Money Talk 4-25-26

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Earning season, watching the Fed, and retirement confidence still low.

Can certainly help guide you through that uncertainty if you have some.

This is Money Talk, the Annex Wealth Management Show.

Great to have you here. I'm Joel Kraus, Chief Economic Strategist, Dr. Brian Jacobson,

is here. Hey, Brian. Hey, it's great to be here.

Anne, CEO of Annex, Dave Spano. Thanks, Joe.

Of course, it is earning season and despite the recent events in Iran, the market continues to move

up. What's really happening, folks, is that operating margins are expected to go up almost 20%,

somewhere between 15 and 20%, and therefore a lot of those companies, Brian, are beginning to trade

with that information. It is, and that's one of the reasons why we like looking at a number of

different financial metrics when looking at investment opportunities. Those operating margins,

we think are really one of those kind of our favorite indicators. If you have to pick one,

we love them all, just like you love all of your kids, but the operating margins, if you kind of

think about what's been happening, all of these cost pressure increases over the years. It's

incredible how resilient business profit margins have been. You think about the increase in oil costs,

like as an example, this past week Procter & Gamble, they reported earnings and they said that

if oil prices stay where they are for the duration of the next quarter, it could cost them close

to $1 billion extra because of the transportation of the ingredients, some of the ingredients they use,

contain petroleum, the packaging, all this, but yet businesses are able to cut costs in other

areas and judiciously increase prices on consumers too. So we're really talking about a couple of

things. First of all, people were afraid that the war was going to cause a whole lot of disruption,

and maybe it will down the road, we haven't quite seen that yet, and then it could become inflationary

down the road, but the markets seem to be looking past that, at least their earnings that they're

reporting. Now, let's kind of tear that apart a little bit. We saw what Intel did on Friday morning,

opened up 25% to start the day. Yeah, that was an incredible move up, and Intel has been in the

news quite a bit lately. We know that they did have that partnership with the federal government.

They've been having these plans to build, I think they're called fabs or those factories where

they make the chips and things, and what they were really reporting is that if you kind of think

about artificial intelligence, when they're training those big models, that requires like those

Nvidia GPUs, those graphic processing units, but when you're actually running those models, almost

like the consumer and business level, well, that's powered by CPUs. And really, if you think back

to, I think was it in the early 2000s, the windtell, right, Windows and Intel, and it was Intel

inside a lot of those computers, right? It's Intel chips or AMD, but there is that big demand now

for those CPUs, and that's was reflected in what Intel reported. So CPUs and GPUs, and you're

going to learn a lot of stuff. Well, let's change topics a little bit. We do know that earnings

is set up to continue, and not only in this quarter, but the following quarter as well. So

that is positive news. And you put that on the back of what's happening with the federal reserve.

Of course, Kevin Worsh was being grilled this week. He is the person who's expected to be the

next Fed chair. And that path kind of opened up a little bit when the Department of Justice

dropped their pursuit of the current chairman. Yeah, that was interesting. So Senator Tillis,

who's on the Senate banking committee, he said that he was not going to allow the nomination to

go forward for a vote. So the process is he testifies before the Senate banking committee,

they vote, and then they might allow it to go to the broader Senate for the actual confirmation

vote. And so there was that bottleneck. And Senator Tillis said, hey, I'm not going to let this

through until this Department of Justice investigation is over. And on Friday, that's what was

announced is that they were going to be dropping that. So those clouds have parted for Kevin Worsh

now to actually be confirmed to the chair. And the timing here is pretty good because chair

Powell, his term is up technically May 15 as chair. He can stay on as governor until like January

20, 2028. And as a result, we don't have to worry then about are they going to have this like

arm wrestling match or play musical chairs to see who gets to sit in the chair, who's the chair

of the Fed. I think that would bring some clarity. What I heard from Kevin Worsh from that

nomination hearing, not a lot of new information. I think he is very focused on inflation. And it's

just a question of, do they need to change their approach to how they combat it? Ever since Ben

