Money Talk with Carl Stuart

Carl Stuart explores questions about Real Estate Investment Trusts, Austin property values, what to do with your old employee retirement accounts, and the merits and pitfalls short selling stocks.

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.

[LAURIE] This is Money Talk with Carl Stuart. Carl Stuart is an investment advisor representative of Stuart Investment Advisors. Now, here’s Carl.

[CARL] Good afternoon and welcome to Money Talk. I’m Carl Stuart and you’re listening to KUT 90.5 and KUT.org. When you hop—

I’ll tell you a little bit about the broadcast because you may be a new listener. While we have broadcast Money Talk for 30 years, it’s our third Saturday here on KUT. 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. If you text, you will hear the text go off here in my studio. I take today’s calls first and then today’s texts and then any other texts that I have not had the opportunity to fully answer in the past. It’s a terrific idea to call at the beginning of the hour. Give me ample time to do my best to answer your question.

And also if you don’t have a chance to listen live today, you can go to kut.org/moneytalk, which I just did before the show, and you can download all of our previous broadcasts. So, as we build that archive here on KUT, you’ll be able to go back and listen to that.

Once again, the numbers— the, actually, number (is) 512-921-5888.

One of the things that I like to do because our listeners have a real interest in residential real estate and what’s going on in central Texas, I get the monthly data for what’s called the Austin metro area. And for the month of March, the median sales price was $430,000. That’s down 3% from a year ago. That means the median price per square foot was $219, and that’s down 2% on a year-over-year basis.

The total homes sold, 1,854, that was a pretty sharp drop, down 18% from this time last year. And the median days on the market was up to 91 days, that’s up 10% on the year- over-year bases. The supply of inventory is at five and a half months. That’s a sharp increase of 31% from a year ago. That’s good if you’re shopping for a home. And the number of homes sold above list price stays pretty stable. It was up 12%, that’s 1% more than a year go.

And the new number of listings is increased. There were 3,339 listings in March and that’s up 10% from February. So that’s kind of the status of the Austin Metro Art Market Residential Real Estate.

You’re listening to Money Talk on KUT 90.5 and KUT.org. Give me a call at 512-921-5888.

BJ, you’re on the air. How may I help? Hello, BJ. I’m sorry, I cannot hear BJ, Marc. Hello BJ, we have a little technical problem here. BJ has a question about retirement accounts. Hello? Sorry for this, folks. We’ve got a little technical issue here. I have on my machine, the BJ’s on the line, but I know what I have to do. This is what you call learning a new system. It’s not Marc’s problem, it’s Carl’s problem. Let’s see. Let’s just go, okay. Error.

BJ, you’re on the air, how may I help?

[BJ] Carl, like you say, it’s live radio.

[CARL] I wonder why it wasn’t working is because I got to click it on. That’s something new for me. So, thanks for bearing with me here. I belong to the Slow Learners Club.

[BJ] Well maybe that’s why I listen. I followed you over from the other radio station and I’m going to show my appreciation to KUT by making a donation.

[CARL] Oh, that’s so wonderful. That’s so good. I’m so wonderful, great. Good. Well, what’s on your mind?

[BJ] Yeah, I like your thoughts about mutual funds in a balanced portfolio for a retiree whose enemy is inflation.

[CARL] Yeah, that’s a great question. So what BJ is asking about, REITs are real estate investment trusts. It’s an instrument that’s been around for many, many years, and it is a way to own a more diversified portfolio of income producing real estate. You can buy individual REITS that might have office buildings or might have hotels or apartments. And the idea behind mutual fund is you give the manager leeway to put together a portfolio. So if you, for example, had only owned a real estate investment trust that was in say shopping malls and then COVID hit, you had a really bad experience.

So in my view, there are a positive that let’s do the positives first. And I know because you’re a regular listener. What I’ve learned in my career and what I’ve read is that the two asset classes that outperform inflation over longer periods of time are common stocks because they have rising earnings and consequently rising prices, and income producing real estate, not residential real estate because they are rising rents which leads to higher valuations.

