Skip to content.

April 1, 2023 - Money Matters Podcast

The consequences of banking industry troubles, why it’s taking so long to lower inflation, and when should you sell stock that’s almost worthless?

On this week’s Money Matters, Scott, Pat and Allworth Chief Investment Officer Andy Stout discuss the repercussions that banking industry turmoil could have on the broader economy. They also tackle the fight against inflation, and the disconnect between Wall Street and the Fed. Finally, Scott and Pat help a caller who wants to know when he should sell stock of a company that just filed for bankruptcy.

Join Money Matters:  Get your most pressing financial questions answered by Allworth's CEOs Scott Hanson and Pat McClain live on-air! Call 833-99-WORTH. Or ask a question by clicking here.  You can also be on the air by emailing Scott and Pat at

Download and rate our podcast here.


Man: Would you like an opinion on a financial matter you're dealing with, whether it's about retirement, investments, taxes, or 401(k)s, Scott Hanson and Pat McClain would like to help you by answering your call. To join Allworth's Money Matters call now at 833-99-WORTH. That's 833-99-W-O-R-T-H.

Scott: Welcome to Allworth's Money Matters. Scott Hanson...

Pat: And Pat McClain. Glad you're here.

Scott: Glad you're here. Glad I'm here.

Pat: Glad we're here. And we're all here together.

Scott: Talk about financial matters, we do every week. So we're all here.

Pat: Silicon Valley Bank now purchased by another bank. What's left of the $20 billion, is what the FDIC is making up. Which represents roughly 15% of their total reserves, the FDIC. That's a big number. And last week we had Krista Snelling on from the local Community Bank of Santa Cruz County. And if you haven't listened to that podcast, I would please encourage you to go back and listen to it.

It's funny, I got an email from a friend of mine that I hadn't talked to in several years. He sent me a text, how much he enjoyed that particular podcast. That's why I brought it up because I received lots of feedback about, "Oh, okay, this makes sense." Because what's happening is, it's actually very similar to the government's response to the pandemic, and the pandemic drove a lot of small businesses out of business. And...

Scott: The government's response.

Pat: And this will have a similar effect to a lot of small community banks.

Scott: And communities.

Pat: And communities.

Scott: Local lenders. So if you have...and listen to that podcast...

Pat: And the businesses that rely upon those local banks.

Scott: Oh, exactly. Personal relationships. We did talk about it all last week.

Pat: Yeah, we did. But I'm just encouraging those people that did not listen to the podcast to go back and listen to it. And we received probably some of the most positive feedback we've received in the 26...

Scott: Well, I don't know about that, but...

Pat: Well, at least in my recent memory.

Scott: One of the things on this show, is we try to take complex financial matters and make it so that everyday person can understand those. And just because you've saved well, or you built a business, it was worth a lot of money, does not mean you are an expert in the world of finance. And understand when we start talking about, you know, medium duration, bonds, and basis points and... I mean, we can get into all kinds of esoteric stuff and sometimes you flip on the television, you watch them talking head and they get a little... We try to explain things in a manner that a typical person can understand, so you can make wise choices. Make informed decisions.

Pat: And it's hard. Yes. I always to say like, "Could the average person digest this information?" So that is our attempt on the show. And to that, I used to say, "Could my mom understand...?" But given that I've been in the business so long and my mom doesn't pay attention to anything because she's like, "Oh, I know everything's gonna work out fine, and if it doesn't, I can always move in with you."

Scott: That's not a fair...

Pat: So she pays zero attention to this stuff. So I no longer say I wanna explain this in a way that my mother could understand because...

Scott: Well, and trying make it understandable, we're going to have our Chief investment Officer, Andy Stout, join us now. And we're gonna talk a little bit about what's happening at the Fed and yeah...

Pat: It's a minor banking crisis, major banking crisis. It's hard to tell what it is. The contagion has seemed to have spread worldwide, for some of those banks that were...

Scott: Yeah. I think the bigger issue is like, what's this really mean? What are the repercussions to the rest of the society and the economy, over the short and long term? So Andy, thanks for joining us today.

Andy: Thanks for having me.

