Bonds, Crypto, & Beyond
by SGL Financial
Our 2 Cents – Episode #221
Bonds, Crypto, & Beyond
On today’s show, the Lewits keep the bond series rolling with more insights and a deeper dive into this investment option. They also explore the evolving world of crypto and future legislation implications. We’ve got plenty to dive into, so jump in now using the link below!
- Quotes of the Month:
- “Don’t simply retire from something; have something to retire to.” – Harry Emerson Fosdick
- “People say that money is not the key to happiness, but I always figured if you have enough money, you can have a key made.” – Joan Rivers
- Back to Bonds Part 2:
- Next up in this bond series, Steve and Gabriel break down the different types of bonds, explain how ratings work, and explore bond funds you should know about.
- The Crypto Wave:
- Recently, Congress passed the GENIUS Act, the first major U.S. crypto law, focused on regulating stablecoins.
- Discover how new crypto bills are shaping increased regulations, even as critics raise concerns about the risks in this evolving financial landscape.
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Podcast Transcript
Announcer: You are listening to Our 2 Cents with the team from SGL Financial, Building Wealth for Life. Steve Lewit is the President of SGL Financial, and Gabriel Lewit is the CEO. They’re here to discuss all the latest in financial news, trends, strategies, and more.
Gabriel Lewit: Well, hello and welcome back to Our 2 Cents. We hope you’re doing great today. You’ve got Gabriel Lewit here with Stephen Lewit, the magnificent.
Steve Lewit: The magnificent second penny.
Gabriel Lewit: Can I tell you something?
Steve Lewit: Okay.
Gabriel Lewit: I was a little bit sad the other day. A client came to me, said her and her husband were traveling or something, and they listened to eight hours of our show in a row or something like that.
Steve Lewit: Oh my gosh. Give that lady or person a medal.
Gabriel Lewit: The wife was like, “I think it was a little bit too much.” But then she also said that she found you very funny, much funnier than me, and I’m the serious one.
Steve Lewit: Oh, wow. Thank you, thank you.
Gabriel Lewit: You’re the fun one and I’m the serious one. And I said, “Well, I’ve got to keep the show on point.”
Steve Lewit: We might go on a roll. If I’m running the show, we’re going in a lot of different directions.
Gabriel Lewit: I said, “I try to be a little bit of fun.”
Steve Lewit: Yeah. Well, I have a good news to report.
Gabriel Lewit: What’s that?
Steve Lewit: Well, I met one of our clients out in the lobby of our office here.
Gabriel Lewit: Yes?
Steve Lewit: And he said, “Steve, I know what a valise is.”
Gabriel Lewit: Yes, yes, yes. Someone said that to me, too.
Steve Lewit: It must be the same person.
Gabriel Lewit: So, I felt bad last time because I cut you off.
Steve Lewit: You did.
Gabriel Lewit: So, what does valise mean?
Steve Lewit: Valise is luggage. That’s all.
Gabriel Lewit: Luggage. So what was the context you were using it with last week?
Steve Lewit: I have no idea.
Gabriel Lewit: I don’t even remember how this came up.
Steve Lewit: I don’t know how it came up, but I know we were talking. We must be talking about luggage, and I probably said you have to take your valise with you, because way back when, that’s what we said when I’m your age.
Gabriel Lewit: So, you pack up your valise for vacation.
Steve Lewit: Yeah, yeah. I remember.
Gabriel Lewit: Did I use that correctly in a sentence?
Steve Lewit: I remember my mother saying to my father, “Get the valise from upstairs.”
Gabriel Lewit: In that voice?
Steve Lewit: In that voice.
Gabriel Lewit: Well, I like the spelling bee-type things where they’re, can you use that in a sentence? To try to figure out the word so they can spell it better. But also in this case, it helped me understand what a valise was.
Steve Lewit: Yeah. It’s a piece of luggage.
Gabriel Lewit: Okay.
Steve Lewit: Yeah. I don’t think I’ve heard that word, however, in 100 years. I mean, that’s just a word that’s-
Gabriel Lewit: It popped in your head. Because I know I didn’t bring it up.
Steve Lewit: But isn’t it amazing how some words just leave our vocabulary and they’re gone.
Gabriel Lewit: Well, it’s like right now, I could have said indubitably, but nobody says that in real life.
Steve Lewit: No, nobody says that.
Gabriel Lewit: I think I used that in the proper context,
Steve Lewit: Undoubtedly.
Gabriel Lewit: Yeah.
Steve Lewit: Indubitably.
Gabriel Lewit: Which is you were undoubtedly correct.
Steve Lewit: Undoubtedly.
Gabriel Lewit: Indubitably.
Steve Lewit: There’s no doubt when I say something that I’m correct, Gabriel. You know that.
