Josh and Austin are back with the fifth episode in their “What We’re Reading” series, highlighting current news along with some articles they have been reading. This week the guys dive into the Vatican trial, interest rate hikes, average car ages, the worst years in stock market history, and so much more! Listen now! 

Main Talking Points

[1:10] – Josh’s First Article: The Vatican Trial 
[4:12] – Austin’s First Article: eBay Enters NFT Business 
[6:34] – Josh’s Second Article: Interest Rate Hikes 
[9:05] – Dad Joke of the Week 
[9:31] – Austin’s Second Article: Average Car Age 
[12:18] – Josh’s Third Article: Inherited IRAs 
[15:24] – Austin’s Third Article: The Worst Years in Sock Market History 

Links & Resources

Europe Business Religion Trials Philanthropy – AP News  
eBay Enters NFT Business – CNBC 
Stiglitz Says U.S. Rate Hikes Killing Economy Won’t Fix Inflation – Financial Advisor Magazine 
Average Age of U.S. Cars Tops 12 Years Amid Supply Price Woes – Bloomberg 
New Rules for Inherited IRAs Impact Bequests – Financial Advisor Magazine 
The Worst Years Ever in the Stock Market – A Wealth of Common Sense 
NFT is Going On? – The Invested Dads Podcast 
Don’t Fall for It (ft. Ben Carlson) – The Invested Dad’s Podcast 
Invest With Us – The Invested Dads
Free Guide: 8 Timeless Principles of Investing

Social Media

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YouTube

Full Transcript

Welcome to The Invested Dads Podcast. Simplifying financial topics so that you can take action and make your financial situation better. Helping you to understand the current world of financial planning and investments, here are your hosts, Josh Robb and Austin Wilson.

Austin Wilson:
All right. Hey, Hey. Hey, welcome back to The Invested Dads Podcast, where we take you on a journey to better your financial future. I am Austin Wilson, research analyst at Hixon Zuercher Capital Management.

Josh Robb:
And I’m Josh Robb, director of financial planning also at Hixon Zuercher Capital Management. Austin how can people help us grow this podcast?

Austin Wilson:
Yeah, we would love it if you would subscribe on whatever platform you are listening to us on. We put out new episodes every single Thursday, so please subscribe. And if you can leave us a review on whatever platform you listen to, but a lot of people have done that on Apple Podcasts and Spotify and we thank you for that because that helps us get found by more listeners who we hopefully can help with what we’re talking about. And today what we’re talking about is what we’re reading, because we read a lot of things.

Josh Robb:
What we’re reading. We do.

[1:10] – Josh’s First Article: The Vatican Trial

Austin Wilson:
There’s a lot of interesting stuff going on. Not all of these topics deserve a dedicated episode, so it’s just good to kind of give you some little blurbs on things that we see as interesting or that might help you.

Josh Robb:
Yes. So, my first one is headline news, the Vatican, there’s a trial going on. In fact, they’re the ones that were taken advantage of. So, the Vatican, had some people within their organization that were using money for nefarious things. So, the Vatican had some money, and they would invest it and…

Austin Wilson:
Lots of money.

Josh Robb:
They would use it for growing their outreach. And along the way they’d invest it in certain things, think of any kind of non-profit you kind of set up an endowment type of thing.

Austin Wilson:
Right.

Josh Robb:
So they had all this been coming to light in this trial. And it’s been actually going on for about two years, but between the pandemic and other things and this being such a big thing, it’s really gone on, it’s going to continue going for a while. And these are all just accusations at this point. There’s nothing proven, they’re on trial right now, but there’s been some crazy, we’re talking hundreds of millions of dollars here.

Austin Wilson:
That’s a lot of money.

Josh Robb:
Yes. Of just bad deals or deals that went to friends or money being spent for things that they shouldn’t be spent on. All this stuff is coming to life. For instance, there was this intelligence analyst who was an outside consultant that they brought in. A lot of money, but one of the things they gave money to this person to help with missionaries that were being held hostage by rebels overseas, different places.

Austin Wilson:
I’m guessing that didn’t happen.

Josh Robb:
Apparently, they may have used that money for buying Prada and Louis Vuitton and stuff for themselves instead. And again, all just accusations of this point, but just things like that also just by the way, is the biggest criminal trial in the Vatican’s modern history.

Austin Wilson:
Wow.

