Speaker 1: Stanton buck Sexton doing their homework.
Speaker 2: Today at noon because you got to make sense of
Speaker 2: it on fifty five KRCD Talk Station.
Speaker 1: Eight oh five.
Speaker 3: And Happy Monday to you, Brian Thomas. Always looking forward
Speaker 3: to this segment because you get to learn about money matters.
Speaker 3: It is time well money Monday with all their financials.
Speaker 3: Brian James. He's a certified financial planners and he's here
Speaker 3: to talk about well one thing, the jobs report. Welcome back,
Speaker 3: Brian James. Happy Monday to you.
Speaker 1: Back at you. Good morning to you as well. Hope
Speaker 1: you had a good weekend.
Speaker 3: I had a great weekend.
Speaker 1: All right.
Speaker 3: So we have this job's report and it looks good
Speaker 3: two hundred and fifty six thousand games. However, it's bad
Speaker 3: cause you get good news. The employment rate is down
Speaker 3: to four point one percent, a lot of additional jobs.
Speaker 3: That all sounds like wonderful news. And yet Wall Street's
Speaker 3: reaction is the stock market to tank or at least
Speaker 3: drop precipitously. How can you reconcile these Brian, Yeah, it
Speaker 3: doesn't make a lot of sense, does it. We really
Speaker 3: want jobs.
Speaker 4: We need as many people to have jobs as we
Speaker 4: can possibly get. If everybody's working. That means everybody has
Speaker 4: money to spend, and money makes the.
Speaker 1: World go around.
Speaker 4: It all moves around in a virtuous circle, and we
Speaker 4: all do better right well, long term, yes, but short term,
Speaker 4: remember what we're battling right now. We've been battling interest
Speaker 4: rates for the past several years, through the whole COVID crisis.
Speaker 4: And while we're not at the over nine percent inflation
Speaker 4: situation that we were out a few summers ago, we're
Speaker 4: not back down to where we want to be either.
Speaker 4: The Fed's goal is normally to keep inflation in the
Speaker 4: two to two and a half percent range, and we're
Speaker 4: hovering just above that, somewhere in the three percent range.
Speaker 4: And what we're making progress, but at the same time
Speaker 4: not where we need to be, and we've been here
Speaker 4: for a while, so the concern is keeping the momentum.
Speaker 4: What that means, though, is that the economy would preferably
Speaker 4: would slow down just for a little bit, so we
Speaker 4: can kind of get caught up on that. And a
Speaker 4: Job's report of two hundred and fifty six thousand new
Speaker 4: jobs created shows that that is not quite happening to
Speaker 4: the Fed's life king just yet.
Speaker 3: So obviously, if you have jobs, you have money, and
Speaker 3: you're there. There therefore creates demand for goods and services,
Speaker 3: which I suppose to some degree are still in shorter
Speaker 3: supply and the ripple effect we're still experiencing from COVID
Speaker 3: and supply chain issues and things of that nature.
Speaker 1: That's correct.
Speaker 4: Yeah, So the concern all along and I don't remember
Speaker 4: the last time I heard the term a hard landing.
Speaker 4: We seem to have avoided that knock on wood, but
Speaker 4: nobody says that anymore. Right, We've been expecting this, this
Speaker 4: fall off the cliff moment where the economy absolutely collapses,
Speaker 4: but that is just not happening. As much as the
Speaker 4: talking heads UH seem to want want that to happen,
Speaker 4: and as much a volume of discussion as there is
Speaker 4: around that that has not come to pass, and nobody
Speaker 4: uses those terms anymore. So this is evident that we
Speaker 4: are not seeing the pullback that we expected we would,
Speaker 4: and that's going to be in the short term.
Speaker 1: As we're talking about that.
Speaker 4: That's a that's a challenge from a standpoint of if
Speaker 4: the real goal is to keep inflation down, then the
Speaker 4: economy has got to stay up on the brakes a
Speaker 4: little bit. At some point but as long as we're
Speaker 4: out there spending money and creating economic activity and creating
Speaker 4: these new jobs, and that's not going to happen, and
Speaker 4: we'll have to continue this fight. So what's looking right
Speaker 4: right now is that the Federal Reserve is not likely
Speaker 4: at this point, as we're sitting here right now with
Speaker 4: the information we have, not very likely that the Federal
Speaker 4: Reserve is going to continue cutting rates in twenty twenty five.
Speaker 4: The prevailing opinion is we're probably going to stand flat
Speaker 4: for the balance of the year unless we get new information,
Speaker 4: which we always do well.
