Dive into the parallels between today's AI hype and the late 90's tech bubble. Discover similarities, differences, and valuable lessons for smart investing. Explore how historical trends can guide us in making smarter investment decisions amidst the current AI craze.

Episode Highlights:

AI's transformative potential, economic disruptions, and cybersecurity risks, balancing its benefits with potential drawbacks.

The true cost of technology, particularly AI and its impact on the job market, including potential job losses.

Energy usage and carbon footprint of AI platforms like ChatGPT, alongside the resource requirements of electric vehicles and AI technology.

The adverse impacts of technology on social behavior, productivity, and the risk of dependency, prompting the necessity for a 'tech detox.'

The speed of market transactions, the shift to decimal stock prices, blockchain technology, and the environmental impact of AI and digital technology.

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TRANSCRIPT

00:00:00 What's the diminishing return, right? AI can do everything in 0.001 seconds, but we need to get it down to 0.0001 seconds. And you're like, what's the differentiator? Right now, if it has to fight another AI for something and it needs that speed, maybe, you know, military, something like that. This is for most of us. It's like, I can wait the one 100th of a second and I don't have to spend twice as much.

 

00:00:32 All right, that's the new music. It tells us we're going again. Welcome to the True Wealth radio show. I'm your host Dave Littlejohn. Matt's in the studio with me today. And we're currently setting up cameras and making sure that they are live because we are chatty and sometimes, we're a little slow on the uptake here, but we've got a very interesting show for you. And again, this is the greatest Tuesday you've had all week. 

 

00:01:01 First, I'm just going to say this out loud. I think we're going to have to try to get different music, right? This is not a news program. This is like a financial entertainment program. Right? So we got to talk about money and we got to talk about it. Make it fun. Right. So we, this, that news thing, it just makes me all stressed out. 

 

00:01:22 Well, it's not my favorite. Yeah. 

 

00:01:25 All right. So Dale, we've officially put our vote in Kyle. We were officially voting. We're going to change the music for our program. You know why? 

 

00:01:33 What's like if your life was a theme song, what would it be? 

 

00:01:36 Oh, probably something goofy. It's not like--

 

00:01:39 I had a tiger or something super cool. 

 

00:01:41 No, no, that's cool. That I'm like, I'm not the cool guy. I'm firmly in dadland now. And so my life is a stream together of dad jokes and finance. Yeah. 

 

00:01:57 In that order?

 

00:01:57 Yeah. Do you need me to, are you going to fight the microphone? 

 

00:02:00 I am. 

 

00:02:01 That's like literally just, you guys are going to have to watch the video of it later because it's going to look ridiculous. Like, what are you, are you arm wrestling the microphone?

 

00:02:10 I'm just going to give up for the segment and say, you know what? We'll fix it at the break. 

 

00:21:16 Yeah. So anyway, we got to thinking today, what would be the most valuable thing that we can talk about? And I will tell you, I feel like I was chasing a curveball today. 

 

00:02:28 Yeah, but. 

 

00:02:29 Well, why? You know, cause yesterday was tax day, right? So tax freedom day, which I haven't checked the actual date. You know, there's a thing by the way, you know, there's a thing called tax freedom days.

 

00:02:37 You have to work in order to like start to break even. And it's like, you work for the first, what, three or four months.

 

00:02:43 It's usually really close. It's somewhere in early February. It's usually the crossover point where great, you're done paying your taxes, the rest of what you earn can be yours, at least at the federal level. So, and then there's different tax freedom day for different states, right? Oregon's historically been on the higher side of things, so, you know, who knows? But anyway, so if you didn't get your IRAs funded. 

 

00:03:07 Well, too bad. 

 

00:03:08 Now you have to do it for this year, right? Yeah, but 2023 is officially in the books. 

 

00:03:12 Does it feel good to have another one like crossed off the list. Is it starting to go too by? Is it going by too fast? Or, I mean, you've been in business for a lot of years now. How many years have you been in this industry? 

 

00:03:23 So, Little John Financial's been around since 2010 now. 

 

00:03:27 Right, but you were in it even before 2010. 

 

00:03:29 I started, I had my licenses formally in 2000. So, I started going. 

 

00:03:34 24 years. 

