Speaker 1 00:00:08 What's up, everyone. Welcome to the finance for physicians podcast. I'm your host, Daniel Raimi. Join me as we dig into what it looks like for physicians to begin using their finances as a tool to live better lives. You can learn more about our
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Speaker 1 00:00:26 Hey everyone, hope you're having a great day. There's a lot going on in the news lately in particular of late, it's been the, um, Russian and Ukraine war. And so today I was planning to talk about, you know, how that's affecting things, you know, maybe talk about some of the potential future things that might happen as a result of it. And, um, hopefully give you some things to think about, uh, in relation to, you know, how this translates to our situation here in the United States. So we'll, uh, we'll talk through that today and, um, jump into it right now. Okay. So before I get into, you know, what's going on with the war and everything, um, I think it would be good to kind of talk about how our economy looked right before all this started. I think that's just a good kind of, um, comparison point as things play out, you can kind of, we can kind of look back at that and say, okay, you know, here's how things have changed.
Speaker 1 00:01:30 So right before the war, um, well the most, so the big, the big factors, you know, you typically look at as far as like gauging how our economy is doing, especially of late, a lot of people who are paying attention to inflation. So I looked at the most recent inflation numbers and as of February of 2022, uh, the inflation rate is 7.9%. So there's probably like a touch of the war effecting that rate. Um, but it's mostly, that's the 12 month average inflation. So it's, you know, 90 plus percent pre or stuff. And so in other words, all these changes associated with the war will not have come into play with that for the most part. So 7.9% 12 month inflation as of February, that's really high. Um, in the grand scheme of things, that's the highest since 1982, it's the highest I've I was born in 83.
Speaker 1 00:02:24 So it's the highest, um, since I've been alive. And so, you know, that typically that's viewed as a negative, we talked about it in a episode a while back about inflation. So you can check that out if you want to understand that a little bit more, but most time it's viewed as a negative and it can be a huge negative. Now, if you're working and earning income and being responsible with your money and putting it in the right places, inflation should not be too big of a deal. Uh, most of you listening have solid income, solid jobs, you know, and maintaining a job is one of the best ways to kind of like ride the inflation rollercoaster because, you know, as inflation goes up, you should be compensated more as a re you know, as that rate increases. So, but either way prior to all this new stuff, kicking up inflation was already really high.
Speaker 1 00:03:17 7.9% is really high. Most people, especially like the, uh, economists and government people argue, that's mainly related to the, all the COVID stuff kind of working its way through. And that probably is partially true. Um, and the argument from most people argue that that's going to be going down. You know, it's kind of like a quick spike time will tell whether or not that's accurate, but basically going into this big, huge new development with the war inflation was already pretty high. Second big metric that I think is important to look at is unemployment. So re unemployment, um, as a February as well is actually 3.8%, which is extremely low. So that's generally viewed as a really good thing. And it's, so that's pretty close to the, um, low that we had right before the pandemic, which was a 50 year low. So basically in the grand scheme, that unemployment rate is extremely low relative to historical rates.
Speaker 1 00:04:19 So, you know, obviously that's a good thing because people are working and, and, um, there's plenty of jobs, which is typically reflective of a solid economy. And in actually higher inflation is can also be reflective of a solid economy. It's tip, you know, it's kind of like an overheated economy to higher inflation gets that's like, because, you know, sometimes that's because there's such a high demand for things. Um, but so unemployment was low inflation was high. And as kind of, as a result of that and other things, the government has already kind of announced, uh, that it's, you know, their plans to continue to increase interest rates and that's to help, you know, a big part of that is to help keep the inflation numbers under control and kinda like cool off the economy, a touch so that it doesn't get overheated. So that all came out and this has all come out before any of this war stuff even came up, the plan was to increase interest rates.
Speaker 1 00:05:22 And so what's happened also prior to the, uh, war stuff is the stock market has generally been really, really good now, 20, 22 year to date, as of like the middle of February, it was not great. It it's started to go down ever since all this talk of inflation, maybe lasting longer in interest rates going up the market has had some downturn. If I looked at the, uh, Vanguard total stock market, I like to look at that as like a gauge of the overall stock equity market in the U S and as it been fair February, it was like in the five to 10% down range, you know, depending on which days you look at. So that's, that's like a modest downturn for stocks. That's not a huge downturn by any means. That's like a, you know, modest downturn, definitely not great, but the, so the market has been down a little bit prior to the war, uh, starting in whatnot.
