September 6th, 2025 - Jackpot Finances

The Van We Financial Hour, hosted by Steve Van Wie, Adam Van Wie, and Joey Loss, discussed the implications of the large Powerball jackpot and strategies for managing sudden wealth. They also covered current market trends with a focus on value investing’s resurgence, interest rate projections, and job market updates. Emphasizing prudent financial planning, the hosts provided advice on securing winnings, tax considerations, and the importance of diversified investments for long-term wealth preservation.

Transcript

Steve Van Wee 0:00

It's Saturday morning, it's 10 o'. Clock. This is the Van We Financial Hour. I'm Steve Van Wee.

Adam Van We 0:06

I'm Adam Van We.

Joey 0:07

And I'm Joey Law.

Steve Van Wee 0:08

We are here again, which means only one possible thing. Joey is still not quite a father of two. Sneaking up any minute now, any day now. Every Saturday when I see him walk in, I wonder, is this one going to be the last one?

Joey 0:15

That's right.

Joey 0:23

I'm praying for my wife that he comes soon because he's growing like half a pound a week. Crazy.

Steve Van Wee 0:29

I remember three times thinking, you know, it's getting about that time. And the end is, I wasn't even caring for a kid. No, no, not at all. But as long as everything's healthy and progressing as schedule, everybody's happy. That's wonderful. All right. What a day, what a week. It's so crazy out there. I, I'm going to spend a little time today after we get through all the rudimentary talking about Powerball fever, because everybody else is, we might as well do, why not? So going to do a little of that. And got a couple other good topics today, one of being one of which is Trump accounts. Most people have heard of them now, but hardly anybody really knows all about Trump accounts. And I'll fill you in on some details that I guarantee you you did not know until today. And then of course, if you want to stray onto any other subject, it's really easy. Just pick up the phone down 904-222-8255

Adam Van We 0:35

Yeah, yeah.

Adam Van We 0:38

The woman.

Joey 0:46

It is.

Steve Van Wee 1:33

and we will put you to the head of the class. So I think you heard, if you're carrying over from Angela Walker's show, that it was a kind of a mixed week, but generally it was a very good week. Even though yesterday didn't look good on paper, the week came out pretty darn acceptable. I think speaking for three people in this room, we would be real happy if we had a lot of weeks just like that one.

Adam Van We 2:01

Yeah, we saw a little bit of up and down, but overall not too bad. Interestingly enough, in the last month, the, the worst performing stocks from the first half of the year have become the best performing stocks. So lot of rotation out of things that did well up through, I don't know, mid August and into things that were really considered dogs.

Steve Van Wee 2:25

So value investing is coming back.

Adam Van We 2:27

Exactly. And that was really helpful for our portfolios because we do put a good weight into value stocks and they really hadn't been performing very well. In fact, one of our One of our, one of the two main value funds that we used last quarter, one was up, but it was only up 0.9% and then the other one was down 4%. And that was in a quarter where the S P exploded. So. But it was all on the growth side, so that was nice to see. The bottom 10% of stocks through August 11th, from, from January 1st to August 11th, the, the bottom 10. The word. The. The ones that perform the worst, the 10% that performed the worst are now up 9.4% since then, while the top 10% of stocks that were up in the first half of the year or a little bit beyond the first half, they're up just 1.5% during that same time. So that's how much of a rotation we've seen in out of growth and into value.

Steve Van Wee 3:26

So the one word lesson from all of that. Diversify.

Adam Van We 3:30

Yeah. Hold both.

Steve Van Wee 3:31

I always don't guess you'll be wrong.

Adam Van We 3:33

Exactly. And don't sell because something's underperforming. That's the worst thing you could do.

Steve Van Wee 3:39

Everybody does.

Adam Van We 3:40

If you looked at that value fund after last quarter, you would have been tempted to say, oh, this thing is, this thing is terrible, let's get rid of it. But it's out outpacing the growth side in this quarter. Anyways. The, the broader market looked a lot like it has all year, despite that fact. In fact, the NASDAQ led the way higher this week again, as usual, it seems it gained 1.1%, the S&P was up 0.3% and the Dow was down 0.3%. And that follows the trend of the year, which has the NASDAQ up 12.4%, the S&P up 10.2, and the Dow up 6.7. So interesting that the trend from the year stayed in place while all that sector rotation was happening.

Adam Van We 4:26

As everyone here knows, we've been telling Powell to cut interest rates for months now. And he, it appears like he finally listened. And it looks like they're going to move. The market agrees with that. They're pricing in a 89% chance of a 25 basis point cut at the next meeting. But also there's, they're now saying there's an 11% chance of a 50 basis point cut. I don't think that's going to happen, but that's what the market's saying. The market's also pricing in just a 2% chance that the Fed only cuts one time by the end of the year, a 25% chance that they cut 50 basis points by the end of the year and a 65% chance that they cut 75 basis points by the end of the year. It also has an 8% odds on the chance that they do a full point by the end of the year. I think that the three cuts of 25 are probably most likely. So I kind of agree with the market. Although I wouldn't be surprised to see just two cuts.