And so from that concept, owning real estate investment trusts is a reasonably wise thing to do. They absolutely belong in the equity portion of your balanced portfolio, because, and I’ve put this to memory, in the global financial crisis, which is the biggest stress financial market investors have experienced in decades, the S&P 500 in 2008 was down more or less 40%, the NASDAQ more or least 50%, some international stocks down more than that. I beg your pardon, it wasn’t the NASDAQ, it was the international markets, but some countries down more than that. And the real estate investment trust as a group dropped 55%. So, when there’s a risk off situation going on like we had with COVID and we had in the global financial crisis, REITs have not been defensive. The other thing that makes them attractive to some investors is that the name is what they are. They’re a trust, they’re not a common stock, and so the distributions are trust distributions, and in some cases, some of the distribution may not be taxed as a return to capital. I think as long as you understand that when you own a specific industry or a specific area, you own healthcare, or you own energy, or you owned manufacturing, you’re accepting a more volatile experience. And in a rising rate environment like the one that we’ve been in that puts downward pressure on the future of Real estate income producing real estate because real estate trades if you will at something called a capitalization rate And what that means is what the buyer is looking at is if I buy this property And I take all the projected revenues and I take older projected expenses so that I have this net what rate of return do I want on that net? Because if I want a 5% return, I’m gonna look at that’s gonna be about, I’m going to be willing to buy that instrument and that property at about 20 times the cash flow because that’ll be a 5%, 5% returns.

So if cap rates will rise, then the value or what I’m willing to pay will decline. And if capitalization rates fall, what I am willing to play will rise. So that’s why real estate, income producing real estate is so sensitive to interest rates. And the other thing, and of course, this is, I know you know this and it’s common sense.

The other thing is it’s obviously tied to the growth of the economy, just like the stock market. And we’ve seen some dislocation because nobody expected the work from home phenomenon to occur as a result of COVID. And so what you see is there’s been a slowdown in the broad commercial market in this country. There’s massive amounts of capital on the sidelines. A couple weeks ago, I had a chance to spend two hours with one of the largest and finest developers based in Central Texas, but with developments in Nashville and Charlotte and San Diego and Phoenix and Dallas and Austin. And they’re saying that even the investments that they have, the returns look promising longer term, but they’re not gonna be as promising in the short term. Because we have this rising interest rates and also in some cases the work from home. We’ve also had a large increase in apartment construction. So that’s reduced the potential there in the shorter term. And I will say student housing looked very, very attractive to these people. So as long as you understand the risks, you understand it as a positive correlation to equities, then I think it’s a perfectly reasonable thing to do, BJ.

Speaker 3 [00:09:59] Excellent. Thank you very much, Carl.

Carl [00:10:01] Okay. Thanks for waiting and letting me figure out how to operate the software. You got it. Okay. You’re listening to money talk on, on KUT. I almost did it at KUT 90.5 KUT dot org. When you have a question, call or text 512-83, wrong one. 512 921-5888 because if you don’t regular listeners know that then what happens. Is we have the bloviation, which nobody wants. So last week, I got a question that I think is really on the mind of lots of investors. And that is, in this world with tariffs, what is the possibility of there being weakness in the US debt, the Treasury debt? Because foreigners own a lot of Treasury debt. And I came across these data on the 10th of this month. Foreigners own, this is 2024 data, foreigners own $19 trillion of U.S. Equities, stocks, $7 trillion in treasuries, and $5 trillion in U. S. Credit, that’s non-treasuries but corporate bonds. That corresponds to 20% of all U.s. Equites, 30% of treasurys, and 30% of the credit outstanding. But I also got some more. Data that I thought, this was really stunning to me. In 2007, treasury ownership by foreigners was 51%, so they owned essentially half of all of our outstanding treasury debt. By 2019, that had dropped to 42% of ownership by foreigners, and by 2024, last year it dropped to 31%. That’s a huge decline, so 40% decline. From 51% to 31% since 2007 over that 17 years. And specifically China, because people wonder what China might do in this high tariff trade war. In 2015, China held 1,267 billion of U.S. Treasuries, and last year they had pared that back by approximately 500 billion to down to $750 billion. So is there a risk there? Sure, but one might ask. Yourself, why have foreigners been doing this? I think there are two or three plausible reasons. One, they wanted to diversify their holdings, and so they were looking for other things. Gold has been a net acquisition of central banks now for quite some time. So there was some additional upward pressure on gold, and also no doubt diversifying it to some other solid currencies like the yen and perhaps the British pound and the euro. You’re listening to Money Talk on KUT 90.5 and KUT.org. When you have a question, call or text 512-921-5888. I’m going to take a break, and I’ll be right back.

[LAURIE] Carl Stuart is an investment advisor representative of Stuart Investment Advisors. Now, here’s Carl.

