Ricky Mulvey (3:18)

Well, this case started during the first Trump administration. I believe there's been changes since then. Now you have ChatGPT eating a little bit of Google's lunch within the search landscape. So things have happened not just within the government regulating this place or trying to regulate this space. And Google still is a little worried about competitors coming in. Its lawyers basically saying competitors would be able to use Google's search engine to build and train their own products, while Google is essentially forbidden from making the deals and investments required to keep winning. So they're saying if we just give our data to everyone, then yes, you could go out and build the next Google. Do you think the lawyers for Google have a point there? I mean, if you're judge Jason, how are you ruling on this?

Jason Moser (4:06)

They definitely have a point. I mean again, I think giving that data away or making that data accessible really opens up the lanes for a lot of competition. And you mentioned ChatGPT of course, obviously a tremendous tool, these AI chatbots. I think Google's made a lot of progress on this front as well with Gemini. I mean, if I'm rolling on this, thank goodness I'm not. This is really tough. I mean I'm generally, I'm not one to hold a company's success against it. I mean, I think I encourage that. Right. With that said, obviously there are some concerns there in regard to a monopolistic practices. I think for me I would definitely focus going forward on any acquisitions. I think that's a no brainer and that's something that could be a little bit more proactive because I think a lot of these companies have benefited from some very shrewd acquisitions in their history and I could see the data sharing and or search agreements as a more reasonable target as well. Again, kind of going back to the Chrome thing, I just have a hard time seeing that get split off. And as soon as I say that, watch, watch that be the recommendation. But I don't know that that's the most achievable outcome in my mind.

Ricky Mulvey (5:18)

And then as you're watching this case play out, one potential ripple effects that Dylan Lewis pointed out is that Apple could lose the easiest $20 billion that a company can make. And that's what Google pays Apple to be the default search engine. But there's a lot of other big tech observers seeing what's happening here. What ripple effects are you watching?

Jason Moser (5:38)

Right. I mean that money for Apple unbelievably is just a drop in the bucket. So it obviously wouldn't impair the business. But I think to me, and I mean we're watching Meta go through this as well right now, I think this really just, these are the signs that big tech is really under the microscope. And I think that after we look at Google and we look at Meta, it's just going to be very interesting to follow how all of these companies sort of, sort of fall into these antitrust examinations. Right. Because, because it's, it's not like this is, it's not like Google is doing anything that a lot of companies aren't. Right. I mean it's just big company, very successful, has a massive reach, but there are a lot of companies out there that do as well. And so my suspicion is we'll probably see them come under, under the microscope here in the near future.

Ricky Mulvey (6:22)

Let me, let me push back on that. You, you said the 20 billion is a drop in the bucket for Apple. I would disagree with that. That's about 16 of their pre tax income. Because this is a lot of, you know, there's no costs on that payment. That's $20 billion for freezes. And this is also a company Apple which has started, you know, the growth story for that company has slowed a bit. So if you have an impact like that and it slows down the growth story even more for investors, I could see that causing some concern among Apple shareholders.

Jason Moser (6:54)

Well, you're correct. Absolutely. And that's very high margin free money. Right. And so there's no question there. And maybe drop in the bucket wasn't the correct phrase. But, but I still, I still believe like if that agreement goes away, I mean Apple's, Apple's got a number of different ways to make, to make their money. And so I don't think it's something that ultimately would impair their business.

Ricky Mulvey (7:16)

Fair enough. Let's go to this GM story. So there's a saucy headline in BusinessWeek and a good story in my opinion From David Welch, GM's Mary Barra has to make a $35 billion EV bet work in, in Trump's America. There's a few ways of spinning this. One is that GM is selling a lot more EVs. The second is that it's a tough political landscape. The third is that they're still selling these electric vehicles at a loss. Jason, it's a long article. I appreciate you reading it. But any, any big takeaways for you when you were going through it?

