Economy vs. Reality: Is Your Clients Actually Struggling?

[0:00] JD: As possible. [0:01] Chad: Did you just say a new wheel up your ass? [0:21] JD: Tony's already. Tony Davis already, like Sat in the Mood show. I like it like he. His chat right there is basically the vibe of this show. Welcome, everybody, to another episode of Retire Hollows. It is the third Thursday in a month, which means, you know, it's the experimental version of the show. There's no acro sin. There's no drunk stock tips. There's none of the stuff you guys like. These are the shows. We just do boring stuff that you all hate. So congrats, you're here for one of those. What are we going to do this time? We're going to call this one the Charts and Statistics episode. Whoa, whoa. People, stop signing out. Where are you going? Stay here. It's going to be fun. I will pull up a chart or explain some statistic and that will be the motivation for our conversation. But we've. Before we hop into all these charts and these, this fancy financial talk, there were a couple headlines I want to go over real quick. So, Brandon, if you've got the trigger ready, can we do some headlines? Right? There's a couple. I wouldn't want these to slide by before we get into the charts and stats. These all come from PlanAdvisor.com because Plan Advisor has just been on a heater lately. These are great articles and I want to talk about them. The first one is about our buddy Aaron Schum at Vestwell. The title of the article is where is It? That's. Well, Partners with. Wait, a Morningstar ad came up online and then a Plan Advisor dash Stop Ask me to sign up for things Best will Partners with Commonwealth Future Plan to launch pooled and PEP to launch a PEP is what they're going to do. I got one question and I'll be very calm and and slow about this. Okay, just one question. The title of the article we're looking at right there says uses the words partners with. Okay, in air quotes. Partners with. So what does a pooled plan provider do? What does a PPP do? Well, I went on the Internet just to double check, make sure I wasn't going crazy. One of the rules that a PPP does is to manage the selection and oversight of various service providers such as record keepers, investment advisors, custodians, administrators. So how does this work when the very pooled plan provider has partnered with these very entities to create or establish this said pep? This is where I get confused thoughts and we can move on. We don't have to stay here long. [3:26] Chad: Maybe it's just in the fine print. I don't know, maybe there's something that's like they have the ability to change, remove, get rid of one of these partners. Should somebody fall outside of there like that? I don't know. I'm being super like so no that's. [3:47] JD: Well by the way I should have clarified. Veswell is a pooled plan provider. A census last future plan is what I would call the administrator and Commonwealth is the Commonwealth is two things. It's the, it's the captured audience of advisors that they want to sell this thing to across the country. The Commonwealth advisors and then Commonwealth as let's call it the broker dealer I guess is is playing in the 338. I mean just conflict of interest to conflict of interest. Conflict of interest. But to Mark's point, Chad or maybe when is Commonwealth going to be replaced and when is a census future plan going to replace when they're not up [4:25] Justin: to their duties instead of asking the question in that capacity. JD let's go back to stage one and let me ask you how did this relationship get created? Who started it? Who built this, this three person group to launch this? [4:45] JD: I don't know if this was how it happened in this case but I would say typically it'd be Commonwealth reaching out right to. To set it up? [4:55] Justin: I would think so. [4:57] JD: And do you think happened here? That's fine but that's typically how it happened. [5:00] Justin: I would think probably that the folks at Veswell and maybe even in conjunction with the folks at future plan probably connected with Commonwealth and said you guys are a perfect candidate to set up a pep for your advisors out there and sell. [5:16] JD: But why does that. [5:18] Justin: Well because in my mind the way I just described that vessel is the ppp. Do you think they did due diligence on. On future plan as a provider in that or do you think that they were already partnered up and came and said this is a solution we have to offer to you. [5:36] JD: I. I love you. I think the due diligence came after the idea of partnering but I'm not, I'm not here to suggest that future plan of census would not at current moment pass said due diligence. [5:51] Justin: Not at all. That's not. [5:52] JD: That's fine. I'm just going to Mark's point of like if the PPP is supposed to be this person with their hands on the wheel who's in charge of everything from a fiduciary perspective and acting on in the best interest of not only the plan participants but the plan sponsor, how on earth are they going to accomplish that when they are in this partnership and create the other? [6:16] Justin: So, and I do, I do think Mark's original statement was totally accurate because we are pretty much against the PEP world, I would say, for in the most part I do believe there are areas of fits which we've discussed. But to Mark's point earlier, we're picking at semantics here. We're picking on the term partner because we want to pick on another PEP situation. [6:39] JD: Well, I, I played golf with a dude the other day, part of a large advisor shop, very large. And so they created PEP for they were in charge of it and they put in place someone who as the pooled plan provider who's also doing the administration work. And they were grumbling and grunting to me that they feel stuck. They don't like the work that they're doing, they don't like how it's playing out. And I'm saying, oh, so now you as the advisor going to remove the pooled plan provider. However, like this seems all backwards to me and I just don't think that this is what the government had in mind. That's all. I'm glad that Rob's here. He can. He can. [7:24] Mark: Is he here? [7:25] JD: Blasphemy in the chat bar. So we'll see. [7:29] Mark: So I feel like we've had this conversation a couple times now and this might be a stupid question, but are we missing something here? Because this is not the only time where the PPP is do doing supposed to be doing the oversight on themselves. And it's not that. It's not the only situation. Are we missing something here in the fact that that's actually allowed and. Okay. And it's not a conflict of interest. I don't think we are. [7:53] JD: You just said. Whoa, you made me a martini. Jesus Christ. I was just trying to have beer here. [8:00] Justin: Lucky you. [8:01] JD: You're a bad influence. I didn't hear what Justin said. I apologize. So you answer his question. [8:09] Mark: Did what I asked make sense or no? [8:11] Justin: Yeah, I think what you're saying is Vestwell is part of the. Not only the ppp, but I think your thought is they're using their operational system as well, so they are a covered service provider under it. And how do they. [8:24] Mark: That's what we're saying. [8:25] Justin: I don't think we're missing anything, Justin. I just think people are very willing businesses are very willing to blend that line and I think that's well, to JD's point, that's well in future plan would pass the sniff test in this, like if it wouldn't be an issue. But I, I don't think we're missing anything on that. I think we're just kind of willing to call it out when others are willing to sweep it under the rug. [8:49] JD: Let's. Let's move on. But let's just. Last statement here is when they created the pooled plan provider role, its intention, and when I say they, I mean like the government, when they put this in place, its intention was to be this