The I Love CVille Show With Jerry Miller! - Xavier Urpí & Alex Urpí Joined Jerry Miller On “Real Talk With Keith Smith!"

Episode Date: December 20, 2024

Xavier Urpí, CIO of Emergent Financial Services, and Alex Urpí, CEO of Emergent Financial Services, joined Jerry Miller on “Real Talk With Keith Smith” powered by YES Realty Partners and Yonna Smith! “Real Talk” airs every Wednesday and Friday from 10:15 am – 11 am on The I Love CVille Network! “Real Talk With Keith Smith” is presented by Charlottesville Settlement Company, LLC, El Mariachi Mexican Bar & Grill, Fincham & Associates, Inc., Free Enterprise Forum, Intrastate Service Co and YES Realty Partners.

Good Friday morning, guys. My name is Jerry Miller, and thank you kindly for joining us on Real Talk with Keith Smith. A pleasure to connect with you guys through the I Love Seville Network on a show presented by Yes Realty Partners online at YesRealtyPartners.com. Today's program, guys, is going to be absolutely fantastic. A little programming note for you. Keith Smith and Yonah Smith are spending the holidays in the Caribbean on a beach under the sunshine, drinking Mai Tais and just having a good time. Can't say that I'm not jealous of them right now as it's 25 degrees in Ivy, Virginia, when I was walking the family German Shepherd. But they have certainly earned it after a fantastic

year. And it could not happen to better people. Keith and Yona, the salt of the earth when it comes to just being there for family and friends. And if you're watching this, Keith and Yona, the salt of the earth when it comes to just being there for family and friends. And if you're watching this, Keith and Yona, happy holidays, Merry Christmas. We miss you. Keith is back in the saddle on Real Talk with Keith Smith in January. And I can already tell by the couple of emails I received this morning that the man is partly missing the program today. And we miss you too. Judah Wickhower is behind the camera the director and producer of the I Love Seville Network every team needs a a glue guy someone whose contribution may not show up in the stat sheet but if he doesn't show up the team does not win and that is Judah Wittkower ladies and gentlemen I sincerely mean that to you Judah if we can go to the studio camera and welcome

two esteemed guests and household commodities, Alex Erpey and Xavier Erpey of Emergent Financial Services, smart guys who have the skill set of taking very complicated material and topic matter and making it easy to understand. I think both you guys have that traits. First, I will start with a good Friday morning to you guys. I'm looking forward to the show. Yeah, I'm looking forward to it. And thank you, Keith, for inviting us. It's always a pleasure being on Real Talk. Always love being on.

I'll start with an open-ended question as I adapt to you guys. I'm just the pace setter here. Jerome Powell, much like Alex Erpey and Xavier Erpey, a household name. And Jerome Powell, the expectation at a meeting this week was a 25 basis point cut. Some folks thought maybe 50.

He ended up 25. But what spooked the markets was the language utilized after the cut, saying that we're potentially only going to have two rate cuts in 2025. I didn't want to take a look at my portfolio after he made those commentaries. I did. Didn't like what I seen. But the next day, it rebounded well. I'll get out of your way.

Why don't we start with you, Alex? What did you make of Mr. Powell's commentary? It's funny because it never ceases to amaze how – and I think that's something for people to understand. Expectations is what sets the market. People often think, you know is the market set by inflation no the the market is set by what i think inflation is going to be like next year two years three years and i think it was you can see you could see that happening on wednesday afternoon because i think i think it with me, I would say sentiment was probably split 50-50

on whether there would even be a rate cut on Wednesday afternoon. So you would have thought that, okay, oh, he cut rates, that should be good, market should go up. We said, well, the market wasn't looking at Wednesday's rate cut. The market was looking at, oh my goodness,

we had expected that there would be more than two rate cuts next year in 2025 and suddenly now a lot of them are not because they have all those the fed the fed have their little dot charts where they all each of them predicts how many rate cuts they think there's going to be and said oh my goodness the consensus is is only two and then you literally at two o'clock the market just within seconds starts going down and i think that's important for people to keep in mind that it's just a reminder of that key lesson that it is not today's number that is affecting the market the market is a future looking a future forward

looking entity it is looking at what do i think is going to happen in the future and to the extent that today's number affects the future, that matters. But if today's number is overwhelmed by what we think is going to happen in six months, then that's going to be what impacts the market today. And, you know, what's interesting is, you know, when you read what went on in that particular meeting, it wasn't a slam-dunk decision by everybody. Everybody was really discussing whether or not they should do the 25 basis points. And I think there was one Fed that did not go along with that.

And, you know, I guess part of the reason where I believe they decided to do it now was I think their favorite, I mean, guide right now is the PCE index, which is the index that looks at consumer expenditures. Consumer consumption expenditure. And except that it doesn't include food and energy, right, which is somewhat important. Yeah. Yeah, it does. Because we need to eat. It doesn't include two-thirds of a family's budget. We need gasoline to get to our jobs yeah let's not go

there right but that the point being that was a little lower in november in october than they expected right so the year over year it's about you know 2.6 2.8 percent all right which is still higher than their two percent but again they cut 25 basis points that means they cut already one percent since they started so we're down to about 4.25 to 4.5. It's a range. T-bills are down to about 4.25. But what's really interesting is you look at the rest of the interest rate curve, right, which means anything longer than a three-month T-bill,

and you look at the two-year, the five-year, the 10-year, the 30-year, and particularly the 10-year because this is a real estate chat, and the 10-year is the key for the mortgage rate. That rate is up from at the beginning of the year, I think it was around 3.9%. It's now 4.5%, and it's been skyrocketing for the last two or three months, right? And the minute they cut the rate, the 10-year went up, right? What does that mean? That means that I think the bar market,

and I've always said this, I think the bar market is the leading indicator as to what is happening in reality in the economic world. And I think it's telling you that the inflationary expectation for 2025 and thereafter is probably higher than what the Fed is expecting. And therefore, they don't think that the Fed is going to be, you know, as aggressive next year as, and maybe, and who knows? Less aggressive than the Fed themselves thinks at this point. So I think, you know, it's like Alex said, you know, first of all, there's the expectation. What are they going to do? Then they do it. The market reacts immediately.