Josh Robb:
So you talk about that. There’s all the way up through cardinals, other people. One was tens of millions of dollars went towards this bad investment. They went towards friends, family. There’s chance for prison for some of these people. I was reading through this whole article, which by the way, all the articles we’re mentioning today, we will have links in the show notes.

Austin Wilson:
Yes we will.

Josh Robb:
But there was this real estate deal, and again, it’s popular part of London and they were buying the building and then this business didn’t go well so they wanted to get out of that, but hold the building. So they hired this person, this real estate agent said, all right, here’s the deal to own the building, get out of the business and get these all accusations, allegedly, structured the deal so he had all the voting rights and so then after this person in the Vatican signed this one page memo, summary. Which he thought he trusted the lawyer, turned out the lawyer that gave him the one page also worked for the same real estate agent. Not a great idea. It gave him full rights.

So then he turned around and said, if you want to buy the rights and actually have ownership of this building, which you thought you already did, you have to pay me now, this extra money. And all this fun stuff. So lesson to be learned from this whole article is no matter how big, powerful and how much money you have, be careful and understand what you’re actually getting yourself into. And sometimes complicated is not better.

Austin Wilson:
And I can see your Chief Compliance Officer ears were just ringing as you were reading this.

Josh Robb:
I was getting…

Austin Wilson:
Fired up!

Josh Robb:
My heart was racing fast, and a lot of disclosures happened. I was really sweating. Oh man.

[4:12] – Austin’s First Article: eBay Enters NFT Business

Austin Wilson:
My first article is titled eBay is entering the NFT business with an assist from hockey legend Wayne Gretzky. And this is a CNBC article, also linked in the show notes. If you want to know what an NFT, or non-fungible token is, we do have a dedicated episode on that from 2021. And we will link that in the show notes as well. So eBay, which is you can buy and sell used items, new items, anything, you can buy anything. I think that’s their motto really. Also used to involve a lot of PayPal. PayPal then was spun off. All these things happen there. They’re getting into selling NFTs and they’re using a partnership with Wayne Gretzky-

Josh Robb:
Legendary hockey player.

Austin Wilson:
Yes, yes. Then he is going to be featured in the first collection of NFTs from eBay. You’re going to be able to have an opportunity to buy 13 limited edition digital collectibles in partnership with a web three platform called One Of. Each of which is going to contain the 3D animated rendering of Gretzky making one of his signature moves on the ice.

Josh Robb:
Oh man.

Austin Wilson:
There’s only 13 of them out there, supply and demand.

Josh Robb:
That’s right.

Austin Wilson:
How can you afford not to. That is not a recommendation, I’m totally kidding. NFTs are one of the most controversial aspects of the whole crypto digital asset move because technically you could copy and paste about anything and not have the original, but have something that’s the exact same, but it’s not as valuable for some reason to someone. So that is NFTs for you. But yes, listen to that episode. There are going to be additional NFTs in this partnership coming with eBay through the company called One Of, so those are going to be more accessible. I think these first 13 are going to go really high priced-

Josh Robb:
Or they hope so.

Austin Wilson:
They hope so. It’s a Wayne Gretzky kind of partnership. It probably will, but they are going to have some new ones that are featuring some of the most iconic features Sports Illustrated covers. Those are going to be quote, unquote priced for the everyday fans starting at about $10 each.

Josh Robb:
Now see, I could get on board with that because you buy these NFTs, you can use them as your icon or image for Twitter or whatever you want. And then you could have it as your desktop. I could see if you had one of those really awesome Sports Illustrated covers you really like, 10 bucks isn’t that bad-

Austin Wilson:
Think of Michael Jordan from the nineties dunking and whatever.

Josh Robb:
I could almost justify $10 for that, but we’ll see.

Austin Wilson:
Josh is going to go all in on NFT.

Josh Robb:
I’ll one $10 sports illustrated NFT of Bo Jackson.

Austin Wilson:
You can buy NFTs. That’s kind of an upcoming platform through them too.

[6:34] – Josh’s Second Article: Interest Rate Hikes

Josh Robb:
All right. My next article is discussing rate hikes and how they will hurt or help the economy due to inflation.

Austin Wilson:
Well, that’s a very popular topic. So illustrate us.

Josh Robb:
So this is an article in one of my financial advisor magazines and the concept there is they were talking to a Columbia University professor and their opinion was that the US economy does not need rate hikes to slow inflation, but instead inflation is a result of supply demand, mismatch.