[CARL] Welcome back to Money Talk. I’m Carl Stuart and you’re listening to KUT 90.5 and KUT.org. When you have a financial or investment planning question, call 512 or text 512-921-5888. We have all of our lines available, no incoming texts and that would be the horrible bloviation time. So, I’m just gonna take some popular questions that I’ve had. Over the years and answer those until you either call or text 512-921-5888.

So, we had a question last week about engaging an advisor as a fiduciary. And I would go through this. And the question I’m gonna seek to answer is, should I have an advisor? And if so, how shall I go about selecting one?

And what I’ve observed in my career around having an advisor are there are two kinds of people. There’s the kind of person who is a do-it-yourself investor, I suspect our friend BJ is. That’s the kind of person that would be successful in owning income producing real estate because they like to get, they like the hands-on experience and they’re willing to deal with the hassle. So, if you are that kind of a person, the world has come your way in financial asset investing, because transaction costs, commissions, expenses have really collapsed. And if you have the time and the interest and the desire to do your own investing, you can do so and you have the world of mutual funds, exchange traded funds.

If you’re a stock and bond picker, you can go to a Schwab or Fidelity or somebody like that as well.

Now I heard that, so let’s just see here if I have got a message, okay. Bear with me, we’ll see if I’ve got a text here. For trying something new, okay. I thought I did, but I don’t see that I have a text here, so perhaps I was mistaken. I’m gonna continue to see if know how to do this. I’ve gotta news, what I’ve go is a Samsung phone and I’ve never, there it goes, okay, here we go. Okay, you can hear him, this is terrific.

What are the most popular retirement plans and what makes them different?

Back in the day, Americans went to work, many of them stayed at the same company for a long time. And they put money in, they were obligated to, wasn’t voluntary, and their employer put money in, it was obligated. And then when they met a certain time and working there in a certain age, they retired and they had a lifetime benefit. And those are called defined benefit plans, and we know them as pensions.

They basically disappeared in the private sector because two things, they’re very expensive for the employer and they have risk. And the risk is that if the investment returns don’t turn out, the employer’s gotta step in and make up the difference. And so big companies, what I would call legacy companies like Coca-Cola or Procter& Gamble or 3M, large law firms would have these, those are gone.

But what Congress put in were called defined contribution plans, and there are two kinds of those. One’s called a 401k plan, and that’s at for-profit companies, and one’s called a 403b plan, that’s for a not-profit company. And what happens is the employer makes a voluntary contribution, meaning they don’t have to do it if they don’t want to, and you have, you as the employee participant make contributions.

And you can put none in. You can put some in. This year, if you’re under age 50, you can in as much as $23,500, and if you are over 50, you can put in over $30,000.

You’re given a menu of investment options. They’re typically mutual funds, and you then go ahead and drive your own portfolio.

Some employers, in my view, the good ones, also give you educational advice, either face-to-face or online to help you make decisions about what to do. And they’ve also, Wall Street has invented, I think something that many people use called target date or lifestyle funds, where you pick a date in the future and then Vanguard or Fidelity or JP Morgan or somebody else, whoever the asset manager is, divide, makes decisions between say bonds and stocks, domestic stocks and foreign stocks.

And the thing about this— pardon me—  this is, when you leave your employer, that money is yours, okay? And that’s a big deal because people don’t work at the same place for a lifetime any longer. So, you get to take that. That’s what’s called portability. And some employers will have made contributions and have what’s call vesting schedules. And if you get some portion of their contribution, you’ve worked there long enough, you get the entire amount. And then you have a choice.

If you go to a new employer. You can transfer that money to a new employer if they have a 401 or 403B plan, or you can take it and put it in an IRA rollover and manage it yourself or engage an advisor. Then there are individual accounts for the small business person.

There’s what’s called an SEP IRA, which allows the self-employed person to put away, frankly, a lot of money, as long as she brings her employees along with it. You can put in, it’s up to 25% of compensation. It is an individual account, so what that means is that it’s fully portable, and you put the money in all of these, and the money that goes in, you pay no taxes on. And if you leave the money there and it grows, you pay taxes on the growth. And when you take the money out, provided you’re over 59 and a half, you pay income tax on it. And in the case of IRAs and SEP IRAs, 401 and those two.

When you hit a certain age, right now it’s age 74, you have to begin taking the money out called a required minimum distribution. There’s a more recent retirement plan called a Roth, R-O-T-H, Roth IRA. And like an IRA, it has the same contribution limits of 7,000. If you’re over 50 this year, $8,000, you do not get a tax deduction when you put the money in. But provided you leave the money in there five years from your initial investment. And you’re over 59 and a half when you take it out, it comes out entirely tax free. The one thing that makes these attractive for lots of people is there’s no required minimum distribution.

