Wealth Podcast Post

Financial Prosperity with Gil Baumgarten

George Grombacher June 23, 2022

share close

Financial Prosperity with Gil Baumgarten

LifeBlood: We talked about finding financial prosperity, how interest rates impact the stock market, how to think about inflation, thoughts on students loans, and keys to success with Gil Baumgarten, President of Segment Wealth Management, author and industry thought leader.  

Listen to learn why why resilience and grit are keys to long-term financial success!

You can learn more about Gil at SegmentWM.com, Facebook, Twitter and LinkedIn.

Thanks, as always for listening! If you got some value and enjoyed the show, please leave us a review here:


You can learn more about us at LifeBlood.Live, Twitter, LinkedIn, Instagram, YouTube and Facebook or you’d like to be a guest on the show, contact us at contact@LifeBlood.Live. 

Stay up to date by getting our monthly updates.

Want to say “Thanks!” You can buy us a cup of coffee


Invest in yourself. Bring it All Together.

Work with a coach to unlock personal and professional potential.

Our Guests

George Grombacher

Gil Baumgarten

Episode Transcript

eorge grombacher 0:00
Come on one level, this is George G. And the time is right welcome. Today’s guest is strong apart from Gil Baumgarten. Gil, are you ready to do this? You bet. All right. excited to have you back on. Gil is a president of segment wealth management. He’s a fiduciary financial advisor, Best Selling Author of foolish. He’s a disruptive Wealth Management pioneer who’s been named to the top 20 ETF thought leaders by The Wall Street Journal, and Barron’s. Gil, glad to have you back on tell us a little about your personal lives more about your work and why you do what you do.

Gil Baumgarten 0:43
Thank you. Well, I’ve been married for 38 years, and 35 years, and got three grown kids. And, you know, I have two little grandbabies. And just, you know, I’ve been in the financial services business for that’s what I’ve done for 38 years. And, you know, just do a little painting, do a little woodwork. You know, so just enjoy spending time with my family and taking care of my clients.

george grombacher 1:18
Nice. I appreciate that. So we’re having this conversation on May the 11th. And we are experiencing lots of different experiences. When when the market. How do you think about the market today?

Gil Baumgarten 1:36
It spooks me. You know, throughout my 38 years in the business, I’ve had the benefit of the backdrop of declining interest rates. And now suddenly, we have a very different set of circumstances. And that creates several problems for investors. One is it gives them other alternatives. One of the things that has driven stock prices higher, I believe, over the last 40 years or so has been that people’s other competitive choices have become worse and worse. When you had an 8% CD and you were offered a 5%, you might accept that. But when your 5% went to 3%, you might not accept that. And some of that money ended up in the stock market. And because the stock market is an auction, in which the motivation of buyers and sellers are what determined equilibrium price, the more buyers and more money you have chasing those stocks coming out of CDs and bonds, the higher those prices are going to go. And so I think we have seen the culmination of that over the last 40 years. And I don’t really look forward to an environment in which other competitive vehicles suck that money out of the stock market. So I think that’s what the market is bracing itself for.

george grombacher 2:54
So that we’re going that that regular investors are going to have the opportunity to put money into some kind of a fixed income type investment and get a an attractive rate of return versus for the last 40 years, the rates of return just or give or take have not been attractive. So it’s all gone to the stock market.

Gil Baumgarten 3:14
Yes, but that too, is a double edged sword. Because when you buy a fixed vehicle, say you could get a 5% Treasury bond that’s 30 years long, which we’re approaching that, you know, as interest rates head higher. If interest rates go to 8%, your 5% bond is going to be worth about 70 cents on the dollar. Because the bond market prices future cash flows and equates that into current market value. And so depending on how high interest rates go, the bond market could also be a dangerous place. So there’s investors don’t have a lot of really good alternatives, because that factor also affects real estate. And the prices that people are willing to pay for real estate is driven by how cheaply they can finance things. And when they can finance things cheaply. They will drive prices higher and higher. So you have sort of this nothing is undervalued, everything is fully valued and rising interest rates puts a lot of pressure on a lot of different types of vehicles. So it makes me edgy,

george grombacher 4:20
spooky and and and a little edgy. So how do you navigate this? What what are the conversations with clients?