Austin Wilson:
Not enough supply, more demand.

Josh Robb:
And the demand piece right now is because of influx of cash. We have a lot of cash floating around, so there’s a lot of demand. And then we have supply chain constraints, all that fun stuff. The thought here was instead of fixing the demand side, which is what raising interest rates does. Historically that’s why the Fed is doing that; Is it pushes down the demand because it makes things more expensive. Slows down inflation. Why don’t you fix supply side?

Austin Wilson:
Bring more supply online.

Josh Robb:
So couple examples they gave, and this is something that President Biden had early on as one of his agendas was to make childcare more affordable and more available so that… In general, it is the woman who stays home with the kids… if you made childcare more affordable and more available, you’d have more women coming back to the workforce, thus increasing your labor issues.

Austin Wilson:
Which we have a very tight labor market-

Josh Robb:
There’s jobs available, way more jobs than people looking for jobs. So that’s one. Food right now, we’re in a high food inflation environment. It has to do the war in Ukraine. There’s just supply issues still. Weather impacts it, droughts, all that stuff. Handful of years ago, the United States had a surplus of food, and we were exporting. And we still export some stuff, but in general that why don’t you fix the supply by giving motivation or incentive to produce more food instead of adjusting the demand on the other end.

Austin Wilson:
Bring more supply online. And even if demand stays the same, you’ll bring inflation down.

Josh Robb:
That’s so that was just something that was interesting, and that if you are going to be sticking your business disruptions, in a sense, the government is trying to stick themselves in and make an adjustment by raising rates. You could do that on one or the other. Why not focus on the other end is, what this article’s about, which I just thought was an interesting approach. The Fed necessary cannot do most of this because they have only a couple mandates that they have control over. But the idea was the overall government maybe could focus more on one end of supply instead of the demand.

[9:05] – Dad Joke of the Week

Austin Wilson:
That is interesting. Before I give you my second article I have dad joke of the week, Josh.

Josh Robb:
All right.

Austin Wilson:
What is a pizza’s favorite song?

Josh Robb:
Ooh. Pizza’s favorite song. Hmm. I don’t know what they listen to.

Austin Wilson:
Another one bites the crust.

Josh Robb:
There you go. I like it. Who sang it?

Austin Wilson:
*Singing* – I know it, but I can’t pull a name out of my head.

[9:31] – Austin’s Second Article: Average Car Age

Austin Wilson:
My second article is titled Average Age of US Cars Hits a Record 12.2 years in fifth straight annual increase.

Josh Robb:
What would be hilarious is once they get to 16 years, they can get their own license for their own driving. The cars are self-driving now.

Austin Wilson:
Self driving, that’s right. But this was an article from Bloomberg, I believe. And I will link that in the show notes, but it’s pointing out that vehicles are older than ever. We’ve had now five years where the average age of the car on the road has been on the rise. People like me are contributing to that because I’m driving an ’07. How many years old is that? 15 years.

Josh Robb:
There you go.

Austin Wilson:
That’s old.

Josh Robb:
That’s old car.

Austin Wilson:
So the people like that driving up the average is killing me. What this article pointed out is that because this is what’s happening, this is going to slow the spread of new safety technology such as side airbags or better crash ratings or all these things.

Josh Robb:
Electric windows.

Austin Wilson:
I have those, Josh.

Josh Robb:
Okay.

Austin Wilson:
As well as emissions technology. So typically, older vehicles are a little bit less emissions friendly. So, these are not necessarily things that are helping out with the safety aspect. Obviously very important as well as the emission side of things, as we’re trying to do things for climate change, as well as just in the high gas price we’re in right now, mileage matters with $4.50 gas. So, a couple things going against that. One of the main reasons is that a global microchip shortage, supply chain snags and inventory challenges all are keeping people driving their older cars longer because they’ve led to the price of new vehicles, on average, according to Kelly Blue Book, $46,526 on average. That means there’s a lot more above and a lot more below-

Josh Robb:
Some of those pickup trucks are expensive brand new.

Austin Wilson:
Absolutely. But that is a high average. And another component of that is the fact that financing costs are up because rates are up. So when you take out a loan, if you take out a loan, which is not something we would typically advise for vehicles because it’s a depreciating asset, but you’re taking out a loan with rates that are moving up right now. Definitely more than they were a year ago or two years ago. So that’s something that’s causing the monthly car payment to be higher as well and keeping people in their cars.

