Let's Talk Money

probably more in the range it should be in. But it takes a little bit of getting used to when we've had such warm, balmy weather. But it's great to be here with you to answer any questions you may have regarding your financial planning or investment managic concerns, and I encourage you to calling those questions. You can read me on a hotline at eight hundred Talk Wy. That's eight hundred eight two five five nine four nine. Again it's eight hundred eight two five five nine four nine.

Or as we've talked about, we now have an email for any of our shy listeners who don't want to get on the radio. I hope I'd rather talk to you, but if you want to email me, you can, and that email address is ask Bouche at bouche dot com. Uh again, it's ask Bouche at Bouche dot com and Bouche is b O U C h E Y dot com. So you can email me or give me a call. And as I always say, there's no dumber silly question

except for the one you don't asking. You may be doing your fellow listener favored by asking that question that they have. So boy, a good week in the market, folks, hitting all time highs we with desp five hundred. We briefly passed over the six thousand level mark. It kind of came down from there, but for the week, the markets were up. He was up four point seven percent for Russell two thousand, which is more in the small cap bigcap space, up by eight point five percent for

the week. So certainly, you know a number of factors come into play here. One is the market doesn't like uncertainty. It does not like uncertainty, and with the election coming, there was a lot of discussion of volatility and uncertainty of how the election was going to play out. And you know, half the country is happy with the results. Half the country's not happy, or maybe it's a little bit more were happy because the popular vote and a

little more towards Trump. But as we've always said, at the end of the day, it does not matter to the broader economy, to the broader markets on who into loses. We've got fifty years of data that shows you can have good years under Republicans, you can have bad years on the Republicans. You have good years under Democrats, you get bad years under Democrats. So don't get too caught up in your own political views as to what you're

going to do with your portfolio. And again, I think now having some certainty on Trump being president, and again there's going to be certain industries or areas that win or lose. But you know, it's interesting, and I think

I talked about this last week. Even having those industries that you think, oh, they're going to do really well under a certain president and maybe some of the regulations help them, whether it's enunder the Bidy administration with clean energy or energy oil and gas under Trump, it doesn't always play out that in that period of time that those sectors from an investment perspective, do well, now they may be better off because of regulatory environment, but it

doesn't necessarily mean that in that period of time it's good to be invested in that sector. And it's really interesting to see how, in particular with the energy industry, it really had done better from an investment perspective under Biden versus under Trump. And there's a number of different factors that came into play in that, but that can

be true with a lot of different areas. So the big thing is, you know, when we're looking at portfolios, we're looking at the economic data, we're looking at the corporate data. We're not worried about, you know, who's in office or whatnot. The other thing that drove market hire is that the set of Reserve cut interest rates this week by twenty five basis points, so one quarter of

a percent. Now, that was somewhat expected that they were going to do that, but there was maybe some concern that because the economy continues to do so well, that maybe they were going to hold off, but they in now, we're going to get some inflation data out this week, and again the Fed did come out and say pretty clearly that it is going to be data dependent as to what they do as they go forward. And we've

talked about this. You know, you could be in a situation where this economy continues to remain very strong, and if inflation doesn't continue to move to that two percent target that they have, then you may have the Fed reserve pause. They may not cut rates another quarter basis point in December, which is what the market was expecting.

So you have to appreciate that. But you know, certainly, this has been a great year in the markets, and I think it's a perfect example of you know, you had all these talking heads it was two years ago talking about a recession, and then you know, this year even concerns over that happening, and you know, here we are with the sp up twenty five plus percent, and you know, all I would tell you is this is a good time to rebalance if your asset classes like

stocks or large cap growth have just gotten so strong, to rebalance back so that you're properly weighted. It's still a good time to be getting money invested, even though we're at all time highs. But you know, it's not a bad time as well to have some allocation to bonds. And you know, what we're seeing we've talked about this a little bit, is that with the Federal Reserve cutting interest rates, that you know, your money in your money market accounts, in your CDs, it's not going to earn

as much. And that's why over the last you know, year or so, we've really been recommending the people to really get back into bonds, get back into some longer dated bonds. With a ten yu US treasury up right now about four point three percent, and it's still below where it was a year ago, which was at five percent, but it's well above where it was this summer at three point six percent. So it's not a bad time to be moving back into bonds in some capacity. Depend