almighty independent overseer acting on behalf of the. Of the client. And by the way, I, I'll defend Rob. There are peps out there that don't take this approach and there are independent pooled plan providers out there that are not a record keeper and not an advisor and not another thing. So it can be put together properly. Well, when I say properly how the government intended. But this shit's weird to me. So no offense to Aaron Shum and everyone involved, but I just, I continue to have a tough time wrapping my brain around these things and I will continue to ask the question. [9:48] Justin: So I think we have said in the past and let's move on, but this could be one of the fits in which I think a PEP is a good solution. A group like Commonwealth, I think that of all the ways we've seen them created and tried to be marketed so far, I think a group like Commonwealth could be a good distribution channel for a product like this. [10:08] JD: Are you suggesting that the Commonwealth advisors are not sophisticated when it comes to 401k? [10:13] Justin: That is not what I just said. [10:15] JD: How dare you. There's another article from plan advisor.com that is Pantera partners with Record Keeper 401 go. I don't know if you guys remember, but we had the 401 go guy on our show quite some time ago. We were out alive. [10:36] Justin: Yeah, Live event. [10:38] JD: And Pantera is this application, for lack of a better word, if you guys remember, we've talked about it before, but just allows like an outside advisor, like not the advisor to the plan to have access to a participant's account to help them with their investments, you know, move money around on their behalf. And a lot of people are really excited about this type business model. And so 401 go is a record keeper, you know, bundled record keeper that has 2500 plans and has decided to partner, you know, aka give access to Pantera to their 2500 plans. For advisors that want to get in there and use that. [11:20] Chad: Is it therapeutic time you say Pantera, I feel like you're Pronouncing the band Pantera wrong. You just can't. [11:26] Justin: I feel like it's a car for some reason. Similar name. No, thinking of something else, but I don't know. [11:38] Mark: No, I know exactly which one you're talking about. [11:40] JD: Move on from there. [11:42] Justin: Jd, help me understand this. And I, I just want to make sure I have the fact straight before I make comment that I want to make. They're providing a doorway for an outside advisor that may be doing private wealth for a participant to come in and assist in the diversification allocation for that participant. [12:03] JD: It's that classic problem. Chad. I'm a, I'm a financial planner, I'm a wealth manager. I sit down with you and I go, Chad, I really want to help you. And in the old days you'd bring your statement into me and I'd be like, okay, go back to your website and I want you to move this large cap value into this fund and I want you to do this and do that and then you'd go do it on my instructions. And so the modern day world wants to say like, okay, just give the advisor access to it and they can go in and make these changes on your behalf. So go ahead. [12:33] Justin: I, I have always felt that there is a space for that. I have always felt that there is potentially a need for that. I do worry that participants are kind of paying maybe double expenses in that scenario. If they're paying a private wealth advisor to look at their current assets and they're also paying a 401k advisor to be a part of that relationship. [12:55] JD: What? Well said. What part of the 50 basis points that the a plan advisor is charging is for participant help, education, meetings, etc. Etc. Because it varies from client to client to client. Right. So you're totally right. There's totally a possibility for double charging there. [13:15] Justin: Although, yeah, I, I also question the relationship and maybe this is me being naive, but let me just say what I was thinking. 401k go does not have too many of their 2,500 plans that are probably in the upper space that have a significant number of highly compensated, that have private wealth advisors that want access to the platform. I look at 401k go as an incubator program that's probably working significantly. Small market relationships and the highly compensated probably are the private wealth clients of the advisors on that plan. [13:56] JD: Just because you're small plans doesn't mean you don't have some execs that do well and have large account balance and stuff. [14:03] Justin: But not denying, not denying that But I think that if you looked at the average client of 401 go, it's probably a business owner, maybe one other highly comp. And then the rest non highly comped. I think that's the typical client there. [14:19] JD: Let me just take you to my next and final headline because it, it dovetails with this one. Plain advisor.com spelling advisor with an E. We still need to talk about that again someday. Fidelity to limit third party credential sharing for foreign K access. So 401k go says yo. Fidelity says no. And that's exactly what this is about. This article even mentions pona in it and that Fidelity is locking up their participants and saying no, we're not going to allow these third party advisors to come in. [15:07] Justin: Yeah. [15:07] Chad: You know why that is? [15:09] JD: Why? I think it's a security issue. But. [15:14] Chad: Well, I think that's, I think that's, I think that's the, the obvious answer. But at the same time you get someone digging around in there and you see that oh, your Fidelity plan is just stockpiled with Fidelity funds and we're going to make some changes to that. They don't want people doing that. So I don't know. [15:35] Justin: You're saying the participants allocation is heavy. Fidelity and an outsider. [15:40] JD: Yeah, you're an outsider. [15:41] Justin: You are smarter than you look. [15:43] JD: You're a financial planner and you want to help out and you get in there and you realize it's all proprietary funds and you're like shit, what am I going to do here? That's when you're going to run off and find your local 401k Pro to help you find a new, new record keeper to move to? No. I don't know. I think it's a security thing too. I think it's a thing. [16:01] Justin: Can I ask in terms of, of the relationships that we know strongly typical broker dealers, how many broker dealers are going to allow their, their registered reps to go in through a third party credentialing site to an employee slash client 401k and make changes on their behalf in that setting. Yeah. Without some sort of documentation or client endorsement or something else. [16:35] JD: I don't, My brain's so small and [16:37] Justin: I'm sure Pontana, the broker dealers doing [16:39] JD: it has created tech for this but I still, I'm trying to figure out like the, what do you call it? MFA Multiple Factor Authentication or whatever. I'm probably botching that but. [16:51] Justin: Well, they're probably getting their own login JD like, like if they're partnering with 401go in that example 401go is probably creating a separate login for advisors who have registered through Pantera. [17:03] Mark: Yeah. [17:03] Justin: To access and get approval from a participant. I'm, I don't think you have MFA issue. [17:09] JD: I'm personally against this. I, I, I, and I'm mostly against it. Call me an old fatty daddy. Based on Chad's initial reaction. [17:18] Chad: You're against what? [17:20] JD: I'm against allowing an outside non plan advisor to gain access to a participant's account to move around. I don't like that. And, and I think that I'm trying [17:33] Chad: to put this in the same perspective of like when I share my Netflix password. So you're saying that I shouldn't be able to do that or I should be able to do that? [17:43] JD: You shouldn't be able to do that because that account that