Speaker 1:
Information presented on this program is believed to be factual and up to date, but we do not guarantee its accuracy and it should not be regarded as a complete analysis of the subjects discussed. Discussions and answers to questions do not involve the rendering of personalized investment advice, but it’s limited to the dissemination of general information. A professional advisor should be consulted before implementing any of the options presented. Certified Advisory Corp is registered as an investment advisor with the SEC and only transacts business in states where it is properly registered or is excluded or exempted from registration requirements.
Speaker 2:
Stay tuned for On the Money, Central Florida’s most listened to financial call-in show, brought to you by Certified Financial Group in Altamonte Springs. It’s the only show hosted exclusively by certified financial planner professionals. Monday through Friday, their CFPs provide financial planning and investment advice for a fee. But on Saturdays, the advice is absolutely free and has been for more than 30 years for their WDBO listeners. If you have a financial question you want answered by real fiduciaries, the lines are wide open. Call (844) 580-WDBO, that’s (844) 580-WDBO and enjoy the show.
Josh McCarthy:
Hello and welcome to On the Money right here on WDBO 107.3 FM AM 580, always streaming live in your WDBO app. My name’s Josh McCarthy, the glorified middleman between your financial questions and the fantastic financial answers of the certified financial planners of the Certified Financial Group. So fortunate to be joined today by Aaron Bert and Chris Toadvine. If you’ve got a question for these two fantastic qualified, and when I say qualified, that’s not me just throwing out words, they are one of the top 100 firms in the country as deemed by the CNBC and that is a very, very big deal. So we are very proud of them.
Well, we knew what was coming. They’ve been giving out fantastic advice earning a great reputation, well-earned in the Central Florida area. If you want to talk to Chris or Aaron today, the number to call is (844) 580-9326, (844) 580-WDBO. That’s the whole point of this show. They’re giving out fantastic advice for the low, low price of free, one of the only financial calling programs of its kind and it’s always live. Gentlemen, how are you doing this day?
Chris Toadvine:
Good morning, Josh. Doing good.
Aaron Bert:
Yeah, we’re doing great.
Josh McCarthy:
Fantastic. Fantastic.
Aaron Bert:
Looking out the window here at our office and see the clear blue skies of sunny Florida, here in Central Florida and just super excited about today, should be a beautiful day and we’re here ready to give advice out to people. We talk to people Monday through Friday in our office doing personal financial planning and investment management. And we answer questions about what people should be doing with annuities and long-term healthcare and their mutual funds and portfolio allocation and cash flow planning and estate planning, and all these different types of topics that we talk about day in and day out with our clients. Monday through Friday, Chris and I and the other 14 certified financial planners here at Certified Financial Group answer these questions, day in and day out. We are here giving up the beautiful floor to sunshine to answer your questions. If you have one, please pick up the phone and dial these magic numbers.
Josh McCarthy:
(844) 580-9326, (844) 580-WDBO. Was actually cutting up an open mic to play later on today. If you guys want to have your question and if you don’t have a phone handy, feel free to download our WDBO app and send in your questions via the free open mic.
Aaron Bert:
Appreciate that. Chris and I like to answer question. We have a couple of topics for today, and I think our topic today is FDIC coverage.
Chris Toadvine:
Well, no, it’s March Madness actually.
Aaron Bert:
Oh, it is March Madness.
Chris Toadvine:
It’s actually March Madness. We’re here to talk about basketball. Sports shows get all the ratings, so I figured we talk about sports and think our ratings will go even higher than they already are.
Aaron Bert:
I like that. I heard I missed a good game last night.
Chris Toadvine:
Oh, you missed a good game.
Aaron Bert:
Iowa and South Carolina.
Chris Toadvine:
Iowa and South Carolina. South Carolina was 36-0 and they got beat by Iowa. So Iowa will be going to the women’s finals, which I think is tomorrow night.
Aaron Bert:
They have a superstar on their team. Huh?
Chris Toadvine:
Caitlin, yeah. Boy, she was something else last night. 41 points and just seems like she’s got ice water running through her vein.
Aaron Bert:
Yeah, it makes me want to watch tomorrow and see if she can pull it off again and lead them to the championship.
