Welcome to Financial Detox, where host Jason Labrum and co-host Alex Klingensmith simplify the complex, share industry secrets and provide proven strategies designed to take you from financial insecurity to financial independence. Today’s episode begins with an introduction to Jason and Alex and how they began this podcast. The world of financial advisory can feel convoluted and overwhelming, but this show aims to educate listeners and clarify fundamental concepts that will help you achieve financial success and peace of mind.
Our hosts dive right into some fascinating topics, beginning with Cryptocurrency and Blockchain technology, and how it will change the way we think of and use money over the next ten years. They discuss the role of government regulation in currency, China’s refusal to accept Bitcoin due to their inability to manipulate it as a medium of exchange, and why socialism always fails as an experiment. You’ll also hear about the importance of allowing free market capitalism to play out, having a diversified portfolio, and investing in Cryptocurrency only if you are comfortable with a higher degree of volatility.
Jason and Alex then move on to the very real topic of inflation. Warren Buffett recently stated that we are seeing substantial inflation and higher prices, but Jason and Alex explain that there are ways to adjust your portfolio to prepare for this. Certain assets perform better in inflationary environments, such as inflation protected bonds, real estate, stocks, and commodities.
They also break down the four main components of a proposed tax increase under the current administration: Doubling capital gains tax rate; increasing corporate tax rate; increasing state tax rate and decreasing the exemption amount; and changing or eliminating step-up in basis. They explain why increasing corporate tax rates will be prohibitive for business owners, forcing them to spend less on innovation, computers, and hiring employees. Changes in state tax will also involve an estate tax, meaning people will have to pay even more tax on their hard earned income after they pass away, leaving less than 30% for their heirs. Eliminating the step-up in basis also means that those heirs will have to pay significantly more tax on the dividends of their inheritance as time goes on. And doubling capital gains tax simply punishes people for investing, and prevents them from using those gains to invest in local businesses, create jobs, and feed more families. There are certain strategies you can use to mitigate the effects of these possible tax increases, however, so be sure to ask your advisor about incorporating these tactics into your financial plan moving forward.
For more podcasts and information, visit FinancialDetox.com. You can also call (877) 707-8889 with questions, comments, or feedback. Thank you for listening.
In this show you will learn about:
-Cryptocurrency and government regulation of currency
-Proposed tax increases under the current administration
View Transcript of This Weeks Show Here
Speaker 1 (00:01):
This is financial detox, helping you retire with confidence. Featuring Jason labrum, certified financial planner and founder of Ida wealth intelligence driven advisors. For over 20 years, Jason has shown people how to steer clear of toxic advice, achieve financial peace of mind and manage their wealth for maximum impact. Join Jason and cohost Alex Klingensmith. As they simplify the complex share industry secrets and provide proven strategies designed to take you from financial insecurity to financial independence. This is financial detox.
Speaker 2 (00:39):
Hello. Welcome to financial detox podcast. This is Jason labrum, your host with Alex Klingensmith co host of financial detox. Hey Alex, what’s up. This is, this is kind of interesting. It’s fun. This is the first time we’ve recorded a podcast only show podcast only. I did have to remind you and remind myself that we get to go a little more paced, right? You have to be radio show and podcast lens. So this is going to be we’re trying something new. Yeah, be good. No more radio show for now. We’re just going to take a little pause. We do this about every, what three years, or take a little positive, just reassess pre COVID days. It was when traffic got bad. Cause the track opened up. Remember the tracker, the Belmont race track would open up and we’d be like, we really don’t want to drive to the studio anymore during the summer.
Speaker 2 (01:22):
So, and we have this awesome studio to use, which we totally under utilized, but that’s okay. Okay. Now we’re doing a podcast in it. We should remind listeners those that have never listened before, especially what, what, who are we, what do we do? Why and why are we doing a show? Right. Okay. Why don’t you say, okay. I’ll tell your story. Um, my isn’t my story. It’s our story. And you started it though. So I think you did, you started labor and capital advisors right back in 2009, September, 2009, turn into labor moth management today. It’s intelligence driven advisors through massive growth. We have over a thousand clients nationwide. We have four offices. We have 20 great employees have a half of which are or are fiduciary full-time wealth advisors. Yep. Um, so we serve many, many, many private clients, individuals and families across the country.
Speaker 2 (02:11):
We serve many, many institutions through businesses and institutions through 401k plans and business retirement plans, foundations charities. We do all this in a full-time fiduciary capacity, right? Yep. So we do not get compensated by anyone on the planet except for our clients. Right. Which is nice. Well, and I feel I’ve got, I like a disclaimer on that regarding insurance, right? Because if we do an insurance product where they’re still not sometimes the best insurance product, whether it’s life insurance for our client may be a fixed index annuity or something. There are times when the best solution for the client, isn’t a fee-based solution, meaning that we charge a fee for that instead. So then the insurance company pays us. The difference is that as a full-time fiduciary, we disclose that compensation not kind of, sort of in a roundabout way. No, we actually disclose that sensation.
Speaker 2 (03:01):
I’m glad you brought that up because later in the show we’re going to hit on insurance. And so it’s good to know how that fits into what we do and how we do it. So we do all this for clients. And then, and then about five years ago, if you had this epiphany and decide and desire to try and create a, you know, remove even more conflicts of interest in what we, and how we put ourselves out into the universe and create financial detox, right. Consumer advocacy brand. That’s what it’s about. You know, the problem is Alex, there’s so many intelligent people who may be very sophisticated and do great in business or be really good at things they do, but they don’t understand the inner workings of the financial advisory situation, the financial advisor advisory environment and how financial advice is being delivered. We call it toxic advice in the book, financial detox.