And let's let's be honest also it's the end of the year i mean the stock market i mean growth is still like up 33 percent this year the s&p 500 is up like 23 24 we could see yeah some profit taken there saying i just want to lock in some of these gains right to show our clients how well we did that happens at the end of the year sometimes this This could have been also the impetus. But without any doubt, there's an immediate reaction. Oh, my Lord, this is bad because they're saying next year we're only going to do it twice.

Therefore, we've got an issue, right? And then, as Jerry said, the dust settles, and the next day is like, wait a minute, why are we in such a panic mode? Let's take a step back and try to figure out what's going on. And I think you made a point that touches on people need to realize we're not in an environment where the Fed cutting the discount rate makes mortgage rates go down. Right. That correlation is not there right now because the 10-year is the basis of the 30-year mortgage, right? 10-year is the basis of the 30-year mortgage.

10-year is the basis of the 30-year mortgage. Fed cuts rates, 10-year goes up. So it's because the 10-year is looking at a different – it's looking at something else. The only thing I would say is that – let's remember. I mean the mortgage market in the old days, right, included variable rate mortgages, which disappeared because if short-term rates are higher than longer-term rates, who's going to do a variable rate mortgage, right? But the curve now has positively sloped. I mean, it's a three-month Treasury bill.

It's literally yielding less than the 10-year, right? So whether or not that part of the market, the mortgage market, begins to say, hey, for anybody that is looking to be here for four or five years or seven years or maybe you're willing to take the risk, there may be opportunities saying the short end of the market now is saying that you can now borrow at, you know, 6.5 versus, you know, 6.7, 6.8. So if they cut rates again, and even if the 10-year doesn't really come down, you know, there is the opportunity for people to say, hey, wait a minute. I'm willing to take. Now, you know, the homeowner, right, the consumer, it's up to him to take that chance, right? Do I want to take that risk or not? And they may. It's like I just want to buy this house. I want to be in there. And this rate allows me to do that, right? Do I want to take that risk or not? And they may. It's like, I just want to buy this house. I want to be in there. And this rate allows me to do that, right? Well said. So a lot of

comments coming in already. Before I get to the comments here, I'm going to highlight in tidbit fashion some of what Xavier and Alex have unpacked here. The personal consumption expeditious price index is the PCE. Correct. And the PCE, this news came out today, the PCE index, price index, which is what the Fed prefers as an inflation gauge. It showed an increase of just 0.1% from October and a 2.4% annual rate. Both were below expectations. Below expectations. That does not, as Xavier highlighted, include food and energy. So think about that.

That does not include your grocery bills, ladies and gentlemen, or the money that you're pumping into your car, which I would say are probably easily top five when it comes to a household budget where the money is going out. Groceries and fuel. Mortgage number one or rent number one, then probably groceries and fuel are two or one or rent number one then probably groceries and fuel are two or three or three or four um so do you discount this the powell and the fed do not but perhaps we do because this is not us um i make our living we make our living at this firm in the real estate commercial and residential space and we saw after pow's conference, news conference, and after he said it alluded to two rate cuts in 2025, a lot of folks in this line of work spooked. A lot of folks got spooked.

2024 was a challenging year from an inventory units sold standpoint. Now, some folks in this space are still doing extremely well because they're selling inventory at higher price point. Values are increasing. Inventory units sold are decreasing here. The question that I'm seeing from the folks with you guys is, how is this going to impact the widgets that we have to sell? And the widgets in this case are the residential units, the commercial units that are out there. And I'll start with a little commentary before I pass it on to you guys. I think 2025 is going to be another challenging year for the amount of units that are available to purchase, guys. And a lot of folks are still rate locked with the rates they secured during COVID and the pandemic.

Those two and a half and three percent rates that they don't want to get off of. And if we don't see a big swing with rates, folks are still going to feel compelled to keep that rate locked, the rate they secured during the pandemic, which is going to throttle inventory again. Time will tell. We can go down that road. We can go down any road you guys want to go to.

Yeah, and I would tend to agree with that. I mean, the issue here and the statistics also have shown that, you know, I mean, permits, housing permits went up last month, but without inventory, meaning without new inventory come to the marketplace, it's going to be sitting there and saying, yes, I'd like to either move or, I mean, they may have to move because of work or something else, right? But there's, nobody's going to be saying, I want to go into a larger home or even downsize because I got this mortgage that is absolutely phenomenal as far as interest rates concerned. So I'm not putting my house in the marketplace, right? So that's going to be an enormous challenge. It's only going to be new construction coming to wherever it is and trying to keep up with the demand. That's the only way it's going to happen.