on your risk tolerance, and it's always good. You know, there's a lot of pretty optimistic sentiment right now, which could be warranted, but it's always good not to get overly caught up in that, depending on what your risk tolerance is and where you stand as far as in your life and what you can be doing. Right So, if you're getting closer to retirement, this is not a bad time to make that adjustment to become a little

more conservative. It's just always you've got to be aware of what's going on in your life versus getting caught up in what's going on from a broader market perspective. But there's a number of things that I want to discuss today, both with from a funded planning perspective but also with the markets. But before we jump into that, if you have any questions again, feel free to give me a call. You could reach me at eight hundred

eight two five five nine four nine. That's eight hundred eight two five five nine four nine, or email me at ask Bouche at Bouchet dot com. Uh and that is b O U C h e Y dot com. One of the questions I get caught offen is you know,

why should I take my SOLI security? And you know, there used to be a lot of strategies about when was the right time, and you could do what's called filence suspend where you take it and your spouse takes it and then you suspend it and then you flip back it to your own because you were doing spouse self benefits and all those strategies went away, so decisions are much clearer as to when you should take it.

And my general recommendation for a couple who has good health is that one of you should wait either until your age seventy or certainly a little bit later sixty seven, sixty eight, sixty nine, especially the higher income earner, because by doing that, every year you delay taking it, you get an eight percent increase in the amount that you're going to receive. So it can be very beneficial. I

think I talked about this on the show. Right now, if you're going to be one of the higher income earners and you haven't taken your Security and you're gonna be age seventy next year, when you take it, you're gonna kind of get around seventy sixty one thousand dollars.

Sixty one thousand dollars is what you're going to get if you're going to be age seventy next year and you haven't taken Social Security and you've been more on the higher income spectrum, So you think about that, that's a nice add on, especially you know, if you're married and now your spouse can say gets twenty or thirty thousand dollars. Even for people or high income owners, to be able to have that kind of basically fixed income

in place is important. But what I hear people ask is they say, well, what if I take it early and then I go ahead and invest the money that you know, if you look at that, that could be

beneficial depending on how you invest it. But what I often see is that if people do that, they tend to spend the money right and you know, they maybe are successful for a little bit in investing, but I quote often will check back in them with them and say, hey, how's it going to You know, you're gonna be able to move that money over that we can invest and

they're like, well, Marty, I'm actually spending that money. I'm like, that is fine, But I think it's important to remember that as you have that income coming in, there's a good chance you're going to spend it. And that's one of the guides I always give clients, which is, you know, hey, if you're young and you want to do things, and you know you want to get that se security benefit so you can spend it and live your life, or

certainly if you have help concerns. Right. So the break even age is between age seventy eight and eighty one. All that means is that if you live past that age, then you're better off by delaying your benefits for as long as you can, but if you have concerns over your health, then certainly taking it early now whether or not so security benefits are going to be here in

the future, I would necessary. I wouldn't necessarily have that dictate your decision, because you know, I think there's going to be some changes that are going to have to occur to the system in order for it to be successful long term. But you know, I do feel very strongly that it is going to be intact in one

way or another. And I always joke with our younger advisors when they're in the meeting with me that it's probably more their generation or my kids generation that are going to be seeing their benefits change or having to pay more into it. But I do feel pretty strongly that it is going to be there in some capacity. So I won't necessarily take it now because you don't think it's going to be there in the future. I mean, you can do that, but I don't think that's necessarily

a wise decision. But these are things that you need to consider. And again with our clients, we walk them through, you know, what does this look like and why do you need to consider this? But what we always say to our clients is that decision on take your social security. Don't overthink it. It does not and will never make or break your plan. It just doesn't. I mean, even whether you take it at eighty sixty two versus eight seventy, I can kind of show you that it can move

the need all a little bit. And moving the needle, frankly is more so if you live longer. Obviously by delaying to age seventy it is better. And we do when we do a plan for our clients, we usually assume that they're going to be living to age ninety five.