Speaker 2 (03:48):
Yeah. There’s a lot of scenarios where it’s pretty bad. And unfortunately you just don’t know what you don’t know. So financial detox was born out of trying to help educate people about some of the basics. It’s pretty basic, but some of the fundamental things that you need to be aware of, I mean, even mutual funds and share classes of mutual funds and the different internal expenses right there. I probably lost half the audience, right. Mutual funds and share classes and think about what that is. We were talking to, I was talking about that this was Bo our 401k guy, and that is his titled by the 401k guy. And he said to Greg guy, the way someone’s personality and he’s already keeping up, he’s doing great. Um, but we were talking about, we had a HR person on the phone during a 401k review and we’re breaking down the expenses of plan and it’s a new plan to us.
Speaker 2 (04:41):
So we’re about to change that the whole expense structure and fix it and make it much better. But we use the word share classes and internal expense and ETFs versus mutual funds. And I went and we looked at the conversation in her eyes and the conversation went, you could see her brain go, huh? She didn’t know what we were talking about. Which how many people do an internal expense? What is an internal expense that an expense that comes from inside the house, outside the house, inside the office, inside the, you know, what is it? So that’s hopefully what financial detox and the book does a really good job with that. So yeah, I give to every client, I don’t know if you knew that. And I say, here’s a book I give him. Yeah. That book. And then if they’re near or in retirement, I give them the purposeful retirement book, sell someone else.
Speaker 2 (05:24):
But yeah. Right. But it gets, it gets you on track and just understanding those basic things because it’s, it’s a convoluted world, but the power power, or the flow of assets and the number of individuals and, or small businesses seeking out true fiduciary advice, what that means, what does true fiduciary advice mean is pretty phenomenal. I mean that, that’s, there’s a lot of people seeking that out and starting to at least one understand what it is a problem is though, too. So many advisors when asked if there are true fiduciaries. Yes. Even they’re not, well, some of them, I would give them that I will give the most in the benefit of the doubt because some of them are friends. They actually don’t know. They’re like, I think I am, I’ve been told, I was sometimes I’m just gonna say yes. And they probably want to be there.
Speaker 2 (06:08):
They just are in this struggle. I used to say that these are, they’re great people that work at the big wirehouses. Yeah. Lots of them. It’s the, it’s the structure within the operate, which is actually the part that’s flawed for the consumer. Right. It’s not designed for the consumer, which I mean, it’s not transparent. No. And if you think about most businesses, unfortunately the businesses is going to protect you. It’s self first and that’s that inherently is true with most businesses. Right. Healthcare is next. Oh, that’s scary. I mean, that, that can, you can go off on tangents about, you know, this whole past year and a half of what he making the money there and yeah. The conflicts that exist there. But yeah, I love this, what we do with this, this type of show, whenever we’d do the financial detox thing, because it really is.
Speaker 2 (06:48):
Yes we are. Yeah. Yes. We have clients. Yes. How it’s made, how we make money as a company and as individuals, but this education is free. Right. You know, we want to be able to help people not listen to the news and not make bad decisions. And that’s what it’s about. And today we’re going to cover some things that are going to be their top times. Let’s go, let’s talk super top of mind. Crypto has gotta be in the conversation because I mean, how could it not be? I mean, I can’t get away from it every day. Somebody wants to talk about some part of it. It’s very interesting, right? I mean the whole crypto space and it should be because blockchain technology is totally new. And I think the way we think of and use money and even credit cards will probably change dramatically over the next 10 years, hit inflation where we have to hit inflation.
Speaker 2 (07:28):
Because again, I can’t get away from a single day lately without somebody’s valid questions, valid points, uh, concerns. And then of course this impending tax change, you know, what, what, what the administration is trying to push through for, for taxes and it’s changing every day. And so there’s some, some things we’re going to hit on there that are, I think are probably more important than the first two, but I think they’re all interesting. So yeah, exactly. Yeah. That’s the show today? Well, let’s talk about crypto. So, uh, crypto is an interesting, you know, uh, last night, yeah. Last night docs, my boy was asking me, so what is it, how does it work? And I was doing my best to explain it. And I think I got some of the points, but I mean, there’s still even pieces of it that I don’t totally understand.
Speaker 2 (08:07):
I think there’s pieces that we’re all being honest, that all of us don’t understand. Right, right. Um, he was saying like, well, how do the miners make money then? How do they mind? What does the mining mean? Do they have pics? Do they have shovels? You know what I’m I know they have computers and then, you know, we’re talking through that and it got, it got pretty deep, pretty quick where I was like, well, I don’t know that answer. Um, and then amazing that kids are the ones that seem to cut through the noise so fast. They just are straight to the point. It’s beautiful. Right. It’s and so those cool. So crypto, um, you know, our view on it as long band, we should understand it. We should continue to do research on it. Uh, we think that the blockchain technology is obviously undeniably interesting and potentially a game changing technology for the world that money and money supply and transfer of dollars exchanges.