And you're right, unless interest rates come down. And I'm with you. I don't think 2025 we're going to see a large decline in interest rates. You've got a new administration, new policies. We just don't know exactly how that's going to impact the marketplace. I mean, I'm very positive from perspective of economics, what it's going to do. But like everything else, the impact of whatever changes they make, it's not going to be immediate. It's going to take a little bit of time, right? So I think

it's going to be maybe 2026 before we see that coming to the marketplace. What do you think, Alex Hervey? I agree with that. I mean, part of what Keith was sending us this morning, I think, was basically he was looking at last seven days in the car footprint, last seven

days of the same seven days in 2023 last year, fewer homes coming on the market. Now, the pace of homes days in 2023 in last year, fewer homes coming on the market. Now the pace of homes going under the contract was doubled. So I guess when they do come on the market, maybe people are getting things done. But in other words, no,

we're not looking at a noticeable, oh my goodness, suddenly there's a bunch of homes coming on the market because you've, to your point, right, you will always have the movement that occurs of people needing to move. I got a new job. I'm leaving the area. But the voluntary movement of I'm going up.

It's entirely possible that you could be sitting on a large dame, capital dame in your house. do the numbers to move to a new house and be like, I'm coming out behind because my monthly payment is now so high that it overwhelms the additional down payment I'm able to bring to this more expensive home. And if that doesn't happen, then you're not going to see new existing homes go on the market. Exactly.

We talk about, Vanessa Parkell, thank you for watching the program. I'll highlight some of the folks that are watching right now. Join us in the market. Exactly. We talk about Vanessa Parkell. Thank you for watching the program. I'll highlight some of the folks that are watching right now. Join us in the discussion, guys. I'm very curious of your thoughts. Carol Thorpe, hello. Joe Reed, hello. Lisa Kustelow, Bob Yarborough, Ian Caskell, hello.

Got some folks working in finance that are watching the program right now. Peter Krebs, hello. Thank you for watching the program. Mr. DL, a number of folks in the real estate space watching the program. I mean, if you're trying to play the anticipatory or predictive game of when is the right time to buy, that's a very difficult crystal ball to figure out. And if you're looking at a personal residence, some folks look at personal residence as something that's a commodity, that's tradable, that's an opportunity to make a living on, but that's another slippery slope as well. If you look at first a personal residence as a home where you're raising your family and your

kids, getting into a personal residence now and then refinancing later might be your best approach. Trying to gamble on when is the best time based on interest rates to buy and choosing to get in another 12-month lease, the homes are just going to appreciate in value and become more expensive after the 12-month lease is over. You can always refi. You'll never recoup the 12 months of rent payments that you made. You can refinance the interest rate.

You can't refinance the price. You can't go back five years and go, well, you know, my home... You can't renegotiate that price. Yeah, if I renegotiate the price I paid five years ago, it doesn't work that way. Yeah. And they're appreciating, guys, depending on the pocket in central Virginia, double digits year over year. And that's significant. And it's something to really follow. That 12 months of rent, you will never get back. This comment's come in from Jonathan. He says, how do the guests characterize the economy today? And then we have questions coming in.

How do the guests, what do the guests think the new administration is going to do to either jumpstart or throw or, as Jerry said, throttle the economy when the new administration starts? So there's two questions there. Which one do you want to take first? I want to take current state. Yeah, go ahead. Current state seems, I think there's a lot of uncertainty in the current state. There are some underlying things that are concerning, but I think these are tied together, because I think obviously there are some good tailwinds for growth companies on the horizon.

Even if we've been seeing, obviously in this past year, underlying concerns, namely consumer debt, is I think a big one. In other words, the big question that I think Xavier and I would have is, as far as the stability of the economy, is how much of consumer spending, which, as we all know, is about 70-plus percent of GDP, how much of that is debt-fueled, and how much longer can that go on? Particularly since, yes, inflation is calming down, but it's not going backwards.

In other words, inflation doesn't go backwards. We're not seeing prices that are going to go down from where they were. That doesn't happen. So the consumer is going to be looking at this price level for the going into the future. The consumer

is not going to be able to sit here and say, oh my goodness, maybe things will get better because everything I buy will be cheaper next year. That's not going to happen. The question is, will their wages grow higher than a new inflation number? But I think the difference here is that we could be looking at a scenario where if there is maybe more room for growth, more investment opportunities, particularly for smaller companies, less barriers

to entry, that you could see some economic growth on the business investment side compensate for the fact that maybe consumer spending is on a bit of a shaky stool. Yeah, and those are interesting points. And, I mean, if you look at over the last couple of months, the consumer has continued to provide the impetus to this economy. I mean, the GDP was indicated it was about 3.1%. So that's a great number, right?

And they were looking at 2.8. And it's the consumer that continues to spend, right? The issue is that we see without any doubt that the debt levels of consumers are increasing. So at some point, you know, they're not governments. They're not the U.S. government that can print money. At some point, they're going to sit there and say, I've got to pay for this debt, right?

So that's a challenge. On the other hand, there's something – I was just literally reading this two days ago, which I thought was interesting, but it said that 99.9% of U.S. firms are small businesses, right? And small businesses produce 43.5% of gross domestic product. And the reason I'm excited is that without any doubt, this administration, and again, whether they achieve it or not is always the question mark, right? All we can go by now is what the goals are. Exactly what they say. I think this administration is definitely, their policy is such that I think it's going to improve small company opportunities, right? And if that's the case and small companies can do well, then I think the economy is going to do much better.

And, again, it's just going to take a little bit of time. It just doesn't happen in a snap of the finger. As we all know, they're also pro-energy. So that's one of the areas we always talk about. In other words, if energy prices can continue to be stable or go a little – I mean, that's one area that can go down. I mean, gas prices can go down. That's an area that we beneficial to the consumer. But as Alex said, and you know, what I commented, you know, many times is that I don't see inflation dropping below 2% anytime soon, because we are leaning more and more to become a self-sustained economy, meaning we are looking at the global arena and saying, who are our friends?

