Money Talk with Carl Stuart

Carl Stuart takes text and caller questions on markets, real estate, and retirement during uncertain times. How long term investing beats emotional decision-making!

The full transcript of this episode of Money Talk with Carl Stuart is available on the KUT & KUTX Studio website. The transcript is also available as subtitles or captions on some podcast apps.

KUT Announcer: Laurie Gallardo [00:00:01] This is Money Talk with Carl Stewart. Carl Stewart is an investment advisor representative of Stewart Investment Advisors. Call or text him with your questions at 512-921-5888. Now, here’s Carl.

Carl Stuart [00:00:20] Welcome to Money Talk. I’m Carl Stewart and you’re listening to KUT News 90.5 and on the KUT app. Welcome. Money Talk is a broadcast about the world of financial and investment planning where you always determine our agenda by calling or texting 512-921-5888. It’s been a couple of weeks since listeners could call or text and have me here. So if you’ve been thinking of calling and have a question, it’s always a great idea to do so at the beginning of the hour. I take today’s questions first, I take to day’s calls first, I should say, and I take the day’s texts second, and then previous texts that I haven’t had the opportunity to answer. So let’s get started at 512-921-5888. If you’re a regular listener, you know that… Every month I get the update on the Austin Metro residential real estate market and I know that’s interesting to our listeners and so let me just go through the data. This is for April. The median sales price was $430,000. That’s down 2.3% from a year ago. The median price per square foot was $210. That’s done a bit more, 5% from year over year. The total home sold was 2,657, that’s up 2.5% from a year ago. Here’s an interesting one. Median days on the market was 94 days, so that’s just a bit over three months. That’s, however, significantly up 27% on a year-over-year basis. The supply of the inventory, it’s about 4.9 months of inventory. That’s down a bit, down 3.9%. You gotta wonder if people are just not. Bringing their houses into the market for sale, and sold above the list price, or 13% above the price. That was down 3% year over year. And new listings were up sharply. I think this is a seasonal thing. I’m not a real estate expert, but new listings were up 30.6% from last month. I would guess that’s as school comes to an end in the spring, hopefully for sellers and for buyers, an opportunity to either sell their home or get a new one. You’re listening to Money Talk on KUT News 90.5 and the KUT app. Call or text 512-921-5888. I am going to go to previous texts and if you hear new texts come in, I will obviously take that. So let’s look here. Here’s the long one, bear with me. Your show is extremely helpful, Carl, thank you. Thanks for sharing your expertise, you’re welcome. I have about $400,000 in high yield savings in the money market right now. I’ve been advised to put $250,000 into a fixed annuity that would pay for the rest of my life, keep $100,000 and a high yield or money market account and place $50,000. Into exchange traded fund investments. I’m currently 65 years old. If I start taking the annuity payments in a year when I’m 66, it would result in about $20,000 annually. Most of it is pre-tax money. I plan to wait until I’m 70 to start Social Security. It’s very possible that I’ll be laid off in the next few months due to the global economic situation. I only have about $10,000 in the 401k. I hope to find another job if I lose the current one, but I’m realistic to know that due to my age and the economic downturn and the world of artificial intelligence, it would be a challenge. What can I do to alleviate financial stress if I were unable to find a good paying job again? As a single person, is the fixed annuity a good idea? I know it won’t increase for inflation or increase cost of living expenses, and It would take about 12 and a half years to break even on my investment. If I live that long, I guess I’ll be close to the average life span for women in the United States. Both of my parents passed before age 70. Thanks so much in advance for your feedback. Thank you for your text. So for everybody else, an immediate annuity is different than a lot of the types of annuities that people are either sold or invest in. An immediate annuity is basically you put money with an insurance company, a life insurance company. And based on your age and gender, they give you lifetime income. So it is a bit like social security. It is like a pension that you can’t outlive. And the insurance company knows how many people are gonna die at your age and them by gender. They just don’t know them by name. So they have a very strong actuarial case that they rely on. Some people will live longer and some people will have shorter lifespans. I would say this to you. It The good news is, with a quality insurance company, when I used to look at these years ago, I could get eight or ten different quotes from different insurance companies and the monthly income was virtually identical because of this efficiency of actuarial data. So you have identified the risk to this. The risk is that you live a long life as a healthy female and the cost of living goes up and if it goes up you know, say 3% a year right now, it’s above that. You can see that, you know take that and expand that out, compound that out and the income, $20,000 a year, will buy less and less, will buy fewer and fewer goods and services. So I think keeping 100, if you do this, I think, keeping $100,000 in a high yield account and only putting $50,000 and exchange traded funds is frankly I would do it the other way around because if you put a hundred thousand dollars in some passively managed exchange traded funds that invest in the global stock market they’re very tax efficient they’re going to have good years and bad years but over your lifespan based on history they’re gonna keep up with and actually surpass the rate of inflation that’s your hedge that you live a long life, that the $20,000 plus your Social Security check after age 70 will not provide enough income. So I don’t have any problem with the immediate annuity. I do have a problem with asset allocation of 50,000 ETFs and 100,000 savings. I’d have $100,000 in global stock, passively managed international and domestic index funds, and then I would put the balance in the high-yield savings. Thanks for your text. You’re listening to Money Talk on KUT News 90.5 and on the KUT app. Call or text 512-921-5888. Here is a text from today. Carl, what do you recommend for two working professionals who don’t want to keep their paychecks in a regular checking account, but need access to the money? To the money more so than investing in the market would permit? Do you recommend a high yield savings account? So I would recommend that you consider a money market fund. Money market funds have been around a long time. And with one exception that was not sponsored and then broke, so-called broke the buck during the global financial crisis, I’ve never observed a money-market fund that lost money for any of its investors. It is a mutual fund, but it doesn’t invest in stock. And invest in very short-term, high-quality, fixed-income securities. There are three types. They are prime, government, and treasury. They have daily liquidity. You can get in and out with one business day’s notice, and they’re going to follow the short- term interest rates. In my experience, over time they have paid a higher yield. Than a savings account at an institution. Are the FDIC insured? No. Is that a reason to avoid them? No. The prime invests in corporate securities. The government invests in U.S. Treasuries and government agencies, primarily Fannie Mae and Freddie Mac, and the treasurys and money market fund is strictly in treasureys. If I were going to do it, I would put it in the government money market funds. You can do some shopping. All the big. How shall I say that custodians offer this if you’re going to do this on your own and not with an advisor Just go to the big ones like Vanguard and fidelity and Schwab go to their website Do some searching and I think you’ll find that those are available and that’s what I would do if I were in your shoes Thanks for the text. You’re listening to money talk on KUT news 90.5 and on the KUT app call or text five one two nine two one five eight eight eight Rob you’re on the air how may I help