Speaker 2 (08:54):
And Babby, it can be used in so many different ways still. I, I, I would say I don’t totally understand blockchain technology and exactly. I, you know, I couldn’t write an algorithm on it or do any computer work on it, but yeah, but it it’s interesting. And then you look at the what’s happened with the price of Bitcoin. I mean, I was looking at it last night when it was down, uh, late last night, it was down significantly more than even it is now. Uh, last night it was down, I’m pulling it up here, but, and this is like, today’s May 19th. Right? And if you just rewind a month from now, it was at all time highs and lows. And it looked like there was no limit because all these people were doing things to pump it up even more. I mean the one year return on Bitcoin right now, one year return is 295% that’s today with the big recent sell off.
Speaker 2 (09:42):
Right. So there’s two. Now, if you look at the one month return, it’s down 30% in the past month, in a month, because like with the China thing and the Elon Musk thing, and yes, exactly. What is the China thing? I think what’s happening is China. It was basically saying that they’re not going to allow Bitcoin in the banking system and the banks are going to accept Bitcoin, right. And they’re just not going to allow, and China’s a communist country. So they get to decide what they want to allow. It’s not a free people. So this is the long ban. I think the biggest headwind of Bitcoin and or cryptocurrency is governments not allowing or denying or putting up major regulation to stop it. Why would the governments do that? I think the reason why they would do that is because it, it, it could, it’s so good.
Speaker 2 (10:24):
The free exchange, right of money and or information that’s self verified through the own system itself. Right. That can’t be manipulated. Can’t be hacked. Can’t be recreated. You can’t just print more Bitcoin. There’s a finite number of Bitcoin tricks or something. It really is. No, but it’s that cool? Yes, it is. And so you can’t just create more, there’s a finite number going to be created. Therefore, if it’s used as a medium of exchange, it can’t be manipulated by a government in any way, shape or form. And governments really want to manipulate their currencies. That’s how peculiarly now, which ties into inflation and protecting regularly. When you look at third world countries and you think about the massive number of people in this world who don’t have access to clean banking, to a safe place to store money, they don’t, I mean, look at Venezuela, right?
Speaker 2 (11:19):
The, the, the, the, this Waylon money becomes worth nothing overnight. It happened in India. It’s happened in all of basically socialist dictatorship, communist countries at some point point in history, sometimes even in countries. Like, so I’m thinking of like Argentina, for example, which is not. Yeah. And they just messed up their own thing. But so it’s, it’s a dangerous thing. It’s and, and you look at what the us is doing with money and you have to wonder, oh, wow, how’s this going to unfold? Right. We’re giving out, we’re paying people to not work. Yeah. We’re paying people, we’re money to stay at home. Then to go be a productive member of society. Why would any rational human or government do that? Why would anybody have rational thought or mind vote for a politician who is going to be a proponent of paying people to do nothing, to not be a productive member of society?
Speaker 2 (12:13):
Right. The whole concept of socialism is that we’re all going to all get together and do our equal Sharon split, everything equal, right? The reason why socialism fails in every experiment across the globe in all of history is because when you put a bunch of people together and say, let’s all do equal work, we don’t do equal work. There’s lazy apathetic, productive members of that group. And there are highly motivated, energetic, productive members of that group. So the work is not even therefore the distribution of the wealth and the benefit is also not easing even as it should be. So that’s the trick is now you have governments for even the U S right. Who’s doing things that no rational person, I don’t care if you’re Democrat, or if you’re a Republican, or you call yourself an independent or a libertarian or any one of our political parties that you can’t say, it’s good to pay people to do nothing.
Speaker 2 (13:10):
It’s good to take from people who are out there working and contributing to society. You give money to somebody else. That’s a problem. Right? So, and, and so that’s embedded in the fact that we’re just printing money and just pumping it, trying to protect the economy, let it fall, let it do its thing, let it go through a natural cycle. But we haven’t done that since 2008. If you think about it, we’ve propped up this economy and pumped cash into it since the recovery of oh eight, which I can’t argue that that didn’t work. And that wasn’t good because we did recover from that. It would’ve recovered. Anyway. Some of the argue that even that like bailing out them too big to fail companies, if you would have done it a different way, maybe you let them fail. Yeah. It would have transferred wealth maybe around in a way where it would have been actually the right way to train or not.
Speaker 2 (13:52):
I shouldn’t say right or wrong, but in a different way where some of these other problems would have been solved back then, that way, and new innovation and new and energetic energy go down, let the insurance companies get really stung. And then you, and then you kind of have a reshuffle of like, okay, what’s really a solid business plan and what’s not, you know, right. No, no doubt. But now they’ve manipulated that so much that even look at like what’s happening in middle market lending, right? If you want to, if you’re a middle market company, and by that, I mean, let’s call it a hundred million dollar revenue company to a billion dollar revenue company. You really can’t go to traditional banks for money. Like you’re trying to do a big acquisition acquisition, you know, hundreds of millions. And you’re trying to do a big product launch or you’re developing or launching or doing different things.
Speaker 2 (14:35):
You can’t go to a traditional banking because of the regulation that came out of that. So now what’s happened is there’s a new emerging opportunity for investing in the private markets and private debt. But all this is manipulation of free market capitalism and free market capitalism. When you allow free markets to work, to do their thing, then it’s, it’s good for prosperity for all people. The lower ends of the economic status, the higher ends, because what happens is lower end people get jobs from higher and people, they get work, they satisfy their family. It goes around and you climb your way up that free market capitalism chain, the crypto. So back to the crypto thing, kind of put them, put a, uh, a finishing note on that one. I mean, our, our, I think our thought on that is it’s good to learn about. It’s important to learn about.
