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Not ready to cry recession · The Financial Exchange Show

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Speaker 2: Kicking off another week here on the Financial Exchange is Chuck, Mike,
1:13
Speaker 2: and Tucker with you, and we've got a busy, busy, busy, busy, busy, busy,
1:18
Speaker 2: busy week full of economic data. We're all the way
1:22
Speaker 2: through earning season, is a handful of companies left to report,
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Speaker 2: so not much on that front, but from an economic
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Speaker 2: data standpoint, on Tuesday, we're gonna get the job Opening
1:32
Speaker 2: and Labor Turnover Survey report, the Jolts Report that comes
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Speaker 2: at nine am tomorrow, actually ten am. Sorry, my calendar
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Speaker 2: did not adjust for daylight savings time yet. So I
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Speaker 2: hope all of you that are working on you know,
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Speaker 2: springing forward, that you got a little pep in your
1:47
Speaker 2: step today, because we'll be talking about that too. Yeah,
1:50
Speaker 2: let me tell you my step is peppin. I gotta
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Speaker 2: say that. Wednesday we're gonna be getting inflation data. The
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Speaker 2: CPI is out at eight thirty am. We're also on
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Speaker 2: Thursday in begetting the Producer Price Index, the PPI data,
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Speaker 2: and weekly jobless claims. And then on Friday we get
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Speaker 2: consumer sentiment out of the University of Michigan. So pretty
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Speaker 2: much every day, but today we've got some major economic data,
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Speaker 2: and today what we have so far is just a continued, nice, steady,
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Speaker 2: orderly puke of markets at this point, with what I
2:24
Speaker 2: will say is at least to the downside here kind
2:26
Speaker 2: of the first potential break to the downside that we've
2:29
Speaker 2: seen out of the range that we've been in since
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Speaker 2: early November. So we'll see where this market ends up going.
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Speaker 2: But ultimately, the question that I've heard in the last
2:40
Speaker 2: twenty four hours now, there was an interview with President
2:43
Speaker 2: Trump on Fox News yesterday morning and he was asked, Hey,
2:48
Speaker 2: are you expecting a recession this year? And he basically
2:52
Speaker 2: did not say no. Is the short of it. His
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Speaker 2: quote is, I hate to predict things like that. There's
2:56
Speaker 2: a period of transition because what we're doing is very big,
3:00
Speaker 2: and so I think that, look, I think it's actually
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Speaker 2: a pretty fair statement by him, and that, Hey, the
3:07
Speaker 2: Trump administration is trying to effectively overhaul the US economy
3:15
Speaker 2: in a really substantial way. And what's going to determine
3:19
Speaker 2: whether or not they're successful, in my opinion, is not
3:22
Speaker 2: whether or not the economy slows down in the short term.
3:26
Speaker 2: I think it's probably going to And I'll get into
3:28
Speaker 2: my reasons why for that in a bit, but rather
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Speaker 2: the two questions that you need to ask, how deep
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Speaker 2: does that slow down get and then how quick is
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Speaker 2: the economic growth on the back end of it, And
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Speaker 2: those are going to be the things that ultimately determine
3:42
Speaker 2: whether or not they are successful at this.
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Speaker 3: So Jack, I mean, I found it incredibly telling because
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Speaker 3: it is, to your point, I think, both an accurate
3:50
Speaker 3: and honest assessment of the economy, and to some degree
3:54
Speaker 3: you wish politicians would be this honest more frequently, Right,
3:57
Speaker 3: Like I think about the last few years messaging from
4:00
Speaker 3: the Biden White House on the state of the economy
4:03
Speaker 3: and basically getting out there and in disregarding I think
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Speaker 3: a lot of the polling that Americans were stating about
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Speaker 3: their feelings on the economy and inflation and pricing, and
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Speaker 3: that did not go terribly well.
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Speaker 4: That having been said, I don't know a lot.
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Speaker 3: I can't think of, for instance, in my adult memory,
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Speaker 3: a president coming out there being asked about weakness in
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Speaker 3: the economy and not trying to spin the question right,
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Speaker 3: not trying to say, hey, yeah, we might be facing
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Speaker 3: some form of downturn, but I have confidence that tax
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Speaker 3: cuts or if it gets that way, the Federal Reserve
4:38
Speaker 3: will lower interest rates, or I will put pressure on
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Speaker 3: Congress to pass a stimulus bill or lower taxes or
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Speaker 3: do any of those things that you would expect an
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Speaker 3: administration to respond to an economic downturn with instead saying yeah,
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Speaker 3: I'm not really sure, and we kind of anticipated this
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Speaker 3: sort of turmoil to get where we're going. It is
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Speaker 3: very honest, but very surprising to hear from a sitting president.
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Speaker 2: And so let's enter some facts into evidence. I'll put
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Speaker 2: on my lawyer hat, which I generally try not to
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Speaker 2: wear because well, I'm not a lawyer, but I like
5:15
Speaker 2: the way they build arguments, and so that's what I'm
5:17
Speaker 2: going to do here. Let's enter a couple things into evidence. First,
5:23
Speaker 2: the reason that companies and large portions of the United
5:30
Speaker 2: States have enjoyed and benefited from globalization is because of
5:36
Speaker 2: lower costs.
5:38
Speaker 3: Yes, go look at the price of a TV thirty
5:40
Speaker 3: years from now compared to it today, and we don't
5:42
Speaker 3: need to explain a lot more. But that has played
5:45
Speaker 3: out everywhere across food supply chains and every other area
5:49
Speaker 3: out there.
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Speaker 2: The reason that companies send their production elsewhere is because
5:54
Speaker 2: it's cheaper for them to do so, and that allows
5:55
Speaker 2: them to do two things. Number one, expand their margins.