Speaker 1 00:06:22 And I think most people would say that's due to the, uh, unemployment and, uh, or I'm sorry, the due to the inflation being higher. And the fact that interest rates are probably gonna start going up. And so that, that was all, that's kinda like where we were at. Uh, most people, most economists would say our economy was extremely solid. Most people would argue we've recovered pretty well from the pandemic and all that sort of stuff. Um, so that's kind of the, if I was, if I was even like a snapshot as of, you know, mid February, or, you know, around the time of when the war started, that's the summary I would give as far as our economy. So now, you know, it's like, just after we get through all this COVID massive news. It's like, that's finally starting to maybe slow down all of a sudden we have this war and then it's, so now that's all in the news and it's, it's terrible.
Speaker 1 00:07:16 It's terrible. You know, nobody wants to see that happen. Um, but it's definitely ramped the news cycle right back up again. So now that we have this, so we've added the, you know, this Ukraine, Russian war on top of everything. So that started February 24th officially, but, you know, there was a lot of talk about it before, so that's going to change, that's changing the game quite a bit. So it's the part that the news, well, I guess for starters, it's a, you know, true war, you know, combat, that's the S that's the worst part of all of it. You know, people are dying and that getting injured and destroying property, it's terrible. That's the terrible part about it. And that's definitely happening now. That's mostly limited to Russia and Ukraine. There's a few like, you know, other there's countries sharing, helping out mostly Ukraine, but, you know, the actual combat is for the most part limited to Russia and Ukraine, the, um, the war itself.
Speaker 1 00:08:24 Uh, now what's been interesting about this particular engagement. I mean, this is not the first time this happened, but it's the, it's the most aggressive situation as far as like economic, uh, adjustments. So the way I would look at it as it's like, it's a, it's a combat war between just two countries. Um, Russia's pretty big from a military standpoint. Um, Ukraine is smaller, but it's also an economic war and it's, that's where that's massive. Uh, because, so it's like potentially maybe the majority of the world, if you're looking at economically, like all the big economic powers basically have gotten together and like brought the hammer down on mainly Russia. So it's definitely negatively affecting Ukraine's economy as well. But so that's, I kind of look at that. That's like a, okay, economic war almost with all the sanctions and like limitations and not taking exports and not doing business and all that stuff.
Speaker 1 00:09:28 So that's much more expansive. It involves lots more countries and it's, you know, going to have a big potential ripple effect. So Russia and Ukraine are not huge players in the, if you look at like the overall economy, like as far as size of markets, they're not very big, they're very small, but they are really big players. If you, if you look at the, a couple of sectors, the main sectors, like if the, if we look at energy and food, they are big players in that arena. So Russia, especially with like energy, they just have a lot of energy exports and food is another big one. I didn't realize until all this happened, how much food, both those countries produce and export. And so what's happened with all this, all these sanctions and like, you know, just the war in itself, plus all the other countries, you know, cutting ties and all that kind of stuff.
Speaker 1 00:10:28 You know, exports of both energy and food have definitely decreased and potentially even like stopped completely depending on, you know, the country we're talking about and the specifics, but basically exports from Russian and Ukraine for energy and food have gone way down. And in some cases maybe is zero. So that has in part of a lot of that has been like proactively done by other countries. That's the part that's unique. There's always going to be some effect, uh, in a war in relation to their business and economic output. But in this case, um, you know, all these countries are like, no, no, no, we're not X. We're not going to take any Russian exports. Uh, we're cutting it off completely. So, um, especially for Russia, it's like, we're not doing business period with you. And so what basically happens when that occurs, uh, it definitely is kind of like a restricting on the economy that like Russia and Ukraine, they're going to have major economic challenges and potentially have a blow up, especially, you know, the longer this plays out, but it also affects the whole entire world because all the, uh, all this stuff has become so globalized.
