The U.S. Bureau of Labor Statistics reported that food prices were up 10,8% for the year ended April 2022 marking the largest 12-month increase since November 1980. Just to name a few, this includes increases in*:
Gas prices are up nearly 50% since last year.
The price of everything appears to be on the rise – as does inflation.
Are we heading toward a recession? Are we already in a recession? Is there any relief in sight? With all the uncertainty in our economy, you need to ensure that you understand its current state and what you can do to protect yourself and your family.
During this live discussion led by Kami Elhert, Tom Gibson, CPA, and Brian Shey will discuss:
Transcript (edited for clarity)
Kami Elhert: Gas prices are up nearly 50% since last year. Are we heading toward a recession? Are we already in a recession? Is there really any relief in sight?
With all the uncertainty in our economy, you need to ensure that you understand its current state and what you can do to protect yourself and your family. The U.S. Bureau of Labor and Statistics reported that food prices were up 10.8% for the year ending April 2022, marking the largest 12-month increase since November of 1980. Just to name a few, flour is up 14%, butter and margarine 14%, with meat, poultry, and fish at 13.8%. It seems that the price of everything is on the rise, as is inflation.
I’m Kami Elhert, Senior Client Relationship Manager. Today, I’m joined by Tom Gibson, CPA, and TSP Family Office’s very own Senior Tax Professional. Good morning, Tom.
Tom Gibson: Good morning, Kami, and good morning, Brian, as well. And good morning to all folks joining us for the webinar.
Elhert: And thank you, Brian Shey, TSP Family Office’s Tax and Financial Strategist for joining us as well. Good morning, Brian.
Brian Shey: Thanks, Kami. Good morning to you. Tom, pleasure to see you again and welcome. Happy Friday to everybody out there.
Elhert: Today we’ll be talking about the last time we saw inflation as we are now, the effect the current economy could be having on your industry and your employees, the implications of rising gas prices, as well as any silver linings that do exist.
Tom, I know that there has been a lot of talk regarding inflation. Are we or are we not in a recession? Can you break down what technically is and what practically is a recession? Because right now we all feel as though we are in a recession.
Gibson: It remains to be seen in a technical sense if we are in a recession at this point.
The technical definition of a recession is back-to-back declines of the gross domestic product, the GDP, for two quarters in a row. We certainly had that for one quarter. We will see when the numbers come out what the second quarter looks like and how it’s going to play out. That’s the technical definition.
Now, for those of us who still have to go to the grocery store and buy food or go to the gas station and buy gas, certainly, the inflationary pressures are there. Ronald Reagan when he was running against Jimmy Carter in 1980 had, I think, a pretty good practical definition of a recession. He said, “A recession is when your neighbor loses his job, a depression is when you lose your job,” and then he ended with, “A recovery is when Jimmy Carter loses his job.” And that actually is how it played out, to be honest.
There’s almost a seven stages of grief approach to most problems. There aren’t quite seven stages, but we began last year with not really any inflation. Then we pretty quickly moved to, “There’s inflation, but it’s transitory, it’s not going to last too long.” Next, we moved to, “Inflation is not necessarily a bad thing.” And now we’re to the finger-pointing stage where inflation is Vladimir Putin’s fault, it’s the greedy company’s fault. It’s always somebody else’s fault.
The layman’s definition of inflation that most of you are probably familiar with is when too many dollars are chasing too few goods, and that causes prices to rise. Well, of course, the pandemic was kind of a perfect storm of both. Some of you took advantage of the PPP loans, the ADA loans, all of that. And the advice I was giving then, I would still give you today: get all you can because they’re going to be looking at you to pay it back eventually. And so what I’m about to say, I don’t want you to feel bad about taking my outstanding advice that I gave you, but the fact of the matter is there were trillions of dollars that were artificially injected into the economy, not because of higher productivity, not because of rising wages. It just kind of happened.
At the same time that was happening, we also had the fallout from the supply chain being constricted, and we’ve seen that in many different ways. Computer chips for cars – people have cars they’ve ordered, and it’s going to be months before they get them because they’re waiting to get the computer chips in. The infant formula fiasco that we’ve seen. It’s just the perfect storm.
