Money Talk with Carl Stuart

Carl Stuart answers your questions including the unemotional choice of robo-advisors, using expendable income to pay down a mortgage or buy stocks, and advice for a soon-to-be-teacher to hold on to savings during the lean months ahead of student teaching. Also, some popular questions of late on 529 college plans and protesting property tax appraisals.

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 Stuart. Carl Stuart is an investment advisor representative of Stuart Investment Advisors. Call or text him with your questions at 512-921-5888. Now, here’s Carl.

Carl [00:00:20] Good afternoon and welcome to Money Talk. I’m Carl Stuart and you’re listening to Money Talk on KUT News 90.5 and on the KUT app.

Now, as we enter our 31st year here together, Money Talk is a broadcast about the world of financial and investment planning.

You always determine our agenda by calling or texting 512-921-5888. It’s always a terrific idea to call or text early in the hour, giving me a better opportunity to do my best to answer your question.

As always, I take today’s calls first and then today’s texts and then texts that I have not answered or have not answered fully that I previously received. I’ve already got a text here today. Let me remind you to call or text 512-921-5888.

[Text] Hi, Carl. What is your impression of the robo-advisory services offered by many of the large brokerage firms like Schwab and Fidelity? They seem like an inexpensive way to achieve diversification along with automatic rebalancing, but I wasn’t sure if there were any potential downsides.

So, for everybody else who’s not familiar with robo investing, this is an attempt, I think a product that’s meeting a real need. It’s designed for individual do-it-yourself investors. And as this person says, some of the large custodians, like I presume Schwab and Fidelity. I don’t know whether Vanguard does this or not. And I believe that some of the brokerage firms that may do this as well. It allows you to buy and sell securities directly at little or no cost.

And so do I think it’s a good deal?

I think the answer is yes. Provided that you understand the upsides and the downsides of being a do-it-yourself investor. Over my 46-year career, what I’ve learned is that if you are the kind of take-charge person who wants to be responsible through thick and thin, then having an advisor will frustrate you. You’ll say, why is she saying this or why is he recommending that?

On the other hand, if you’re a person who says, you know, I really don’t want fix my own toilet or I don’t want to do my own income taxes, or draft my own will off the internet, then having an intermediary, someone who you believe has integrity, intelligence, and experience stand between you and the investments who really understands your goals and objectives, it’s worth paying that person.

What we know from Nobel Prize winning research is when we experience a 10% gain in our – the emotional experience is 10% gain. That when we experience a 10% loss, the emotional experiences is a 20% loss. So, there are going to be times like 2022, when no matter what you do, you’re likely to have a negative return in stocks and in bonds as well. So, I just, that’s a cautionary tale, but I think to answer your question directly for the right type of person, I actually think that robo advisors are a fine thing. Thanks for the question.

You’re listening to Money Talk on KUT News 90.5 and on the KUT app. Call me or text 512-921-5888.

[Text] Hey Carl, I worked for the State of Texas for nine years, three months, and at 60, I can now retire with the state and start drawing $1,400 a month. But 13 years ago, I started working for a high-tech company that pay is good. They have an excellent 401k program and I like the work. I don’t plan to leave this job for another five or six years. My question is, should I retire now with the state or wait till I leave my current job, go back and work for the state for another nine months, then retire at which point I would also qualify for free health insurance for myself and reduced insurance for my wife. Leaning toward the latter, but I’m interested in your thoughts.

First of all, it’s a wonderful program to have. And for everybody else, in the private sector, we don’t have any more in this country, what we call divine benefit or pension plans. Back in the day, if you worked for a career at IBM or 3M or Coca-Cola or Procter and Gamble, and you retired, you got guaranteed income for life.

Those are really expensive because they leave all of the liability to invest some money to make those payments on the shoulders of the Today, companies starting and even older ones either don’t have those or if they had them, they put a line in the sand and say no moss. And so you’re on your own with the 401k.

And if you move, you can take that with you. The benefit of the defined benefit plan is that once you qualify with no concern about how the investments in the portfolio are doing, you have guaranteed lifetime income.

Typically, we see these more in government entities, states and counties. And cities, police, firefighters, and teachers. And do I think that this is a good thing? Yes, I actually do. And if I were in your shoes, the answer is a little complicated.

I think it would depend on the size of your 401k. You do really enjoy what you’re doing. It would seem to me the middle ground is work as long as you want to and enjoy it. Knowing that you still have the ability to go back to the state and work for another nine months, be sure and confirm that that’s the case. Having free health insurance and reduced insurance is a terrific idea.

Now you say you’re 60, so you will qualify for Medicare when you’re 65. So my guess is, do I think going back would be a good thing? Yes, I do. If you had other sources of income. Or your 401k was so large that you could take a modest withdrawal rate for yourself and know that you’re not going to run out of money. That may make the pension less attractive.

