WEBVTT 1 00:00:00.040 --> 00:00:03.080 Often for what's developing. This is just developing out of 2 00:00:03.080 --> 00:00:05.960 the Middle East now right now, it's developing. 3 00:00:06.120 --> 00:00:13.720 Fifty five KRC the talk station AATO six fifty five 4 00:00:13.759 --> 00:00:18.120 k r c D talk station. Happy Monday always made happier, 5 00:00:18.120 --> 00:00:20.280 at least from my perspective. Money Money with Brian James 6 00:00:20.320 --> 00:00:22.480 from Allwar with Financial Joints. The program. We talk about 7 00:00:22.559 --> 00:00:25.839 well investments and strategies and thinking about retirement and talking 8 00:00:25.839 --> 00:00:28.760 to financial planners about that and thinking about how much 9 00:00:28.760 --> 00:00:30.640 money you do here? Is that what we do, That's 10 00:00:30.640 --> 00:00:33.079 what we're supposed to do. Get people incentivized to sit 11 00:00:33.159 --> 00:00:35.759 down and give some thoughtful planning for their future. 12 00:00:36.960 --> 00:00:38.240 That's a good idea. Let's talk about that. 13 00:00:38.320 --> 00:00:43.679 I like that, Amen, get yourself a fee based financial 14 00:00:43.719 --> 00:00:47.000 planner because that means they have a fiduciary obligation to 15 00:00:47.119 --> 00:00:51.240 work for you and maximize the return on your investments. 16 00:00:51.719 --> 00:00:53.960 With that speaking, you're going to have to start from 17 00:00:54.000 --> 00:00:56.799 the very beginning in little tiny points that a fourth 18 00:00:56.799 --> 00:00:59.759 grader can understand. Because all I have is a headline 19 00:00:59.759 --> 00:01:04.120 from Bloomberg subscription only service. Bloomberg Blackrock puts private equity 20 00:01:04.159 --> 00:01:07.319 and credit into four oh one K funds. What does 21 00:01:07.359 --> 00:01:10.480 this mean for your average investor? Does it impact us? 22 00:01:10.760 --> 00:01:12.319 What is this all about? Brian James? 23 00:01:12.439 --> 00:01:14.640 Yeah, so I sort of anticipated that the questions might 24 00:01:14.680 --> 00:01:16.680 come up that way, and so that's the research that 25 00:01:16.680 --> 00:01:19.519 I did this morning in wonderful addition to that. So, yeah, 26 00:01:19.599 --> 00:01:21.200 when we normally think of our four to oh one 27 00:01:21.239 --> 00:01:24.079 K as our investments and things, we are thinking of stocks, bonds, 28 00:01:24.159 --> 00:01:26.359 mutual funds, those kinds of things. Those are what are 29 00:01:26.359 --> 00:01:29.560 referred to as publicly traded, meaning pretty much anybody can 30 00:01:29.640 --> 00:01:33.319 buy and sell all the time. You can log in online. 31 00:01:33.319 --> 00:01:34.519 Back in the day we looked it up in the 32 00:01:34.560 --> 00:01:37.959 newspaper whatever. But the closing prices and the daily the minute, 33 00:01:38.000 --> 00:01:41.519 the minute changes, all that stuff is publicly available, ready. 34 00:01:41.280 --> 00:01:42.200 At your fingertips. 35 00:01:42.879 --> 00:01:46.319 And so now the change is Blackrock is going to 36 00:01:46.359 --> 00:01:50.319 be integrating private equity and private credit investments into four 37 00:01:50.359 --> 00:01:53.040 oh one K target date funds by mid twenty twenty six. 38 00:01:53.280 --> 00:01:56.400 So obviously the differing word there is private versus public. 39 00:01:56.400 --> 00:01:58.840 So what does that actually mean. A private equity or 40 00:01:58.879 --> 00:02:02.760 private credit is literally that it's a private arrangement set 41 00:02:02.840 --> 00:02:05.280 up by you know, a small group of people to 42 00:02:05.599 --> 00:02:08.360 either support a business. Right, you might see you might 43 00:02:08.400 --> 00:02:11.960 see some business that's developing out there, a new restaurant 44 00:02:12.199 --> 00:02:14.879 or just something that you know, a small industrial company 45 00:02:14.919 --> 00:02:16.520 or something like that. A lot of times those are 46 00:02:16.560 --> 00:02:20.919 owned by private equity organizations. The difference is there's there's 47 00:02:20.919 --> 00:02:22.719 a little there's a little more risk involved. There can 