Speaker 2 (15:19):
And if you’re going to take a risk and meaning, if you’re going to invest in it through whatever the forum is, whether it’s I did it on PayPal, remember I bought $20, $20. Does that work well? So he bought it lower. I bought it at 20, it went to 34 in a week. Right. I sold the $14 of, oh, quilts, profit. That’s how this is how risk averse I am with gambling. Right. I kept my $20 on the table. We’ve got the forks. And now this is real. There’s a real numbers, zeros behind this is it. And the 20, I haven’t even checked because I’m sure it sounded like 12 or something. Right. So, well, yeah, I mean, you’re talking about an asset class that over the last six, or over the last 12 months, you know, you’re up 300, but you have to be willing to be down 30% in, in, in the 30 day period and maybe more.
Speaker 2 (16:02):
And so I would argue that most human beings are not capable of dealing with that kind of volatility with any serious amount of money. Correct. Because I’ve seen firsthand, and this is something I, you know, financial detox. We talk a lot about, this is how confident and courageous people get. When markets are up, everybody wants risk. I’d want where it’s going. Why aren’t I getting more vault return? Why aren’t, why am I not? This is I’m simulating a client. Why do I not get more return? Or, you know, or I should be in all stocks, or I should go do this and that. And then when the market’s down, it’s the same person that says, why aren’t I getting more return when the markets are up that are going, like, this is terrible. I can’t handle this. Let’s go to cash and wait. Yeah. So there is a human, but that’s a human thing, right?
Speaker 2 (16:41):
We it’s fear and greed and we try to protect ourselves. And then we also want to be part of anything. That’s great, but it doesn’t work when it comes to investing. And so to be in Bitcoin, one or 2% of your portfolio or some cryptocurrency. Great. Makes sense. Hold on to, it’s highly secular. It’s a flier. It’s really high. I mean, 40% in a month. And that up 300% a year. I mean, this is crazy, right? Yeah. So you know that this is a new technology because it’s trying to find its way and the, the opinion sways and can change so dramatically. Okay. Elon Musk, even, wasn’t he the one that said we as a company, Tesla going to accept it. Yes. And he changed his mind a couple of months later. I don’t know why, but I mean, that’s a pretty big, like, I mean, we change our minds sometimes in our business.
Speaker 2 (17:24):
That’s a big one, a really the big one. And I, you know, who knows why? Right? I mean, I don’t know if anybody will ever know the real reason. Is there some, did he short Bitcoin? I mean, I don’t know, what’s the deal he’s already gotten in trouble for that kind of stuff too. Is he interesting for sure. The fact that, you know, one person could have such an impact on the price of something that’s supposedly maybe be the new future of the currency. That’s not good. Okay. That, that really puts some doubt into the validity of it. If one dude can change the price of it. I think it’s beautiful case study for efficient markets though, which is what is the foundation of our investment philosophy. Because if new information can come out, that affects the price faster than fast as lightning, right? It’s already too late to respond with.
Speaker 2 (18:09):
This just reinforces our investment philosophy, which is be diversified. First risk and reward are correlated and then diversify and rebalanced accordingly go, yes, it’s not that difficult. That’s the thing is I think people try to make it harder than it needs to be. The difficult part is being tried and true to a philosophy and a discipline and like, uh, free men or whoever said the important thing about investment philosophy is that you have one, but he also said both. The important thing about investment philosophy is that you have one dimensional fund advisors that you just have one, but that you have one, just one. Yeah. So is it correct? Because he has a Bitcoin or Ethereum or what is your one [inaudible], whatever it is that was made is actually a joke. Yeah, that’s hilarious. All right. So Bitcoin’s interesting, you know, it’s wild, it’s a wild ride.
Speaker 2 (18:59):
You know, I play golf with a friend. He calls himself the Bitcoin king and he thinks he was, uh, five days ago or 10 days ago, he was saying I’m about any, he likes to talk about his money. It seems like most Bitcoin people like to talk about how much money they think they have or don’t have. But I mean, he says he has $2 million and today he does down to about a million. That’s a tough break. Right? That’s fast. Yeah. So, I mean, it’s crazy. Get ready to, to ride the rollercoaster if you’re going to get on that training. But, um, there are getting to be, by the way, let me just finish on this. There are right now multiple ETFs that track Bitcoin does. So their job is to track the price of Bitcoin. Those are out of Canada, there’s eight ETFs that are in approval stages, U S United States ETFs that will track a Bitcoin price.
Speaker 2 (19:43):
That’d be an interesting way to own it, right? You’ll get the price movement of Bitcoin by owning that underlying ETF. And then there are also closed end funds and different exchange funds and different types of funds where you can actually have underlying Bitcoin as the holding. So they hold Bitcoin in cold storage and you own that fund and you have a representative percentage ownership of that robotic coins. They have real access to Bitcoin. So there are ways to do it. I have a bunch of ticker symbols that if you want to get access to, I’ll send you a list of the ticker symbols of these different ones. I’m not, I’m not validating them. I’m not saying they’re good. I’m not promoting. I’m just giving you, here’s some things to go do. Some research. I think people on this show too, if they’re, if you’re thinking about how do I haven’t bought Bitcoin yet, or I have bought it, I’m trying to think of how do I apply it to my overall investment portfolio.
