what's up guys bang bang today's episode is with Phil Rosen Phil is the co-founder and editor-in chief at opening bell daily in this conversation we talk about why are stocks and Bitcoin down what's going on is the interest rate cut actually going to be bullish for these assets then we talk about both president Trump and vice president Harris their economic policies this proposed capital gains tax increase and we also get into why you sitting at home should just be dollar cost averaging into Financial assets over the long run and stop stop worrying about whether the Market's going to go up down sideways or backwards on a day-to-day basis I always enjoyed talking to Phil this conversation is no different here is my latest episode with Phil Rosen all right Phil what's the first topic you got okay so Bitcoin is hovering at about 56k right now and it's down 12% in the last 6 months in March when Bitcoin was at 73k the number of daily active addresses was 1. 2 million that has since dropped about 30% what do you make of this data and are you more or less optimistic when you hear it if you understand Bitcoin you get excited when the price goes down because you can accumulate more at a lower price the other thing is that people who hold Bitcoin are active users of Bitcoin it just doesn't show up in the data part of Bitcoin story is that it's a store value so if you're storing your value you're using the product you're an active user you're a daily active user um and so yes people do look at things like transaction volumes and activity uh as a sign and then when price goes up of course people are trading they're transacting they're moving stuff around so you would expect price goes up transaction volume goes up price goes down transaction volume goes down but the unique thing is for store value a holder is an active user and so there are hundreds of millions of active users around the world we just don't think of it that way because it doesn't show up in the data in a way that if you're looking at a mobile app or something like that so what I saw when I read that I was like wow we're not getting close to the 100K price targets by year end which many many analysts said uh all year pretty much um if you had to make the bare case for Bitcoin for it to go further down let's say in the coming uh six to 12 months where would you start well I think the short answer is just uh there's no obvious Catalyst in the next you know through the end of the year um outside of the macro environment so the macro environment if they cut interest rates um there's you know things around the election there that um could potentially happen maybe a potential Catalyst although it isn't guaranteed to happen before the end of the year as The Sovereign wealth fund comes out and says they bought Bitcoin or something but there's not a very clear hey this is going to happen if you go back to this time last year when the ETF was being rumored to be approved it was very clear if this gets approved this is going to be a catalyst in price it is worth noting that we are still up about 50% from before the ETF got approved so we kind of got this repricing we've gone sideways for you know the summer um I do expect that there will still be kind of a bull market uh I do issue a word of caution though that people who are expecting the bull market to be hundreds of percent from here uh I think could be quite uh disappointed my guess is that uh we should expect the volatility in each cycle to go down over time and so it'll still be attractive compared to you know the S&P but it shouldn't be hey we're going go from 50,000 to 500,000 or something like that in the bull market I think that makes sense um speaking of the S&P 500 we are right now in the worst month of the year for stocks historically I think dating back 75 years the S&P 500 loses 7% every September and there was an article in the Wall Street Journal this week that pointed out how investors are still super super bullish on stocks even though we're in this very red month historically so we have retirement accounts that are booming households keep piling into stocks at record uh amounts the S&P 500 has had hit almost 40 record highs this year and there's a bunch of other metrics that are indicating that there's plenty of optimism for stocks right now my sense when I read this was okay are we getting near the top of the market um all this exuberance and frothiness what do you make of all this so if I remember the stats correctly uh new all-time high at Fidelity for the 401K accounts there's 497 th000 of them now uh on top of that 42% of financial asset allocation is going to stocks which is also a new all-time high High there are two things that I think you can take away from this the bull case for this is well people have been invested in the market the Market's gone up a lot it's minted a bunch of millionaires the US Stock Market is the single greatest millionaire minting machine ever created it mints millionaires uh if you allocate to it you keep investing in it you think longterm and you do it for decades right so kind of the Timeless investing principles end up actually working over a very long time period if you can ignore the short-term volatility the second thing is uh not only for um kind of minting a millionaire but if you've been invested stocks go up you keep putting more money in right you keep buying and so there is a lot of data that suggests that buying all-time highs leads to more all-time highs I think this year alone there has been almost 35 all-time highs in the US Stock Market so obviously it keeps going up the bare case is what you're talking about which is oh my God everyone's Overexposed to equities there's the big crash that's coming next um I actually think this is the wrong framing of like is this good is this bad instead what gets lost in that analysis is what is the time frame in which you're looking I have no clue and wouldn't try to predict what's going to happen through the end of the year or what's going to happen in the next 12 months right I think that's a Fool's game there are some people like a Renaissance who very good at figuring out what's the price of you know a certain stock going to be at the end of