But again, don't overthink this. Make your life easier. Just to kind of think about this will always tell people as they're making decisions, whether it's financial or not, you know, make a list of just the one, two or three main things that are the most important to you as you go about that. And that's the same thing with deciding when to take your security is what are the top two or three things that are most important to you as you make that decision, and that will help

you guide you as you make that decision. And that principle right there is something that you utilize in any decision making that you're going through I'm a big believer in the Kiss principle to just keep it simple. And you know, I think so often in our life we make things more complicated they need to be. If you can really simplify your life and decisions in your life, you really it's kind of amazing. You can kind of come to those conclusions a little bit easier than you

might expect. Let's go on to some questions. One question that I've got here from and is the Federal Reserve is cutting rates, but the thirty year mortgage keeps going higher. Why is that? That's a great question. So it was we talked about the Federal Reserve cut rates by fifty basis points are a half percentage point in September, and then they just in the meeting this week they cut it by another twenty five basis points. So you might be like saying, well, okay, this should mean that all

interst rates are going down. But we have to remember is the said the Federal Reserve only has control over the Federal Reserve Funds rate, and that rate is the rate that the Federal Reserve charges banks, So it's an overnight lending rate. So it is very very short term. So as they cut that rates. As I mentioned earlier, what that's going to mean is that infrast rates for CDs or money market funds, which are very short term

in nature, they're going to go. They're going to refer let that change very quickly, and you're going to see that in your money market fund, You're going to see that in your CD rates that they're going to drop very quickly. But now the rest of the rates, they exist in the debt market. I don't care if you're talking about treasury rates or you're talking about corporate rates or mortgage rates. The rest of those rates are controlled

by the bond market. The FED can impact them in different ways, but really only it only has real control over the Federal fund rate. So the rest of those rates are step on the market. And really what the market saying is, HM, we see inflation moving to two percent. But given how strong the economy is, and you know, now even a little bit more with with Trump having won the election, there may be a little bit more

concerns over inflation. We'll have to see what happens with the tariffs, but you know, it's pretty clear if you start putting tear on things that can be problematic for inflation. So that's the bond market, which can also usually have some better insight to the broader economy than the stock market. That's the bond market saying hmmm, I don't think inflation is going to be really running to that two percent target real soon, and I don't think the economy is

actually that week. I think it's pretty strong. So they are keeping rates higher. And actually, over the last six weeks, the thirty year mortgage has continued to increase. Right now, that's six point seventy nine percent, So it is certainly below where it was a year ago, but it's well above where it was this past summer. And you know, this goes to this whole concept, which is, you know, I think you know, if you're out there in buying a home, I think you're still going to see prices

remain pready, stubborn. You know, we see this with clients who are either selling or buying. If they're selling, those houses are going pretty quickly. If they're buying, uh, they're seeing a lot of competition for the houses they're buying, and in many cases they're getting outbid. In many cases they're getting outbid with a cash offer, and so they could even be putting in a higher price than the other bidder, But because they're not putting in a cash offer, uh,

that's that you know, becomes a problem. You know, I always suggest to people to the extent that they have the assets, they put in that cash offer, it doesn't preclude them from getting financing on the loan. And you know, we help clients a lot with this, which is, if you're successful to be able to build up a taxable account, we can we help our clients facilitate a margin loan on that taxable account that can be used either in the short term funding for real estate or even from

a long term perspective. So for example, let me give you an idea on this. We have a client that's buying a second home, not sure if they want to sell their primary home, and just from a mortgage perspective, right now, they're not working, so sometimes that can be problematic with a bank lending. But they've been very successful. They have a sizeable taxbile account and they can borrow up to about seventy percent of the value of that

taxile account, and this is a fairly large purchase. So that through our finance custodian Charles Schwab were able to negotiate a very good margin loan for them, and so relatively speaking, it's much better than they're able to get through a bank on a fixed loan. And the upside with the marginal loan too is you don't necessarily have to pay it down at all. You don't have to pay interest on it, you don't have to pay any

the debt on it. Now, the thing you have to appreciate, which is not so rising, is that if you don't do that well, the interest is going to accumulate and your deat amount is going to increase. But all things considered, it gives you a lot of flexibility if you want to go down that route. So this is one of the options that you can consider, especially if fixed mortgage rates remain so high, and that that is a real possibility.