48 00:02:22.800 --> 00:02:25.120 be there's a reason that they need they want to 49 00:02:25.159 --> 00:02:28.120 keep it private. Oftentimes they're not big enough or they're 50 00:02:28.120 --> 00:02:32.080 just not stable ready to deal with larger financial institutions 51 00:02:32.080 --> 00:02:34.439 and it's just not an option. But they can be 52 00:02:34.439 --> 00:02:38.360 really lucrative too, given the fact that these are small companies, 53 00:02:38.439 --> 00:02:40.599 and they can shoot for the moon and go ten 54 00:02:40.800 --> 00:02:43.319 x or they can go negative ten x. That's just 55 00:02:43.439 --> 00:02:46.800 kind of the difference in the in the risk there 56 00:02:48.240 --> 00:02:51.599 that we need to be mindful of in terms of 57 00:02:51.719 --> 00:02:52.800 private versus public. 58 00:02:53.000 --> 00:02:56.319 Okay, so in a real world context, there was an 59 00:02:56.360 --> 00:02:58.280 article in the Wall Street Journal about this company that 60 00:02:58.400 --> 00:03:04.719 is manufacturing from wood waste, this new ultra light wood 61 00:03:04.840 --> 00:03:08.520 which is as strong as steel, and it's got all 62 00:03:08.680 --> 00:03:12.120 these different potential applications. One, it's wood waste, so that's 63 00:03:12.159 --> 00:03:16.080 readily available and unlimited supply basically, but that it's lighter, 64 00:03:16.199 --> 00:03:18.400 it's you can use thinner amounts. You could put it 65 00:03:18.520 --> 00:03:21.560 like carbon fiber, pretty much turn it into anything. And 66 00:03:21.599 --> 00:03:24.520 it's sounded like this is just guaranteed to make millions 67 00:03:24.560 --> 00:03:27.159 and millions of dollars and it's a private company right now. 68 00:03:27.240 --> 00:03:29.919 So to the extent I could get a slice of that, 69 00:03:29.919 --> 00:03:32.400 that would be private equity. 70 00:03:32.879 --> 00:03:36.240 Correct, Yeah, because you're simply you know, if you know 71 00:03:36.360 --> 00:03:38.879 the organizers of this, you're somehow connected to the group 72 00:03:38.960 --> 00:03:40.520 that's putting it together, and then yeah, that's how you 73 00:03:40.520 --> 00:03:42.960 get invited into the fold to be a part of this. 74 00:03:43.039 --> 00:03:45.800 So what Blackrock is doing, and several others as well, 75 00:03:45.800 --> 00:03:48.479 it's just black Rocks in the headline. What they're doing 76 00:03:48.560 --> 00:03:51.240 is making it available, making it possible for people to 77 00:03:51.759 --> 00:03:56.000 participate in these markets, just by putting it inside mutual funds. 78 00:03:56.039 --> 00:04:01.039 So the catchphrase is they're democratizing private equity. So hopefully 79 00:04:01.080 --> 00:04:02.840 there's not a ton of detail yet about how they're 80 00:04:02.840 --> 00:04:05.199 going to do this, but hopefully there's somebody out there 81 00:04:05.280 --> 00:04:07.479 vetting these opportunities the one you just described, Yeah, that 82 00:04:07.520 --> 00:04:10.439 sounds great. The risks there is what if some big 83 00:04:10.479 --> 00:04:12.479 company decides, you know what, that's a great idea, and 84 00:04:12.520 --> 00:04:13.840 with our scale, we can do it a heck of 85 00:04:13.840 --> 00:04:16.519 a lot cheaper. Well, and there's there are ample stories 86 00:04:16.519 --> 00:04:18.160 out there of some little company came up with a 87 00:04:18.160 --> 00:04:20.600 great idea and got blown out of the water by 88 00:04:20.680 --> 00:04:24.160 a big company. Look we're bought out, Yes, exactly which 89 00:04:24.199 --> 00:04:25.600 and and honestly, that can be. 90 00:04:25.720 --> 00:04:28.000 That's a great point. That's a good thing. That can be. 91 00:04:28.120 --> 00:04:30.519 That's a good thing, and it can be the ultimate goal. 92 00:04:30.800 --> 00:04:32.759 I want to build something that some other company goes, 93 00:04:32.800 --> 00:04:34.199 you know what, we could build from scratch, or we 94 00:04:34.199 --> 00:04:35.160 could just buy these things. 95 00:04:35.199 --> 00:04:37.519 That can be the exit strategy. But it can go 96 00:04:37.560 --> 00:04:38.959 the other direction too, all right. 