Speaker 2 (20:28):
Yeah. I think we’re probably a really good resource for that because we’ve been getting this question for five, six years, at least. And we’ve actually spent our investment committee has dedicated real time and energy towards learning. Do you apply to your overall portfolio? Do you not? You know, what kind of investor are you, what kind of behavioral tendencies do you tend to have with volatility? So we are a good resource for those things. Yeah, we totally are. And I mean, like, literally I’m looking at these ticker symbols right now, you know, E B I T E T H E. There’s an a, and I’ve done a bunch of research on all these gray scales, a big player in the Bitcoin space. GBTC O BTC. There’s a bunch of these that you can get access to a big one. We, by full disclosure, we haven’t put it across the board on our client accounts yet.
Speaker 2 (21:09):
Um, we’ve recommended to some people who get it, who’ve asked for it and who can handle that type of volatility in small amounts and various smaller amounts. All right. Let’s rock on. Let’s talk about inflation. Okay. Inflation’s not as exciting, but it is real. And people have been asking about this for again, a long time. It’s a real thing. It’s huge. And I was just pulling up this article before we were talking about it. Cause you know, uh, Warren buffet quoted and I, and I quote, we are seeing very substantial inflation. Buffett’s said that the conglomerates annual shell shareholder meeting, he said that a couple of weekends ago, it’s very interesting. We are raising prices. People are raising prices to us and everybody is accepting the higher prices. So what I, I want to say to people that are really worried about inflation and they’re like, think of the psychology of this kind of thing.
Speaker 2 (21:57):
Right. It’s okay. You don’t have to be afraid. And here’s why it’s just like when you’re out camping in the desert or in the forest and you know, there’s a storm coming, you know, it’s coming because in order to be put in that position, you’ve thought about what could happen while I’m out there camping or whatever. Right. And if you see there’s a storm probably on the horizon, you prepare for it. You don’t just get there and then hope that it’s okay when, when the storm comes. Right. I hope you don’t. And if you do, then you won’t do that again. But so it’s, it’s been okay. That’s, inflation’s coming. It’s been okay for years in the sense that you can do things with your investments to prepare for that. Yeah. All right. You don’t have to be scared. It’s going to be okay. Also some assets that do better, you, you, so you do need to pay attention.
Speaker 2 (22:36):
Right. And, and I think what’s interesting, Alex, if you look at the last four or five years with the exception of some short, short timeframes, like the shortest bear market we’ve ever had on history, I think was this most recent vehicle crash? The COVID crash was like a 47 day bear market. I mean, that’s crazy, right? The normal bear market is 18 months. It goes down 20%. It went down 35%. It was down for 27 days or 37 days or something. You’re talking about us stocks in general and the docs across the board. I’m being very general. That’s okay. That’s good for clients here because the bond market was stable. If not positive, a tiny bit, a little more stable. There was some, no, there were some moves in bond markets to the downside and stuff. Yeah, definitely. But so, you know, and then 2016 started rough worst start to the year than any year we’ve had.
Speaker 2 (23:18):
But by and by and large, a few really quick bleeps. I mean, we’ve been in this unbelievable rising asset environment from us stocks and bonds standpoint, but the interest rates are going down. Bonds have gone up, stocks have gone up, everything’s done good people start to think they’re really smart when it comes to investing. We’re at right now for us as a firm. I think it’s harder for us, although we’re not having a hard time. Thank goodness, but it’s harder for us to bring on clients than any other time because people feel like it’s working. Why change? Right. It’s when peop things really start coming undone is when the less intelligent folks will go make a change. And I think the more intelligent people will start right now saying, wow, it’s been really good for really long. I need to be making sure that I got a handle on this.
Speaker 2 (24:05):
I need to make sure that I’m thinking about adjusting my portfolio for potential inflation. What type of assets do well in an inflationary environment? What assets don’t do? Well, bonds have been on this terror for, so for 40 years, so right. A full on 30 year bull market, just crushing stocks doing really well too. So, and it’s been tech stocks, tech stocks, you know, every 25 years or so, we go through this somewhat of a technological boom. It’s about every 25 years. And it typically lasts five to 10 years, four to five, three to seven, somewhere in there. This is, um, there’s some pretty good data to back this up. These, we go through these little mini technological revolutions, and then we kind of hit a precipice and, you know, chip speeds get as fast as they can for the time being the internet comes out.
Speaker 2 (24:47):
And then, and then we hit kind of a wall for tech for a while. And then some new innovation happens in tech jumps. Again, are we at the end of that technological revolution? You know, if you think about the internet and you think about the advance of Bitcoin and you think about just the speed of chips and now the shortage of chips and the shortage of supplies, really good reason to potentially be nervous or think about the fact that we might be at the end of this little technological revolution, then for there could be a big sector, a rotation out of technology stocks, and they’re not going to be the best performers. These are the types of things people need to be thinking about are they’re having a conversation and getting back to some basics of investing yeah. Said inflation too. I mean, it all comes back to knowing what your, what your goal needs to be like, how much money your target rate of return.