Chris Toadvine:
For sure. For sure.
Aaron Bert:
Super exciting in Men’s Tonight, Final Four.
Chris Toadvine:
Men’s Final Four tonight, and we got two Florida teams in the Final Four. So how about that? I’m pulling for FAU.
Aaron Bert:
Is that who you’re pulling for?
Chris Toadvine:
Yeah, well they are the Cinderella story, the underdog of the tournament, so that would be pretty cool to see them in the finals. But it’s pretty cool to see a team that hasn’t been there like that, make it this far, so that’s… Go ahead.
Aaron Bert:
I heard that there was 37 brackets that had that Final Four in it of the 25 million that were submitted or something like that.
Chris Toadvine:
Is that right? There you go.
Aaron Bert:
Some people actually got those bracket, that final… They didn’t have the perfect bracket, but they got the final four correct.
Chris Toadvine:
And those were the people who were coerced to participate and knew nothing about them and probably did it based on colors or something like that.
Aaron Bert:
Where they go to FAU and they’re going to choose FAU to go all the way. I’m sure that’s the only way that stuff happens. So anyway.
Chris Toadvine:
That’s one flavor of March Madness. But we had some other March Madness going on.
Aaron Bert:
Especially last week.
Chris Toadvine:
Well, yeah, last week. But we zoomed back to the first couple weeks of March and here we are, can you believe the first day of the second quarter? March is officially over. But March, we had a couple banks go down. We had Silicon Valley Bank, which went down on March the 10th, and we had Signature Bank, which went down on March the 12th. That’s not something you hear about every day, and it’s a big deal. That can lead to questions. But those banks were a little different, Aaron, than your typical bank. There are some reasons why I think they went down and it really had more to do with mismanagement than poor credit, which is what we saw back in ’08. A lot of times I think folks that don’t pay close attention to this stuff like we do, might think, “Hey, this is 2008 all over again, the big one’s coming.” But that’s really not the case.
Aaron Bert:
No, not from what I’ve seen. Silicon Valley was unique in the fact that they had a lot of really, really large customers.
Chris Toadvine:
They did.
Aaron Bert:
Most of their deposits were massive because they did a lot of venture capitalist type stuff. That community, from what we understand was pretty tight-knit. In that tight-knit community if some rumor starts about some mismanagement within the bank or possibly a run on the bank, and it-
Chris Toadvine:
It spreads like wildfire.
Aaron Bert:
… articulates through there pretty quickly, and next thing you know, people pulling money out of the bank in large amounts.
Chris Toadvine:
That’s right. Well, here are the numbers. 88% of the deposits at Silicon Valley Bank and 90% at Signature Bank were uninsured, meaning they were in excess of the FDIC limits.
Aaron Bert:
$250,000.
Chris Toadvine:
250 or a joint account could be 500. In other words, nine out of 10 of their clients were in excess of that limit, so that’s not normal. If you go to a local bank here in Altamonte Springs, Orlando, or most communities across America, that’s certainly not the case. Then not only that, it’s how they handled the reserves that they had. Signature Bank had about 5% in cash. Silicon Valley had about seven. The industry averages twice that, 13. They didn’t have enough cash on hand. Then Silicon Valley Bank had 55% of their assets in fixed income securities. The industry average is 24. What happened when people started withdrawing money, they had to sell securities. When that happens, what happens? Well, they got to raise capital. That’s where the word on the street was, “Hey, these guys are desperate, they need money.” Then everybody, they run on the bank today, unlike in George Bailey’s days where they lined up at the front door. The run on the bank today, you just sit on your couch at home, get on the computer and say, give me my money.
Aaron Bert:
Or get your iPhone out and just start hitting buttons and start transferring money around.
Chris Toadvine:
Well, that’s exactly right. I want to talk about FDIC limits. So that’s the March Madness that happened. I want to talk about FDIC limits, but Josh, I see we got a couple callers, so let’s jump to them. We’ll come back to the FDIC topic.
Al:
Good morning.
Chris Toadvine:
How you doing?
Al:
Good, how are you?
Chris Toadvine:
I’m doing good. Thanks.
Aaron Bert:
What can we do for you?