As a consequence, if you don’t need the money, you don’ have to take it. So that’s a quick analysis of some of the most popular retirement plans and what makes them different.

You’re listening to Money Talk on KUT 90.5 and KUT.org.

Okay. Bob, you’re on the air, how may I help?

[BOB] Thank you for taking my call you bet I am about three years ago. I did a transfer I sold some apartments. Yes, sir, that that I owned and I did 1031 exchange. Someone said that was great way to save on taxes, but yeah, it’s named in my name and I want to change My will and do a trust and put the trust as the owner. Is that possible?

[CARL] Boy, that’s a really technical question, Bob, and I’m not an attorney, but that is just such an important question. I don’t know if you can do that. It would seem to me, because you own the property outright that you can put that into trust just like you could if it were stocks or bonds or mutual funds.

So, my common sense is that, yes, you can put something that you own – you acquired it–   through a 1031 exchange to reduce or eliminate the taxes on the sale of the first property, but you own this property free and clear. It’s your property. And if you choose to put it in a trust as part of an estate plan, I would think it would be the same as if you put any other asset in a trust. So, my best guess is yes, but unless we have an estate attorney listening and she or he comes, calls or texts with the answer. I would get professional advice, but I’m optimistic that you can do that.

[BOB] Well, I appreciate that. Uh, that’s what I’ll do. And thank you for your help.

[CARL] You bet, good luck and thanks for calling.

You’re listening to Money Talk on KUT 90.5 and KUT.org when you have a question, call or text 512-921-5888.

Let’s just see here about how I get more texts on here. Ha ha ha, okay. See if there’s another, I’ve heard the text going on here. I’m just looking for them and I’m not seeing any others. So let’s look. Here we go. Let’s see. Terrific. Here I found out how to find them. Okay.

This is about a gold I saw. So, let’s just look here. 512-921-5888. Let’s see if I can, I’m sorry. Just don’t know how to do this.

I’m just going to continue to bloviate, and then I’m going to ask for help from Marc when we go for a break, because I simply do not know how to operate this device so that I can find out when I know I’m getting texts, because I hear them, and I do not how, let’s just look here. Okay. I’m going to keep giving the number, I’m gonna keep, there we go. Let’s see.

All right, let me go back to this when I was talking about, and I apologize for this, but I need more training here. Oh, good, it looks like somebody’s calling in. Ha ha ha! 512-921-5888. Let’s just see, we’re getting, Mark’s setting up the call for me, and then I will be able to answer this for this person. Okay, now I see it. Looks like

Carl, I purchased gold exchange traded funds 10 years ago at a much lower price. Is now a good time to take some profits?

Great question. I would say the way I think about it is twofold. I would think about what was my original asset allocation to gold exchange-traded funds, all right? And you clearly have moved beyond that. Asset allocation is the single biggest determinant of risk and return.

And so I think that what I would want to know is, if I started with say 5% and it was 10 years ago, you’ve probably got 15% now. So now you have a concentrated position. Is that a good idea? Probably not. Should you sell all the gold? The answer is no.

Trends in gold last years. And also gold tends to hold value in uncertain times and if there’s one thing we can agree upon, we are in uncertain time. And so I would say that I would not sell all of it, but I would get it back to where it was, it fit my asset allocation. Thanks for the text.

Let’s keep going here. Sarah, you’re on the air. How may I help?

[SARAH] Hi, I am currently navigating the distribution of a family trust and there’s a lot of us. We have our appointed trustee, like the person that is kind of in charge of everything. So, because there’s so many of us, we’re wondering if we need to bring a lawyer in to help just make the process smoother. And if so, is that something that as the trustees we can just do or is there something in the trust that we need refer to?

[CARL] I really think because there are multiple family members in it, this is a fraught situation to my experience because people may, particularly if they’re illiquid assets like a vacation home where I’ve seen one person wants to keep it, one person want to sell it, nobody has the ability to buy that out, the other person, it gets really confusing and messy.

So, I think this is absolutely worth spending the money the trust should bear the cost of that and when you seek out an attorney. You want to ask here her or him? Is this the type of work they do? Because attorneys, just like physicians, have specialties and you want to find someone that does estate work.

But yes, I think the downside of not doing this and, either A, making a mistake, or B, creating a lot of family ill will. Someone once told me that the easiest way to get a bunch of adults to act like children is to have their parents pass away and they all act like they’re like they are 10 years old again. So, I think, I think if I were in your shoes, I fire in your shoes here, I’d get I get myself a lawyer, you bet. Okay.