Jason Moser (7:50)

I think to me it's just, it's this ongoing story of GM trying to, or, or developing their own battery technology and ultium and ultimately that is to, to drive down costs and increase production efficiency. I mean, they are really investing heavily in their own battery technology and that is just not easy to do. So a doff of the foolish cap to them for really making those investments. And it appears they're succeeding.

Ricky Mulvey (8:15)

Mine was basically just how much 4D chess lobbying is going on behind the scenes. One thing that GM doesn't like is the way that incentives are structured for EV leases where people can get a tax credit for LE leasing, which helps their international competitors. So if you take that away, it would hurt gm, but it would hurt their competition more. And there's stuff going on in this market, especially in Colorado, that's just kind of weird. I've benefited from it, Jason, where I, I got a low cost EV lease where it was, you know, all done, fifteen hundred dollars down and then a hundred bucks a month. And even when I was getting that, I was like, there's no way this thing is going to last forever. This really doesn't feel sustainable, but there's a lot of work going on behind the scenes.

Jason Moser (8:58)

Yeah, absolutely. I, I don't know that it is sustainable, but a lot of these companies are really trying to, to get evs out in the market. And that, that, that is, it's kind of that loss leader behavior in the early days. Right. You're doing what you can to get it out there, create the demand, and then hopefully down the road consumers see the virtue, the value, and you start to realize a little bit more pricing power as things progress.

Ricky Mulvey (9:21)

Yeah, you mentioned that these EVs are being sold at a loss for a big company like General motors. You know, EVs have been around. Work started on it in the 1990s and you know, there's a big gap there. I don't want to discount that. But for a big auto company like gm, which sells a lot of cars, why do they need to sell electric vehicles at a loss?

Jason Moser (9:41)

So I don't think that is ultimately what they want to do for the long term, right, Ricky? I mean, eventually, they hope that's not always the case. But when we look at EVs and the differences there, I mean, there are a lot of upfront costs that come with developing these vehicles and ultimately getting them out to market. Talking about heavy research and development spending. There's manufacturing headwinds, right? Hurdles to clear, factory retooling to account for sort of these different bodies, these different vehicles, and ultimately how they can make them. I mean, battery costs, of course, have always been a real issue. And those costs are coming down. And then sort of the softer costs involved, like gaining market share, right? Building the brand. I mean, they want to be seen as a credible EV provider. And that just takes time to do. Now, the goal ultimately is to get to where you've got that market share, you've got your manufacturing processes in place, and you can start to realize more profitability per vehicle. But that just takes time.

Ricky Mulvey (10:45)

Also worth mentioning, Tesla, the politically divisive company, it does make a profit when it sells electric vehicles, and that's a part of this story. There's a little bit of a bank shot here, which is that as Elon Musk becomes more politically divisive, fewer people tend to be buying Teslas at the same time. Last year, General motors went from 6% of the EV market share in the United States at the beginning of 2024 to 12%. By the end, its EV sales doubled. And that seems to be maintaining it nearly the same pace in the first quarter of 2025. Maybe GM eating a little bit of Tesla's lunch here. You blame Musk or you credit Barra for this?

Jason Moser (11:25)

Can I hedge my bets and say a little bit? I mean, I think it is a little both, but I mean, there you saw, I don't know if you saw. There was a recent CNBC poll that just came out this morning that showed that basically half of, of Americans now hold a negative view toward Tesla. Now that that clearly is, is up significantly. And that's, that's compared to, I think, around 24% with an actual positive view, or 27%. The rest are basically neutral. But the bottom line is that certainly Musk's actions here over the last year or so have had an impact on the business. And I think that really shows the dangers of, of business leaders wearing their politics on their sleeves. So you just got to understand that does come with a cost. I do think that Mary Barra deserves a lot of credit, though. In pursuing this strategy and gaining share. I mean, when you look at the reasons why she feels that GM needs to pursue this, I mean, electricity, she says simply makes for a better car, represents the future of transportation. They see electric vehicles as a corporate imperative. So that, that I think says a lot right there. That's where they are steering this company. And ultimately they are looking to provide customers with a wider choice of vehicles. And I think that is something that's really important because this doesn't strike me, at least in the near term, as like an all or nothing bet. It's not going to be all EVs and no gas. Maybe years from now that'll be the case. But I think today we're looking at some folks want EVs, some want hybrids, some want all gas. And as an automaker, you want to be able to open yourself up to the widest market possible. And that makes a lot of sense from GM's strategy perspective.