Al:
Yes, sir. Our property value is 625. Our mortgage balance is 220. And our saving is 350. I’m thinking about paying off our mortgage, which will leave us with 130 cushion and will save us about 70,000 in interest. So the question is to increase our cushion, is it better to get home equity line of credit or the reverse mortgage? Our credit score is higher than 780.
Chris Toadvine:
Okay. Al, this is a great question. Help Aaron and I understand a little bit more about what’s going on. First of all, what is the rate on your mortgage?
Al:
3.375.
Aaron Bert:
And how long have you had it for?
Al:
12 years.
Aaron Bert:
12 years, okay.
Al:
12.
Aaron Bert:
12 years, yes.
Chris Toadvine:
And how is your money, your savings, Al? You said you got 350 in savings. How is that invested?
Al:
It’s not. It’s just sitting doing nothing.
Chris Toadvine:
Is it sitting in the bank doing nothing?
Al:
Yes. Saving account.
Chris Toadvine:
Okay, there you go. Well, we got a lot to talk about Al.
Aaron Bert:
We see this a lot actually, you’re not unusual, and this is a question we get all the time.
Chris Toadvine:
Well, it is, and your situation is what some people refer to as lazy money. Lazy money in the sense that it’s sitting in the bank, it’s not doing anything for you. Notoriously the banks pay you zero point nothing. That zero point nothing might be up to 0.3 or something today, but less than your mortgage. Now, this is one of those unique times in history, Aaron, right?
Aaron Bert:
Yes, sir.
Chris Toadvine:
And Al, where you could go invest in treasuries-
Aaron Bert:
Guaranteed by the government,
Chris Toadvine:
Backed by the full faith and credit of the US government, so in theory, the safest investment that there is. You can earn four, four and a half percent. In other words, you can earn more in interest as safely as you possibly can, than you’re paying on your mortgage. I understand the desire to be debt-free and I support and appreciate that on the one hand, on the other hand, you have a pretty low rate and you’re pretty far into it. The interest payments are going down each month. Mortgages are front loaded on interest. If I were you, I might rethink your strategy, what are you thinking?
Aaron Bert:
Yeah, I agree. This is one of those unique times that you are able to earn more, and guaranteed interest by the government than you’re paying interest on your mortgage. And Chris is absolutely right. People would give their left arm to get a rate under four right now. Anyone that’s in that position, we’re discouraging them, especially if they have lazy money, like Chris is suggesting, from doing that and paying that off because you have the question of how do I get that money back out? Because that’s really what your question is. I’m going to put all this money into my mortgage or into my house, now how do I get it back out? The only way you’re going to get it back out is by putting another mortgage on your home that’s going to be at a higher rate than what you’re currently paying. I would not be in a hurry to do that. I would look at it like you’re just making a rent payment, allocate some of that lazy money you have to earning some higher interest and at the end of the day, you’re going to end up ahead.
Chris Toadvine:
Yeah, I agree Al. I think that Aaron makes some very good points that you’re looking to pay off one mortgage, but go get another one. Why jeopardize your liquidity? Here’s the thing, we’re not talking about you buying pork bellies or futures on-
Aaron Bert:
Anything exotic or crazy.
Chris Toadvine:
… titanium or something. We’re talking about you just moving your money, you’re probably not going to do it in a bank, so you may have to go elsewhere to get even a government money market fund or something like that, that’s going to pay you north of 4% safely. You get to keep the difference. In theory, you’re earning as much as you’re paying out an interest and more. You still come out ahead and with the amount that you come out ahead, it’s probably greater than what you would earn in the bank anyway. I would just caution, maybe pump the brakes for a while, consider that strategy. What do you think Al?
Al:
Well, I think it’s a good idea, but the only thing I’m looking for is just to increase the cushion. I don’t really need them. [inaudible 00:13:15]
Chris Toadvine:
I tell you what Al, I think we’re up on a break. Can you hang on with us for just a minute and we’ll come right back to you after the break?
Al:
Thank you, sir.
Chris Toadvine:
Finish up. Sure. Okay.