Steve Van Wee 5:21

I'm stuck on two.

Adam Van We 5:24

All of that led to a spike in bond prices late this week and earlier when, when you were talking about what a good week it was, that really helped. We saw bond funds move up by about 80 basis points and most of that happened on Thursday and Friday. So when you're, when you're 40 side of your 6040 portfolio does almost a percent in a week. That generally helps your your overall picture pretty, pretty nicely. Bonds are on a bit of a tear this year really. A bunch of our funds are up over 6,7%. So not too bad.

Steve Van Wee 5:59

Long time coming.

Adam Van We 6:00

Yeah, for sure. Let's talk about jobs. There was a ton of jobs data released this week and none of it was good. That's pretty much the summary. The Jolts report was released Wednesday. It showed job openings decreased by 3% despite the headline number falling. The 12 month average shows that the amount of open jobs has actually leveled off right around its pre Covid peak of about 6.5 million. The amount of job openings per unemployed worker is still falling and now slightly below the pre Covid peak. Layoffs are also trending up, but they're actually still well below the pre Covid levels. So you're hearing news reports about all the layoffs increasing. The fact is we're not even to back to where we were in 2019.

Steve Van Wee 6:43

I missed that number Thursday. How did it come in? The first time unemployment claims?

Adam Van We 6:45

Which one?

Adam Van We 6:49

Oh, the weekly jobless claims. They were up a bit this week there. I think they were at 238,000,

Adam Van We 6:56

but nothing to be concerned about.

Steve Van Wee 6:58

250 has been that magic number for a long time.

Adam Van We 7:01

Continuing claims also higher than they have been the last couple of years, but not at levels that suggest anything out of the ordinary. So those two things looked pretty good. The ADP report that came out Wednesday showed private employers added just 54,000 jobs last month. That was lower than expected and lower than the 104,000 in the previous month by about half. The government report came out on Friday. It showed that just 22,000 jobs were created in August and prior months were Revised down by 12,000. The revision to June brought that month negative. That's the first negative month since 2020. This also brought the unemployment rate up to 4.3%, which is a cycle high. A bit of good news in the report is that labor income rose 7% annualized in July and 5% annualized in August. And that goes a long way towards consumers dealing with inflation. That's happened over the last four years.

Steve Van Wee 7:54

It does indeed. And it was badly needed. When you've got a 70% consumer driven economy, you got to keep consumers flush with money so they'll spend it. And simple formula.

Adam Van We 8:05

Yeah. That's a pretty big number. 7% annualized.

Steve Van Wee 8:09

Yeah. And there's a lot of longer term money that will start shaking loose also because people know that they're not going to be stuck with a big tax increase on January 1st. That psychologically you don't buy anything for three or five or seven years if you think that's going to happen. All right. Much more to come on the other side. We'll pay some bills and be right back this year. This is the Van we Financial Hour. Welcome back to the Van we Financial Hour.

Adam Van We 8:34

I'm Steve Van We're Adam Van We.

Joey 8:35

And I'm Joey Loss.

Steve Van Wee 8:37

We do have a trivia question. I actually have several of them. I got to decide which one to do. But how about this? Let's, let's do good news today, shall we? Good news in the 401k front. Fidelity came out with their increase in the number of 401k millionaires. That was kind of staggering, actually. But that's not my question because anybody could look that up. But my question is partly because of new contributions. Are people becoming 401k millionaires? In fact, contributions were up rather nicely. And leading the way is baby boomers.

Steve Van Wee 9:19

What percentage increase did baby boomers or what percentage did baby boomers increase their far away contributions in the second quarter from a year ago? H. Okay, what percentage? Between 1 and 100.

Adam Van We 9:33

The new tax law has some interesting provisions in it for older working people to save as well. I wonder if that will further increase the contributions.