97 00:04:39.000 --> 00:04:42.079 So in my hypothetical scenario, I've actually got access to 98 00:04:42.160 --> 00:04:44.639 invest in this they let's say they do sell out. 99 00:04:44.680 --> 00:04:46.720 They sell it for a billion dollars or something, and 100 00:04:46.759 --> 00:04:50.600 that allocation that purchase price is divided amongst the various 101 00:04:50.600 --> 00:04:53.680 initial investors. I presume that's how the scenario would play out. 102 00:04:54.079 --> 00:04:56.439 So whatever pile of cash I got from that would 103 00:04:56.519 --> 00:04:59.439 go into my four oh one K. Would that be 104 00:04:59.519 --> 00:05:02.399 considered pre tax like four to one k contributions are 105 00:05:02.480 --> 00:05:04.839 now under a non roth product or how would that 106 00:05:04.879 --> 00:05:06.399 be treated? And does this happen? 107 00:05:06.480 --> 00:05:06.680 Yeah? 108 00:05:07.120 --> 00:05:09.319 Right, now you're getting to the fund stuff, right, this 109 00:05:09.360 --> 00:05:11.279 is what makes everything complication. 110 00:05:11.439 --> 00:05:12.240 Yeah. 111 00:05:12.360 --> 00:05:14.279 So not not only that, but but the other thing 112 00:05:14.319 --> 00:05:16.920 you didn't mention in there is this is happening inside 113 00:05:16.959 --> 00:05:19.360 of a mutual fund, inside your four oh one K. 114 00:05:19.759 --> 00:05:21.920 So all that's really happening now is they're kind of 115 00:05:21.920 --> 00:05:24.639 throwing the doors open. But how is this actually going 116 00:05:24.680 --> 00:05:26.240 to work with regard to reporting. So one of the 117 00:05:26.240 --> 00:05:28.279 big things that we didn't touch on yet was if 118 00:05:28.319 --> 00:05:32.079 I'm a small company and I'm a private equity funded organization, 119 00:05:32.680 --> 00:05:36.160 then that means I don't have daily pricing, So how 120 00:05:36.160 --> 00:05:38.279 do I know what this thing is worth? So Blackrock 121 00:05:38.319 --> 00:05:41.120 says they're gonna they're gonna put maybe maybe twenty percent, 122 00:05:41.279 --> 00:05:43.519 and then more aggressive funds twenty percent could go into 123 00:05:43.519 --> 00:05:45.879 private markets. So that's twenty percent of your fund where 124 00:05:45.920 --> 00:05:48.920 there isn't a daily valuation. Yeah, So it's not going 125 00:05:49.000 --> 00:05:51.279 to be a conglomeration of a little businesses up and 126 00:05:51.279 --> 00:05:52.800 down the street that you drive by on the way 127 00:05:52.839 --> 00:05:54.319 back and forth to work. These You're gonna have to 128 00:05:54.319 --> 00:05:59.040 be places that have some ability to price their value regularly. Otherwise, 129 00:05:59.079 --> 00:06:01.279 how do you have any idea what you're mutual foot 130 00:06:01.319 --> 00:06:02.240 inside your four oh one. 131 00:06:02.160 --> 00:06:02.680 K is worth. 132 00:06:02.920 --> 00:06:06.160 Now to mention required minimum distributions, that's a whole other animal. 133 00:06:06.240 --> 00:06:09.839 Well, and I have to assume or presume that these 134 00:06:09.879 --> 00:06:13.399 would be limited to some entities that actually do put 135 00:06:13.399 --> 00:06:15.839 these financial projections together, so you would know the value. 136 00:06:16.399 --> 00:06:19.240 Otherwise you, as a financial planner, would have to go 137 00:06:19.279 --> 00:06:21.680 out into the world and acquire that information in order 138 00:06:21.680 --> 00:06:23.399 to provide guidance to your client or whether or not 139 00:06:23.439 --> 00:06:24.279 they're making money. 140 00:06:25.000 --> 00:06:28.439 Right, that's the exact point. So hopefully there's a go between. 141 00:06:28.480 --> 00:06:31.040 But as we know, in four oh one k situations, 142 00:06:31.040 --> 00:06:32.680 which again that's the whole point of this article, that's 143 00:06:32.680 --> 00:06:35.399 where they're talking about putting these things, there's very rarely 144 00:06:35.439 --> 00:06:37.519 an advisor in the middle. A matter of fact, the 145 00:06:37.600 --> 00:06:39.920 company itself. A lot of people don't know this. The 146 00:06:40.000 --> 00:06:42.279 employer itself is a fiduciary. 