5:59
Speaker 2: Number two, sell those goods more cheaply. Then, So that
6:02
Speaker 2: is first and foremost what you see. So number one,
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Speaker 2: if you're talking about bringing production back into the United States,
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Speaker 2: ultimately it is an absolute certainty, an absolute certainty, And Mike,
6:16
Speaker 2: I'm not certain of too much in life. Maybe a
6:19
Speaker 2: few things on a daily basis, that's about it. It
6:22
Speaker 2: is an absolute certainty that if you are bringing production
6:25
Speaker 2: back to the United States that you had previously Offshort,
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Speaker 2: it's going to be more expensive because otherwise you wouldn't
6:30
Speaker 2: have Offshort. Agreed, it's easier to make stuff here and
6:33
Speaker 2: not have to deal with logistics and you know, potential
6:36
Speaker 2: currencies and this it's the reason that you do it
6:39
Speaker 2: is because it's cheaper.
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Speaker 3: So and by the way, no one in this administration
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Speaker 3: is denying that. Scott Beston just last week, and you
6:44
Speaker 3: can't deny because it would be fundamentally unserious. Scott Besen't
6:47
Speaker 3: last week acknowledged that, hey, you know, the American dream
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Speaker 3: is not built on the idea of being able to
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Speaker 3: buy cheap goods.
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Speaker 4: That was specifically speaking to.
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Speaker 3: The fact that, yeah, if you try and manufacture much
6:59
Speaker 3: stuff in the United Dates, no matter where you were
7:01
Speaker 3: doing it previously, it'll be more expensive to do it.
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Speaker 2: Just here part number two. When you're talking about imposing tariffs,
7:07
Speaker 2: whether it is on China, Canada, Mexico, the EU, European Union,
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Speaker 2: whoever it might be, that is raising costs as well.
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Speaker 4: Sure hard stop yep.
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Speaker 3: Whether born by entirely by the consumer, in part by
7:21
Speaker 3: the consumer and part by the manufacturer or importer up
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Speaker 3: for debate, but higher prices yes.
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Speaker 2: Number three. If you are talking about wide spread deportations
7:35
Speaker 2: of people that are not legal immigrants in the United States,
7:39
Speaker 2: you are reducing the labor force in the United States
7:43
Speaker 2: because the vast majority of those people are working. They
7:48
Speaker 2: are often working under the table and jobs where they
7:50
Speaker 2: can be paid, you know, in cash and things like that,
7:53
Speaker 2: and oftentimes in jobs that a lot of Americans probably
7:57
Speaker 2: wouldn't do for the wages that are available. And that
8:01
Speaker 2: is something where you're talking about again. If you look
8:04
Speaker 2: at where GDP growth comes from, it's a function of
8:06
Speaker 2: two things. How many hours does the population work and
8:10
Speaker 2: how productive are they during those hours. If you're reducing
8:13
Speaker 2: the labor force, you are reducing the number of hours worked.
8:16
Speaker 2: As such, it's going to be a drag on growth. Now, Ultimately,
8:23
Speaker 2: what you are trying to get to if you are
8:26
Speaker 2: President Trump and his team is something where you say, look,
8:28
Speaker 2: I want to resolve these imbalances so that the average
8:32
Speaker 2: American can have a better platform for growth for the
8:35
Speaker 2: long run. So the fourth piece that I'll enter into
8:39
Speaker 2: evidence is kind of one of these long run things
8:41
Speaker 2: that's out there, which is the United States is running
8:44
Speaker 2: seven percent annual deficits at a time when unemployment is
8:48
Speaker 2: four percent. That is not sustainable. That can be more
8:55
Speaker 2: up for debate because there's really no clear there's no
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Speaker 2: hard and fast rule when it comes to exactly what
9:00
Speaker 2: level of debt or deficit you know, annually or in
9:03
Speaker 2: totality is sustainable or not.
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Speaker 3: And to be fair, like every previous understanding of what
9:08
Speaker 3: was sustainable.
9:09
Speaker 4: Has been stretched and it just expanded.
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Speaker 3: Right, if you had told somebody where deficits would have
9:15
Speaker 3: gotten to back in the nineteen seventies by the nineteen nineties,
9:18
Speaker 3: they would have told you that it's completely unsustainable. And likewise,
9:20
Speaker 3: if you told somebody from the nineties where we'd be
9:22
Speaker 3: by twenty twenty, they would say that's crazy, but we're.
9:25
Speaker 2: In unprecedented territory right now. Like agree, it's it's like
9:28
Speaker 2: completely agreed, you know, like everything sustainable until it's not.
9:33
Speaker 2: And you know, one of the one of the lessons
9:35
Speaker 2: that and this comes from from NASA when the Challenger
9:40
Speaker 2: space shuttle exploded. The reason why, yes, it was you know,
9:44
Speaker 2: a failure in and overring, but the reason why was
9:46
Speaker 2: that they launched the thing with temperatures way too cold.
9:50
Speaker 2: And the reason why they did that is because they
9:52
Speaker 2: had kind of kept moving the goal posts and they
9:54
Speaker 2: saw no problems and so they said, Okay, maybe we
9:55
Speaker 2: can go a little bit further, and eventually they couldn't.
9:59
Speaker 2: And so so it was one of those situations where
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Speaker 2: everything was fine until it very much was not. When
10:05
Speaker 2: you look at deficits again, there's been this Okay, we
10:09
Speaker 2: can stretch it a little further. We can stretch it further,
10:11
Speaker 2: but eventually you get to a point where you're like, no,
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Speaker 2: you really can't. So where that point is, we don't
10:17
Speaker 2: know until we get there. And so ultimately, if the
10:20
Speaker 2: federal government is saying, hey, we want to reduce government spending,
10:26
Speaker 2: that is going to be government spending. Whether you think
10:28
Speaker 2: it's efficient or inefficient. It is going into the economy
10:31
Speaker 2: and producing demand. If you reduce that demand and suck
10:37
Speaker 2: it out of the economy, it's tough to say that
10:40
Speaker 2: that is going to help growth. So you got four
10:43
Speaker 2: key areas where you're sitting there and you're saying, these
10:45
Speaker 2: are things that potentially raise prices and slow demand in
10:49
Speaker 2: the short term, which brings us to again, there's two
10:53
Speaker 2: trillion dollar questions, which are, hey, can you slow demand
10:57
Speaker 2: in a way where it doesn't get so bad that
11:00
Speaker 2: you have, you know, a recession because quite honestly, I
11:04
Speaker 2: think a lot of us have forgotten how bad recessions are.