Gabriel Lewit: Indubitably again?
Steve Lewit: Surely. Surely.
Gabriel Lewit: Oh my gosh.
Steve Lewit: See? Surely I haven’t used that. I was using that all the time.
Gabriel Lewit: Until I said, it sounds like you’re saying your mom’s name 40 times an episode.
Steve Lewit: Folks, my mother’s name was Shirley. We called her Shirl the Girl.
Gabriel Lewit: And then what you don’t know if you haven’t listened to all of our shows, which most of you probably haven’t is, a while back, we all get onto this kick where we say the same words over and over again. A long time ago, I used to say the words at the end of the day all the time to summarize things.
Steve Lewit: Yeah. Now you say, fast forward.
Gabriel Lewit: Yeah. Well, Steve and a couple of episodes you kept saying, surely, like 18 times an episode.
Steve Lewit: Surely. Yeah, surely.
Gabriel Lewit: And I kept thinking of your mom, and I think I mentioned that to you one time. Now you don’t say surely anymore.
Steve Lewit: No, I don’t. Well, then I have to think of my mom. Actually, she was a great lady.
Gabriel Lewit: Oh, gosh.
Steve Lewit: She gave me a hard time, but I gave her a hard time too.
Gabriel Lewit: Well, let’s-
Steve Lewit: I think I gave her more of a hard time than she gave me.
Gabriel Lewit: Probably.
Steve Lewit: Yeah.
Gabriel Lewit: Well, let’s jump right in. So we’ve got a great show lined up for you today. We’re going to continue our conversations around bonds, which we started last time. We’ll get to that here in just a moment. We’re going to talk a little bit about some new cryptocurrency-related rules, and also as a follow-up to our notes on the One Big Beautiful Bill Act. More notably, we had been talking about what was included in it. We’re going to talk a little bit today about something that is very important for retirees that was not included in the OB3 Act that has very direct and relevant impacts on retirees and healthcare. But to kick things off, we’re going to talk a little bit about quotes of the month.
Steve Lewit: Oh.
Gabriel Lewit: Just to-
Steve Lewit: I didn’t know that was coming.
Gabriel Lewit: … stroll into this with some fun.
Steve Lewit: Well, stroll away.
Gabriel Lewit: I will. I shall.
Steve Lewit: Okay.
Gabriel Lewit: Okay. Well, quotes of the month. I don’t know this guy. So we always look it up when we’re talking about them, but I just find the quotes. Harry Emerson Fosdick. Okay. Quite a name. Says, “Don’t simply retire from something. Have something to retire to.”
Steve Lewit: Yeah. Yeah. I mean, that’s a quote.
Gabriel Lewit: It is.
Steve Lewit: That’s a notable quote.
Gabriel Lewit: He’s very famous. He’s a pastor. An ancient pastor.
Steve Lewit: An ancient pastor?
Gabriel Lewit: Yes.
Steve Lewit: What’s an ancient pastor?
Gabriel Lewit: Well, he died in ’69, so he is old, but he was a pastor, and he said, “Don’t just retire from something. Have something to retire to.” I like this phrase.
Steve Lewit: Yeah. I like it. It is just not notable, I don’t think. But anyway, the point is-
Gabriel Lewit: Well, I know you’re frustrated that you don’t have any quotes on Google.
Steve Lewit: Well, I’m going-
Gabriel Lewit: You’re working on it.
Steve Lewit: I’m working on it. So look, we live in the past or we live in the future. We rarely live in the present, but that’s another conversation. So if we retire, it’s like what is the meaning of our life? What are we going to create in retirement? What are we going to do? And you might want to say, I’m going to sit back and listen to eight hours of the podcast, Our 2 Cents podcast, but have a purpose in retirement.
Gabriel Lewit: Yes. Well, I did talk with someone the other day, which is part of what made me think of this quote and called out to me that he had recently retired. And he said to me, “I don’t even know what I do all day, really, but the days just fly by.”
Steve Lewit: A lot of retirees say that.
Gabriel Lewit: Right. And so it’s interesting. I mean, sometimes it is important to feel like you have a very big game plan for retirement, but you also might be surprised that you retire to retirement. And then man, just life just takes time and friends and dinners.
Steve Lewit: I said to a couple, they were retiring at the same time. I said, “What are you guys going to do in retirement?” “We’re just going to have fun.” Hey, I like that.
Gabriel Lewit: Yeah. So when in doubt, try to create a game plan, of course, for how you think you want to spend your time. That’ll give you a bit greater sense of purpose and fulfillment. And we’ve talked in previous shows about how important that is to feel like you’ve got a plan for retirement. So I thought that quote was very nice.
Steve Lewit: It’s a very nice quote. I agree with you.
Gabriel Lewit: All right. My next one from Joan Rivers. Who is Joan?