But boy, that health insurance option is really, really terrific. So I would confirm that I can take that nine months at my leisure. And then I would stay at my job which I enjoyed for as long as I chose. That’s a terrific problem to have and good luck.

You’re listening to Money Talk on KUT News 90.5 and on the KUT app. Call with your questions or text me at 512-921-5888. Kevin, you’re on the air, how may I help?

Kevin [00:07:24] Yeah, I called in last week about my property tax (appraisal protest).

Carl [00:07:28] Yes.

Kevin [00:07:29] So, yeah, I had my informal this week, and it was basically like 20 minutes of silence. They didn’t know what to say to me, and they said they would call back, and I called yesterday, and they said, oh, it says pending, so don’t worry. They’ll call you back. So that’s the news. I’m hoping the longer it takes them to call me back, the better the news will be.

Carl [00:08:01] I hope so too. Well, this has become an ongoing story for all of our listeners. So, thank you for keeping me posted. And anytime you get any new information, please give us a call. Would you do that for me, Kevin?

Kevin [00:08:15] Oh, yeah, yeah. I mean, I think anybody that has their appraisal triple in one year. Yeah. I think that’s a mistake.

Carl [00:08:25] Yeah, I don’t disagree with you. Well, thanks for calling and good luck to you, Kevin. Thank you.

You’re listening to Money Talk on KUT News 90.5 and on the KUT app. Call with your questions or text me at 512-921-5888. Okay, it’s time for me to look here and see if I can find this. Yes, here’s another text. Came last Saturday after we were off the air.

[Text] Hi, Carl, I’ve been fortunate to have a little extra disposable income. How can I figure out if I should use it to pay down my mortgage or put the money into my retirement account?

This is a really interesting question and there are lots of moving parts. It’s also, I will tell you, a question that I have received regularly over the last 30 plus years on Money Talk.

So, there’s two or three things to think about. The first is, what is the interest rate on your mortgage? Because if you have a 3% mortgage… Probably be better to put it in your retirement account. If your retirement count is a pre-tax contribution, then that’s even better because if you’re in a, say, less 22% tax bracket, the government’s paying 22 cents on every dollar that you put in because you’re not paying taxes on it.

Secondly, if you have a reasonable portfolio in your retired account, let’s assume it’s a 401k, the odds of future returns exceeding 3% are quite high. On the other hand, if you have a 6% mortgage or a 7% mortgage, that’s, in my view, a whole different calculation.

And also, it depends on how much money you have saved for retirement, because you’re not going to sell your house and live in your car when you retire. And because house prices have risen so sharply across the United States, and particularly in Central Texas, selling your house, and downsizing, It is plausible, but I’m encountering people who are discovering it’s not nearly as easy to do as they thought, because when you retire, you want to live near healthcare, for example. So, living way out in the country where you get an inexpensive house may not be plausible.

So, I would say to you, you have several pillars to your assets. You have your home, and you have your retirement savings, and you have your future social security. Your home, if you have it paid off when you retired. So that all you have are operating expenses, property tax and insurance is a wonderful thing. If on the other hand you have a modestly priced mortgage and you have fairly small amount of savings for retirement, then I would opt towards the retirement. So those are the variables and without talking to you on the phone, that’s not the best I can do.

You’re listening to Money Talk on KUT News 90.5 and on the KUT app. Call or text 512-921-5888. Steven, you’re on the air. How may I help?

Steven [00:11:30] Hey good afternoon i love your show I was wondering about gold and silver investment, particularly silver.

Carl [00:11:43] So, um, two or three things, uh, basically silver, gold is clearly a precious metal. Other than for jewelry, there’s not a lot of use for gold.

Silver is much more of a commercial metal. It has much more usages in manufacturing. For example, as a result of, as the result of that, if you’re buying, if your buying it as an investment.

I prefer gold over silver. And here’s the reason why in a, in a recession in periods of time, when the economy declines, the demand for silver declines. Okay. And so you’re going to have a lower return historically in times and in times of, of anxiety, like we’re in now, uncertainty over tariffs in the war in Ukraine, gold has tended to be a better investment. So for example, this year, if you had bought a gold exchange traded fund at the beginning of the year, you were up 25%. And if you have bought a silver exchange traded fun, you’d be up about 14%, that’s a huge difference in return.