Rob [00:09:48] Hi, Carl. Listen, I have a question for you. My parents are getting up there in age. My dad is 88. My mom is 83, going on 84.

Carl Stuart [00:09:59] Mm-hmm.

Rob [00:09:59] He has Parkinson’s. He has had two strokes, a bypass, three stents, a kidney removal, and he is now in assisted living. My mother is in rehab hoping to get over to assisted living

Carl Stuart [00:10:16] He

Rob [00:10:16] He recently said, Hey, I’ve got about $200,000. I think I want to give to some charities and I’ll put in a charitable remainder trust and I can get $14,000 a year, uh, in income off of that. Yeah. And I’m thinking, dad, you probably need to hold onto that money, uh to pay off whatever you need to pay for your assisted living. Um, because He’s like, 14,000 a year, I’m like, uh, you’re 88. How long do you expect to live?

Carl Stuart [00:10:50] Yeah, exactly right. I mean, that’s why the income is so high. So for everybody else, if Rob’s father put $200,000 in charitable remainder trust, he puts the money in to the extent that he can use it. That’s a tax deductible thing, tax deductable. And then they pay him, the nonprofit pays your father monthly income and upon his demise, the balance goes to the nonprofit. And so at 88, gosh, he’s awfully senior to be putting that much money in there. I’m like you, I’m a little concerned about that. And you’d have to know his entire financial situation. If the 200,000 was the sole amount of his financial assets, does he have a pension? What other sources of income do your mom and dad have, Rob?

Rob [00:11:49] But they do have other sources of income and that’s where I’m looking at this and saying dad, if your intention is to donate money out of the goodness of your heart, then by all means do this. But if you need money for the future, don’t rely on that 7% rate of return.

Carl Stuart [00:12:06] Right, I agree with you. Maybe, since they have other sources of income, maybe what you can do is you can talk to them about putting $100,000 in, getting $7,000, that’s $84,000 a year, keeping the other $100000 in a quality government money market fund just in case he needs it. That might be a good way to kind of split the deal in my view, Rob.

Rob [00:12:28] No, understand. And of course, it’s 7% per year. So it would only be 7,000 for the year, not 7,00 per month.

Carl Stuart [00:12:34] Okay, $7,000 per year on $200,000? Yes, sir.

Rob [00:12:39] Yeah, it’s a seven percent. Well, no, it seven percent on two hundred thousand.

Carl Stuart [00:12:44] That’s $14,000, that’s$ 14,000 a year. Yes, sir. Yeah.

Rob [00:12:48] Yes, sir.

Carl Stuart [00:12:49] I stand by my advice, suggest you do 100 and keep the other 100 out.

Rob [00:12:56] And from my standpoint, Carl, I’m like, dad, I don’t need it. If you want to do this, I’ll make sure it gets donated whenever you pass.

Carl Stuart [00:13:04] Well, exactly. He can put that in his will, and you can, as presumably his executor, you can make the donation after his demise, that’s correct.

Rob [00:13:15] Absolutely. And I am already executive and I have no plans on taking anything away.