 

00:03:35 Yeah, I'm in my 24th year, because I would say it's kind of easing into the industry in '99. I mean, I remember watching Y2K and wondering what was gonna happen. And I was in the business when that was happening. So I started in 99% insurance. 

 

00:03:48 Oh, so you started right at the tech bubble. 

 

00:03:52 Yeah. 

 

00:03:54 So that must've been kind of an interesting time to watch. 

 

00:03:57 It was fascinating to watch the NASDAQ just fall and fall and fall. 

 

00:04:03 And then here I start during kind of the COVID pandemic where markets are getting rattled around and...

 

00:04:09 Yeah, COVID was its own weird animal, right? 

 

00:04:12 And you've seen a lot of these, you know, kind of big moves in the market. You were there for the dot com bubble. You were there for oh eight and the housing issue. You were there for COVID. I mean, you've been through a lot of these market cycles. What have you learned? Let's let's go there. Like what has Dave learned over the last 20 something years of being in this industry? 

 

00:04:33 Okay, this is one of the things that I've learned is that the technology may keep changing, but the principles really don't. Like every time somebody says this time it's different, it's hardly ever different. 

 

00:04:43 Right, so right now, I mean, the headline articles are, oh my gosh, look at AI and how this is gonna reshape the entire stock market. Does it feel a little bit kinda like what the dot com bubble was, where everyone's like, forget earnings and forget everything, let's just buy the thing that's the internet? 

 

00:05:00 Well, I think you know my answer, cause you just totally, you know, aked it into the question a little bit. 

 

00:05:04 I did, but that's- 

 

00:05:06 Because what have I been saying? 

 

00:05:07 Well, kind of that, but I want you to expand upon it for the listeners so that they get a feeling of how you're kind of connecting the dots here. 

 

00:05:15 Right. So I remember in '98 and '99 when people started to say that Warren Buffett was washed up. Right? He'd just been underperforming and the Oracle of Omaha was old news and he was missing out because everybody was jumping in tech funds and they were making huge returns You know, you were seeing 40 50 60 percent returns in 99 some cases higher than that it was just money getting printed and The logic at the time was that well the internet had really exploded now The internet wasn't new at that point, but the dot-com phenomenon was really exploding It was personal computers. You were starting to see a lot more web browser search engines

 

00:05:57 Yahoo was really big news. There were companies like Alta Vista and Lycos and Netscape and Prodigy and AOL was big back then. Right. And so you had this this massive push to get people accessing the internet. And you know, to this day, you can go find Gen Xers and play the sound to a modem connecting and on dial up and everybody will kind of giggle about what that meant because we all knew. Right.

 

00:06:26 But there were things like, this is the new economy, right? You don't have to make money in stocks. The company doesn't have to make money as long as it's growing rapidly, right? Investors put money into these things and as long as they were acquiring customers rapidly, that was all it took to be relevant. Just find eyeballs, eyeballs, eyeballs. And then there was a big spend that aligned with that, right? The big spend was the scare around Y2K.

 

00:06:56 The idea that the computers, because before we had memory coming out of our ears, before memory was everywhere in computers, it was sort of a premium. I can remember actual, now I don't remember punch cards, but I remember the five and a quarter actual floppy disks that had very limited storage. And then the three and a half inch sort of hard disk that had very limited storage. And then it was a very big deal when DVDs started to show up on scene and you had as much as 4.7 games. 

 

00:07:31 Knowing your love for technology, I bet you, you bought hundreds of DVDs and you still have them. Am I correct? 

 

00:07:37 I still have some DVDs, yes. 

 

00:07:39 Oh man. I love them. I do. I like having a physical copy of stuff. Like gaming, I still have, you know, the original Xbox, the 360, I have the new one. And I'll tell you, I play the 360 more than I do the new one because I like putting the disc in there and playing the game. I hate having to download the game. Oh, I'm out of storage. Delete that one. Redownload that one. 

 

00:08:05 Right. Well, the storage thing was the gotcha, right? Storage was expensive. And so everybody had to be careful with it back then. And so when they design computers, even the code was about keeping the date had to be short to save on memory. 

 

00:08:24 I think it's interesting that, you know, it's evolved so much since then,...