Steve Van Wee 9:43

Well, if you're 60, 61, 62, 63, you're still considered a baby boomer and you get the extra contribution level. And I think there's a lot of things going into it. Part of it I also believe is that when you get a little older you tend to get a little more conservative. But when the market starts humming, you get a little less conservative. So maybe more in. There's probably as many reasons as we could sit here and roll off our tongue for the next 10 minutes. But the point is they're doing it and they're doing it successfully. And there's a lot of people who have reached that sort of magic for no other reason except it feels good. Million dollar mark. Yep. What percentage did they increase their contributions during that quarter? All right, back to jobs. One thing I told Adam in the break, the one thing I couldn't quite rectify in that whole job support was in the household survey from the BLS and that said that 288,000 new jobs were created according to the household survey. Now you got to look at that in terms of the ADP survey. 54, those are actual payrolls and the 22,000, which really netted out to 1. With the decreases in June and the increases in July, that one was just inexplicable compared to this. So my speculation is that more people are starting self employment and gig work and that kind of thing. The interesting stat to me was that the population itself grew by 216,000, but the people in the workforce, they were up 436,000. And the participation rate we've been whining and crying about for years now, it actually ticked up. So I think people are gathering a little momentum in their search for jobs just at the time it's getting a little tougher. I would say that's a pretty good idea. Yeah, they're not going to come to you anymore. You're going to have to go get. So that seems to be what's going on by next month. You know that they put the new guy in at bls, but he hasn't had a chance to change any of their surveying techniques or anything yet. So we're trying to, trying to see what will happen with him in there and see how reliable these things become.

Adam Van We 11:40

Exactly.

Adam Van We 11:59

Yeah, hopefully they revamp some of those systems and get things get data that's more accurate the first time around.

Steve Van Wee 12:05

Yeah. The other thing I was looking at was I did a little survey and actually used by AI for this, but I did a little survey of the labor strikes that happened in August. So there were a lot of labor strikes, people like Boeing and Republic Services and Mercy Health and Butler Hospital,

Steve Van Wee 12:29

so on and so forth. A lot of labor strikes, a lot of nurses and machinists looking for better money and things like that. So that, that might interfere a little bit too. But the strange part is, maybe not so strange, but the most predictable part. In August, the car factories do their retooling because they start to produce Next year's vehicles in September. And that's why you can go in September and October and see next year's vehicles on the lot, even though it's not next year yet. So keep all those things in mind. This could be kind of a low mark for job creation.

Adam Van We 13:04

I think so. I mean, after the results of the second quarter being so much better than anyone expected and sort of the uncertainty around the tariffs going away, I do feel like there's. I feel like an uptick is probably coming.

Steve Van Wee 13:19

Another thing, too, the mainstream media whiners are all complaining that Trump hasn't produced manufacturing jobs yet. But have you looked at construction jobs? How many weeks have we been saying first you build the factories and then you hire the people to work in them? Construction jobs are up, manufacturing jobs are down. That will reverse itself. I'm not going to hire 350 people to work a shift in my factory until it has an actual roof on it and some machinery inside.

Joey 13:48

I think there's some logic to that.

Adam Van We 13:50

Yeah, for sure. And those factories take a while. Even if you're restarting up an old factory, there's still a lot of work that needs to go into it before you can get it running again.

Steve Van Wee 14:00

Well, first off, an old factory, you're going to run it on a lot less people. Yeah, there's going to be a lot of automation in every factory that's either refurbished or built from new this year. There's going to be a lot of automation.

Adam Van We 14:13

No doubt about it. I actually had an article I pulled and I made a little note to myself above it and I said, dumbest article of the week. It the headline is jobless claims rise to highest level since June, adding to concerns about labor market. And then the sub headline says claims jumped to 237,000 above expectations. 237,000 is a really good number. That's like historically super low. It's 250 is where you start to get worried. It's been below 250 for years now. And I mean, maybe one little blip above it, but essentially we've had great numbers on the, on the employment front.

Steve Van Wee 14:53

Zero or one in the last five years, I think. And the trend immediately reversed itself. So it was an anomaly.

Adam Van We 14:56

Yeah, something like that.

Adam Van We 15:01

It rose by 8,800.

Bob 15:04

Housing.

Adam Van We 15:04

Yeah, just really adding to concerns.

Steve Van Wee 15:08

That's a rounding error, as we always say at the bls. That's just a rounding error.

Joey 15:12

I think the definition of rounding error grew to like 88 after last month.

Adam Van We 15:16

Well, actually, with the revisions this month, that's down to almost 100% of the jobs that were reported were fake.

Steve Van Wee 15:22

That. Yeah. Here I've got one of my great big stack of things. US Manufacturing shows signs of rebound. And as output and orders rise. And that was from September 3rd. And the whole rest of the week all I hear is whining and moping around on the media. And they're, they're never trumper types. I just had to laugh. US Manufacturing activity picked up sharply in August. There you go.

Adam Van We 15:52

So the ISM number came out this week. It showed it rose to 48.7, which is still contraction. But it was higher than the, I think 47.1 that it was last month. So definitely moving in the right direction.

Joey 16:05

I mean if you just step back and think about everything that's gone on this year and how resilient the market, every piece of the market, it's amazing and promising. I wouldn't bet against it.

Steve Van Wee 16:16

A lot of people did.

Joey 16:17

Yeah. And, and they got over pretty quick. People, I think they bet against it for like nine days. And then April 9, they all came back.