Josh McCarthy:
Thank you so much, Al. Ron’s still on hold. Open lines for you to call in (844) 580-9326. Hop on the air with the team at the Certified Financial Group, Chris Toadvine and Aaron Bert joining us today, a couple of fantastic certified financial planner professionals. (844) 580-WDBO or send us an open mic via the WDBO app. We got one coming up here soon and I’ll give you a little sneak peek even I know the answer to this one. And also it’s not really a financial question. You are listening to On the Money, where we’re planning tomorrow-
Chris Toadvine:
Today.
Josh McCarthy:
With the Certified Financial Group.
Welcome back to On the Money right here on WDBO, brought to you by the one and only Certified Financial Group office here in Central Florida a top 100 office as far as the financial planner in the country per the CNBC. Nothing to sneeze at there. Whenever you work with them, you’re working for one of the top agencies in the country. If you want to hop on the air, ask them a question live. We’re talking to Aaron Bert and Chris Toadvine, couple of certified financial planners with the Certified Financial Group. The number is (844) 580-9326, (844) 580-WDBO, or you can send us an open mic. Just before the break, we were talking to Al. Al, how you doing?
Al:
Hi. Good.
Josh McCarthy:
All righty. Pick up right where you left off guys.
Chris Toadvine:
All right, Al. So you were telling me, you were saying something about you don’t need the liquidity. So help us understand maybe Aaron and I missed, what is your real motivation for wanting to pay off the mortgage but then get a line of credit?
Al:
The motivation is, based on our cash flow, we have enough income to live by and even save another a thousand dollars extra per month. We really don’t need the investment basically. This may not be intelligent, but all we’re trying to do is reduce our monthly payment and live by… I am 66, my wife is 62, and I just file for social security benefit. I get almost $3,000. My wife will get her spousal benefit, about 33% of that. We’re all good there in terms of the income and the expense, but all I’m trying to do is just increase our cushion.
Aaron Bert:
To me, this is a perfect situation for you to come into our office and maybe meet with Chris or one of the other planners in our office and run the projection so we can show you visually the impact of making one decision versus another. Because you’re right. Right now, everything’s good, your income’s good, you got your expenses under control. What’s the best way to utilize the assets that you have and to minimize taxes and to increase cash flow and to increase your cushion? Over your life expectancy, things are going to get more expensive and really the best ways to illustrate it for you and run some different scenarios and show you what the probability of the different scenarios is. And then at the end of the day, you’ll have a high degree of confidence that you’re making the right decision because once you write that check to pay that mortgage off, it’s gone. You’re never going to get that mortgage back again. I really think that that’s probably the best solution for you. So what do you think, Chris?
Chris Toadvine:
Well, Al, I think Aaron and I have given you what we think would be our first answer, first and best. And that is that you, and the fancy word is arbitrage, you can make four plus percent and you’re paying out three. You get to keep the rest and that just helps you save even more. Again, this is one of those unique times in history when you can do that. Mortgage rates, I get an email every Friday, I look, 30 year mortgage rates are like seven and a quarter. I think that’s the first and best answer. What I will say is the other side of the coin is some folks, it causes them angst or anxiety to have debt.
If you want to pay it off and it gives you peace of mind, you got enough cash flow, I think you’re looking for validation to do that. It sounds like that’s what you want to do. If we can help you further, give us a call here at the office. Al, you can sit down with Aaron, myself or one of the other 14 certified financial planners. I did want to say to our listeners out there, Aaron, that Charles Curry is here in the office taking calls.
Aaron Bert:
Yes, he is. If you have a question you want to ask off the air or Al you want to call in (407) 869-9800. That’s our number Monday through Friday. Right now, if you want to call, you can call that in and talk to Charles directly as well. I know we’re up against the break.
Josh McCarthy:
No problem.
Chris Toadvine:
Thanks for calling Al.
Josh McCarthy:
Thank you Al. If you want to talk to Aaron or Chris, live on the phone now on the air, (844) 580-9326, (844) 580-WDBO, or send in your open mic. You are listening to On the Money, where we’re planning tomorrow-
Chris Toadvine:
Today.
Josh McCarthy:
… with the Certified Financial Group.