Scott: Yeah. So, if we go back a year ago, the Feds, there wasn't a lot of talk of...maybe a year and a half ago. There wasn't much talk at all about raising rates. Inflation started popping up. They said, "Oh, it's just transitory." Whatever that means. Then it's like [vocalization], maybe inflation's a problem. Then the Fed starts raising rates. People start believing, "Oh, they're gonna raise rates. Oh, they're gonna raise rates quite a bit." Then we saw the collapse of Silicon Valley Bank. We saw what happens when the Feds print money as fast as they can for a number of years, and then what happens when they suddenly start raising the rates?

Pat: Not just in the U.S. economy, by the way.

Scott: Yeah. So, last week they did a rate increase, a week or so ago, lower than was expected. Where do you see rates going over the next coming quarter?

Andy: Yeah. When we look at what the Fed's doing, what the Fed has really done over the past year, I mean, you're right Scott, it's been a drastic shift. If we look back at January 1st, 2022, the market was pricing in 75, or 3.25% of rate hikes. They did four and a quarter of rate hikes, because the inflation environment just really flared up. And now we look at where we're at right now, we're really maybe looking at just one more quarter-point hike in the not too distant future. But then here's the interesting thing, the market's quickly expecting rate cuts, which flies in the face of what the Fed has been saying they're going to do.

Scott: What do you mean? You go looking out, you look at the futures markets, markets are priced in the rate cut.

Andy: Yes. When we look at what the Fed says it's going to do, and we can see that from their last meeting, you know, last week, where they released what's called a dot plot. And dot plot is essentially where each Fed member believes interest rates will be at the end of upcoming calendar years. So at the end of 2023, the dot plot showed that the middle dot, or the median dot, which is what everyone hones in on, showed one more rate hike priced in. And during his press conference, following the meeting, Fed Chair Jerome Powell said, no Fed member is even thinking about cuts at all. So it's just one more quarter-point rate hike. Now, when we look at what the market has priced in, it's basically a coin flip if they hike on May 3rd, at the next meeting. But after that, then what's getting priced into the market is really almost two to three rate cuts or quarter-point rate cuts. So about half to three-quarters of percent of rate cuts. So the market is saying something very different than what the Fed is. And the market gets these views based on what's called, Fed funds futures trade-out, which are just securities that trade based on where traders will believe the interest rate will be at.

Scott: And that's the median consensus, right, of investors? Which is the market, right?

Andy: Right.

Scott: So Andy, would you speculate that the market thinks that the banking crisis is going to actually slow the economy by itself without any more interest rate increases?

Andy: Yeah. I think absolutely that's true. And I think the Fed believes that too, because if you go back two weeks ago when Fed Chair Jerome Powell was testifying before Congress, he told Congress that we expect rates to be higher than what we previously thought. Well, and we would expect to see that in the dot plot for the 2024. But what happened, there was no move on where 2023's dot was going to be at, so it stayed showing just one more hike from the current levels.

So instead of what Chair Powell was saying in front of the Senate when he was testifying, what happened between now and then was you had, you know, Silicon Valley Bank, you had Silvergate Bank, you had the Credit Suisse, and all these things happened, and so the dots say the same. So that said that the Fed believes that interest rates are where they need to be and this banking crisis is essentially acting like rate hikes. And we're estimating that the banking crisis that's really come to the forefront, has probably taken about half a point of rate hikes off the table.

Scott: And purely because of the fact that there's a flight to safety and the banks are less willing to actually put money out there, there's less risk that they're willing to take with their lending. Is that correct?

Andy: Yeah, that's absolutely true. I mean, there's ripple effects really, even beyond that. So they're putting out less loans. They're not able to actually loan as much either, because I don't want to get in the weeds, you know, that Scott's mom may be listening. But basically...

Scott: She's not by the way.

Andy: buffers, they're shrinking, which means they don't have as much money to lend. So not only are they just shoring up their own balance sheets, but because they've had to write down some assets and value, they may not be able to lend as much from a regulatory perspective.

Scott: And do you believe that all banks... Well, I know the answer to this. I don't believe that all banks are actually a hundred percent truthful in how they're writing down their assets.

Andy: Are you asking me if banks are ethical?

Scott: I guess. Well, many of them try to, but some of... Anyway, I'll leave it at that. Because it's really...

Pat: Well, everyone's trying to manage their environment. I don't care if you're running a construction yard, you're running an auto dealership, you're running a bank.

