Retire Smart Austin | Episode 198

Cynthia de Fazio  00:00

Welcome to Retire Smart Austin. My name is Cynthia de Fazio, joined today by Phil Capriotti Senior of Empower Wealth and Tax and to our viewers at home. Do you find yourself wondering what will be some of the effects that are coming about with the tariffs that are being implemented? Well, if you’re curious and you’re not sure, today’s show is just for you. Phil, how are you today?

Philip Capriotti  00:50

Absolutely wonderful, Cynthia, and just for our viewers, and also for you, happy anniversary. Ah, happy anniversary to you. My goodness for us, because this is five years, five years. We’ve been on set five years, and we’re about ready to tape our 200th show.

Cynthia de Fazio  01:10

Amazing.

Philip Capriotti  01:12

So, when we started this, we were thinking, eh, six months, maybe a year. Think we did a year contract.

Cynthia de Fazio  01:18

Like we’ll see how it goes

Philip Capriotti  01:19

And we’ll see how it goes, yeah, and so it’s been a lot of fun.

Cynthia de Fazio  01:23

And look at how it went.

Philip Capriotti  01:27

It’s amazing. You know, we started talking about Social Security Maximization, tax efficient retirement income planning, yes. And here we are, five years later, talking about the effects of reciprocal tariff agreements, yes, and I can’t even believe it, so I didn’t even know what the heck that was five years ago. I don’t think, I mean, I knew about it, but I didn’t- It wasn’t front and center.

Cynthia de Fazio  01:52

We weren’t thinking about it. We had no reason to really think about it. But now it’s on every news channel. It’s on every radio show, every newspaper is talking about the tariffs, the effects of the tariffs, the stock market with the effects of the tariffs. All of these, we have to talk about.

Philip Capriotti  02:07

One of the things that we did. You know, one of you know, one of the benefits of Mr. Trump is he tells the truth and he does what he says. So, he warned us, okay, when at the taping of this show, he warned us, over 30 days ago that he was going to initiate reciprocal tariffs. He gave these countries, all of these companies that have been eating our lunch for years, an opportunity to come to the table. He even did an extension. He didn’t want to do it on April Fool’s Day, April 1. He waited till April 2. So, what our team did for our clients, because we manage, you know, millions and millions of dollars, hundreds of millions of dollars in IRAs and Roth IRAs. So, what we did was we did a little research. So, I told my team, I said, you know, what’s going to be the effect on the stock market if these countries do not come around? And we, and he actually has to call their bluff. And so, we’re going to talk about that today. But one of the things that we noticed that stood out as a major sell off, pardon me, in US equities, and really global equities. Okay, so what I told my staff, I said, Look, get all of our clients, every single one of them. I want a whole list. I want a list of my clients that are in large cap, mid cap, small cap, growth, anything that’s going to be effective sector rotation. Are we? These are parts of our different portfolios, unconstrained. So, we looked at a lot, even as far as our Blackrock models, because we have proprietary Blackrock models that manage our portfolios, I said, and if this thing comes to fruition, sell them. Move them the cash. Move it because we have had two years of amazing, sustained growth. I said, move it to cash. Let’s just see what happens. We can always buy it back. It’s an IRA and a Roth. Ira. There’s no negative tax consequences. So, lo and behold, that’s exactly what my staff did. And I couldn’t believe it. I was, I was expecting a correction, but I wasn’t expecting 1600 points down in the Dow on Thursday, and then another 2200 points on Friday. I know in two days, the market sold close to $4,000, it dropped in two days. I don’t think we’ve ever seen that. So, at any rate, so-

Cynthia de Fazio  04:39

What I have to ask you, let’s stop right there, because what did your clients say? Because you were so proactive in thinking ahead and feeling what could be coming, how many roses did you get,