Ricky Mulvey (13:05)

You said 27% have a neutral view on Tesla? 27.

Jason Moser (13:09)

Either 27 or 24.

Ricky Mulvey (13:10)

Yeah, something like that. I want to hang out with them. They sound like some chill people you could talk about movies, sports with. You don't have to bring up politics all the time. Shout out to the neutral people. I want to chat with you.

Jason Moser (13:21)

That's my crew.

Ricky Mulvey (13:23)

After, after you read this story. Long form article. A lot about innovation and how they're. They're really working on battery adoption playing in this EV lane. Did it get you any more interested in General Motors as a stock?

Jason Moser (13:36)

Not particularly, but it's. That's not a GM thing. It's just I'm not really an auto stock guy. I mean, I love my car, but I just. To me, yeah, autos aren't the most exciting market opportunity for me. I've never owned car stock and I don't suspect I ever will. A little bit too cyclical for me, Ricky.

Ricky Mulvey (13:56)

Fair enough. Let's move on to this last story quickly, which is about Hertz, another auto kind of an auto stock. It's an auto rental stock and it has been flying lately up almost 150%. Tough to tell given the extreme moves in this stock. And it's on Bill Ackman's hedge fund buying up about 20% of the company. And that's according to CNBC. There's a lot of forces going against this company where people may not want to be traveling as much. You have international tourism going down. Car rental businesses are really difficult. There's a lot of debt on Hertz's balance sheet, but what the heck is Ackman seeing here?

Jason Moser (14:32)

So I think for him this is where he sees a company that maybe was mispriced. Hertz made a big blunder a few years back when they really went all in on Teslas. Right? They were trying to reshape their, their vehicle portfolio and really lean into EVs and Teslas in particular. And that just didn't work for a number of reasons. But ultimately he sees the business recovering from this mistake. He feels like there's a return to what he called rational consumer behavior. They've got new leadership and CEO Gil west who came in and came on in April of last year and you mentioned the balance sheet. Yes, it is absolutely highly levered, but that debt is staggered out pretty nicely over the next several years. So I think that affords the company some, some financial flexibility.

Ricky Mulvey (15:19)

And Amman likes posting on X. He gives out, he gives out his thesis. You know, if the price of used cars goes up, that is a big impact for the balance sheet of Hertz as they would own a lot of used cars. And who knows, maybe if there's self driving dreams for Uber in the future. Here's a fleet of cars that Uber could use. All of this is to say Amman says This is a $30 stock. Right now it's about a $9 stock. Any advice to retail investors that want to tail this acclaimed investor on a turnaround story?

Jason Moser (15:50)

So first and foremost, I think it's always worth your while to do your own work and come to your own decisions. But you said it at the top. I mean, this stock has taken off. It's up a lot in a short period of time. My suspicion is this isn't a company that he plans to hold on to for a long, long time. It seems more of a value thesis where he sees a short term catalyst maybe offering an attractive risk reward situation. So if you want to jump in, more power to you. But he's got a big head start. And like you said, the stock has already seen a pretty good bit of price appreciation.

Ricky Mulvey (16:21)

Jason Moser, thanks for your time and your insight. Appreciate you being here.

Jason Moser (16:24)

Thank you.

Ricky Mulvey (16:31)

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Ricky Mulvey (17:33)

Sport all right, up next, Robert Brokamp answers some of the questions you emailed us about tariffs 401ks and backdoor Roths if you have a question for the show, shoot us an email@podcastsool.com that's podcasts with an sool.com the first question comes from fool up North I have a basic question about how tariffs work. Let's say US Company A buys widgets from a foreign company B. Let's also say that company B charges company A$100 for the widget. Now that foreign company has a 10% tariff levied against it, which means that if company A wants to buy the widget from company B, they must now pay $110 for it. Who gets the other 10 bucks and what do they do with it? If a branch of the US government receives the $10, then which branch and what is that money earmarked for since it's essentially all new revenue that wasn't already planned for a budget somewhere? Bro, this feels like an SAT question, but I'll let you take a crack at it.