Scott: Yeah. It's really difficult to know what your assets are worth in this kind of environment.

Pat: And look, if you're running a car dealership and you've got tons of inventory, someone comes in, "Oh, we've got so much inventory, we really need to sell some cars." You'd need to kind of play like, "Nah, things are fine. We've got some inventory. We'll able to meet your needs, but you know, there's a lot of other people who might want that car, so you better make a decision today." And you running a bank, it's like, maybe you've got some real issues here, like we need some more depositors. But you're not gonna go out and say, "Hey, we've got some issues going on here,...

Scott: Yeah. Trust us.

Pat: ...please bring us your new capital to deposit with us." It's...

Andy: Yeah. They're not gonna do that. And the banks are in a little bit of a different situation compared to, you know, some other businesses. So when they think about the assets they have, they have to break them down into three different levels: their trading securities available for sale and health and maturity. The available for sale and the trading assets, they are marked to market, so they're gonna see that volatility. The health and maturity, they can just hold them until those bonds typically mature, but you don't really know necessarily what those are being valued at. But also, some of these available for sale securities that they have, that they're supposed to mark to market, if they don't trade very frequently, well you don't really have a market to mark them too. So they might do a best guess to say here's what they are. But that best guess can sometimes, and we saw this in 2008, I'm not saying this is 2008 by the way. But we saw banks be pretty optimistic with those valuations, making their balance sheets appear better than what they were.

Pat: It's interesting.

Scott: So Andy, why is it taking so long to get inflation under control with these rising rates?

Andy: Well, it takes a long time for these rate hikes to actually have an effect. So we have that side of the coin where there's usually about a six to a nine-month lag before these rate hikes really affect the economy. And if you just think of how quickly the Fed has raised interest rates. Really just over the past, I mean, you know, seven months, we've seen two-and-a-half percentage points of rate hikes. That's more than half of what they've done from this entire cycle. So when we look at that, we have a lot more rate hikes that haven't actually made their way into the economy to truly affect the consumer, so we have that lagged effect.

But then there's some other issues which are, you know, pushing on inflation on the other end. We seem to keep running into, you know, some supply chain issues, which have been really bumpy. And those are finally appearing to, you know, be in the rearview mirror. So we've got some improvement there, but that was really one big factor that kept inflation higher than what it does. And then you just have these other things, the war in Russia, the Ukraine, that has an effect there. And that's certainly come down a little bit, but there seems to be these things that keep popping up that forces inflation higher. And when we look at what's keeping inflation elevated right now, we're still seeing shelter costs. Even though we've seen mortgage rates get to 7%, we haven't seen the shelter costs come down as much. And that's really been what's lifting the CPI or the consumer inflation that has that...because shelter costs, they're about 35% of total consumer inflation...

Scott: Is that right?

Andy: ...and we haven't seen those come down yet.

Scott: I've been amazed. In fact, there was an article I read this week about how the two coasts are actually dealing with it differently in terms of shelter costs. Would you speculate on why that is? We're not seeing a huge reduction in home prices...

Pat: Or rents.

Scott: ...or rents, that I would've thought would be part of this, or is it just lagging? Would you speculate on that? I'm gonna ask Andy Stout to speculate, which is a really difficult thing for him to do.

Andy: No. I think there's a couple things that go into that. So in terms of the shelter impact on inflation, there is a lagged effect. I'm not going to go into the weeds here...

Scott: Well, I mean, if I own an apartment complex and I kept raising rates over the last few years, because I could, now I've got some vacancies, I'm gonna let the thing sit vacant for a few months before I come to the realization that, "Hmm, maybe the market's changed a bit and I better lower my rent."

Andy: Well, yeah. That part's true from a fundamental perspective. But what I was getting at was there's a lagged effect in how the government actually records CPI and takes into consideration the shelter cost. So there's a inherent like, I'll call it a mathematical calculation lag there. So there's that. You have the point you just brought up there in terms of, you know, demand and supply. And I think that's the other thing right there. So when you look at the housing market, not necessarily rental costs, but the housing market, the inventory is just still really, really tight, and that's keeping the pressure there. And so even when you see...

Scott: Yeah. Why would you sell your house when you have a mortgage at 2.875 and a new mortgage is gonna cost you 6.5.