you have is an employer sponsored retirement plan that comes with certain fiduciary responsibilities. And so the very core menu that's been selected or manage account that was offered to you was devised in a fiduciary review meeting where people were dotting their eyes and crossing their T's and looking at all other types of factors to make sure they're making prudent decisions in the best interest of those plan participants. And now you're going to bring in a rogue outside cowboy to come in and or cowgirl to come in and do something different? God damn it. I don't want to say smart things when I'm sober. Okay, let's move on from well, you've [18:28] Chad: said smart things up to this point. [18:30] JD: When Hackler tells me I'm speaking clearly, [18:33] Chad: that means it's because you're enunciating and he can understand you. That's all he's saying. [18:38] JD: Okay, it's not smart. [18:39] Chad: No, you're not making good points at all. [18:44] JD: Okay, let's see. Why are we going to talk about the economy and look at stats? I feel like. Please back me up. Anyone in the chat bar that sneakily over the last few episodes or maybe the last few months, it seems that Chad once in a while pops in this little doom and gloom comment about the future of our economy. He did it two weeks ago. And, and he was like, yeah, I don't know, you know the future. And I was like, what? What are you talking about? And you were like, the economy, man. Like, I don't know, shit could hit the fan. And I said, we're gonna talk about this. [19:23] Chad: Okay, so because Chad's digging a hole for his doom and gloom zombie apocalypse bunker and he's trying to stop it with. With gold. [19:33] Mark: That's what you were working on. [19:35] Chad: Okay. [19:36] JD: He just wants to defend his bitcoin and ranch purchase in Missouri. That's right. No, Chad, give us a little taste before I jump into like metrics and stuff. Oh, took off. [19:48] Chad: I think he. I think he. He went to go grab some more bitcoins falling from the tree. [19:52] JD: You know, it's funny, he did say in a text that he had to. [19:57] Justin: Yeah. [19:58] Mark: Ready? [19:59] JD: I love it. [20:00] Justin: Oh, hello, guys. Oh, boy. Very nice to see you. [20:04] JD: This doom and gloom you speak on, [20:06] Chad: was this a pre planned thing you, [20:09] Mark: Chad does not have? [20:09] Justin: No. Between those two. These are. These are Shay's glasses for a computer. No. I told jd, Dylan was supposed to have practice night. I'm like, I got 20 minutes at the start of the show and then I gotta bounce. And he's like, no, I'm gonna tee you up for your doom and gloom. So that's why I knew this was coming and decided to pull out. Nerdy chad. [20:29] Chad: Well, you're 20 minutes in, so can you just go now? [20:32] Justin: Then his practice was canceled, so you got me, Mark. Look, look, look. Let me, let me be, Let me be clear here. You mentioned in your setup there, jd, that I have long term fears. Somebody else mentioned in the chat, but I remember it was. But you don't bet against the United States for long term. That's a losing bet. That's not at all what I'm saying. I am saying that as a, as a consumer, as an individual, what do I feel? And then I'll support that with some back data. I feel that living expenses have gotten to a point where it makes it difficult to live. That rents are close to an all time high. [21:17] Chad: Seem like they're doing just fine, buddy. [21:19] Justin: That. That paychecks and payroll have not kept up with inflation increases of normal everyday living expenses. Groceries are up almost 30% over the course of the last three years. You have. Gas is finally pulling back down. But gas is high. Rents are high. Going to a restaurant trying to feed your family is accelerated. [21:45] JD: This is perfect. So this is exactly what we're going to talk about. These are the stats that I have brought. You've b. You're basically talking around and around and around about two of them, which is inflation and housing costs, you know, and we'll talk about those. [22:00] Justin: And the lack of. The lack of paychecks or the lack of income keeping up with the rate of inflation. [22:09] JD: Okay. [22:10] Justin: And housing costs. [22:11] JD: I might be looking at unemployment rates and job growth and not. [22:18] Justin: Are you looking at job growth. Are you looking at job growth after the, the addendum and fix to 800,000 jobs that were inaccurately reported? [22:27] JD: That's part of it. Yeah. That's part of what we'll talk about. So, so we'll get. [22:30] Justin: So here I'll finish my doom and gloom by saying that is the experience I feel when I'm chatting with businesses. It is the experience I feel living in the center of the country where the average income is not what it is in California, where going to the grocery store here for my family of four is a $300 venture and it leads to maybe a week of groceries in doing so. And I think in California, my recent experiences, same exists there, it's $300. But income there is vastly different than it is here. And then if I look at that, that feeling and I try to look at the next six months and we talk about the implications of an election and we talk about the uncertainty of an election year, you push in the fact that consumers believe what they hear. And I fucking hate to admit this, but as a whole, we believe what we hear and we believe what we see. And when we're hearing doom and gloom from a political party and another one on their heels trying to defend said doom and gloom, that is going to bleed into our economy. And we have had no real pullback. We have had a flattening of rates. We've had a flattening of the, of the rate in which expenses have climbed and groceries have climbed and house building has climbed and lumber has climbed. We have not had a pullback. We've had a flattening. Instead of growing at 32% a year like it did the last three years, they're growing at 12% per year. [24:13] JD: We're getting into the weeds, which I want to do later here, but I'll defend you on that, is even when things come down, you know, everyone talks now about how inflation is in that 2 to 3% range, but what they failed us to talk about is, yeah, but it, it's, it's, it went up so high. So even if you've got it under control now, it's still, that gallon of milk is still way more expensive than it used to be. But this is okay. You set it up perfect. So let's, let's dive into these. And by the way, thank you to the chat bar for already throwing in some charts and stuff. And I love the back and forth. A chart was thrown out and then someone else said that data is manipulated for rhetoric. Chad's bringing up political candidates. I love it. But all you can do is look at data. So let me try to set that up. So when you're trying to be a logical person and you want to put your finger on the pulse of the economy and try to figure out if things are good or bad or somewhere in between, what do smart people tend to look at? And it's these financial metrics. You look at job growth, you look at unemployment, you look at the salaries that Chad was just talking about. You look at the Fed, the Fed fund rate plays a role. You look at the stock market, you look at consumer confidence, which Chad kind of just mentioned there, people feeling like bad stories are going to be told to them. So you look at what. What are the consumers actually saying about how they feel about the economy? Because there's rankings for this. You look at inflation rates, as Chad talked about, you may look at personal savings and credit card debt, gdp, government debt, the real estate situation, all these things, Mark. No, these are the things you look at. [25:59] Chad: That's why we're man. Because none of those numbers make sense. None of them correlate. None of them go together. Everything. You change one, the other changes, you change another, the