I mean, I think you have to appreciate that if this economy remains strong, the Thuner Reserve is probably going to pause in December and not raise rates. And you know, at the end of the day, that's that's okay. I've said this all along. You know, if I'd rather have a much stronger economy with inflation, you know, kind of in the two percent range then certainly moving higher, and I think that's better from an investment perspective as well.

Allows it's going to allow corporations to grow profits in a better way. Let's go on to a couple of other ideas I want to share with you, But again, if you have any questions, you can give me a call at eight hundred talk w g Y. That's eight hundred eight two five five nine four nine. That's eight hundred eight two five five nine four nine. Or as I've mentioned before, you can reach me at ask Bouchet at Bouchet dot com. That's asked Bouche at Bouche dot com.

You can email me and I can give you some thoughts. Another question we have that's come in is that said that there's new changes coming to four and K catch up amounts for twenty twenty five. Can you talk about that? And that is somewhat true. There is new amounts that you're going to be able to contribute to your four and K in twenty twenty five. It's gonna go up from twenty three thousand dollars to twenty three thousand, five hundred in twenty twenty five. So that's the base amount

that you can contribute. Simple art raiser are also going up. This is another type of retirement account for small businesses that's going to go up from sixteen thousand in twenty twenty four to sixteen thousand, five hundred and twenty twenty five. But now the standard catchup amount, which is seventy five hundred for a falling K plan, is staying the same.

But what's in place for twenty twenty five, and there's another element like this for simple arrays, is that for falling ks four to three b's and four fifty seven plans, if you're between aged sixty to sixty three, the catchup amount is not seventy five hundred dollars, but instead it's eleven thousand, two hundred and fifty dollars. Again, I'm gonna say that again. So if you're between, if you're sixty to sixty three, the catchup amount is not seventy five

hundred but eleven thousand, two hundred and fifty dollars. So the IRIS put this in place to allow people who are maybe behind where they think they need to be from a retired perspective, to put more dollars away. Now I think that's great, and that's fantastic. Any opportunity to be able to save more is good. They certainly make

it more complicated. I do feel like with all these new legislation that's come out, let's say, over the last five years, one of the things they've done is just make it a lot more complicated for people to understand and for the possibility of an error to go up. But that's what we're here for, right to give you a guidance. In a simple I rate plan, the same idea is true, which is, if you're between age sixty to sixty three, the standard amount catch up is three

eight hundred and fifty dollars. But under these new rules, the catch up amount is five thousand, two hundred and fifty dollars. So a way to be able to contribute some additional dollars there, and you know, I would really encourage you to take advantage of it as you can. Now. One of the things that people ask is the raw form and K does that you have to start contributing after your catchup amount and that doesn't start into twenty

twenty six. If you're a high income earner, you got until twenty twenty six until you have to put your catchup amount into a raw form and k. It was supposed to start in twenty twenty four, but it was delayed. Well, folks, orre to go with a commercial break, but come back as we get team to take your questions. You'll listen to Let's Talk Money, brought to you by Bruchet Financial Group, where we help our clients prioritize their health well we manage their wealth for life. Come back, folks as we

take your questions. Welcome back, folks. For those of you just joining us, my name is Martin Shields. I'm the chief Wealth Advisor at Blouche Financial Group and I'm your home today for Let's Talk Money. It's great to be here with you. And I want to also, as we got Veterans Day on Monday, just thank all of our veterans. You know, we appreciate anybody who's in the military, the

sacrifices they make for our country. I just really want to thank you personally, my family and you know, many people paid a huge price for serving in the military in a lot of different ways. So if you know somebody who's a veteran, is currently serving in the military or serve, go out of your way over the next few days and thank them for the service because what they do is just fantastic for us. So that's great.