Steve Lewit: She’s a great comedian.
Gabriel Lewit: I definitely heard that name.
Steve Lewit: She’s one of the best comedians ever.
Gabriel Lewit: Joan Rivers. Let’s see. Yes. Okay.
Steve Lewit: Why are you looking it up when I gave you-
Gabriel Lewit: Because I like to-
Steve Lewit: Wait a second. I gave you the answer, and you’re still looking it up.
Gabriel Lewit: Did you know her original name was Joan Alexandra Molinsky?
Steve Lewit: I did.
Gabriel Lewit: You did know that.
Steve Lewit: I did know that. Well, I grew up with Joan Rivers. She was very famous.
Gabriel Lewit: Yeah, I think she was maybe prime time before I was watching prime time TV. But yeah, so Joan, Ms. Joan says, “People say that money is not the key to happiness, but I always figured if you have enough money, you can have a key made.”
Steve Lewit: I love that. Yeah. It helps to have money. People will say, I don’t need it. You know what? If you have it, you feel better.
Gabriel Lewit: It does.
Steve Lewit: It just helps to have money.
Gabriel Lewit: It does.
Steve Lewit: You can’t deny that. But you know what, I envy-
Gabriel Lewit: But it’s not everything.
Steve Lewit: I envy people who don’t have a lot of money yet figure out how to have a great life and are happy and are content.
Gabriel Lewit: But I think you could always, of course, do your best to have a great life, even if you aren’t flush with money. But I think behind the scenes, you’d probably say, I really felt stressed by money frequently for many of those people.
Steve Lewit: I don’t know. We have people that have lots of money and they’re just miserable, some of them, they’re not happy people.
Gabriel Lewit: Well, money doesn’t give you happiness, but what we’re talking about here is, well, it can help, but also, it’s not the end all be all. And of course, our goal is to help you make money on the show here and give you wisdom and ideas for smart financial decisions and good retirement strategies because we do think it’ll help improve the quality of your life.
Steve Lewit: Hey, marketing persons, we should make an SGL money key to give out to people and say, “We are the key to your future.”
Gabriel Lewit: Money is the key to your happiness.
Steve Lewit: Money is the key to your happiness. Something like that. We’ll figure out something.
Gabriel Lewit: Well, well, there you go.
Steve Lewit: The SGL key.
Gabriel Lewit: There you go. So those are our two quotes for you to ponder and peruse. And if you have any questions on how to make money useful for your retirement or how to retire happy, of course, let us know. Okay. Back to bonds.
Steve Lewit: Bonds.
Gabriel Lewit: Back to bonds.
Steve Lewit: Back to bonds. That world of interest rates and prices.
Gabriel Lewit: Yeah. So last time we had talked a bit about bonds and we wanted to do a bit of a deeper dive on those here today. So as a very quick recap, we haven’t really spent a lot of time on this show talking about bonds and bonds are a really big part of investing in just about every single person’s investment portfolio. So let’s just do a quick recap of what we covered last time because I don’t want to spend too much time on this. A bond is essentially money you’re loaning to the government or municipality or somebody else, and they’re going to give you back interest over time for you lending them money, and then they’re going to give you your original principle back at some point in the future.
Steve Lewit: Yes.
Gabriel Lewit: Okay.
Steve Lewit: Good job.
Gabriel Lewit: So that’s a bond where you can buy and sell them directly on the marketplace.
Steve Lewit: Yes.
Gabriel Lewit: You could also buy bond funds, which is where a fund manager is doing the buying and selling of those bonds on behalf of the fund and all the fund’s investors to the scale of hundreds or thousands of bonds individually inside of a bond fund. We talked a little bit about interest rates. Interest rates go down, bond prices go up. We gave some examples of that. Interest rates go down, bond prices go up, interest rates go up, bond prices go down.
Steve Lewit: And that all has to do, as we explained with consumer demand.
Gabriel Lewit: Yeah. We talked about yield versus interest rates, just briefly. There’s some slight differences there. Yield is dependent more on what you pay for the bond versus just the interest rate on the bonds.
Steve Lewit: Which is called the declared rate. Had a hard time getting that out.
Gabriel Lewit: We talked a little bit about some of the benefits of holding bonds individually to maturity, eliminate some of the interest rate resale value risk that you might face in a bond fund, but not in an individual bond. We talked about where bonds fit into a portfolio. And then we were going to talk today about more advanced bond topics such as bond myths and other various bond alternatives. And again, just sort of rounding out the rest of this topic, we actually covered a lot last time.
Steve Lewit: I was going to say, that’s quite an introduction.
Gabriel Lewit: Wow. Yeah. I didn’t realize we went so deep already.
Steve Lewit: This was so like the first lesson.