147 00:06:42.399 --> 00:06:42.519 Right. 148 00:06:42.560 --> 00:06:44.680 You could be a company that makes widgets, you make 149 00:06:44.720 --> 00:06:47.600 do hickeys, and you sell them to other do hickey 150 00:06:47.639 --> 00:06:50.040 making companies. You have nothing to do with financial advice. 151 00:06:50.240 --> 00:06:52.279 But if you offer your employees of four oh one k, 152 00:06:52.639 --> 00:06:55.680 you are indeed a fiduciary, just like me here at 153 00:06:55.680 --> 00:06:57.360 all worth, where I sit here and do financial plans 154 00:06:57.360 --> 00:06:59.319 all day, every day. So you have a duty to 155 00:06:59.360 --> 00:07:02.360 make sure you're your employees have what they need and 156 00:07:02.399 --> 00:07:05.199 have some level of advice. But there is very rarely 157 00:07:05.240 --> 00:07:07.360 an individual person that's going to sit in between the 158 00:07:08.160 --> 00:07:11.000 employee participant and that four one okay to say you 159 00:07:11.000 --> 00:07:12.519 should do this, you should not do that. 160 00:07:12.560 --> 00:07:13.879 Right, all right? 161 00:07:13.920 --> 00:07:15.480 Well, if the risk of going over a little bit 162 00:07:15.480 --> 00:07:17.680 in this segment. The other article, and I'm not sure 163 00:07:17.680 --> 00:07:20.759 if it's a corollary to this Blackrock and private equity, 164 00:07:21.560 --> 00:07:23.480 but headline from Bloomberg again, and I don't have any 165 00:07:23.519 --> 00:07:26.519 details on it, Congress will open private markets to everyone 166 00:07:26.680 --> 00:07:28.759 next year. What's this one all about, Brian James? 167 00:07:29.040 --> 00:07:30.360 Well, it is very similar. 168 00:07:30.399 --> 00:07:33.399 So the whole point of this, so where we started 169 00:07:33.480 --> 00:07:35.519 was just blackrocks a little corner of the world there, right. 170 00:07:35.639 --> 00:07:37.600 The reason where this is coming from is by the 171 00:07:37.720 --> 00:07:40.199 end of twenty six Congress is expected to relax the 172 00:07:40.279 --> 00:07:42.519 rules for private market access, which is the exact same 173 00:07:42.560 --> 00:07:44.959 thing we're talking about. What this means is that non 174 00:07:45.079 --> 00:07:48.160 accredited investors could be allowed to invest in private equity. 175 00:07:48.160 --> 00:07:49.680 So that's a big fuzzy word. Let's talk about what 176 00:07:49.720 --> 00:07:53.079 that actually means. An accredited investor is somebody who, if 177 00:07:53.079 --> 00:07:56.639 you're an individual, you have earned two hundred thousand dollars. 178 00:07:56.319 --> 00:07:57.600 For each of the past two years. 179 00:07:58.000 --> 00:08:01.120 Where if there's a spouse or spousal equivalent is whether 180 00:08:01.319 --> 00:08:04.199 the words work in the mix that it's three hundred 181 00:08:04.240 --> 00:08:06.879 thousand or you're worth over a million dollars. That's the 182 00:08:06.879 --> 00:08:10.199 definition of an accredited investor. It doesn't say that you 183 00:08:10.240 --> 00:08:12.319 know anything about money. You know anyth about investments, is 184 00:08:12.360 --> 00:08:14.519 just how much income and what's your networth? So those 185 00:08:14.560 --> 00:08:17.199 are the rules where they're starting to say that private 186 00:08:17.199 --> 00:08:19.959 equity may no longer require that to happen. And again, 187 00:08:20.000 --> 00:08:22.839 this is all being spun in a manner of democratizing 188 00:08:22.879 --> 00:08:23.720 investment opportunities. 189 00:08:23.759 --> 00:08:25.759 Okay, and I find no problem with that. 190 00:08:25.839 --> 00:08:27.360 I mean, if I have money and I want to 191 00:08:27.399 --> 00:08:29.199 invest it in private market, I should be allowed to 192 00:08:29.199 --> 00:08:31.680 do it regardless of what my annual salary is sort 193 00:08:31.680 --> 00:08:34.600 of demands asking the question why is the current rule 194 00:08:34.639 --> 00:08:36.799 in place? Why is it limited to people with worth 195 00:08:36.840 --> 00:08:39.200 of a million dollars or making salary of two hundred 196 00:08:39.279 --> 00:08:41.159 or three fifty depending upon marital status. 