Carl Stuart [00:13:22] Good for you. Good for your Rob. Well, good luck and thanks for calling. You’re listening to Money Talk on KUT News 90.5 and the KUT app. Call or text 512-921-5888. All right, let’s just see here if I got another one. That’s another text I just read. How about this one? Hello, Carl. I went through a divorce and in debt. And then in debt because of legal fees. I am not going to do that. I’m going to go back and listen and do this to the one that just came in, OK? What do you recommend for two working professionals? Oh, I already did that one, okay. Here we go, Carl. I have two iBonds of $10,000 each. I’ve owned them since they became available around the time of the pandemic. What should I do with them? Should I continue to hold them, cash them out, or something else? Well… They’re designed to keep up with the rate of inflation. As you know, because you’ve held them for so long, there’s a periodic resetting of what the interest rate is. When you own the I bonds, at maximum, my understanding, you can buy them one time. It’s 30,000. So you’ve already accomplished that with the two 10s. And now it looks like with the Strait of Hormuz closed, the financial markets, shall we say. We’re expecting two interest rate cuts this year and prior to the war, but based on my reading the futures market is now saying no interest rate cut this year. If you don’t need the money and these do what they’re supposed to do, I think I’d keep the two $10,000 iBonds if I were you. Thanks for the text. You’re listening to Money Talk on KUT News 90.5 and the KUT app. When you have a question, call or text 512-921-5888. Lawrence you’re on the air, how may I help?

Lawrence [00:15:38] Thank you, Carl. Carl, I’m 77 years young. I have no beneficiaries. If there are any assets left when I die, I plan to give them all to charities. So now, having said that, I have that $150,000. In combination of a step ira and inherited ira my first question is carl given my situation doesn’t make sense for me to do uh… Prior all over in a in a rock ira and the way second question is what’s your opinion about investing in a matter of the partnership and i i i e t f and in a red ETF.

Carl Stuart [00:16:24] Okay, I see no benefit to you of doing a Roth conversion and paying the taxes now, because you’re not doing it for your beneficiary, because you don’t have one. Okay. So there’s no real compelling reason to do that. I don’t like master limited partnerships in IRA accounts because you can get, you can have taxable income. You can have an IRA with a master limited partnership and you still owe taxes, okay? There’s something called. UBTI, unrelated business taxable income. So I don’t like them and I’ll raise. And if it’s a traditional real estate investment trust, you need to do your analysis because you need make sure that it’s not just in one part of the country, just one type of real estate, and also to see if there’s been any taxable distributions under UBT. If there haven’t been, then you wanna put some of it in there. That’s fine with me. You’ve got to remember the thing about master limited partnerships and real estate investment trusts is that they’re interest sensitive securities. They tend to do better in periods of falling and low interest rates. They tend do not as well in periods of rising and higher interest rates, it’s entirely plausible over the next year or two, we could have higher interest rate and that could put some downward pressure on them. So I would stay away from the MLPs in any tax deferred. I’m okay with the REITs if they meet the criteria that I suggested, and I do not see a benefit for you of doing a Roth IRA, Lawrence.

Lawrence [00:17:56] If it makes any difference, I wasn’t planning on putting those in an IRA, I was thinking of possibly investing in an ETF, an exchange traded fund, you know, massive partnership and so I just wondered if that would make any difference in your opinion.

Carl Stuart [00:18:16] Yeah, it might, except I’m not a big fan of sector funds and that’s investing in one sector. Typically, their returns are much more stock-like. They don’t really have, they don’t have that downside protection of a more diversified ETF. So you get the higher yield, there’s no question about that. But, you know, I wouldn’t, you not, if I were going to do that, it would be a small piece of the portfolio and I treat it like a bond. And for my asset allocation, I treated it like it was a bond. Because it will have the same sensitivity to interest rates going up or going down as a bond. As a modest portion of your portfolio, I’m okay with Lawrence, but I would not have a significant amount in there because I think there are other things you need to add to that in ETFs to get a real balance.

Lawrence [00:19:04] Supervise thank you so much. Thank you so

Carl Stuart [00:19:08] Very welcome and thanks for calling. It’s time for me to take a break. It’s a perfect time. We have all of our lines available for you to call or text 512-921-5888. I’ll be back.

KUT Announcer: Laurie Gallardo [00:19:39] This is Money Talk with Carl Stewart. Call or text him with your questions at 512-921-5888. Now, here’s Carl.