And can we trust them that at crunch time, if we need medicine, if we need glass, if we need steel, they'll come and produce and we can import it? And the answer is, I think we've learned our lessons and say, no, we need to produce this here. Now, robotics is great. They help keep prices down. But without any doubt, labor prices are much more expensive in this country than anywhere else in the world. And therefore, we will see inflation be at a continued pace of somewhere between 2% and 3%. And that's my expectation. But, again, if energy prices can come down, that helps. As Alex said, food, it's not like we need to import food to survive.

So food should be not a big challenge to keep those prices lower. So if those two things can be sustained and keep lower, I think we'll do very well. I mean, I feel very positive. Again, growth has been phenomenal. Growth companies are phenomenal for two or three years now. I think small caps, and one's got to be a little picky because there's a lot of things going on also in that arena, but I think small caps are going to finally do a little better. But you need to look at your sectors very carefully

because I didn't want to tell you healthcare sector in the last two months was not where you wanted to be in small cap. Exactly. Or any cap. Or any cap. Comments coming in, guys. We'll get to some of them here. next, the incoming administration, why the opportunities may be more robust for your business sector for growth, how it could lead to potentially more hiring, more cash on hand, potentially less tax exposure for the business sector. This really helps. Obviously, it helps

it across the board, but this really could help your small businesses. Let's unpack that. Well, I think one of the errors is regulations, right? I mean, and you always, whether it be service or any other type of business they're trying to grow, sometimes you look at what the regulations are and you sit there and you go, holy Toledo, I got to do this, this, this, and this, which means I need to hire now either a compliance officer or a lawyer or whatever it may be, and you're looking at, you know, initially somewhere between $40,000 and $100,000 of costs that you say to yourself, for what? Just to fill out these particular forms, right,

in order for me to create a business. A large business, they look at $100,000, it's like nothing, right? But for a small business, that's a barrier. Like I said, it's a barrier to entry. And I think if they begin to look at things of that sort and say, these are some regulations we don't need. I mean, there are some that you need, there's no doubt about it. But there's other regulations.

You say, why in heaven's sakes is this regulation on the books at all? Because it just stops small businesses from being created. If you want a concrete example of that, right? The beneficial... BOI. I was just going to go on the road. Dude, I have seven LLCs. I had to take seven of them for the various holding companies.

Pay the tax preparer per LLC to do it. And it's expensive. It was expensive. And what's most expensive is if you don't meet, is it the December 31st deadline? It's a $500 fine per day, I believe is what they're saying.

It's insane. Remember, the response rate among small businesses was sitting at like 30%. So basically, 60-70% of the small businesses in this country were about to be hammered by huge fines that also sort of carried jail terms. That's on pause. There's an injunction in Texas that has paused that.

And I think there's a good chance that that doesn't end up happening. The interim administration is not going to push to fight that injunction or to fight on behalf of that. But that's the example of a type of regulation that really, between the might be doing $200,000 a year in sales, is in compliance with all these laws. Man, heck, small business is just trying to get three softwares to interact with each other to get some streaming out. Exactly. I mean, goodness gracious. Exactly. softwares to interact with each other to get some streaming out. And you're sitting there and that's a key example because

that law, that BOI form, you didn't have to do it if you had more than 25 employees. So the larger the company you didn't have to worry about filling out that form, the liability, the threat because somehow they got themselves exempted from that by somehow convincing

Congress that they were less of a threat to fraud and money laundering than small businesses. So that's kind of a concrete example. There's a number of people who are saying, what? What do we have to do here? That's on the feed right now. A lot of people do not know about this, which is extremely unfortunate. Some accounts I'm talking to are saying, hold off. Don't go through that effort at the last minute.

You need a lot of documentation. There are costs to do it. That thing is under federal injunction. In fact, if you go to the website to fill out that form now, online, it's like FinSec. The financial

certification part of the federal government. They have a big red bar at the top that will tell you, you do not actually need to do this right now because enforcement is basically banned. Enforcement has an injunction against it. And they cannot enforce

until that injunction is lifted. So you have time till next year. I would say talk with your accountant before feeling the need. You have to fill out that form. But see, like I said, the response rate was like 30%. So 70% of small businesses were about to become criminals.

And there were criminal penalties attached to that. Not just a criminal penalty. Not just a criminal penalty. That would have really shocked me. The $500 a day fine for each time would have crippled small business, would have put them out of business. Exactly.

So, you know, I think we're – there's no reason to be scared here for the viewers and listeners that are watching the program right now. All right. This comment is coming in. Sandra McDaniel, who's in finance, says, companies are regulated to death. Get rid of the red tape and small companies have a good chance to grow. Growth equals jobs. Exactly. Mr. McChesney, my inflation indicator is a gallon of distilled water that has climbed from 89 cents four years ago to today's price of $1.59.

Cost of materials, bottles, and shipping would have increased. But when I see that go down, I will feel inflation is retreating. I like that comment from Bill McChesney right there. Other comments are coming in. First, Logan Wells-Claylow, thank you for watching the program. How about this comment? Does the panel think that the Trump administration will keep inflation in check and have four years of growth for the American economy.

This is purely about economics here. Yeah, I think I don't foresee them causing inflation to go down below that 2% number. I think it is a different type of inflation because there are different ways that prices can go up. In other words, if prices are going up because you were on-shoring a lot of jobs, those prices are going up because there are now more people making higher wages. That trickles into the price of the product, but you've compensated for that with more people now employed at higher wages in America.