Bernanke became the chair of the Fed, they really focused on their almost what we call open

mouth operations where they talk. They talk a lot. And Kevin Worsh says, maybe they talk a little

too much. Maybe they need to be a bit more circumspect about what they say because they run the risk

of painting themselves into a corner. If you say something, people expect you to follow through

on it. And he said, maybe we're almost like trying to pre-anticipate what the data is going to be

and pre-commit to policies that at the time when you actually make the decision, you shouldn't be

making. Yeah, one of the tools that they have is called job boning. And they actually try to talk

things into a particular purpose. Certainly interesting when he's that he's going to deemphasize

this forward guidance. Now, frankly, I do like the transparency, Brian, that when they tell us that

it's easier to kind of forecast if you have kind of an idea. And of course, the predicting markets

then are pretty good at suggesting where that's going to go as well. Maybe we're going to have to

rely more on the prediction markets now as opposed to all that forward guidance. Since instead of

you remember back in the day, when we had a Fed chairman, you say how thick is his brief case,

they would tell you with the direction of what interest rates were going to go. And I think he

was keen to wear that. Yeah, Alan Greenspan, he became aware of it. So he basically like had other

people carry his briefcase, then people looked at the color of his tie. One of my favorite quotes of

his was when he was speaking in front of the Senate, I believe it was. And he said, if you think you

understood what I said, I must have misspoke. By the way, he just turned 100 years old. That's

his people. Yeah, it's incredible. And he's married to Andrew Mitchell, who of course you get to watch

on NBC if you're so desire. The last piece that we do want to talk about is a lot of people are

still concerned about inflation, but there's a lot of money that is sloshing around right now

from the federal government. And so that is going to put more money in people's pockets.

It is. We have had a pretty decent tax refund season. People were expecting that thanks to the

one big beautiful bill act and number of provisions affected the 2025 tax filing. So we did get those

types of refunds, which looks like that was a type of stimulus, you know, giving people their

money back, that offset some of the higher costs associated with the fuel costs where they are now.

And maybe that's part of the reason why like the retail sales numbers, they were better than

expected. Some of the ISM Institute of Supply Management, some of their numbers that I've been

seeing was a little bit better. So maybe that was just in time that we had the tax refund season

to offset some of these higher gas lean price costs in folks. This is the time. You know, there's a

lot of moving parts you can see what the market has done here in the last few weeks. We often talk

about not trying to time the market. And this is a perfect example of it. This is the time to have

a plan that is thoughtful that aligns not only your investment plan, but that with the financial

plan, a state plan and tax plan, Joe. And if retirement is getting closer or you are a few years

in, there might be a few things you have questions about how are these recent headlines we're talking

about affecting what you have worked hard for. Click the get started button at annexwealth.com.

Maybe there's something you don't need. Are you paying too much for something? It's a whole

team working together in house who has your best interest in mind on your side at annex. We can

be on your team. This is Money Talk, the annex wealth management show on 620 WTMJ.

Custom-tainered investment and retirement planning from a fee-only fiduciary. Know the

difference. This is Money Talk, the annex wealth management show on WTMJ. Know the difference

with annex wealth management. And you can know the difference in person. Did want to remind you

about a very cool event that we have coming up on April 30th from 6 to 8 p.m. And I think this is

the first time we're going to be there at Aspen Sky Winery and Distillery in Slinger. Maybe you've

driven past it before dinner, refreshments. And of course there's a theme too because we like to

guide you the art of giving. There is an art to it. Tax savvy strategies for a greater impact.

You can discover how to maximize both your charitable impact and your tax efficiency under the

new one big beautiful bill act. It's still pretty new. Maybe you've seen the impact of that with your

recent tax filings and maybe you want to plan ahead for next year's filing. And one of the fine folks

here, one of the experts that's going to be there on April 30th certified financial planner,

senior wealth advisor, Mike Kirk. Mike, what can people experience April 30th in Slinger?

Really the whole point of this is twofold, Joe. It is important we believe to

be vocal and be advocate to our clients as far as showing them away a path to help them save

money on taxes, right? And if your ambition is to help a community and to help the charities that

are supporting a community that make it different than communities that don't have these sort of

endeavors, this is an event that you want to join us at. So if I'm looking at my portfolio and

I'm thinking, well, how much money should I take? Is here a minimum? Obviously there's not a

maximum, but is there a minimum that I should be thinking about? The important thing here is that

we always start with a plan. And in our planning process, this is a scary part is we can show you

exactly how much money or buying power your money has with or without the erosion of taxation

around it. And that's why we want to say come join us. We have wine. We're going to have some

bourbon there as well and some great food. You really comes down to what do I want to do with my

money? What is the purchasing power of this? And how do I not let it erode? Bring an open mind

learn about what's happening in the community in your backyard all around Washington County.