Speaker 2:
Welcome back to On the Money, Central Florida’s most listened to financial call-in show, brought to you by Certified Financial Group in Altamonte Springs. It’s the only show hosted exclusively by certified financial planner professionals. Monday through Friday, their CFPs provide financial planning and investment advice for a fee. But on Saturdays, the advice is absolutely free and has been for more than 30 years for their WDBO listeners. If you have a financial question you want answered by real fiduciaries, the lines are wide open. Call (844) 580-WDBO, that’s (844) 580-WDBO, and enjoy the rest of the show.
Josh McCarthy:
Welcome back to On the Money right here on WDBO, brought to you by the Certified Financial Group. Sitting here with a couple of certified financial professionals, Aaron Bert and Chris Toadvine of the Certified Financial Group. Monday through Friday, they answer your questions in office for a fee. But on the weekend what we do here is we answer your questions live on the air for free 99. Of course, that is a fair-
Aaron Bert:
Nice. I see what you did there.
Josh McCarthy:
I heard that somewhere once and I love it so much that I’m just going to steal it, make it my own. I’ll give you guys some advice for free, free 72. If you want to hop on the air with Chris and Aaron, the number to call is (844) 580-9326. That’s (844) 580-WDBO. Or you can send in an open mic with your questions. If you’re on the go, you can do so. Download the free WDBO app in the Google Play Store or the Apple App store and push the open mic button and send them in. Gentlemen, do you mind if I play the one we received this morning?
Aaron Bert:
No, go for it.
Chris Toadvine:
Go for it.
Speaker 7:
How can we get the latest podcasts that you all doing, like the show you’re doing today on estate planning? Actually it was last weekends because I’d like to send it to a friend of mine.
Aaron Bert:
So on our website, financialgroup.com, you’re able to go and we have a link on there for On The Money, which is our radio show, and you can access all of the shows there. Additionally, I should say that we basically podcast the show out to all the major services. So Spotify, Apple, you can go out there and you can subscribe to our podcast so that when the show drops and we upload it for today’s show, it’ll be uploaded automatically. Get out there to your subscription and download to your device. You’ll be notified that it’s available.
You can go right to our website and get it on the financialgroup.com. Click On The Money at the top of the page, or again, once you’re able to go into Spotify or Apple Music or some of those other podcasting services, we basically drop it on all of them and search for On The Money FL, because there are some other On The Money shows out there, they’re not as good as this one I believe. But On The Money, FL is the name of our show and you’ll see our little logo and you’re able to download it and subscribe right there. If you like the podcast, leave us a five star review, please.
Chris Toadvine:
There you go. It works. It helps.
Aaron Bert:
Yeah, it helps us and it helps boost it and hopefully that-
Chris Toadvine:
And share it with your friends, as you said you were going to, so thanks for that. Good job. Okay, well, I just wanted to remind our listeners too, Charles Curry is out there. If you have detailed or nuanced questions or you’re feeling a little shy this morning, you want to talk to someone off the air, Charles is out there to take your questions and you can reach him at our office number here at (407) 869-9800. Again, (407) 869-9800 and Charles will be glad to talk with you.
Aaron Bert:
And speaking of Charles, I’m just going to put a little plug in here for some workshops that we have coming up. So speaking of our website, financial group.com, across the top of that is also a link for workshops and we have several of them coming up here on our offices in Altamonte Springs. The next one is actually April 15th in about two weeks, and it’s called everything you wanted to know about mutual funds and ETFs hosted by the Charles Curry and Rodney Ownby. So you can register for that one. It’s 11 to one o’clock here in our office on the 15th of April. Also, Charles will be hosting another one about cybersecurity on the 19th of April, that’s an evening workshop from 6:30 to 7:30. And to round out the month on the 29th of April, Matt Murphy is going to be hosting tax planning strategies through four stages of retirement. That’s 10 to 11:30 on the 29th of April.
And actually that one’s special because I believe that one’s at the WDBO studio. We’ll be able to pull in some of those people from South Orlando and have a bigger workshop because I think the studio over there holds about 100 people, if I’m not mistaken. So if you’re interested in registering for any of these workshops or if you just want more information, please go to our website, financialgroup.com, click on workshops at the top of the page and you can scroll down and see all the dates, times, and topics for everything coming up in the next several months.