Gil Baumgarten 4:31
Well, our clients are in it for the long haul. And they understand that they’re going to lose money periodically in pursuit of higher returns. And they’re also they prioritize tax management. So we can’t very easily go in and completely restructure client portfolios because I don’t want to force them to pay taxes any sooner than they otherwise would have had to. And blue chip stocks held for a lifetime are tax free. Upon the death of the first spouse, so we manage money, understanding that a step up in basis is the most powerful tax rule that a lot of people don’t understand and don’t optimize. And so a lot of people who are transactional minded will swap one investment for another, and maybe even make another percentage point or two, but have no idea that they’ve just lost 50% of the benefit from the vehicle that they just sold. And so people are not mindful of how complicated the ecosystem is. And they can create tax problems for themselves that will deteriorate their return in their pursuit of higher returns. So we are, we try to be mindful of optimizing all of that. So we try to buy assets, that we have a 30 or 40 year timeline on, and we don’t hop around a lot, because that’s what creates tax problems for clients.

george grombacher 5:57
That makes sense. And in terms of managing fear, and and the emotions which our brains naturally, you know, when when we see the market goes down by XYZ percent, we don’t like it. Yeah, I don’t know that anybody does. How do you? How do you handle that? One

Gil Baumgarten 6:15
of the issues that I see repeat itself over and over again, is that people are relative performance evaluators in an upmarket? How did I do relative to everything else. And it’s almost like a horse race where everybody’s jockeying to be at the front of the pack. But when we go into a negative market, people completely shift their mindset away from the objective, how am I doing relative to everything else, and they switch to absolute. Meaning, I could have owned a bank CD, where I wouldn’t have lost any money. And you can’t really have it both ways. If you’re going to be a relative performance evaluator, you need to be relative performance in all markets up or down. And it can be really mentally and emotionally vexing to play this game with ourselves, where we try to be at the front of the pack when everything’s going fine. And then all of a sudden, we envision we should be an observer of the horse race, when everybody else is losing money. And that’s extraordinarily difficult to do. And actually, the pursuit of it will probably end up generating much worse returns overall, than if you had just simply endured all the good and all the bad.

george grombacher 7:29
can’t have it both ways. That’s exactly

Gil Baumgarten 7:31

george grombacher 7:34
Jacob needed to I’ve probably got a couple more couple more in May. But we’ll, we’ll just keep going. All right. So it’s always let’s, let’s keep things in perspective, let’s, let’s take a step back. And this is just part of the way that the stock market is supposed to operate. That’s right, we go through cycles,

Gil Baumgarten 7:53
I heard a quote the other day that I had never heard before, that I thought was absolutely fantastic. And the quote was, the stock market is not a pricing mechanism for the value of businesses, it is a mechanism to shift money from impatient investors to patient investors. And I thought, oh my gosh, that’s so profound, because that’s what happens. People who are impatient, ended up losing money. And the people who stick around are the ones that absorb all that money. So back to buying good stuff and hanging on to it for a lifetime. There’s a lot of wisdom in that.

george grombacher 8:32
And you need the wisdom to be able to plan for the great times and then plan for the bad times, too. So you’re in a position to be able to say that’s right, Gil told me I just need to be patient. That’s right.

Gil Baumgarten 8:44
Patience is a virtue, especially in investing.

george grombacher 8:49
And then when people are driving and filling up their gas tanks and and buying food, and the cost of that has now gone up exponentially across, I think probably everything. Yeah. How are you thinking and talking about communicating that about inflation?

Gil Baumgarten 9:09
Well, that kind of goes into politics, because in prior administrations, and I’m not going to say which is which I think people can easily recognize what types of government action resulted in stable prices, and what more recent type of government action has resulted in much higher prices. And I went to a cafe 20 years ago, and I was the last guy in it. And this I walked in late and this waitress comes up to me and offers to serve me despite the fact that the restaurant was almost closing. And she asked me what I did for a living and I told her that I managed money for people. And she took my order, kind of cogitated on that for a bit and since I was the Last customer in when she brought my food out, she asked me if she could sit down and talk to me for a minute. And I said, Sure. And she said, How come the government couldn’t just simply decide that everybody needs to make twice as much money? And at the time, I think minimum wage was $5, or whatever it was, why couldn’t they just made sure that I had plenty of money just by making people have more money I could be making make it mandate that the minimum wage should be $15 an hour, and I was suddenly have a lot more money, and how come I couldn’t just get my income to be doubled? And I said, Well, if they did, that, every one of your dollars would be worth 50 cents. And she had this puzzled look on her face. And then it finally sunk in that, you know, value is relative to how much predicted productivity you produce. And therefore, that’s how you’re compensated. And when the government throws a bunch of money into the system through PPP loans, and, you know, bailouts for this or that, or, you know, money for nothing, a lot of the supply issue, problems that we have right now is because people have been compensated to not work, then you have the lack of their production, causing a decrease in the supply of all the goods and services they would have produced. And all the dollars that have been given away or not produced are chasing fewer number of goods, guess what’s going to happen? You’re going to have much higher prices for things like boats and planes and cars and motorcycles, the cost of everything is going to go up. And so that is directly due to government policy. And I think people should think about that next time at the ballot box.

george grombacher 11:44
That makes sense. In terms of will this kind of stay on on other really hot button issues right now? What do you think about wiping out student debt?