Speaker 3: And I think, as everybody knows by now, California as
Speaker 3: a state is one of the largest economies in the
Speaker 3: globe all by itself. Will I mean, I guess to
Speaker 3: rebuild Los Angeles as much damage has been done and
Speaker 3: it's going to take a lot of work, a lot
Speaker 3: of energy, and a lot of materials and supplies that
Speaker 3: do that, is that going to feed inflation? Do you
Speaker 3: think what have that substantial and effect given the how
Speaker 3: sizable the damages and how much of the California economy
Speaker 3: comes from the greater Los Angeles area.
Speaker 4: Yasolutely so, the state of California is one of the
Speaker 4: largest economies on the face of the earth. Obviously, it's
Speaker 4: ranked above even many other countries, most other countries, frankly,
Speaker 4: And so when we have this big of a hit,
Speaker 4: of course it's gonna have an impact. There are, of course,
Speaker 4: supply chain disruptions that can happen. Los Angeles is a
Speaker 4: major port.
Speaker 1: And while you.
Speaker 4: Want to want to say the wildfires probably aren't going
Speaker 4: to affect direct to all those ships coming in, at
Speaker 4: the end, any kind of chaos in an area where
Speaker 4: goods and services are supposed to be moving through is
Speaker 4: going to have an impact. And then, not to mention insurance,
Speaker 4: this is probably the big one to keep an eye
Speaker 4: on because we all have to the whole purpose of
Speaker 4: insurance is that everybody shares the risks. You pay your premium,
Speaker 4: you're covering not only your own home, but everybody else's home,
Speaker 4: and that because that's how insurance works. So this is
Speaker 4: going to have a widespreading effect over time. It's going
Speaker 4: to remain to be seen exactly what the impact will be,
Speaker 4: but there's no denying that it's going to have an
Speaker 4: impact on people who live nowhere near Los Angeles.
Speaker 1: For all these reasons.
Speaker 3: Well, and I think it's a pretty good time for
Speaker 3: people to maybe take stock in their own insurance. It's
Speaker 3: like a cautionary tale. What's happening out there could very
Speaker 3: well happen to you. And one of the interesting things
Speaker 3: that was reported, for example, the Marshall fire, which happened
Speaker 3: in twenty twenty one in Denver and Boulder, Colorado, they
Speaker 3: found out a study was done after that they found
Speaker 3: thirty six percent of homeowners homeowners who filed insurance claims
Speaker 3: learned that their policies covered less than three quarters of
Speaker 3: their home's replacement cost. So you've got a replacement cost
Speaker 3: policy and you think you're all, well, that's fine. Usually
Speaker 3: the policy will specifically identify what the cap is on
Speaker 3: the replacement cost. And I know I had my home
Speaker 3: evaluated recently because when I saw what the replacement costs
Speaker 3: was valued at on my policy, I'm like, there's no
Speaker 3: way in hell this could replace my house. We've been
Speaker 3: here for twenty five plus years, we have made a
Speaker 3: lot of investments into it on the interior space, and
Speaker 3: nobody knows about this, most notably my insurance company. So
Speaker 3: if it all burned to the ground, how on the
Speaker 3: hell would I prove what the real replacement cost is,
Speaker 3: and would it be subject to some kind of cap anyway.
Speaker 4: Right, you've identified a pretty specific risk that affects anybody
Speaker 4: who has a home.
Speaker 1: You need to understand where you're exposed.
Speaker 4: And so when you use the term replacement cost, what
Speaker 4: you're talking about is the fact that you could find
Speaker 4: a home that is very similar to yours on the
Speaker 4: market right now, and perhaps you could buy that as
Speaker 4: your replacement. But the replacement cost is actually the sum
Speaker 4: total of the two by fours in the dry wall,
Speaker 4: the insulation, and all the other stuff that make up
Speaker 4: your house. That's a lot more than buying a similar
Speaker 4: house elsewhere. So your insurance, yeah, your insurance needs to
Speaker 4: cover that replacement cost, not just another the value of
Speaker 4: a similar home.
Speaker 3: Well, and I suppose it's a cautionary tail. And again
Speaker 3: for people to identify all of the things they own
Speaker 3: in their home, maybe you can take some sort of
Speaker 3: video of it and keep that in a fire safe
Speaker 3: or in a safe deposit box or something. Because in
Speaker 3: the aftermath of a major disaster like this, the likelihood
Speaker 3: you're going to remember everything that was in the house
Speaker 3: is slim to none. And the fact I think you're
Speaker 3: going to have to demonstrate to your insurance company the
Speaker 3: improvements that you made that went up and smoke.
Speaker 1: Yes.