There's quite a few things happening there. We're going to have a few folks people there representing

them. We're going to give you some ideas as far as how to start. What we don't want is anyone to

freeze into I don't know what to do next. So we're there to really talk about how we will guide

families and how we have guided families in the past to move certain pieces on the chess board

of their financial plan that really maximize their impact. It's a fun, fun experience. And if these

are ideas that have been either rolling around in your mind and you're looking to become more

astute about it, this will help you sharpen that blade so that you can find out how to maximize

everything that is your endeavor. This is April 30th Aspen Sky winery and distillery like Mike

was talking about. There are going to be beverages. There's going to be food and it is free and you

want to make sure you secure your spot at anxwealth.com. Click that events button. Now, if I'm thinking,

well, I have my own questions. I have a few, but I might get there and I think I forgot my

questions are what should people come prepared with as far as questions? What have you heard from

clients? What should people think about? Yeah. As far as preparation goes, a lot of this is focus

around tax and tax strategies. So we all just file their taxes. We're all either waiting for that

refund or begrudgingly writing that check for what we owe the government. And that's fine. So

while that's fresh in mind, think about what your situation is today. And if you want to be prepared

to ask questions specific to tax around what you can do, we will be there. We'll have the experts

there to help begin those conversations with you as well as give you some new ideas. Some maybe you

have heard of and some maybe are completely foreign to you, but they are on the table. And if you

don't know about these and you're not getting this sort of insight from your existing relationship,

or you just don't want to Google this anymore, come join us. It is the first step in a journey

that we like to think about as planners that we help families get through. And maybe people aren't

happy with the communication or their service they're getting right now or you're sick of doing

it alone. We hear that from people a lot especially if a business the business is growing or think

about about a business sale. These are things that we can help you with. Certainly if you own a

business tax savvy strategies and things are always changing too. Of course, a lot of talk about the

one big beautiful bill act that came out in 2025 and how it applies to what you're doing right now.

So you probably have a lot of questions. This is a place where you can start. A lot of people say,

I don't know where to start. Well, we have to get started button at annexwealth.com. But this is

an opportunity for you to kind of talk to people in person certified financial planner and senior

wealth advisor Mike Kirk from annex wealth management. Thanks for being on the show. Thanks, Joe.

He'll see it April 30th. Aspen sky winery and distillery in slinger. There's still spots available,

but get your spot soon. Click events at annexwealth.com. Financial planning at every level annex ignite

annex comprehensive wealth annex Friday client. This is money time. The annex wealth management show

on WTMJ eight more in-person events this past week with big turnout. So thank you if you've

joined us. So we'd love to see you in person. Love to see your questions too with this webinar.

The instant insight series continues the Fed and the markets. That is this Wednesday, April 29th.

3 p.m. Central 4 p.m. Eastern. How the Fed's announcement might affect your retirement plan.

A ways to stay informed and trust your financial plan. Take in your questions live with Dr. Brian

Jacobson, our chief economic strategist. That's going to be a big day for you. There's lots to talk

about. I feel like the Fed is almost should I say like reality TV. It has been. Yeah, that's a great

way to put it. And now I guess they could do the reality TV, perhaps with like sock puppets.

So when that be kind of fun to see that's quite the interesting thing because not only did the new

nominee talk about ways to communicate better, but also he doesn't want to be a sock puppet.

That's right. And I don't think he will be. I was thinking more in terms of will he be a lap dog

because I love dogs and he won't. I think that he's going to be very independently minded.