I love when they use the term unexpectedly in economists “unexpectedly” see a rise in this. I don’t know why they weren’t expecting this. I’m not an economist, and I was sure expecting it. Do you remember that scene in “Back to the Future” when Marty is sitting on the couch and there’s an episode of I Love Lucy that comes on and he says, “Hey, I’ve seen this one before. It’s a classic.”? And the younger version of his mom says, “Oh, no, this is a brand new episode.” For some of you, this is a brand new episode. For someone a little bit older, and I’ve said this, the only good thing about turning 60 in December is I’ve seen this before. I’ve seen this movie before.
The Carter administration and the early part of the Reagan administration, that’s my expectation of what we’re going to be seeing now. We’re not quite there yet, but to put it into perspective, Kami was absolutely scandalized when I was telling the story about the first mortgage we got on the first house that the first Mrs. Gibson and I bought back in 1985. We had a first-time home buyer loan. I was making $16,000 a year. We had a $400 house payment on a $40,000 house, and the mortgage interest rate was 10%. And we thought we were flying because the normal mortgage interest rates were 12%, 13% at that point. They had been as high as 15% to 18%. It was like buying a house on your credit card. That’s the kind of interest rate we were dealing with back then.
There are really two ways to deal with inflation. There’s the way that Reagan and Paul Volcker, who was the head of the Fed at that time, handled it. You raise interest rates, and we’re already starting to see that tactic. We have rocked along for years now with phenomenally low interest rates in general. And one of the ways that you can try to slow down or stop inflation is to raise the interest rates, which will decrease the number of dollars that are out there chasing goods. The Fed has already done at least two increases. I fully expect that there will be more going forward.
The other way that to focus on cutting down inflation would simply be to increase the supply. Now, that’s more problematic. I’ll use the infant formula issue as an example. When we were flying in formula from Europe and making a huge fanfare about it, the question that would come to most people’s mind would be, “Why weren’t we importing it before we had this emergency? Are European children dropping like flies because of the formula that they’re drinking?” Well, again, it was an FDA approval thing. You couldn’t sell the French version of Enfamil in the United States. It hadn’t been manufactured here, and all those types of things.
Kami mentioned gas prices. For policy reasons, there are certain types of energy that are in vogue right now and that the government is certainly pushing. And there are other types of energy, the types that most people actually use, that are out of vogue. One of the ways to get the price of something to come down is to let business produce, and that’ll pull the prices down. In the last month or so, we’ve gotten a little bit of relief on the gas prices for the moment, but I don’t know what that’s going to look like going forward. I certainly do think we’re at 9.1% on the consumer price index as of the last numbers.
Brian, do you see any way that we’re not going to be in double-digit inflation by the end of the year?
Shey: No, I think your spot on there. I think there’s no way that we won’t see double digits given the fact that we’re already at nine. I think we’ll be in double digits by the end of the year. And unfortunately, the lower and middle classes of the population of the country are those who are going to get hit the worst. Luckily, most of our clients make a pretty good nickel, have cash flow and cash reserves. And while there’s always two sides of the coin, there’s the positive and the negative. And obviously, our dollars are certainly not going as far as they were a year ago and certainly not even close to where they were two years ago. So I think you’re spot on.
Gibson: A certain level of inflation is going to be part of a healthy economy. Productivity goes up, people get raises, and we rock along with somewhere between a 2% to 3% inflation rate. That’s not necessarily as problematic as what we’re talking about now. Right now, I’m absolutely convinced half of the United States is trying to move to Florida and they’re rolling down here from Poughkeepsie with wheelbarrows full of cash. My home that Ann and I have owned our home for about seven years I could sell for twice what we paid for it if I wanted to live in a tent, which I don’t. It’s not that I couldn’t sell it and make some money; it’s that I couldn’t then turn around and find any place to live. Folks who rent, my heart goes out to them because the rental rates around here have just gone absolutely through the roof. Those are again, the practical impacts of inflation.
Do we want to see people’s houses and the value of their homes increase? Well, sure. Over time, a house tends to be a very good investment. Do you want to see it double in two years? No, you don’t. If you’re ready to move somewhere else where the cost of living is lower, that might be a good thing. But if you’re living in the community or moving into the community, that can be really tough.