Speaker 1 00:11:51 So if I was to boil it down, simplify, um, it's like with energy, um, there's, you know, the price of energy is, and the price of most things is based on the supply, how much is available and then the demand or how many people are buying it are using it. So what happens when this kind of thing occurs, and especially when they go above and beyond and put all these restrictions is that, um, that basically like stops a segment of the supply. And so it's when you have less supply, but demand stays the same that will always result in prices going up. Same exact thing for food when supply gets cut like overnight, and it's a pretty big chunk of the world supply, but when supply goes down and demand stays the same, which, you know, should say the same, then that will always mean prices will go up.
Speaker 1 00:12:55 And because of how globalized we are now, it's kind of like a global price increase for both of those. So that's a given that's already kind of happened. It's probably going to keep happening. Nobody knows exactly how it's going to play out, but that's the kind of immediate effect on that. So all this has played out really in a short period of time. You can see, I mean, if you can see it firsthand, if you go to like gas station, I mean, you know, gas prices are up, you'll start to see, you know, uh, your heating bill or if you use gas, um, and your house, um, will go up. And, um, and then he, you know, food prices, what I was reading is they, especially like wheat is an export from, uh, uh, those areas. And so food prices should be going up as well, uh, as a result of all this.
Speaker 1 00:13:46 And that's, like I said, that's all already starting to play out. And so the problem with that is that's gonna compound inflation cause really, uh, inflation is just, um, you know, when prices go up, that's what inflation is. And so if, if, uh, food and so food and energy are both slices of that inflation pie. And so if they're increasing, then that's going to further increase inflation. And so basically this has set the stage for kind of like a further, this is another additional factor that's probably going to keep inflation. I, or probably bump it up even a little bit for sure, in the food and energy, uh, categories. But, um, a lot of people think it will, it will bump, you know, the net effect of all of it will be that inflation will be quite a bit higher even than what it is now.
Speaker 1 00:14:49 So I'm starting to get into some of the future effects of all this, but as, as it stands today, it's, we're still really early in as, as I'm recording this, it's still very early in on this, but if we start to kind of a guesstimate, well, I guess before I get into the future stuff, really, I mean, with the future, everybody likes to predict the future. And, but who knows, what's going to, I mean, nobody knows what's going to happen in the future. It's super easy to make predictions and you know, most of the time people don't hold you accountable. So everybody loves to make predictions. People love to hear predictions, but I think it's important to realize at the end of the day, nobody knows exactly what's going to happen, especially with things like this, this is like completely uncharted territory. There's this kind of thing is very different than situations in the past.
Speaker 1 00:15:41 You can't look back in history and find an exact example of this that played out in exactly this way. And while I'm talking about that, that's kind of how all these new economic seasons, they all kind of have that same, that similarity in that it's, it's a, it seems like it's a, you know, it's really kind of a new situation, um, that hasn't, I mean, there are some similarities from the past, but you know, everything's changing. And so it's difficult to that further. It makes it even harder to predict the future, given that it's like a new sort of situation that also is why a lot of times people get caught off guard and are not expecting it cause they had just, people don't have a good bearing on how to kind of act in this situation. So this is, so I think the way I would view it is we don't know what's going to happen and we're in uncharted territory.
Speaker 1 00:16:37 It could, you know, it could be a rough patch even for our, you know, economy, but it could be short-lived and not so bad, but I don't. W so as I talk about these potential future effects, I don't want you to think like this negative situation or positive situation don't assume one or the other, just because we don't know. Um, I do think it's helpful to think through them and, um, keep an eye on it and, and that sort of thing, but, you know, ideally your planning is based on you and you've already kind of built in like the fact that the future is unknown with this kind of stuff. Anyway. So as far as the future, you know, I, I guess I could see like multiple things playing out. My hope would be that it kind of like slowly starts to deescalate or go the other direction and things die down and there's more conversations and less just like shots in the dark.