Andy: Exactly. It's very, very tight.

Scott: Yeah. Well I've got such confidence in the Feds and the Treasury Department, they'll make all the right choices...

Pat: Andy, are we...

Scott: Because no dislocations within the market.

Pat: ...are the savings rates so that at the end of the pandemic, or whenever that was.

Scott: It's not quite over yet.

Pat: Well, it depends on what state you live in.

Scott: If you're a tennis star, you can't come to the United States unless you get vaccinated, I guess.

Pat: It depends on which state you live in. But are we seeing a spenddown of the dollars that were accumulated by the average American, is that starting to take place and that's gonna slow inflation as well? Is that happening?

Andy: That's a great point, and it's very true. So, you had savings rates at the heart of the pandemic because of all the government assistance, get up to about 34%, was on a monthly basis. Right now...

Pat: Wait, stop. Let's just put a pin on that one, 34% of what?

Andy: Of disposable income.

Pat: Because they were locked in their bedrooms.

Andy: I know, they couldn't do anything. So they camped out longer. They bought some things on Amazon. Maybe they got some takeout, because that's about all you could do at that time. And now what you've seen is prices rising. So people are dipping into their savings and they're buying more to try to, you know, keep up their lifestyle. But we've really gotten to the point where those savings are pretty much depleted. There might be a little bit left over from an excess capacity. But now we're at the point where, you know, we believe that there will be less demand from consumers going forward because of a couple things.

We talked about banking, let's bring this full circle here. Banks are pulling back on credit and the loans, they're shoring up their balance sheets. Consumers have pulled and drawn from their savings, they don't have as much luck as they did a year or so ago. So when you look at that, that's going to bring down the demand. I mean, that's one reason that we think that inflation will come down from the current levels, which is 6% on a year-over-year basis when you look at the CPI, which is consumer inflation. But we're probably still not getting to that magical to 2.5% area that a lot of people would like us to get to in the near future. We're not gonna get there yet.

Pat: And 34% during the heart of the pandemic, what is the savings rate now? What is it normal?

Scott: It's like nothing right now, isn't it?

Andy: It's 4.7%.

Pat: And that is primarily by the wealthiest...

Scott: [crosstalk 00:18:17] ask Andy any number, he just gets it.

Pat: I don't remember all these things, Andy. And I've gotta guess that that's probably from the top 20% of earners or net worth in the U.S., where most of that's coming from.

Andy: Well, if you consider, I think it's about 69% of Americans live paycheck to paycheck or at least they used to prior to the pandemic, I would say you're spot-on, Pat. Spot-on.

Pat: Well, as always, Andy, I'm impressed by your recall of facts, figures, and your grasp of...

Scott: Useless trivia.

Pat: It's not useless...

Scott: Sorry, I'm just kidding.

Pat: Or to us, we had him on as a guest.

Scott: I'm kidding. Thank you, Andy.

Pat: Thanks, Andy. As always, thanks for being part of the Allworth team.

Andy: Thank you.

Scott: So by the way, Andy works out of our Cincinnati office and he used to be an adjunct professor at some local college spectrum. I don't know if he is anymore. He'd be a great college professor. I would've loved having him as a college professor. I've always thought being a professor would be tough, I could be a professor for like one class, but having to come up with a new lecture every, you know, twice a week or whatever.

Pat: You mean one class, not one semester, one class. Like 1 hour, 15 minute...

Scott: I got like 90 minutes, that's all I got in me. I was a professor for a day at Chico State, no, it's a University of North..

Pat: It's kind of the Harvard of the West Coast.

Scott: Oh yeah, absolutely. And they asked me to come in. So I spoke in the afternoon to like people who signed up. It was some business fraternity of some sorts. And that was a great event because people, they were interested to hear what some business guy had to say. So people showed up because they were there eventually. But it was like a 90-minute class, a human resources class. And the professor asked me to speak on 401(k) plans. So I did this 90-minute presentation on intricacies of 401(k). I swear to you, Pat, half the students were sleeping at their desks. And I started thinking like, "If I were in college and I had 0 interest in ever managing a 401(k) department at a company, I would probably decided to take that time to sleep as well."

Pat: Exactly. So, I don't know.

Scott: Well anyway, but with the inflation, it's a challenge for a lot of families.