Gabriel Lewit: It is, it is. Well, before we jump in further, Mr. Lewit, any comments on what we covered last time that you thought needed to be repeated or you think we are good to move on with those basics behind us?
Steve Lewit: Well, I think yields and declared rates are really mystifying to some people because I hear those words interchangeably. But the yield again, is what you pay for the bond is your yield. What the bond says it’s going to give you as an interest rate-
Gabriel Lewit: Well, what you pay for the bond, just to clarify-
Steve Lewit: Determines your yield.
Gabriel Lewit: … would determine your yield to maturity.
Steve Lewit: Yes.
Gabriel Lewit: Versus the stated rate of the bond itself.
Steve Lewit: Yeah. I just wanted to say that again because it can be so confusing.
Gabriel Lewit: Yep, exactly. Okay. Now, let’s say you want to go buy a bond. The first thing I want to just expand on is there are different types of bonds. Many different types.
Steve Lewit: Many, many,
Gabriel Lewit: Okay. You’ve got government bonds, which are issued by the government. You’ve got municipal bonds, which are issued, no surprise, by municipalities. You’ve got corporate bonds, which are issued by big corporations. What other types of bonds are there, Mr. Lewit?
Steve Lewit: You have inflation-protected bonds.
Gabriel Lewit: TIPS.
Steve Lewit: TIPS.
Gabriel Lewit: Inflation-protected securities, but they’re bonds.
Steve Lewit: You do have a private bond market, which is not publicly traded. You can buy those bonds.
Gabriel Lewit: This is sort of interchangeable with some of the others, but you’ll hear a term called junk bonds, it could be a corporate bond that’s called a junk bond based on really poor rating, which we get into bond ratings in just a second. Anything else that comes to mind for you?
Steve Lewit: I’m thinking.
Gabriel Lewit: Yeah. Well, those are going to be the most common ones you’re going to hear. Do I buy muni bonds? Do I buy government bonds? In the government bond world, you have shorter duration bonds, one year or less, you’ve got 1 to 10 maturities and you’ve got 10 to 20, 20 to 30. So you’ve got really long-term, long-term, medium-term, short-term.
Steve Lewit: Bills, notes.
Gabriel Lewit: Bills, notes, bonds. So all these things are just a way of denoting different maturity lengths. Now, speaking of maturities, if you had to buy a bond today from the government to keep things simple, would you buy a one-year bond? Would you buy a five-year bond? Would you buy a 10-year or would you buy a 20 or a 30? What would impact your decision-making process there?
Steve Lewit: Well, what would impact it is my need for money. In other words, what am I trying to accomplish? Now, I’m trying to secure a long-term… Let’s say I have questions about the market. I’m very uncomfortable with the market, and I can buy a 10-year bond at what, what is 10 years now? Four point something?
Gabriel Lewit: Yeah, roughly. I think maybe-
Steve Lewit: Could you guys look that up?
Gabriel Lewit: Yeah.
Steve Lewit: Yeah. So I can secure that rate for 10 years, and with interest rates going down, that might be a good buy. Whereas if I want to get a higher rate today, I can actually go shorter term which is usually the other way around. It just depends what I’m trying to accomplish. When do I need the money? How does that balance in my portfolio for income, if I’m using it, how does it balance my equities? All those questions are the things that I would look at if I were choosing to buy a bond.
Gabriel Lewit: So right now, we pulled this up here. To answer your question, you could buy a US 10-year bond yielding 4.34%.
Steve Lewit: Yep.
Gabriel Lewit: Okay. So let’s give a real-life example. You need $40,000 a year of income.
Steve Lewit: Yes.
Gabriel Lewit: You could go out and take a million bucks of yours and buy a 10-year government bond.
Steve Lewit: You’re set.
Gabriel Lewit: And it’s going to give you every year, $43,400-
Steve Lewit: Exactly.
Gabriel Lewit: … in income. Which isn’t generally state taxable if you buy it from the federal government. So something to keep in mind there. And it’s pretty secure. That’s the goal of a government bond.
Steve Lewit: It’s very secure.
Gabriel Lewit: Very, very secure because it’s backed by the full faith of the government. Now, why don’t people do this? Why don’t they just take a million bucks and buy a 10-year treasury?
Steve Lewit: Well, a lot of people don’t have a million bucks.
Gabriel Lewit: Well, that’s problem number one. Yes. If you don’t have a million, you can’t do that.
Steve Lewit: I was on WGN-
Gabriel Lewit: It’s not very diversified. I mean, to that extent either.
Steve Lewit: Well, just as a sidebar, I was on WGN last night and we were talking about why people are invading their 401(k)’s, and 37% of the people in our nation do not have $400 in their savings account. So here we’re talking to, okay, we need $40,000 a year. Okay, we’ll take a million and buy treasuries and we’re set.