11:06
Speaker 2: We haven't had a real one in you know, seventeen
11:08
Speaker 2: years now. Yep. The twenty twenty one was induced by
11:12
Speaker 2: our behavior from you know, kind of the top down
11:15
Speaker 2: and ultimately was you know, resolved pretty quickly. The last
11:18
Speaker 2: real recession we had was sixteen seventeen years ago, so
11:20
Speaker 2: we haven't gone through one in very long I'm sorry,
11:24
Speaker 2: in a long time actually, And it's something where hey,
11:28
Speaker 2: can you avoid it, or at least if you do
11:31
Speaker 2: experience one, can it be you know, relatively short and shallow.
11:37
Speaker 2: And the second piece there is then okay, how do
11:39
Speaker 2: you grow on the back end of that recession or
11:43
Speaker 2: slow down? What do you do on that front? So
11:47
Speaker 2: I think this is the bet that the Trump administration
11:51
Speaker 2: is making. I have no idea if they're going to
11:54
Speaker 2: be successful or not. They may they may not. I'm
11:57
Speaker 2: not going to preemptively punish them for something that hasn't
12:00
Speaker 2: happened yet. I'm not going to be the boy who
12:02
Speaker 2: cried recession. If it does happen, Okay, like, how are
12:05
Speaker 2: you going to actually deal with it? And how do
12:07
Speaker 2: you get out of it? And how do you manage
12:08
Speaker 2: your way through and what do you look like on
12:11
Speaker 2: the back end of that is going to be the question.
12:13
Speaker 2: But we're not there yet. And that's something that I
12:16
Speaker 2: keep coming back to because I am a follower of
12:20
Speaker 2: the data. There's things out there that's concerning, but you
12:24
Speaker 2: have to see how it develops because you just don't know.
12:27
Speaker 2: And we've seen plenty of these instances in the last
12:28
Speaker 2: few years where everyone wanted to cry recession and it
12:31
Speaker 2: never happened. And I'm not going to cry recession if
12:36
Speaker 2: we don't see the data suggesting it.
12:41
Speaker 3: What else we got, Mike, Uh, We've got a Monday
12:44
Speaker 3: Morning acquisition to talk about. Oh that's fun across, So
12:47
Speaker 3: we'll be covering that and a whole lot more, but
12:50
Speaker 3: really much more on this recession concern, how the Fed's
12:54
Speaker 3: likely to respond, and economy talk as markets are once
12:58
Speaker 3: again selling off as we head into it new week
13:00
Speaker 3: week quick break, we'll be right back with that next text.
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Speaker 2: Hit Chuck.
14:11
Speaker 3: Yeah, we just spent the last time we're talking about how,
14:14
Speaker 3: you know, policies that we've been looking.
14:16
Speaker 4: At could drive up prices.
14:19
Speaker 3: We didn't spend a lot of time talking about why
14:22
Speaker 3: markets are responding to what seems to be a recession
14:24
Speaker 3: scare here, and that's I think that's very clearly what
14:27
Speaker 3: we're getting. We had the Nasdaq just a second ago
14:29
Speaker 3: down more than three percent, the S and P right
14:31
Speaker 3: now off one in three quarters. You've had ten year
14:34
Speaker 3: treasury yield drop, you know, no real talk of a
14:37
Speaker 3: rate hike with response to higher prices. So where does
14:41
Speaker 3: this all come back to? Why is everyone spooked about
14:44
Speaker 3: recession in particular, because, like you just said, I think
14:47
Speaker 3: we're talking about potential deportations, tariffs, deglobalization, all of those
14:54
Speaker 3: I can see very clearly how they how they correlate
14:56
Speaker 3: to potentially higher prices in the future. But as far
15:01
Speaker 3: as I can tell, that's not seemingly what markets are
15:03
Speaker 3: scared about right now.
15:04
Speaker 2: No. I mean, look, I'll be I'll be completely honest.
15:07
Speaker 2: If I look at what's moving in this market today,
15:12
Speaker 2: the biggest players that are moving down, it's it's big
15:15
Speaker 2: Teket's mag seven. Yeah, and after that. The only thing
15:19
Speaker 2: in the market that is pointing to recession right now
15:22
Speaker 2: is that financials for the last week and a half
15:24
Speaker 2: have gotten absolutely whacked. It's it's basically like Jamie Diamond's
15:28
Speaker 2: woken up every morning looked at JP morganstock and just
15:31
Speaker 2: been like pull the covers back over my head and
15:33
Speaker 2: get back to bed. Like it's it's so, if you
15:36
Speaker 2: do want a sign that this market is starting to
15:38
Speaker 2: price in something recessionary, financials are getting absolutely bodied every day.
15:43
Speaker 2: It's just like, over and over, you're seeing it right now.
15:47
Speaker 2: But aside from that, like you take a look at it,
15:51
Speaker 2: and some of the stuff, a lot of this is
15:53
Speaker 2: that you're seeing in markets is not necessarily hey, recession
15:57
Speaker 2: is coming, but much more these valuations got absolutely out
16:02
Speaker 2: of line, and now we just need to adjust them.
16:05
Speaker 2: We've talked about Max seven, but I want to spend
16:07
Speaker 2: some time on boring old consumer staples. Boring old consumer staples,
16:13
Speaker 2: and I want to talk to you a little bit.