Steve Van Wee 16:25

If you are, if you're this the scaredy type, the Chicken Littles and you listen to people. I keep stacks of things. People like Harry Den. Harry said the market is going to drop by 88% this year. And it's a slam dunk guarantee by a guy who can't guarantee anything except that he'll charge you 350 bucks a year for his newsletter.

Joey 16:50

I can't imagine the conditions where I would ever say 88 decline. I mean I genuinely. We could have a nuke hanging over us and I would not say 88.

Adam Van We 16:58

Yeah. There's just, no, there's no logical reason that that would happen.

Steve Van Wee 17:05

Cash on hand in the companies in the list of exchanges. Be a lot higher than that. You could swap that for cash and make money on it.

Joey 17:11

Yeah.

Adam Van We 17:15

I think you gotta. I think the, the dollar becoming worthless is the only reason that something like that could happen.

Steve Van Wee 17:22

Yeah. And you know, that's just not in the cards.

Adam Van We 17:25

Not right now especially.

Joey 17:26

I think the genius act is going to help even further protect the US dollar.

Steve Van Wee 17:30

I think so too. You know, everybody wants to dump on the dollar and create a new global currency and all that stuff. And by everybody, I mean everybody who hates us, which internationally is pretty much everybody. But I don't care about that. And I don't think you should either. Look at what's going on in, in some places like Argentina. And success is right around the corner.

Adam Van We 17:46

No.

Adam Van We 17:54

What a crazy turnaround. Story that's been just really impressive what he's done down there.

Steve Van Wee 17:59

Have you seen the woman in Colombia that was actually the one who received the most votes in the last election, but Maduro is trying to find her and kill her. So she's in hiding and she's been doing some interviews. This week on fox.

Steve Van Wee 18:17

She, if, if we can get rid of him, we got a 50 million dollar bounty on him. If we can get rid of him and pave the way for her to get back in. I would almost guarantee you. I don't guarantee much, but I would almost guarantee you that Colombia would have the turnaround or Venezuela. Excuse me?

Adam Van We 18:33

Yeah, I was gonna say that's not Colombia's.

Steve Van Wee 18:35

I lied about that part. Okay. It's Venezuela. But I would almost guarantee you that Venezuela's turnaround would mimic that of Argentina. It was once upon a time the wealthiest country in South America.

Adam Van We 18:48

I've had, I have some friends who have been there. Say it's absolutely stunning. Really an amazing place. Unfortunately, it's been ruined by a couple of bad leaders.

Steve Van Wee 18:56

When I was in high school, we had a exchange student named Jaime Fantasia. He's still in touch with some of my old classmates. I see on the email things that go out. And he, he was part of the successful version of Venezuela and he always talked about it with the kind of reverence that you would think might be reserved for Americans. But it was beautiful and it was prosperous and so on. And then it wasn't. And it, it can come back because it has the natural resources. Fantastic.

Joey 19:31

Their inflation, I can't believe this is a celebration. Their inflation's down to 27.7% year over year.

Adam Van We 19:38

In Argentina or in Venezuela? Yeah. And it was over 100.

Joey 19:39

In Argentina.

Joey 19:43

Yeah. The compound since 20, 23,000.

Adam Van We 19:46

Yeah.

Steve Van Wee 19:47

Wow. The big numbers. There have been other places and other incidents like that. For instance, the Weimar Republic in Germany. And you, the way you had to, if you wanted to employ anybody, you had to pay them in the morning so they'd run out and buy bread and whatever for dinner, take it to their house, then come back and work the day because when you got paid the next day it was going to be worth a lot less. That's how you had to do business. We'll be right back after a short break. This is the Van WE Financial Hour. Welcome back to the Van WE Financial Hour. I'm Steve Van We.

Adam Van We 20:22

And I'm Adam Van Wee.

Joey 20:23

And I'm Joey Loss.

Steve Van Wee 20:24

I remind everyone, lines are open. 904-222-825. 5. Where you can take a shot at the trivia question, which is by what percentage did baby boomers increase their 401k contributions in the second quarter? And it's a nice number, people, you know, considering that's a bunch of us older guys and gals. All right, Lottery fever, Everybody's talking about it. Why not? It is now officially the second largest in history. There was one just a very few years ago, 2022, I think that hit 2.04 and it was won by someone in California. But this one's at 1.8. And the way the drawings are going, you never know. But you know, the odds are so remote. I, I've had some, a lot of, you know that we've had some personal experience with sudden wealth. Not our own, but vicariously through people who came to see us. And it's been quite an education for, for us and a lot of other people as well. There's a lot to be said that isn't necessarily said. I got thinking about all of this, of course, watching the, the prize money go up and then I read kind of a deep recent article in Financial Planning or one of the, one of the industry trade magazines. It was written by a woman advisor in California and it was what should you do if it turns out to be you? And everything she said was good, but she didn't say everything. So there's some things that she definitely left out.