And the rocksack event, I like that. I came across a friend who was doing rucksacking, so it's like a thing now, and this gentleman was out walking four or five six miles a day with weights in a backpack and he lost a lot of weight. I was like, wow, you look really good, and he was telling me about it, and I guess this is a new thing now that you know, kind of come over from the military, where you know, you go out, you do exercises, and you

do with your backpack, so it gets you stronger. And so I went out and I went went walking with my wife and I was had the backpack on. We're pitty metals, but I decided to put some weight in there. But I put him fifty pounds. So it's we did about two miles and that was I was. I was done after that. I said, that's uh, would not put on that much weight. So my recommendation Tia is go low, try low first, which is be a smart thing to do, and it's going to be a little more challenging that

you expect. But again, thank you to all of our veterans for the all you do and have done for us. We're going to go the phone lines. We have Luri Laurier there, I'm here, Good morning, Good morning. What can I help you with?

function of your cash flow in where you stand. You know, it goes to what I said earlier. Though this will never make or break or plan. But some people are like, you know what this is like in these situations from a spouse perspective. You know, if you're going to retire, you want your money, you want some cash flown, then take it earlier and you can use that kind of as your kind of spending dollars on your side. But if you're looking to maximize your benefit, you should wait

until your full retirement age. Now, the one thing I will tell you is that you don't benefit by waiting past hs your full retirement age. So whatever that is of at sixty six in a few months. That's the one difference is you know, unlike other folks, if you wait into age seventy, you get a higher amount. No, for you either take it now it's et two, or don't definitely take it by age your full time and age, which is like close to sixty seven. There's no benefit

to wage age seventy for you. Oh that's good to know.

the A word annuity. And I just wanted to see if you knew about that and if you had any thoughts on it.

you in. That is, if I get a commission charge or something, and you know what I would recommend is that you simply just put that cash. Will either do one or two things. You either uh, set up your investments to automatically invest reinvest dividends so as cash accumulates, it just goes back in and buys the security where it came out. And you know the power of compounding

with dividends. I was just reading something. If you looked at the S and P. Five hundred over the past fifty years, and he looked at the price performance, it's at let's say you know, up three hundred percent, but if you look at the power of compounding and reinvesting those dividends, it's up like five hundred and fifty percent over that time period. So you know, in general, if you don't need that cash, my first recommendation is to

automatically reinvest it back into the investments. But if you want to have a little extra cash surplus there, I would simply put it into a money market fund, which they have gotten down from where they were, but they're still above you know, where it was, let's say four years ago, So you're not earning the five and a half percent, but you're earning four and a half percent,

and you have complete liquidity and complete transparency for that. Again, this is the challenge of working with somebody who's not a fiduciary, because it's it's almost a no brainer that

unless you were. The only time I would ever recommend an annuity to somebody is if you said, Marty, I am deathly afraid of the markets, I really don't want to be in there, and I want to have something like a pension, And in that case, what I would recommend is an immediate fixed annuity that you'd say you could put in one hundred thousand dollars or two hundred thousand dollars and then you would annuitize it, turn it into a pension basically, and that money is basically is gone,

meaning that you're not going to pretty much going to be able to access the lump sum amount, but you're going to have that pension guaranteed for the rest of your life in that circumstance, and somebody explained it to you very clearly like that, and you're like, yes, that's what I want, then that is the right approach. But because you have cash accumulating to put it in annuity,

no way. I would definitely not recommend that. And again, that sounds like somebody who's selling you something because it's they're going to earn a pretty good commission on it.

it's a variable annuity and they could be inequities. I showed their investment performance versus what would otherwise be and it's not very good. Usually it's I mean, it could be usually quite ugly. So I've said this, I will say this NonStop. Before you buy an annuity, you really should absolutely be talking to somebody, another advisor or somebody who is a fiduciary who has no skin in the game and can give you advice on whether it's to

do that. I talked about a colleague friend of mine that came and talked to me about it, and very successful individual, lots of assets, and he was getting sold in annuity and I just told him to get away from that as quickly as you can, because the problem is, like anything in business, you know, if you're going to lock up your money and you don't have transparency, you bet it paid a lot more money for that. And

that's the problem. The newity is not only they're expensive, but they lock you up with the penalty phase for ten to twelve years. We're gonna stay with the phone lines we have ed from Schenectady. Eddie there, good morning.