Speaker 2 (25:33):
We call it right in your financial planning process. When you sit down and you look at everything, you’ve got all your assets, all your liabilities, your income, your expenses, taxes, inflation, inflation, right. I said, inflation lasts. Maybe it should be first, but, and then you project out the future and you stress test it with things like software that Mike does Monte-Carlo and you say, okay, I need to, I need to make 7% a year on my overall investment portfolio, or I need to make four, or I need to make 10. Right? Like, and then also, what, what am I going to do to prepare for that story? Like, how am I going to react and respond and rebalances the jargon, right? How am I going to rebound rebalance when the storm hits? Am I going to, and like put up tarps and stuff and then do that right when it’s happening or we’re going to do that an hour before, you know?
Speaker 2 (26:13):
Right. Well, it’s not that hard, right? I mean, you can build a portfolio that, you know, what the expected volatility is give or take. I mean, you can’t, you can’t know it. Perfect. Unless you put it back big Bitcoin in there. Right. And you’re like, oh my gosh. Yeah. Right. And you can also, no, you know, roughly speaking what the volatility is going to look like, you don’t know when it’s going to happen, but you know what it’s going to look like, but inflation is the real deal it’s happening. And unfortunately our CPI, consumer price index, or most common measures of inflation, aren’t really actually very good of inflation. Um, because they’re, they’re generated by the government to try and so that they can make them run so they can make the numbers look the way they want, as they continue to pump currency into the marketplace.
Speaker 2 (26:55):
I mean, okay, let’s just do this simple, right, Alex, let’s say we have a hundred million dollars American dollar bills in, in supply in the economy. Um, then there’s some finite supply, right? There’s a hundred million dollars of supply on the economy, but then we just go on and just double the number of dollars in supply. Well, it makes dollars worth less because it takes more of them now to do something because they’re less valuable. There’s more of them. Yeah, we have, this is going on. So what, the things that you can take away from this shows the listeners, what does well, and that, you know, there’s, there’s such things called inflation protected bonds. So you can buy bonds that adjust the interest rate that it’s paying you adjust up as inflation goes up. Pretty cool thought process in a time like now also real estate and stocks tend to do well during inflationary environments are better.
Speaker 2 (27:47):
And also commodities tend to do REL the prices of real assets co even airplanes do well. My dad and I were talking last night about airplanes. And you look at the late seventies and early eighties when inflation was crazy. And my dad was in a car business at that time. And they had to fly back and forth to buy cars for the auction and all that kind of stuff. And so they, he said, every plane that we bought during that timeframe, we always sold it for more than we paid for it. Yeah. Because it was a hard asset that was worth more money because there was so many dollars floating around that. Then the prices of things just kept going up because everybody has money, particularly when you’re even going to pay people who don’t work more money than they made when they were working.
Speaker 2 (28:28):
Like if you paid people who were out of work, cause they fell on hard times and they were legitimately trying to get a job, but there’s no way to measure whether people are legitimately trying to get a job. Right. They would say, if they’re trying to measure, it’s ridiculous over tens of millions of people. And there’s no chance embarrassing. Yeah. It is embarrassing. But if you paid people 25% of what they normally make, when they’re unemployed, guess what? You don’t have to worry about whether or not they’re trying to get a job because they’re going to go get, we’ll have to. Yeah. Right. They’re going to go get one and you don’t provide food stamps and free school and free this and free that, you know, you make people be contributing members to society or their option is to live in poverty, which is an option.
Speaker 2 (29:06):
You can choose certain parts of the country or the world and go to them, go live on the beach and Costa Rica, man. I want to switch to taxes. Okay. I don’t, I want to make sure we have enough time. Yeah. And I think, yeah, so this is, this is probably the most, I mean, crypto is interesting and exciting and fun. Inflation’s real. Whether you like it or not, and it’s okay, it’s going to be all right. But tax, this tax thing has me actually personally kind of nervous. Um, and, and for good reason, I mean the four, the four big pieces of it, the, and there’s a, by the way, I think it’s like a 37 real bullet points of this thing. We’re not going to do that in the show. But the four big ones that I thought worth mentioning were number one, doubling the capital gains tax rate, number two, increase in corporate tax rate, number three, increase in estate, state tax rate and decrease the exemption amount.
Speaker 2 (29:52):
Right. And then number four, change or elimination of step up in basis. So those are lots of like packs jargon things. But if you’re, if you’re listening to this show and you are at all wealthy, and I don’t know the definition of wealthy, depending on where you read it, but your net worth is over, let’s say $2 million even, and you’ve invested in anything ever outside of your retirement account, it’s going to affect you. Right? Yeah. It’s a real problem for particularly the people who are producing, who are employing people. So you can’t hate the rich, if you want to get a job and make money because the rich are the ones who have the companies and are going to pay you to work for them. Right. When’s the last time you got a job and made a great income or got a promotion or got a bonus from a really poor person, right.
Speaker 2 (30:39):
Or an unemployed person, or, you know, now I know the government’s paying you, but you might want to wonder why they are, they’re buying your vote. Right? So we, we have, this is I personally, uh, um, and politics aside are Paul’s ticks in the front. I don’t really care. Um, this is bad policy. If we have been poor, we have proven time and time and time again, that reducing taxes and reducing burdens and, and, and regulation on companies and individuals is good for all people in this country. And so it’s just, and at the time, because they do affect different types of people. Like the, the one let’s let’s hone in with when you’re talking about the corporate tax rate, right? So if you’re, if you’re someone who right. Tons of business, which we are, by the way, um, this is near and dear to us, what is that me?