The other thing that we didn’t mention, and this is, again, a throwback to the Carter administration, is another term stagflation. You’ll hear that more and more. Things are beginning to change a little bit on the political landscape. The media, I think, definitely has kind of soft-pedaled a lot of what’s going on over the last 18 months or so. And now that there are concerns, first of all, for the Democrats about the midterm elections and then two years later we’ve got presidential election, they are being less and less protective of the current administration. With stagflation during the Carter administration, you had the perfect storm of high inflation, high unemployment, and incredibly slow economic growth.
While the economy technically is not in a recession at this point, it’s obvious that things have slowed down a great deal. When retail sales were up, it’s because the cost of everything is more than it was. Of course, the numbers are higher because things cost more. Stagflation to me is a huge deal. Japan essentially lost about a decade out of its economy to stagflation and really only started to recover from it in the 1990s. It’s a big deal.
Elhert: I’ve never heard of a loan for a house being at 10%. When I purchased mine, I had a 3.29% rate. And that was a little on the higher side than what other people were getting during that time. I was in college during 2008, so the real estate bubble that popped didn’t necessarily affect me too much, although I did see it in my community and across the board. Just driving down the street, you could see that every other house in South Bend, Indiana was either foreclosed on or vacant. So obviously it was hitting different communities. But as someone who wasn’t invested in that market, it didn’t affect me. So seeing it now, it’s almost unreal because it’s completely opposite. As you said, there are no houses available. Having a vacant house on your block would be just a different view than what we’ve seen in Vero Beach for the last year, year and a half.
Gibson: In our neighborhood for the folks who have sold, the sign goes up on Monday and by Friday it’s gone. It’s that quick. My daughter and her husband were buying their first home last year and people were coming with cash offers, $30,000 above the selling price. These were two kids who were just starting out, trying to buy their first home in that environment. They got one and it’s really nice, but it was nerve-wracking for them. I felt so bad for them. Not bad enough to actually give me the money, but I did feel bad for them.
Shey: Tom, Kami, I was reading an article yesterday, since we’re talking a little bit about the real estate industry and the real estate market, and obviously, everyone knows, like Tom just mentioned, the sale signs went up and they came down almost the same day, and the sellers had their pick of any number of probably double-digit offers. In the article I was reading yesterday, they were measuring mortgage applications and trying to talk a little bit more about how that may be affecting the real estate market. The interesting thing about that article was they mentioned from 2007 all the way through 2017, so almost that 10-year period, there wasn’t a lot of construction in the country. Different areas, obviously. And, Tom, everyone’s coming to Florida, so there is always construction. But the amount of people who have refinanced their homes in the last year and the last two years to take advantage of low interest rates have driven applications way down because nobody’s really looking to refinance now because rates are so high. But then secondary to that – and I’m segueing this into what people should be investing in during high inflation rates and if we’re moving towards a recession –real estate is still certainly a good play and there’s still a huge demand out there for it.
Gibson: And whether the air comes out of the bubble or it’s a slow leak or whether the bubble pops at some point, I think it is a difficult time. It’s going to continue to be a difficult time for a while. But there’s always a silver lining to every dark cloud. When the real estate market does correct itself, there will – for people who have cash readily available, good credit, things like that – be some bargains out there. In 2009, in Vero Beach, you could buy a three-bedroom, two-story condo for about $60,000. And I know that because when we were looking for our first home, I was always looking at the previous sale price. People panicked and sold at the low end of the market. If you had the money or had the ability to get credit at that point, you could have really gotten some steals in our old town.
I mentioned this before the soft-pedaling of what’s occurred over the last couple of years. Let me share a couple of pictures with you here.
Part of it is how inflation is measured now, as opposed to how it’s been measured in the past because the things that are in the Consumer Price Index right now are not the same items that were in the CPI in the 80s or in the 90s. This chart is from the 1980s.
The red line at the bottom is the published Consumer Price Index. If we were using the same elements of the CPI that we were using in 1980, you can see there the blue line, the inflation rate at this point. This is from the end of June so it is a little bit dated, but the inflation rate would be somewhere between, it looks like, 17%, 18%.
