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Money Talk with Ed and Chuck

Money Talk with Ed and Chuck

Written by: Ed Sutkowski Chuck Lefebvre
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 Independent, uncompromised, absolute financial truths behind financial perceptions. Presented by hosts Ed Sutkowski, Esq. and Chuck LeFebvre, Esq.; based on more than 75 years of combined experience representing entrepreneurs, family offices and high net worth individuals.2019 - 2023 Money Talk with Ed and Chuck Economics Leadership Management Management & Leadership Personal Finance
Episodes
  • When To Quit

    When To Quit
    Feb 28 2023
    Welcome to our listener-supported podcast, Money Talk, unpromised absolute financial truths behind financial perceptions with hosts Ed Sutkowski and Chuck LeFebvre. Let's listen in.Chuck: Welcome to Money Talk. This is Chuck.Ed: This is Ed. Today's topic is the power of knowing when to walk away. In other words, quit and based in part by the book called Quit by Annie Duke who was a professional poker player, by the way.Chuck: Oh.Ed: Made millions of dollars doing that. Gave it up to write, I guess.Chuck: Very nice.Ed: In any event, Chuck, do you have some observations of when to quit and what to quit?Chuck: Well, yea. We see this all the time, particularly with deals relating to acquisitions of businesses typically. I've actually run across this on either the side of somebody seeking to acquire a business or on the side of hoping to sell a business and people get embroiled in these discussions. They get emotionally involved in anticipation of being able to complete a transaction. Somehow the enthusiasm over reaching the finish line starts to take over the ability to analyze whether it's a good idea to get there. It seems like quite often I find myself in the position where I'm suggesting to somebody that they need to take a step back and think about if this is really something they want to do. It's swimming up against the stream, so to speak, having that discussion with people.Ed: There's really two aspects of this. There's the quantitative side, how much money, dollars, and then there's the qualitative side which gets to the question of abandoning the child, the new business or an idea. We do have an endowment effect that if you have come up with an idea that perhaps maybe is counter to the norm, you're going to really focus on that and make sure that any information you get that is counter to the norm that you rationalize as being inappropriate. In other words, it's quitting not only in terms of an investment, a job, but yourself. When do you quit? You lose your identity.Chuck: Right. Right.Ed: Can you handle quitting the loss of your identity? We see this, especially with professionals. Now many of the accounting firms and some of the large law firms, typically the large organizations have a 62 and out, which is incredible to me. Nonetheless, so those individuals lose their identity. That qualitative issue is very troublesome but in terms of when you quit. Often times whether it's identity or whether it's money, let's focus on money for a second. Typically, if you're going to quit, you typically feel that's too early.Chuck: Right.Ed: Chuck said to Pete, "Look, you got $50 million. How much more do you want?" Pete said, "Just a little more." So, it's never ending. You have to think, though, what's the expected value if you did or you did not quit? Are you going to enhance your position or not? Is it going to deteriorate? People don't think of the expected value or the absence of value to quit. People tend to hold on to losses and sell profits.Chuck: Oh, yes. You see that all the time.Ed: Your experience?Chuck: Right. You see that frequently when you're dealing with in the investment world. Right? Where someone will decide…they decided that they're going to pick some stock that they just read a story about that intrigued them or whatever. It turns out it's a company that's not doing very well and they'll follow that for years and years and years because they're sure that their initial impression of this being the next big thing must be right. It's just a matter of when it's going to finally turn around and pull a profit for them. Right?Ed: Yes, and I must tell you, I see this and neither of us do, divorce work, which is a good thing, I think.Chuck: A very good thing.Ed: In visiting with folks that are having a difficulty with the relationship when he suggested, exit the relationship. "Oh, I'm going to sunk cost. I've been married to whomever for X number of years. And we have X, Y, Z together. That sunk cost precludes them from making a decision and they forget if they had left that relationship five years earlier and either not enjoyed another one or just have been free as a bird, they'd be much better off. This question of exiting, whether it's quantitative or qualitative, but even in the divorce and marriage scenarios. This Dan Kahneman, who is really the top of the bottom that comes with these issues. He's characterized this as a sure loss aversion. In other words, you've got the loss built in, but if you stick with it, it's going to get better. What?Chuck: Right. Right. There's sort of a tax-related analogy here, which is that when you own the stock, until you sell it, you don't realize for purposes of tax reporting either the gains or the losses on that stock. Right?Ed: Right.Chuck: The idea is if you're holding a stock and it's trading at a loss, you didn't really get a loss until after you sell it.Ed: What you should do is double down. Chuck: Right.Ed: Your average, I see this with the ...
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    23 mins
  • Zero Wealth to Substantial Wealth with Joseph B. Anderson, Jr.