So you have a compensation for that, which if they then go in and spend, you could see some economic growth alongside that inflation. What we've experienced in the last few years, the issue is – what we've experienced in the last few years is the classic Milton Friedman too much money chasing too few goods inflation, meaning we had a supply chain crisis, too few goods, and we just spent gobs of money on top of – and I'm not talking just like the general each year we have a deficit. I mean we've had a deficit for like two decades running, right? I'm talking 2021 we have a deficit, but then we also spend $1.9 trillion on an Inflation Reduction Act, right? So in other words, when you just have that much money going into the system on top of what was spent in COVID, on top of the Federal Reserve having pumped money during COVID, you had a classic too much money, too few goods, inflation just goes through the roof. But there's no productive element offsetting that. In other words, the inflation wasn't up

because all these people suddenly had jobs who didn't before. You mean the government telling us to all stay at home and not do anything while giving us free money was bad for the country? Is that what you're saying? Surprise, surprise. Surprise, surprise right there. Who would have thought that would cause inflation? Oh, my goodness.

And so I think that's a different kind of inflation than the inflation you may see from, in other words, this product, which was made in China with slave labor, is now made in America where the guy needs to be paid $20 an hour. Yes, that's going to make the product more expensive. But now you have a person making $20 an hour who didn't have a job for $20 an hour six months ago. Right? The big question mark there, I think, is the tariffs. Right. That's what people are worried about. And that's what people are worried about.

I'm worried slightly about the tariffs. I'm also worried about if immigration is enforced as Trump campaigned, if it's enforced like Trump campaigned, like he said it would be enforced, what is that going to do to certain sectors that rely potentially on undocumented individuals as labor? And I'm pointing to F&B potentially, and I'm pointing to remodeling and construction potentially, which I think could be a headwind for housing. I would say to that, I think the language coming out is very, when they are talking about people who have committed misdemeanors after getting here and have yet to be deported, gangs and so forth, my suspicion is it will take a year

or two before they even get down that road because ICE is not going to waste resources on going after the remodeling guy when they know that there's 300,000 people with felonies, violent felonies, that are walking around they haven't caught yet. So my suspicion is that the border is where we're going to see a lot of activity first, and then second in terms of people who already have other criminal convictions. I think if we see inflation in construction down the road because of that,

I think that's still more than a year away. In other words, I think they would have to succeed beyond their wildest measure in grabbing all these other people first before in 2020 they start looking at

that road. You with that? I agree 100% with that. And with regard to the tariffs, I think that Trump is, without any doubt, is an extremely good negotiator. And he throws this out there as...

To spook the other countries? Absolutely. Just tell the other countries, listen, we need to negotiate because you're imposing these tariffs on us and we don't do anything to you. And therefore, we can then play this game by saying we will then impose these tariffs on you and see how you are. Because let's face it, without the U.S., a lot of these other companies, I mean a lot of these other countries and their economies, they're going to be in trouble, right? Because we are the largest consumers in the world, right? So they want to make sure we continue to be the consumers, right? So they're going to eventually negotiate.

And I think that, you know, I'm not, I don't worry that much about the tariffs cost and inflation, because I think there's going to be a negotiating tool more than anything else. Yeah. I don't think he's going to turn around and slap a 60% tariff on China on day one. In other words, the goal is to use that as a threat to get something else in exchange. FinCEN is what we were looking for. FinCEN, there we go.

Yeah, that's been put on the feed. FinCEN is exactly right. And it was the, what is it, the Financial Crimes Enforcement Network when it came to registering the LOCs with the BOI e-filing. So this is crazy to say that I think a lot of people watching the show, this is the first they're hearing. It probably is.

And again, I would not panic about that. You can do that online. From my understanding is the only actual documentation you need is pictures, I think, of driver's licenses. I mean, obviously, you'll need information, you know, like your social security number. But you can do that online. So I would not rush to do that, especially with an injunction sitting on it. Yeah, and he's right. Alex is all over this.

The language on the filing portion of the website. Please note that beneficial ownership information reporting requirements have been affected by a recent federal court order. The Department of Treasury is appealing that order. In the meantime, reporting companies are not currently required to file a BOIR and are not subject to liability if they fail to do so while the applicable order remains in force. I would not be – I just want to say this. You're listening and hearing about this from us but the appropriate measure for you the viewer and listener is to check with your tax preparer. Follow up with your tax

preparer please. I'm going to be honest that's what I did I gave my accountant I did hold off I gave my accountant a call and said hey what do you guys recommend that I should do? They said hold off and so I did so so I would definitely recommend people call their accountant

and talk to their tax filer before making that decision. So in terms of, this is what frustrates me the most, is that when you look at things of this sort, it continues to impact small companies, small businesses. And let's face it, a lot of small business, sometimes it's just mom and pops, two or three people. And I remember once I was in a meeting with regard to even just here locally and the lady was talking about all the things that you have to do and i said you

realize that the majority of people here never heard of these things that they have to do even locally and there's so many companies i'm sure around here small business that don't know because most people don't just go on a website say let me see a small business all the things that i have to do in order to create business no they're anxious they want to get a business going they want to make a livelihood and yeah i'm a baker great i'm just going to make cookies and i'm going not realizing well if you do that you're going to have this you're going to do that. And this is what frustrates me because these are people who have dreams, and those dreams are basically based on I want to start my little company,

and I want to grow that company, and I want to make enough money to really make my family, to grow my family, to support my family. And I figure one of your viewers mentioned how many jobs are created by small companies. This article mentioned this. 17.3 million net new jobs were created by small businesses from 1995 to 2021, and only 10.3 by larger businesses. So, again, it's the backbone of this country, and yet I always feel like... We hammer them the most.