Carl Stuart [00:19:53] Welcome back to Money Talk, I’m Carl Stewart and you’re listening to KUT News 90.5 and the KUT app. And by the way, you can listen to past shows going to Kut.org slash Money Talk. Jimmy and I did a remote at the Kut Kutx Festival. If you didn’t listen to it, I think you will enjoy it. And if you have friends who you think might enjoy the broadcast, tell them to go to 921-5888. OK, here we go. This is just finished and this person sent another text. Thanks for your answer. You’re welcome. I have another question for you. My 12-year-old son has odd jobs and sources of income around the neighborhood that yield a couple of hundred bucks a week. Wow, really? Boy, I’d like to have a job like that when I was 12. He would like to know. How do you recommend he invest it? Well, first of all, he’s got, it’s wonderful that this question has come up. He’s got a long time before he’s gonna spend this money. And so he is, by definition, a long-term investor. Because of his age, you would be his custodian. So it’s Jane Doe, custodians for John Doe Jr. And you can do this at a lot of different places. I would start by going to the websites of the big do-it-yourselfers, Vanguard, and Fidelity, and Schwab. I don’t make recommendations on Money Talk. I have heard promotions on NPR that Schwab has a program for children that allow them to buy things in small pieces. I would go there and take a look at that. I think it’s pretty obvious that they have. Two motivations, one is to make people more interested in and educated about investing and also to start a lifetime habit, I guess I should say the third thing, and then make them customers, clients. There was nothing wrong with that. So custodial account, I would recommend exchange traded funds. The broadest allocation, what we call a total stock market fund, would be the place to start. And if he puts it in regularly. Because of the regularity of his income, that’s gonna be terrific because if we have a stock market that goes down this year, after all we’ve had three really good years, he’ll be putting more money in as prices decline and buying things when they’re less expensive. So that’s what I would recommend for you and for him. You’re listening to Money Talk on KUT News 90.5 and the KUT app. Call or text 512. 921-5888. Hi Carl, can you explain who benefits from treasury strips? You don’t get the interest and you still pay the annual taxes. They don’t trade much higher than treasuries. All can’t seem to help me. Okay, AI can’t seems to help. So, I haven’t thought about these in years, but what you can do, these are what are called zero coupon securities. You buy them at a as a discount to their maturity value, and if you don’t sell them, you get your $1,000 per bond. They can be tax-exempt. They can taxable. The treasuries, typically people who do these would do the treasury ones in a tax-deferred environment because as you say, you can own them in your own name. You get no cash flow every year, but you have the tax liability, so that doesn’t make sound very attractive. If you have a specific liability in the future. You’ve promised to pay for part of your granddaughter’s college education and you can put some money away now and know that it’ll be x dollars in 10 years. That’s a pretty good thing. So if I had a known future liability of zero coupon bond, whether it’s taxable or tax exempt, seems reasonable to me to do. It’s a very conservative investment since you absolutely know the future value. You can’t anticipate a terrific return. Great question. You’re listening to Money Talk on KUT News 90.5 and on the KUT app. Call or text 512-921-5888. Eli, you’re on the air. How may I help?

Eli [00:24:35] OK.

Carl Stuart [00:24:38] Hello? Are you there? I think you did something to your phone. We can’t hear you. I’ll give you one more chance. Eli, you’re on the air.

Eli [00:24:48] Can you hear me?

Carl Stuart [00:24:50] I can hear you now, please go ahead.

Eli [00:24:53] So, my wife is getting nervous about the financial, you know, we’re breaking records, high records, but she’s nervous about this world situation and she wants to move half of IRA investments that are now in robo accounts to cash.

Carl Stuart [00:25:19] I’ve been doing this 47 years and investing by the headlines has almost always been a very bad idea. After all, if I just said last year we were gonna have the highest tariffs in American history and the market would go up 18%, she could have been out because of that. Reminder that when COVID hit, stock markets around the world collapsed And in 43 days, the market was back to where it was. Right before COVID occurred. She really needs to stay invested. Now, whether or not, I don’t know her asset allocation, so I can’t say that what she’s got’s the right thing. I don’t know anything about what’s at her robo investor. But if she’s conservative, if she got broadly based index funds, they’re both domestic and foreign, and then she also has some offsetting assets, bond funds, for example. Then there’s absolutely no reason to make a change. Even if the market goes down, she’s had three fantastic years and if she’s a long-term investor, no matter what happens in the headlines, she’d just tell her that if she were a pension investor and investing for a school teacher’s retirement, she wouldn’t be taking it out of the market. So please encourage her, Eli, to keep the money invested, okay? Thank you. You’re very welcome. Thanks for calling. You’re listening to Money Talk on KUT News 90.5 and the KUT app. Call or text 512-921-5888. Elaine, you’re on the air. How may I help?

Elaine [00:26:59] Hi, Carl. Hi. Let’s see, I am 63 years old, I’m retired, and I have $400,000 in savings and $125,000 when it earns $16,000. So that’s in a CD that has matured. I don’t know what to do with the money. It’s not earning much interest, and what should I do with it? Well- Until I figure out what I need to do it. Sure.

Carl Stuart [00:27:27] There’s always a relationship between the rate of return that we earn, Elaine, and the risk that we take. And right now, you’re in very low risk, low return. And that may be where you want to be to sleep nights. But over my 47-year career, after the low interest rate and you pay income tax on it, it doesn’t keep up with inflation. But you have to decide that you’re willing to take some more risk. What I would do if I were in your shoes insurance. Savings and CDs, is I would begin to put some money into two things. I put money in a government money market fund. This is not a money market account at a bank or a credit union or savings and loans. A money market has daily liquidity. You can get your money whenever you want it, probably paying 3.6, 3.7 percent now. I haven’t looked recently. And then take some of the money. And put it in something called a short-term bond mutual fund or exchange-rated fund, it will pay more, it will go up and down a little. The one that I use is currently, the dividend yields about 4.4%. If interest rates go up this year, which is plausible, short over time, the rate of return will go off on that. If next year, the war is over, Oils prices have come down some. And interest rates start to come down in 2027, this will actually go up in value while getting a dividend. So I would say the two things for you to consider are what’s called a government money market fund, and the other one is called a short-term investment grade bond fund. You do not want to buy a bond fund that has the word high yield or strategic income because they are riskier, and if the stock market goes down, they have historically gotten down with it. I would do those two things if I were you. And then if you can get comfortable with putting a smaller amount in the stock market, you can always call me back in the future and we can talk through that. But right now I think that money market funding and the short-term bond fund would be the first two things that I would do, Elaine, if I was in your shoes.