    Zero Wealth to Substantial Wealth with Joseph B. Anderson, Jr.
    Feb 27 2023
    Welcome to our listener-supported podcast, Money Talk, unpromised absolute financial truths behind financial perceptions with hosts Ed Sutkowski and Chuck LeFebvre. Let's listen in.Ed: Welcome. I'm Ed. Chuck is on vacation or otherwise occupied. I think he's hunting somewhere. My special guest today is Joseph B. Anderson Jr. We'll be discussing Joe's journey from zero, I'll call it money, to I'll call it fairly substantial wealth over a long period of time. But more specifically, we'll discuss Joe's beginning at Topeka, Kansas, and then at West Point, and then Vietnam, and then the White House fellowship, then General Motors, and then Tag Holdings, LLC. Joe, are you with me?Joseph: I am with you. I'm glad to be here. Good afternoon.Ed: Yes, it's my pleasure. looking at all the information, I must tell you the most impressive part of your CV, I'll call it, is these medals: two silver medals, this is Vietnam, two Silver Stars, five Bronze Stars, three Army Coordination medals, eleven Air medals. Were you doing anything other than fighting and getting medals, Joe?Joseph: Yes, there was a little break for R&R in between. It wasn't overly aggressive, but I did get into a few conflicts.Ed: Yes, We’ll discuss that. What it's like to almost be the subject of someone trying to kill you, or conversely, you trying to kill someone else. This idea of having served two tours in Vietnam, we'll address that. Let's go back to the beginning of Joe in Topeka, Kansas. February 12, 1943. Your father was a widower with one son, your mother two daughters from a prior marriage. You were an Eagle Scout, I believe, and more specifically, you graduated with honors from high school. Joe, the Brown v the Board, tell me about your relationship with the plaintiff in that case.Joseph: Brown versus the Board of Education of Topeka, Kansas, which included several other states by the way, was a Supreme Court decision that desegregated schools across the United States, so that segregated schools are no longer could be considered separate but equal. I grew up in Topeka, Kansas and started grade school in the fifth grade, kindergarten. From kindergarten through 6th grade, my grade school was fully segregated. So, there were nothing but African American teachers and African American students during that period of time. That was my experience in grade school in Topeka, Kansas.Ed: Then middle school, that was not segregated, is that correct?Joseph: That is correct. When I left grade school, the law, the Supreme Court decision had desegregated the school. Even before that, the Supreme Court decision during my 2nd, 3rd, and 4th grade, the junior highs in Topeka and the high school in Topeka were all desegregated. There was no segregation there. What I recently found out, because I'd always wondered why, is somebody said they thought the primary explanation is that the city, the community did not have the financial resources to create segregated junior highs and segregated high schools. They stopped with the four segregated Black grade schools in Topeka, Kansas.Ed: How did you feel about that? Being a Black, a gentleman with brains in a system that first was segregated and then not segregated? How did you make the transition intellectually?Joseph: The reality, first of all, is that's just the way it was, and that's what I knew, et cetera, and the entire environment and community reflected that. It was not only the grade schools, but the Boy Scout troop that I belonged to was all Black. The YMCA that I went to was all Black, the swimming pool that I went to, et cetera. It was truly segregated in the community, even beyond the schools.That's what I was born into, that's what I knew, and it was just the way it was. My parents were working parents in that environment, and they did what they needed to do. The church I went to, of course, was all Black. So I didn't know anything different. So there were no issues. When I transitioned to junior high school, again, the junior highs had been used to having Hispanics, and African Americans, and Whites together, so there was no big deal there. It just was making the move to the next level in an integrated environment.Ed: One of your favorite sayings is, "It is what it is." It seems to me that whatever the circumstances were, you were flexible enough intellectually to accommodate to those different environments. Is that fair, or what am I missing here?Joseph: What you're missing is I didn't know anything different. So I wasn't flexible enough to accommodate it. To your point, it was what it was, it is what it is. If you grew up in another community, whether it's another religion or another race and so forth, and that's the way things are in that community, that's all you know. I wasn't looking at television or interacting with others to say, "Well, that's the way it is where you are, but that's not the way it is wherever I was to go." I didn't know anything different. It wasn't an intellectual exercise. ...
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    1 hr and 1 min
  • Conflicts