And when we look at what is likely to happen at this upcoming meeting. So on April 29th,

the policy statement comes out at 1 o'clock central time. Okay. So that's what we kind of dig through

as far as did they hike rates. Did they hold? What's the rationale? And then we wait 30 minutes

for the press conference. And that's where chair Powell. And maybe in the future, it's going to be

chairwarsh. They go to the podium and then they start answering questions. Give a little bit more

detail. The fascinating thing could be going forward, right? It's up to the chair if he wants to

have those press conferences. So if a chairwarsh decides that the Fed is communicating too much,

that they're saying too much, is he really going to want to do these press conferences after every

single meeting or maybe every other meeting instead? Does that affect things differently if he

communicates less of our Fed chair isn't telling us enough? I think it could. So we've been talking

about that on our team as far as what might that mean? And so what we've done is looked at some

of the data as to Fed communication style. And how does that relate to volatility in the markets?

And as you'd probably imagine, a lot of times if the Fed is communicating a lot, the market moves

on what they say, which can be well in advance of the meeting itself. Whereas if they're not saying

as much, then it's about what happens on the day of as far as when they actually make the policy

decision and you get that type of action. And so it can almost like kind of condense a lot of

the volatility into that day. We're thinking that this could actually create a bit more volatility

in the interest rate market. So from an investing perspective, we think that it's really interesting

to think about different strategies. For example, we have the capabilities where you can invest

in mutual funds, exchange-stated funds that are in fixed income in bonds. But you can also

buy the individual bonds themselves. And so maybe it's going to be a bit more attractive to

some types of investors if they can to better stomach some of that volatility. It's almost like

there's pluses and minuses to communicating more or less. There is. There's trade-offs.

We're going to be out in slinger, the art of giving tax-savvy strategies for greater impact. That

is this coming Thursday. I'm going to be at the Aspen Sky Winery and Distillery. Discover how to

maximize both your charitable impact and your tax efficiency. Click events, annex-wealth.com.

Time for news. Let's go to the WTMJ Breaking News Center, planning an investing insight from a

fee-only fiduciary. You're listening to Money Talk, the annex-wealth management show on WTMJ.

Hey, good morning. Welcome back. This is Money Talk, the annex-wealth management show. What

to remind you about our new Women in Wealth page at annex-wealth.com and the new Women in Wealth

podcast with special guests and strategies to empower women and gain greater confidence. And

Dr. Brian Jacobs and Chief Economic Strategist, speaking of confidence, people heading into or

planning for retirement or people in retirement are not so confident these days. Yeah, unfortunately

not. So the Employee Benefit Research Institute, it's a nonprofit. They've been studying this

for quite a long time. They said 61% of surveyed workers are confident that they'll have enough

in retirement. So this is people who are working, right? So thinking ahead how confident it's

down from 67%, not too long ago. So it's moving in the wrong direction. If you think about

the key drivers behind that, people are of course concerned about inflation. Then they're also

concerned about just the programs themselves, these entire online programs. Are they going to be

around when they're the ones who are supposed to be receiving the benefits? Start taking a look at

your portfolio. What can people do? How can annex help with that confidence? Yeah, well, I think

part of it is just in terms of almost a reality check. People are very concerned about the high

cost of living and with inflation. You might not have an expectation of what inflation is going to

look like. Can you build a plan where you think out different scenarios about what if, right? What if

inflation is higher, lower, and it depends upon your lifestyle too. Because if you travel a lot,

obviously you're concerned about inflation from airline fares. If you do a lot of cooking at home,

it's more food at home. If you eat out a lot, it's food away from home. These all are different things

that have different historical experiences with inflation. So that's part of it, I think, is just to

really sit down and maybe map it out as far as, okay, let's instead worrying about it. Let's look

at the data. Let's look at the numbers and do some of these stress tests. Another is to also,

I think, consider that a lot of Americans and depending upon the source that you look at,

anywhere from like, you know, 25% to 40% of Americans who are in retirement are only living on

their social security checks. So maybe you can have more confidence if you consider some of those

other resources that you have as well, like your IRAs, your 401Ks, your pensions, right? Is it

possible to do a part-time job? So I think that how confident you are in terms of being able to

have enough resources in retirement will depend upon how dependent are you going to be on those

entitlement system. And I think a lot of it depends on your age too. I got a big birthday coming

up at the end of the year and should I be thinking about retirement? Of course, it's never too early

to start planning for something like that, but as you get closer and closer, maybe your confidence

starts to drop. It could, we wanted to increase as time goes on. So you'll be turning 21. So obviously,

you know, you have a long run way ahead of you. Yeah, I'm going to start planning early.