Philip Capriotti  04:51

No, actually, I’ll tell you what happened. It was really kind of funny. See, this is active portfolio management. Yes, you have to use what’s around you. This is not timing the market. Exactly. I bet people tell you you’re timing the market. We’re not time in the market. We’re using current events. What is going to be the effect of whether it’s a whether it’s a pro or a con, whether it’s good or bad? And then react to that? Sometimes you have to do that. I tell my clients, I’m going to manage your money like it’s my own money, and we’re going to actively manage your Roth conversions, we’re going to actively manage your portfolio. So, I’m not going to wait for the portfolio managers to do it if I see something, you know, my dad, my mom, used to say, if it smells bad, if it looks bad, chances are you better not eat it. Right? Bad, probably bad. So, at any rate, it was just one of those things, because we had something similar happen in 2008 and we had a similar reaction. So, at any rate, it’s really kind of nice, because, yeah, clients calling, oh my God. You know the sky a Chicken Little The sky is falling. The sky is falling. And, like, if you looked at your portfolio lately, okay, yeah, the Dow’s down. 20% 22% look at your portfolio. Where are we? We’re down four. We’re down five. No worries. Okay, so, so the big question my staff, especially my son, does. So, okay, smart guy, that’s my son, Phil, I love him. Okay, smart guy, so what do we buy? I said, Well, that’s easy. He goes. What do you mean? It’s easy? Your time? I said, No. I said, look, it’s really simple. It’s common sense. It’s economics. Okay. Once they pass the tax bill and they lower corporate taxes down to 15% and they use the tariffs to bring in all of this foreign investment, the market, in all probability, is going to go through the roof. So again, will it? I don’t know, but the probability is there, and it’s very strong, so that’s when we’re going to, again, reinvest, ride the wave. So, at any rate, it’s not timing the market, okay? It’s using common sense, and it’s using your knowledge.

Cynthia de Fazio  06:55

And I’m just thinking back, Warren Buffett obviously made some serious decisions not too long ago. And let’s talk about that, because that was for a reason.

Philip Capriotti  07:03

That was for a reason, and that was the other thing near the end of the year, November, December. I mean, the Oracle of Omaha. What did he do? He got, he took all of his technology, he started cashing out, and it was advertised. They were telling us, well, obviously, when he’s selling, when hedge funds are selling if you’re not paying attention to these things, okay, these are little nuances that can make the difference between having a 20, 30, 40% correction in your portfolio and thinking your retirement plan is unstable and having a focused, active leap, you’ve got to follow The leader. So, again, this is what we do. I always say I don’t need to be the most intelligent person in the room, Cynthia. I just need to work with the most intelligent people. Yes, that’s it. I love it. We’re having a lot of fun needlessly. So, we get these calls, yeah, and I’m like, Look, did you look at your portfolio? Did you go on your Orion? Did you look at the portfolio, and so at any rate, yes, we’ve had corrections, but nothing like a lot of folks are seeing here. I would say to you folks today, if your current advisor, if you are your current advisor, maybe you need a little help, give us a call or click the QR code. I would also say if you’re working with an advisor that wasn’t reducing your exposure to market volatility because of the policies that are being implemented, maybe it’s time to get a second opinion, come in for a portfolio review.

Cynthia de Fazio  08:34

And I think we should take a very short commercial break, because we have so much to get into. So, to our viewers at home, there’s a number to call on your screen, that number is 888-818-6557, as you can clearly see by the opening of today’s show, there is such a difference between active and passive, active and passive portfolio management, the strategies are different, and you shouldn’t be putting all of your eggs in one basket. Are you taking too much risk. How do you know? Come in today for that complimentary consultation, 888-818-6557, or if you’re rushing out the door, we’ve made it even simpler. Grab your smartphone, click on the QR code at the bottom corner of your screen. That’ll take you right to the landing page of Empower Wealth and Tax and you can schedule your time accordingly. We’re going to take a very short commercial break when we come back, we’re going to do a deep dive into some of the negative impacts versus pros and cons of the tariffs that we are seeing today.

Philip Capriotti  09:35

Our office is in Cedar Park. We employ 14 people. We have experts and professionals. Everyone’s licensed, if you fit into our company, you love people, you care people, you’re service oriented. So that’s our home office. We just opened a satellite office in Horseshoe Bay. Within the next 12 to 15 months, we’re opening up another satellite office in South Sun City in Georgetown. I told my wife. I said, we’re going to open up another. She said, What? Open up another office. When are you going to retire? I said, Honey, I am retired. This is what retirement looks like to us, and you better- Might as well hold on to your hold on your skirt, honey, because we’re probably going to open one up in Dripping Springs, too. My son, Philip, he and his wife, who’s also involved, Erica, she’s wonderful, will probably end up running the Cedar Park office. My son Parker, he may run the Horseshoe Bay office. My daughter Lisa is going to be running the Sun City office, and I guess I’m going to need a grandchild to run the other Dripping Springs office. But at any rate, I was really blessed in that out of my five children, three are in the industry. Two directly work for us. This is really their legacy as well.