Yeah, we hammer them the most, and it's like you're trying to get rid of small businesses so that the large companies take over, and that just frustrates me. I love that. That was a fantastic commentary right there from Xavier Guz. Let us know your thoughts. I'll relay them to the panel here on the Friday edition of Real Talk with Keith Smith.

For those that are asking, Keith Smith is celebrating the holidays with his family on a beach in the Caribbean, but he is back in January. What do we think? I'll throw this to you guys. You mentioned health care as a category or as a sector that face significant headwinds here. What do you like some sectors or some categories next year that you may find appealing, you're interested, you're following

for 2025? Maybe ones that you're concerned about to stay away from. I know in the long run, your financial advice is diversification, hold long term, be balanced, index,

but some people like to roll the dice a little bit. I mean, we can start with some that I think have struggled and may continue to do so. I mean, obviously healthcare because of uncertainty. Healthcare is probably where, it's interesting, right?

Certain things became certain once the election passed. Like, okay, take the corporate tax hike and throw that out the window, right? Certain things like, okay, how is the FDA going to look at pharmaceutical companies are now, they've moved to an uncertainty category. Right, because, okay, how are they going to now look at some of these companies?

There has been talk. Are we going to become... From my understanding, there's two countries in the world where pharmaceuticals are allowed to do direct consumer advertising. They are the United States and New Zealand. And so there's a big question. Will we go the way of everyone

else and not allow that? What effect would that have? So I think that's where there's a lot of uncertainty. I would say probably a lot of uncertainty in clean energy. And I don't particularly relate that solely to this election. We've seen for the past few years that clean energy, you would have thought under the previous administration that clean energy would have done very well. It has struggled tremendously. Clean energy has had a very rough time since 2021.

And our suspicion is a lot of that is they received a great deal of government subsidy in 2021. A lot of those companies did not figure out how to make money absent the subsidy. And so they are struggling. However, within that, I think you can be smart and say, okay, clean energy as a whole is struggling. Looking forward, where could be areas of clean energy that are going to be necessary? And I think a lot of people are now beginning to see nuclear is going to have to be part of that picture.

So if you do go into that space, I think you need to be cautious and say, clean energy may not be the space where I want to just throw everything at the wall. I may want to focus on clean energy with a little bit of nuclear. I may want to... I'm sure in the ETF world,

there are specific nuclear uranium ETFs and so forth. So I think you need to be cautious in that space. I'm not saying leave it behind, but I think the days of just throwing darts at clean energy and hoping something sticks, we haven't seen that in the past few years. I don't know what sectors you think might. So, I mean, yeah, I mean, it's not so much...

When you look at investment portfolios, I look at it as two categories. So one category is retirement funds, right? Retirement funds, the goal there is really to achieve a particular goal depending on the age of the client, consumer, whatever, right? The brokerage accounts are a different story because there's also tax consequences both with income and capital gains. So that's where you have to do a lot more homework and there's opportunities. And just to give you an idea, if you take a look at the S&P 500

and there's 11 sectors in there, right? And you go back in history and look at those 11 sectors, it is unbelievable how within the S&P 500, in some cases, some years, some sectors are up, some sectors are down. I mean, look at this year, right? I mean, the S&P 500, even last year, we're up in the 25%, right? They're sectors that are down big, right? How is that possible, right? And so what you have to do is that you have to begin to think about what is my

expectations going forward for this particular economy? And I'm not saying that we have a crystal ball or anybody has a crystal ball, right, but everybody has a feel for it. Those sectors have betas against the market. So if you're concerned about the market going forward, you want to look at those sectors that have a lower beta, right? To be clear for people, what a beta means, beta is an indication of the risk of a sector or even a stock, but of a sector relative to the market as a whole. So it's not talking about return.

It's talking about purely risk, the risk of a sector relative to the market. So a low beta sector, for example, consumer staples. Consumer staples, in other words, if the economy is up, consumer staples will be up a little bit. If the economy is down, crashes, consumer staples will be down. It's as a low beta. Tech is a high beta. Semiconductors. Yeah, other one.

Exactly. So the point being is that there are enormous amount of opportunities every single year to take a look at one, what happened last year and the years before that. And you just look at the last 20 years and say, what happened during these years? What impacted the markets? And how did these sectors do? And that's kind of what we do for, you know, I guess that's our homework on a continuous basis, and try to say, what do we think is going to happen next year? And then so what sectors in those specific, you know, individual brokerage portfolios do we want to highlight in order to make sure that, you know, we have the best portfolio out there.

And like everything else, I mean, there are years where, you know, we're perfectly right and there are years where we're not, right? Because, again, nobody has a crystal ball. The point is you have to be able to recognize that there are opportunities and the only good thing is that when you are slightly wrong, Nobody has a crystal ball. The point is you have to be able to recognize that there are opportunities. And the only good thing is that when you are slightly wrong, then there's the tax loss harvesting that you can do for clients, right? So, again, all that is important. But as I mentioned, I think last time we had a real talk, I mean, I'm very positive. I think, again, small companies just have to be a little more vigilant.

I like convertible bonds. I like them very much. They did extremely well already this year. I think that they're going to continue to do very well. So those are two areas that we're focusing on enormously. Ms. McDaniel, I'll get to your comment here in a matter of moments. I'll ask a question myself. That seems like an easy segue into the influence of Elon Musk on not just the Trump administration, but Elon Musk, who appears to be the most

powerful man in the world right now. He's certainly the richest man in the world. He's the richest man in the world by a long shot. And he has Trump's, not just Trump's ear, but he's Trump's right-hand man here. The Musk influence on the next four years and change. I mean, what do we got? He's got Tesla. He's got SpaceX.