Speaker 4: And remember it's not going to be very right. Right now,
Speaker 4: we're still fighting fires. But what's going to come very
Speaker 4: shortly is the scammers out of the woodwork, oh, making
Speaker 4: claims of things that didn't happen, or offering to help
Speaker 4: people that they actually aren't going to deliver on any
Speaker 4: of those kinds of things.
Speaker 1: All of that is going to drive the cost of
Speaker 1: insurance up as well.
Speaker 3: True that also, I can use that as a little
Speaker 3: springboard to remind people of something that I read this morning,
Speaker 3: and it's a terrible thing to happen. But since you
Speaker 3: brought up scammers, they are targeting people who want to
Speaker 3: help out the victims of these wildfires. And there are
Speaker 3: always scammers out there. That's really prudent of you to
Speaker 3: be very, very very cautious about who you're writing a
Speaker 3: check to in terms of providing some aid. There are
Speaker 3: people that get on the phone and call and ask
Speaker 3: you this solicit It sounds like a legitimate group that
Speaker 3: they're not, so be if you're choosing a charitable contribution,
Speaker 3: and I'm not going to try to steer anybody away
Speaker 3: from helping their fellow Americans in times of need. But
Speaker 3: just make sure you're not dealing with a scam organization
Speaker 3: and go with someone like you know, Matthew Twenty five
Speaker 3: Ministries is one of my favorite to mention because they
Speaker 3: are legitimate and every dollar you give to them is
Speaker 3: going to land in the hands is someone out there
Speaker 3: who needs it. People have forgot about North Carolina too
Speaker 3: by now, Brian Jeeves.
Speaker 1: Yeah, yeah, we do.
Speaker 4: Have short attention spans for our natural disasters anymore. But
Speaker 4: I know you raise a great point one of those things.
Speaker 4: If you are contacted by somebody who is raising funds
Speaker 4: on behalf of these the people who have suffered this misfortune,
Speaker 4: then what the best thing to do really is take
Speaker 4: the information from that organization, then go research it on
Speaker 4: your own. If when you ask for the website or
Speaker 4: some other outside resource, a legitimate organization will be ecstatic
Speaker 4: to give to you over the phone, somebody who is
Speaker 4: not legit is going to insist that you need to
Speaker 4: give them money right then and there at that moment,
Speaker 4: and not let you go to that outside resource.
Speaker 1: So be careful who you're listening.
Speaker 3: To amen that We're going to continue with all our financials,
Speaker 3: Brian James and find out the details on apparently something
Speaker 3: that's very popular. But is it the right thing for you?
Speaker 1: What is this? What are these things called TDT date funds?
Speaker 1: Target date fund, target date fund?
Speaker 4: These are funds that are supposed to be set and forget.
Speaker 3: Let's learn together, because I'm not familiar with target date funds,
Speaker 3: and I always like to point out there's not a
Speaker 3: day that goes by in the morning show where I
Speaker 3: don't learn something. Today, I'm going to learn something from
Speaker 3: Brian James, which is something that usually happens. Come up
Speaker 3: an eight fifteen fifty five KRC the talk station, don't
Speaker 3: go away, We.
Speaker 2: Right back fifty five kransrust Brian James doing that money
Speaker 2: Monday thing. Hey Brian, Before we get onto target date funds,
Speaker 2: what are they and whether we should be in him
Speaker 2: or not? On interest rates, we talked about the idea
Speaker 2: of this in the current inflation rate that the the
Speaker 2: stellar jobs report, which means a lot of people are
Speaker 2: more people are employed, obviously potentially fueling the the the
Speaker 2: inflationary concerns. You mentioned that the Feds probably no longer
Speaker 2: likely to cut interest rates. But I saw this, Matt Rowe,
Speaker 2: portfolio manager over at Norma Capital Management, this article you
Speaker 2: pointed you forwarded along saying that they may even raise rates.
Speaker 4: Now, yeah, that's highly possible because again, remember it's all
Speaker 4: about inflation.
Speaker 1: We want to get inflation under control. And for the
Speaker 1: last couple of years.
Speaker 4: We've been on a pace of having stopped it and
Speaker 4: then driven it down all the way down from that
Speaker 4: nine percent range. But now that we've kind of plateaued,
Speaker 4: there's a chance that it could turn around and go
Speaker 4: the other way. So yeah, I mean, I think that's
Speaker 4: a fairly obvious conclusion for this gentleman to come to,
Speaker 4: just to say that if things start to if we
Speaker 4: see start see prices go up.
Speaker 1: Again, then we may be raising rates.