Speaker 1 00:17:43 So, you know, ideally it's a deescalation and things slow down and eventually it less, less and less of a, of an issue. I don't know how likely that is. It doesn't seem that likely, but that would be my hope. And it's definitely possible. Another situation I could see happening would be the economic war kind of just continuing on and maybe even ramping up. I could see the economics. So I mentioned like at the, be at the beginning, like the fact this is unique in that how economically there's been so many, uh, sanctions and changes to kind of restrict Russia. And so I called it an economic war. So that sort of thing I could see even continuing to ramp up and maybe lasting as long as, or maybe even beyond the whole, you know, actual combat war. And, you know, maybe that's like the, that could be a huge factor in itself.
Speaker 1 00:18:42 That's kind of like almost like reverse globalization, I guess, you know, cause globalization has been more like w has been the trend of all of all countries kind of like being integrated. So, um, if that were to play out, I could see us kind of taking some steps back on that. Or maybe it's like, we have kind of like one global side economically and another global side economically. So, you know, maybe Russia has pairs up with some other countries to kind of economically speaking, stay afloat and kind of maybe even throw some, uh, sanctions back the other direction or, you know, restrictions or whatnot. They have definitely means of being aggressive in the economic front, um, as well. And so who knows, you know, I just, I, I just can see a scenario where this economic aspect continues and even increases. And it's like kind of like an economic war that drags out for a while.
Speaker 1 00:19:42 I have no idea how that would affect things, uh, because it's, I mean, that's totally uncharted, but I kind of view it as like a reverse globalization it's like kind of start to isolate sections and, you know, who knows how that affects, uh, you know, the markets and that sort of thing. And then there could be the, just all out, uh, this would be, I think, worst case scenario, for sure. But, you know, if all the countries get involved with the actual combat, you know, you have like all out war between many countries. And so I think, well, based on like the trends right now, um, I think, you know, a lot of the big, you know, like the U S and the European countries are valuing not to get involved, um, in the combat itself. Uh, and hopefully they don't, but I could see the, this kind of creeping over borders, or, I mean, especially if, uh, this expands to a different area that would potentially change that overnight.
Speaker 1 00:20:42 And or if Russia kind of starts to come back with, you know, attack on as a result of the economics. In other words, I could see Russia getting aggressive with combat in defense of the economic warfare. And I think there's been some like threats of that kind of thing on their end. So anyway, all out war, definitely worst case scenario. Nobody wants that, but there's, and I, I hope, I think that's probably the lesser, uh, likely scenario and, um, but it, but it's possible and you know, who knows, or along those lines and, and this, I guess would not be as bad near as bad as a all out war. You know, we could have like a kind of a repeat of the cold war type situation would just lots of, lots of threats and fear and that kind of thing. I don't know if that's likely, I don't think that situation is as likely either, but, um, I think if I was to sum up like the future, I've said it already, there's just a lot of uncertainty and nobody really knows.
Speaker 1 00:21:49 So that's part of what is, um, caused a lot of anxiety is just the fact that it's, um, it's so uncertain. So as far as like actions to be thinking about, you know, as it relates to your situation, I think I'll hit on a few just considerations and, um, throw out some ideas. But first of all, diversification, I'm sure you've heard diversification. I've talked about this lots before, but the idea is just having your investments or your money in lots of different types of vehicles and places so that when one doesn't do well, you can kind of offset it with something that is doing well. And, you know, you don't have all your eggs in one basket. And so diversification has always been key, but it's especially key right now. And you can kind of see why, I mean, this is a good, a good example of why it's so important.
Speaker 1 00:22:45 So for example, um, the average person owns Russian stocks, whether they realize it or not like a lot of these international funds, especially like emerging emerging market funds, like an index fund, or really a lot of emerging market funds period, uh, owned some, at least some share of Russian stocks. And so some are much higher than others. And so that Mar that slice of the pie is pretty much like going to, I mean, it's getting killed in the, in the Russian stocks are getting killed. Uh, and they're going way, way, way down. You know, a lot of people think they might, even, everything might go down to nothing like bankruptcy, that kind of thing. And so, but, but definitely huge losses in Russia and potentially just total loss, uh, for Russian securities, which is definitely not good. Now, if you were, I don't know. I mean, hopefully none of you were in this situation, but, you know, I could see someone maybe not realizing it, but having some, like overconcentration in Russia, maybe there was a fund that you own that had kind of like a aggressive, uh, or a, um, uh, had a positive view on Russia or invested in Russian stocks.