Pat: Oh, yes. There's no question.

Scott: I mean, my wife and I went to Costco on Sunday afternoon and I walked all the food aisles. Because I go to the supermarket and sometimes I'm like, "How much is a loaf of bread now?"

Pat: How much is a dozen eggs?

Scott: Well, there's a lot of factors and the reason why eggs are expensive right now, but just the average. Well, especially in third-world countries where this is taking place and the base price of wheat is up. I mean, it's fueling. But look from an investment standpoint, you're trying to figure out, "How do I allocate my dollars today, given where the current market is?" Let's assume a recession is coming, probably a pretty good chance. Let's assume a recession's coming. Just because we enter a recession does not mean that the value of securities that you own fall in value, because they tend to be very forward-looking. So like we were talking about with Andy before, that the market is already betting that rates are gonna come down later in the year, the markets are already priced in that we're gonna have some sort of recession. It's based upon new news that we come into, like Silicon Valley Bank collapses, overnight. Those sort of things can change prices immediately, but otherwise, like a lot of the things are priced in.

So I think sometimes the concern I have for investors, for people who are nearing retirement with the retirement dollars, is they look at this, they think, "Uh-oh, I saw these banks collapse before in '08 and I saw how things went down, and maybe I better get my money out before things get worse." The challenge with that is, if you do that, how do you get back in? You never know where you're at in the economic cycle. You just never know until it's over, where we're at in an economic cycle. And nobody can really predict when they're gonna come and when they're gonna end.

Pat: Nope.

Scott: It's funny, there was an article this week, I think you just mentioned it Pat, on home prices and someone was predicting the...I think it was a decline of whatever the decline was supposed to be this year. I'm thinking, "Come on, how do you know what is actually gonna happen in the future of prices of anything?" Because a price today is pretty much what people believe about the future.

Pat: Yeah. So this unusual pattern, 12 major housing markets west of Texas plus Austin, saw home prices fall in January and the opposite happened in the rest of the country. So for whatever reason, if you look at...mostly on the West Coast is where we've seen it and on the East Coast in the Middle of America.

Scott: Seattle, San Francisco, pretty significant declines.

Pat: There might be lots of things driving that.

Scott: Hey, we're gonna take a break here in just a moment and then we'll take calls, because we've got some calls. We would love to take your calls. But, wanna let you guys know about a Social Security virtual workshop? And you're like, "Why do you guys always promote this sort of stuff?" Like, we really believe that the more one has education and information, the better decisions they're going to make, and the greater confidence they're gonna have in their own finances. And I think, Pat, you talked about last week or the week prior, like, having confidence in your finances is really important in retirement. And it's not having boatloads of money, it's really not even about how much money you have. It's having the right kind of plan in place so that you are confident about your financial future.

So we've got these virtual workshops with Social Security, it's The Rule of 5 on Social Security. It's how to determine what your retirement income needs are, kind of starting from there. Some of the considerations and tactics on when's the best time to start claiming your benefits, looking at taxation of Social Security, what changes might happen. And some strategies really about, how do we take your overall financial situation and integrate Social Security with that. That has implications on when you might take withdrawals from your retirement accounts, also might have implications on when you might start Social Security. So April 11th at noon, April 13th at noon, April 15th at 10:00 a.m. So April 11th, 13th and 15th, those three days we will be showing our virtual workshop. Go to to register. And we're gonna take a quick break, we'll be right back.

Man: Can't get enough of Allworth's Money Matters? Visit to listen to the "Money Matters Podcast."

Scott: Welcome back to Allworth's Money Matters, Scott Hanson.

Pat: Pat McClain, thanks for sticking with us.

Scott: Yeah. Of course, if you're a podcast listener, I don't even know if there's a commercial that runs between our breaks, just goes, it doesn't really, whatever the case may be. Anyway, to join the program, 833-99-WORTH. That's our contact number. Also we can schedule time to talk with us at We're in California talking with John. John, you're with Allworth's Money Matters.

John: Hello, Pat and Scott.

Scott: Hi, John.

Pat: Hi, John.

John: Hey, I'm looking for a little guidance on something I've never come across before in my 40 years of buying and selling stocks. And I understand, in advance, that you're not tax advisors.