In this video, we'll explore how different generations view and manage money based on their historical experiences. From The Silent Generation to Gen Z, we'll discuss the unique perspectives each generation brings to money management.

Curious about mutual funds? In this video, we dive deep into the structure of mutual funds to help you understand them better. So many options, but we've got you covered!

Are you struggling to make financial decisions? A financial coach can help you reach your financial goals and reduce financial stress. Find out if a financial coach is right for you in this video!

In this episode, you will learn the following :

Human aspect of financial advising and the importance of personalized coaching.

The transformative impact a financial mentor can have on an individual’s success.

Significance of strategic advisory teams and the concept of having a personal ‘board of directors’ for different aspects of life.

A holistic financial advice that encompasses taxes, legacy and trust planning is important.

Value of tailoring a coach’s approach to the individual needs of clients for optimal growth.

Role of third-party expertise in business and how it can contribute to monumental growth and avoidance of pitfalls.

Building a strong professional network and being selective in choosing experts who can communicate effectively is necessary.

VIEW FULL EPISODES ON YOUTUBE!

Confused about which retirement account is best for you? In this video, we break down the differences between Roth vs Traditional IRA, covering key details and considerations to help you make the best decision for your financial future. Watch now to become an expert on Roth vs Traditional IRA!

In this episode, you will learn the following :

● Distinguishing between traditional and Roth IRAs, their tax implications and the significance of rolling over these accounts.

● The IRA contribution rules, emphasizing that one must have earned income to contribute.

● The importance of maximizing catch-up contributions for those over 50.

● The need to stay current with regulations that adjust for inflation and the changing ages for required minimum distributions (RMDs).

● The significance of keeping track of non-deductible IRA contributions, which can affect your tax situation upon withdrawal.

● The five-year rule for Roth IRAs, explaining that both contributions and conversions to a Roth IRA must satisfy a five-year holding period to avoid penalties.

● The estate planning considerations.

● The unique benefits of Roth IRAs in estate planning.

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TRANSCRIPT

00:00:00 Here's an example that you have to be aware of too, for example, a lot of people, oh,

I've worked for years and I have a 401(k) plan. Years ago, my employer offered the ability to

have a Roth 401(k). And so you took that up and put some money in there.

00:00:15 Perfect.

00:00:15 And then you say, I'm gonna retire and I'm gonna roll over my IRA and I'm going to–

00:00:23 I'm cringing.

00:00:24 Then take control of it and get it out of the company plan. Why are you cringing,

Matt?

00:00:30 Because if you roll it over into the Roth portion, you're starting that five-year clock

that we just talked about. And it's like, hey, I'm retired, and I'm ready to spend some of my

money. And then you're like, mm.

00:00:43 Oops, I just rebooted my five-year clock. I just re-exposed myself to the taxes that I

wasn't exposed to.

00:00:57 I'm so excited to be here. I can't even wait for the guitar riff, Matt.

00:01:01 You know what? Just cut that guitar riff out.

00:01:04 Let's do this thing. Welcome to the True Wealth Radio Show on this, the greatest

Tuesday you've had all week. I'm your host, Dave Littlejohn. Joining me today.

00:01:12 Matt Dickson.

00:01:13 And we did show prep.

00:01:17 You did.

00:01:18 Yeah.

00:01:19 Well, I was kind of there for some of it, right?

00:01:20 You were. Oh, actually, no, we did do show prep, believe me. We've had a lot of

discussion. Today, we are going to talk about something that should be relevant to all of our

listeners. And no, we're not going to go run off into the weeds. We're not going to talk politics

or anything like that, although it's probably unavoidable knowing who we are. But we are

going to talk about IRAs.

00:01:41 Is it because April 15th is kind of around the corner?

00:01:44 April 15th is around the corner. No, it's the way you say it.

00:01:48 I feel like winter.

00:01:49 Irish Republican Army. Who is that? Not that IRA.

00:01:53 Not that IRA. No.

00:01:54 Yeah, I mean, that was sort of the start of it. And then I've had a number of questions

that have just come up recently. We've had a number of clients that have also been talking to

us about things like, should I convert some IRA into Roth and so forth? So we are going to talk

today about exactly that. Right.