16:14
Speaker 2: We touched on this last week, but Walmart and Costco,
16:17
Speaker 2: their valuations now on a forward earnings basis are higher
16:20
Speaker 2: than NVIDIAs now looks. As I said on Friday, I love,
16:26
Speaker 2: you know, big slabs of meat as much as anyone else,
16:29
Speaker 2: but there's no reason why Costco should be trading like
16:33
Speaker 2: at a valuation premium to an AI stock.
16:36
Speaker 4: I don't know, man, you have ever been there at
16:37
Speaker 4: like eleven am on a Saturday.
16:39
Speaker 2: I have. Well, actually I haven't been to a Costco
16:41
Speaker 2: just because i'm a BJ's member, but I drive by
16:44
Speaker 2: the lot and I'm like, yep, it's like there's a
16:46
Speaker 2: line out the door. So here's what's happened in the
16:49
Speaker 2: last one week is Walmart's down nine point six percent,
16:52
Speaker 2: Costco's down ten point eight five. So generally you look
16:56
Speaker 2: at it and you're like, okay, big consumer staple stocks,
16:58
Speaker 2: they don't usually get whacked heading into recession. Usually they
17:00
Speaker 2: pick up some some gains. Actually, like, that's that's where
17:03
Speaker 2: people go in their.
17:04
Speaker 4: Nervous at least relative gains to the market.
17:06
Speaker 2: Or actual gains. Because here's here's where I'm going with this.
17:10
Speaker 2: Procter and Gamble is up one point three three percent
17:14
Speaker 2: during that time, Clorox up six point seven percent, Kimberly
17:18
Speaker 2: Clark up three point two, can View up point eight percent.
17:22
Speaker 2: I don't know what el is ste lot Air. Okay, fine,
17:25
Speaker 2: they're up five point four to two. Let's see again.
17:28
Speaker 2: Sticking with you know, consumer staples, General Mills up six
17:32
Speaker 2: point one one percent, uh Craft Hinds up five point
17:35
Speaker 2: four point seven three percent, Cannagra Foods up seven point
17:40
Speaker 2: nine five percent. Some of what you are seeing in
17:44
Speaker 2: this market right now is either just rotations out of
17:48
Speaker 2: overvalued stuff or even within a sector, rotations from the
17:53
Speaker 2: overvalued to undervalued parts of it. It's not like consumer
17:56
Speaker 2: defensive has just gotten whacked as a whole because everyone's like, no,
18:00
Speaker 2: tell the sector. It's no. Like there's there's a reason
18:02
Speaker 2: why Walmart doesn't usually traded thirty five times forward earnings
18:05
Speaker 2: is because that's insane. And I think part of this
18:09
Speaker 2: is just you're going through a correction on this front.
18:12
Speaker 2: The other piece when it relates to so we got
18:14
Speaker 2: a few things. Banks are absolutely screaming recession right now,
18:18
Speaker 2: no doubt about it. Some of the other stuff that's
18:20
Speaker 2: getting hit, like Walmart and Costco is just like Vali,
18:24
Speaker 2: you got overvalued, and like when when the levy breaks,
18:27
Speaker 2: like you move on. The mag seven stuff is concerning
18:31
Speaker 2: to me, not because of recession, but it's been dominated
18:34
Speaker 2: by a bunch of foreign capital flows coming into the US,
18:38
Speaker 2: where hey, there's been all these dollars that went overseas
18:40
Speaker 2: because of you know, imports from overseas, and instead of
18:43
Speaker 2: going out and buying you know, real estate in Manhattan,
18:45
Speaker 2: the money's been coming back in and buying mag seven stocks.
18:49
Speaker 2: And when those flows stop, there's a real problem for
18:52
Speaker 2: those companies because a lot of them trade it, you know,
18:55
Speaker 2: pretty crazy valuations too. The growth is there in a
18:57
Speaker 2: lot of cases, but not all of them. You know,
18:59
Speaker 2: Apple growing revenue three percent year over year. Tesla might
19:03
Speaker 2: not have any growth this year, that's what their CFO said.
19:06
Speaker 2: And Video sure, like you're growing a ton Meta, You're
19:08
Speaker 2: growing a ton of Microsoft. Okay, you're growing like low
19:11
Speaker 2: double digits. So there's some stuff there that's dodgy, and
19:14
Speaker 2: so I think part of it is, you know, you
19:17
Speaker 2: get these big narratives that pop up in markets, but
19:20
Speaker 2: if you actually look at what's going on, I think
19:22
Speaker 2: there are three or four different stories that this market
19:24
Speaker 2: is telling you right now, and only one of them is, Hey,
19:28
Speaker 2: this could because of you know, recession. Let's take a
19:31
Speaker 2: quick break. When we come back, we got Wall Street
19:34
Speaker 2: Watch after this.
19:40
Speaker 1: Like us on Facebook and follow us on Twitter at
19:43
Speaker 1: TFE show. Breaking business news is always first right here
19:47
Speaker 1: on the Financial Exchange Radio Network. Time now for Wall
19:52
Speaker 1: Street Watch, a complete look and what's moving market so
19:55
Speaker 1: far today right here on the Financial Exchange Radio Network.