Scott: Well, we certainly employ a lot of tax advisors. Certified financial planners, so yes, we provide tax advice.

John: Okay. So last year I bought some Avaya stock. And in 2021, it'd been up over $28, last year in May it came down to just under $5. And I thought, "Okay, here's an opportunity." I know the company. I used to work for 'em. So I understand the industry, but evidently I didn't understand what was going on internally with the company. Because this past February, as a friend of mine says, they filed Chapter 22. It was the second time that they filed Chapter 11. So now, I'm stuck with a short-term tax loss, or capital gain, maybe it's capital loss.

Scott: Well, not unless you sell the securities. Which may be what you wanna do. I mean, I don't know where they are in the process. I mean, if the bankruptcy has been completed and all equity holders were wiped out, then it's worthless at that time. But otherwise, you still own the security...

Pat: Even if it's worth 1 cent. So you can't recognize the loss until it actually has either zero value or you sell it. So what did you pay for it?

John: So I paid $4.50.

Scott: How much money did you spend?

John: Ten thousand. Right now, it's something called a pink sheet.

Pat: Okay. Yeah, it still has value.

John: I can't sell it.

Scott: Yeah, you can. You can still sell it. You can list it for...

Pat: It's just not on one of the major exchanges.

Scott: Yeah. So what's it trading at on the pinks?

John: 0.0002.

Scott: All right. So that's pretty low. I'm not super good at math. That's essentially worthless now.

Pat: It is worthless.

Scott: But it still has value.

Pat: Yes.

Scott: In order to take that loss, you actually have to sell it.

John: Okay. Obviously from what I've read on them coming outta bankruptcy, previous equity holders like me that own the stock, we're gonna be wiped out.

Scott: That's right.

Pat: Typically.

Scott: Yes. But there's no hurry because you didn't...

Pat: Well, unless you wanna take a short-term loss, then you wanna...

John: Exactly. And I've got till May to make that decision.

Pat: Well, it's not hard. I mean, your choices are one of two things. One, is you just ignore this and wait until the bankruptcy's final and most likely you're gonna be wiped out, and then it's worthless, and then you could take a long-term capital loss. Or you make a decision today, and you notify your broker that you want to dispose of these securities in one fashion or another. Either you just simply... I don't know how you trans-... You need to sell these. Look Scott, there's three decisions. One is, not hit the short-term and wait till the end of the year and take a long-term, or wait till it actually happens to you.

Scott: Okay, thank you. But a short-term loss is better than a long-term loss.

Pat: Yeah. So I would act on it now. So just put it up for sale. Take it.

John: Okay, that makes sense to me. But then, how can I use it in my taxes? Do I sell some stock out of my brokerage and get a long-term capital gain, and it goes against that since it's the short-term? Or does it just come off my taxes and it's better just to take off...

Scott: Well, I think there's a bigger question here. Like, how you manage these investments to begin with? Because in a perfect world, there's tax planning that happens every year and there might be some tax loss selling and there might be some tax harvesting...that you're harvesting gains at the same time to help manage your long-term tax situation. So like, is most of your portfolio just individual securities that... Or how...

John: No. I've got a couple that I just play with. A lot of it is in ETFs and mutual funds.

Scott: Okay, good. Glad to hear that. And so how much money do you have in...

John: IRAs and Roth.

Scott: Yeah. How much money do you have outside IRAs and Roths, like in a brokerage account?

John: In a brokerage account?

Scott: Yeah. Anything that's outside of your IRAs.

Pat: Where are you holding the shares of Avaya?

John: With Fidelity.

Scott: Yeah, brokerage account.

Pat: So what do you have in brokerage accounts?

John: I probably got a little over a hundred thousand.

Pat: Okay. So, and you own mutual funds and ETFs...

John: Correct.

Pat: ...primarily in there. But you may at the end of the year find that you have a short-term gain that you could use this to offset. So I would recognize the loss, the short-term loss. And quite frankly, I wouldn't do anything until the end of the year in order to try to figure out what I would do with the loss.

Scott: Yeah, I would agree with you, Pat.

Pat: So, you might...see because these mutual funds and ETFs will distribute short-term gain and long-term gain, as well as short-term loss and long-term loss. And so the better visibility you have into that, you'll actually know whether you should sell something or let the mutual funds do it themselves. Did you follow me?