Chris Toadvine:
Sounds good. Josh, looks like we have a caller.
Josh McCarthy:
That’s right. Jim’s giving us a call from Winter Park. Jim, go ahead. You’re on the air with Aaron Bert and Chris Toadvine at the-
Chris Toadvine:
Hey Jim.
Josh McCarthy:
… Certified Financial Group.
Jim:
Good morning.
Chris Toadvine:
How you doing?
Jim:
I’m doing very well. Thank you. I have a portion of my retirement in muni bonds, and as you could probably guess, they’re dropping quite a bit. Could you explain that to me and do you have any idea when they might come back to paying a better monthly amount of money?
Chris Toadvine:
Well, first of all, good question, Jim, you’re not alone in your bond values dropping, if you’re talking about the value. But that’s the first thing I want to clarify. What is dropping? The income you’re getting from the bonds or the value of the bonds themselves?
Jim:
Income’s probably down from 10 years ago, that’s probably down 40% and the bonds themself are down about 25%.
Chris Toadvine:
Got you, so well-
Jim:
It’s a Franklin Mutual Fund.
Chris Toadvine:
Oh, okay. So it’s a bond fund. Again, can we explain what happened? Well, first of all, we can definitely help you understand hopefully what has happened with the price of the bonds and the fact that it’s down 25%, that’s pretty steep. I mean, that’s more than the market on average. So what that tells me is they are probably longer dated bonds and there’s a relationship, Jim. I oftentimes will have people visualize the seesaw that’s on the playgrounds where you used to play when you’re a little kid and you sit on opposite ends and bounce up and down and as one end goes up, the other end goes down. Well, that’s what happens with interest rates and bond prices. When interest rates go up, bond prices go down because why? Well, those bonds that were existing that were paying a lower rate… Let’s say you have a bond paying 2%, and now interest rates are 4%, is someone going to pay you for that bond, what they would pay for a 4% bond? No, they’re going to pay you less for it. Now the good news is that’s only part of the story, right, Aaron?
Aaron Bert:
Yeah.
Chris Toadvine:
Only part of the story. So the other part of the story is that as those bonds draw near to maturity, the values will come up to what’s known as the par value or the face value of the bond. Let’s say it’s $100 bond and it went down to $90 because interest rates went up. Well over time, that 90 will inch its way back towards 100. And when the bond matures, so long as the issue of the bond is solvent, guess what? You’ll get your $100 back. That dynamic is true in lots of corners of the bond market right now, but I think it also puts a wind at the back of bond investors. What do you think, Aaron?
Aaron Bert:
Yeah. The challenge you have with bonds too is for a long, long time they were able to issue at lower interest rates because of what was happening with the interest rate environment. A municipality was able to issue bonds and charge or get 3% interest and get people to buy them at 3% interest tax-free because it’s a municipal bond. Now those tax-free bonds at 3% aren’t as attractive. As those mature, the bond mutual fund can go back out and now buy bonds at higher interest rates because that’s what the market rate is for those municipalities. It’s really about having patience and knowing that as they mature, you’re going to get back the par value and then the interest rates will continue to increase because of the fact that that’s the going rate for issuing new debt. Because that’s one of the advantages of higher interest rates is that everything goes up with it, whether it’s in the bank or a municipality or the government.
You may have heard us talking about treasuries earlier, now yielding 4% because the government, it’s more expensive to finance debt because of what’s been going on with the interest rate environment. It’s really about having patience with the municipal bond market. My guess is you bought it for tax-free income, which you’re still getting. It is going to fluctuate a little bit over time. The key is that you don’t need to sell off the bond shares themselves, the fund shares themselves, because yes, they are down, but they are going to continue to pay you that tax-free income. Even though it may be down a little bit right now, we expect that to probably rebound as those bonds mature and then they go back and purchase higher interest rate bonds.
Chris Toadvine:
Jim, does that help answer your question or is there something else there?
Jim:
Yeah, what term mostly? Is it one year, two years to get rid of the bonds they bought at low interest rates when interest rates were low? What’s the mutual fund like that usually by, am I going to be waiting two years, three years, for them to seesaw to come up?