[SARAH] Okay, great. Thank you.

[CARL] You bet, thanks for calling. You’re listening to Money Talk on KUT 90.5 and kut.org. Where Carl Stuart’s learning how to work new technology like an Android device. Give me a call or text, 512-921-5888.

Emma, you’re on the air, how may I help?

[EMMA] Hi, Carl. So, I am in my thirties now and I’ve had various jobs, different types of employer retirement accounts, 401Ks, Simple IRA. I’m in a nonprofit now, so I’ve got a 403B. And I’m wondering, like, what do I do with them all as I leave employers? Do I combine Tindy, what is going to happen?

[CARL] it’s a great question and I encountered this regularly. Because as I was saying earlier today, my father worked at the same place for 42 years, but today people change careers and within the same career, they change employers. So, there’s really two ways to go about this. If you work at an employer currently and they have an employer-sponsored retirement plan, in a 401K, for example. If you choose, you can consolidate all of those other ones into the current plan.

Now the benefit of that is it makes life a lot more simple. You get one statement, you know exactly what you’ve got. You’ve got one menu of investments to choose from and your employer has a responsibility. They have to do due diligence. They probably had to hire an advisor or some other retirement plan expert. To provide the lowest cost and most diverse choices of the 401k. That’s one choice.

The other is to combine all of those previous employers into one account and you can do that. That’s called an IRA rollover. And you then have a decision. I have the time and the interest and I wanna do this myself. So, you go to a do-it-yourself custodian. And of course, I’m not recommending, I’m just identifying Fidelity and Vanguard would be two of the largest, Schwab would be another one. You would set up an Emma IRA, that company is the custodian.

You would then go to each of those former employers and say, I want to roll over on my money. They would have a form, and on the form they would say, do you want us to cut a check made payable to Emma? You say, no way, because that would be all taxable income to you, and you’d pay income tax plus a 10% penalty because of your age. Or there’s this position where you mark off, “I want a check payable to my custodian,” an IRA rollover. And it would be Charles Schwab custodian for Emma IRA rollover. They would likely send you the check, because they don’t want to send it to Charles Schwab, but they may do that.

They send you check, it’s not payable to you so you don’t endorse it. You take the check to Charles Schwab. And now you have the IRA and you have their menu of funds from which you can choose. Or you can say, “Really, this is important to me, but I don’t have the time, the interest, or the desire. My idea of fun on Saturday afternoon is not reading the Wall Street Journal, although I love to listen to Money Talk.” And so, in that case, you choose an advisor.

Now, when you want to choose an adviser, you can do a couple of things. You can ask friends who you think are in similar situations, the persons that they’ve used. And that’s one way to start. That doesn’t mean you ought to do that person. You need to interview this person.

And there ought to be three clear things that happen out of that interview.

The first thing is that she should be able to articulate for you what her investment philosophy is. Because if she can’t do that, that’s not the right person. If she does it and it doesn’t make sense to you, then you just need to keep on looking. And then secondly, You wanna know, if I engage your services, what does a happy, healthy client relationship look like? There’s a lot of data that say that when people are unhappy with their professional servants, whether that’s an attorney or an accountant or an investment advisor, it’s often not because of performance, it’s because of a complete misunderstanding of expectations between the client and the professional. So you wanna know how are we gonna connect with each other? Are we gonna meet face to face? Is there a frequency to this? Are you going to be sending me regular information? What does it look like to be your client? And third, how are you compensated? Because these people deserve to be compensated just like your lawyer or your accountant. The one thing you want to avoid is anyone who says, oh, don’t worry about it. We’re going to put you in investments where you don’t pay anything. Run as fast as you can in the other direction. Because you’re paying for it one way or the other. You’re either going to, and you’re going engage some. So these people can call, everybody can call themselves financial advisors, that’s a term of art and not a term law, but the people who charge transaction based commissions or sales charges are legally called, are called registered representatives. The other type charge you a fee based on the value of the assets. So if the assets grow, the fee grows, the assets fall, the fee falls, that would be my preference. If you could, provided you have enough money that that person is called an investment advisor. And they have what is called a fiduciary responsibility. They have to act on your best interests. They have put your interests before theirs. They have what’s called a duty of care. So that’s a long-winded answer, but that’s how I would go about it. Those are the points I wouldn’t want to make if I were in your shoes, Emma.