Speaker 2 (31:35):
W what is the pro and the con there? Is there a pro yeah, not really. I don’t think is there a con there you pay more taxes, so you’re doing your business. He was also already really, really difficult to run a business in it’s expensive, and it’s prohibitive for, you know, employee protection is important, but it’s not so important that it’s like impossible to run your business, right? That’s not, that’s not fair. So now, if the corporations have to pay more in tax, what’s that going to do? They’re going to spend less money on innovation. They’re going to spend less money on computers. They’re going to hire less people because they have more of a burden. And quite frankly, they’re just going to produce less. They’re going to be less productive because why produce more when you have to pay more in taxes? I mean, we’ve seen, we’ve seen it very, very clearly in the last, uh, three or four years by lowering the tax rates, how much money came to the United States back in from countries, the investment that started happening, we became an energy independent world, a country, a completely energy independent country, which by the way, would be probably the single most important piece of being a self-sustained free people and free country is to be energy independent, not depend on other people, but that’s gone now.
Speaker 2 (32:44):
So for those that are listening, that are, that are in this particular camp, um, that are affected by this particular part of the potential PACS change. What, what kind of solutions, you know, would you look to provide, what did the we look to provide for these people move off shore? So I would, I would probably say it has more to do with, you know, really getting, getting the CR the great tax team that is at, at, at a con with a more complex type of entity structures and compensation arrangements, and all kinds of things that are, that are there and exist already, um, that are going to allow you to potentially mitigate this increase in corporate tax rate, right? There’s only so much you can do, right? I mean, the thing that’s crazy about this as right now, or going back to some numbers around 2017 to 2020, the top 1% of income earners in this country paid more than 90% of all the government tax receipts.
Speaker 2 (33:46):
1% of human beings in this country paid 90% of the tax fields for ultra 1%. Now, that’s you too, by the way, you’re in that 1% think, ah, yeah, probably very close. So 1% of the people paid 90% of the tax. So what happens when you go to really tax those 1%, a whole bunch more, you don’t get that much more tact. You can’t, you could take all of their money, a hundred percent of their money, and you still haven’t solved the problem. The problem is our government is wasteful. Our government spends too much money, and it’s mostly on entitlement programs like Medicare and like social security and unemployment and food stamps and things like this. This is the problem. Military is big spending. I happen to be a fan, but, you know, because I think that our best defense or our best offense is a strong defense.
Speaker 2 (34:42):
I’m sure they can get more efficient with how they use their money. Like, it’s, that’s probably the first place you look when you’re, when you’re thinking from, as an operation, I’m an operator, right. So I’m like, okay, let’s first look at the big ticket stuff and like, make sure it’s efficient. I’m not saying we take it away, but let’s just make sure we’re not wasting money here. Yep. Let’s switch for a second to, um, uh, this is state tax one. This one is really, really, um, interesting because is what you’re doing there. If they, if they say that, okay, if you die now and your states worth more than that, $23 million, if you’re married anything above 23 million is taxed at 40%, they also call it a death tax. Right? Yep. There’s not a lot of people out there that are worth more than 23 million when they pass away now.
Speaker 2 (35:21):
Uh, and, and in 2020, only 0.1% or only 1900 of states across the whole country, 1,900 states that actually fell into that last or in 2020. Now, if that number comes down to where it was even close to where it was the back in oh four, for example, it was $2 million per person. So that’s 4 million total, 4 million total effects. A lot of people like, like way more like catastrophic more. And so the thing about that one where it’s, it’s really, um, it’s the American dream, right? And there, we all have their different definitions of what the American dream is. Home ownership is one. Sure. So you’re basically penalizing people and legacies, families, grandparents, parents, kids, you’re punishing them for living the American dream financially, right. And saving money and being good savers and being, being prudent with their money that he not only wants to bite and does not only want to change the estate tax number.
Speaker 2 (36:15):
So, and by the way, state tax, you could just call it a death tax. That means when you die, you have to pay tax of all your hard-earned money that you’ve already paid tax on, right? You’ve already paid tax on it. You are taxed on your income. When you earned money, you are paid property tax. You paid state income tax. If you live in California, you’ve paid local taxes, you’ve paid sales taxes, you’ve paid tax on all your money, but now they’re saying estate taxes. When you die, we’re going to tax you again. And we’re going to take that money away from you and your savings and not let your heirs get it. Uh, Biden’s proposed tax rate for the estate tax is 77% starting, right? So literally they just take it off of the amount over the threshold, whatever that threshold, 70% goes to the government.
Speaker 2 (36:56):
And I’m not, I’m, I’m a, self-proclaimed complete amateur when it comes to politics. As you know, I have to imagine that are the ones we’re discussing right now. That’s one that won’t go through because even Biden himself and the people that are writing the law, they are these people that have these problems, quote, unquote, right. Rich people, problems, change, or eliminate step-up in basis. And is another one it’s the same kind of thing. Yeah. Yeah. It’s just crazy. Cause you’ve already paid tax on that money. You pay capital gains tax. When you sell anything during your life, the step-up in basis means that when you die, your heirs, get to step up the basis to that date of death valuation. Therefore that money is tax free to them. And then as they go on, invest it and they grow up. They pay taxes on the dividends and the interest and whatnot, which seems to make a lot of logical sense, but we’re proposing not.