Elaine [00:29:43] Okay. So the short term fund, I can probably find something like that on a trousse wall.

Carl Stuart [00:29:48] Yes, ma’am, you sure can. The Schwab, they go by categories. You can look at their mutual funds and things called exchange traded funds. Charles Schwab will have three money market funds, prime, government, and treasury. I recommend the government. And they’ll also have bond funds. And you want to look for the shorter term bond fund. Yes.

Elaine [00:30:09] Okay, okay. Thank you

Carl Stuart [00:30:11] You’re very welcome, thanks for calling. You’re listening to Money Talk on KUT News 90.5 and on the KUT app, call or text 512-921-5888. Hi, Carl. You are on a, ha ha, you are an oasis in the sea of infomercials, I’m the oasis, there you go. It’s been said that a bubble cannot be recognized until it pops. Do you think AI is in a bubble territory? I think where we may have a bubble is not necessarily in the prices of all the stocks, but the investments that are being announced in data centers are greater than have ever happened in the history of the world, and where the electricity is gonna come from, where the water is going to come from is unknown. Companies like OpenAI have publicly committed to investing billions of dollars in data centers. They aren’t even making any money. So is there a bubble in the data center business? The answer is it sure looks like it. Is there a bubble in common stocks of companies related to AI? In some cases, yes. We had one come, was it called Cerberus or something like that? It’s That seems kind of bubble-licious to me. On the other hand, in today’s Barron’s Magazine, they opined that Nvidia is still cheap, and they believe it has another 50% move in it. So I think you have to be careful. We do have some of the characteristics of a bubble. There’s no doubt about that when you see what’s going on in initial public offerings. So I’d think I’d be judicious about it, but I think I still have, you know, if you own… An index, an S&P 500 or a NASDAQ index fund, you are participating in AI because those are market capitalization weighted and as those companies like Nvidia go up and up, they become a bigger percentage of the index. And so you’re gonna get exposure to that, whether you like it or not. So I think you’re right. Generally, people don’t see bubbles coming because if they did, they’d be selling into that strength. We wouldn’t have the sharp drop. And, of course, we have the added additional unknown of how long will the war go on and what will happen to the price of oil and what’s that going to do to global economic growth, to say the least, if you’re not worried you’re not paying attention. But I just think you have to parse what’s going on across the economy as it regards AI. I think there’s some aspects that are bubbles. Thanks for the text. You’re listening to Money Talk on KUT News 90.5 and the KUTF. Call or text 512-921-5888. James, you’re on the air. How may I help?

James [00:33:13] Hi, Carl. Yeah, we have a question. We have a, like, a multi-story townhouse in Houston. It’s in the Edo district, you know, so it’s like right near all the sports venues, but it’s not selling. Our tax says we’re about worth $540,000. However, we’ve got like the $500,000 nobody’s buying. It looks fairly new and it’s only about, I don’t eight years old so I’m wondering should we what should we do with it

Carl Stuart [00:33:43] Do you have a, James, do you have a mortgage on the property?

James [00:33:48] Now we’ve everything’s paid off on it and our house as well. Yeah. Oh boy. It’s kind of like, you know, dangling out there and we just want to, uh,

Carl Stuart [00:33:59] Yep, I don’t blame you. I mean, this is always the problem and in bull markets for real estate people don’t appreciate liquidity until something like this occurs and I mean even here I sit at the top of the show that we’re seeing We had a many median days on the Austin metro market. We’re up 27% in April over a year ago And interest rates don’t appear to be coming down Which means that anybody who’s looking at your condo who’s going to finance it? Is looking at a much higher interest rate than a few years ago. So the fact that you haven’t been able to sell it, it really comes down to, are you willing to take a bigger discount? And if you are, frankly, if you can’t sell it in Houston, and Houston’s the energy capital of the world, and you can sell it at these times, and it looks like mortgage rates are not gonna come down and give you more buyers, I’d probably be more inclined to bite the bullet cuz I’m assuming you live here in central Texas, you don’t live in Houston, do you?

James [00:35:02] Yeah, yeah. We got it because my son was going to law school and rather than go out and rent a property, we got a nice house for him.

Carl Stuart [00:35:09] Well, this happened back in the late 80s and 90s where people thought I can send my son to law school, be there three years, sell it, and it’d be like living for free. But what happens is when the condo market, when things collapsed here in Houston and around the Southwest, the condom market was probably the worst of it all. And we’ve got a very robust supply of apartments around here, so you probably don’t have a lot of motivated buyers. I think I’d bite the bullet and sell it if I were in your shoes, James. Raise lower the press

James [00:35:39] That’s kind of like what we’re thinking, but you know the price is going down almost at the price that we paid for Yeah, many years ago. Yeah Yeah, I heard that you can’t really make out with Texas real estate that was somebody told us that many many well

Carl Stuart [00:35:54] Well, you know, it’s timing. Timing is everything. And when you if you bought it at the right time, you think you’re the world’s smartest real estate investor. And if you buy it, and we’re having this time now, you just don’t know. So it’s been a three year hold. That’s not a real time wrong time for real estate. Like I said, I think I’d sell it at a lower price and move on If I were you, James.