Now let’s look at the 1990s. Same basic idea here. As you can see, we’re literally off the chart by that measure. And again, I mean, it’s tough to say, but certainly 15% by 1990 definitions.
I have another one that, I think, is a little bit more illustrative of what’s going on. The official inflation rate versus the actual inflation rate. Everybody can understand that comparison.
Elhert: That chart makes a lot more sense to me today.
In the 1980s versus 2008, what were the big differences as far as the recession? Was it simply based on real estate? Is that what caused the recession? I know we talk about the Consumer Price Index. Were there a majority of differences in the consumer goods as well coming in? Because for me, I see that they were giving out too much money at that point, and they just couldn’t make those promises or keep those promises.
Gibson: In the 80s, the economy was very different. That was when you really started to see a lot more foreign vehicles. In the 80s, there was much more manufacturing going on in the United States. Well, if you’re manufacturing in your own country, the supply chain problems aren’t going to be quite what they are now.
Another big difference for those of us who remember the odd-even days and gas lines, and there were certain days, depending on what number your license plate started with, that you could go get gas and other days that you couldn’t. I remember when they switched to gas pumps actually being able to have dollars in the per gallon price. Prior to that, there were three numbers and it was like six, nine, nine or whatever. And then they put new pumps in and it had a dollar for the first time. It was a very different time.
I mentioned a moment ago, my first job with a four-year degree in accounting was at a local CPA firm. I was getting paid $16,000 a year and I thought that was what people made. Of course, things cost a lot less at that point too, but with the North American Free Trade Agreement, a lot of things changed. Much more foreign manufacturing, longer supply chains that are more subject to things like the pandemic or even weather-related things. Hurricanes and things like that that strike Mexico can put a snag in goods flowing into this country. It was just a very different time.
The other thing, obviously, is the United States has always had debt. There was debt, but the comparison of what the national debt was in 1980 compared to what it is now and the rate at which it’s accelerated is just crazy. The rap on Ronald Reagan was he cut tax rates and he drove the deficits and stuff and the same people who were complaining about that in the 80s, some of whom are still in government, they just need to stop talking about it. They’ve done their part too to add to that problem.
Shey: Tom, as you take a trip down memory lane, when you think about long term, I’m going to pivot toward investing. I’ve had a number of meetings this week where there’s one side of the coin in which people are taking advantage of the economic arena that we’re all playing in right now and then there’s the other side in which the people who are getting nervous are yanking everything out of the market and unfortunately, they’ve reacted instead of slow planning it. But when you look back, long-term investors who put money to work back in the recession have done pretty well over time. If you look at the data from the 2007, 2009, the recession of 2001, which if you remember back then was fueled really by the dot com crash and the 911 attacks and then the 1991 recession when long-term economic expansion really was fueling that through the 80s, as you mentioned, the economy was completely different in the 80s. People might be surprised that the long-term results of those investments back then really fueled or had an average on an annual basis of almost 9%.
So, if you are keeping your money in the market during these times, obviously, you’re buying at a discount. Even if you invested in just index funds back in 2007, you’d be doing very, very well. My point is that this is not a time to react, get nervous, and make knee-jerk reactions to what the market is doing.
Gibson: Clients have told me, “I’ve lost X amount of dollars or X%,” and my response is always, “You haven’t lost anything until you sell it.” Selling something that you think has the potential to come back obviously, by selling it, you’re just locking your loss in.
Back to the silver linings on two fronts. One, we have been working with a lot of you over the last three years on moving money from your pre-tax retirement accounts like your 401(k)s and traditional IRAs, and transferring that over into a Roth environment. The fact that the market is down means that in terms of just the raw numbers, transferring $200,000 this year – particularly if we’re doing a custodial transfer where you’re moving assets as opposed to going to cash and moving cash, moving $200,000 this year, you’re going to move a lot more stock than you would have been – is not the same as moving $200,000 two years ago. And it’s because the market’s down. So for our clients, that’s a good thing because when the market does recover, all of that upside that you’re going to get is going to be inside an account where the tax consequences have been dealt with. You’re never going to pay tax either on the money that you put in or on the growth that you’re going to experience between now and retirement.