That's right. That's part of it. Plan early. So this, you know, retirement planning isn't just

for people in retirement. It's not just for people who are near retirement. It is for everybody.

Believe it or not, I'm having my son do some retirement planning by when he's working. Can we

contribute to a Roth IRA to start putting that money away for him such that it makes it a little

bit easier so that as he's getting closer and closer to that retirement date, he has more confidence

not less. When you have questions, especially when it comes to your money and where it's headed,

having someone ready to answer those questions can make all the difference. I know I always have a

lot of questions. We're here for you. You can hit the ask annex button to at annexwealth.com. Click

to get started button. We've got all kinds of buttons for you. This is Muddy Talk, the annex wealth

management show on 620 WDTMJ. Muddy Talk is straight talk from a local fee only for do sharing.

It's time to know the difference. This is Muddy Talk, the annex wealth management show on WTMJ.

Know the difference with annex wealth management required minimum distributions. Can trip up even

experienced retirees and the consequences can be costly. So some small oversights with timing,

taxes and account types can quickly turn into unnecessary penalties or maybe even higher tax bills.

So knowing where mistakes commonly happen can help you keep more of what you have worked so hard

to save. Drew Powell has seen this. He is an associate wealth manager here at annex wealth management.

Let's talk about the RMDs, the required minimum distributions. What are the most common RMD

mistakes you see sometimes even with well prepared retirees? One of the biggest mistakes

that I see even among people who have saved really well throughout their careers is simply waiting

too long to start thinking about these required minimum distributions and get a plan in place.

A lot of people don't start planning until they actually reach RMD age and by then some tax

saving opportunities may have already slipped away. For example early retirement can be a great

window to do Roth conversions, moving pre-tax dollars out of retirement account and into a Roth IRA.

This would then shrink down the future RMD amounts and potentially decrease the amount of taxes owed

over your lifetime. One other big mistake can be only taking the bare minimum once RMDs begin.

With some strategic tax planning it can sometimes make sense to take more than just a required amount,

pay the taxes upfront and then have lower RMDs in the future.

I was going to ask you about the timing. Why do timing errors around these RMDs create such

big tax problems sometimes? Timing is really important when it comes to RMDs and if you miss that

deadline, which is typically December 31st end of year, the IRS can hit you with a penalty of 25%

on the amount you should have taken. You might be able to get that down to 10% if you fix it within

a two-year timeframe, but either way that's a significant penalty that can be avoided with some

organization. Organization key right there and sometimes the RMD rules change when somebody inherits

a retirement account. Where do people get tripped up when it comes to that? This is important is

inheriting a retirement account can result in much different RMD requirements depending on a

variety of factors such as who you inherited from, how old they were, when you inherited the account,

and what type of retirement account it was, and where people can really get tripped up is that RMDs

for inherited retirement accounts are often treated differently than accounts that have always been

in your name. For example, under the Secure Act 2.0, and depending on those different factors,

you could potentially be required to take an annual RMD and withdraw the full account balance

within 10 years while paying income tax on those distributions. And then the RMDs are pushing

you into that higher tax bracket. RMDs are added on to your other taxable income for the current

year which can sometimes create a jump into a higher tax bracket. With that jump, we can potentially

see some other unwanted consequences such as making more of your social security taxable,

increasing future Medicare premiums with Irma surcharges, and even increasing capital gains

taxation within a taxable account. So although required minimum distributions are in fact required,

it's worth getting a plan in place that you can make the most out of this requirement,

and sure that you understand the implications, and potentially save you some money in the long run.

Understanding can make all the difference, and we can certainly help you with that here at

Annex wealth management, and so what might be some smarter ways people can handle the RMD money

once it comes out? First is incorporating it into your retirement income strategy and supplementing

your other income sources. Although with that being said, just because you have to take it out of

the retirement account doesn't mean you have to spend it, can reinvest that money. For example,

you could utilize a brokerage account and allow that money to continue growing for you. One other

very important method that often gets overlooked if you are charitable inclined is using qualified

charitable distributions, or QCDs, to donate to a charity directly from your retirement account.