Aaron Bert:
That’s the beautiful thing about a bond fund though, is that you have spread duration throughout the entire portfolio, and so you’re constantly having bonds that mature. But when you look at a bond fund, you have to look at what the duration of that fund is and that will tell you the average of all the holdings that they have. And so you have some shorter ones that are constantly maturing, and then obviously they were buying some longer duration ones, probably I’m assuming, within that portfolio as well. It’s a constant maturity as the bonds mature and they purchase new ones. You’re able to find that information online. It’s called the duration of the fund of the portfolio. If you go to Yahoo Finance or Morningstar, you can type in the ticker and it’ll tell you the duration of the fund that you have. I will say the longer the duration, the higher the interest rate sensitivity, right?
Chris Toadvine:
Oh, yeah. And that’s why Jim, when you say you’re down 25%, that’s more than average. Last year the aggregate bond index and it was an awful year, was down 13% and you’re down twice that. So-
Jim:
Well, I might have misstated. The bonds were at $10.68 something like that and they’re at eight, about $2 down. I might have overestimated that. Probably 20% would be close to where they’re at.
Chris Toadvine:
20% is above average, if we use the Bloomberg Berkeley’s aggregate index as an average. You’re not quite twice that, but you’re down substantial. What that tells me is that you have a fund that has more longer dated bonds. When you ask the question, how long will it take for those to get back? Well, it’s going to take probably more time. Now the good news is if within that fund, they’re out there buying new, longer dated bonds today, which may be difficult to do because a lot of municipalities and others who are financing today don’t really want to lock in at today’s rates because they think rates is what you hear about the inverted yield curve. They think rates are going to be going down in the future. So unless they have to, they kind of hold off.
That’s a long answer to a short question, but what I would say is it’s probably going to take a few years, it’s going to take a little bit of time. Two thoughts, Jim. Number one, you got to understand what you own. Right here you’ve got a bond fund that a lot of folks prior to last year thought, “Well, I can’t lose money in bonds.” Well guess what we learned otherwise. And so that’s one. And then the second thing, does it still remain appropriate for you today, in light of what you’re earning, in light to the rest of the holdings in your portfolio? If there’s something we can do in the way of a second opinion or look at that more closely with you, you’re welcome to give us a call and schedule some time to sit down. But I hope that helps you. Anything else?
Aaron Bert:
Yeah, and I’m going to just throw out. We use a little analogy with our clients, especially on the municipal bond side because you probably bought that fund for tax-free income. We use the analogy of chicken and eggs. The bonds themselves are the chickens and they’re laying the eggs, which are those interest payments every year or every month or however often you’re getting them. Sometimes the chicken’s going to be thin, sometimes the chicken’s going to be fat, and that’s the bond price, the value of the fund going up and down. But all you really care about is that it’s laying some eggs. As long as you’re getting those eggs, you don’t want to go slaughter the chicken, because you know you still want the eggs. If you want to keep eating, just keep getting those eggs. That’s my chicken and egg-
Chris Toadvine:
There you go. Just as long as your eggs don’t get scrambled, Jim, you’re good.
Aaron Bert:
We really appreciate the call.
Chris Toadvine:
Absolutely. Thanks for calling, Jim, hope that helps.
Josh McCarthy:
Thank you so much, Jim. That opens up a line for you to hop on the air with Chris Toadvine and Aaron Bert of the Certified Financial Group. Charles Curry is standing by off the air if you want to talk to him. (407) 869-9800. That’s (407) 869-9800. You want to hop on with Aaron or Chris for the last couple of minutes of the show, the number is (844) 580-WDBO, (844) 580-9326. You are listening to On the Money where we’re planning tomorrow-
Chris Toadvine:
Today.
Josh McCarthy:
… with the Certified Financial Group.
Welcome back to our final segment of this episode of On the Money brought to you by the Certified Financial Group. Come in, tune in every Saturday at 9:00 AM for the live show. We got replays of the show tomorrow at 7:00 AM, Sundays at 7:00 AM and Saturdays next week at 7:00 AM. We got all kinds of ways to listen to, On The Money right now. We’re sitting here with Chris Toadvine and Aaron Bert of the Certified Financial Group, (844) 580-9326, (844) 580-WDBO. Or if your question just popped into your head, but you might not have time to call in on the air, Charles Curry is standing by in the office. That number is (407) 869-9800, (407) 869-9800. Gentlemen, we’ve just got about four minutes left.