today that's not my game instead I think the average American is much better off saying to themselves what is the timeline on which I am investing can I invest for five years 10 years 15 20 years if that's the case the price tomorrow does not matter and so instead what they need to focus on is how do I continue to dollar cost average into a great asset that I can hold for five 10 15 20 years in that case now what you're really talking about is you actually may want prices to go down because if you're going to keep allocating in dollar cost averaging you're buying up the asset as it is cheaper and so let's say that you're going to buy an asset and hold it for 20 years actually you want the asset to go down for 19 1/2 years and then right before you're going to sell you want it to explode upwards right in more value that's not how it works the stock market is going to continue to go up and so I do think that um kind of that long-term thinking the beauty is that you can have that uh Viewpoint because the US dollar is going to be devalued because they've got to be able to monetize the debt and so as long as that dollar gets devalued stocks will go up over the long run you just have to have the stomach to VA uh to uh be able to withstand the volatility in the short term and keep that long-term perspective if you do that you'll be fine can you explain that a bit more about the dollar getting devalued which will make the stock market go up there is one thing that every politician in America agrees on they're going to devalue the Dollar that one data point is the single intelligence test for investors over the next 10 years if you realize they're going to devalue the currency you should get long Financial assets because all of the financial assets are denominated in dollars so why do Real Estate Investors always make money if I buy a piece of real estate and I hold it for some Peri period especially long-term period uh somebody is going to have to show up with more dollars in the future to buy that same piece of property in a lot of cases it's not like the land got more valuable or the house you know all of a sudden a bunch of things got built around it Etc it's that the dollar the thing it's denominated in is worth less and so if you look at home prices in America and their average appreciation over the last couple of decades it mimics about the loss of purchasing power in the dollar it's kind of a 45° angle up into the right you look at the stock market very similarly it's a 45° angle up and to the right at about 8% a year and so that is the dollar losing purchasing power which means somebody in the future will buy that same asset from you just need more dollars because they're cheaper in in terms of value and so that is the argument as to rather than trying to time markets and do all this stuff the US Stock Market is a millionaire minting machine if you simply keep allocating and people always say oh I don't make enough money take an average teacher in America let's say and I don't know exactly what the salary is but let's say it's $50,000 if you work for 30 years so you start working when you're 22 you stop when you're 52 you don't even work till you're 62 you just work till you're 52 that means that you would end up making about $ 1. 5 million in your lifetime and so if you start doing taxes if you start doing all this expenses Etc let's say that you can invest 300 to $500,000 of that right so you're able to invest about a third or less of your actual salary if you are able to do that and you watch it compound for 30 years at 8 to 10% you end up in a really good financial position you're not going to be Jeff Bezos but you're also not going to be in a dire financial position where you can't retire Etc and so the reason why that's interesting is if you go and you look Dave Ramsey did a study years ago he said what are the top five in uh occupations that become millionaires teachers is one of them and when you look at that you say well why is it have you ever seen a teacher D drive a Ferrari no they're in an environment where it's not keeping up with the Joneses most teachers right they drive a Toyota Corolla they wear kind of you know regular clothes they're not trying to live in a mansion like it it's something about whether it's a personality whether it's an environment whatever they live within their means they're able to save a lot of their income if they invest it they can end up being in a good position and so the real you know kind of um attack maybe on that story is that we have Instagram and people were like I want to be balling I need the watch I need the car I need the house and that is really is preventing people from uh being able to leverage something like the stock market instead they become consumers not investors and so if they could switch that and say I'm not going to consume all the craziness I'm instead going to be fanatic about investing getting exposed to the US Stock Market simply buying something like the S&P 500 and letting it compound for years will end up being a really good thing for them yeah I I think that makes sense especially someone who's very steeped in financial markets every day I'm writing reporting on this um that's what everyone tells me so um I did want to ask you about vice president Harris's new plan on capital gains tax uh Biden had a plan for a 39% tax and Harris came out on Wednesday saying that should be down to 28% what was your read on on that sort of a tweak there today's episode is brought to you by domain money I love talking about money but I'm not a financial professional so I don't offer one-on-one coaching or advising but in order to get ahead you need someone with expertise to work with you oneon-one and provide personalized advice the decisions you're making now will significantly impact the rest of your life the more time you waste not taking the steps to get a plan for your money the harder you make it to achieve your goals that's why I've partnered with domain money to pair our community with flat fee certified financial planners that's right they are cfps they can actually give you advice and they can help you level up your money game don't get left behind and head over to domain money.