This counts towards satisfying your annual RMD and is also not included in your tax

plan come if you qualify it and if it's done properly. So there's an organization that you're

passionate about. We can certainly help you help them. In turn, maybe kind of help your situation

as well. And how should retirees be thinking about RMD strategy as tax rules and rates continue

to evolve? Because we see headlines and there's all kinds of noise in the news. And what should we be

looking at? Yes, as you said, tax laws are consistently evolving and changing. And what's important

here is your RMD strategy should evolve with those changes. As an example, there's currently a

temporary senior deduction for people 65 and up, which can be up to an extra $12,000 as a

deduction for married couples filing jointly. If you qualify, that might be a great time to take

a larger distribution or even convert some of those pre-tax dollars to Roth while those rules

are in your favor. So, you know, looking through a forward looking tax plan and tying that in with

your goals is a great way to be ready for those opportunities as they arise and as tax laws continue

to change. A lot of different strategies to take a look at and why not talk with somebody who's

seen a lot of different situations and a lot of different portfolios. Great stuff drew associate

wealth manager at annex wealth management drew Powell. Thank you for being on the show. Thank you,

Joe. Know the difference with annex wealth management. Click that get started button at annexwealth.com.

Financial planning at every level annex ignite annex comprehensive wealth annex private client.

This is Money Talk, the annex wealth management show on WTMJ. Hey, we just realized it's been 20

years of money talk, the annex wealth management show and CEO of annex Dave Spano. You've talked about

a lot of highlights in the economy over the years, two decades. Yeah. So, we've been doing the show.

annex has been doing the show for 20 years and of course, there's a lot that has happened and I

can remember all of these years back is we would go to the studio and do the shows on Saturday

mornings and then we'd breaking news. So, there'd be times that we would have to stop the show

to do breaking news and especially as we got into 2008. As you remember, it was the great financial

crisis and the bank failures would be announced on Friday night and so on Saturday morning,

it was unfortunate, but we'd have to talk about the bank failures every Saturday morning during

2008 and into 2009. So, that was pretty traumatic time some 20 years ago, but we've had great guests

along the wave. There was a lot of folks that we had brought in over the years and they were really

engaged and engaged in and so yeah, it's been great. Thanks to the folks who have been listening for

20 years, a lot are our clients and this is an opportunity for us to talk to them as well.

Yeah, and we post a lot of our content now and thanks for interacting with us on social media too

or other podcasts. This shows also a podcast as soon as it's done at the top of the hour,

the wealthiest podcast, ideas, strategies and decisions of the wealthy in America,

SWOT podcast. That's a new one every Monday morning, strengths, weaknesses,

opportunities and threats of the current market and our new women and wealth podcast featuring

special guests, speaking of guests, helping to empower women of all ages through genuine

conversations. You can find all of that at annexwealth.com. Cheap economic strategist, Dr. Brian Jacobson

also here and CEO of Annex Dave Spano. Thanks, Joe. You know, Brian, one of the questions I'm getting

most often from clients is, you know, we've had this rally and when I say to folks that during

this rally, which has been pretty significant, that the price to earnings ratio has actually gone

down. There's really the eyebrows go up. Yeah, they're like, how on earth can that happen

where the market is going up and how can the price to earnings ratio then go down? Because

it's a ratio, right? You think, well, if the price is going up, that's on the top of that ratio.

You would think that for a given level of earnings, that that ratio should be increasing,

but that is really, I think the nub of it, the earnings, what goes in the bottom,

those have actually over the last year been rising faster than what the prices have. And if we

kind of just think about year to date, what's been happening, S&P 500 is up probably, you know,

close to like 5% or so. But yet, earnings expectations have increased even more than that, right?

So we have expectation was for about 13% earnings growth over the last year. We're coming in at

closer to a 15, maybe 16% earnings growth depending upon who you ask. And that's one of the things

that can oftentimes drive the markets over the long term is what are those fundamentals?