Gil Baumgarten 11:58
Well, that would be another inflationary activity. So therefore, you would have money that is going to be returned to one group versus another. And I think it’s extraordinarily unfair for people who have taken out student loans and have paid them off to them find out that another group of people in a different timeline happened to be getting their loans forgiven. I think that when you have somebody who takes out a loan, and derives the benefit from and was the sole decision maker with regard to the responsibility, now shifting that back to taxpayers, who didn’t decide to do that, nor did they benefit from the education that came from that, I think that’s extraordinarily unfair. And I think it’s corrupting with regard to how people make value decisions. And it completely distorts the risk offset in how people perceive risk and stocks and risk and real estate risk in the bond market. There is a free market enterprise system that is held together by those promises and risk and reward. And when you when you come in and start juggling around what that risk and reward looks like. And you reward people who took the risk, and you penalize people who didn’t take the risk. I think it really is a corrupting. Act action.

george grombacher 13:21
Couldn’t agree more. Couldn’t agree more. When I think and I I’ve been it’s hard for me to get my brain around it. I think if I actually sat down and thought spent some more time thinking about it, maybe I can figure it out. But since since you’re here, I think you can probably save me some time is who will be the bag holder.

Gil Baumgarten 13:46
The taxpayer would be the bag holder. And they’re the government does not produce anything. The government only takes money from people who produce and it spins that on all types of things, some of which I agree with, some of which I disagree with. And this is true of, you know, conservative administrations and liberal administrations, I’m not picking on anybody. I’m just saying that’s government’s job is to take money from the people and distributed in very inefficient ways. And you have people who are decision makers and government who never had any private industry experience. And they have never taken economics. So they don’t really understand the payoff of how you know, money was obtained and what you’re requiring of what you’re spending, they become somewhat arbitrary. They have no real stake in the game. And I think if you pay real close attention, you will find people in positions of power, make decisions to not be criticized, as opposed to making economic decisions that are good for everybody. So I think you just have to look between the lines and figure out you know which side you’re on.

george grombacher 14:57
Yeah. So federal government guaranteed these loans. So George George went me I went to college, I took out $50,000 in loans. And that was essentially the government lending me that money. So, so they, that year will say 20 years ago, assessed taxes, collected taxes. And then they gave me that money which I gave to the university. That’s right. And now, so along the way, I’ve been paying that back. And so that money plus interest has been going back into the federal government, which they have used to make a budget off of assuming that Georgia is going to be making payments. That’s right. So now, if all of a sudden that $50,000 $40,000 debt that I still owe goes away, that’s going to have other impacts, that’s going to result in having to raise more tax revenue. That’s right.

Gil Baumgarten 15:51
Yeah, that’s what that’s what that’s the mechanism by which it puts that responsibility back. So you now have a hole in the balance sheet of the government that it was expecting to receive back. And that becomes part of the deficit, that new taxpayers and new taxes have to fill in that hole over time, assuming that you had a mandate of a balanced budget, which I would think would be a very good thing, I have to balance my budget at home. But the federal government seems to think that all they have to do is print more money, which is exactly why you’re having high inflation.

george grombacher 16:27
So I think that that’s such an important thing that people sort of understand, because it’s a good talking point, when they say, oh, we’ll just cancel student debt, it just goes away. And then nobody needs to worry about it. But that’s just not the reality.