Josh Robb:
That’s crazy.

Austin Wilson:
So that is where I was at. Josh, what is your third article?

Josh Robb:
Question before we go on.

Austin Wilson:
Yeah.

Josh Robb:
Now if someone owns a classic car, that may bring that average down pretty significantly. So, if you have a sixties or seventies, one of those muscle cars. I think the average is the average.

Austin Wilson:
I bet this probably has to do with daily drivers. There’s probably some way that they-

Josh Robb:
Driving a Ford Model T somewhere. I bring the average way down.

Austin Wilson:
So I think that they probably go by DMV information and if you have a historical plate, you’re probably excluded.

Josh Robb:
So I think that’s over 25. Not that matters too much, but I’m just curious.

Austin Wilson:
That’s a good question.

[12:18] – Josh’s Third Article: Inherited IRAs

Josh Robb:
All right. My last article is exciting. I think we should have just started with this article.

Austin Wilson:
It’s best one.

Josh Robb:
We’re going to talk about inherited IRAs and your required distributions out of them. Austin’s sleep already. The idea there though, is this isn’t actually new news in that this whole piece. What’s new is that the IRS has interpreted this significantly different than most people in our industry thought it would.

Austin Wilson:
Interesting.

Josh Robb:
So this is actually a law that was passed in 2019, a handful of years ago. And the idea was starting in 2020, if someone passed away and left their IRA or some sort of pre-tax account. So, think 401ks, IRAs, those type of accounts, left them to someone, that there was new rules required. And the general consensus was that if you were what’s considered to be an eligible beneficiary, which is your spouse, minor children, somebody that’s disabled or chronically ill, or if they were less than 10 years younger, so within 10 years of the person who passed away, they just followed the old rules. They just said, I get it for the rest of my life. I’ve got to take a little bit out every year, but I get to do it for the rest of my life.

They created this new group that were non-eligible beneficiaries. And the idea there was that if you died in 2020 or later, they would then have a 10-year window to get all the money out. They had to do it by the December 31st of that 10th year. That was kind of how everybody in the industry read it. That’s how it was worded. IRS waited a little while, thought about it and then in 2021 near the end of it, they kind of were like, I think it looks a little different. And then here in this year in 2022, they kind of pushed some stuff out to indicate that they’re actually leaning towards adding a couple more categories. Because if there’s anything I know-

Austin Wilson:
Partially eligible.

Josh Robb:
The government loves complicating things to the extent that they can. And so they said, okay, if the person who passed away was not taking required distributions yet, in other words, they were under age 72, then you have a 10 year window, no required distributions for whoever inherits it. But if they were taking distributions, so they were 72 or over, then the person who inherits it has to take distributions and has 10 years to take it out. So now there’s potentially all these different categories that you have to track. And the hardest part about this all is we’re two years into this and they’re changing…. Well, what’s going to happen is they may require people who did not take a required distribution last year that was supposed to, because it is the year after you pass is the first year. So they passed away in 2020, 2021 would be the first year that required distribution would show up. The most anybody’s miss is one year. But the penalty for miss required distribution, by the way, is pretty steep tax.

Josh Robb:
And so-

Austin Wilson:
But could they penalize you if there wasn’t a rule?

Josh Robb:
That’s where there’s a lot of things floating there. What are they going to do? And all this stuff. So long story short, nothing’s decided yet it’s kind of out there for kind of opinions and kind of revision, but something that we’re keeping eye on and that you should be keeping on if you’re fall in this category of receiving an inherited IRA is maybe I may have to take two this year to catch back up and start planning for distributions between now and that 10th year.

[15:24] – Austin’s Third Article: The Worst Years in Sock Market History

Austin Wilson:
And long story short if the IRS finds a way to fix some ambiguity with a way that’s going to line their pockets a little bit more, they’re going to do it. So my third and final article is titled The Worst Years Ever in The Stock Market. And it’s, this was written on, or published, on May 22nd by Ben Carlson, which we’re going to put a shameless plug in because we actually interviewed Ben Carlson in 2020, early on in our podcast.

Josh Robb:
Yes.