Gabriel Lewit: Well, yes, saving for retirement is important. One way or the other. If you need, I mean, 40 grand a year is not a lot of money. And if you think about it, to get that in retirement, you need a million bucks.
Steve Lewit: The other reason people don’t do that is there might be better ways of getting that $40,000.
Gabriel Lewit: Correct. This would be a very simple way. And the other thing is, rewind two years ago, and that wasn’t available.
Steve Lewit: And what happens when… Right. You couldn’t do that.
Gabriel Lewit: In 2022, The 10-year treasury was one and a half. I’m just throwing a number out there. I don’t think it was very high.
Steve Lewit: Well, let’s say it was very low.
Gabriel Lewit: Very, very low. And so right now is an interesting time to buy bonds, but it’s also an interesting time to buy bond alternatives or build a plan that leverages some of these. But yeah, in theory, you buy a 10-year treasury paying you 4.34%, you’d be set there if you needed 40 grand a year. Now, you could also take that million dollars, assuming that you had it, and you could buy, say a 10-year corporate bond paying you 5.75%, let’s say.
Steve Lewit: That’s right.
Gabriel Lewit: Now, why wouldn’t you do that over the 10-year government bond? It’s got a higher yield, You’d go that route, wouldn’t you? Hypothetical question.
Steve Lewit: I’m taking a different kind of risk, which is a business risk. The corporation could go out of business or it could not pay the bond. That happens all the time. So when you buy a government bond, you know you’re going to get paid unless there’s a total disaster. Buy a corporate bond, you’re taking a little more risk. Thus, the higher interest rate they’re paying you because they know to lure your money away from government debt, they have to pay you a higher interest rate to get your money over to them.
Gabriel Lewit: It’s the same principle of stocks, if you’re going to take some risk, you better get a higher return.
Steve Lewit: Exactly.
Gabriel Lewit: So, using US 10-year in this example, as a good benchmark, it’s as safe as you can get. Essentially, you’re getting 4.3. If I was only getting 4.3 with a riskier corporate bond, why would I do it?
Steve Lewit: Why would I buy it?
Gabriel Lewit: It wouldn’t make any sense. So they’ve got to give you a higher potential yield to entice you to potentially take a little bit of risk there. Now we get to junk bonds.
Steve Lewit: Right, well, I was just going to say, I had a client in last week, “Well, I’m getting 7.5% on my bonds.” I said, “Well, you understand if you’re getting a higher rate, you’re taking more risk.” “Oh no, these are good bonds.” I said, “They’re BBB rated bonds. They’re not good bonds.”
Gabriel Lewit: Can you explain bond ratings real quick? Just high level, we’re not going to get into the nitty-gritty. There’s A, AA, AAA.
Steve Lewit: Just like insurance companies have ratings, bonds have-
Gabriel Lewit: Independent agencies.
Steve Lewit: Independent agencies look at bonds and say, “What is the probability that this bond could go south?”
Gabriel Lewit: Default, you lose your money.
Steve Lewit: The company defaults, you lose your money. And I don’t know the structure of the rating system, but I-
Gabriel Lewit: I’ve actually, Producer Gabby, could you Google quickly the rating or below what rating is a junk bond?
Steve Lewit: BBB is a junk bond rating.
Gabriel Lewit: It’s triple B and below, right?
Steve Lewit: Triple B and below, yeah.
Gabriel Lewit: Okay. Let’s just confirm this real quick here.
Steve Lewit: No, here you go again, you see I say something, I say who Joan Rivers is, and you have to look.
Gabriel Lewit: We were both correct. I thought the same thing. It’s terrifying.
Steve Lewit: But you see, this is what you do. I say Joan Rivers-
Gabriel Lewit: This is why you’re older than me.
Steve Lewit: Oh, who was the guy, the rich guy that I said, oh, that’s a rich guy.
Gabriel Lewit: I was actually, I forget what that was, but yes, you were correct. I was correct. Below triple B. or more confusing, Moody’s has their rating. BAA three, I think triple B is a little easier.
Steve Lewit: Triple B is easier.
Gabriel Lewit: Above triple B is considered investment grade, below triple B is considered non-investment grade, or what’s called a junk bond.
Steve Lewit: And people say, well, nothing’s really going to go wrong. Are you kidding me? Why do you think it’s a BBB?
Gabriel Lewit: Yeah. Yeah. Okay. So again, you could buy a high rated corporate bond, that’ll give you a high yield, or you go junk grade, triple B or below, you get a 7.5, 8% yield. But there’s risks in these, And so how do you reduce those risks? Enter the world of what’s called bond funds, just like investing in a single company stock. Is that risky? Yes. If you invest in the S&P 500 different kind of risk, you still have principle risk to your equities, but your concentration risk of being invested in a single company is far less if you diversify across, say, an S&P 500 fund. A bond fund follows a similar thought process and logic here, Instead of buying one single corporate bond from a triple B rated company, I might buy a basket of 1,000 bonds. Some are As, some are double As, some are Bs, some are triple Bs, some are junk, depends on the bond fund’s objective.