Gil Baumgarten 16:39
Well, Elon Musk said the other day, and I don’t want to misquote him, but I think what he said was, it’s a, an unfortunate situation that a recent a student aspiring to go to college, can borrow $100,000 in student loans, but couldn’t borrow $10,000 from the bank. Well, that tells you a lot right there. And that creates inflation in education. I just recently sent three kids through school. And you wouldn’t believe how much more expensive every year it gets from year after year after year. Some of the tuition programs at colleges now allow you to lock in four years of tuition, if you will pay in year one. Well, that you’re avoiding the inflation in year two, year three and year four, which, if I had done it correctly, would have been actually a good decision for me. But I think the number is annualized at 9%. And so you think about how expensive that is? Well, that is there that inflation exists because essentially, incoming students have free money available to them, and they will pay whatever it takes. And the colleges know that. And so it’s a it’s sort of a very interesting ecosystem that we have created. And that’s also the same reason why healthcare costs escalate. Whenever you put the cost off on a third party, guess what prices are going to go up because people don’t have a stake in the decision making as to how to consume those services. One of the ways to fix that I think would have a copay on every single transaction. If you go in for, you know, an emergency room visit that might be expensive, and you have no copay. I think if you had a $20 copay, your number of visits to the emergency room would be substantially less people would then have a stake in the game. And it’s the exact same thing with the tax situation up to $10,000 worth of income, essentially, there is no tax levied, well, those people don’t have a stake in the game. So I think that even if it was just $1, it would have some way of making people part of the tax system and it would change their thinking about the way they apply economics in their own life.

george grombacher 19:12
Well said, Gil, you’ve already given us a bunch of the people are ready for that difference making tip, what do you have for them?

Gil Baumgarten 19:19
I think the key difference in doing well in life has to do with resilience, otherwise known as grit. And many people who don’t prosper financially wonder what it is that makes people with money different. And it is primarily that they don’t give up. So resilience and grit is the key to prosperity. And I hope people can get something from that.

george grombacher 19:50
Well, I think that that is great stuff that definitely gets come on resilience and grit. It’s the key to prosperity. I love it. Gil, thank you so much for coming back. icon where can people learn more about you? How can they engage with you?

Gil Baumgarten 20:04
My firm is called segment Wealth Management SCG. me NT segment wm.com is our website. I also wrote the book that you were talking about foolish how investors get worked up and worked over by the system, which is kind of a exploration of how the brokerage industry operates. And then the uphill battle that people fight with themselves in dealing with fear and greed issues that cause bad decision making. So they can get that on Amazon. It’s also on Audible. So that’s where they can, they can find me, I also write a blog segment wm.com For slash blog, people can sign up for it. We don’t send out any trash mail. We don’t sell the mail list, we don’t call you. We just write about current topics. And if they want to read our current writings, it’ll come in as an email to them if I sign up.

george grombacher 20:55
Now that you enjoyed this, if you enjoyed as much as I did, show your appreciation and share today’s show with a friend who also appreciates good ideas go to segment W M as in segment wealth management.com and check out the great resources, check out the blog and pick up a copy of foolish wherever you buy your books. Thanks again, Gil.

Gil Baumgarten 21:16
Thank you, appreciate it.

george grombacher 21:18
And until next time, keep fighting the good fight. We’re all in this together.

Transcribed by https://otter.ai

Thanks, as always for listening! If you got some value and enjoyed the show, please leave us a review wherever you listen and we’d be grateful if you’d subscribe as well.

You can learn more about us at LifeBlood.Live, Twitter, LinkedIn, Instagram, Pinterest, YouTube and Facebook.

Our Manifesto

We’re here to help others get better so they can live freely without regret
Believing we’ve each got one life, it’s better to live it well and the time to start is now If you’re someone who believes change begins with you, you’re one of us We’re working to inspire action, enable completion, knowing that, as Thoreau so perfectly put it “There are a thousand hacking at the branches of evil to one who is striking at the root.” Let us help you invest in yourself and bring it all together.

Feed your life-long learner by enrolling in one of our courses.

Invest in yourself and bring it all together by working with one of our coaches.

If you’d like to be a guest on the show, or you’d like to become a Certified LifeBlood Coach or Course provider, contact us at Contact@LifeBlood.Live.

Please note- The Money Savage podcast is now the LifeBlood Podcast. Curious why? Check out this episode and read this blog post!

We have numerous formats to welcome a diverse range of potential guests!

  • Be Well- for guests focused on overall wellness
  • Book Club-for authors
  • Brand-for guests focused on marketing
  • Complete-for guests focused on spirituality
  • Compete-for competitors, sports, gaming, betting, fantasy football
  • Create-for entrepreneurs
  • DeFi-for guests focused on crypto, blockchain and other emerging technologies
  • Engage-for guests focused on personal development/success and leadership
  • Express-for journalists/writers/bloggers
  • General-for guests focused on finance/money topics
  • Lifestyle-for guests focused on improving lifestyle
  • Maximize-for guests focused on the workplace
  • Numbers-for accounting and tax professionals
  • Nurture-for guests focused on parenting
  • REI-for guests focused on real estate

Feed your Life-Long Learner

Get what you need to get where you want to go

Rate it
Previous post