What are those earnings? Now, for some perspective, you were talking about looking back 20 years,

the PE ratio based upon the Bloomberg numbers for like expected next 12 months earnings. Back in 2006,

the PE ratio was about 16. The day we're at about 21 might seem elevated, but it's actually down

from some of the peaks that we had over the last few years. Plus the mix of what's really the

biggest companies in the market has changed dramatically over time. 2006, you had some, you know,

banks, you had general electric, you know, some of these big companies. Now it's all these tech

companies. So the composition of the market has changed materially over the years and you kind of

have to keep up with that. And then you really look at those top companies and that had changed, as you

said, 20 years ago. And by the way, if you went 20 years back, they were a whole new set of companies

as well, which is the reason why you see a lot of the Dow index begins to change is because the

composite changes of the companies that go in there's tech companies that didn't exist 20 years

ago that are now part of the S&P 500 and some of the biggest companies. But the other point I'd

like to point out, even though that when people point to the S&P 500 PE ratio being over 20,

we have to remember what interest rates have done. And if you look at it, I don't want to get too

deep in the weeds about risk premium, but I think it would be good to explain what has happened with

interest rates and why that's being supported. Oh, yeah, very good point. So there is this thing

called, people used to call it the Fed model, the idea that how is it that we can justify what the

price to earnings ratio is? And one of the ways that you can look at it is, well, what's the

alternative? Right? You could be investing in bonds. And so if you look at the yields on bonds,

government bonds, so that difference could be considered like maybe an indicator of our things

overvalued or not. Well, we had this long period of time of very low interest rates. And that

tended to push up that PE ratio kind of makes sense because, you know, it's like, well, why would you

want a 0% 2% bond when you could be investing in a business? And so those changes in interest rates

affect the price to earnings ratio. I look back at some of the longer term data like where were

interest rates in the 1970s, 1980s and even 1990s, right? It was normal to have interest rates

well above 4 or 5, 6%. And now, you know, we're kind of pulling our hair out when we see, wow,

look at mortgage rates are above 6%. Yeah, but you put it in perspective. And if you go back even

farther, you know, and we have this chart here where interest rates have gone, it looks just like a

big mountain, right? So post world were two interest rates below. They began to continually climb

up until around 1979, 1980. Everybody will remember those days and inflation rates. And then

turned around and started to go back down until we just had the great financial crisis and flattened

out there for a long period of time. Yeah. Now they kind of poking back up again. Now we don't

think it's going to go back to that big mountain again over the next 80 years. But historically,

you can see what has happened. You had an equity bull market and a bond bull market as well.

Yeah, the fun thing is to look at some other data, especially from the United Kingdom. They have

very good data going back to, you know, like the 10 hundreds. And you can see that what they would

call a secular decline in interest rates. It used to be that it was like, okay, it's going to be like,

you know, 5%, somewhere between 5 and 10%. You get to the 1970s because of that inflation. That's

what really, I think, drove those interest rates higher. Now we've been on the other side of

where that's beginning to slide down. I don't think we're going to go back to a period where we have

the persistently high inflation close to double digits. It's elevated now, but just because it's

elevated now, doesn't mean it's going to be elevated forever. Let me throw a softball to our chief

economic strategist. What should people do with all of this information? Well, that's a great

question. I would say that that's why you want to work with a professional. There is a lot of

information and how do you process it? Right? You have your life to live. You want to enjoy

yourselves. We enjoy doing this. This is what we do. We love serving our clients by helping them

think through things, build that financial plan, and then build the portfolio to support the plan.

So one of the key things that we really want to look at with some of those projections with your

financial plan is in terms of what is inflation likely to be and to stress test the portfolio

or the plan against different regimes for inflation. What if it's higher, what if it's lower,

and try to have that portfolio that's adaptable, but fits and supports that long-term plan.

Mark projections, something we love to do for clients here at Annex. Another episode of Money Talk,

the Annex wealth management show. The podcast is ready right now on the radio. If you missed

some of it or the radio station website, just search Annex Money Talk for Dave Spano and Dr.

Brian Jacobson. I'm Joe Kraus. Have a great week. Join us again next Saturday at 10 a.m.

This is Money Talk, the Annex wealth management show on 620 WTMJ.

Advice and opinions expressed during Money Talk, the Annex wealth management show are solely that

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