20:00
Speaker 5: Coming off a losing week where the SMP five hundred
20:02
Speaker 5: sung three point one percent. Overall markets today are extending
20:07
Speaker 5: their losses as investors' way of recession fears and ready
20:11
Speaker 5: for a new batch of economic data points this week,
20:14
Speaker 5: including a CPI inflation reading on Wednesday. Right now, the
20:18
Speaker 5: Dow down by one percent or four hundred and twenty
20:21
Speaker 5: four points, SMP five hundred selling off by two percent
20:25
Speaker 5: or one hundred and sixteen points, and the tech heavy
20:28
Speaker 5: NASDAC plunging over three percent now or five hundred and
20:33
Speaker 5: eighty four points, Russe of two thousand is down one
20:35
Speaker 5: in seven tenths of a percent, ten year treasure yield,
20:38
Speaker 5: ten year treasure yield excuse me down by ten basis
20:41
Speaker 5: points at four point two to one percent, and crude
20:44
Speaker 5: oiled down by three quarters of a percent trading and
20:47
Speaker 5: sixty six dollars in fifty four cents a barrel. Several
20:50
Speaker 5: bank stocks, including JP, Morgan Chase, Bake of America, and
20:53
Speaker 5: City Group are seeing losses on the day as worries
20:57
Speaker 5: over a possible economic slowdown weigh on them. While Tesla
21:00
Speaker 5: shares down another eight percent today are now down over
21:04
Speaker 5: thirty five percent so far this year, and Video shares
21:07
Speaker 5: down nearly four percent, bringing its total pullback this year
21:11
Speaker 5: to over sixteen percent, and Pallunteer shares down to another
21:14
Speaker 5: seven percent, bringing its total losses this year to more
21:18
Speaker 5: than twenty seven percent. Elsewhere, Robinhood agreed to pay nearly
21:22
Speaker 5: thirty million dollars to settle an investigation by the Financial
21:26
Speaker 5: Industry Regulatory Authority into a range of violations. Robinhood down
21:30
Speaker 5: by fourteen percent on the day. Nova Nordisk shares down
21:34
Speaker 5: by eight percent after trial results for its weight loss
21:38
Speaker 5: drug cagri Sema, I think showed the treatment yielded a
21:43
Speaker 5: smaller impact for patients than previous tests. Door Dash will
21:48
Speaker 5: officially join the S and P five hundred on March
21:50
Speaker 5: twenty fourth, sending shares in the food delivery company actually
21:54
Speaker 5: down now by three percent, Redfin surging by seventy two
21:58
Speaker 5: percent after the Realists, a brokerage firm, announced plans to
22:02
Speaker 5: be acquired by Rocket Companies in a one point seventy
22:06
Speaker 5: five billion dollar all stock deal expected to close in
22:10
Speaker 5: the second or third quarter of this year. In cloud
22:13
Speaker 5: software company Oracle will report their earnings after today's closing bell.
22:18
Speaker 5: I'm Tucker Silvan, that's Wall Street Watch.
22:21
Speaker 2: Mike. You mentioned earlier you had a mergery that or
22:25
Speaker 2: a deal that you wanted to talk about.
22:27
Speaker 4: That was it the Rocket Redfin deal?
22:29
Speaker 2: Interesting something else? Now, talk to me a little bit
22:32
Speaker 2: about that one. Well.
22:33
Speaker 4: Redfin major platform.
22:34
Speaker 3: I remember that they're not just a tech platform like
22:37
Speaker 3: Zillo for instance.
22:39
Speaker 4: You tech platform.
22:41
Speaker 3: Then they sell different leads in advertising, two different agents
22:45
Speaker 3: across the fross across the nation. Redfinn has their own
22:48
Speaker 3: employee agents. From what I understand, and I don't know
22:51
Speaker 3: how big that business is. It looks like about twenty
22:54
Speaker 3: two hundred agents across the country, so clearly not a
22:57
Speaker 3: massive brokerage, but very much one of the dominant I
23:01
Speaker 3: think too, like online real estate venues to go take
23:06
Speaker 3: a look at, and so you know, I think an
23:08
Speaker 3: acquisition by a big mortgage. I don't think Rocket actually
23:11
Speaker 3: originates mortgages. Maybe they do, but do they do originate
23:15
Speaker 3: as well? I don't know that they carry any I
23:17
Speaker 3: don't know they like I believe they might just be
23:20
Speaker 3: an originator. I don't know if they hold any inventory.
23:22
Speaker 3: In any case, you know, teaming those two ups so
23:26
Speaker 3: that you know you have this default and very easy
23:30
Speaker 3: to use, because I think that's Rocket's main appeal is
23:32
Speaker 3: like you know, sign on will get you a pre
23:34
Speaker 3: approval letter in like fifteen minutes. And if you have
23:37
Speaker 3: that integration right alongside redfin, I can see how that
23:40
Speaker 3: might be valuable, especially if you are of the opinion
23:43
Speaker 3: that rates might be dropping in the near future. But
23:46
Speaker 3: Redfin itself has never really been able to I think,
23:49
Speaker 3: fully execute on some of their vision. You know, they
23:52
Speaker 3: came out there, made a big splash by discounting commissions,
23:55
Speaker 3: and you know Frankly, it's not like I see Redfin
23:59
Speaker 3: for sale signs all across the country on a frequent basis.
24:04
Speaker 3: You see them here and there, but it's not like
24:05
Speaker 3: they've made a huge dent in the industry or brought
24:08
Speaker 3: down prices.
24:09
Speaker 4: I think in the way they were hoping to.
24:11
Speaker 2: Yeah, I think that's a fair statement. Anything else that
24:14
Speaker 2: you want to talk about, we got. We got a
24:16
Speaker 2: piece where you know, Treasury Secretary Scott Bessen talking about, hey,
24:20
Speaker 2: there could be some economic pain coming as well. I
24:22
Speaker 2: think we kind of covered most of that.
24:25
Speaker 4: Yeah, I don't want to beat this to death.
24:27
Speaker 3: Many people within the Trump administration are going in eyes
24:30
Speaker 3: wide open that when you attempt to reign in government
24:35
Speaker 3: spending and you know, take in these frankly outlandish deficits
24:41
Speaker 3: that we've been seeing over the course of the last
24:43
Speaker 3: few years, that it can lead to unforeseen consequences, one
24:47
Speaker 3: of which could be recession. And they're not really denying
24:51
Speaker 3: any of that because it would be tough to do so.