197 00:08:41.840 --> 00:08:45.320 Those rules have been in place for decades upon decades. 198 00:08:45.399 --> 00:08:46.799 I'm going to go ahead, I'm going to take a 199 00:08:46.799 --> 00:08:48.879 stab here. Somebody might know the history better than me, 200 00:08:49.000 --> 00:08:50.759 but I'm going to go ahead and say that a 201 00:08:50.799 --> 00:08:52.759 lot of this was wald off years ago because it 202 00:08:52.840 --> 00:08:55.000 was just a kept for the people who could truly 203 00:08:55.399 --> 00:08:58.320 you get into it, of course, And I will also 204 00:08:58.320 --> 00:09:00.799 say technology plays a rule a role here. So in 205 00:09:00.799 --> 00:09:03.759 other words, thirty forty years ago, if I am a 206 00:09:03.799 --> 00:09:06.399 you know, a company that wants to woo private equity 207 00:09:06.440 --> 00:09:08.440 and bring dollars in, I don't want to have to 208 00:09:08.480 --> 00:09:12.000 spread it across hundreds of thousands or millions of people 209 00:09:12.039 --> 00:09:14.039 with a couple thousand dollars inside of a mutual fund, 210 00:09:14.080 --> 00:09:15.600 because I have to track and deal with all that 211 00:09:15.679 --> 00:09:17.799 and report to them all and follow all those rules. Well, 212 00:09:17.840 --> 00:09:20.240 technology has made a lot of that a lot, a lot, 213 00:09:20.240 --> 00:09:23.240 a lot easier. It's not unsimilar to where exchange traded 214 00:09:23.240 --> 00:09:26.039 funds came evolved out of mutual funds. So I think 215 00:09:26.039 --> 00:09:29.200 that the technology the ability to track the different shareholders 216 00:09:29.240 --> 00:09:32.240 and report to everybody, since this is again not publicly 217 00:09:32.279 --> 00:09:34.200 traded stuff. This is stuff where you just have to 218 00:09:34.200 --> 00:09:35.639 wait for an accounting for them to say here's what 219 00:09:35.639 --> 00:09:38.159 it's worth. And sometimes that's only once a year. The 220 00:09:38.879 --> 00:09:40.919 need is to get that information out to each every 221 00:09:41.000 --> 00:09:43.759 tiny little shareholder. So I think those hurdles have been cleared, 222 00:09:43.759 --> 00:09:44.919 and now it gets a little easier. 223 00:09:45.399 --> 00:09:48.720 Okay, I guess it's a complicated thing investing in private market, 224 00:09:48.799 --> 00:09:51.559 some for the reasons you've obviously stated. But then again, 225 00:09:52.279 --> 00:09:55.000 let's say the company has improved and it's you know, 226 00:09:55.039 --> 00:09:58.279 it's worth more in your slice however it's expressed. I 227 00:09:58.279 --> 00:10:02.080 guess is are are they considered shares in this type 228 00:10:02.080 --> 00:10:03.840 of arrangement or is it depend on the arrangement. 229 00:10:04.480 --> 00:10:06.399 Well, it very much depends on the arrangement. Right. 230 00:10:06.399 --> 00:10:08.080 So when we were talking about black Rock a little 231 00:10:08.120 --> 00:10:10.679 bit ago, that whole point was you inside their target 232 00:10:10.759 --> 00:10:13.159 date funds. Those target date funds, those are the set 233 00:10:13.200 --> 00:10:15.039 it and forget it options inside your four oh one 234 00:10:15.080 --> 00:10:17.200 K and that was specifically that announcement. That's where it's 235 00:10:17.200 --> 00:10:18.960 going to be available. So in that case, you would 236 00:10:19.000 --> 00:10:21.399 simply own shares of a mutual fund that in turn 237 00:10:21.519 --> 00:10:26.240 owns shares of some private equity firms. The more broader 238 00:10:26.360 --> 00:10:28.639 range here, Yes, you still own shares. You'll still own 239 00:10:28.679 --> 00:10:32.559 a certain number of shares of a private equity type arrangement. 240 00:10:32.600 --> 00:10:35.240 You might be a limited partner and you are subject 241 00:10:35.279 --> 00:10:37.399 to whatever the general partner, who's kind of the boss 242 00:10:37.440 --> 00:10:40.159 of the whole thing, does, But there are still shares 243 00:10:40.159 --> 00:10:42.600 that are divided out by however much you put into 244 00:10:42.639 --> 00:10:43.120 the arrangement. 