    Conflicts
    Feb 13 2023
    Welcome to our listener-supported podcast, Money Talk, unpromised absolute financial truths behind financial perceptions with hosts Ed Sutkowski and Chuck LeFebvre. Let's listen in.Chuck: Welcome to Money Talk. I'm Chuck.Ed: I'm Ed. Today's topic is conflicts.Chuck: You say conflict and immediately I think about lawyers. I know we're going to talk about lawyers, but of course, also we're talking specifically about conflicts of interest.Ed: We're going to be talking conflicts associated with economic interests, money, honey.Chuck: Yes.Ed: And specifically, the lawyer that manages the estate of an individual and charges a percentage, which is interesting. I mean, a decedent's estate and does the investing. Any observations about that, Chuck?Chuck: Yes. Clearly, there's an absence of independence there. What happens anytime you're involved in investing, I don't care who you are, if you're actually marketing investments for somebody, the financial industry is great at especially one thing and that is providing some means by which revenue from the investment vehicle makes its way back to whoever marketed it. And so, whenever I hear about a lawyer or a CPA or anyone else who holds themselves out as being completely independent making investment decisions, I always wonder: Wait a minute! What types of under the table or in some cases fully disclosed? Yet still, in my opinion, inappropriate financial arrangements are in place whereby they're being paid by the financial instrument itself for the marketing of the financial instrument.Ed: You must understand that a lawyer's role is that of a fiduciary.Chuck: Yes, and for this reason, I really feel most strongly about this in the case of lawyers, maybe it's because we are lawyers. I think of that one as one where the clients really ought to expect absolute independence.Ed: We travel with various levels of sophistication clients and it's appalling to me. We see some folks that are not sophisticated, but for one reason or another, won a lottery or inherited, are so, so naive and they're taken advantage of. We had a situation this morning. Chuck: Right.Ed: I can't believe it. Chuck: Right.Ed: These representatives, registered investment advisor, sold the client an annuity without disclosing the fees and has in the-- how many issues? I saw 300 or 400 issues.Chuck: Oh, yes, in this investment account. When the client died and then we got into administering the estate, there were, I believe, 238 individual positions in this. When I say positions, what I'm referring to are individual stocks, bonds or mutual fund shares, 238 separate positions. For people who don't travel in the investment markets very frequently or browse, you might think, "The S&P 500 has 500 stocks. 238 doesn't seem like that many positions." That is an enormous number of positions to have in one account. To tell you how vast that net ends up being cast, there were stocks in-Ed: Russian banks.Chuck: Russian banks.Ed: I couldn't believe it.Chuck: Bolivian breweries and places you'd never even heard of. And you're just thinking, "There's absolutely no way one advisor can possibly understand each of those investments", especially when you get into so many foreign issues. On top of having to understand what's going on with that business, you have these geopolitical considerations, you have exchange rate considerations. You have all kinds of things that you if you understand what is good or bad about purchasing stock in some small Russian bank somewhere, you can't possibly also be an expert on all of these other things that were going on.Ed: I see that. I think of this registered investment advisor, and we cleaned up a lot of them. The decedent came over from the old country, was gifted, and has a little trouble with the language, and yet-- anyway, there's all kinds of devices these advisors use to make sure that no one understands what the actual fees are.Chuck: By the way, boy, we really quickly got off the topic of lawyers, but let's go. What's going on with this advisor, I'm almost certain, is that this is driven by a commission structure that rewards lots of trades. Let's say there's $100,000 of cash that needs to be invested, if you just buy a single stock or a couple of stocks, that doesn't really generate as much revenue as if you're trading in 100 different things with that money. By the way, these people who are captive employees of some of the big brokerage houses, they might have their commission structure for their individual trades.Then there's also this overlay incentive that has to do with the revenue that the firm generates from their accounts. By that, I mean it's not directly commissions, but fees and so forth, that the firm gets to charge through its clearing operations. Among those fees have to do with extra fees that have to do with purchasing or even holding foreign securities. It just kind of appalled me to look at this account and see all of these issues that are sitting out ...
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    28 mins
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