I just hopped off a call with client who has a substantial long-term capital gain. Of course, there are things we can do to mitigate that. The Opportunity Zone is something that comes to mind. But I asked him, “Do you have some things in your stock portfolio that you don’t like, that have been losers for several years now, and you don’t really want anymore?” And he said, “Yeah, I’ve got some things like that.” I said, “Well, then sell them. Sell them, take a loss, use that to offset some of this other gain that you’re experiencing, and then buy back into things that you do like in the current market.” He’s really getting the best of both worlds, mitigating some of the long-term capital gains from the sale. And also, he’s buying in at what we hope is the lower ebb of the stock market. People who were buying in 2008 and in that time frame, as Brian said, did pretty well over the long haul.
Elhert: Thankfully, most of our clients do have some resilience based on their industry. Our medical professionals, obviously, people are still going to utilize their medical insurance. And medical care is something that’s not taken lightly.
Gibson: Absolutely. And the other issue is, and this is just true across the board, going back to Kami’s earlier comment about energy costs, when the cost of energy goes up, the cost of everything goes up. Because goods have to be transported, you’re going to have higher costs for your supplies. It’s employees who bear the brunt of this to a great extent. Inflation is really just a hidden tax that everybody pays. There is no standard deduction for inflation. You don’t get $12,950 that inflation won’t affect. It’s going to affect everything. And ultimately, eventually, that is going to lead to higher prices. There’s just no way around it. So one of the things that you may think about doing now if you think the price of a certain type of supply that you use in your dental or medical practice is going to be going up and you have some space to buy now, you know you’re going to use it anyway, that might not be a bad thing to do. Now, don’t run out and buy a five-year supply of tongue depressors because of what I just said. But again, if you think the price of something is going to be higher a year from now and you know you’re going to use it, it makes a lot of sense maybe to buy more while the price is still a bit lower.
Shey: Tom, I think this bears repeating, especially at this time of year when we’re coming into your busy season of tax forecasting and looking at the real estate investment. You mentioned the Roth conversion, which we’ve been talking to people about now for a number of years regarding getting the money out from their traditional IRAs and out of their 401(k) plans and moving it over to a Roth so then they can invest it and grow it over time and not have to pay the taxes later on. It’s still shocking to me that people continue to open up traditional 401(k) plans. When you ask them if they believe marginal income tax rates are going to be higher in the future, they say yes, but then they still continue to defer paying taxes today so they can pay it later on. It just bears repeating that our clients need to look at what the government’s doing today. The economy that we’re in now, none of us created the problem. It’s too much money out there that has created this inflation problem that you’ve eloquently told everyone about today. But continuing to do the Roth conversion, continuing to move money into an environment that you don’t have to pay taxes on later in life, you’re going to be in a better off position.
Elhert: Even setting up those plans 401(k) plans through the administrator for those employees that are participating and having an option for the employees to contribute on the Roth side as well. Because obviously, as we know, tax rates are going up and that’s going to go up across the board. Not only for some of those top dollar amounts but those smaller amounts. Even those with less earnings per year, their rates are still going to increase.
Gibson: And even if they didn’t, if you have an employee who is in the 24% tax bracket now and we stretch it out 30 years and he’s still in the 24% tax bracket when he retires, he’s deferring now so he can pay tax down the road. But what he doesn’t understand is that money that he’s kicking into the 401(k) or that he’s putting into his IRA, he’s going to pay tax on that. What’s going to kill him down the road is he’s going to pay tax on all of the growth that is going to happen in those accounts for the next 20 or 30 years. Certainly, it is a question of what you think your tax rate is going to be in retirement. And we’ve had that discussion on a couple of different calls. The bigger issue, though, is it’s not the $6,000. It’s the fact that by the time you get ready to retire, that $6,000 now is going to be $12,000 in 10 years, $24,000 10 years after that, or $48,000 when you get ready to take it out. And that’s what you’re going to be paying tax on. Not all at once, obviously, but over time.