Speaker 2 (37:42):
So now when you die, your kids won’t get a step up in basis. So they’ll have potentially substantially more tax. It’s a way to, it’s just a way to tax people and strip away. These are big things these are, and if they don’t dovetails into doubling the capital gains tax rate. So if they double the capital gains tax, right, when you sell something that you’re, you’re still alive in this one, by the way, you don’t have to die. The other two when you’re dead, but this one you’re alive and you buy something, you buy your Bitcoin and it goes up on 300 and now you sell it, you know, before you could keep, well, it was 15 or 20%. And now they’re talking about making an ordinary income and it’s are, I mean, that’s just almost a sure thing going to happen. That it’s going to be ordinary income for people over a certain income.
Speaker 2 (38:21):
So now you’re just punishing investment. You’re punishing people to say, you’re getting mad. You’re getting me gutters. And you’re punishing people to invest in businesses. You’re punishing people to invest in real estate to develop, to start a restaurant in a local area, which by the way, creates jobs, right? When people invest money in buy things. When I invest in a publicly traded stock that publicly traded company is using that money to grow and to hire more people and create more jobs and feed more families. Right? This is how it works. So when you start punishing people for investing, as opposed to rewarding them, that’s crazy. And we in our country have the, if not the, one of the most progressive tax codes in the union, in the world right now, which means that the more you make you don’t only pay more because you’re paying 10% of your tax.
Speaker 2 (39:13):
You pay a higher percentage. So we already have one of the most progressive, no return on that, right. Basically you hit a certain point. You’re like, I don’t even want to do. And he’s not a point you cap it. Yeah. It’s not worth it. So interesting challenges. I think we can wrap it up with the fact that, you know, there are solutions, there are ways to work around this, right? It’s like what happened 10 years ago or so, and this is where the insurance world and the estate planning lawyers world, they’re going to get a ton of business because of the, yeah. Any one of these four things we’ve covered. And there’s 33 other ones, by the way, that we’re aiming to go down. Yeah. But the insurance agents of the world are going to make a killing off of, well, hopefully we can, we can help people by providing the right type of insurance or solution in a comprehensive manner and not just going to an insurance person who sells insurance.
Speaker 2 (39:58):
And every solution is more insurance, more insurance, because you can overdo it. But there are always loopholes. And in the case of insurance, these there’s a lot of the loopholes have been set up to avoid taxes or defer taxes. And that’s because the senators and the Congress making the rules, they know the loopholes and they just don’t want the general public to understand the loopholes. Our job as advisors is to help you not cheat the system, right? Because we don’t want to cheat. We don’t want to cheat on our taxes or manipulate or lie or any of that. But we certainly do have a constitutional right to try and pay the least amount of tax possible and use the laws and the regulations to help us pay the least amount of tax possible. And that’s what we will do. This goes back to having a plan and an advisor who gets paid in a way that you understand it’s simple and it’s in line with, you know, it’s the fiduciary thing, right?
Speaker 2 (40:42):
So having that plan and having that be the focus of your conversation and meeting every time you meet with your advisor, when these things go through, if any of them go through their advisors should be well-equipped prepared, right. And know, okay, check it out. You’re in this particular net worth bracket, here’s some, some, some strategies they’re going to be flexible strategies because guess what’s going to happen 10 years from now or five years from now, it’s going to change again. And that’s okay. So we’ve got to have flexibility, but we don’t want to overdo insurance. Like you said, we don’t want to set up 19 different irrevocable trusts that you can’t unwind later that you’re like I spent $45,000 on estate planning and we’ll look at all the AB trusts. And I know we’re ending the show at this point, but again, we are a resource for, especially these people. I feel like because this is what we do. This is what we do is financial detox. Hoping you get better educated and avoid toxic advise and make better financial decisions. Avoid the great behavioral blunders that most investors and people make with their money. Thank you for tuning in today to the podcast, you can check us out of financial detox.com. I’m Jason labrum, your host with Alex Klingensmith and you can reach us at (877) 707-8889 that’s eight seven seven seven oh seven 88, 89 or financial detox.com pitch on that show
Speaker 1 (41:54):
To learn more about financial detox and to get access to today’s show notes, transcript and resources, visit financial detox.com. Call Jason and the team at intelligence driven advisors. If you’re ready for financial detox and a better tomorrow, call (877) 707-8889. Get answers to your questions. That’s (877) 707-8889. That’s financial detox.com for podcasts and information. And if you like what you’ve heard, be sure to hit the subscribe button that way you’ll be notified about upcoming podcasts. You’ll take one more step toward financial peace of mind. This content is provided for informational purposes only, and should not be considered investment advice or recommendations to buy or sell any types of securities. Mr. Labrum and intelligence driven advisors are not responsible for the consequences of any decisions or actions taken as a result of information provided in this program and do not warrant or guarantee the accuracy or completeness of the information provided the information discussed today, reflects the views of Mr.
Speaker 1 (42:58):
Labrum and his guests. As of the date of the show and are subject to change without notice past performance is no guarantee of future results. Any forward looking statements or forecasts are based on assumptions and actual results may vary from any such statements or forecasts. No reliance should be placed on any statements or forecasts when making an investment decision. Accordingly listeners should not rely solely on information provided today in making any investment decisions. There’s a risk of loss of investing in securities, including the risk of loss of principle. Different types of investments involve varying degrees of risks, and there can be no assurance that any specific investment will be profitable or suitable for particular investors by natural situation or risk tolerance, asset allocation and portfolio diversification cannot assure or guarantee better performance and cannot eliminate the risk of investment losses.