Adam Van We 22:05

Have a call.

Steve Van Wee 22:07

Good morning, Bob.

Bob 22:09

Good morning.

Steve Van Wee 22:10

Got your ticket.

Bob 22:13

Did I? What? Pardon?

Steve Van Wee 22:14

Got your, your Powerball ticket.

Bob 22:17

Oh, no, I don't, I don't have that. No, I don't, I don't gamble. I rather have my investment people manage my risk versus me.

Steve Van Wee 22:27

That's very good advice.

Bob 22:30

Taking a sack of money like Santa Claus to the, to the gas station and standing there for an hour and a half buying tickets. People, people do that. But I'll tell you what, you talk about instant wealth. If I had a dollar for every love bug that I've chased away from our porch over the past couple weeks, I wouldn't have to even invest in the stock market because I'd be a multi billionaire. They just keep coming. It's unbelievable.

Steve Van Wee 22:38

Right.

Steve Van Wee 22:57

We've been lucky we've avoided them so far.

Adam Van We 23:00

Yeah, I used to live kind of where like down southwest of here. And they are way worse down by you than they are up here usually.

Bob 23:08

Oh my God. We're overwhelmed. But I just wanted to update you. We traveled to celebrate my brother in law's birthday in Boston. And let me tell you about the city of Boston. You cannot move without a ICE agent, a DEI agent. A DEI or dea. Dea, Okay. A, excuse me. Harbor police or Boston Police. You, you just, I mean people are out on the streets at night. It's unbelievable. I think, you know, that's their attempt to prevent an invasion of the National Guard. But it's overwhelmed by police presence and all, all types of police presence in Boston. When we were there for the weekend, we were out in the, in the bay on my brother in law's boat. And it's really interesting to read the numbers on the bottom of the airplanes as they go overhead landing in airport.

Steve Van Wee 24:07

Well, I hope Michelle Wu is miserable. Nothing personal, I'm sure.

Bob 24:13

I'm sure. Yeah. Anyhow, just calling in, let you know that we were up there and I haven't been up there in a couple years, but it's. The harbor front has changed drastically. You can't buy real estate there anymore. It's unbelievable. The am of homes and condos and high rise condos built. It's, it's.

Steve Van Wee 24:34

And there's still a, there's still a housing shortage in the northeast. Yeah, there's so much demand.

Bob 24:39

Yeah, it's incredible. The demand that we saw was, was multimillion dollar for just a little place and a high rise.

Steve Van Wee 24:48

That would curb my demand.

Bob 24:50

Yes, for sure. The trivia, But I had the blower running when you announced it, so I didn't even hear it.

Steve Van Wee 24:51

You want to take a shot at.

Steve Van Wee 24:57

Baby boomers increase their 401k contributions nicely in the second quarter. What percentage increase was it?

Bob 25:05

It's just a number between 1 and 137%.

Steve Van Wee 25:11

And where did you come up with a number like that?

Bob 25:14

That was swag.

Steve Van Wee 25:16

It was also perfect. Really? It was 37%.

Adam Van We 25:19

Oh my God. That's impressive.

Joey 25:21

Bob, you need to buy that Powerball ticket. Get the heck over there.

Steve Van Wee 25:24

Get out to Publix and buy that ticket, man.

Bob 25:29

37%. Really?

Steve Van Wee 25:30

It is 37%. It was followed closely by Gen X at 25%. And all told, 401k investors just at Fidelity, they were up, I think 73,000 of them. I've got it somewhere. But something like that. New millionaires in that quarter. And part of that's from the contribution, part of it's from the strong tailwinds in the market. Nice.

Bob 25:57

I need to, I need to get. Sit and get a. Go through the course and get my financial advisor's license and go to work for you guys apparently.

Steve Van Wee 26:06

But just don't, don't always guess but you know, good luck.

Bob 26:10

If I can pull something out of the. Out of my rear, like that number, like, whoa, let's see what could be in the market.

Steve Van Wee 26:18

You know me. I've got a million old sayings, and one of them is, I'd rather be a little bit lucky than a whole bunch of good. It helps. We've got your address. Don't worry about it.

Bob 26:25

That's true. True. I was very lucky.

Bob 26:31

Just donate it to a deserving soul. Yes, we're. We are. We're happy to just take a guess occasionally. And if we're right, whoever needs it, you know, there's people out there in need, you know, public service. I'm sure you guys can do something in addition to what you already do for the community.

Steve Van Wee 26:52

Perhaps we'll find an agency that deals with the eradication of love bugs and send it there.

Bob 26:57

Oh, that would be great.