Also in 2022, when U.S. Stocks declined 20 to 30% and bonds declined 13%, Gold held, it was flat at down 0.6%. So between the two, I prefer gold. The final thing is I would say this. I do not care if it’s a gold bullion. I think gold coins are a bad investment because you’re paying more than the price of gold because you’ve got to buy them from a dealer. That’s a markup. You have to pay for the minting of the coin. And then if you choose to sell it, you got to pay a mark down. Whereas over the last, I don’t know, 10 plus years, You can actually buy the gold through a financial asset, like a mutual fund, it’s called an exchange trade to trust. They’re very inexpensive, and they have two symbols. One’s called IAU, with an M at the end, and the other’s called GLD, with a M at end. They’re vary inexpensive, and they do track the price of silver and the price gold. Silver is SLV. So that, between the two, Stephen, I’m more inclined to gold, frankly.

Steven [00:14:08] Um, but it’s good to have 10% in silver or gold.

Carl [00:14:16] I would say, again, I prefer gold. 10% would be the maximum for me, and I would prefer gold rather than silver, Stephen.

Steven [00:14:25] Uh… Thank you very much get out

Carl [00:14:26] Good afternoon. Thank you for calling. You’re listening to Money Talk on KUT News 90.5 and on the KUT app. It’s time for me to take a break. I think yes, it is. Stick around. I’ll be back.

[KUT Announcer Jimmy Maas] [00:14:44] Money Talk airs every Saturday at five o’clock on KUT News 90.5 FM on the KUT app and at KUT.org. This podcast is produced by KUT and KUTx Studios as part of KUT Public Media, home of Austin’s NPR station and the Austin Music Experience. We are a nonprofit media organization. If you feel like this is something worth supporting, set an amount that’s right for you and make a donation at supportthispodcast.org

[KUT Announcer Laurie Gallardo] [00:15:20] This is Money Talk with Carl Stuart. Call or text him with your questions at 512-921-5888. Now, here’s Carl.

Carl [00:15:34] Welcome back! I love that music! That has become the Money Talk theme here on KUT. Music for Fedora Wearing Dudes was written, performed, and produced by KUT’s Music for Fedora-Wearing Dutes band. Congratulations!

You are listening to Money Talk on KutNews 90.5 and on the KUT app. So, call with your questions or text me at 512-921-5888. Here’s the text.

[Text] Hey, this is my first time listening. Great. I am 28 years old and wondering what is one piece of advice you would share? I have no car payment and live in an apartment, so no mortgage. That is, thank you.

That’s a wonderful question. If every 28-year-old person in America was thinking the way you are, we wouldn’t have to worry about the future of the social security system, or frankly, the future of anything else as regards retirement planning.

So, here’s what you should do. You are by definition a long-term investor. And because you have no debt, you should open up an account. If you have a job and you can put the money away until you’re 59, you can open up in IRA and it’ll get a tax deduction likely.

Or you can do a Roth IRA, which I really like, because you put the in, it’s after tax money, you leave it in there, you make good mutual fund stock investment. It grows over time, you pay no taxes while it’s growing, and provided you spend their five years since the beginning and you’re over 59 and a half when you take it out, it’s absolutely income tax free and you’d never have to take it as opposed to an IRA where you have a required minimum distribution.

On the other hand, if you will be making a large purchase, say you’re going to make a down payment on a home or you’re gonna purchase an automobile. Then you’re probably better off splitting your money between say a Roth IRA and just opening your own account, right, and making the same investments probably.

So as long as your investment horizon, in my experience, is three to five years or longer, and because you’re 28 years old, I think you’d be best off by investing in stock funds. You can start with an index fund, probably one that covers the total U.S. Stock market. And one that covers the total international, and not global, because that includes US, international stocks, which means companies based outside the United States.

You can buy them in a form called an Exchange Traded Fund, ETF. They’re extremely inexpensive, and they’re very tax efficient. What would be the best thing to do, in my view, is to go do homework on the big companies like Schwab and Fidelity and Vanguard. They all offer these. And you can study up on these, and then you open an account with one of those custodians, and you set up something called an ACH, where you give them your canceled check and your banking information, and they will draft from your checking account or savings account the same amount every month.

You’re totally in charge. So if your job gets you more income than you need, you can increase that. If on the other hand, you’re between jobs, you can eliminate it until you get another job. If people did this and put money in every month, it would be great because when stocks decline, and boy will they decline, we just don’t know when, that monthly contribution’s gonna buy more shares, and then when stocks go up, and boy they’re gonna go up you’ll buy fewer shares.

And over your lifetime you will create wealth because what you’re doing is making a bet on and investing in human ingenuity, and that has been about as good a bet as I can find. So, I think that’s how I would get started if I were you. And good luck.

You’re listening to Money Talk on KUT News 90.5 and on the KUT app. Call with your questions or text me at 512-921-5888. Okay, here’s a text.

[Text] Hi Carl. I have an Avantis Mutual Fund with its top holding being Apple and Nvidia and Amazon in the top four. Is that risky with tariffs coming up? What do you think of real estate investment trusts as a portion of a portfolio? This is, thank you, Edward from New Braunfels.