James [00:36:16] Okay, that’s a good slice for us.

Carl Stuart [00:36:18] Thank you very much. You bet. Thanks for calling. You’re listening to Money Talk on KUT News 90.5 and the KUT app. Call or text 512-921-5888. Ben, you are on the air. How may I help?

Ben [00:36:37] Hey, Carl. I love the show. I always learn whenever I listen to you. And so I got a question for you today that I haven’t heard you talk about. We got an umbrella insurance policy whenever we were foster parenting, because we figured that there’s kind of a high risk situation, and now we’re just too… Two, we’re just a couple living by ourselves, living a low-risk life, and, um, and I was wondering what you, when you think people should get umbrella insurance, when that’s a good…

Carl Stuart [00:37:18] Right, so for everyone else who’s listening, an umbrella insurance is, it has a list of liabilities it will cover, and it’s relatively inexpensive. And it’s a prudent thing to do when you have a life situation like Ben does. Or if you are in a high-risk situation, or let’s say you have, you do a lot of entertaining. You have a lot of parties in your home, you serve alcohol in your house, somebody has a little too much wine, they get in an automobile accident, and you’re in trouble. If you have a lifestyle where there’s some plausible, legal and financial liabilities out there, an umbrella is a perfectly reasonable thing to do. If you assess your life and you don’t think that you fit that situation and you don’t have plausibly high-risk things going on, then I agree with you, Ben. You might as well not keep it. No sense in the money when the likelihood of a claim is so very, very infinitesimal.

Ben [00:38:27] Well, thank you. Let me ask you one follow-up, which is what I’ve read is that once you start to accumulate some retirement savings, then you want to have a policy for roughly that amount because then for some reason, if you were to get sued or something, then they would, they would try and sue you for the amount of, you know, your savings that you do have. House.

Carl Stuart [00:38:57] I believe if your savings are in a retirement account, like an IRA or Roth IRA or a 401k, they can’t come get that. So then it would be retirement savings outside of that. And again, it’s a risk-reward analysis. And we all drive, we all can have automobile accidents, where someone can slip and fall on our property. All those things are plausible. And in the discovery process, if you’re being sued, yes, you’re going to have to disclose your assets. And yes, there’s an argument they’re going to sue you for up to the level of your assets. They can’t take your home, my understanding, they can’t take your retirement plans. That’s a risk, frankly, that I’m prepared to live with, Ben. I don’t think that’s a very compelling argument.

Ben [00:39:41] Well, thank you very much.

Carl Stuart [00:39:42] You bet, thanks for calling. Time for me to take a break, a perfect time for you to call or text 512-921-5888. Stick around for the rest of Money Talk.

KUT Announcer: Laurie Gallardo [00:40:08] This is Money Talk with Carl Stewart. Call or text him with your questions at 512-921-5888. Now, here’s Carl.

Carl Stuart [00:40:22] Welcome back to Money Talk, I’m Carl Stewart and you’re listening to KUT News 90.5 and on the KUT app. When you have a question, call or text 512-921-5888 and you can catch past shows at kut.org slash money talk. Here’s a quick answer because the answer is I don’t know. Can you explain the rule of 55 for 401ks? Is it only for certain accounts or is it available for all 401Ks? I just do not, I’m just not knowledgeable enough. I know there’s a special rule and I, but I’m not close enough to that that I want to tell you something and then be mistaken so I’m sorry I can’t help you. You’re listening to Money Talk on KUT News 90.5 and the KUT App. 512-921-5888. Hi again, you’re indeed a wealth of information. Thank you. Do you recommend Super Funding 529 accounts? I should say this is for the 12-year-old I wrote about earlier and his eight-year old little brother. Well. I would say, I always say this about 529s, I’m reminded of the politician who changes her point of view and says, my thinking has evolved. I don’t think 529 are a bad thing. You put the money in, if it grows in value, you don’t pay any taxes. If you take the money out for a long list of eligible educational expenses, you don’t any taxes. And if they don’t spend all the money and you leave it there for a really long time under Secure Act 2.0, you can put up to, I think, $35,000 in a Roth IRA, thank you very much. I just like the full flexibility of having the money invested. Call it an education account. Do it with your advisor or Fidelity or Schwab or whoever and make the investments and if you do those in exchange-rated tax-efficient funds. You’re not going to have tax liability until you sell it. If you sell, you’re going to pay the lower long-term capital gains tax rate. And if you want to buy your child a car, or there’s some other special expense that isn’t in the list of eligible withdrawals from 529s, or you don’t spend all the money, it’s your name. You call it the education account. You put it in there. And then your son can, you work it out with your family. I tell you, if you do a custodial account, when she or he turns 21 under the Uniform Transfer to Minors Act, that money is theirs, okay? But it was his to begin with, because it’s earning, his earning. If you’re gonna put money in that’s not from his earnings, and you’re putting it in for education, I have a very different answer. Go open an account, call it the. Shane Smith Education Account and begin to put money in there instead of the 529. Thanks for the question. You’re listening to Money Talk on KUT News 90.5 and the KUT app. Call or text 512-921-5888. Tom you’re on the air, how may I help?