24:54
Speaker 3: The promise on the other side is that hey, this
24:56
Speaker 3: public spending might get replaced by private spending, because we
25:00
Speaker 3: are going to attract investment by making the United States
25:02
Speaker 3: the most compelling place to invest in in the world.
25:05
Speaker 4: Jury is out on that one.
25:08
Speaker 2: One other thing that I do want to talk about,
25:09
Speaker 2: just when it comes to the market and trying to
25:13
Speaker 2: get a read on again more the market than the economy,
25:15
Speaker 2: and whether the market is saying anything about recession. I
25:19
Speaker 2: mentioned financials, and generally when we talk about financials and
25:23
Speaker 2: think about them, what most people are thinking about is
25:28
Speaker 2: JP Morgan, Chase, JP Morgan, Bank of America, Goldman, Sachs,
25:31
Speaker 2: Wells Fargar, Like, what are those companies telling us? There's
25:34
Speaker 2: another part of the market though, that is quite honestly
25:41
Speaker 2: completely melting down right now. And like I, anyone who
25:46
Speaker 2: listens to the show knows that I generally am not
25:48
Speaker 2: someone who you know, gets all excited about things and
25:52
Speaker 2: uses terms like that frequently. But you do have one
25:56
Speaker 2: that is happening right now. And specifically look at some
26:00
Speaker 2: of these alternative asset managers and for those of you
26:04
Speaker 2: are not familiar with them, an alternative asset manager is
26:06
Speaker 2: basically someone who manages something other than traditional publicly traded
26:12
Speaker 2: equities or publicly traded bonds.
26:15
Speaker 3: Massive growth area over the last fifteen years, as banks
26:18
Speaker 3: have largely been forced to exit the area of smaller
26:22
Speaker 3: size financing and things along those lines, or if not exit,
26:26
Speaker 3: then you know, hands tied in terms of what they
26:28
Speaker 3: are able to do. Their private credit has come to
26:31
Speaker 3: dominate and makes up massive portions of insurance companies, businesses
26:35
Speaker 3: in terms of their assets. Private equity funds, pensions, all endowments,
26:41
Speaker 3: all sorts of things like that have a lot of
26:44
Speaker 3: exposure to this to this area.
26:46
Speaker 2: So you get a bunch of these that end up
26:47
Speaker 2: being big enough that they're publicly traded and they're in
26:50
Speaker 2: the S and P five hundred. Some of them, their
26:52
Speaker 2: names might be familiar to you, Apollo Global Management, Blackstone KKR,
26:59
Speaker 2: Colbert Cravertz, Cravis and Roberts. Others you might not be
27:02
Speaker 2: as familiar with. You might not have ever heard of
27:03
Speaker 2: Blue Owl Capital, you might not have ever heard of
27:06
Speaker 2: Ari's Management Corporation. But these are the big names in
27:09
Speaker 2: this space. And what has happened now basically in the
27:13
Speaker 2: last four five weeks, this is since the end of January,
27:18
Speaker 2: is the five companies that I just mentioned, which are
27:21
Speaker 2: really the biggest ones playing in this space. They run.
27:25
Speaker 2: The huge growth in their business in the last couple
27:28
Speaker 2: of years has been through something called private credit, and
27:30
Speaker 2: private credit is a really wide like it's a big
27:35
Speaker 2: term for something. It's kind of like if you tell
27:38
Speaker 2: someone that you have mammals at your house, Like that
27:40
Speaker 2: could mean a lot of things. Private credit is kind
27:43
Speaker 2: of like that in that it's not one specific thing.
27:46
Speaker 2: It could be direct lending where Blackstone takes in two
27:50
Speaker 2: hundred million dollars and lends it all to one company.
27:53
Speaker 2: It could be something where there's a bunch of death
27:56
Speaker 2: that's out there and Blackstone buys it all and consolidates
27:59
Speaker 2: it and and it's no longer, you know, being traded publicly.
28:02
Speaker 2: There's all kinds of different flavors that you can have.
28:05
Speaker 2: It can be for companies, it can be for real estate,
28:07
Speaker 2: all kinds of different things. I've seen like private credit
28:10
Speaker 2: businesses that lend for jewelry inventory. Okay, like again, you
28:15
Speaker 2: can anything you can think of. It's in there. But
28:18
Speaker 2: regardless of it, all of these companies are big in
28:20
Speaker 2: that space. Here's how far all of these companies are
28:25
Speaker 2: off their fifty two week highs right now, and this
28:27
Speaker 2: has pretty much all happened in the last four weeks.
28:30
Speaker 2: Blue Owl is down thirty point eight percent from its highs.
28:33
Speaker 2: Apollo is down thirty point four to one, Aries down
28:36
Speaker 2: twenty seven, Blackstone down twenty nine, KKR down thirty six.
28:41
Speaker 2: So all these, all these companies that focus on that
28:43
Speaker 2: space are down about a third. And the interesting piece
28:46
Speaker 2: to me isn't just that they're down a third. But
28:49
Speaker 2: one of the places that investors look to see how
28:52
Speaker 2: risk is being handled by the financial system is in
28:55
Speaker 2: the credit markets to see, hey, is it becoming more
28:58
Speaker 2: expensive for copanies in general, but in particular for bad
29:02
Speaker 2: companies with bad debt situations to manage their way through.
29:06
Speaker 2: And we've seen a little bit of a widening of
29:08
Speaker 2: credit spreads in publicly traded markets, but nothing huge, nothing notable.
29:12
Speaker 2: But these companies that operate in the private credit space
29:16
Speaker 2: have been Again, a thirty percent drawdown in five weeks
29:21
Speaker 2: qualifies as a meltdown in my book, Michael, It's hard
29:25
Speaker 2: to call it anything other than that. And so part
29:29
Speaker 2: of the problem here is there's a theory out there
29:32
Speaker 2: that a lot of the companies that are really bad
29:34
Speaker 2: credit risks have been going to the private credit markets
29:38
Speaker 2: rather than publicly issuing bonds. And so you might not
29:42
Speaker 2: have a great signal anymore from public credit markets as
29:46
Speaker 2: to how bad things are, because all the really bad
29:49
Speaker 2: stuff might not be publicly traded anymore. It might be
29:52
Speaker 2: privately held.