245 00:10:43.159 --> 00:10:45.120 So and that's how you end up getting the money out. 246 00:10:45.200 --> 00:10:47.559 Let's say, okay, I want to sell I need that money, 247 00:10:47.720 --> 00:10:50.159 or I'm retiring, I want that money. Those have to 248 00:10:50.159 --> 00:10:52.440 be sold, but they are sold on a private market, 249 00:10:52.519 --> 00:10:54.679 as opposed to being posted on the or just being 250 00:10:54.799 --> 00:10:56.440 easily dumped on a stock exchange. 251 00:10:56.559 --> 00:10:59.240 That's correct, and a private market basically means again it's 252 00:10:59.240 --> 00:11:01.559 not out there, it's posted for sale to the entire 253 00:11:01.559 --> 00:11:04.159 world like the overall stock market is. It basically means 254 00:11:04.240 --> 00:11:06.279 that all the other partners are informed that one of 255 00:11:06.279 --> 00:11:09.679 the partners wants to sell out and they can either 256 00:11:09.720 --> 00:11:11.679 buy it that they can pick up those shares and 257 00:11:11.840 --> 00:11:13.639 get you out at that time, or you might be 258 00:11:13.679 --> 00:11:15.039 stuck with them. A lot of times there's a lock 259 00:11:15.120 --> 00:11:16.480 up here where you can only get out once a 260 00:11:16.600 --> 00:11:19.080 year's and sometimes they actually have the opposite where they 261 00:11:19.120 --> 00:11:20.879 can come back and do a capital call where they 262 00:11:20.960 --> 00:11:22.440 require you to put more money. 263 00:11:22.279 --> 00:11:25.120 In okay, And that's actually where I thought the rule 264 00:11:25.159 --> 00:11:28.679 came from. Having a certain amount of financial ability. The 265 00:11:28.720 --> 00:11:32.960 million dollar a worth because that could happen, and if 266 00:11:32.960 --> 00:11:35.639 people invest and they don't have the resources to pay 267 00:11:35.679 --> 00:11:38.200 that kind of price, they're going to find themselves in 268 00:11:38.279 --> 00:11:40.919 a financial world of hurt, like a protectionism type measure 269 00:11:41.360 --> 00:11:41.879 to save. 270 00:11:42.240 --> 00:11:44.320 It, and you could wind up if you don't have 271 00:11:44.360 --> 00:11:46.759 the ability to put more in. The fund itself might 272 00:11:46.799 --> 00:11:48.559 be okay with that, but that means your shares are 273 00:11:48.559 --> 00:11:50.759 going to be deluded. If everybody has doubled their investment 274 00:11:50.799 --> 00:11:52.639 after that capital call, now you have half as much 275 00:11:52.639 --> 00:11:54.759 as you did, proportionally fair enough. 276 00:11:54.799 --> 00:11:56.559 I think you. Thank you very much for walking me 277 00:11:56.639 --> 00:11:58.919 through that no idea about what we started, and I 278 00:11:58.919 --> 00:12:01.200 feel a lot more smarter. I spill smarter now. Brian 279 00:12:01.279 --> 00:12:03.679 James will continue to find out some new crypto rules 280 00:12:04.000 --> 00:12:07.399 that're unveiled by some Republican senators. That's going to be next. 281 00:12:07.399 --> 00:12:09.799 It's eight eighteen fifty five k stee talk station and 282 00:12:09.879 --> 00:12:12.600 plum type plumbing. You deserve better, They know you deserve better, 283 00:12:12.639 --> 00:12:15.679 and plumb tight delivers on better. Treat every call like 284 00:12:15.720 --> 00:12:18.159 a neighbor asking for help. That's why there might go 285 00:12:18.200 --> 00:12:21.120 to plumbers. 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They offer that a plump tite don't 296 00:12:49.559 --> 00:12:51.120 have to dig up your lawn to fix that sewer 297 00:12:51.159 --> 00:12:53.879 line for all plumbing projects. Call Plumb Type Plumbing five 298 00:12:53.879 --> 00:12:57.440 one three seven two seven tight te five on three seven, 299 00:12:57.759 --> 00:13:01.039 seven eighty four eighty three online It's plumb Tight dot. 300 00:13:00.799 --> 00:13:02.559 Com fifty five KRC. 301 00:13:03.559 --> 00:13:06.120 Iheartly thinking about parcit talk station Brian Tummas with all 302 00:13:06.080 --> 00:13:10.279 Worth Financials, Brian James H. I've always view crypto is 303 00:13:10.320 --> 00:13:12.559 like the peace of God. It passes my human understanding 304 00:13:12.639 --> 00:13:17.399 and so I don't understand it. But what is this legislation, 305 00:13:17.600 --> 00:13:19.919 this bill which apparently is going to define when crypto 306 00:13:20.000 --> 00:13:22.399 is a commodity or a security? I guess it could 307 00:13:22.440 --> 00:13:24.759 be either. What does this mean generally speaking? 