other changes. And then everything else gets so that just. We got to get rid of all that and just start over and just go off of vibes. You know what I mean? Just go off of vibes. [26:20] JD: Very. I never applied drunk stock tips to the. To the national economy, but I like this. I like this. One other thing. Let's talk about why this is important to us. Okay, hold on. No, no. But not yet. [26:32] Chad: Not yet. Imagine being the first person that was like, hey, you know what number we [26:37] JD: need to look at today? Everyone probably looked at them like, you're crazy. [26:41] Chad: And then all of a sudden it just stuck, right? Well, why did it stick? [26:45] JD: Maybe one time it was right. [26:48] Chad: I just. No, start over. [26:50] JD: I don't know. I think you could. You might be able to make the argument, if we get deep into it today, that some of the things that our government did to avoid a recession maybe worked. Maybe they could have been. [27:03] Justin: Definitely did so well. Definitely did. [27:07] JD: But why is it important to us as 401k people? I would just simply remind everyone that the participants in these plans, and maybe even more importantly, the companies that offer these plans to their employees are tethered to the economy and to the stock market. And if you're listening to this show, like that's your gig, man. That's what we do, is help employers help their participants. So this Stuff is well and it's important. [27:33] Justin: And, and don't, don't be naive to the way I, I, I phrase that at the beginning which is what am I feeling? I'm a participant in our 401k plan. And, and whether the market is running or the market is crashing, you can't be naive to what people are actually feeling. And the folks you are serving are those, those people that are having these feelings of positive or negative around the economy and what they think is coming this. What did Jeannie Sutton throw out there? Somewhere in the range of like only 20% of people feel the economy is in a good space. Oh well look, these are your consumers. These are the people we're trying to service. [28:15] JD: I have different stats on that. The consumer confidence index is actually very high right now. But, but that's to Mark's point. There's a lot of studies out there [28:25] Justin: talk to you right now and you [28:28] JD: just, you're just looking at as many as you can to kind of. I just want to go back to the 400k people. The, another reason why this stuff is important is I do believe that your business model will, will pivot. It will adjust based on the type of economy that you're in. And that might mean your current clients and how you support them in a fiduciary review meetings and making decisions. It can also mean being aware of that when you're walking into new prospects and trying to win new business. Don't kid yourself. Decisions are made differently in good times versus bad times when you're an employer and that absolutely relates to the 401k plan. If you just think about matches and profit sharing and eligibility and, and reviewing your vendors and fee structures and whether you're shifting fees from asset based a hard. These are all relevant things that, that will ebb and flow based on the economy. Okay, let's start with job growth and let's do what I said earlier. Let's throw up a chart. So Brandon, if you could. Thank you. Reading my mind. Job growth. Okay. And all since Chad's so passionate I can let him kind of kick off here. But so here's a US job growth from. I try to get most of these that will show pre Covid because let's be honest, anytime you're looking at these numbers you got to be really careful about the drop off and then the increase in Covid. I see our politicians using that stats all the time or they, they talk about job growth or this or that even, even illegal border crossings and they're using that pandemic to their benefit, which I think let's, let's span out a little further. So here you go back down to 2015 and, and what this chart I think is saying, Chad, is, hey, job growth continues to be very good. We're back to pre pand, pre pandemic highs. It looks to be trending up. I see this as a positive thing for employers, which to me is a positive thing for participants. We will talk about inflation, so put a pin in that. But how do you feel about job growth as a stat? [30:36] Justin: I'm positive. [30:38] JD: Fine. [30:39] Justin: I feel that, well, leading up to this point, I feel like job growth as a whole has been steady slash up. To be honest, I don't know the truth behind the way the opposing would argue that. Meaning. Yeah, well, two people are carrying dual part time jobs and that's counting as two job growths because there's not enough full time positions out there. People are paying for project work instead of 40 hours a week. You could argue some of those factors in there. That's what the others, that's what the opposing side would do in terms of job growth. But I feel positive when I'm speaking with clients. They're looking to add folks struggling to do so at times because not everybody's wanting to work. [31:25] JD: Still, that's, that's interesting. [31:26] Justin: They're looking to add folks. [31:27] JD: That's interesting, MD in the chat bar, because yeah, I do talk to employers and I probably sit on a fair amount of fiduciary view meetings. And you say they're not confident, but they're growing and they're adding jobs. And to Chad's point, the job market's been very tight, meaning it's hard to find good people. So that to me, MD in the chat bar does not sound like a non confident time. A non confident time MD is when you're shedding people, cutting costs, getting rid of people. [31:56] Chad: Okay, but what about the flip side to this? Okay, the flip side is that there's also, again, I don't live in the middle of the country, okay. I live in the heart of Silicon Valley where everybody's building goddamn robots and artificial intelligence, where it's a little bit of a different mindset of people going, they're gonna replace jobs with all these engineers and tech people creating these programs and softwares and other things that are doing the jobs of humans. But obviously you need humans to get them to. But so I would say I again, from where I sit, things are relatively fine, but there's a little bit of a Uncertainty for the future. I don't know how far we're projecting out, but that's kind of how I operated. [32:44] JD: I operated that. You say that because I did not apply an AI filter to this in my mind. So that's interesting. That's a valid point. I, and I didn't bring that up in any of this, but point well taken. Artificial intelligence could be a tough one. We got a lot. [32:59] Chad: Samson, you can't say nice things about San Jose. After you on it already. I remember. [33:05] Justin: Let me, let me, let me make one clarification. Point to that. Too many of the businesses that we're speaking with and the jobs that they're looking to add and I'm just, I'm just going off those that we are speaking to. They're adding jobs, not new jobs. They're trying to fill positions that have turned. There's. So the turnover rate at least in the groups that we're speaking to are still high right now. They're leveraging the 401k to try to create retention, which is why we're involved in many of these discussions. [33:37] JD: And, and to the point it's a competitive job market so it is leaving for other stuff. But don't you feel like that also backs up that things are in a good space places you're in a good space. When people are bumping around into other employers and other jobs, they feel like they have that opportunity. Most people, they have that opportunity because [33:59] Justin: other people are searching for job, for searching for candidates. They're not adding new positions like oh, we need five more people to cover new clientele. No, they're, they're, it's a constant churn. And there was a comment made if people are struggling to find jobs. I don't, I do not, do not believe that there are too many people who are still choosing not to work. [34:20] JD: Look, that's a perfect segue to the next stat. So Brandon, if you could put up the United States unemployment US unemployment chart because that's perfect. Started in 2024. The unemployment was at when we started. 