29:52
Speaker 3: Yeah, we used to look at like the spread between
29:55
Speaker 3: junk and treasury. And that's what you're talking about, hey,
29:57
Speaker 3: is there's a whole bunch of debt out there that
29:59
Speaker 3: we don't even qualify as junk because there's nobody rating
30:02
Speaker 3: it because it's.
30:02
Speaker 4: Held by private credit.
30:03
Speaker 2: You don't need to rate a private credit like if
30:05
Speaker 2: I make a loan to you, Mike directly, I don't
30:07
Speaker 2: need to go out and have you know, Moody's or
30:10
Speaker 2: Fits or Standard and Poors rate it.
30:11
Speaker 4: No, I just because I'm not selling it on public market, I.
30:13
Speaker 2: Just go and do it like I'm not trying to
30:15
Speaker 2: sell it to anyone, or at least on public markets.
30:17
Speaker 2: I And this is here's the other part of this.
30:21
Speaker 2: So and again, my intent have been up about this
30:24
Speaker 2: for the last year or so because I see so
30:27
Speaker 2: many emails and pitches about private credit this and private
30:30
Speaker 2: credit that, And in particular in the last year or so,
30:35
Speaker 2: it's been starting to push more towards the average retail
30:38
Speaker 2: investor under the guise of, Hey, we want to democratize
30:41
Speaker 2: access to these products and listen, it's all well and
30:47
Speaker 2: good if you want to democratize access to products, but
30:50
Speaker 2: generally there's a reason why big companies don't like to
30:53
Speaker 2: sell expensive investment products to retail investors. There's actually a
30:57
Speaker 2: few different reasons. The first is it's really in a fit.
31:00
Speaker 2: They'd rather, you know, get one hundred million dollar client
31:03
Speaker 2: than a thousand, you know, a thousand you know, one
31:07
Speaker 2: hundred thousand dollar clients. It's just like they don't want
31:10
Speaker 2: to be dealing with all that administrative stuff. The second
31:13
Speaker 2: piece is, hey, like, if their job is, you know,
31:16
Speaker 2: managing money and there's some kind of end, there's kind
31:20
Speaker 2: of an elitist thing to it, and that hey like,
31:23
Speaker 2: come to us because this is how you get access, Like,
31:25
Speaker 2: you don't want to offer it to everyone otherwise, you know,
31:29
Speaker 2: why would anyone want it. The fact that it's being
31:32
Speaker 2: offered to so many more people now is kind of like, Okay,
31:35
Speaker 2: you're just trying to dump this on retail. As you know,
31:38
Speaker 2: the musical chairs are ending. It kind of has that
31:41
Speaker 2: feel to it to a certain extent. So there's a
31:43
Speaker 2: lot out there that you wonder about. And the fact
31:46
Speaker 2: that these companies that specialize in this alternative asset management
31:50
Speaker 2: are at the front lines for what's getting beaten up
31:52
Speaker 2: in the last you know, four weeks or so. Might
31:56
Speaker 2: be a signal here, like there's something going on there
31:58
Speaker 2: that that you just kind of perk up ears at
32:00
Speaker 2: and you go, oh, like I need to pay attention there.
32:05
Speaker 2: I don't even know how we got on this topic neither,
32:07
Speaker 2: but we gotta take a break. We do, so, let's
32:09
Speaker 2: take a break when we come back. Let's do a
32:11
Speaker 2: little bit of FED talk when we return.
32:14
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32:17
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32:22
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32:32
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32:35
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32:45
Speaker 2: All right, let's do a quick market update here. We've
32:47
Speaker 2: got the Dow off four hundred and seven points about
32:49
Speaker 2: one percent right now, the S and P down one
32:51
Speaker 2: hundred and seventeen points about two percent, the NASDAC taking
32:55
Speaker 2: it the hardest, down about six hundred and twenty one
32:57
Speaker 2: points three point four percent right now on the Nasdaq
33:00
Speaker 2: tenure US Treasury moving eleven basis points down to four
33:04
Speaker 2: point two oh seven percent. So you got bonds getting
33:07
Speaker 2: bit up, Oil down thirty four cents a barrel on
33:10
Speaker 2: West Texas Intermediate to sixty six sixty nine, and we've
33:13
Speaker 2: got gold down two dollars and nine cents per ounce
33:17
Speaker 2: to twenty nine twelve. Even so overall you've got a
33:20
Speaker 2: pretty steep cell off inequity markets, energy and gold not
33:24
Speaker 2: really moving anywhere, and he got bond seeing some inflows there.
33:28
Speaker 2: So certainly some nervousness and skiddishness in markets. And big
33:32
Speaker 2: thing is, hey, when you look at where this market
33:35
Speaker 2: actually stands right now, a lot of times we kind
33:38
Speaker 2: of poopoom. We're like, well, this market hasn't really moved,
33:41
Speaker 2: you know, too much or anything. And to be fair,
33:43
Speaker 2: this is still regular, you know, normal market action. You
33:46
Speaker 2: typically see a ten percent correction in the S and
33:49
Speaker 2: P five hundred anywhere from every like twelve to twenty
33:52
Speaker 2: four months, depending on you know, exactly how the market moves.
33:55
Speaker 2: Where we stand right now with where you know the
33:58
Speaker 2: S and P five hundred currently is is it is
34:01
Speaker 2: now down about eight point six percent from it's high.