Speaker 4: Now, what we haven't talked about yet this morning, Brian,
Speaker 4: is the incoming administration and what their thoughts are. It's
Speaker 4: one thing to want to increase the position of the
Speaker 4: United States with regard to its trading partners with tariffs,
Speaker 4: but we can't pretend that that's going to happen in
Speaker 4: a vacuum. Tariffs are the purposeful raising of prices on somebody.
Speaker 4: The goal is or at least on paper, we would
Speaker 4: want to raise prices on people who want to export
Speaker 4: their goods on country who want to export their goods
Speaker 4: to our country. But what that is always going to
Speaker 4: lead to is increase prices because they're simply going to
Speaker 4: recover those from the consumers. If you are a producer,
Speaker 4: you have that control. If you are a consumer, then
Speaker 4: you eat it. So I think there's a there's a
Speaker 4: bigger and bigger drum beat for the fact that interest
Speaker 4: rates are not only going to at best stay flat,
Speaker 4: like you just said, that could also increase. It remains
Speaker 4: to be seen.
Speaker 3: Well, and some people view that as a political measure,
Speaker 3: and I know it was observed in these comments from
Speaker 3: Matt Rowe that, well, the political will of the Trump
Speaker 3: administration will certainly be to keep rates down and be
Speaker 3: upset if they get raised. But that reminds me of
Speaker 3: this of the argument that I believe it was Jimmy
Speaker 3: Carter had with wasn't it Alan green Span at the
Speaker 3: time he begged and begged and begged and pleted to
Speaker 3: lower the interest rates because they were so onerous, but
Speaker 3: what the stagflation that was going on. It was like, no,
Speaker 3: we have to do this in order to bring to
Speaker 3: write the condition. So Jerme Powell may raise rates, but
Speaker 3: it probably won't be a politically motivated I guess is
Speaker 3: the conclusion we must draw.
Speaker 4: Right, So, Jerome Powell as the Fed Chair is not
Speaker 4: subject completely to the whims of the president.
Speaker 1: He's not a cabinet member.
Speaker 4: So if the President wants to get rid of the
Speaker 4: Federal Reserve Chair, he has to prove legal cause. There
Speaker 4: has to actually be something other than I don't like you.
Speaker 4: So he doesn't have to be as Jerome does not
Speaker 4: have to be as politically sensitive as many other cabinet
Speaker 4: members do as a decision maker.
Speaker 3: All right, let's move over and together learn maybe you
Speaker 3: will for the first time. I know I am target
Speaker 3: date funds. What's the story on these? They apparently are
Speaker 3: quite popular for four to one k's.
Speaker 4: Yeah, target date funds the Kellogg's Variety pack of investments.
Speaker 4: So the purpose of a target date fund is one
Speaker 4: fund that owns a bunch of other things, and the
Speaker 4: intent is kind of a one stop shop for a
Speaker 4: properly allocated portfolio according to what your retirement date might be.
Speaker 4: So these frequently appear more and more. They're appearing in
Speaker 4: four oh one CA's and it's believed that they're going
Speaker 4: to capture out two thirds of all four to oh
Speaker 4: and K contributions by twenty twenty seven, and so they're
Speaker 4: already in there. You probably have them in your four
Speaker 4: oh and k R four or three B or whatever
Speaker 4: your employer offers as your retirement plan. And the goal
Speaker 4: here again is to most of them have a number
Speaker 4: in the in the name of the fund. So twenty
Speaker 4: forty five, twenty thirty five, twenty fifty, whatever that may be.
Speaker 4: What that number is intended to be is approximately the
Speaker 4: year you might retire. So the intent is that it
Speaker 4: will build a portfolio with one, one single option.
Speaker 1: You don't have to choose anything.
Speaker 4: It's just going to build a portfolio that is targeted
Speaker 4: toward that date, and then as time goes by, the
Speaker 4: portfolio itself will become more conservative. So, for example, a
Speaker 4: twenty fifty fund is probably you know, that's somebody who's
Speaker 4: gonna be working for another twenty five years. That's a
Speaker 4: long term timeframe that's going to be mostly stocks. Ten
Speaker 4: years from now, are fifteen years from now, in twenty
Speaker 4: forty it's probably going to be about a seventy percent
Speaker 4: stock thirty percent bond type of a portfolio. That's generally
Speaker 4: how they work. It's a set it and forget it approach.
Speaker 4: So these are good tools. I'm not somebody who believes
Speaker 4: that all target date funds are bad. That's what if
Speaker 4: you read the headlines, that's kind of what can come across.