So, I happen to know something about those funds. So let me just share this with other people. So, there’s a lot of academic work around what are the factors that cause stocks to move up? And I’m using that term factor because that’s what they use. There were a couple of people at the University of Chicago. Eugene Fama and Ken French, who got a Nobel Prize in finance for doing their homework over years on what are the factors that lead to stocks outperforming other broad-based indexes.

One of their people, the chief financial officer, Eduardo Repetto, broke off and started this other company because he was working at Dimensional Funds Advisors, which is based here in Central Texas, and he added another factor, a quality factor, and set up It’s a company called Avantis. But it’s still market capitalization weighted and so what that means is, is when a company like Avanti– a beg your pardon– like Nvidia, the more the price goes up, the bigger the percentage it is of that index. That’s just the nature.

Back in the day, they might’ve been energy stocks. Back in today, they may have been healthcare stocks. Back in 90s, it was Dell computer and Cisco systems. That’s the nature of the beast.

The academic work says that most active managers cannot outperform that. And Avantis would say they’ve added a quality screen. Does that alleviate your concerns? Absolutely not, it does not. And I would hope that you have, if you wanna stick with Avantis, that’s your business. I’m not making any recommendations. You wanna have an Avantis International Fund as well.

Now, as far as real estate investment trusts are concerned. So, they go back a long ways. They have unique taxing. Where if they pay out 90-plus percent of their funds from operating the real estate, then there’s some tax benefits to that. And the Real Estate Investment Trust can own any kind of income producing real estate from golf courses to hotels, to warehouses, to apartments, multifamily, to portfolios of individual residences.

So over time, income producing in real estate along with common stocks have been the two asset classes. Which have outpaced inflation.

So, from that standpoint, it’s a good thing. However, when real estate goes down, it can stay down for years. Any of us who were in central Texas in the late 80s, early 90s, when we saw almost all of our savings and loans collapse, shareholders wiped out, and all of major banks taken over by other larger banks, that was, shall we say, a deeply unpleasant experience.

So real estate investment trusts are positively correlated to the stock market. And when the global financial crisis peaked to trough in 2008, they dropped some 55%. So, you’re diversifying, but you had the same correlation that you have to those stock funds at advantage. And it depends on which real estate you own.

Imagine what happened if you owned a real estate investment trust to specialize in large shopping centers and COVID hit. Nobody went shopping. They went online, they went online and Amazon’s blew up because people went on and buy things online.

So, I’m not opposed to them. I don’t personally have them in anything that I own. And I’m saying, if you’re a regular listener, you know I don’t make recommendations on Money Talk. So they’re just fine. Count them as part of your stock portfolio, even though they’re real estate, because they’re very positively correlated. Understand what the risks are, but they are a diversification for what you have. Good luck.

You’re listening to Money Talk on KUT News, 90.5, and on the KUT app. Call with your questions or text me at 512-921-5888. Scott, you’re on the air, how may I help?

Scott [00:24:08] That carl uh… Uh… I was calling because I was going back—I finally decided to go back and uh… pursue the dream of being uh… high school teacher but

Carl [00:24:18] Good for you, let me interrupt you. That’s one of the most important jobs in the world. And I just wanna salute you for doing that because teachers, when you look at, and I’m a big proponent of the free marketplace, but if there’s one where that doesn’t work, does the value of what teachers do compared to what they get paid is totally wrong. And I, I just salute you because it is a noble profession. So congratulations, Scott.

Scott [00:24:48] Uh… I appreciate it and yeah, the next struggle is I’m going to be student teaching in the fall and that’s uh… more or less a full-time job with no pay

Carl [00:24:57] Yes.

Scott [00:24:57] I have some savings, but just looking for general kind of advice or suggestions of what to do in that meantime. I don’t want to blow through all my savings.

Carl [00:25:09] So it says here on my software that you have $60,000 in stocks and savings. Is that accurate?

Scott [00:25:17] Yes, sir. I sold a house and I moved into an apartment two years ago and I still have a good chunk of that, but I was hoping to use that for a house in the future.

Carl [00:25:27] And how much of the 60,000 is in stocks and how much it’s in distance savings accounts, Scott?

Scott [00:25:33] Uh… Sixty k then general ETF like triple q in vanguard

Carl [00:25:39] And do you have any just plain cash savings then?

Scott [00:25:43] I have about $6K in plain cash savings that I have right now, most of it’s in the stock.

Carl [00:25:50] And just, you sound like someone who’s very thoughtful, so help me understand, what do you think it’s gonna take for you to get through student teaching before you start earning a salary? How much is that gonna cost you, do you think?