Steve Van Wee 26:59

Serve everybody.

Bob 27:00

Welcome that unbelievably.

Steve Van Wee 27:03

All right, Take care, Bob. Thanks. Well, that was pretty easy. Shoot a number between one another. That wasn't just in the margin of error. That was the number. Isn't it crazy?

Adam Van We 27:09

Yeah, that was crazy.

Adam Van We 27:13

That's nuts. But I do remember driving that stretch of 75 when I used to live down there. And that stretch between North Tampa and Ocala. Once you got through there during love bug season, you could barely see out your front windshield.

Steve Van Wee 27:26

And the worst thing would be when it clogged up your radiator and your car's overheating. Yeah, you see a lot of people with cardboard in front of them, that kind of thing.

Adam Van We 27:34

Yep. It's really diesels.

Steve Van Wee 27:36

The 18 wheelers had to put the canvas covers on their. On the front of their trucks where the radiators were because they were going to overheat. It was just a mess. Anyway, that was fun. Thanks, Bob. And we will find it. We'll find somebody worthy for it. You're right. A lot of people do need a lot of help, and it isn't coming through the lottery. Among my other old sayings is that I. I have my own rules for the lottery, and they go this way. Number one, someone will win. Two, it will not be you. And three, reread number two, be before you go do number one, which is to buy the tickets. Shouldn't. Shouldn't happen. Anyway, when we did encounter this kind of thing. And by the way, sudden wealth can apply to inheritance. If you inherit $100,000 and you've never had $100,000 in your life, that's sudden wealth. But we don't spend A lot of time as a society talking about that. The ones we like to talk about are the really big ones. This one's now at $1.8 billion. And that would bring somebody in the 800 million range something along those lines in actual cash. And there is a problem that most people don't understand until perhaps it's too late. But the first thing you do when you find out that you're holding the winning ticket and it's hundreds of millions of dollars, the first thing you do is nothing. Absolutely nothing. You zip your mouth shut, tape it shut, do anything it takes to keep you quiet. Right? No one. And people say some stupid thing like why? And I will just simply tell them that you have too many friends and too many enemies the second they know who you are. Yeah. And we've all seen them, mom and pop, holding up the gigantic check that was printed out for them because they won $100 million or $50 million or $20 million or whatever. And they're in the small town and they're grinning and then their lives are ruined. From that day on, they can no longer leave the house. They have to have security driving around the house all the time. Because people believe that they should share in your newfound good fortune.

Adam Van We 29:17

Anyone? No one.

Adam Van We 30:00

Oh, yeah.

Joey 30:01

And I have a bit of a story related to this. In a previous firm, I was working with a family that when they came to us, they had about $3 million invested. The guy was a veteran, he was a venture capitalist. And one of his funds finally hit, and it hit big. And he'd been in the business for 15 years. You know, we diversified the rest of his money, but he had this little pocket of money that was his experiment and his work related money, it blew up. I mean, it was like 20, 30 million dollars overnight after tax. And so

Joey 30:33

he's a great guy. And the thoughtfulness that they exhibited because they had young daughters, they had just a lot of things to consider. Left an impression on me, I won't forget. And I think they navigated it perfectly, the things they did. They did not buy a new house for years. Right. I mean, they just quietly accepted this money and moved on. Didn't say anything and spent years really thinking about and reading about what is the appropriate. How do I keep my kids from being spoiled and changing their outlook on life, their expectations from themselves. They're a few years out from college at the time. And just their gradual approach to doing everything. They eventually upgraded a house. It was a very nice house, but not an insane house for that amount of money. And I think their thoughtfulness paid off and eventually there was a conversation with the whole family and the advisors talking about the money and what it meant for the next generation and things like that. But it took a long time and I think there's their slowness was there. They did it right.

Steve Van Wee 31:26

So they did it all right. I did a quick search on Amazon this morning, lottery winners who went broke and it came up with a little three page

Steve Van Wee 31:40

explanation. They did maybe 15, 20 of my, I didn't count but it was a short explanation of each one and then it had had the links to read their whole story and some of them wound up dead, some by their own hand, some not. If you want to see the worst case in South Florida, the guy became a foundation in his own home. His girlfriend buried him. The fun side coming up right after the break. We'll be right back. This is the Banwu Financial Hour. Welcome back to the Van We Financial Hour. I'm Steve Van Weigh.

Adam Van We 32:16

I'm Adam Van We.

Joey 32:17

And I'm Joey Loss.

Steve Van Wee 32:18

And we're going to continue our discussion on sudden wealth. And my erudite research department has just chipped in over the break and said reminded her of a line from old brother, where art thou? Do not seek the treasure. Well, a lot of people are seeking the treasure, believe me, lots and lots of them. And you know, the practical side of me, the advisor side of me says don't buy tickets. But the real truth is what Bob was saying, don't take a sack of money or a wheelbarrow money and go over and buy all those tickets if you can't afford it.