Tom [00:43:39] Hi, I have a question about real estate property, a single family home that I own. This is not the one I live in. I use it as a short-term rental. And it’s a running licensed short- term rental right now, but I’m trying to decide that I should sell it this summer for whatever I can get or I should continue running as a term rental. Now I know… It might be a little complicated calculation, but if you could shed some light on what methods I might use.

Carl Stuart [00:44:15] Are you talking about taxes, Tom, or something else?

Tom [00:44:21] I’m talking about, is it financially better for me to continue running this business as a short-term rental or to sell the house? It’s the capital gain that put them in the ETF.

Carl Stuart [00:44:31] Right. So here’s my experience over the last 47 years. Some people are frankly enjoy rental properties. They enjoy the whole process of it. They like the hands-on process and when you put money in financial assets you are what’s called a outside minority passive investor and that’s either a good thing for you or a bad thing. I had a rental property back in the late 80s with Two Buddies. And the old joke is the boat owner’s two happiest days of the day bought the boat and the day he sold the boat. I was so happy to get out of that, I couldn’t believe it. If this doesn’t meet your enjoyment threshold, I would tell you that the two asset classes over American history that have outpaced inflation are rental property, rental real estate, and common stocks. Rental real estate because over time, rents go up, not always, but rents goes up and over time stocks go up. So unless you had a particular enjoyment feature in the rental, I’d sell it and invest in a broad passive index, balanced exchange traded funds. You don’t have capital gains unless you liquidate. You have daily liquidity. So if you want to take part of the money in cash, you can do it in one business day. So based on what you’ve told me, I’d probably sell it and put it in ETFs if I were you.

Tom [00:45:56] That’s great advice, thank you so much.

Carl Stuart [00:45:58] You’re welcome. You’re listening to Money Talk on KUT News 90.5 and the KUT App 512-921-5888. Richard, you’re on the air. How may I help?

Richard [00:46:15] Hi, Carl. Thank you very much. Can you hear me?

Carl Stuart [00:46:17] Yes, I can. Please proceed.

Richard [00:46:20] Okay, it’s a fairly simple question. Typically, so let’s say I want to buy a car or a house and I have the cash to pay for either one of either one that I did. Would it be better? My assumption is it’d be better to pay all cash if what I’m doing with my money makes more money than the interest payment. Is that generally true?

Carl Stuart [00:46:48] Okay, so I certainly agree with you when it comes to the automobile because what we know is overtime guaranteed the automobile will lose value. So paying interest on an asset that we’re confident will drop in value just doesn’t make sense. So I completely agree with the automobile. Now, the mortgage on a piece of real estate is a little more, shall we say, nuanced. Back when mortgages were 3%, it was pretty easy. Get the mortgage and invest the cash. But now at 6% to 7%, we’re getting really close to the long-term averages in the stock market. But on the other hand, you should make more in the residential, it doesn’t matter, you should more in the real estate because it’s illiquid. If you were listening earlier, we have a couple that haven’t been able to sell their condo in Houston that they’ve owned for three years. So you should get what’s called a liquidity premium in the real estate to make it worth invest more than what you get in the stock market. So if your hurdle is let’s just say 6.7 percent, that’s the mortgage rate. You have to have confidence that you’re going to make 6.70 percent or more in your equity investments because they’ll be daily liquid and then you can go ahead and take the mortgage. On the other hand, there’s also a psychological component of knowing that you’re debt free. You can sleep nights with that. If you’re close to retirement, having no debts is where you wanna be. And the third thing is it depends on your overall financial situation. If you had cash for a house, cash for car, but then you had a small or non-existent financial asset portfolio, that’s a very bad deal, because you’re gonna have to sell your house and live somewhere, and you may have to sale your house in a bear market and you’re not gonna get an attractive price. So it depends on your financial situation. The car’s an easy one. The mortgage is much more personal. That’s an excellent answer. Thank you very much, Carl. You’re very welcome. Thanks for calling. You’re listening to Money Talk on KUT News 90.5 and the KUT app. Call or text 512-921-5888. Jim, you’re on the air. How may I help?

Jim [00:49:15] Okay, are you referring to Jim?

Carl Stuart [00:49:17] Yes, I am. Please go ahead.

Jim [00:49:18] Good yeah I have I had a question my we co-signed a house for my granddaughter and her husband and they have pets one of the dogs is not a good dog it has jumped the fence and bit people and what I’m worried about is are we liable for anything since we co signed for them

Carl Stuart [00:49:41] I think the answer is yes. I’m not an attorney, but I think, but you’re a co-owner. So if you’re an owner of it, if you are on the deed with it, then it seems to me it’s your liability, Jim.