He's in the ISP space with Starlink. He's in the battery space. He's got one of the biggest megaphones in the world with X. Exactly. The battery space. He's launching in a school, a monastery school. He says he's going to focus on education, pre-K all the way through senior and high school is going to be one of the next spaces of pursuit for him, education, Musk. He's had some comments on health care and pharmaceuticals. He desperately needs chips like NVIDIA for his Tesla company.

And, you know, just anywhere you want to go on Musk's influence here. I would say the one thing that will temper Musk's influence, because I think his influence is going to be, yeah, I think health care will probably get some more scrutiny. Where things are made will probably get some more scrutiny. Where things are made, we'll probably get some more scrutiny. And then, obviously, his primary role is to reduce government spending in certain areas. And they're talking maybe a government closing right now. Regardless of... Efficiency. Efficiency.

Exactly. He's a very bright man, right? And we already know that, right? But I think what makes him special is that he's so efficient in creating and making things work without it costing an arm and a leg

in the sense of workers or whatever. A large portion of the Twitter workforce was either let go, pink-slipped, or quit. And some would say Twitter's running better than ever. Well, I mean, think about it. He took Twitter basically, from my understanding, that were 80 80 of people working

there and the thing didn't fall apart like it actually now i know people creep about i i'm not i can't say that i'm i've ever been on twitter i'm on twitter quite a bit as far as the user experience i don't know how much it's changed but in other words it's functioning there aren't many things where you can get rid of 80 of people doing it and it still functions so you know he's going to try to do something like that to the federal government. The question is, does he get tempered by Congress refusing to actually go along with some of

what he wants to do? However, he's obviously made it clear that he is going to primary anybody. So I'll put that in perspective right there. Anyone that gets in Musk way, he said he's going to challenge the incumbent, find an opponent, and fund their competing campaign.

Yeah, so that's the flip side of that. With the biggest megaphone and the largest war chest. Oh, and he could do it. He could absolutely do that. So that's really the only temper that he has on that. I think they will find,

you know, maybe I'm too pessimistic. I don't think they will do as much as I hope they will do, but I think they will. I think there will be some cuts and some areas where they find inefficiencies. And we've talked about this and again, not to just pick on one area versus another, because I mean, I think you can say this about large companies too. I'm sure if you go, even if you're probably going to JP Morgan Chase, I guarantee you that you sit there and go, there's just a lot of waste here, right? But when you look at our government, who has continued to increase over time, and it's probably now larger than the public entity, right? And you realize that there's just such a large portion of those employees working out of the house, right?

That's a challenge, right? Because I'm saying, who is controlling to make sure that they're doing the work properly? And I know there's computers, et cetera, but I always, you know, there's nothing like being in the office and seeing how that work is being done. 100% agree. The GAO report, which is, there is an office called the Government Accountability Office. They issue independent reports. I mean, the GAO report from a month ago was damning. Yeah, I know. GAO report from a month ago was damning as far as the waste. I mean, there were people, there were bureaucrats

that were working full-time for two different government agencies, each of which thought that they had hired them full-time to work only for them, and basically collecting two salaries from two agencies, each of which they thought that they were paying them full-time. You were telling this story yesterday off-air. Didn't someone have trouble with the DUI?

Was it right? There was at least one employee that got a DUI while supposedly working from home. His officials thought that at that moment he was at home on his computer working, and he was getting a DUI at that precise moment. And this came out in the Government Accountability Office report. So I think there is a lot that they will be able to go in there and wipe some of that out. Now let's be honest, as much as this is

great in the sense of making government work more efficiently, the minute you begin to lay off all those people, they got layoffs. Where do they go? So that's why it's a balance. The other side of the economy has to begin to really percolate

really quickly so that there's movement from those people. From the government sectors to other sectors. Who wants those people? The idea of the goal is that you can make them more productive if they don't have incentives to be unproductive. So they have accountability by having a boss

looking at them in person at the office. Ms. McDaniel has this, and she's an investor. She says I love, and Sandra, I love following your content, by the way. I love investing in small business. I own part of a storage facility in California. It kills me at tax time, though. I have to fill

file K-1s. I wish red tape on this would be cut. I could do my own taxes then. Not sure if storage facilities here in Virginia need investors. Any thoughts on this sector? I actually helped put earlier this year a storage unit deal together, Sandra, and the storage unit model is a fantastic one. One that's now being digitized where a lot of these storage units have only one employee on site at a time and the rest is automated. And they're just collecting the rents from units that sometimes go months without being even opened. So it's a very lucrative model if positioned in the right location.

Do you want to go down? We don't have to talk storage units specifically, but she wants us to talk about investing in small business. She wants us to talk about kind of the main street side of the economy. We've touched obviously on regulation. I think

one thing I think, and David can correct me here, obviously we've talked about how the lower interest rates on the short end don't necessarily translate to fixed rate mortgages. However, lower interest rates on the short end, that can help small business. Very much so. Small business, remember, you're talking every business, really. What are you trying to do?

You're trying to use capital to get a rate of return. There's two ways to get capital. It's either your assets or it's debt. If debt is cheaper, the rate of return you need to get for a project. I mean, you can sell equity and so forth. Well, I mean, if you sell equity, it becomes an asset, right? But you're turning equity in your company into cash. But you have equity and then you have debt.