Adam Van We 32:58

I, I'll be honest. When it gets over a billion, my wife and I spend 20 bucks on every one. And that's just for fun. I mean we're not like we can afford it. Yeah, that's not going to break us. It's fun. You have a chance. But we're so bad at this that during the last drawing we did 20 bucks. So that's 10 tickets. I went and checked. That ticket that I had in my hand did not match a single number on any of the picks that were done. So that's how bad we are at playing the lottery. That's.

Steve Van Wee 33:27

That's pretty bad. Yeah, you should have called. So you, you want to be the person in line right ahead of you or the one running right behind you. So you can take all the bad numbers.

Adam Van We 33:33

Exactly.

Adam Van We 33:36

If you see me in line, get that wheelbarrow and dump it.

Bob 33:39

Right.

Steve Van Wee 33:40

Well, let's talk about what Happens if it happened to be you. Because rule number one says someone will win it. It doesn't have to be tonight necessarily, but someone. And of course, the worst of all worlds would be if you found out you were a winner and you had to split it.

Adam Van We 33:56

Yeah, that would be a bummer, wouldn't it?

Steve Van Wee 33:59

You only wind up with 900 million or something like that. Well, anyway, when you discount it to its present value, that 1.8 becomes. I'm rounding it down a little bit to $800 million. The first thing you should know is that Uncle Sam will withhold federal tax that at 25%. Uncle Sam will also charge you federal tax on that at the rate of 37%.

Adam Van We 34:02

I mean, just devastating.

Adam Van We 34:27

Yeah. So there's automatically big gap there.

Steve Van Wee 34:30

Yeah. So the first thing you have to understand, let's say you get $800 million and they take their 25%. So you got 600. Now there's another 12% of 800, another hundred million dollars, basically that you owe them next April 15th.

Steve Van Wee 34:50

Number one thing to remember, that's not your money. Number two thing to remember, you can make a lot of money on that before you have to send it to him. Adam's had some experience with that recently for a client had had a windfall and it was even better than it could have been, remember, because it turned out that he lived in one of the areas that was called a disaster zone. So they got a further extension to file their taxes. And he still hasn't paid it.

Adam Van We 34:58

Yeah.

Adam Van We 35:15

Yeah.

Adam Van We 35:20

No, he has till November, I think, to pay it now. And so we've just got it collecting interest. And that interest is substantial.

Steve Van Wee 35:27

Oh, yeah. And think of that interest on $100 million. At today's rates, you can have a.

Adam Van We 35:31

Yeah.

Joey 35:33

Risk free 4 million bucks in a year. Wouldn't that be nice, just parking it? Yeah. To be clear to listeners, don't go buy options with that 100 million. That's not what we're saying.

Steve Van Wee 35:37

Yeah.

Steve Van Wee 35:42

No, Uncle Sam doesn't like it when you remit your options.

Steve Van Wee 35:47

That brings up another obvious point. Every state and. And I guess maybe even the Central Lotto. But I think they're all done state by state. They have a time period for you to collect it. There's still money out there in the pool waiting for people to collect. And some of them are big ones, tickets that probably got lost or whatever. But yours wouldn't be like that if, of course, you were the winner. But don't claim it if, if the. If the time is good enough. And I think it got six months in Florida. Don't claim it until next year because that's going to make your taxes due by April 15, where if you wait till after January 1, then your taxes aren't due until the next April 15 on that remaining part. So little. Little things like that, that can make a difference.

Joey 36:37

I totally agree. But if there's $800. 800 million in my name, I don't know if I'm waiting. You know, I got it.

Adam Van We 36:41

I don't know if I can wait.

Steve Van Wee 36:44

Let's just chalk that one up for. It's easy to meet it for me to say. Right.

Adam Van We 36:47

I mean, 4 million is nice, but you're sitting on 800. I mean.

Steve Van Wee 36:50

Yeah, yeah.

Joey 36:51

Last time I had this problem, I couldn't wait. I had to go get it.

Steve Van Wee 36:54

I understand completely. Yeah. Anyway, the. The whole concept of it's not all yours once you've got it. That's kind of an important thing.

Adam Van We 37:04

It is, it is. And the reason that you only get 800 is that it's discounted. You have the option of getting paid out in equal installments over like 20 years, I think is the time frame, then you'd get the full amount. But if you take a lump sum, it's discounted by. They use the current interest rate. I think it's like a. What is it? Like Libor plus something? So I don't know. But they calculate a discount and so you get a lump sum that's not 1.8 billion or whatever. The. The number.

Steve Van Wee 37:27

Yeah.