2024 is at 3.7. In August, it was at 4.2. When we started Retireholics almost 10 years ago, it was at 5.7 was unemployment. So I'm kind of going back to this concept. By the way, if you look at the last 20 years, there was a non pandemic high. You know, if you don't look at Covid of 10% unemployment in October of 2009, take the pandemic out because it's kind of a weird little moment. But my point is, even if you look back at the beginning of retireholics, just put where was your head space then? And all the years in between to now, literally it was worse then than it is now in terms of unemployment. So that backs up what you were just saying is this is not a tough to find a job current status that we're in, period. It's just not. [35:32] Chad: But see, I struggle with some of these numbers and metrics and again, this is just because I question most things, but percentages don't tell everything in, in my mind because it's not like, again, maybe I'm, maybe I'm an idiot and I don't know how unemployment is calculated, but to me it would assume that numbers fluctuate over time, meaning there's more people. Thus a percentage might be lower, but it might equal more actual physical human beings. [36:03] JD: You know that the, literally the feds funds guy, what's his name? Someone help me. In the chat bar, he literally talked about the fact that he thought unemployment rate was a little higher. J. Ho was a little higher because of all. I don't know if this is politically motivated, but because of all the immigration that's come into the country and that, that has hurt the, the unemployment has brought it up to that 5.7, excuse me, 4.2 number. And so he thinks it's actually a little low than that. In reality, that, that's kind of a blip on the, on the chart there. So that makes sense. What you're saying makes sense. No one's saying that these numbers are perfect. They're just some numbers to grab at, to look at, to get an idea of, like what is the current state of what we're doing, you know, and I, I think, I think most sane people would agree that it, it's not a. Oh my God, people can't get a job these days. There's plenty of opportunity for that. I think the bigger argument was what Chad said earlier, which I don't have the stats, although Webby put a link in the chat bar. There is what the wages look like. Like, that's great that everyone's got a job, but what are the wages like? And then we will get to inflation here shortly. [37:23] Justin: Do you want to chat on that real quick? Webby's point in the chat bar, which I understand. I did not look at it. I did not look at it. But what he was essentially saying is that year over year wage growth has outpaced inflation. [37:41] JD: Yeah. If you were to look at the Chart, it's literally those two lines, wage growth and then inflation. And it shows, it shows inflation in black on this steady decline right now. Right now keep in mind this is a chart from August of 2020 to, to current day. So back to that kind of COVID thing. But it's showing inflation just dropping, dropping, dropping and then wages kind of gaining and then kind of flattening out but, but above inflation. But they're again pretty pill in chat are like well that's kind of a chart for this reason or that reason to Mark's point. I get it because I will back you. I do think you're correct that wages seem to have not moved as much as other things. But people will fight you on that. [38:30] Justin: Well and my comment back to Webby. When you're just looking at those two factors meaning wages versus inflation, we have to look at what the majority of working Americans are spending their money on and they're spending their money on groceries and they're spending their money on rent. And when you look at the, the increase rate of those two specific items and utilities for example, it's not the, the, the expense increase of those are not pacing with inflation. Those are going up fast. They have gone up faster. Your core expenses. So if wages are pacing here and inflation is pacing here, but your core expenses are, are pacing at this rate, this rate, then what you are spending money on is growing at an exponential rate versus your wage increases. [39:26] JD: Two things here I just want to reference the, the 800 person revision in the jobs. Totally aware of that to me though is like it's not that big of a deal. Like it was a minimal number in the whole scheme of things and that's its own little kind of fun thing like why the that happened or why they did that. But to me it doesn't really change the narrative. But to your point, the cost of goods, you keep going back this inflation kind of thing. Yes. No one is in denial that we just went through some massive inflation. I would like to talk about it as we get down to kind of this list of things. Of course. And when you're in inflation, things go up. But guess what, that's what happens sometimes when you talk about why it happened [40:10] Justin: and why, why does it, why does it come back down though? How, how and when does it come back down when you have massive years of inflation? J.D. [40:17] JD: well, it, it is trending down. It did stop going. [40:21] Justin: No, it flattened. It flattened. It did not. These are, these things are not trending backwards. They're not, they're not Coming back down to a normal realm. The cost of milk is still outrageous. The cost of eggs is still up 77% from what it was in 2020. Well, can I tell you, the growth rate is flattening. [40:43] JD: God, what was inflation before it went up and how long was it that low there? [40:48] Justin: Yeah, but what causes. [40:50] JD: You can't keep living in your fantasy land that you lived in for 12 years before that. So if you zoom out a little longer, things are. Inflation isn't really that out of whack. It's a little out of whack, but not a lot out of whack. [41:03] Justin: But my point to you, when you were talking about them being up, was how do they come back? They come back with pullbacks. They come back with, when we enter recessions, this is what level recessions are normal. And I'm not saying we're entering one. But it is this kind of uncertainty, this kind of fear that balances things back out. [41:26] JD: That's fair. That's fair. Let's. Let's figure out whether that may happen or not quickly. Fed or let me give you a quick business stat. 99.9% of businesses are small businesses. And so when we're talking about businesses, that represents almost 62 million people that are employed. Okay? So I think if you reduce the 800 jobs, I think you get down to like 152. 