Jim [00:49:56] Okay. Okay. Yeah, but because I want to be able to talk to them about something like that, because my granddaughter’s already talked about trying to get the dog put down because it’s not manageable. She’s tried teachers, she’s tried coaches, and what I don’t want is to be left hanging out there with my butt, you know, if somebody gets bitten, decides they want to

Carl Stuart [00:50:22] Yeah. I think, I think shoot the dog as soon as you can.

Jim [00:50:28] Or send her to Kristi Lohm, you know, she takes care of that kind of thing.

Carl Stuart [00:50:34] Thanks for calling and good luck. I love this show. You’re listening to Money Talk on KUT news 90.5 and the KUT app. 512-921-5888. Skippy, you’re on the air. How may I help? Hey pal, love your show.

Skippy [00:50:57] But i’m a first-time caller okay uh… I own my house and be simple and i had a fire a kitchen fire last year the insurance company is paying out about a hundred fifty thousand dollars restoration two questions first question is Will I be taxed on what the insurance company gives me?

Carl Stuart [00:51:26] Absolutely not.

Skippy [00:51:29] No Okay, that’s interesting. I don’t know why I thought it would be income. I guess it’s not income. It’s something else

Carl Stuart [00:51:35] No, I had, I lost a roof. It was $140,000. I had to pay 14,000 and the insurance paid the balance. There was no tax on it whatsoever.

Skippy [00:51:46] We’ve got to love that. The second question I have is, what do you think? Because I had a fire, I’m going to have to disclose that condition. Yes. How much of a depreciation can I expect because of that condition?

Carl Stuart [00:52:07] Yeah, I have no idea. I mean, there’s too many variables. It depends on whether you’re in a strong or a weak market, all the other things that you would imagine. I mean there’s a period of time back in 2020 in Austin where you could have burned the house to the ground and still sold it for more than you paid for the house because we had a frenzy and house prices went up 40%. Today we have a soft market and you can never have a fire and still be difficult to sell it. So I don’t, you disclose it, it’s going to have a lot more to do with the quality of the house, the quality in the neighborhood, the level of interest, mortgage interest rates, all other kinds of stuff are going to make a lot bigger deal about the value of that house than whether you had a fire or not, in my opinion, Skippy. I appreciate it. You bet. Thanks for calling. You’re listening to Money Talk on KUT News 90.5 and the KUT app. Let’s see better not call but you could text maybe I get it 512-921-5888 Charles you are on the air how may I help?

Charles [00:53:15] Hey, Carl, it’s great to be on your show.

Carl Stuart [00:53:17] Thank you!

Charles [00:53:19] I have questions about gold and silver. I have some old family heirlooms that are silver and gold, not much, you know, and these places ask you to mail it to them and then they will give you a price estimate. Are they reliable? I mean you could mail it to them and they could keep it

Carl Stuart [00:53:42] Yeah, you’re exactly right. What I would do is, rather than those places, I mean, several years ago, someone asked me to help them and they had inherited some gold coins. And I just did a Google in Austin and I think I came up with five or six gold and silver dealers. So I’d take those items and have a face-to-face meeting and go to two or three places. It’s possible that some won’t deal with non you know with not if it’s not a coin or a bullion they may not deal with it or they might but i just i do i do a google search in central texas and then i get their store hours and then i just get in the car with my items and go talk to them uh and see what they have to say because uh you can always check in one of our one of Our sponsors here i guess we shouldn’t call them sponsors we we call them supporters is the better business bureau uh you You can get yourself a list of those dealers, and you can see whether they’re members of the Better Business Bureau, and you could even click on there and see how they’re rated.

Charles [00:54:58] It sounds like a great idea doesn’t look like any of my uh… Errors uh… Potential errors are interested in this uh… I’ve enjoyed having and it reminds me of my childhood of course uh… But i don’t have that many years left and i need to build up my savings of course you do

Carl Stuart [00:55:19] Good. Well, thanks for calling and good luck to you. You’re listening to Money Talk on KUT. I’m in the middle of trying to do three things here. Let me just see if I can get this on. We got a couple minutes. Hi Carl, what are your thoughts having a tilt on small cap value in a portfolio? You think small cap premium is still there? Okay, first of all, I own a small cap value in my portfolio. It’s been painful until this year. Now, right now it’s up year to date 10.6% and the S&P’s up 8.7. But it’s been a long haul. I think it’s fair to say that small caps as a group are less expensive than large caps. You have to be careful. A whole bunch of, if not the majority, which I think is, of small caps are not profitable. I like small cap value, and Yertz, what you said, so the answer is yes. You have decide whether you want to do it passively or you want pick an active fund. In that arena, I kind of like the active. Is there a value premium? I think there is but I think you have to be remarkably patient. We’ve been in a growth market. It doesn’t look like we’re near the end of it, but having a 5% position in there seems like a reasonable thing to do if I were in your shoes. Thanks for the question. Well, we’re out of time. It’s been a terrific show. I wanna thank Mark for doing his usual terrific job as well and to remind you that next Saturday after the news at five, actually don’t even do it after the new because we might just come on right at five. Next Saturday at five… Be sure and tune in to Money Talk.

This transcript was transcribed by AI, and lightly edited by a human. Accuracy may vary. This text may be revised in the future.