Robert Brokamp (18:49)

Okay, well, so here's how it works, right? So when an item crosses into the U.S. whether by air, land, or sea, a division of the Department of Homeland Security called U.S. customs and Border Protection, otherwise known as CBP, classifies the item and assesses any tariffs, although often it's actually classified before it even comes in. It's the importer who classifies it, and then sometimes the CBP kind of checks to make sure they got it right. And CBP employs more than 60 people to monitor the 320 official ports of entry into the US classifying the item can be tricky because, you know, sometimes something is assembled in one country, but it has parts for many other countries. So there's a huge compendium called our Harmonized Tariff Schedule that helps with the classification. If it were printed, it would be more than 4,400 pages long and many, if not most importers actually hire customs brokers to help with this process of getting stuff into the US Properly classifying it, and then paying the relevant tariffs. As our foolish questioner points out, the tariff is paid by the company that imports the goods, which most often is a U.S. company. The Foreign company that made the item does not pay the tariff. So where does the tariff money go? Well, it gets collected by CBP and then it gets sent to the U.S. treasury and goes into what's called the General Fund, which the Treasury Department actually affectionately calls America's Checkbook. And from there it could be used in all kinds of ways, such as maybe paying for future tax cuts or supporting companies hurt by tariffs, as happened during the first Trump administration when money was sent to farmers hurt by a drop in trade with China. Basically, the money can be used on.

Ricky Mulvey (20:25)

Pretty much anything the next question comes from Anonymous. I listened to the Motley fool podcast every day on the drive to work. Great to hear. I recently switched jobs and encountered the issue of rolling over my 401k. I have a few questions about this. First, my current earnings at my new job put me over the eligible limit to contribute to a Roth ira. My financial advisor mentioned doing a backdoor Roth IRA contribution. Can you explain more about what a backdoor Roth is? What do I need to watch out for to make sure I avoid additional taxes? Additionally, I was told I could not do a backdoor Roth IRA as I still had my traditional part of my 401k balance in my account. Is that true? I appreciate when you guys take the time to answer questions from lesser fools. Anonymous, you are not a lesser fool, but we will still answer your question.

Robert Brokamp (21:13)

That is very true. So yes, Anonymous, congrats on the new job by the way, and the higher pay. And I just first of all want you to know that you can still contribute to the Roth 401 if available at your new job because there are no income restrictions on that. So yes, if you make too much to contribute directly to a Roth ira, you might consider doing what's known as the backdoor Roth. And here's how it works. You contribute to a non deductible traditional IRA and then very soon after you convert it to a Roth. And if that's your only traditional ira, there are really little to no tax consequences, right? Because the money you contributed to the non deductible traditional IRA was already taxed and there isn't much time for the IRA to grow very much. So there should not be much in the way of taxable investments, earnings to worry about when you convert. Here's the tricky part. If you have other assets in traditional IRAs, and this includes employer plans that sort of act like IRAs, like the SEP and the simple plans, then every conversion you make will essentially be considered proportionately made across all your accounts due to something called the pro rata rules. And consequently some or maybe even most of the conversion will be taxable. I know that's kind of confusing, so let's go over an example. So let's say you already had $63,000 in pre tax traditional IRAs. Then you made a $7,000 contribution to a non deductible after tax traditional IRA. So that brings your total to $70,000. So 10% of your total is after tax, 90% is pre tax. So if you then do a Roth conversion, even if it's in just one of your many IRAs, 10% will be tax free, but 90% is taxable. Now there's one way to get around this, and that is to roll the money that you have in traditional IRAs into your 401 if your plan allows it. Because money in a 401k is not considered when it comes to the pro rata rules for IRA conversions. Now the pro rata rules can apply to 401ks when converting 401 traditional money to a Roth within the plan, but not when doing the backdoor Roth ira. As you can tell, this can get very complicated. So speak with your financial advisor about doing this to make sure that actually makes sense for you and that everything is done right.