[EMMA] Oh, those are all really helpful, thank you so much.

[CARL] You’re very welcome, thanks for calling. You’re listening to Money Talk on KUT 90.5 and kut.org. Time for me to take a break. It’s a great time to call or text 512-921-5888. I’ll be right back.

[CARL] Carl Stuart is an investment advisor representative of Stuart Investment Advisors. Now, here’s Karl.

[CARL] Welcome back to Money Talk, I’m Carl Stuart and you’re listening to KUT 90.5 in KUT.org. When you have a question, call or text 512-921-5888 and oh by the way, if you want to listen to previous broadcasts, go to Kut90.5 slash MoneyTalk.org and I promise you by next week I’ll get better at all the technology. Here we go. We’ve got a call on the way.

Bob, you’re on the air. How may I help?

[BOB] Carl, how are you doing?

[CARL] I’m doing better.

[BOB] Hey, you’re doing an excellent job. I don’t care what Bob and Orrington says about you. You’re doing excellent job Thank you. So, I’ve been a long-time listener, 25, 30 years. Oh, thank you. I only call in every now and then. My question is about trend following and credit swaps. If credit swap is correct. I know I’m late to the game and I’m 100% equity investor and I like the thrill of what comes at that individual stock. And if you could please comment on that and I’ve been looking at just to learn stuff at reasonable expenses for some ETS to do that type of stuff and it’s like 60 to 100 basis points. Yes. I just want to know what the what a reasonable expense rate might be.

[CARL] To help everybody else, because Bob’s ask a really thoughtful and sophisticated question. So, there is a part of investing that’s been around for a long, long time that really started in the commodity market where my grandfather in Northeastern Missouri had 100 acres and he raised and he grew corn and soybeans. And he, if he wanted to, when he planted that, he could go into the futures market. And sell his harvest in advance. The good news was if he had a big harvest and prices declined, he knew what he was gonna get.

The downside was if demand exceeded the previous season, perhaps the price would be higher and he wouldn’t get it. And that began, that created a futures contract. Today, the futures contracts that are traded globally all the time are commodities. Currencies, equities, and fixed income, or interest rates. And this is a remarkably robust and liquid market. Some of the, one company I followed, I was in their offices last year in London, and they traded in 12 months, seven trillion with a T, values. That’s called notional value.

And the advent of computers, has consequently really made this quite something.

And so it’s trend following, and it’s based on the fact that when there’s a sustainable trend as picked up by the algorithms, they can, if it’s upward, they can go what’s called long that, and if it is downward, they can short. I think it’s a viable alternative for someone who wants a well-balanced portfolio, and there are daily liquid mutual funds. And I would tell you that it’s an expense when compared to paying three three basis points for a vanguard total stock market it’s expensive the ones that I Have looked at and interviewed and done my due diligence or more than 1% But I’m looking at 40 act funds rather than exchange traded funds I’m not opposed to ETFs But every time I talk to a sponsor who has any strategy equities or fixed income or trend following and I ask them, you’ve got an ETF and a 40 act fund, help me understand the difference. The end of the day what it comes down to is there’s more flexibility in a 40 Act fund for the managers than there is in an ETF just because of the structure of an exchange traded fund. So my personal view is I like the 40 Act Fund rather than the ETF. You have to be prepared for the fact that in a market like the current one you’ll have negative returns because the market will go sharply higher, and then the algorithm will move to the long side, and then it will sharply lower, and the algorithm move to short side, but it takes time. And so what happens then is that you get negative returns. But the last good test of this was in 2022, when the S&P was down over 20, the NASDAQ over 30%, the Barclays Ag, Bloomberg Ag down 13%. And the two that I follow were up 16 and 17% respectively. So I like that. I don’t have an opinion on credit swaps, Bob.

[BOB] Hey, Carl. Yeah. One more question. Can you please repeat? I know you said ETF, but what is the the other one? Portia, I think that’s that’s.

[CARL] That’s a 40 act fund is a normal, just a normal straight mutual fund.

[BOB] [Okay, I got it. Okay. I’ll look it up. Thank you so much.

[CARL] You bet, thanks for calling. You’re listening to Money Talk on KUT 90.5 and kut.org. Five one two nine two one five eight eight eight.

Sabrina, you’re on the air, how may I help?

[SABRINA] Uh… High you find out went the best time to get gold uh… I’m imagining right now trying at that time to do that and uh… But i just wanted to find out for future reference when the best times goal to get the that’s great you know and then also should it be physical gold like uh… You know the bar that talk about on TV. The Buffalo coins, or should it be stopped? Then my other half of my question is, I have a Roth and a traditional IRA. I also have, I think it’s still considered a pension that I left when I used to work for them.