Scott [00:26:04] So, realistically, probably around 8 or 10k. I guess it’s just terrifying. Maybe I’m not too deep in as I thought I am. I think it’s terrifying to be heading into something where I’ll be making no money for about five months.

Carl [00:26:19] Of course it is. I would do this. The opportunity cost of taking money out of your cash is whatever interest rate you’re making on the cash. The opportunity costs of taking money out the stocks is higher because the odds are, and you know this because you’re an investor, stock market could go straight down during your student teaching times. It could also go straight up.

And so if I were in your shoes, I would tap my savings first, and then once I went through those, I wouldn’t sell enough to cover the rest of the time in stocks. I would take a little because since they’re in ETFs, they’re very liquid, I would just enough to get me through every month. But because if I have to choose assets for a short time between cash and stock, given what you’ve told me, I’d run down my cash and then I would selectively sell my ETFs.

Now, you have an asset allocation, you have a mixture of ETFs And you’ve obviously done that with some thought. So, as you reduce your positions in these exchange-rated funds, don’t take it just from one because that upsets your asset allocation, which is gonna drive your risk and your return. So, if you have a variety of ETFs and you have 25% in one and 40% in another and 10% in two of them and one and 5%, reduce them as you need them on a monthly basis, pro-rate it so as to keep the allocation that you already have. Cash first ETF second would be what I would do Scott, if I were in your shoes.

Scott [00:27:53] Thank you, sir. I think it’s been very common to talk to you, so I appreciate you.

Carl [00:27:57] You’re very welcome, thanks for calling.

You’re listening to Money Talk on KUT News 90.5 and on the KUT app. Call with your questions or text me at 512-921-5888. When you hear that noise, bing, that means I’m getting a text.

We had listeners from Pennsylvania that when they first started hearing it, that they called in and said, what’s wrong? Oh my, here we go.

[Text] Hi, Carl. As my savings have accrued over the years, I noticed that there are large differences in financial institutions for costs associated for banking, investing, money management, offers available, et cetera. How do you suggest we evaluate the best options for us so we are not wasting an unneeded amount on costs and fees?

Terrific question. So, let’s take this through. So, when you have money and cash, that you’re not using for your living expenses. That should go in a money market fund. Money market fund is a mutual fund. It’s not a money-market account at your bank. Money market mutual fund invests in high-quality, very short-term securities. They keep the price per share, that’s called the net asset value, at $1, and you have daily liquidity, and you can even get them with check writing.

There are three kinds of money market funds, Treasury, government, and prime. I recommend the government fund for you. It owns US treasuries and government agencies like Fannie Mae and Freddie Mac. You keep some amount of money there, but you don’t keep this, if you’ve got steady income, you don’t need this thing that says you should have six months of income in there. I disagree with that completely.

If you have stable expenses and stable income, keep a modest amount in there now. As far banking is concerned, obviously you want to go to a bank. Where the service fees are the most modest, because you’re not looking for advice from the bank. You’re looking for a depository institution. They all participate in the FDIC, Federal Deposit Insurance Corporation. So, it doesn’t matter which bank you go to.

So, I like going to smaller banks, frankly, where I frankly think you deal with a level up of people, because it’s a small bank. And when I say a level-up, I don’t mean the quality of the people. I mean, they’re. Their position in the bank hierarchy. But now when you start talking about investing, that’s a whole nother deal. To go back to something I said earlier, the first decision is I have the time, the interest, and the desire to do this on my own. If that’s you, then you go to the easy do-it-yourselfers, the big ones, the household names, Charles Schwab, Fidelity, Vanguard, and there are mutual fund companies that work directly that are not big brokerage firms like T-Roy Price.

So, you have to decide, you know, years ago, I did my own taxes. And then I thought, OK, I can do that. I’m a pretty smart guy. And then, I got audited from the IRS and I thought you know really, I don’t want to do this anymore. I’m going to have somebody between me and the IRS. And so that’s when I started working with the CPA. Thank goodness I did that.

I’ve learned there’s two kinds of people who invest, the people who do it on their own, and then the stock market drops 20 percent, they lose sleep. And they wish they weren’t doing it. They need an advisor. Then they’re the kind of people who have an advisor, but they’re always wondering, well,

I read this in the Wall Street Journal, why are you doing this? Or a friend at work told me this, how come you’re not doing that? Don’t have an adviser. Now, what advisors get paid? There are two kinds. There are the transaction based, nothing wrong with that, transaction based who earn some form of fee, commission or sales charge, and then there are the advisory fee types. Who don’t earn any transaction compensation, but they charge a fee based on the assets. If you have enough money, that would be my preference.