00:02:16 And maybe like, differences versus similarities?

00:02:18 Yeah, if you're, we're gonna look at traditional versus Roth IRAs and some of the use

cases for the win of, you know, the different types. Like, why might you want one over another?

Might you want both? What does it mean? And so, and some of this, we're not gonna shy away

from, there aren't necessarily yes or no answers to this.

00:02:40 Right, we're not really giving out specific financial advice to any one person. We're

just kind of talking about, yeah, we're just talking about, what do these instruments do and if

you need more information you can see us after.

00:02:54 Well, how about this? How about here are some red flags that may tell you that it's

time for you to go speak to somebody more knowledgeable. Okay, so that's some things that I

want to cover today, too. Like–

00:03:06 Give me an example of a red flag where it's like, maybe go talk to someone.

00:03:10 So a red flag would be if you have a retirement plan that gets like a traditional IRA or

401(k) that gets pretty large, right? And so let's say that you have a million and a half or more

dollars in a retirement plan.

00:03:31 Right.

00:03:32 This may start to come into play. So a flag would be when you have an account that

big, the question is, are you actually going to be able to, are you gonna drive yourself into a

higher tax bracket in the future?

00:03:46 Because of the required minimum distribution that you're gonna face when it's time

that you're forced to start pulling money out.

00:03:52 Yes, there are also some issues that come into things like asset transfer, which is a

really diplomatic way to say–

00:03:59 What happens when you die?

00:04:00 When you die, right? And how much do you wanna give to the government, right? If

there's one thing that seems to be pretty universal, and the studies have sort of proven this out

is that folks seem to be perfectly okay allowing someone else to pay taxes, but they'd prefer it

not be themselves.

00:04:18 That, and I've never heard someone say, let's structure this to where the government

gets more.

00:04:23 Right. And yeah, I mean, I phrase that carefully, but just keep this in mind, right?

They've shown studies where they say, well, hey, you can voluntarily pay more in tax and

nobody does it.

00:04:36 Right.

00:04:36 Right? And that really does make sense when you consider that there's a lot of

criticism about how a really giant ecosystem, you throw money into it and it's not super

efficient. And even if it is, I mean, like I say it really simple, government spends money on

things that are against my value system.

00:04:57 Sure.

00:04:58 And I'm like, I don't like that. So, okay, I will give unto Caesar what is Caesar's, right?

You guys know the reference, if you know what I know, then you know. But otherwise, you

gotta pay your taxes, follow the law. Okay?

00:05:12 Perfect. But be smart about it.

00:05:15 Let's be smart about it, right? Part of the beauty of the American experiment is the

concept of liberty, the idea that you can have discretionary resources, you spend how you want

to. Which means you get to spend it the way you want, well then let's try to not give it to the

government so you have it to spend.

00:05:30 I like that.

00:05:30 All right, there's talk about, you know, earth shattering concept here, right? So first,

let's get into high level, you know, there are actually lots of different kinds of IRAs, but there's

really two primary ones. And the reason there's a lot is because you can have individual

retirement accounts, IRAs, but then there are IRAs offered through employers. And so it kind of

adds more variance to it with different thresholds of how much money can go into it and what

the terms are.

00:06:03 Right.

00:06:04 But let's just keep it simple and let's talk about on the personal side of the equation.

We're not talking about what you do, if you've got a job somewhere, if you're self-employed,

we're just saying, hey, I–

00:06:13 So we're just talking regular traditional IRA versus raw.

00:06:17 Traditional versus raw.

00:06:18 That's where we're sticking to, okay.

00:06:19 And to get into that, we better, let's start with, because it's been around longer,

traditional IRAs. So first pop quiz, do you know what initially kind of brought IRAs into the

marketplace? Like when did it happen?

00:06:34 Oh, like the year? I don't know. When did they come into play?

00:06:37 1974.

00:06:39 Okay, so it's been around for a long time.

00:06:41 It's been around for a while, but it was really kind of born in the Gen X time frame.

Like it was born with Gen X. Okay, it wasn't born by Gen X.

00:06:49 So what were your options? Like, can we go back even further? Like what are your

options before the traditional IRA shows up in the 70s? I mean, I'm assuming that workplace

for a–

00:06:58 There used to be a lot more pension plans.