Steve Lewit: Not only buy them, buy them at a different durations, different times.
Gabriel Lewit: Yeah. All different times. So you’re diversifying in a substantial way inside of a bond fund. But that’s also one of the bond fund’s drawbacks is, you can’t hold a bond fund to maturity. So as we get into more of the mechanics here of how bonds work with interest rates, people were very frustrated two years ago about their bond funds because interest rates rose. Bond funds all lost 10, 15% in value back in 2022. And people were really frustrated because there was no way out of it. You have to sit and just hold on and hope that bond fund comes back at some point. Whereas if you owned an individual bond in that same timeframe-
Steve Lewit: Didn’t have that problem.
Gabriel Lewit: … as long as you held it to maturity, you would never have lost value on your holding. So those are some of the different worlds here. As we get into ratings, types, bond funds versus individual bonds, you can also do individual bond ladders where you take a basket of… You can build your own. We actually can build these for you, if you are at all interested in this world over a bond fund, what you take at least 250,000 because you need enough to diversify and you buy anywhere from 25 to 30 different bond funds, sorry, individual bonds, at various maturities and various types to create your own diversified basket. And generally you would do that with safer, higher rated, higher graded investment grade bonds.
Steve Lewit: You can buy 1 year, 2 year, 5 year, 7 year, 10 years.
Gabriel Lewit: Exactly. So you’re getting some principle maturing at different times in case you need to redeploy the capital without selling, you’re minimizing your interest rate risk, you’re getting yield and you’re laterally getting maturities.
Steve Lewit: It’s kind of what people do with CDs.
Gabriel Lewit: Yep. Yep. So again, a lot there. And I don’t know how much more we really want to get into here. I guess it’s turning into a very long multi-sequence topic, but maybe we’ll do a part three of this next time because I don’t want take the whole show.
Steve Lewit: Oh my gosh. Is there a part three? Well, sure there is.
Gabriel Lewit: Well, let me list of things we haven’t talked about yet.
Steve Lewit: Okay.
Gabriel Lewit: Okay?
Steve Lewit: Okay.
Gabriel Lewit: We haven’t talked about this conception that bonds are always safe.
Steve Lewit: All right. We did.
Gabriel Lewit: A little bit, but I was going to give some more examples. Okay.
Steve Lewit: Okay. What else?
Gabriel Lewit: We were going to talk a little bit more about, hold on please. What’s called where and when to use bonds in your portfolio, should you buy them as a 30-year-old and a target day fund where you have 10% allocated to bonds? Okay, we can talk a little bit about that. Bond alternatives. Well, let’s say buffered funds as a bond alternative.
Steve Lewit: I think that’s really the topic. If I don’t want to buy a bond, what do I buy?
Gabriel Lewit: Some of the bond funds that are highly diversified, but they are corporate bonds. I had a client the other day say to me, “Why in the heck I buy this one bond fund? It’s yielding twice as much as the government bond fund.” And I said, “Well, it’s riskier.” He says, “But it’s diversified across hundreds of different corporate bonds. How is it riskier?” We could dive into a little bit with some examples there, and then probably a few other bits and pieces there. But I’d say maybe a part three briefly, and we could even skip an episode.
Steve Lewit: I’ll go for a brief part three.
Gabriel Lewit: Okay, you’re bonded out.
Steve Lewit: I don’t want to lose our listenership.
Gabriel Lewit: Well, after 220 episodes or whatever we’re up to, we’ve got to continue to round out our topics.
Steve Lewit: I envision people yawning at some point about, okay, enough about the bonds. Give us something good.
Gabriel Lewit: Well, hopefully, if you’re in listening to this show number one, you find Steve entertaining. Not me, apparently, but you find Steve entertaining. So you laugh as we go along through these things.
Steve Lewit: Oh, man. Oh, wow.
Gabriel Lewit: I’m kidding, by the way.
Steve Lewit: So sensitive.
Gabriel Lewit: So, you’re learning and laughing at the same time. Because we’re going to switch from our exciting topic of bonds here to talk about ACA subsidies.
Steve Lewit: Another very positive topic here. So talk about crypto instead.
Gabriel Lewit: You want to talk about crypto today?
Steve Lewit: Yeah, let’s talk about something real.
Gabriel Lewit: And ACA subsidies next time?
Steve Lewit: It’s so depressing. I mean, people are going to lose. Here’s the deal. The subsidies are going away. Millions of people are going to lose their coverage.