152 million or something like that, 0.2. And so of that 62 million are these small businesses. Just so we have kind of an eye on that. Now, the big news was the fed funds rate. This was yesterday. It dropped 50 basis points. So this is very interesting based on what Chad's talking about right now. The reason why that fed fund rate went up so high from those low levels was because they were worried about inflation and a recession. And so what did they do? They jacked it up. Right? [42:29] Justin: Thank goodness they did. [42:31] JD: And in doing so, to Chad's point, they've leveled it. And now that must be concerning to you because yesterday it seems they're going back in the other direction now, like as they show you, which would tell you things are good in that in their mind, it should have our things. [42:50] Justin: Sorry, I'm. I'm pulling in all the air. Justin, you're welcome to, to jump in. I'm not. I feel like you guys are picking on me a little bit on this. But JD That's a good thing. And if I wanted to play devil's advocate on it, I would not inflation to go down. It's a It's an election year. I think that the Fed pullback there was, it was not endorsed by everybody and I think it was quite a surprise to many. But I think that it was the right step forward. [43:27] Chad: Did they ask you first? Is that why you said, did they consult with you, Chad? Did they make sure you were okay with it? [43:32] Justin: Mark, this is all a ploy to have me elected president when I'm 52. [43:38] JD: I find it, I find it a little odd that you are such a champion for getting those that inflation to go down, down, down and not just level, but at the same time you're okay with a 50 basis point rate cut, but it's all right, I'm okay [43:53] Justin: with a 50 basis point rate cut because I. Here's my genuine fear and this is kind of what I started to lay out at the beginning. Your core expenses are up, your wages are not keeping pace and people are kind of fearful of spending money at the moment. They think that the rates are going to help them make money. Well, as rates come down, people are going to be a little more willing to hopefully spend money instead of sit on said dollars that flood into the market. Could be good for consumers, could be good for business. And I would like to see people, rather than sitting on especially large business sitting on hundreds of millions of dollars, investing those, those dollars. I'd like to see that get back into the economy. [44:34] JD: Here's a chart that backs, I think you up a little bit. So Brandon, if you could find the chart titled saving and credit card debt, which is kind of interesting. I don't know if you guys are aware of this, but maybe I think it's okay up in the little, in the little corner, Brandon. Hopefully people see a little better there. I don't know if you knew this. I, I was, I heard about this a year or two ago. I was caught off guard. But you know that when, if you look at 2020, people's saving rates like skyrocketed in the pandemic. People became really good savers. They started squirreling away money. You could argue that a lot of those, that because the government was handing out free money, there's a lot of people that were getting extended unemployment checks that were here in California. Even your unemployment check was a lot higher than it was typically before the pandemic. But either way, people started saving money and their credit card debt was going down in the pandemic. If you look at the black going up and the green going down, this would support to me your concept, Chad, that people are struggling in that they are spending more on their credit cards and therefore in debt with their credit cards and they are saving less, even less than pre pandemic. I think this also backs up your inflation. Of course they are because they have to buy, right? So maybe even the gallon of milk and the stuff they need is going on their credit card and, and, or out of their savings. [46:13] Justin: And that's why I just threw that quick comment in the chat bar. I feel like the average American is being forced to run up credit card debt because living expenses are higher than their means at the current moment for many and, but I also feel like businesses, large businesses are smart and they're looking at easy money and they're saying I'm going to sit on this cash. But I looked it up the other day. Apple sitting on $200 million of cash rather than spending, you have. I just put 13 firms holding 1 trillion in cash, 13 large firms holding 1 trillion in cash on their books. Like that's money that some of it at least should and needs to be in the economy. So it's not the average, average American that's saving right now and taking advantage of some high rates in the fixed space. It's smart businesses that have the ability to do so. [47:16] JD: Corporate profits are way up in a big, big way and they, we didn't talk about it yet, but the stock market, Brian, I think I sent you a chart of the all time highs of the U. S Stock market. Everyone's aware of this. This is business we're in, this is reaching new all time highs. So the stock market, which is this is what a lot of people generally look at to see how the economy [47:44] Justin: is doing so wrong and so right. [47:48] JD: How do the three of you feel about the fact that the stock market continues to be very positive and good? I, I guess there's two ways you could look at is like oh my God, it's gotta, something has to crack soon or are you just like, like son of a. Like we keep humming along, you know, [48:05] Mark: I don't think it's an accurate representation of the economy as a whole, as of society by any means. I think, you know, the top earners have been able to really capitalize on, on the dips and repl. You know. Oh thank you crystal. And really, you know, see a lot of, a lot of growth there. I think the large majority of our economy of you know, society is kind of like Chad is talking about really, really hurting. It's clear in, in the data that we see with the, the credit card debt and, and all that stuff too. And I don't. Yeah, it's cool to have the economy on, you know, the stock market side. It is for a lot of people, but I think people are going to be hurting pretty soon. [48:46] JD: So let me dive more doom and gloom, huh? [48:49] Justin: No. [48:49] Chad: Sorry about positive vibes. [48:51] Mark: The only reason I say that is [48:54] Chad: green and say, hey, this is awesome. Let's just, you know, just be happy for. [49:01] Justin: Let me. [49:02] Mark: It's been going for. [49:03] JD: So it might not be, it might [49:04] Chad: not be a representation of where you think humans are in terms of what Chad's saying with their doom and gloom. But obviously it correlates with the fact of what JD Just said with corporate profits being so high and people obviously buying into these companies and wanting to capitalize on how well things are going. [49:27] Mark: But are they spreading that wealth amongst their employees? [49:31] JD: I think that's. That was the kind of more human. I don't think it is conversation I wanted to have, which is kind of crazy. [49:36] Chad: It wasn't the question. [49:37] Justin: No, I know. [49:39] JD: Forgetting though. But let's go there because that's interesting. Stock markets, all time highs. Cor. Corporate profits are. Are raging and unemployment is low. So these are all these things where you're like, wow, these are all good things. But then I agree with Justin and Chad a little bit to say like, hey, but the general people are struggling and that's due to inflation and possibly due to stagnant wages. But so let me ask you from a 401k perspective, because this is a 401k show. Do you want the employers to be on steady ground or do you want the employees to be on steady ground? [50:17] Justin: Why can it not be both? Why are you making. [50:20] Mark: It's also think about like when looking at inflation. [50:23] Justin: Inflation. [50:24] Chad: Right. [50:24] Justin: Question. [50:25] Mark: It's a percent. No. [50:28] JD: But then I want to know is if, if the employer is on steady ground and you feel like the employees are not, although I can barely get a reservation at a restaurant these days, or I can't go to the movies and get a seat if I don't get my movie ticket fucking six days in advance. But so I, I see a different world here in Southern California than Chad sees in Missouri. [50:49] Justin: Yeah. [50:50] JD: If the employees are struggling, what comes next? Like where, where does the break happen in 401k? You know what I mean? Like, I don't want to know. [51:01] Chad: I'll tell you next week. I'll tell you next week. [51:04] Mark: And I think it's too like, I think a few things have happened that attribute to it. But one thought I Have in my mind right now is that when, when things were