Ricky Mulvey (23:26)

The next question comes from V. Can a parent open Roth IRAs for grandparents with a grandson as the beneficiary, then use that money to pay for college? I thought the last question was complex bro, but this one doesn't seem easy either.

Robert Brokamp (23:40)

No, a lot of moving parts with this one. All right, so let's start with grandparents opening Roth IRAs. They could do it if they have earned income, and that is income from a job. So not interest, dividends, capital gain, Social Security, pension, anything like that. And they have to sign all the documents themselves. I suppose if someone had power of attorney they could open the accounts for them. But I would check with the IRA provider to find out if that's possible. Now once the IRA is open, the money can come from anywhere. It doesn't have to come from the grandparents bank accounts. As for using it for college, it's possible because contributions To a Roth IRA, not 401 Roth IRA, can be withdrawn tax penalty free at any time and then the money can be used for whatever, including college. Also a rule unique to IRAs, not 401 s or 403 BS but IRAs. Withdrawals from IRAs can be used for qualified higher education expenses for the IRA owner, their spouse, children or grandchildren. And it would bypass the 10% early distribution penalty if the owner is not yet 59 and a half. But the money still will be taxed if it comes from a traditional ira and it might be taxed if it comes from a Roth ira, depending on how long the account has been open and the age of the owner. So a likely better way to do all of this would be for the grandparents to contribute to a 529 college savings plan. And if they don't have the money, you can gift the money to them and then they open the plan. The growth and withdrawals would be tax free if used for qualified expenses and any unused money can be gradually rolled over to a Roth IRA for the grandson. But this is subject to a lot of rules. Including the total that is gradually rolled over can't exceed $35,000 and the account has to have been open for at least 15 years. There are plenty of other rules to consider, so understand all of them before trying the rollover to the Roth. But I think most financial planners would recommend the 529 over a grandparent Roth Ira. When it comes to saving for college.

Ricky Mulvey (25:32)

Is there a general advantage to having a grandparent contribute to a grandchild's 529 plan versus just having the parent do it? Some of this seems like we're just doing this on hard mode.

Robert Brokamp (25:42)

Yes, there actually is. And this is a relatively new development and I'm kind of surprised at it. I almost feel like it's a loophole that's going to be closed. But when you apply for financial aid you have to put the child's assets and the parents assets. You don't have to put the grandparents assets. So basically if It's a grandparent owned 529, it's kind of invisible when it comes to financial aid, which is a nice little benefit.

Ricky Mulvey (26:07)

The next question comes from Karen. Is there a book on the origin story of the 401k? I'm curious why pensions disappeared and how we got here with self funding retirement. Wish we saved more. It's hard.

Robert Brokamp (26:20)