[CARL] Yes, you do.

[SABRINA] [And I just wanted to find out how to best edge my bets for retirement.

[CARL] Okay, lots of stuff there. I would tell you my experience over the last 46 plus years, when someone asks me what’s the best time to buy and whether it’s gold or stocks or bonds, I gotta tell you, and I’m not being a smarty pants here, there frankly is no best time. Because you can’t tell the future. That embedded in that question is that I’m gonna know, or you or anyone else is gonna know what’s gonna happen to the price of gold Over the next six months.

We have no idea. Gold was pretty much a bad investment after it peaked in 1980 until just a few years ago. So, I would tell you this, because gold has risen so sharply, it’s up over 26% this year and we’re only in April, I would say I would start with buying some gold but not take a full position. Now I’m gonna tell you how I would buy gold if I were in your shoes and how I do it in my shoes. I would not buy the bullion, you have to store it, it’s illiquid. I would now buy the coins, they’re expensive because you pay for the minting and you buy them from a dealer who’s gonna charge you a large commission and if you ever wanna sell them, you’re gonna pay a large condition to sell them and that hurts your return. You can buy the gold mining stocks but they do not move one-on-one with the price of gold. Some might go, it’s a little bit like oil and gas, Oil and gas exploration companies can make money when oil’s $50 a barrel, others need to have it be $70 a barrel. I would stay away from individual stocks because they tend to do better in good times for gold and do worse in bad times. I would own an exchange traded fund. They’re called ETFs. They’re very cheap. The two biggest ones are called GLD, and that’s the symbol, and the other one’s called IAU. And either one of those would be fine. IAU has a little bit less operating expenses. You have daily liquidity, you can buy and sell them if you’re working in a no-transaction environment. So I would say to you, I would look at my investments that I control, like your Roth and your traditional IRA, and I would stay, okay, if I had $100,000, I want to have $10,000. $7,000? Something some target for gold and then I would take that and I break it into a third and I’d buy a third now I’d wait three months and buy another third and I wait three month and buy the balance and that way if gold has a Sell-off or profit-taking you’ll have it that take advantage of it But if this bull market and gold continues, you’re never going to find a time where it’s going to look like it’s cheaper So that’s the way I would I would leg into it for that Now, talking about your Roth and your traditional IRA and your pension, the pension with the state, they’re gonna determine how that’s invested and when you reach a certain qualification, age, et cetera, you’re gonna be given a range of choices of income from your life or if you’re married, your life and a spouse or your life but a period certain in case you died before 10 years was up, for example. What you have control on, control over is the Roth and the traditional IRA. And what you want to do in my… How old a woman are you, Sabrina, by the way?

[SABRINA] I’m in my fifties.

[CARL] Okay, you got a long time to invest. You got to act like you’re going to live to be 90, whether you are or not. So, you don’t want to be too conservative. You want growth. You want to invest in human ingenuity. So you want to own stock funds. You don’t wanna be a stock picker. And what you wanna do is you wanna use the cheapest funds you can find because that improves your returns. So you wanna to use index funds. You wanna have a certain amount in stocks. You wanna to have a certainly amount in gold and a certain number in bonds. The more you have in stocks, the more that future value is going to occur and the greater risk you take, but it’s a risk worth taking, because as I like to say, you’re investing in human ingenuity. So I would have the same balance, the same asset allocation in my Roth as my traditional IRA, because I’m the same person with the same goals and objectives. And that’s how I would move forward if I were used with Sabrina.

[SABRINA] Thank you.

[CARL] You’re very welcome. Thanks for calling. You’re listening to Money Talk on KUT 90.5 and KUT.org. We’re down to the last seven minutes. If you want to call or text 512-921-5888. Let’s go here.

Edgar, you’re on the air. How may I help?

[EDGAR] Hey man, what a great show. Listen to it for a long time.

[CARL] I’m glad you do. Thank you.

[EDGAR] Thank you. I’ve got, I’ve never called in before because I’ve really never had any questions. Yes. Not that I’m smart or anything, but I’m kind of a trepidatious fellow.

[CARL] Okay.