Steve Van Wee 37:36

And then in theory, if you can invest it at that same lump Sum, in 20 years, you'll have 800 million. That would be the theory.

Bob 37:41

Right.

Adam Van We 37:44

Or 1.8 billion.

Steve Van Wee 37:45

1.8 billion. Yeah. Excuse me. So that's important, but let's go back to the very first thing. When I said don't tell anybody, I meant don't tell anybody. There are two things you have to worry about, and in general categories. One is your personal safety. You can't. That cannot be overstressed.

Steve Van Wee 38:06

People all over the world literally believe that they should get a share of your action. The people we got involved with would tell us stories about letters they get and so on. In fact, by the way, we had a special meeting with the FBI when, When they got discovered, they would never tell who they were. But trust me, the media will find out and they'll find out. You won't go to bed that night without people knowing that it was probably you. And that's not the night of the drawing. That's the night you go over to the lottery office and turn it in, which, by the way, takes six or seven hours to do. And you better have accounts open and know where it's going before you get there. Otherwise, where are you going to put it? Right. So anyway, the.

Adam Van We 38:40

It does take a while.

Steve Van Wee 38:52

I've rattled off there for a minute. The personal safety factor. It. It's a bit dependent on how much this is. But for money like this, you better find yourself a fortress in a fortress someplace that takes their security very, very

Steve Van Wee 39:11

to the limit, I guess. And then your own residence within a gated community or whatever, you have to be careful that it's all set up and you have to have the local police and everybody else understand it, including the FBI and such. That's important.

Joey 39:29

That includes cyber security.

Steve Van Wee 39:32

Yes, absolutely.

Joey 39:32

If anybody's going to find out very people on the dark web, other people that might be looking for you. So be thoughtful about what Internet activity you do afterwards.

Steve Van Wee 39:36

Yep, absolutely. Very important.

Steve Van Wee 39:41

All right. How about the security of your money? How much can you put in the bank or at a brokerage or whatever and have it guaranteed? Well, I didn't know when confronted with the opportunity. So we did business with Schwab as our custodian and we went through all the levels, went up the management rung a while, and the guy who we finally wound up with was big enough to tell me all of this. But they. What they would do is they had guarantees, including Lloyd's of London policies and so on, up to $140 million per account. Well, that's a nice chunk of change. But if you got 800 million, that's not going to cover it. So you better figure out how to divide it up and have it covered by virtue of being in different locations or something like that. Also, when it comes to splitting it with people there, even. Even in the class that Adam took when he was studying for cfp, the teacher of the class said that the people we're talking about weren't well advised because they should have split it up with a bunch of their family members and such. Well, go ahead and try that sometime. Then you're going to get a little notice from the IRS that all that money you gave to all your family members and so on is taxed to you at 40% for gift taxes because they did not buy the ticket, you did. If you're going to split tickets with anybody, document it before the ticket is purchased, you will absolutely have to prove that the people who get any part of that money were part of the purchase of the ticket, things you might not think of. So don't try to be nice. Then the other thing, once you get the money in, don't buy things for people. Everything you buy for people over $19,000 a piece per year is going to be taxed to you at 40% for gift taxes. It doesn't work, people. And that you can only do, you can get out of it on the 1st, what is it now, 20 million or something like that, the gift for.

Joey 41:50

An individual, it's like I think 19 now.

Adam Van We 41:53

Really, it's a, it's a lot of money, but not relative to 800.

Steve Van Wee 41:56

Yeah, but when you start giving things to people, then you're going to start incurring gift tax. And that is not a pleasant thing at first. 40%, believe me. All right, now let's carry it forward some more. When you have your advisory group put together, which means you should have an independent certified financial planner leading the way. And I say that not because of the personal aspect of it, it's just the right way to do things. And then you pick lawyers and accountants by virtue of what they have done in the past, how trustworthy they are, their reputations and so on and so forth. You get all that going fine. Now what about investing? I guarantee you, you don't know anything about investing relative to this kind of money. So you start to learn and little by little you figure out how to preserve, protect, defend your money and then incidentally, let's earn something on it, too. I was telling the guys here that there was one of the wealthiest families in America and I can't remember which one it was, but I promise you, you would know their name. Said the secret to long term wealth, family wealth, is very simple. Don't spend the principle. That's how you stay wealthy. So next year, year after that, year after that, you ought to have your, let's say $500 million that you netted after taxes. That should be the goal is to keep that much money and live off the poultry sum that you can earn off of it, which I guarantee you most people couldn't spend, but some people can and it always gets them in trouble. So the first rule and the last thing to remember for today is if it is you this time, don't do anything until you call us. Literally us. Yeah, because we're good. So good luck to everybody. You know, won't be anybody that we know most likely, but somebody will win. So, Russell, Rock, see you next week, same time. Thanks for listening. This is the Banway Financial hour.