They are what is called fiduciaries. They have a legal obligation to put your interest before theirs, receive no transaction-based compensation, and they have what the law calls a duty of care. If you’re the kind of person that wants an advisor and you have money because those fees are relatively low and if you’re talking about investing 10,000 or 25,000. I doubt you’re gonna find a registered investment advisor who’s gonna do that. But those fees are driven by the marketplace. Let me go back to my CPA example. If I’m looking for a CPA and I have a straightforward tax situation, I’m not gonna go downtown and do a big accounting firm because their accountants are gonna have to charge more because of all the extra overhead. You’re not their type of client. They want large institutional clients.

You wanna do business. If you’re looking for a CPA with a locally owned firm. Now the marketplace suggests that if you went and visited three different CPAs and showed them your tax needs, the fees are gonna be pretty darn similar because the marketplace drives that. So that’s how you determine the fees on that. Great question. You’re listening to Money Talk on KUT News 90.5 and on the KUT app. Call me with your questions or text at 512- 921-5888. Jim, you’re on the air. How may I help?

Jim [00:33:22] Hi carl my question hi my question is uh… Regarding my wife’s social security benefit you know he uh… For several jobs she paid into the social security system and then she uh… Took a job with the school system and uh… She now pays into the t r s yes teachers retired retirement system Yes, now, so I guess she has a. Benefit from both social security and the TRS. Now. What this has to do is, uh, with, is I believe that she will, um, outlive me for various reasons, cause I’m a bit older than her and because of our family genetics, whatever.

Carl [00:34:09] Yeah, sure

Jim [00:34:10] sure though my understanding is one side died she gets to keep one of the two uh… Social security payment so it would benefit her to take my payment because i paid longer into the system

Carl [00:34:22] Yes.

Jim [00:34:23] Right. And it would be higher. So is her participating in the TRS system going to affect her ability or her benefit to keep my social security payment?

Carl [00:34:40] Yeah, great question. So, for everyone else who’s listening, school systems, at least in Texas, do not have to participate in social security. Years ago, it was true for the railroad union people. The idea was that the schools, let’s just say she teaches in AISD. AISC puts money, they have to, into TRS, and she puts money into TRs. She doesn’t have a choice, comes out of her paycheck.

TRS invests the money and promises to pay her a lifetime. Now, if she worked in the private sector or some place that had Social Security withdrawn, she qualifies for Social Security. But there’s an offset so that her Social Security benefit is diminished in some formulaic way by her TRS payments. You predecease her, she can then switch and get your Social Security benefits. And it’s my understanding, I’ve asked people about this, who know this, and it’s understanding that if she’s receiving your social security benefit, it will not be diminished because she has TRS. That’s my understand, Jim.

Jim [00:35:50] Okay, well that’s very good to know because I was wondering if she should just stop contributing to TRS and investing her money outside of that.

Carl [00:35:59] I’ll tell you what, because this is such a big deal, I remember asking my CPA about this. I’m gonna ask again this week. I’m going to send him an email and verify this and then I’ll talk about it again next week on Money Talk.

Jim [00:36:14] Great. I’ll be sure to listen to that. And by the way, I was happy to hear you recommend the IAU gold ETF, because I invested in that a few years ago. It’s gone up, actually. Yeah, yeah, yeah.

Carl [00:36:27] Quite a bit in the past couple of years. Yeah, it sure has. Good, thank you. Thanks for your call, Jim. Bye bye.

Jim [00:36:32] Okay, thank you.

Carl [00:36:33] You’re listening to Money Talk on KUT News 90.5 and on the KUT app. Call with your questions or text me at 512-921-5888. You know what? I think it’s a good time for me to take a break. So stick around, I’ll be back.

[KUT Announcer Laurie Gallardo] [00:37:05] This is Money Talk with Carl Stuart. Call or text him with your questions at 512-921-5888. Now, here’s Carl.

Carl [00:37:19] Welcome back to Money Talk, you’re listening to KUT News 90.5 and on the KUT app. Call with your questions or text me at 512-921-5888. Tommy, you’re on the air. How may I help?

Tommy [00:37:38] Hi, Carl. Hi. Longtime listener on your other station.

Carl [00:37:43] Thank you. Thanks for coming over.

Tommy [00:37:46] Uh… Well, I’m interested in what you think about Berkshire Hathaway you’ve commented several times that active managers generally cannot beat the indexes right that’s not that’s nothing at all true with regard to Berkshire Hathaway right and that’s assuming you can afford – i don’t know what the fee shares are worth now forty thousand dollars a share ever take right I don’t know, I don’t see how you could do better than that.

And then I have a comment about CPAs. It has gotten very expensive to use a fully certified public account. There are plenty of good bookkeepers that can do an excellent job on a tax return without having to spend $200 an hour or more.