[EDGAR] A lot of my friends and neighbors are starting talking about buying Bitcoin, which I don’t want to get into right now, maybe next week, but also started talking about selling Tesla short. And how to put some calls work those are my questions and that will close up your show today

[CARL] Okay, thank you. So, selling a stock short goes back as far as I know to the beginning and here’s how it works If you want to sell sell sell Tesla short, you go to your custodian your broker dealer and You want to tell Tesla short you put in cash So if if if you do if it’s let’s just pretend that’s ten thousand dollars You’ve got to put up $5,000. They sell the stock. If the stock lays flat, that’s it.

And if, on the other hand, the stock goes down, and now the market value is 8,000, you go in and buy that shares of Tesla for 8,00, which you previously sold for 10,000 and you have a $2,000 profit.

On the other end, you sell Tesla short at $10,000 and it goes to $12,000. Buy it back, your $5,000 you invested is now $3,000 and you lost $2,000. That broker dealer will require you to keep a certain percentage of the value of Tesla in that account. So, if Tesla keeps going up, you have to keep putting in more money. And what happens eventually is people can’t stand it anymore and they go in and buy it. That’s called a short squeeze.

That’s how you sell something short. A put option or a call option is a wasting asset. You can buy a call and bet that the price of Tesla will go up over a certain period of time. What you pay is called a premium. You get to pick, there’ll be a series of prices.

So, let’s say a Tesla were $50, you could buy a called that expired in three months that said at 55. And if Tesla went to 60, you’d make money. But if it stayed under 55, you lose your entire investment. That’s a call option. Gives you the option to call the stock from the seller and now you own the stock. A put option, you can buy a put on Tesla, say Tesla’s $50, and you buy a $50 put that expires in three months. If the stock goes to 45, you could sell that put and you’ve made the $5. You’ve made money on the decline in Tesla. But if Tesla stays $50 or above, The put expires worthless. And you lose all your money. That’s how it works, Edgar.

[EDGAR] Thank you. That was very, very concise and well said.

[CARL] [Okay, thanks for calling. You’re listening to Money Talk, you bet. You’re listen to Money talk on News Radio KLBJ. Call or text, well I guess it’s a little late to do that. Let me just go to the next call. If I can hit drop here, and it doesn’t seem to wanna drop Marc, I’m sorry. I’m gonna go to this call here. Marc, there we go, okay. Here we go.

Catherine, you’re on the air. How may I help? I’ve got on air, I clicked on-air and I’m not able to get it on. I’m not sure what to do. Can you hear me? Oh, now I can hear you. Terrific. You can hear me. Yes, I can. How may I help?

[CATHERINE] Yeah, so, well, it’s kind of a little story I’ll try and summarize, but long story short, someone in a family was passing away and I was put in charge of her will, you know, she was passing and they said, you, know, immediately, let’s write a will, I know I want to change it, I want it to go, you now, to share amongst everyone, blah, blah. They called a quote family member who was a lawyer to help and he said, oh, well Put it on probate, you know. I’ll help you with this. It’ll have to go through probate.” And not knowing anything, what I know now, we’re like, okay, you know, we didn’t know. And I figured, oh, well, he would have a fee or something. And he’s like, well we’ll talk later at the office.

Well, after it was all ready and asked it, we spoke. But what he did is he wrote up a will and how it was supposed to basically, equally, you know, and… And there was only one piece of property to sell off, and then everything else was in a stock or fund that just was converted to cash and put into this probate account. Okay, so everything seems fine. Well, in the end, he, the way the probate works, obviously I found out, unless you are charged a set fee, they can claim a percentage of the money it is. And the more the money, the more they make.

[CARL] What?

[CATHERINE] He said, well, I get a percentage and I’m gonna get at least three, 5% of the whole money. Cause he kept wanting me to put it into this account or that account immediately. And, and, and he’s like, well you get money too. I’m like, I’m not taking that money. You know, that, that goes to the family. And he’s, like, well I don’t know if that was his way to, but legally, I guess the law said it can be split with the lawyer and the person who took care of the probate. So Catherine, I’m going to interrupt you.

[CARL] Catherine, I’m going to interrupt you because we’re running out of time. Can you call back next Saturday so we can talk?

[CATHERINE] Oh, I will try if I remember.

[CARL] Okay, well just call call early in the broadcast next Saturday. So and I’m going to talk to a lawyer friend during this week. Okay

[CATHERINE] Oh, all right, wonderful.

[CARL] [Well, yeah, I’m so sorry, but we’re just out of time. Thank you. Well, we’re down to the end of Money Talk. I had a lot of fun. We’re gonna hopefully get smarter at all of this. And next Saturday, after the news 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.