Cynthia de Fazio  10:52

Welcome back to Retire Smart Austin. My name is Cynthia de Fazio, joined today by Phil Capriotti Senior of Empower Wealth and Tax and we’re talking all about some of the tariffs that are going on right now in the world. What kind of impacts are we seeing, and what can we expect to see? Phil, this is a great show, and it’s so important to talk about this because people are so unaware of what to really think. A lot of people are scared. They’re nervous, but your perspective on what’s happening…

Philip Capriotti  11:18

Well, I, to be quite honest with you. I had no idea that most companies charge us 35% and higher on tariffs coming into their country, and our tariffs are like two to 3% so my question is, how did we get here? How did the powers that be allow this to happen? We don’t even produce any steel or aluminum. So, what we’ve seen since 2000 even before then, since, I would say the beginning of the Clinton administration, is really the hollowing out, not only of the middle class, but of our manufacturing. Yes, if, God forbid, we were in a confrontation, we would not even be able to we wouldn’t have the raw materials to make bullets for goodness sakes. So, there are a lot of pros and cons. It is really scary. It truly is. So, I appreciate, you know a friend of mine, one more thing before we get into this. So, a very good client and friend of mine, gentleman I play golf with up at Horseshoe Bay. He says, because, you know, it’s kind of funny. He says, a lot of these politicians, they come into politics broke and they leave multi-millionaires. Isn’t it refreshing to see a billionaire come in as a billionaire, just to try to straighten out the country? And so, he was talking about the DOGE, how you got a group of billionaires coming in trying to right the ship? And I’ve never thought about it, but I’m thinking, Yeah, most of these people, they come in, they’re broke, their political science majors and in college, they’re attorneys, and they come in absolutely broke, and they leave, you know, one, I won’t mention the congresswoman’s name, but just entered, just got into Congress about six years ago, and she was totally broke. Her portfolios get around $28,000,000 6 years later. So, one has to ask, how did that happen? Right? Okay, that’s pretty nice. So maybe these tariffs have something to do with that. But at any rate, we’re going to go ahead and get started. So, one of the major issues, or one of the cons with these tariffs, is we’re going to see a disruption in trade and in supply chains, okay, all right, until we really get back up. But I believe that the Trump administration, Mr. Trump, is using this as a negotiation to, number one, reinvigorate our production and manufacturing in the United States by reducing corporate taxes to that 15% level and to if they’re not going to move into the United States, at least if you charge us 20, we charge you 20. If you charge us 25- so at least get create some balance. So, what we will see is a few things. Number one, supply chain disruptions, and I’m going to put on my glasses. Unfortunately, this is one of the benefits of becoming more experienced. Yeah. We need them. Yeah. The other thing is, we’re going to see a slight inflation. But normally what happens is people simply make better choices. We’re going to see the Made in America come back. So now it seems like everything that we buy is made in China. And I have nothing against China. I understand that if you buy a TV made in China for 500 bucks, and it’s made in the US for 800 you’re going to buy the 500. Well, a lot- the price- a lot to do with that price is the tariffs. Oh, there you go. Okay, so once you bring balance in these tariffs, you’re going to have more balance in consumer goods. Also, you’re going to see a reduction in global demand. This is one of the- so this will be- again, we’ve seen runaway inflation through the last administration. What we’re seeing is a cooling down, a calming down, spending less bringing the dollar, which, speaking of the dollar, some of the one of the pros of this is a stronger dollar. They want to make our dollar stronger. They- it will also cause long term interest rates to reduce significantly. So, one of the biggest issues is market volatility, folks and investor sentiment. People are scared. Of course, you know, we’re frightened of what we don’t know. So, what I would recommend for all of you folks that are watching today is do a little bit of homework, do a little bit of research. Don’t listen to the naysayers. Okay, there are a lot of networks that it’s all gloom and doom. Look at cause, look at effect. And if you’re managing your own portfolio, manage it accordingly. So, what we’ll also see is, one of the concerns is earnings uncertainty. Okay, companies’ earnings will reduce because we’ll be spending less buying less. The other thing is certain sectors are going to sell off. This is why we got what this is why we eliminate, not eliminated, but put on the sidelines our sector rotation sleeve of our portfolios, because certain sectors are going to explode. Certain sectors are going to not do as well. Okay, healthcare might not do as well, although steel manufacturing, okay, technology manufacturing, doing- making chips here that’s going to do extremely well. So, we want to take a look at that, also currency volatility. So, this is another issue that’s kind of negative, but I which, which actually forces the Federal Reserve’s hands to actually implement rate cuts. So, longest time the real estate sector has been hurting, yeah. I mean, when you’re getting a 30-year mortgage at 7% or 6.5% obviously you’re not going to sell the house you’re in at a 2.6% mortgage, right? True, yeah. So, we need interest rates to go down, so it’s a negative, but it’s also a positive. You’re also going to see business investment slow down, but this is what I love about Trump. So, I mean, you could tell this guy’s a sharp operator, because what he’s saying is, yes, under normal circumstances, that would happen. However, if I reduce the corporate tax rate to 1514, or 13, make it the lowest corporate tax rate. Here’s the stick, there’s the carrot. Okay, so he’s giving incentives along with these tariffs. Okay? To create balance. In the end, we’re going to see mega growth, and we’re going to bring manufacturing home and Made in America is going to mean something for a change, absolutely. So, with that being said, there’s going to be a strain on small businesses. A lot of small businesses are not going to be able to handle that. Bank credits tightening as well. Let’s talk about some of the pros. What do you think? Should we talk about some of the good things?