com / pomp to book your free strategy session to help you get started that's domain money. com pomp to get started with a cfp now go check them out and just like any other major financial decision it's important you understand what the service is and if it's right for you so make sure to go see the important disclaimers at domain money. com Leal that's what the lawyers told me to say now go check them out domain money.
com pom well I I think understanding why capital gains tax especially long-term capital gains tax tax exists is really important so the idea is uh we have ordinary income tax and then we have long-term capital gains tax the reason why it is long-term capital gains is it's trying to incentivize you to make investment to be long-term thinking and so they say if you make investment in our long-term thinking if you're investing in America we will give you a lower tax rate in order to incentivize that right taxes are an incentive system and so uh if you go and you look at that people will always yell and scream and say oh wealthy people disproportionately benefit from long-term capital gains it's only 20% compared to whatever the ordinary uh income tax level is the part that has left out of that analysis is it is usually the wealthy people who are making the long-term Investments so it is available to any American it's just that one group has the capital to do it the other group doesn't and so it's not about the tax thing being uh somehow skewed in one favor or the other it's that one group of people has capital and they understand the incentive and they're leveraging the the incentive but anyone any American who buys asset holds it for over a year they get long-term capital gains tax so it's not really um uh kind of skewing anything it's all about uh kind of education and then action now when we look at that 20% level that is a number that they came up with where they're trying to kind of do a a Highwire act they want on one hand to incentivize long-term investment in America on the other hand they need tax revenue right they need the tax receipts and so in order to do that they pick 20% as the number now that number's actually fluctuated quite a bit we have seen a number of different things if you go and you just Google uh history of capital gains tax in America and read the Wikipedia page you'll be blown away by how much it has changed and changed in our relative lifetime the last 50 60 70 years we have seen a ton of change there we've seen change in the percentage but we've also seen things change like right now it's set at one year so if you hold the asset for 12 months in one day then you get long-term capital gains there have been proposals and also plans in the past where maybe they have one rate for if you hold one year another rate if you hold three years another rate if you hold five years Etc and so they play with the timeline and the percentage becomes pretty interesting but it's more complex now if we go back to uh Harris's plan specifically 20% is where we're kind of sitting at today Biden came out at 39. 6% and people had an absolute Field Day in terms of their uh backlash around doing this how can you go from 20 to 40 you're basically doubling it you're going to disincentivize investment in America I would push back on that and say I don't actually know if you would dis incentivize investment because people aren't just going to go move and sit in cash right so they're still going to invest what you're probably doing is you're deterring future investment you're deterring kind of net new dollars on top of what people are already doing so if you want to increase the amount of investment you would actually have to drop the rate not just keep it uh similar right so staying at 20% you should expect to keep getting the amount of investment that you're getting keep that rate just extrapolated out if you were to drop from 20 to 15 a lot more people probably would go invest cuz like oh the rate's dropping the incentive is higher therefore Capital changes uh kind of the the allocation strategy now at 20% we're never going to go to 40 39. 6% that's insane no way you're ever going to get that pasted what Harris did is she basically said well wait a second everyone's anchored on this 39.