Gabriel Lewit: And millions more are going to pay tremendously more next year. And many of you are listeners we know are in this timeframe where you’re retired, but not 65 yet. So you’re on the ACA plans and this is going to tremendously impact you.
Steve Lewit: I mean, that’s the whole deal here. I don’t quite understand the thinking. I try to be neutral about this stuff because I don’t like to get into politics. But to me it’s like, okay, you’re killing this bill. What replaces it?
Gabriel Lewit: Well, that would be why we would talk about this show.
Steve Lewit: People are going to suffer.
Gabriel Lewit: Well, we’ll talk about that next time.
Steve Lewit: Okay.
Gabriel Lewit: Because you want to… We’ll talk about-
Steve Lewit: I’m really upset about this because a lot of people are going to get hurt.
Gabriel Lewit: Well, yeah. Okay, for next time, we’re going to talk a bit more about ACA subsidies. Expand on that. If you’re, again, not 65 and you need healthcare and you’re not covered through an employer, there’s big impacts for you because essentially subsidies were not extended with the One Big Beautiful Bill Act.
Steve Lewit: Let’s talk about making money in crypto.
Gabriel Lewit: Yeah. Let’s talk about speculative high-risk assets.
Steve Lewit: Yeah, let’s have some fun here.
Gabriel Lewit: All right, well, yes. Just recently here, I think week, the Congress passed the Genius Act, which is one of the first major US crypto laws in recent memory here, focused on regulating something called a stablecoin. But the point being here is that more regulation is coming now to this world of cryptocurrencies. There’s another bill that’s pending called the Clarity Act, which would help to enhance or redefine who specifically regulates cryptocurrencies not stablecoins, but things like Bitcoin and Ethereum or other things. Is it the SEC or is it the, hold on here, I’ve got at the CFTC? Okay. Commodity Futures Trading Commission. All right. Because right now it’s sort of this limbo land of an unregulated asset.
Steve Lewit: Well, here, look, crypto started as the wild, wild west. And as more people are populating this area, rules are coming into place.
Gabriel Lewit: More people to be more precise, 4 trillion, trillion with a T, dollars of assets in the crypto space it is a bit more populated.
Steve Lewit: It’s huge. So the message that is being sent, and that I agree with, and I believe Gabriel agreed, is that crypto is here to stay.
Gabriel Lewit: It’s appearing that way more and more.
Steve Lewit: It’s not going-
Gabriel Lewit: I still have a lot of clients who are skeptics and why are they skeptics? Because you go on to Robinhood and you see a cryptocurrency labeled dogwifhat, okay? And you’re like,-
Steve Lewit: I’m not putting my money in dogwithhat.
Gabriel Lewit: It’s not with hat, it’s dog wif. W-I-F. Dogwifhat.
Steve Lewit: You’re right. Wif hat.
Gabriel Lewit: More important. Okay. Or Pudgy Penguins.
Steve Lewit: Yeah. I like Pudgy Penguins.
Gabriel Lewit: I’m not joking folks.
Steve Lewit: I did not buy any.
Gabriel Lewit: These are called meme coins. They’re very different than actually the established cryptocurrencies. We would get into that more-
Steve Lewit: Meme coins, it is the crypto world, but it’s an outlier. I don’t want to get off on meme coins, but listen very carefully, folks. In five years, here’s what’s going to happen. Stablecoins, which are backed by real currency, will become the medium of exchange because it’s so simple and efficient.
Gabriel Lewit: Well, that’s what the pro crypto people, because crypto is kind of a wide-ranging phrase. It’s like saying a fund, like a mutual fund. There’s a lot of types of funds. So crypto is a very wide-ranging label, but a stablecoin, to your point, is issued by a variety of crypto-related companies. But the concept of a stablecoin is behind the scenes, supposedly, it is backed one-to-one in reserves with real US dollars.
Steve Lewit: Which is what the Genius Act was about. You should have to have these-
Gabriel Lewit: And it should be backed very securely, because it could be backed by mortgage-backed securities. That’s not a good deal. We want it backed by cash, FDIC-insured cash or other country’s comparable equivalent. And the idea of a stablecoin, to your point, is you can transfer them very simply and easily through the blockchain. We’re probably using a lot of terms here that are maybe new. We could talk more about these. And it’s faster, more efficient, cheaper.
Steve Lewit: It’s locked in it. And there are a lot of reasons to do this safe.
Gabriel Lewit: Safe, especially if it’s more regulated, if you know that the money’s backed by a real hard actual asset issued by a government.
Steve Lewit: All the bank, not all yet, but most of the skeptics, two years ago, have changed their tune. The banks are getting into this business. Governments are in this business. Trump, whether you agree or not agree, is behind this big time because he has his own coin, of course. But despite that, the thinking here is that this area has so much potential, kind of like artificial intelligence. It’s got that kind of potential to it.