Cynthia de Fazio  18:26

We should talk about the pros. Absolutely.

Philip Capriotti  18:29

What do you think the number one pro is? What do you think then, folks, I’m asking you, what do you think the number one pro is? Full employment. Okay, that’s the number one pro. What we will see over the next two, three years. Be patient. We’re going to see millions of new jobs being created in all markets, technology, manufacturing, production of steel, aluminum. We’re going to see a lot of different sectors do extremely well. The other thing that I also like, how is it that places like China or Japan won’t buy our rice? Do they make better rice? So, one of the things, the reason I’m bringing this up, is because certain countries, they have fair tariff, but then they put these other impediments in our way. In other words, We won’t buy your rice because of the way you grow it. Okay? Yeah, we, it’s bad for our people. But at any rate, with that being said, when we look at some of the pros, and I’m going to jump right in there, we talked about reassuring manufacturing, creating jobs in key sectors. We’re talking about strategic industries as well. Steel. Auto. Do you realize- I did not know this, but Detroit, our automobile plants in Detroit have been sitting empty and idle for decades.

Cynthia de Fazio  19:57

I did not know that.

Philip Capriotti  19:58

Nothing but cobwebs.

Cynthia de Fazio  20:00

I did not know that.

Philip Capriotti  20:01

No, I didn’t know it either. And so, we have situations where they’re developing new automobile manufacturing in Mexico. Well, there’s the- all of the parts are coming from China into Mexico, because Mexico is part of this North- what is it? North Trade Agreement? Okay, they’re moving this stuff into here, so we’re going to see a revitalization of Detroit. Perfect. Yeah, I believe that.

Cynthia de Fazio  20:32

And Phil, I have to stop you right there, because we’re going to take another commercial break. But you have a very special offer to the viewers at home. Please explain what that is.

Philip Capriotti  20:40

Folks, you know you’ve probably been watching us for five years since we’re getting ready to have this five-year anniversary. I believe it’s next week, if you have not called us and had your portfolio reviewed, allowed us to run a Morningstar report, and a portfolio observation by our team of certified financial planners, now’s the time to do it, especially in these tumultuous times. There’s a rainbow behind these gray clouds. Dial 888-818-6557, do it right now, or click the QR code. Come on in. It’s complimentary. Let’s sit down. Let’s have a candid conversation of how your portfolio is going to help you through retirement. One other thing, if you have not executed a tax reduction plan in retirement, let’s sit and have both of those conversations. We’ve been specializing in tax efficient retirement income planning since 2010. Don’t you think it’s time you pick up the phone and give us a call?