Speaker 4: But it's not something that you can completely, just solely
Speaker 4: rely on. You have to pay attention to the same
Speaker 4: things you would any other investment. First and foremost, what's
Speaker 4: under the hood. Just because it has a number in
Speaker 4: the name of the fund doesn't mean that it's a
Speaker 4: portfolio you necessarily that applies to you. So a fund
Speaker 4: with a twenty year time frame can be anywhere from
Speaker 4: eighty percent stocks to one hundred percent stocks. It's just
Speaker 4: the opinion of the fund firm underneath. So you still
Speaker 4: got to look under the hood to see what it's
Speaker 4: invested in.
Speaker 3: But they are actively managed in the sense that you're
Speaker 3: just not They're not just compiled of one set group
Speaker 3: for all time of stocks. Because I mean the point
Speaker 3: that you made that there's some gets moved over to
Speaker 3: bonds over time suggests that there is some active management.
Speaker 3: Are they constantly shifting and changing what these specific stocks
Speaker 3: are that are invested in this this type of target fund.
Speaker 1: And date fund.
Speaker 4: Great question, So the answer is somewhere in the middle.
Speaker 4: So they're essentially active management of passive indexes. So in
Speaker 4: other words, the S and P five hundred, which we
Speaker 4: all know is basically the five hundred largest United States
Speaker 4: based publicly traded companies that's going to make up a
Speaker 4: good core of all these funds. So they're not really
Speaker 4: target date funds, are not deciding they're going to sell
Speaker 4: PNG and buy more Apple or anything like that. They're
Speaker 4: simply following the index. But there will be ten, fifteen,
Speaker 4: twenty different indices inside this fund. So the active management
Speaker 4: occurs in how much are we going to expose to
Speaker 4: stocks big stocks, little stock, small stocks, and how much
Speaker 4: are we going to expose to bonds. It's not at
Speaker 4: the individual security level of the individual bond or the stock.
Speaker 4: It's really at the index level to control the risk
Speaker 4: and the volatility of the portfolio.
Speaker 3: Well, and I would argue, because my financial planners have
Speaker 3: been over my selections. We have a variety of different
Speaker 3: funds we can invest in here through my four oh
Speaker 3: one k at iHeart, my financial planner has looked at
Speaker 3: what I am invested in and occasionally will make recommendations
Speaker 3: about you should change the percentage allocation, because you know,
Speaker 3: there's international investments, there's currency investments, there's all kinds of
Speaker 3: different options for you. But since this is out of
Speaker 3: my element and I wouldn't profess for a minute to
Speaker 3: know anything about investing, I let you know my financial
Speaker 3: planner make the recommendations for me. I suppose anybody who
Speaker 3: has a four h one K plan should still probably
Speaker 3: have a financial planner to help them make sure that
Speaker 3: they're selecting the right funds.
Speaker 4: Yes, absolutely, because you need somebody in arms length away
Speaker 4: who is going to frankly protect you from yourself.
Speaker 1: Yeah. Yeah. Unless you do this all.
Speaker 4: Day, every day, you'll be tempted to react to whatever
Speaker 4: has happened over the last couple of weeks and months.
Speaker 4: And that's never the way to manage a portfolio, because
Speaker 4: we need to be targeting the different piles of money
Speaker 4: we have for specific goals, whether that's a goal thirty
Speaker 4: years from now means you can be aggressive, or if
Speaker 4: it's a goal in the next year going to buy
Speaker 4: a house, or you got a kid going to college
Speaker 4: or something like that each of those goals is going
Speaker 4: to have a unique solution that's going to be best
Speaker 4: for that situation, and a financial planner can help you
Speaker 4: prioritize which ones are non negotiable, which ones can you
Speaker 4: fudge on? If you can't afford to do them all
Speaker 4: at once, how do you organize it all?
Speaker 3: Phebas is the way to go because that means have
Speaker 3: a fiduciary obligation to you, and that's really important as well.
Speaker 3: Brian James, always a pleasure having you on for the
Speaker 3: Monday segment. Money Monday is what we call it. The
Speaker 3: podcast will be availablet fifty five KRC dot com. We'll
Speaker 3: talk again next Monday. Have a great week, Brian, have
Speaker 3: a good weeks day warm thank you brother e twenty
Speaker 3: six fifty five KRC DE Talk Station back to talk
Speaker 3: about the similarities between the La Fire and the Lehina
Speaker 3: Fire and Maui. Stephanie Perucci. She's the author of the
Speaker 3: books we went over last time. She was on the
Speaker 3: program Burn Back Better Lahaina, A Perfect Storm or a
Speaker 3: Perfect Crime, the follow up book, Sound the Alarm, the
Speaker 3: Maui disaster that sparked a global awakening. Stephanie Perucci be
Speaker 3: up next, Don't Go Away fifty five KRC