Carl [00:38:33] Yeah, I think that’s the marketplace, frankly. It’s really hard to find a CPA that’s a local CPA, and a lot of them are retiring. You may have a minimum of say $1,200 fee, something like that. So, it’s really a question of cost benefits. So, I think you’re absolutely right.

So back to Berkshire Hathaway. First of all, I agree with you. Secondly, there are. Managers who outperform, but here’s my experience. Some managers outperform in bull markets by outperforming their benchmark. Some will outperform at bear markets by not going down as much as their benchmark and personally, I only have three active managers, two of which outperform in bad times like 2022. And one of which outperforms in good times like 2023 and 2024. But the idea is active managers are taking what’s called active bets. They wanna be away from the index.

So, Warren Buffett and Charlie Munger and now Mr. Abel are making relatively large bets on a small number of companies, some of which are public like Apple and some of which are private like BNSF, NetJets. Dairy Queen, Nacona Boots. There have been periods of time where if you bought it at a certain time, Berkshire Hathaway has underperformed the S&P 500.

So, your assertion is true over long periods of time, but there have been people who have underperform the S& P. Having said that, I’m not in any way discouraged from buying Berkshire Hathway. It is like buying a highly concentrated mutual fund. And one of the things they do that makes them very different. Is they’re very comfortable sitting on cash. They have hundreds of millions of dollars in cash. The typical active manager will be fully invested. A huge cash position might be five or 6% of the portfolio. When you have a big cash position and cash is paying say 0.01%, that will be a drag on performance versus the fully invested active manager. So do I think Berkshire Hathaway has been a good investment? I absolutely do. Has it always outperformed the S&P 500? The answer, of course, it hasn’t. So I’m a fan of it, Tommy, but that’s how I see it.

Tommy [00:41:07] Uh… Over the long run bircher is substantially with the s and p completely agree with them i think when i think that they are earning a decent return on

Carl [00:41:18] that’s not true they were not earning a decent return when rates were it went into your treasury is one of the quarter percent the simply not accurate they were in our family percent

Tommy [00:41:28] We’re not in that time now.

Carl [00:41:30] Well now, but you’re talking long term. Okay, thanks for your call. You’re listening to Money Talk on KUT News 90.5 and the KUT app. Call with your questions or text me at 512-921-58.

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

Susan [00:41:49] Oh hi, Carl um I’ve-I’ve got a couple of i bonds that i bought in 2000 -yes- and and the interest rate and the interest rate is like 6.9% from that time.

Carl [00:42:08] I don’t think it is, they reset it every six months, Susan. You’re talking about I bonds? Yeah, you’re not talking about double E bonds, you’re talking bout I bonds, they change their rate on those regularly.

Susan [00:42:20] I say so it depends what when you cash it in what the rate.

Carl [00:42:24] No, no, they reset it. You can only buy up to $30,000 a year, and there have been periods of time when the I-bond returns have been quite positive and periods of time when they haven’t. Now, because we have about 2.1, 2.2% inflation right now, I don’t know what they’re paying right now but I doubt they’re paying 6%. But anyway, please go ahead. What is your question, please?

Susan [00:42:51] I’m a little nervous about the current administration and the way things are going uh… And uh… You know dictators and autocrats tend to feel your money if you live in a country uh… In a dictatorship so i’m wondering if i should cash out well i well i still can’t

Carl [00:43:12] No, I would say no because the other thing that happens to dictators is they tend to control the economy, which leads to high inflation. This is exactly the case in Turkey. And most economists anticipate that if the current administration and the president were really to implement all the tariffs that he has threatened, like the 145% tariff on China and tariffs on products coming in from Europe and from Asia. We would then, the result of that would be higher inflation. And if we do get higher inflation, your I-bonds are gonna be a good investment.

So, I would say no. I don’t happen to think we’re gonna have a dictatorship, but I’m just saying around the world, typically dictators, autocrats intervene in the economy in ways that ultimately lead to declining currency, rising inflation, and declining economic activity. And if you have an eye bond and inflation goes up, that will turn out to have been a good investment, Susan.

Susan [00:44:17] All right. Thank you.

Carl [00:44:19] You’re listening to Money Talk on KUT News 90.5 and the KUT app. Call with your questions or text me at 512-921-5888. Bob, you’re on the air, how may I help?

Bob [00:44:36] Hello Carl, how are you doing today?

Carl [00:44:38] Good, thanks.

Bob [00:44:40] Well, I’m one of those weirdos that like your, uh, Bloviation and I’m disappointed you haven’t done that in a couple of weeks. We all know, we all know you do a lot of reading and I learned a lot from it. My question is basically, we’ve been through the earning season and we’ve had about five reports on inflation. We know you have a direct contact with Jamie Dimon.

Carl [00:45:10] Yeah, we’re good buddies.

Bob [00:45:13] I know you are, so I’d just like to get your take on the market the last half of the year and where you see inflation and stuff.