good, people got used to living in a certain lifestyle, right? And then things got shitty, but they kept still living at that lifestyle even through all of this inflation and whatnot. [51:20] Justin: Right? [51:21] Mark: And that's, I think that we see that data in the, the growth of debt and whatnot. And I think that's going to be, there's got to be a tipping point eventually, right? And I think, you know, when it comes, it's not going to be pretty for the large majority of people. Now, J.D. like you're saying, you know, where we live, we don't see as much of an impact. But back where Chad's at, I, I think we see a larger impact in those areas too. [51:46] Justin: Let me, let me ask JD Why do. Why, why are, I'm, I'm not going to say do. Why are businesses feeling comfortable, but employees are not? [52:05] JD: I think inflation is the big thing. I think you started talking inflation. I think inflation is the, is the huge factor here. I think if you didn't have high inflation, we wouldn't be having this conversation because people would be okay. You're saying inflation with homes, inflation with materials, inflation with, with food and groceries and all these types of things. I think that's, that's the difference between the two. I don't think that inflation, businesses can react to it, they can adjust to it. They can kind of change models, increase prices. That's what inflation is. So if their cost of goods goes up, they can increase their prices. So I think it's this inflation and I think it's an appropriate time to have the conversation of why we had this inflation. And a lot of, you know, Trump claims that Joe Biden got in charge and created inflation. That's not true necessarily. The government spending was a big part of inflation and unfortunately, Covid played a role in that as well. You could also probably tie in when Covid created these supply chain issues that, that sprinkled into this effect as well. [53:26] Justin: And which, which once they were solved were never adjusted by the people who were sitting in those roles. [53:32] JD: And then the fed funds rate, we had zero interest rates back in the day. Do you know that the very establishment, I'm probably in trouble for this but of companies like Guideline and Human Interests and these things are because in these deep dark boardrooms where these fat cats with their big fat wallets talk about business, they were getting free money. Back in the day, we had a Fed's fund rate that was basically at zero then. Didn't even creep up till 2 was like at the high percent where it was at for an extended period of time. And so to me, who benefited from that, mostly these corporations. We can see that in their profits now. But people also benefited from that. And to Justin's point, they were kind of living high on the hog too. Not as much as the big investments that are happening. Among the things. But yes, Mark, when interest rates are low. [54:30] Chad: Well, you said high on the hog. That's one of those, those, those fucking terms that I never heard. [54:35] JD: People can buy a home with a 3% mortgage. That is not historical, a normal thing. And so we are paying the piper right now with inflation. That's just, I mean, I feel like that's a fact. Someone tell me I'm wrong. [54:49] Justin: The piper. [54:50] Mark: That's a good point. [54:51] Justin: It is. But you brought up JD when you started that, that. Let's have a human conversation about this. What I continue to see is that the folks in the driver's seat at most businesses are in a position where they're not feeling the negative effects as, as heavily as the person who was paying rent at, at eleven hundred dollars a month. [55:21] JD: Has to be true. [55:22] Justin: And now it's $1,400 a month. And the milk jumped by 60%. Eggs jumped by 70. Those are the, the things that that person is needing for the livelihood of their family. And inflation is one thing. Cost of, of utilities and primary expenses is another. When I look at the success and the market and you brought up the, where the, the stock market is itself. I'm not one of those people that's like, I'm young, I want to pull back. It will help me make more money. No, it hurts too many damn people when we have that. I would love to see the stock market continue to climb and forevermore have constant good increases. We're not going to, but I would love to see that. What I would also really like to see is a community that steps up and says, hey, right now we had to jump prices drastically because of supply chain and because of demand and because of what happened during the pandemic. And it was difficult to get employees in to cut, to cut lumber for homes and it was difficult to get people out to transport milk. And that's why these, these costs accelerated. I would love to see them step up and say, if we're going to keep our costs high, then we're going to pay our employees. [56:44] JD: Yeah. [56:45] Justin: A wage that is going to match what we're now making. [56:48] Mark: Convince people, make less money. [56:50] JD: That's the hard part. Don't hold your breath waiting small hang on for small businesses to fix the fucking inflation problem. [56:59] Justin: It's not small businesses that I think [57:02] JD: have the issue that's never going to happen. What actually needs to happen to unlevel that inflation and bring it down, if that's what you need to do is we need to, and I hate to say this as you know someone who makes good money, but we need to increase taxes. We need to lower the amount of money that the government is spending on things for people all over this country like get a little more efficient and specific with it. Do you know that pre Covid what I'm talking about now is government spending and our debt. Right. Pre Covid we were like someone helped me but it was like we would spend like between four, it was like mid fours or high fours in the trillions of dollars per year. And then when Covid came and I get it, we were scared the out of our minds. We didn't know what was going to happen. So I totally understand what we were doing. But we need to protect everything. And so we jumped that up to like six, six or seven trillion dollars in spending. I mean it's a massive amount of money and mind you don't just think of it as going from four to five to six. We're talking about trillion. So it's like compound it's just a huge amount of money but that we added to it. And to your point of cost of goods not going down, the government just kind of stayed there. It's, it's at 6.2 trillion in 2023 right now. So they, they just stayed at that level of spending and didn't bring it down. That is part, that's a big reason why we have this inflation. So it's your government that's making these people pay. [58:36] Justin: I'm not, we can, we can argue this offline at some point. I'm not going to deny anything that you said. But the government shifted where we were spending money, we were spending money in the economy. We are no longer, we were no longer handing out these incentives in terms of money spend. So here would be my next question along those lines. If the government didn't pull back, why hasn't the cost of primary utilities like eggs, like milk. Why, why has that not gone back to a more reasonable level? [59:10] JD: I think there's a possibility that they think they can get away with it. [59:14] Justin: That's exactly right. [59:15] JD: So if we're talking about change, when [59:17] Justin: you're talking about taxing more and doing like that, I'm Not a person who believes in, in greater governance and greater oversight. I'm not that I don't fit into that bucket, but I do believe some people, some businesses need to have their feet held to the fire to say, why do you feel that it is reasonable for you to charge this rate when four years ago you charged this? [59:41] JD: I don't want to get too political here, but we're not going to turn