Gabriel Lewit: Well, critics would say it doesn’t go far enough to provide security, the bill. But the idea here is that it is a step in the right direction towards more regulation. Regulation is generally a good thing in this industry, should spur wider adoption.
Steve Lewit: Well, to this industry, it’s very important.
Gabriel Lewit: Well, really, the financial industry too it’s important for trust. If your money isn’t safe at Schwab, if it wasn’t regulated highly and Schwab could just take your money and piss it away, it wouldn’t be very safe. You wouldn’t put your money there.
Steve Lewit: That’s correct.
Gabriel Lewit: So, you need some level of trust and regulation in anything where you’re going to deal with trillions and trillions of people’s dollars. So that’s the idea here. Now, can it go further? Of course, I think there’s going to be more developments here, but it seems like we’re stepping, inching maybe, more towards the right destination here with some of the regulation.
Steve Lewit: For sure.
Gabriel Lewit: Okay. Other critics say there’s too much lobbying money though, being thrown around in here.
Steve Lewit: Tremendous.
Gabriel Lewit: A tremendous amount of lobbying money. Well, is there any place where there isn’t?
Steve Lewit: I was just going to say, is there any industry that doesn’t have lobbying money?
Gabriel Lewit: Yeah, hundreds of millions in lobbying money in just about every industry. But yes, folks, what’s the biggest cryptocurrency? Well, you’re going to probably think of Bitcoin with $2.4 trillion now in market cap, I mean massive. It’s the behemoth of the crypto world. But there are many others, many other use cases. People say, well, you can’t use it for anything. What’s the purpose? Well, I think as you peel more and more layers off from here, you start to get a sense of what this can be used for and where some of these things fit in.
Steve Lewit: And Bitcoin is not a stablecoin.
Gabriel Lewit: It is not.
Steve Lewit: So, it’s a different kind of investment.
Gabriel Lewit: Well, a stablecoin’s not really an investment. It’s more of a medium of exchange that’s on the blockchain. Blockchain is the technology that tracks cryptocurrencies behind the scenes to make sure every possible transaction is always permanently recorded and unalterable, called the blockchain, which is the foundation of a lot of these cryptocurrencies.
Steve Lewit: Yeah, we can go into that. I think we did a little bit, a year ago or so.
Gabriel Lewit: A little bit. So you now. Genius Act is out. Clarity Act is coming soon.
Steve Lewit: Now wasn’t that more interesting than bonds?
Gabriel Lewit: Probably, but less applicable to our retirees, many of our clients-
Steve Lewit: Well, wait a minute, we are considering for many people to take 1 or 2 or 3% of their portfolio and invest it in Bitcoin.
Gabriel Lewit: We are. If you’re interested, you could talk to us about that. It’s not necessarily something you have to do.
Steve Lewit: In ETF.
Gabriel Lewit: Yes. In the IBIT or other similar ETFs that are out there representing Bitcoin, not a big fan of many of the others at the moment for long-term investing.
Steve Lewit: I’m not either. But if you look at the asset class performance over the last 15 years, the number one asset class performer happens to be Bitcoin, which very few people know.
Gabriel Lewit: True, true.
Steve Lewit: It is true. Well, I said it. Are you going to look that up?
Gabriel Lewit: No, I know that one.
Steve Lewit: Oh, you know that one.
Gabriel Lewit: There you go.
Steve Lewit: Are you sure you’re right?
Gabriel Lewit: I am.
Steve Lewit: Maybe I should ask them to-
Gabriel Lewit: Are you sure you’re right?
Steve Lewit: I’m going to ask. Can you look that up, Guy?
Gabriel Lewit: We’re running late.
Steve Lewit: I’m teasing. Yeah. We’re… All right.
Gabriel Lewit: Okay.
Steve Lewit: All right.
Gabriel Lewit: Well folks, we hope our meandering journey today through the worlds of many things was interesting for you. If you’ve got questions, we’re here to help. You can call us to set up a complimentary call anytime. If you’re not a client or if you’re a client of ours, call us anytime of course, to chat through your finances, (847) 499-3330 or go to sglfinancial.com, click contact us, and we are here for you. And anything we can do to help support you, make you more money, make life easier, grow your wealth, give you peace of mind, we are here to do. So we are wishing you well.
Steve Lewit: It’s what we do.
Gabriel Lewit: And have a wonderful rest of your week.
Steve Lewit: Stay well, everybody.
Gabriel Lewit: Bye-bye.
Steve Lewit: Bye now.
Announcer: Thanks for listening to Our 2 Cents with Steve and Gabriel Lewit. For any questions about your finances, give SGL call at (847) 499-3330 or visit us on the web at sglfinancial.com and be sure to subscribe to join us on next week’s episode.
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