00:07:00 Okay.

00:07:00 401k was new too. I haven't looked that up. So, you know, I'm not a–

00:07:05 Like a historian of like dates.

00:07:07 Exactly. I'm not an encyclopedia of dates for retirement stuff.

00:07:10 Can we just put a chip in your brain that has ChatGPT where it's like, okay, David.

00:07:14 I know what could possibly go wrong with that. You take me off on these tangents.

You know, I suppose if you could safely access and control it and then you knew that it wasn't

going to somehow damage you or pollute your own ecosystem. But if you had, like a direct

neural connection to that kind of information.

00:07:32 Can you imagine the power of a human who had access to that?

00:07:35 It would be amazing.

00:07:36 Yeah.

00:07:37 Right? It would be sort of that matrix idea of like, hey, download a program so I can

fly a helicopter.

00:07:42 Would you make more mistakes or fewer mistakes?

00:07:47 I was checking into some research last night about this and a little bit more this

morning. And it's interesting because the higher intelligence somebody has, the more they

tend to–

00:07:59 Like just sit there and try and make decisions based on all the facts.

00:08:02 Well, it's confirmation bias. They tend to suffer from more confirmation bias. So

intelligent people tend to go, oh,...

Have you checked to ensure your beneficiaries are up-to-date? Is your life insurance under the correct spouse? Should you consider gifting assets and cash, or allow heirs to inherit? Are your assets titled in the name of your trust? Do you need a trust, and how does it differ from a will? Is a Roth Conversion the right choice for me? What exactly is a backdoor Roth? Should I convert my home into a rental? Mistakes can be costly, so tune in now for tips, tricks, and everything in between.

In this episode, you will learn the following:

Understanding how life insurance policies are included in the estate value is essential. If not managed correctly, life insurance can lead to taxable events.

Trusts can help manage estate tax exposure but do not eliminate tax obligations. It’s essential to fund a trust by retitling assets.

Common mistakes in financial planning can lead to significant tax bills and legal complications. There’s a need for accurate financial knowledge and the value of seeking professional advice to avoid errors.

Strategic planning is necessary to manage estate taxes and preserve wealth within families.

Demystification of the backdoor Roth IRA strategy which allows high earners to maximize their retirement savings despite income limits on traditional Roth IRAs.

The critical role of precise knowledge and the benefits of having a professional financial advisor.

Discover the various methods and approaches to market analysis in this insightful video. Learn all about factor investing and how it can enhance your investment strategy. Dive deep into the world of investment evaluation and broaden your financial knowledge today!

In this episode, you will learn the following :

The basics of factor-based investing and how it differs from asset class categorization.

The relationship between risk and expected rates of return using personal credit as an analogy.

The three-factor model which includes market capitalization, value versus growth investments and the book to market ratio.

How different investment factors such as beta, value and quality impact the volatility and potential returns of a stock.

The concept of the cost of capital, interest rates and their effects on consumers, businesses, and government spending. 

A comparison of how different sectors like technology and consumer staples deal with economic fluctuations.

The importance of having a strategy to weather financial storms.

There seem to be two kinds of people in the world - spenders and savers. Spenders usually need to learn how to save. But when is the right time for savers to spend? If you're never going to spend the money, what kind of impact could you have? David and Justin tackle this question and more in this episode of True Wealth.

In this episode, you will learn the following :

The psychological barriers that prevent individuals from enjoying their finances.

Financial industry's emphasis on wealth accumulation over strategic spending.

The balance between enhancing one's lifestyle in retirement and planned giving to personal interests and charities.

Strategies for managing retirement income, including safe withdrawal rates and the role of insurance.

Financial implications of homeownership and the critical choice between self-insurance and the security of an annuity.

Risk management in the golden years and considers the impact of deep-seated beliefs on financial behaviors.

In this era of escalating labor expenses, inflation, and real estate prices, how do you maintain healthy margins while expanding your business? As the True Wealth team welcomes a special guest to the show, tune in to hear from a prosperous local business owner.

As technology advances, what potential advantages and disadvantages might artificial intelligence have for the world? We must be alert and learn how to use this tool for good as the world evolves.