MUNI or Puerto Rican COMMUNI some a bond. You don't pay federal taxes on that income, and you don't pay state taxes on that income. So you think about it as you move up to higher, higher tax brackets because your income goes higher and you have you want to have some element of bonds or fixed income in your portfolio. It becomes very advantageous to have bonds where you don't

have to pay any taxes on it. So for you to make that decision, what you need to do is say, okay, what if I got this corporate bond and if it's Pimco, there's Pimco has many corporate bond funds, and say what is my yield on that? And compare it to the pimp community bond fund. And then but with the corporate bond fund, you have to take off your taxes off that, right, so federal taxes, in state taxes, So what is your after tax yield and compare that to the meuni tax yield.

And if you're a higher income earner, there's a good chance that the beauty after tax yield is going to be better than the corporate bond yield after taxes. So you've got to do that analysis to make that decision. And right now, MENI bond yield are actually very good. There was a few years ago they were just horrible. We actually moved our clients out of beauty bonds because they were so low. But they've come back up quite

a bit. So, but again, the one thing I caveat with that is you want to it has to be getting New York State beauny bonds. So let's say you got a Pennsylvanianmuni bond and there are funds out that they have meaty bonds from around the country. But if it's not in New York State, then it's only UH tax free for federal taxes, not for state taxes, which you know, again New York State we're a little bit higher income tax state. So you want to if you're a high income earner, you want to be getting that

benefit for both UH federal and state taxes. So but it can still be a good part of your portfolio. Thank you here, welcome all right, folks again, if you have any questions, you can reach me at eight hundred eight two five five nine four nine. That's eight hundred eight two five five nine four nine, or you can email me and ask Bouchet at Bouchet dot com. That's ask Bouchet at Bouchet dot com and Bouchet is spelled b O U c h e y dot com. Jo any questions you may have either give me a call

or send me an email. Let's move on to another topic, and I want to talk about credit scores. You know it is. They're so important if you're going to be going to get a mortgage, a car alone, you know, a loan for a student loan, whatever the case might be. If you're gonna be borrowing money or trying to access credit, having a good credit score is so important. And you know I will tell you, Even as the financial advisor, trying to understand what drives those credit scores can be

very confusing. And at times I look at my OAD and it doesn't seem to always make sense. There's a rhyme or reasons to it. It seems to fluctuate. Sometimes you're like, what is going on here? There's nothing different that I'm doing, but just a few things that I think it's very important. One you should go there's the three credit bureaus you should be going and checking, let's say once a year, to make sure there's no errors. I have reviewed mine and I did find errors with it.

So you want to make sure that there are no errors with your credit score, in particular, if you're getting dinged one something where you shouldn't be to make sure that's changed. One of the most important things is that you make on time and consistent payments for any debt. Late payments really hit you hard on that. So really try to be paying off your debt, you know, very consistently and on time. You know, you think about it these days. I was talking to somebody, I almost never

write a check, you know. I pay all my bills automatically online, you know, so that just as soon as it comes in, it gets paid, and it makes my life a lot easier. I don't have to be thinking about, Okay, I got to make sure I get that check out to pay for, you know, a car payment or mortgage or whatever. It just happens automatically. Plus, you know, the upside is that it's done and that that consistent payment

is so valuable. The other thing is not having debt levels to the too high relative to what your available credit or balance could be. So, for example, if your line of credit could be up to ten thousand dollars, you want to try to keep it below thirty percent. So you want to try to keep it below three thousand dollars. In this example that I'm using, with a credit line of ten thousand dollars, if it starts going to above that, then it becomes a negative to your

credit score. And then the other thing that really it can be problematic is anytime you open up or BAF even ask for a new loan or line of credit, that that's called a hard inquiry and just that asking that you might not even have to open it, but just that inquiry is a negative to your credit score. I'm not sure why, you know, you think about it. You're like, if I paid out my debt consistently and if I keep debt limits below what the line of credit is. And also the big element is what do

you do what do you make right? I mean, you know, if you have a high income and you're very consistent with that, then it would seem that be very positive. But the hard inquiry can be really a problem. So just to be aware of that, and you know that's important. You know, certainly for any debt that you're taking out, it's going to impact what the interest rate is that you get, so you have to be very much aware of that and just try to make sure that if you if you make a mistake, that you get back

on track as quick as quickly as you can. Let's move on to a couple of the questions that I get pretty consistently. But again, if you have any questions, you can give me a call at eight hundred eight two five five nine four nine, or you can email me at ask Bouchet at Bouchet dot com. One of the questions I get quite frequently is why where does