John: Yes.

Pat: So I would sell this tomorrow and take the short-term gain, and then I would just wait and see...

Scott: Short-term loss.

Pat: I'm sorry. The short-term loss. And I would wait until the end of the year to see what the rest of the portfolio was doing before I made any decisions on how I was gonna harvest loss myself. But as a rule of thumb, I'm just telling you, as a rule of thumb, we like to manage loss when it happens, which means we will recognize loss. Just so that you put it in the bank so that you can offset it against gains at some point in time, under current tax law. And because the current tax law allows a step-up in basis of debt for whatever reason, I don't understand it. It drives how you actually make these loss-gain decisions in the portfolios.

John: Okay. Well, I'm a buy and hold kind of guy, so I'm not gonna have any long-term gains, or even, excuse me, short-term gains...

Pat: No, you might in the mutual funds of the ETFs you own. You might sell some shares of a S&P 500 and on the same date go around and buy a total stock market index, which is gonna be highly correlated there. But the only reason you would do that is to take some of the gains that you know you're gonna have to pay in the future and use them and use these losses to offset that. So now, you've just taken a future tax and eliminated it, or locked it in at a lower rate.

Scott: So there's two ways it happens. One is, the mutual funds just do it for you and you have no control over it. And the other is, you do it.

Pat: Yeah. You manage it.

Scott: Yeah. And that's why I'm saying you wait towards the end of the year to see the distributions from the mutual funds. And they will tell you in advance what their distributions, they think they're going to be, and then you decide how you want to use those.

John: Okay.

Scott: So get rid of the stock this week.

Pat: Yeah, sell it immediately.

John: Yeah. Okay.

Scott: And I don't know the process of selling a stock...

Pat: It might actually cost you money to get rid of these things.

Scott: It might cost you something to get rid of these.

Pat: It might cost you $30 or $40 to get rid of them.

Scott: I don't know. And it may take a couple of days, but the tax planning is a big issue with investment planning. Like, so Morningstar and Vanguard have both done studies that look at the values that an advisor can bring...and a good chunk of that comes from just the proper kind of tax planning, the kind of things that we're just talking about with John. Where, look at the portfolio on an ongoing basis, and like, we know that when you've got gains where they'll eventually be taxed, how do we structure those? We know that dividends are gonna be taxed. We know interest is taxed at a different rate than qualified dividends. What do we hold inside retirement accounts? What do we hold outside? What do we hold inside of a Roth? That kind of planning could add up to an extra 1% a year in overall return.

Pat: And not only that, Scott, because of the use of technology that tax lost harvesting and gains, the efficiency is much better than it once was. Just the use of technology. So appreciate the call, John.

Scott: Yeah, thanks for the call. I just wanna remind our listeners, Pat, we've been in this radio program for 27 years, almost 28 years. We've done hundreds, if not thousands of educational workshops over the years, maybe thousands if you add 'em all together. And we do a ton of educational materials online.

Pat: On our website.

Scott: On our website. So on our website, you can go into our learning library there and see all kinds of different information on topics. So if you're trying to figure out, does it make sense to do a Roth, do I...? Spend some time on our website. I mean, there's tons of materials there. There's virtual workshops that you can take part of. There are previous seminars you can view. There are white papers. There are articles.

Pat: You can sign up for our weekly newsletters or you could just call...

Scott: Yeah. We have a weekly newsletter, comes out every Saturday morning that has a couple articles in it on what we think are pertinent to you and what our readers are interested in as well.

Pat: We track what people are actually reading on the websites and/or the newsletters, what they're opening. Or you could just call the firm and ask to talk to an advisor and...

Scott: [crosstalk 00:36:50] as well.

Pat: It's that easy.

Scott: It can be, unless you are a jerk. It's not hard. Anyway,, if you haven't been on the website in a while, we'd encourage you to do so. Hope you enjoy the rest through of your weekend. It's been great being with you. This has been Scott Hanson and Pat McClain of Allworth's Money Matters.

Man: This program has been brought to you by Allworth Financial, a registered investment advisory firm. Any ideas presented during this program are not intended to provide specific financial advice. You should consult your own financial advisor, tax consultant, or estate planning attorney to conduct your own due diligence.