Chris Toadvine:
Four minutes left. Okay. Well, in that four minutes, let’s talk about our topic today. We started off today, Aaron talking about March Madness and the craziness of a couple bank failures. One on the 10th of March, one on the 12th of March. Actually, I had a client or two ask me the question about FDIC insurance. When the seas are relatively smooth, we don’t get these questions. Nothing like a bank failure to get your attention, particularly for those who are sitting on a lot of cash. And so I got the question, and in one case it was an individual that had a number of CD accounts at one bank. And so the question was, well, if that exceeds 250, is it by account or is it by just ownership category?
Aaron Bert:
Right. I got that question a lot as well.
Chris Toadvine:
Probably all our listeners out there know what the FDIC is. It was created in 1933 during the Great Depression when banks were failing left and right, because there were runs on the bank. But the way it works is the coverage is 250,000 per depository per bank for each ownership category. For each ownership category. In other words, if I have 10 CDs that are different account numbers, but I own them all and it exceeds 250,000, they are only insured up to $250,000. There are ways to extend that coverage. If I own an account jointly with my wife, we each get $250,000. What I learned in doing a little homework was there’s a clever little tool called EDIE. We have IRMAA on Medicare surcharges and for the FDIC, they have a tool called EDIE. It can be found at edie.fdic.gov, and it’s the Electronic Deposit Insurance Estimator. Do you think there’s somebody in the government who has the job title of creating acronyms?
Aaron Bert:
Yes, I do. They do it with everything.
Chris Toadvine:
With everything. And it works. The Electronic Deposit Insurance Estimator, edie.fdic.gov where you can actually go in and put your accounts and how they’re owned and the amounts in them, and actually even look at the bank. It’ll tell you if your bank is insured. There are ways to get your insurance amount up if you have an excess of 250,000. I would say that’s something that’s always wise and prudent to pay attention to Aaron, right?
Aaron Bert:
Yes.
Chris Toadvine:
These are the planning types of things that we do with our clients to be sure that they’re dotting I’s and crossing T’s as they ought to be. And again, doing that when the seas are calm.
Aaron Bert:
Right. Well, because when it starts getting rough out, there is not the time to be trying to figure out what you’re doing. I would say the FDIC insurance used to be what? $100,000?
Chris Toadvine:
Yes.
Aaron Bert:
And then in 2008 is when they increased it. When the government realized that there was some issues, they stepped up and obviously increased those coverages because they want nothing more than to have a calm financial system. Even when we talked about Silicone Valley Bank, they stepped up and backed a lot of those deposits as well. So for the most part, the EDIE is a great tool for the regular person to go out there and figure out how much insurance they have. But the system, at least from what I’ve seen, has been stabilizing. It seems like it’s been calming down.
Chris Toadvine:
Yeah. It seems like, excuse me, a non-issue today. It is mostly passed. But you’re right, it’s predicated on confidence. Ironically enough, I did look up FDIC’s beginnings, and there’s actually a clip out there you can listen to of FDR, 13 minutes. His first fireside chat was March the 12th, ironically enough. So the same day that the Signature Bank went down two days as… So there’s something about March, beware of the Ides of March. Here’s what FDR said in that first address.
FDR:
After all, there’s an element in the readjustment of our financial system, more important than currency, more important than gold. And that is the confidence of the people. And so it’s us believing that the money will be there when we need it, and that’s what the FDIC’s all about.
Aaron Bert:
Awesome way to wrap up the show. Good job, Chris.
Chris Toadvine:
Yeah. You’re welcome.
Aaron Bert:
Yes. That’s awesome.
Josh McCarthy:
Thank you so much. You’ve just listened to On The money where we’re planning tomorrow-
Aaron Bert:
Today.
Josh McCarthy:
… with the Certified Financial Group.
Speaker 2:
This is WDBO.
Speaker 10:
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