Carl [00:45:24] It’s a great question.

First of all, right now, the inflation numbers are remarkably good. I mean, I did have spent several hours reading today and the Fed’s favorite measure, the personal consumption expenditure is down below two and a half percent. It’s getting close to their 2% target, which is remarkable.

Secondly, unemployment is stayed right around 4.2%. That’s remarkable. The stock market. Just had the best month of May since 2023, which is also remarkable. All of these things, and then you go read the headlines about geopolitical uncertainty, about war in Europe, about a trade war with China, the world’s second largest economy, and you look at the financial markets and you go, what in the world is going on?

And here’s the thing, no one can figure out, there’s this huge uncertainty, no can figure it out. What the next six months means for tariffs right off the bat. The president will tweet something one day, and the market will go down. The next day, the market would go up. I will tell you this.

US stocks, by normal measurements, are expensive. International stocks, my normal measure, are inexpensive. Bonds with a 5% yield, based on history, that’ll be your return in bonds over the next five years.

So in my view, there is so much uncertainty that I wanna hedge my bets. I’d have a diversified portfolio. I have about 55% in equities. I’d had about 20% in bonds. I’d about 7% in gold. And the rest of it is too hard for me to talk about on the radio, but other stuff that doesn’t go up when stocks go up, it’s not correlated to the stock market. I gotta believe that as long as we have this uncertainty.

I mean, Jamie Dimon said this, he didn’t call me and say it, he said it publicly that it’s uncertainty that’s hurting everybody. A lot of companies, I can tell you pay attention, a lot of company have withdrawn their earnings guidance for the rest of the year, because they can’t figure out what the cost of goods sold is. I was reading today that Deere, the farm equipment and construction equipment company, are trying to figure out where they can move, the get their production from to reduce their exposure to tariffs.

So, companies are totally uncertain. I’m uncertain. I am not bullish on the stock market. And let’s remember, we had a great year in 2023 and we had great year 2024. And so I like that diversified non-correlated approach. I think we have some tough times ahead of us. I hope I’m wrong, Bob, but I think there’s some rough times in the back half of this year.

Bob [00:48:15] Okay. Thank you, Carla. I like the risk and I like the reward. Okay.

Carl [00:48:20] Okay, thank you for calling. You’re listening to Money Talk on KUT News 90.5 and the KUT app. What time? We’ve got a few minutes left. Okay. Daniel, you’re on the air. How may I help?

Daniel [00:48:35] Yes, sir. Hey, thanks girl. Uh, you welcome. I, uh, just had a kid and we’re looking into a five 29, uh education savings plan, but I’m unsure. I mean, the market has done so well. Um, over the last few years, I think I would prefer to be self-directed, but I don’t know. I was just kind of calling to get your take on that.

Carl Yeah.

Daniel Uh, whether I might be able to do better return wise…

Carl Yeah.

Carl …on my own.

Carl [00:49:04] So I’ve got a couple of minutes so I’m going to talk fast and not as if I only I never do.

I used to be a big fan of 529 plans. I’m less of enthusiastic about them. Because you lose control, which is your point. You got to pick a state plan. You got a pick from the menu. You can only make one portfolio change a year.

Now, the good news is it grows without tax liability. For legitimate purposes, it comes out tax free. But if you took the same money, invested it in index ETFs, and get a balanced portfolio, and it grew, you’d have no tax consequences except for dividends. And when you sold that for your kid’s education, you’d had long-term capital gains tax, which is lower. Plus, you just had this child. You don’t know.

This child may end up with a full ride scholarship to the University of Texas, it’s your money. Or you may decide when she or he is 16, that you wanna buy them an old clunker to drive around town. That’s not the educational expense. I like the freedom.

I’d set up a separate account, Daniel. I’d call it the Daniel or you and your spouse or if your last name is Smith education account. If you’re a do it yourself investor or you use an advisor, if you’re do it yourself or go to Schwab or Vanguard or Fidelity and build a portfolio of exchange traded funds on your own and maintain the flexibility and have the maximum portfolio choices. You can do like I talked about earlier. You can have stocks and bonds and gold and all kinds of things. I think that that’s, in my view, I think that’s preferable, OK?

Daniel [00:50:39] Awesome, thank you so much.

Carl [00:50:40] You bet, we have now run out of time. I wanna thank Mark for doing his usual terrific job. A lot of fun this afternoon. And I’ll remind you next Saturday after the news at five to be sure and tune in to Money Talk.

[KUT Announcer Laurie Gallardo] [00:50:59] You’ve been listening to Money Talk with Carl Stuart. Carl Stuart is an investment advisor representative of Stuart Investment Advisors. And this is KUT and KUT HD1 Austin.

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