If you can borrow cheaper, the rate of return that you have to get to engage in a project, hire people, buy that business, go into that area, it is lower. You don't need a 10% return because you're borrowing at 8%. You could actually go forward with a project that has a 7% internal rate of return if you're borrowing at 5%. I think that's

where, to some companies, they will be borrowing on that shorter end of the deal. Remember, when we talked about investing in floating rate notes while interest rates were going up, because those particular companies, they borrow short. So when rates are going up, they have to obviously pay more, which is great for the investors, not great for the company. Now, the reverse is true. Now, it won't be great for the investor, but for the company, as rates come down, their borrowing cost is reduced.

So small companies who go to the bank to borrow always – How about just corporate tax cuts? How about just the corporate tax cuts? I mean, come filing time, if you're an LLC owner, S-corp owner, small business owner, you are going to pay less? Exactly. You're going to have more money on hand? Exactly.

And you know there's a certainty element, right? You know as a business you can make investment decisions right now knowing that the corporate tax rate... Because what was he... He was campaigning 15%, wasn't he? He was campaigning 15%, but even... Let's say, for instance, let's say he couldn't get that through Congress. You at least know that for the next four years, it's 20.

Like, in other words, it's not going anywhere for four years. Because, okay, he may not get the votes to bring it down to 15, but he's certainly going to veto anything that tries to bring it higher. So you have this certainty of investment decisions saying, I know that I can make investments for the next four years, and I am not going to see an increase in that trickle-down corporate tax rate. Yeah, and I agree with Alice. I mean, the key, and anybody that has small business, right, knows that, right? When you're forecasting, what am I, how do I grow, what am I doing for the next year, right? It's the uncertainties that kill you, right?

So knowing those certainties is like, I don't have to worry about that. That's not something that in my projection for the next, you know, four or five years I have to worry about. So let me focus on the things that are going to help my business. I love it. I love it. I love it. This show was a heck of a lot of fun with Alex and Xavier. How about some, what do we got, December 20th, five days before Christmas,

some advice, some closing thoughts, any perspective to share? It doesn't have to be finance. It doesn't have to be economy. It can be anywhere you want to go. It can be finance. It can be economy for the viewers and listeners. You know, Jerry, one thing I always, and I tell this to every single one of my clients, right? We always worry about our future. We want to save. How

do I save for my future, for my retirement or for my kid's college? But there's also a time to sit back and say, you have to life and you know for me this time of the year is a time where you know you sometimes you got to take a step back and say let me just enjoy my time with my family and anything that you that you can do with friends and family because you know they're precious they really are right and then worry about starting january 2nd you start worrying i have to tell you a bunch of things financially that have to be done before December 31st, but if you haven't done them yet,

the trade-off is like, are you going to spend less time with your family on December 25th? And that's the other thing. To make an extra hundred bucks by selling some things at the end of the year. That's the other thing I tell my clients. It's our job to worry, right?

So you enjoy yourselves right now. Let us take care of your portfolio. We're doing everything. I mean, we're going to be working pretty hard until the end of the year because that's our job, right? But for them, it's like just enjoy this time, right? And that's important. Yeah. And look, like, if you have health, if you have family, there's a lot of things to be grateful for.

Yes. And so this is always a good time. Go back. Be grateful for what we have. Tomorrow is promised to nobody. So enjoy. Yeah. Enjoy the day.

Clear your mind. Like Keith and Yona did. Clear your mind. And then start anew. Let the viewers and listeners know what the Earpy family is doing for Christmas and New Year's. You guys are together. Yep, we're Erpie families together this year for Christmas. So we've got, you know, we'll do our Christmas meal, which I think, I know lasagna is on the menu for Christmas Eve.

Yeah, probably, yeah, I mean, you still think about the fish, but it depends on when we go to church. Yeah, yeah, when we go to Christmas Eve mass. And then I think prime rib, some good prime rib. I think this year is prime rib. This year is prime rib we voted on for Christmas Day. So it'll always be cookies, all the good stuff. So it'll be very enjoyable.

A good bottle of wine and a good bottle of port, I hope. I want to make sure I enjoy those old ones. Exactly. Xavier's in the thing where we get the bottles of port, and sometimes you get a bottle, and then the recommendation is like,

well, you know, you should hold this bottle for 20 years, right? And David's like, no, no, no, no, no, no. We're not holding this bottle for 20 years. Sometimes the really good ones down the line will say, you've got to hold this for 20 years, like store it. And Xavier's like, store this. I don't think so. I'm not buying this to store for 20 years

so that you guys can drink it. You guys can buy it. My dime goes somewhere else. These guys are the absolute best, and they can be trusted with your retirement guys in your future. Emergent Financial Services, the absolute best. Alex Erpey, Xavier Erpey, Michael

and Nicholas who are watching, we absolutely love your family. And I know the community trusts you guys. Real talk with Keith Smith on a Friday. The last real talk of Keith Smith, I can't believe I'm saying this, of 2024. It's about to be 2025. This year flew by. It did.

Absolutely flew by. We're very grateful for your viewership and your listenership, ladies and gentlemen. Keith Smith back in the saddle in January. And the second to last episode of the I Love Seville show is today at 1230, the second to last one of 2024, as we do the same as the Earpies, spend some time with our loved ones and our family over the holidays. For Judah Wittkower, Xavier, and Alex, my name is Jerry Miller. Thank you kindly for joining us. Merry Christmas. Merry Christmas, everyone.

That was awesome. That was easy. That's always so fun. Very nice of God. Thank you.