into a communist country. Like, we're not going to put. That's not what needs to happen. What needs to happen is unfortunately, can't, can't buy that product at that price. And once people can't buy the product at that price, that price will come down. But currently, you get what I'm saying. [1:00:06] Justin: I do, I do. And my father in law will continue to argue this is relatively the same concept. He would say, hey, this, this is his analogy, bowling alley and bricks. He's like, hey, if the cost of, of building brick got super high, then business owners who are running a bowling alley would leave the bowling alley business behind and go start building brick because the profit margins are so high. And what would that do? Then you'd have more people step into the space and drive down the expense of that because you have a flood of supply and a lack of demand need. We're not seeing that. That's general supply and demand, but our economy is not living that way right now. [1:00:51] JD: We're not seeing that because, because they're still willing to buy those things at that price. [1:00:55] Justin: Because we have no choice when they're, they're utility. These are things that we have to do. These are not buying brick to build a home. Okay, this is milk and eggs. [1:01:05] JD: I'm with you on that. I don't, I don't mind a little communism when it comes to certain needs. I can even be swayed on the medical debate. You know, I totally get that. Like, I think our, our medical and our pharma is way out of control. And you can't just let a free market work in that space. Like people have to have those services. And so I can see government, which we already do a little bit, get involved. I can see us doing more of that. But again, I'm not here to run for president or come up with any kind of government ideas. But what I am saying is that beyond those that you're talking about, capitalism will work. The free market will work when people stop buying those products at those prices. And like I just said, I'm sorry that it's a San Diego thing. The hotels are full the restaurants are full, the movie theaters are full. People are driving around having a good old time. Like I don't see a depression around me right now. Businesses are flourishing and I don't either get is at all highs. And so I just thought it was odd when you were telling me like things look so gloomy and doom and I was like, God, everything I'm seeing is like we avoided a recession and people are still crushing. [1:02:19] Justin: That's premature. [1:02:21] JD: It could still happen. Yeah, but dude, are you kidding me? It's, it's almost the end of 2024. [1:02:27] Justin: We've done super well. JD I, I think that what the Fed has done, I, I think that as a whole the Biden administration has done a good job hedging the likelihood that we enter a recession and I honestly don't think that we're going to enter a recession. But I do think that consumer confidence is low. I think that couple that with an election year, couple that with the fact that the core expenses remain high. [1:02:55] JD: You don't want me to show you a chart of the consumer sentiment, do you? [1:03:00] Justin: Sure, go for it. [1:03:01] JD: Because I think you're just, we're all just going to kick it down now. But I, Brandon, there's a consumer confidence index chart that I sent you. [1:03:09] Chad: Is it Brandon gone? [1:03:10] JD: Oh, maybe. Yes. Oh this. Let me pull up what I sent him just on my email here and then we'll wrap Consumer confidence index. So the consumer confidence index CCI is the, it's the one that people look at not saying that makes it great or bad or indifferent. But in 2007 it was at like 115 is the index. And then in 2009, which was tough times, it got down to like below 30 and then shot all the way back up to where it was in 2016. 2018 got even higher up to all time highs of like 140. In 2018 when the pandemic hit, it dropped out of the sky from like 130 down to 90 or 85ish and now it's back up towards that 120 range. And this is a very looked after like asking people all across the country how they feel about their confidence in terms of the future that's in front of them. Literally the future. [1:04:19] Chad: They never asked me and I'm just [1:04:22] JD: saying that that is, does not look like despair. [1:04:28] Justin: I, I don't know how to combat that other than fair enough. I feel like we're pretty in tune because of, we are working across the country. We're working with small business. [1:04:40] Chad: You're going off. You're going off vibes, dude. That's all you guys. [1:04:43] Justin: I'm going off vibes, Mark. [1:04:44] Chad: Thank you. [1:04:45] Justin: Thank you. [1:04:46] JD: I don't know. I. I will tell you this. I do think on a. More on Mark's more Vibes. Vibe. Vibes. Vibe. [1:04:54] Chad: Yeah, bro. [1:04:56] JD: When you're at all time highs and corporate profits are really good and unemployment is low and worse, I think this is the worst part. Government spending is way up. Government debt. I think someone in the chat bar talked about that. Like, our debt is. Is crazy. It's like, what did someone say? Is it like a. It's like a third of our GDP or something? Or worse than that? I don't know, but it's like, it's insane. Third of gdp. It's the third largest expense. Higher than defense spending. Yeah. Our interest on our debt. We will spend more on our interest than we will on defending our country by tanks and planes and ships and shit. Like, that's a scary thought. Now some people kind of bash that away or wipe that away with the comparing our debt to our GDP and the massive amount of growth that we've had. I've also seen people compare us to many other first world countries and just say like, yeah, our debt's massive because we're massive. Like, compare us to some of these other countries. But to jump on the doom and gloom, that worries me. And I feel like in our current state with politics and the Republican party and the Democratic Party and everyone trying to, to fight for control over the comp of the country, none of them will want to fix the problem because fixing the problem is like taking your medicine. Right. And it's not a very attractive campaign policy. [1:06:28] Justin: It's not going to get you elected. [1:06:29] JD: Yeah, it won't get you elected and it won't keep you in office. That's a problem. That's a problem. So anyways, I was going to try to finish up with like, how you could take this approach and apply it to your, your clients, but we've, we've ran out of time because on this experimental episode, we only have 67 minutes. That's all we have today. All right, peace out. Thanks for tuning in. Thanks to Chad for all his passionate economy things. And we'll see. I say there will never, ever, ever be a recession again. No, of course things will, will hit the fan eventually. And by the way, Chad, that's why all you bears out there when you hop on these podcasts and these TV shows, let me, let me inappropriately apply you as a negative bear. You, you can always say that story. Everyone wants to hear it because. And you know what? You'll never be wrong because eventually things will go down. Oh great. And so that I hate seeing that shit all the time. He's always, always doom and gloom because eventually they're going to be right because what do they say the clock if [1:07:56] Justin: they do and groom long enough. [1:07:57] JD: Yeah. [1:07:58] Justin: Hey, did you see Brandon's really subtle bear in the background? [1:08:03] JD: Yes. Yeah. [1:08:04] Justin: You're so perfect. He timed that so well. [1:08:09] JD: We are the retire. We are changing the entire plan industry one beer at a time. We will see you next time. The first Thursday of the next month in the year which will be October. Adios muchos. Yeah. See you later. [1:08:28] Justin: Bye. Good night, guys. Later. I'm only happy when it rains. I'm only happy when it comes to.