Speaker 1 00:24:12 And so you, without realizing it had like a higher percentage, or maybe with realizing it, you had a higher percentage of Russian securities. And so you're going to feel it a lot more. Whereas the average investor probably doesn't have a lot, uh, like if you're working with us, it's a very small piece of the pie to the point where, you know, it's like 1% depending on your situation and that kind of thing. It's like gonna be a pretty small percentage of the total, just based on the fact that Russia has a pretty small economy. So that's the passive approach is you're basically owning based on the market cap of the given, uh, stock. And so Russia is a small, very small piece of the pie. And so therefore if you're purely passive, you're going to own a very small piece of that pie. Um, but you're also going to own all kinds of other countries.
Speaker 1 00:25:05 So, uh, Russia is not doing very well, but like, you know, most of the other countries are doing well, so that that's helpful. I think that's diverse. Diversification is key. And, um, if you're not aware of it, wouldn't hurt to, um, take a look at like the international funds you have. And ideally I'm a fan of passive investing. So that's going to be, you know, much more diversified, but if you have emerging markets funds, um, that are especially ones that are not passive, or if you own just a lot of emerging market funds, that would be something to look at is because you're, there's a chance you have a much higher concentration in Russia, which could cause lower returns over this period of time. So main takeaway though, diverse diversification is key. This is just a, one of many examples of why it's key. The other big thing to think about is just staying the course, really.
Speaker 1 00:26:01 And, but, uh, but I think it's, what's interesting is the temptation, as things get worse is to make changes because it's like, why, if something's broken, I need to fix it. So the temptation is to fix things or change things or change course, that's just how people work. But in reality, when things happen, when things get dicey or uncertain, that's actually the most important time to stay the course and not change things like not tinker with things. That's, that's about the worst possible time to tinker with things. And so now more than ever is especially important time to, you know, stay the course, like follow your plan, like focus on your goals and values and your investment plan and all that sort of stuff that's already been established. Hopefully it's th th this sort of thing. This is when it becomes especially important. And this is when it's, this is key to follow that because it'll, it gets emotional and it feels broken, and you're going to be potentially very tempted to make changes.
Speaker 1 00:27:13 So now more than ever, it's especially important to, you know, focus on your situation, your goals. Now, I'm not saying to like, not pay attention to external factors in the news, unless you just don't want to pay attention to it. But I think it's good to have, um, some awareness of what's going on, but you don't want to get in the situation where these external factors that are really at the end of the day out of our control, we don't want to, you don't wanna get in this situation where there's external factors that are out of your control are causing you to make changes, changes should be based more on your situation or your goals. And so, for instance, like when we're helping people put their finances, get their finances in order, like we're kind of already building in this assumption that these kinds of things happen.
Speaker 1 00:28:09 And so that's why we tell people like diversification is important. That's why we tell people like buying individual stocks is risky. Um, that's why we built, it'll be, we'll have an emergency fund. Um, we're kind of, that's why insurance is important. We're already building in like these protective measures because inevitably these things will always happen. And it's more about, you know, having that worst case scenario, backup plan in place no matter when they happen. And we don't know when it's going to get really bad. So you kind of just have to assume it could happen any day. And so a good financial plan has all the has co has thought through or considered a lot of these risks and worst case scenarios, um, which will, should further give you confidence to be able to just focus in on like, what's your goal. So what's most important to you and not make these changes due to these external factors.
Speaker 1 00:29:08 So take away their stay the course now more than ever. Another thing to think about, you know, energy use, I think is, is going to be, I mean, energy prices are gonna have gone up will potentially continue to go way up. So, you know, how efficient is your house? Like, does your house? I mean, my house just, uh, we have old windows and it's just like pours the hot air or the cold air, you know, pours in, in the winter and the hot air pours in, in the summer. So it's this kind of thing as energy prices go up and there's this crunch with energy, it's going to make me think a little harder about like, maybe we ought to get rid of this energy inefficiency we have, or maybe things like solar panels. Like that's a way to, you know, reduce your reliance on, um, electricity or energy in general.
