they will send them the Investor Behavior Study. Also, we will conduct an initial complimentary discovery meeting to answer some initial questions, find out about IDA’s comprehensive range of services, and establish if there is a good mutual fit to accomplish their goals and objectives. They also discussed how IDA is looking to grow and has a core mission of helping as many people as possible while not letting the level of service and experience dip for existing clients. 

Jason did a great job comparing a story of his son saying something he should not have to a classmate and not wanting to admit it was inappropriate to a client not wanting to admit they made an emotional investment decision based on emotions or outside influences when they should not have been reactive. One of the hardest things in life is admitting that you don’t know something, or you need help with something. Our team is able to provide individuals with so much financial peace of mind when they are fully able to let go and allow us to guide them down a path to a prosperous investment experience. They explained how it will not always be smooth, but it will ultimately be successful if we stay true to an investment philosophy and a strategic process.

Jason and Alex finished by talking about a client that is still suffering from the trauma of selling at the bottom back in 2008, and how it has taken years of coaching to get him back on track. The ultimate purpose of Financial Detox is to detoxify people from toxic financial guidance or news.

In this show you will learn about:

- Why should you hire an adviser?

- How to achieve a successful investment outcome.

- The importance of behavioral coaching.

- The road to a peaceful investment journey.

In this show you will learn about:

-          GameStop Short Squeeze

-          Options Investing

-          Robinhood vs Discount Brokerages vs Wirehouses

-          The Nasdaq likened to a Porsche

Show Description: 

Today’s show starts off with Jason and Alex sharing stories about trucks and the potential benefits of depreciating company vehicles warming into the topic for discussion. Tax Planning.

Jason begins the discussion by reminding listeners that now is the right time to start tax planning for 2021 tax year, while you are doing your taxes for 2020. Alex adds that tax planning is one of the least enjoyable planning exercising and unfortunately most individuals are just happy to get it over with and not investigate forward planning. Alex suggests that when you are with your tax advisor completing your 2020 returns ask for a list of action items that you could have done in 2020 that would have reduced your taxable exposure. 

Tip #1

Max out your retirement savings. Maxing out your 401(k) contribution allows you to defer taxable income. In 2021 you can defer 100% of your income up to $19,500 or 26,000 if you are 50 years or older.  Individual Retirement Accounts (IRA) are also an investment vehicle not to be overlooked and can be utilized up until tax filing deadline of April 15th. Contribution limits for 2020 and 2021 in these investment vehicles are 6,000 and 7,000 for individuals 50 years old or older. 

Jason and Alex continue to share tax benefit options for different types of professions and businesses. Alex introduces Cash Balance and Defined Benefit Plans to the conversation and asks Jason to share his experience working with key self-employed clients on their complex business and retirement planning. Jason shares the benefits of these tax-deferred retirement vehicles and the large dollar amounts that can be deferred when tax planning is executed properly. Jason also touches on geographically relocating in retirement to reduce tax obligations.  Alex chimes in sharing his experience while working with business owners and that although these retirement vehicles may be a bit intimidating and difficult to comprehend at first, it is worth checking out because it can be a huge game changer. 

Profit Sharing in a 401(k) is another component that is worth evaluating and utilizing if you are a business owner. Jason shares a story about a group of doctors and their experience utilizing the profit-sharing component within their group 401(k). Alex adds that the small business owner is the heartbeat of the country and like most individuals they are also looking for ways to not pay too much of their earnings toward taxes. This is a conversation worth starting up with IDA. The best tax advantaged investment vehicles available are offered to business owners. Jason adds that they are not too complex and well worth the time to understand. So please call Intelligence Driven Advisers to start a conversation.  

The last tax planning investment vehicle discussed is a Health Savings Account (HAS). If you have a high deductible health insurance plan you most likely are eligible to contribute to an HAS account. For 2021, maximum contribution for a family is 7200. Funded with pretax dollars and distributions eligible to be tax free if used for qualified medical expenses. This investment vehicle over a 30-year life span this will generate significant tax savings. 

Jason and Alex close the show with discussing some of the tax strategies that Intelligence Driven Advisers implements with all clients, specifically tax harvesting and the steps involved in properly executing this strategy. 

In this show you will learn about:

- Individual Retirement Investment Vehicles

- Tax advantaged Investment Vehicles for Business Owners

- Benefits of Tax Planning