Shey: Tom, I can’t say this enough. It’s not the $6,000, it’s the growth. Here’s the analogy, Tom. Let’s say you and I want to go into business together. You are going to put some money in and I’m going to put a match in there, and we’re going to allow that account to grow over 10, 20, 30 years. We own our business, and you and I are partners. In 30 years, after growing our business, I’ll let you know what percent of the company that I actually own. Would you take that bet? Would you get in business with me?
Gibson: No, absolutely not.
Shey: It’s amazing. When I present that analogy to our clients or any person out there in society, they say, “No, I’d never get in business with you, and why would I ever do that?” But that’s exactly the story of a 401(k) plan, a traditional 401(k) plan. People put money into the account, the employer matches it a little bit, then they grow it over 10, 20, 30 years, and 30 years later, that’s when the government is going to let them know what marginal tax rate they are in, and then they’re your partner. So that’s the story, and that’s the question you want to ask yourself. Do you want to be in partnership with the government of the United States and have them let you know what they own 30 years later?
Gibson: It’s not a good deal for anybody but the government.
Shey: It’s a great deal for the government.
Elhert: We do have a question. With the economy in its current state, can the real estate investment that has the potential to go into conservation offer a silver lining as an alternative investment outside of the stock market?
Gibson: Yes. If the partners don’t conserve, obviously, you are able to take a deduction. It’s based on what those foregone economic benefits would have been had the property been developed. So as a tool to offset not just your ordinary income but also when we’re working on those Roth conversions, as we’ve already mentioned, if the market continues to do what it’s doing, you’ll be able to actually move more in terms of assets now than you would have been able to a couple years ago.
The way that the math works for the real estate investment hasn’t really changed. So, absolutely, that’s still a very large part of our tax planning with, I think, the majority of our clients. It’s kind of like when we were in the pandemic and we were having your forecast and I was saying, “If the number comes in here, this is what we’re going to do in Roth conversion. If the income comes in lower, we’re going to speed up on the Roth conversion.” It’s still exactly the same idea. The fact that the market is lower now than it was at that point doesn’t change that. It doesn’t change that at all. In fact, for you, it actually makes it work a little bit better.
Elhert: And one more. Are there any other types of investments that may offer an alternative solution? Tom, being a CPA, any you would like to discuss?
Gibson: Well, from the tax side of things, we talked about harvesting your losses, taking the dogs that you have in your portfolio. Now, if you don’t have capital gains that you’re trying to offset, don’t go out and do that because remember, with capital losses, the most you’re going to be able to deduct in any single year is $3,000. What I’m talking about doing is if you know you have a gain or you know you’re going to have a gain by the end of the year, you can sell some of these underperforming assets off and lower the overall amount of capital gain that you’re going to have for the year.
And as I mentioned earlier, the Opportunity Zones. The fact that we’re able to defer paying tax utilizing the Opportunity Zone on capital gains, if all we’re doing is kicking the can down the road in terms of paying the tax bill, I don’t think that’s that big of a deal. Because potentially, the downside of deferring paying tax is what if the capital gains rates five years from now or six years from now is 25%? Well, then you’re going to end up paying more tax in six years than you would have paid had you just dealt with it now.
The real payoff for the Opportunity Zone is the fact that when you sell out of the Opportunity Zone investment 10 years hence, all of the capital gains at that point are completely tax-free. That’s the real payoff. And you’ve heard me say this more than once, you can’t ever let taxes become the tail that wags the dog. You have to make good business decisions. We’ll figure out a way to deal with the tax consequences, but don’t forget the fundamentals.
The idea of buying equipment to lower your tax bill. I talked about it, but I still have clients when I ask, “What’d your CPA tell you to do?” respond with, “Well, he told me I need to buy about $200,000 worth of equipment.” “Well, do you need it?” “No, not really.” “Well, okay, so you’re going to spend a dollar or you’re going to go into debt a dollar, whatever it is. You’re going to spend a dollar to save 37 cents off your tax bill.” Needing that piece of equipment, that didn’t make any sense at all. That’s a horrible tax strategy. Now, if you need the piece of equipment, the fact that you can buy it for 63 cents on the dollar taking into account the tax savings, that makes sense. But again, it’s all about the business decision underlying it, not the fact that you think your taxes are too high. We’ll help with that, but we will do it in a way that doesn’t bankrupt you, so.