308 00:13:24.759 --> 00:13:25.039 Brian? 309 00:13:25.519 --> 00:13:27.480 Yeah, So, so the first and most important thing that 310 00:13:27.559 --> 00:13:29.240 means is that we are finally going to have some 311 00:13:29.320 --> 00:13:31.360 kind of definition as to what this stuff really is 312 00:13:31.440 --> 00:13:33.200 and really what this is. It's kind of a fight 313 00:13:33.279 --> 00:13:36.519 between what regulatory body is going to sit on top 314 00:13:36.559 --> 00:13:38.480 of it and govern it. So the interesting thing though, 315 00:13:38.519 --> 00:13:41.799 is it it's coming in a bipartisan manner, so there 316 00:13:41.799 --> 00:13:43.399 are there are people on both sides who are actually 317 00:13:43.399 --> 00:13:46.240 starting to agree on something for once. So the big 318 00:13:46.240 --> 00:13:50.559 debate is is a is crypto a security? Which basically 319 00:13:50.639 --> 00:13:54.639 means that it's a for profit venture that you that 320 00:13:54.720 --> 00:13:57.799 you enjoined with a few groups onto and again in 321 00:13:57.840 --> 00:14:01.480 the hopes of profit and from the efforts of others. 322 00:14:01.519 --> 00:14:03.720 That's the definite definition of a security, right. That's the 323 00:14:03.720 --> 00:14:05.519 difference between if I own a business and I run 324 00:14:05.559 --> 00:14:06.639 it for a profit, that's different. 325 00:14:06.679 --> 00:14:07.519 That's not a security. 326 00:14:07.519 --> 00:14:09.279 But if I buy a stock that is a business 327 00:14:09.399 --> 00:14:11.120 and I'm waiting for other people to make money for me, 328 00:14:11.200 --> 00:14:12.279 that becomes a security. 329 00:14:12.320 --> 00:14:12.600 Okay. 330 00:14:12.799 --> 00:14:15.200 Uh, And so that's the big debate. If if it's 331 00:14:15.200 --> 00:14:18.080 a security, then the SEC controls it. The opposite would 332 00:14:18.120 --> 00:14:20.759 be is it a commodity, which means a group called 333 00:14:20.799 --> 00:14:24.399 the CFTC would control it. Democrats prefer the SEC because 334 00:14:24.399 --> 00:14:26.919 there's more oversight, a little more a little more strict. 335 00:14:27.120 --> 00:14:30.159 The CFTC is preferred by Republicans because they think there'll 336 00:14:30.159 --> 00:14:32.360 be a wider playing field, a little more flexibility. 337 00:14:32.720 --> 00:14:37.799 Hmm, Well, what what is the dollar? The dollar? Dollar 338 00:14:37.840 --> 00:14:38.840 is just pure currency. 339 00:14:38.840 --> 00:14:40.840 A dollar is the definition, and we are currently the 340 00:14:40.879 --> 00:14:42.240 currency of the entire world. 341 00:14:42.320 --> 00:14:45.039 But I mean there's there's investment opportunities. People invest in 342 00:14:45.080 --> 00:14:46.399 currencies all the time, don't they. 343 00:14:47.159 --> 00:14:50.840 Correct, It's a little different from the standpoint of the 344 00:14:50.960 --> 00:14:54.519 dollar is used as a medium of exchange. Crypto generally 345 00:14:54.639 --> 00:14:56.080 is true. This is why there's a big debate. It 346 00:14:56.639 --> 00:14:59.240 acts like a commodity. It's where a commodity is just 347 00:14:59.240 --> 00:15:01.399 something where it's worth what everybody says it's worth. 348 00:15:02.639 --> 00:15:04.440 Correct. Yeah, Oil pulled out. 349 00:15:04.279 --> 00:15:05.799 Of the ground in one part of the world is 350 00:15:05.840 --> 00:15:07.559 not much different from oil pulled out of the ground 351 00:15:07.600 --> 00:15:10.360 another part of the world. Same with wheat and any 352 00:15:10.360 --> 00:15:12.240 other type of copper, those kinds of things. That's why 353 00:15:12.240 --> 00:15:15.320 they're all commodity commodity based, and they will go with 354 00:15:15.440 --> 00:15:18.159 whatever the market thinks that those particular things are worth 355 00:15:18.159 --> 00:15:21.919 at any given time, versus a security where somebody will say, Hey, 356 00:15:21.919 --> 00:15:23.679 we're going to invent this new product, we're going to 357 00:15:23.720 --> 00:15:25.840 find this new market, here's how we're going to make money, 358 00:15:25.840 --> 00:15:26.399 and so forth. 