Austin Wilson:
One of our first handful when he released his book, Don’t Fall for It. So, check that, which is a good book. It was a good book. We will link that in the show notes as well. There are some points from the article that I took away. On January 3rd of this year, the first trading day of 2022, the S&P 500 closed at an all-time high of 47.96.

Josh Robb:
Remember that. Lock that in.

Austin Wilson:
It’s been all downhill since then. And the S&P is in the midst of an 18.6% drawdown from those highs. Even when you include dividends, the total return is negative 17.7, which isn’t great.

Josh Robb:
Can you just take that negative off then-

Austin Wilson:
Just put it at plus 17. One thing that stands out historical returns for the S and P 500 is there are lots of big gains and a decent number of big loss per year. The stock market is really prone to extremes he points out in this article. He included 2022 year to date in a chart that shows it as one of the worst years in history. And that’s only so far. If the year were to end today, 2022 would rank as the seventh worst calendar year return for US stock market since just before the great depression. Just out of curiosity, he looked at the returns in the years after the worst annual performance on the stock market to see what would happen next. And here are some numbers on the forward one-, three- and five-year total returns following these periods here.

So, one-year returns are decent, but not great. Average returns were 6.4% while just six out of 11 were positive. Average three-year return was 35% average. Five-year return is a gain of almost 80%. Every five-year return following one of these down years saw positive returns. So historically speaking, again no guarantees, but historically speaking, if you have a five year or more time horizon, the market has been positive from this point. Which is good. So he finishes this article by saying, he does not know what’s going to happen the remainder of 2022. He would not be surprised if it gets worse and he would not be surprised if it gets better. But I think he was overall net positive that forward returns from here are pretty good.

Josh Robb:
And interesting to note, like you said, if it was to end now how it would rank now? The thing is we’re, you said, with total return to 17.7 at this point of time, the average drawdown for a midterm election year is 16.6%.

Austin Wilson:
We’re pretty much right on that.

Josh Robb:
So in other words, midterm election years fall to be if they would end at their worst point in the top 10 worst times ever. Just from that standpoint.

Austin Wilson:
Absolutely.

Josh Robb:
So midterm more volatile year and second drawdowns are more steep intra year than we usually see at the end of the year.

Austin Wilson:
In fact, once you get the election figured out the way that these midterm years have historically worked, you usually get a little bit of a rally at the end of the year. But you still end the year with a less total return than you would on a non-midterm year. Historically speaking again, not guaranteed that it’s going to work out that way, but we’re seeing some similarities already this year where we know we’re having midterms and the markets down pretty sharply. So it’s very interesting time period we’re in, but I’m kind of with him. I could see some arguments for some reasons we could have some continued choppiness.

Austin Wilson:
We’ve got the fed and inflation and that’s really driving the ship on everything we’re seeing right now. But I could also see the fact that things are really, really beat up and there is upside. If you get some light inflation ratings, then boom. I think you’re set up pretty well for some opportunities. So that is what we are reading. Josh, why don’t you wrap us up?

Josh Robb:
Yep. Well, thanks for listening. Make sure that you share this episode with anybody who says, Hey, do these guys read? And show that we do so share this with them. But also, if you have any ideas, questions, thoughts, shoot us an email at hello@theinvesteddads.com. We’d love hearing from you.

Austin Wilson:
Absolutely. Well, until next week, thanks for listening. Have a great week.

Josh Robb:
Talk to you later. Bye.

Thank you for listening to The Invested Dads Podcast. This episode has ended, but your journey towards a better financial future doesn’t have to. Head over to theinvesteddads.com to access all the links and resources mentioned in today’s show. If you enjoyed this episode and we had a positive impact on your life, leave us a review, click subscribe, and don’t miss the next episode.

Josh Robb and Austin Wilson work for Hixon Zuercher Capital Management. All opinions expressed by Josh, Austin or any podcast guest are solely their own opinions and do not reflect the opinions of Hixon Zuercher Capital Management. This podcast is for informational purposes only and should not be relied upon for investment decisions. Clients of Hixon Zuercher Capital Management may maintain positions in the securities discussed in this podcast. There is no guarantee that the statements, opinions or forecast provided herein will prove to be correct. Past performance may not be indicative of future results. Indices are not available for direct investment. Any investor who attempts to mimic the performance of an index would incur fees and expenses, which would reduce returns. Securities investing involves risk, including the potential for loss of principle. There is no assurance that any investment plan or strategy will be successful.