that two percent target come from for inflation? And the fact the matter is it's arbitrary, right, that there's nothing necessarily that's overly important about two percent for the inflation target. But the question I have, well, why not make it zero? Why have any inflation? And the main reason for that is that the concern is that if you make it zero, it was just no different than when you make it

at two percent, that you can undershoot it. Right, So for many years our target was two percent, but the actual inflation rate was a half a percentage point or one percent or one and a half, so well below that two percent target. And that was the case for boy ten fifteen plus years. And I always, you know, I really say that, I think you know. The challenge that so many people are facing over the last four years is not that this economy is not good or

not that they're not getting pay raises. But that impact of inflation is so dramatic. I mean, we haven't had inflation for forty five years since the mid seventies, so you know, when it came back, and it really came back high at nine percent or even five or six percent,

it really impacted people in a real negative way. And I even saw that with people who've got big promotions, so got big raises, that just even having to go pay to the grocery store and pay that much more for things they weren't paying that much before a few years ago, really impacted their psyche in a real negative way. And so the concern though, is if you make it at zero, that we're going to undershoot that. And now

that's called deflation. That's where prices are actually declining. Now that may sound good to you, but the problem is no different than as bad as inflation is, deflation is even worse because you think about it, If prices are going down, what that does is it incentivizes consumers to wait. So you think about this, if somebody said to you, hey, you can buy that pair of shoes now, or if you wait a month, they're going to be cheaper. Well, many times people may wait on that. They may hold

off on purchases, especially larger purchases. If they thought they could buy a car and they knew that was going to consistently go down in price, well they may wait on that. And then what happens is that that becomes a self falcilling prophecy, which is that actually, now there's less demand, so that price goes down even more. Right, so the company selling that has to incentivize people, so they lower the price even more, which now you've got

this rapidly declining price circle. So that's the reason that it's at two percent. So that is that as inflation is, deflation would be even worse. Now, we really have not experienced deflation. I'm not sure when's the last time we experienced deflation, Probably since a Great Depression where there was real deflation. And you know, it's one of those things where you know, price stability no different than the markets

like certainty. As consumers, we like some element of certainty and stability as well, So that's why that is the case. The other question I get quite often is is it possible that we could have a situation like Japan did where they had a booming stock market for the seventies and eighties. And you know, certainly if you were in business are around in the eighties, you knew, I mean, Japan was going to take over the world, right They

were buying US assets, properties, and companies. Their companies were doing incredibly well here in the US. It was a role model for how all business should operate. And then after it hit around eighty nine to ninety, the Kniek average, which is the top two hundred fifty companies in Japan, started going down, and it was called it's called the last decade, but it's actually really a longer period of time than that that the market just kept going down.

And this is what many people don't know is that the NK just hit back to close to where it was back thirty years ago. So it was thirty years that it took that declient. Now, there are a number of reasons that drove that, one of which, and the most important item, is that the NIK, the price the PE, the price or earnings ratio of NIK at that time was seventy. Right, So to give you an idea, our average price or earnings ratio for how expensive stocks are

is around nineteen. Right. Now we're at like twenty three twenty two, so we're a little bit expensive relatively speaking. They were at seventy, right, So that gives you an

ideas of how expensive those stocks were. The other thing is that Japan is a very homogeneous society that has a demographics issue that the population is declining, And so when you put all that together, then you had just a situation where their economy was not growing that much, their companies were not doing that well, and oh, by the way, that those very expensive companies came down dramatically.

So you know, could it happen here in the US? Sure, I mean, anything is possible, But is it likely to happen? Certainly not anytime soon with our economy how vibrant and dynamic it is, and also with our demographics the way they if they continue the way they do, but also under the current evaluation structure, it's just not something that

it's anything likely. But now you certainly could have a situation like you did in nineteen ninety nine where a certain asset class like an astec is overly priced and the other ones do well. Later well, folks, we spend an hour together, I hope you'll learn something. As always, it's been great to be here with you. You'll listen to Let's Talk Money, brought to you by bouchet and a screw. While we helped our clients prioritize their health,

while we manage their wealth for life. Folks, Happy Veterans Day tomorrow. Take care of yourself and take care of each other.