6% I've been backing a lot of the same Biden economic policies they expect me to come in at 39% if I come in at 28% I'm actually in a weird way moving more to the center even though she's increasing the rate by 40% there's a 40% increase she's proposing in the capital gains tax rate now Harris and Trump both are populist candidates they're going after the working class and so it's really easy to say oh but we're only going to do it for people who got over a million bucks immediately a huge portion of the population says well I don't got a million dollars I don't care what you do to those people take all their money and so by approaching it from this populist perspective what you end up doing is the the most important vote in this election for both Trump and Harris is unaff Ed by this policy and so she kind of doesn't care if she pisses off a bunch of rich people now what I found hilarious and important was when she made the proposal it came out she then went to a rally and she said we are going to create a tax rate that incentivize investment in American innovators Founders and small businesses I love hearing that the presidential candidate and the current sitting vice president is talking about innovators Founders and small businesses we should be cheering her on yes these people small businesses make up 50% of jobs in America but what she is saying is not necessarily what 28% long-term capital gains tax would do instead she's saying the right things but the proposal is she would actually be 40% increase in that tax rate it would be a deterrent to a bunch of people and so I think that there is a near 0% chance that whether Harris or Trump gets into office the long-term capital gains tax rate moves because uh it is very very hard to convince a wide majority of people to increase taxes when it comes to the investment class it's easier to do it in sales tax or things where it isn't exactly like you're taking my money right it's more so like you're inserting yourself into a transaction that's very different but to go from 20 to 28% I think that you would have every single person on Wall Street on both the left and the right they would be up in arms saying this is insane and so my base case is it stays at 20% regardless of who the uh presidential candidate is um and kind of nothing changes the world just keeps spinning everything's fine this is all a bunch of hoopla um Trump on the other hand wants to cut taxes and so obviously that sounds great to some people but the question is whether we increase or decrease taxes does it matter and my answer is no it matters for the individual wallet but as a country we do not have a tax receipt problem it's not a revenue problem we have a spending problem it doesn't matter how much money we give to the government they're not going to stop spending and so if we give them more more tax revenue they're just going to spend more and still operate the deficit so if we want to address the problem we have to stop spending as much if we stop spending as much I think it'd be interesting if a candidate came out and said you know what I'm going to slash government spending if I get spending under control now all of a sudden I get to a balanced budget or maybe I can get to a surplus if I can get to a surplus I'm going to drop the long-term capital gains rate I'm going to go from 20% to 10% and I'm going to say if you hold an asset for 5 years or longer I'm going to only have you pay 10% how can I do that well cuz if all of a sudden I'm not spending as much as the government I don't need as much tax receipts and now I'm going to shift the thinking from a 12-month cycle can I get to a 60-month cycle and so if all of a sudden they came out and they said it's a 10% tax rate and long-term capital gains if you hold asset for five years how many people on Wall Street or in the investment world would all of a sudden say I ain't doing anything for five years that's a 50% drop in long-term capital gains rate could that actually lead to more innov more productivity more jobs all that stuff it's yet to be seen we don't know there will be people who say yes there will be people who say no but that is how taxes and incentives can work to change behavior in society and so rather than have a political class that wants to constantly increase taxes I actually think it'd be much more interesting if they could simply just get spending under control and then we don't have to take more money from the citizens instead we just say hey we're not spending as much so therefore we can have a balanced budget everyone chill out keep your money you're working hard for let's go build a great country so when you talk about government reigning in spending I don't know if that will resonate with that many voters because most voters don't know what that means how so how could Trump or Harris campaign on we're going to pull back on spending because that's way less sexy than saying okay we're going to tax you more or less today's episode is brought to you by I trust Capital are you buying crypto on an exchange because you're excited about the Bull Run well well I hope you're reporting your crypto gains to the IRS because they want you to pay your taxes that's right when you buy and sell crypto on an exchange you need to pay the government taxes when you make profits that sounds pretty taxing there's another way you can buy and sell crypto without worrying about taxes at it trust Capital you can buy and sell crypto inside of a tax advantaged crypto Ira crypto IRAs are retirement accounts that work similarly to an exchange but with tax benefits let me give you an example if you can buy and sell crypto on an exchange and you make a $20,000 profit you have to pay the government taxes however if you do the same thing in your Roth IRA and you make a $20,000 profit you don't need to pay any taxes that's right you get to keep all the profits and not have to pay taxes because it's in a tax advantaged account so opening a tax advantage Ira at it trust Capital only takes a few minutes you have 24/7 access to the markets with some of the lowest fees in the industry the Bull Run has begun and people are starting to see their accounts go up so start taking advantage of tax benefits with an IRA at itust Capital you can start maximizing your crypto investment today go to itust capital. com that's itrust capital.