Speaker 1 00:30:00 And so that can be, you know, a way to help lessen your reliance on that, uh, segment. And, you know, potentially this doesn't have as much of an effect or even electric cars. I mean, like if you had, for example, right now, if you have electric car solar in your house and your house is pretty efficient, I mean that you're not going to have, you're not going to be feeling these gas prices and oil, gas prices, and inter uh, natural gas and gas spread gasoline and natural gas prices going up. You're going to, I'm sure there'll be some small, small effects, but you will not fear it, feel it near as much as, uh, the average person and then public transportation. That's always a way to reduce that energy reliance and then food. Um, I don't know how much you can do about this, but I mean, I would expect food prices to be higher.
Speaker 1 00:30:56 And so, you know, I think what I was reading is especially like wheat is a big export from that area. So, you know, I would think that category of food, I know a lot of stuff has made with wheat, but, um, I would expect that segment to go up more than others. And then I think the last big thing would be, I think now is an excellent time to, if you are charitable or you wanna want to give, or you already give, I think this, this is a good time, great time to, to potentially give to some people. Cause like that's unfortunately the loser and all this, like I'm talking about all these economic things sitting in my office and it's sunny and I'm not worried about any, you know, not worry about gunshots or my life. All everything's good here. And hopefully that's the case for most of you all.
Speaker 1 00:31:52 But the people that really are getting the brunt of this are the people in Ukraine and Russia. And I say Russian people as well. When I say, I think the governments and the leadership is what's driving a lot of these things, but the Russia, I think I would hope that the average Russian person is a good, generally good person. And unfortunately they are going to feel huge negative, uh, effects from this. And unfortunately a lot of the big leader, uh, wealth in control in those countries will be able to, you know, avoid a lot of the pain as part of the problem. And so average people in Ukraine and Russia, I think they're going to feel the brunt of this. And, you know, if you want to help people that are struggling now is better time than ever. Um, and so what I would suggest if you, like, if you start to go down that path, I think it's a good idea to do a little homework on it.
Speaker 1 00:33:01 Um, you don't want to over overanalyze things, but like, ideally it's a 5 0 1 C3 that's established and it has some financial information and you can kind of get an idea of where the money's going and, um, you know, maybe they have some information and some reviews and stories and that kind of thing. I would be a little hesitant or a lot hesitant to give to like individuals, unless there's some sort of personal relationship established. It's just, I think also this kind of situation can, uh, increase the number of like scams too. So, you know, that kind of stuff, I'm sure some, some jerk out there is like trying to come up with a way to benefit from this and know, you know, come up with some scheme that's, uh, intended or they say is going to help out. So keep you have to, I mean, I know that sounds like super skeptical, but like that's reality.
Speaker 1 00:34:03 Um, and so you got to keep an eye out for those sorts of things and, um, you know, look at the, do a little homework on it before you just start writing checks. So, so I think those are some of the big actions to, to keep in mind. I think the main thing is, um, you know, not making emotional decisions, staying the course and you know, doing what you can, keeping an eye on things, hopefully things, hopefully this all goes more that direction of fizzling out that would be best case scenario, hopefully fizzle out by the time you're listening to this, that would be, I would be so, you know, hopefully this is worthless and it's all gone away by the time you're listening to this. I don't know. I unfortunately think that's unlikely, but that, you know, we can hope for that, but, uh, hope this has been helpful.
Speaker 1 00:34:54 And, um, we will, uh, hopefully we don't have to dig into this topic again in the future. Um, but if, if things keep going, um, we'll definitely circle back to this cause I know it's a big, you know, it's a big story. So, um, hope you have a great rest of your day and, uh, look forward to catching up with you next time as always, thank you so much for joining us today. If you found this valuable, please give us a review on iTunes and share with a friend. Also check out our website at finance, for physicians.co for all sorts of additional content. See you next time. Finance for physicians is not an investment tax legal or financial advisor. All content included in this podcast is for informational purposes only and should not be considered financial tax or legal advice. Material presented. It is believed to be from reliable sources and no representations are made by finance for physicians as to another party's informational accuracy or completeness, all information or ideas provided should be discussed in detail with an advisor accountant or legal counsel prior to implementation. You don't have an advisor or like a second opinion. Feel free to check out our website for recommended advisors.