Yeah. So there are a few books Karen, but I'll instead recommend a podcast episode. It was the December 7, 2021 episode of Motley Fool Answers, a show that no longer exists, but the episodes are still available out there. And in that episode, I interviewed Ted Benna, who is the father of the 401. So here's the short story, right? So Ted Benna was a benefits consultant working for a company outside of Philadelphia. There was a law passed in 1979. He's sitting in his office on a Saturday in 1980, working for a banking client. And this new law allowed for employer contributions to a tax deferred account. This new law, by the way, was codified in section 401k of the IRS code. And he figured the law would allow employees to make pre tax contributions and these accounts would be done in such a way that employers could match those contributions. But it wasn't written for that. It was not designed to create a retirement savings plan for the average Joe. But he thought it could be possible. So he proposed it to the banking client. The client's attorney said no. They didn't want to be the first company to try this new benefit. So Bena's company actually decided to try it. They created the first 401k on January 1, 1981. Fortunately, for those of us who like 401s, it was helpful that one of the clients of Bena's company had a connection to the Reagan administration, who then put Bena in contact with some folks at the Treasury Department. And that helped get Uncle Sam's blessing. It took a few years for the 401k to catch on, but then when it did, it just took off. As for why companies move from traditional defined benefit pensions to defined contribution plans like the 401k, I think it ultimately comes down to cost and complexity. It's just easier for a company to say, you know what, I'm going to give you a 3%, 4%, 5% match and then be done with it. As opposed to when you have a pension, you're constantly doing calculations about whether there's enough money and you're essentially responsible for the employer till the day they die. And I think it's just easier. They decided that's just too complex. We're just going to give you some money and then you do with it what you want. I do understand that it's hard to figure all this out. And I think most people, once they get to a certain age, wish they had saved more. Karen says that she wished she had saved more. And when you look at surveys that ask older Americans about their financial regrets, in almost every case, the number one or number two response is they wish they had saved more. So, Karen, you're not alone. So I know, it's complicated, especially since once we've moved to the 401 system, people have to decide how much to save, how to invest it, how much to withdraw when they retire. Unfortunately, though, the good old days of traditional pensions just aren't coming back. So I recommend that you just learn as much as you can and in the meantime, follow some rules of thumb, such as you should be saving probably 15% of your household income for retirement. That includes the match. If you're not yet an experienced investor, start with target date funds as a starting point, which have a prudent mix of cash, bonds and stocks based on your age. And then once you retire, I think the old 4% rule is still a good starting point. It's probably too low for most people, but I think it's a good place to start.

Ricky Mulvey (29:22)

Companies really like getting long term liabilities off their balance sheet, bro. Our last question comes from Jonathan. A potential new employer offers a capital accumulation plan. I've never heard of these. They offer an 8% contribution of your pay after the first year. It seems almost too good to be true because I don't need to contribute to get the 8%. Do these function like a retirement account? If I left after a few years, would I be able to roll it over to an IRA or a 401k plan? For more background information, the organization is a nonprofit which sells life insurance.

Robert Brokamp (29:56)

Yeah, Jonathan, these plans aren't very common, but you're kind of onto something when you say that. They really are similar to a 401k except that the employer makes the contribution often as a profit sharing arrangement. Right. So each company will have its own criteria. But in some cases, if the firm reaches a certain level of profitability, all eligible employees get money deposited in their account and there usually is a vesting schedule. So if you leave the company within a certain number of years, you won't be able to take all the money with you. Often, any money that is left behind is often used by the company to cover the cost of administering the plan. Also, you may see more restrictions on how soon the money can be withdrawn. Like I said, there aren't that many of them. But one example of such a plan is the NFL. NFL players have a capital accumulation plan. Their team deposits the money and invests after three seasons. The player determines how it's invested and they can choose from among several mutual funds. Just like a 401k. The way it works now is your first season, the team deposits nothing. Seasons two and three, the team deposits $2,500 but after seasons four or more, they're depositing $40,000 or more each year. So you got to stay in the NFL for a while to really get the benefit. In most situations, they can't withdraw the money before the later of age 40 or 5 years after elapsed since the player's last full season. And like a 401k or IRA, the money can be rolled over to another plan. Like an IRA or 401k, withdrawals will be taxed as ordinary income and withdrawals before age 59 and a half may be penalized. So again, very similar to an IRA or 401k, the NFL's plan is just an example of a capital accumulation plan. Definitely dig into the details of your plan so you know how to make the most of it.

Ricky Mulvey (31:34)

Any advice on how to stay in the NFL for more than three seasons, bro?

Robert Brokamp (31:38)

You know, I'll call up my friend Tom Brady later on and I'll pass along what he says.

Ricky Mulvey (31:43)

I'll say, stretch, we'll leave it there. Thanks, bro. As always, people on the program may have interests in the stocks they talk about, and the Motley fool may have formal recommendations for or against. So no buy or sell stocks based solely on what you hear. All personal finance content follows Motley fool editorial standards and are not approved by advertisers. The Motley Fox only pitch products that we personally recommend to friends like you. I'm Ricky Mulvey. Thanks for listening. We'll be back tomorrow.