359 00:15:26.440 --> 00:15:28.080 That's the big difference between the two. 360 00:15:28.879 --> 00:15:32.000 Well, it's kind of like the wild wild West out there. 361 00:15:32.039 --> 00:15:34.360 I get the impression of with regard to crypto, there's 362 00:15:34.399 --> 00:15:37.159 some kind of new cryptocurrency coming out every five minutes, 363 00:15:37.200 --> 00:15:40.480 and I don't know what the regulation is going to 364 00:15:40.519 --> 00:15:42.919 do to change that reality, other than to provide some 365 00:15:42.919 --> 00:15:45.879 sort of oversight monitoring of it so they can collect 366 00:15:45.919 --> 00:15:48.200 tax dollars so they can prevent money laundering. I mean, 367 00:15:48.759 --> 00:15:50.799 I guess I have more questions now than I had 368 00:15:50.799 --> 00:15:51.759 before we started. 369 00:15:52.000 --> 00:15:54.759 Yeah, I think all of the things really, so there 370 00:15:54.759 --> 00:15:57.039 are no answers right now currently, which is literally why 371 00:15:57.039 --> 00:15:59.399 they're calling this the Crypto Rules of the Road Bill, 372 00:15:59.639 --> 00:16:02.919 because they're just starting to define this thing. So generally speaking, 373 00:16:02.960 --> 00:16:05.960 when Republicans look at this and you have Cynthia Loomis 374 00:16:05.960 --> 00:16:08.840 and Tim Scott. They're looking for clear guidelines that limit 375 00:16:09.000 --> 00:16:11.480 SEC authority the things that they're after. They want to 376 00:16:11.480 --> 00:16:15.159 support the exchanges like Cornbased Kraken Gemini, who have long 377 00:16:15.200 --> 00:16:18.559 pushed for clarity between the SEC and the CFTC, crypto 378 00:16:18.600 --> 00:16:22.519 ad advocacy groups like the Blockchain Association, and they're they're 379 00:16:22.559 --> 00:16:25.600 all supporting the idea that there should be government but 380 00:16:25.720 --> 00:16:29.360 not too much. But on the other hand, those who disagree. 381 00:16:29.639 --> 00:16:33.000 SEC chair Gary Gensler go figure he strongly opposes any 382 00:16:33.039 --> 00:16:35.639 framework that's going to weaken his authority to govern these things. 383 00:16:35.919 --> 00:16:38.480 And he's saying that most digital assets are securities and 384 00:16:38.480 --> 00:16:40.919 they already fall under existing securities laws. We don't need 385 00:16:40.960 --> 00:16:43.840 to set up anything new. And he's supported by people 386 00:16:43.879 --> 00:16:46.960 like Elizabeth Warren and Brad Sherman, and they feel that 387 00:16:47.000 --> 00:16:50.799 crypto poses systemic financial and national security risks because of 388 00:16:50.840 --> 00:16:53.440 the way that you can move money around quickly and 389 00:16:54.080 --> 00:16:56.399 kind of hide it, So there's money launderings concerns, tax 390 00:16:56.440 --> 00:17:00.799 evasion scams, and just a speculative nature of assets has 391 00:17:00.840 --> 00:17:02.759 some people kind of up in arms as to, you know, 392 00:17:02.799 --> 00:17:04.160 whether they want to support this or not. 393 00:17:04.440 --> 00:17:05.359 All right, Brian James. 394 00:17:05.400 --> 00:17:10.200 Always appreciate the information and you're helping me understand it. 395 00:17:10.759 --> 00:17:11.720 At least I can do. 396 00:17:11.880 --> 00:17:13.440 Good to have you on every Monday here for Monday 397 00:17:13.480 --> 00:17:15.799 Monday with Brian James, Mollworth Financial. Thanks all Worth for 398 00:17:15.880 --> 00:17:17.640 loaning out for a while, and I hope you have 399 00:17:17.640 --> 00:17:19.480 a great week. Brian, all right, you too, have a 400 00:17:19.519 --> 00:17:21.359 go one eight twenty seven right now if you have 401 00:17:21.400 --> 00:17:25.440