Cynthia de Fazio  21:41

Phil. Thank you so much to the viewers at home. The number to call is 888-818-6557, 888-818-6557, as Phil just mentioned, he’s very passionate about tax planning. So, there’s a website that you can visit. It is called empowertaxbill.com, empowertaxbill.com. When you get to this website, you’ll put in a little bit of information about yourself and what you believe your current tax bracket would be, if you will. You’ll get an emailed report that will show you what your tax implication and your burden is currently, today, and what it could look like if you implement some changes. Again, that’s empowertaxbill.com we’re going to take a very short commercial break. Don’t go anywhere. We’ll be right back momentarily.

Philip Capriotti  22:24

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Cynthia de Fazio  23:07

Welcome back to Retire Smart Austin. My name is Cynthia de Fazio, joined today by Phil Capriotti Senior of Empower Wealth and Tax. And we are talking today all about the tariffs that are happening right now, and what are the pros of those. So, Phil, obviously, so much that we’re talking about today, but what it comes down to, truly, is keeping everything in America again. I’m seeing growth, I’m seeing jobs. I’m seeing just a happy future for Americans overall. Correct me if I’m wrong.

Philip Capriotti  23:36

No, you’re absolutely right. And what we’re also seeing is balance. Now we have to create balance with the US. Over the last 25 years, we’ve shipped jobs. Over we’ve shipped literally money. Okay, how can we borrow $2 trillion a year and then fund countries that want to take over our country, I just don’t understand it, so I like the balancing. So, we’re going to see, as a result of this reciprocal tariff agreement, stronger pricing power. We’ll be able to be competitive again, because the revenue that we take in from these tariffs, if used properly, used to pay down the debt, it will, in fact, help lower our overall income taxes. We have to pay the taxes. So, if we cut spending, like this DOGE is doing, and I’m saying, cut spending, just waste and fraud, okay, okay, like, for instance, all of these folks that are 125 years old, up to 300 years old, collecting Social Security checks, the money is going somewhere, where? So, yeah, where is it? Where is it going? So, finding that out and then eliminating it. What that will do is it will save Social Security. It will save medica. Care and Medicaid, it won’t hollow it out. So, I listen to some of these politicians say, Oh, you want to destroy it. No, what they- what we want to do is make it whole again. You and I, we’ve paid into Social Security. Well, I paid in for about 45-50 years. You probably just about 20-25. You’re much younger than I am.

Cynthia de Fazio  25:19

That’s why I love you!

Philip Capriotti  25:21

Fact of the matter is, okay, we paid for our- for the- for our grandparents and our parents. Okay, so who’s going to pay for us? So, I think this, this reciprocal tariff. Yes, we’re going to go through some growing pains, but in the end, it’s going to make America stronger. It’s going to make us stronger, and it will save, it will save Social Security. Also, we’re going to see a resurgence in domestic firms. Okay, financing of domestic firms, okay, building, taking these old factories in Detroit, refitting them. Now, one of the nice things about bringing all this manufacturing and industry back home is technology. We don’t need as much manpower doing manual, but we need manpower to handle the technology. You know, I had one of the gentlemen I played golf with. He goes, Yeah, before long, Phil. He goes, You won’t, you’ll have, we’ll all have our own robots. And I’m thinking, Yeah, but I’m thinking, I’m hoping it’s not made in China. I want my robot made in the United States. So, at any rate, with that being said, we want to see greater capital investment in the US. We have seen a fall off on capital investment in the US. Everybody wanted to invest overseas, because that’s where the jobs were shipped, no more. So, we’re also going to see much higher valuation in US companies once this ball gets rolling, once they reduce the taxes, and once we start reinvigorating the entire country, especially middle America. This is going to be a boom that we’ve never seen before, and I do agree with Mr. Trump. It’s not just reciprocal tariffs. It’s everything that goes along with it. It’s reducing corporate income. We want to if you want to make it here, no tariff, and we’re going to charge you the lowest income tax rate, 15, maybe 14% so with that being said, tariffs, are they good or are they bad? I believe that if they’re done right, we will see our country explode with growth like we’ve never seen it before.

Cynthia de Fazio  27:38

Phil, thank you so much to our viewers at home, the number to call is on your screen, 888-818-6557, 888-818-6557, or click on the QR code at the bottom corner of your screen, we will see you back one week from today on Retire Smart Austin with Phil Capriotti Senior.