Shey: Kami, let me respond to that question also.
Are there other alternative investments that are good options out there? First and foremost, if you have not had your initial meeting this year with Kami or Crystal, I highly encourage you to schedule that meeting. Number two, if you have not built out your eMoney financial platform, again I’d highly encourage you to do so and have a conversation with your relationship manager about building that out because that will allow our Family Office team to take a look at what you’re doing to be able to answer that second question. Are there other alternative investments as an option? Absolutely. It’s an easy answer because obviously we’re in a different economy right now with nine point whatever inflation as Tom mentioned. So there are certainly some other options. eMoney allows us to examine what you’re currently doing and determine what your risk profile would be so we can come back with a number of recommendations. There are investment products that are an option. There are some insurance products that are an option.
Before somebody calls me up and says, “Hey, you’ve always told me that insurance is not an investment,” I still stick by that statement because it’s not. Insurance is not an investment. Insurance is insurance about your investments not working out. But if you’re in a position right now, which a lot of our clients are where they are using their own money to finance things and not borrowing it at a high rate because they positioned themselves a number of years ago to be able to do that, that’s another option for you to use right now. As Tom mentioned, the tax component is always in play with investments and/or insurance. We still consider this tax strategy.
Elhert: Tom, we’ve talked about that before with our clients. Fridays tend to be a little better, which is good for our clients during the weekend, but come Monday or Tuesday, things could change dramatically, and they have been. And so making those knee-jerk decisions is something that I would recommend that you contact us and schedule a meeting to discuss through before you act.
Gibson: Absolutely. If we have the discussion on the front end, it’s going to be your decision. You’re going to call me and ask me what I think. Brian and I may hop on there and talk to you about it, but ultimately, it’s your decision. I’ve seen so many times when people made bad decisions because they were scared. The worst time to sell – all things being equal – is when the market is down and the worst time to buy is when the market is up. But there’s a real tendency to do so because there’s, and don’t take this term wrong, a herd mentality. When I said earlier the news has been pretty muted up until this point, as more bad news starts to come out, it’s going to make you more uncomfortable, it’s going to make you more concerned. And when people are in that state of mind, that’s when they tend to make poor decisions because they’re making them based on emotion, not based on the fundamentals of the market or the fundamentals of business.
The meter doesn’t start running when you call me. Brian, me, John Kloss, we will give our best advice. I don’t have a dog in the race, so I’m going to tell you exactly what I think, and then you can take that for what it’s worth.
Shey: Well said, Tom.
Elhert: Great. Tom and Brian, I want to thank you for the information you have presented today. And as always, Tom, any final words for our attendees?
Gibson: Just to sum up, don’t panic. I mean, it is not good. It may get worse over the short term, but don’t panic. Don’t make snap decisions. And given the fact that a lot of help that we got during the pandemic may have – well, I don’t think there’s any may have to it – helped cause some of the difficulties that we’re experiencing now, don’t look for more help from those folks. You’re going to have to help yourself at this point. And it’ll pass. I mean, there’s parts where we just laugh.
When Elizabeth Marchesi and I met, we were the same age. We talked about what life was like in the early 80s and how different life is now. But we got through that. We got through the Great Recession in 2008. We got through the pandemic. This will pass.
Elhert: And we still have toilet paper on the shelf, so don’t panic because it will only drive up the cost of those things. That’s a very good example of what happens when people start to panic. I don’t think we needed a year’s worth of toilet paper, but it felt like when the shelves were empty, I had to get a year’s worth of toilet paper because it’s never coming back.
Gibson: When I looked underneath the shelf at the Publix and found a six-pack of toilet paper, I was as proud as if I had shot a deer.
Elhert: Brian, any last words for our attendees?
Shey: If you haven’t got with us, don’t react quickly, get in touch, let’s have a conversation. Don’t rule out options that you don’t even know exist.
Elhert: Again, gentlemen, thank you so much for the webinar today. Thank you, everybody. Have a great day. To learn more, call us today at (772) 257-7888.