34:05
Speaker 2: So we have kind of broken out to the low
34:07
Speaker 2: end from the trading range that we had been in
34:10
Speaker 2: since election day. The day before the election, the SMP
34:13
Speaker 2: closed at fifty seven eighty two and it really had
34:18
Speaker 2: not spent any time below that until the last couple
34:21
Speaker 2: of days. We're now sitting, you know, almost two percent below,
34:24
Speaker 2: So today's action really pushing us there. So if we
34:27
Speaker 2: close below and then stay down there for a little bit,
34:29
Speaker 2: this is kind of the first real extension to the
34:31
Speaker 2: downside that we've seen. It still is something where hey,
34:35
Speaker 2: the S and P five hundred is where it was
34:38
Speaker 2: back in last July. So yeah, it's given up you know,
34:41
Speaker 2: eight nine months of gains at this point. But obviously
34:45
Speaker 2: market's a little nervous and certainly something where individuals, you know,
34:49
Speaker 2: I can understand some nervousness out there if you're wondering,
34:51
Speaker 2: ge like, how does this end up moving from here?
34:54
Speaker 3: Yeah, because look, nobody has any guarantee that this is
34:56
Speaker 3: going to go one direction or another from here. Could
34:59
Speaker 3: continue down very frequently historically has, but nobody actually knows
35:04
Speaker 3: and certainly nobody knows what the next policy outcome from
35:06
Speaker 3: the White House is going to be. But I can
35:08
Speaker 3: certainly understand how investors would be starting to get nervous
35:11
Speaker 3: now you've wiped out a few months of gains pretty quickly,
35:14
Speaker 3: especially in some of those high flying companies that have
35:16
Speaker 3: really made people money over the last few years. Here's
35:19
Speaker 3: the one question that I would be asking myself as
35:21
Speaker 3: an investor, and it's really a question you should be
35:23
Speaker 3: asking yourself at any point in time, But how was
35:26
Speaker 3: I prepared for a potential market downturn in recession going
35:30
Speaker 3: into twenty twenty five? Like what specific parts of my
35:32
Speaker 3: portfolio had me prepared for that potential outcome? And what
35:36
Speaker 3: was my game plan going into this year in the
35:38
Speaker 3: eventive one? And if you can answer that question in
35:40
Speaker 3: like three sentences or less, then I'm not sure there's
35:44
Speaker 3: really much that you need to be doing. But if
35:46
Speaker 3: you can't, just honestly, if you can't answer that question
35:50
Speaker 3: when looking at your investment portfolio and your retirement future
35:53
Speaker 3: and trying to sort those things out, if you can't
35:56
Speaker 3: honestly assess that and say here is where I am
35:58
Speaker 3: prepared for that potential outcome, Here are the steps that
36:02
Speaker 3: I took ahead of time, then I think you'd need
36:05
Speaker 3: a second opinion, and if you would like one of those,
36:08
Speaker 3: no commitment, just second opinions on what it is that
36:11
Speaker 3: you are doing today, the potential upsides and downsides and
36:14
Speaker 3: risks that you have when you approach your own portfolio.
36:17
Speaker 3: Please give the folks at Armstrong Advisory Group a call.
36:19
Speaker 3: We'd be happy to offer one of those. The phone
36:22
Speaker 3: numbers eight hundred three nine three for zero zero one.
36:26
Speaker 3: I know that markets like this can be nerve racking.
36:28
Speaker 3: If you have questions about how you are prepared for it,
36:31
Speaker 3: call us at eight hundred three nine three for zero
36:34
Speaker 3: zero one.
36:35
Speaker 1: The proceeding was paid for by Armstrong Advisory Group, a
36:38
Speaker 1: registered investment advisor. Nothing in the ad or in any
36:40
Speaker 1: Armstrong guide a specific financial, legal, or tax advice. Consult
36:44
Speaker 1: your own financial, tax into state planning advisors before making
36:46
Speaker 1: any investment decisions. Armstrong may contact you to offer investment
36:49
Speaker 1: advisory services.
36:52
Speaker 2: Mike, let's talk a little bit. Actually, I just want
36:55
Speaker 2: to briefly hop forward to one story here in terms
37:00
Speaker 2: of Mike, when's the last time we even saw a
37:02
Speaker 2: piece published in any publication talking about dividends.
37:09
Speaker 4: Mid twenty tens.
37:10
Speaker 2: It's been a while, right, like a yields are higher,
37:13
Speaker 2: and b stock performance has been good the last few years.
37:17
Speaker 2: Twenty twenty two obviously was was a hiccup, but I
37:19
Speaker 2: don't think anyone was like sitting there like, hey, dividends
37:22
Speaker 2: in twenty twenty two, Why amsing?
37:23
Speaker 3: Why am I obsessed with dividends when I can get
37:25
Speaker 3: four percent on a bond and tech stocks are going
37:29
Speaker 3: up by thirty percent a year.
37:30
Speaker 2: But interesting point here where this piece from the Wall
37:34
Speaker 2: Street Journal that hey, dividend stocks are dramatically or at
37:38
Speaker 2: least the dividend indices are dramatically outperforming their non dividend counterparts.
37:45
Speaker 2: Standard and Poors for the S and P five hundred
37:48
Speaker 2: has a sub like index called the Dividend Aristocrats. It's
37:52
Speaker 2: companies that have raised their dividends in each of the
37:54
Speaker 2: past twenty five years. That index up about three and
37:57
Speaker 2: a half percent, while the S and P five hundred,
38:00
Speaker 2: again this is when it was published, you know, down
38:02
Speaker 2: a couple percentage points on the course of the year.
38:05
Speaker 2: So I don't know if this is you know, investors
38:07
Speaker 2: specifically seeking out dividends or more just hey, those are
38:10
Speaker 2: the companies that aren't as overvalued, and that's where they're
38:13
Speaker 2: flocking to right now, but a little bit of noise
38:15
Speaker 2: that we haven't heard on that front in recent years.
38:18
Speaker 2: Quick Break, our two of the Financial Exchange is coming
38:21
Speaker 2: right up.