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Is the US economy regaining its swagger? · The Financial Exchange Show

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1:03
Speaker 1: Face is the Financial Exchange with Mike Armstrong and Mark Vandetti.
1:11
Speaker 2: Good morning.
1:12
Speaker 3: Hope everybody had a nice weekend. Back added here on
1:16
Speaker 3: the Financial Exchange amidst earnings week, and we really start
1:19
Speaker 3: kicking things into high gear with those earnings this week,
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Speaker 3: in particular with both Tesla and Alphabet reporting. I was
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Speaker 3: trying to think, Mark, because Verizon reported this morning, and
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Speaker 3: I'm trying to think if there's any company whose earnings
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Speaker 3: are more predictable and boring than Verizons. That business model
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Speaker 3: is just so predictable at this stage. I'm not sure.
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Speaker 3: Maybe a utility company out there would be more boring
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Speaker 3: than Verizon's earnings. But it's like, Okay, how many wireless
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Speaker 3: subscribers did you have and how many people cut their
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Speaker 3: FiOS cord in the most recent Yeah, like that's about
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Speaker 3: as much as you get from Verizon.
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Speaker 4: I wish you had asked me this question earlier. I
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Speaker 4: had Volatility of earnings by sector or something like that,
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Speaker 4: not something I've ever looked at. Yeah, I wonder if
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Speaker 4: we'd be surprised.
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Speaker 2: Yeah, maybe, like you.
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Speaker 4: I would put utilities at the top of the list,
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Speaker 4: but maybe it's volid Maybe demand is more volatile.
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Speaker 3: Ion gives us nothing at least at and t who
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Speaker 3: operates a very similar business model, screws things up all
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Speaker 3: the time, right, Like, Hey, we're going to go acquire
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Speaker 3: a giant creative engine HBO and then do a terrible
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Speaker 3: job managing and then spin it back off and see
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Speaker 3: what happens. Verizon, I guess what they buy Yahoo years ago.
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Speaker 3: I think that's the most exciting thing that they've done
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Speaker 3: in the past.
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Speaker 2: So yeah, But if you're an investor, do you.
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Speaker 4: Want stable earnings or do you want the chance of
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Speaker 4: greater upside? If that's what the volatility implies, I mean,
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Speaker 4: you don't necessarily want set of earnings. I'm not saying
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Speaker 4: you want I'm not saying you want an a radically
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Speaker 4: managed company. I'm talking about earnings inaggreate. I'm not talking
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Speaker 4: about buying a company and saying, hey, surprise me. You know,
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Speaker 4: I don't know what's gonna happen next quarter. I can't wait. No, no, no,
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Speaker 4: I'm talking about inagris.
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Speaker 3: I guess it depends what you're doing. But yeah, I mean,
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Speaker 3: if you're buying Verizon, you probably want stable earnings. If
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Speaker 3: you're buying if you're buying a company that's basically a
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Speaker 3: regulated utility, you want still.
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Speaker 4: Overall, higher volatility is associated with lower earnings over long
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Speaker 4: periods of time, not something I've looked at in detail.
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Speaker 3: In either case, like I mentioned later on this week,
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Speaker 3: we will get the heavy hitters, and so taking a
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Speaker 3: look at that. Wednesday, after the bell, both Alphabet and
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Speaker 3: Tesla will be reporting earnings. That's a combined three and
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Speaker 3: a quarter trillion dollars worth of market cap. We will
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Speaker 3: have others as the week goes on, though, Coca Cola,
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Speaker 3: Philip Morris, Raytheon all reporting. Sorry, they're now RTX Corporation
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Speaker 3: all reporting tomorrow morning before the bell. Let's see. In
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Speaker 3: addition to Alphabet and Tesla, we also have IBM and
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Speaker 3: T Mobile reporting earnings tomorrow. Sorry, that's Wednesday, along with
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Speaker 3: AT and T and Thermo Fisher. Thursday, we'll have Honeywell, Union, Pacific, Blackstone,
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Speaker 3: among to others, and Intel I believe is also reporting.
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Speaker 3: That's been a bit of a dumpster fire over the
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Speaker 3: course of the last few years. So we'll see what
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Speaker 3: they have to say. But by and large, all eyes
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Speaker 3: are going to be on those big heavy hitters Alphabet
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Speaker 3: and Tesla, and so I don't know how much is
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Speaker 3: to be learned about the broader economy from either of
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Speaker 3: those two. But those two in particular make up a
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Speaker 3: massive portion of the overall stock market, and so they
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Speaker 3: have the potential to move things around a little bit.
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Speaker 3: Let's start with Tesla first. In terms of what we
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Speaker 3: might learn there, one would be just a rapid sales
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Speaker 3: decline that Tesla has experienced over the course of the
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Speaker 3: last year or so. Does that continue? Has that reversed
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Speaker 3: at all? Now that Elon Musk has at least stepped
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Speaker 3: away from his government job and focused on other areas
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Speaker 3: we will see. My guess would be no. But it's
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Speaker 3: more a question of how successful is he in redirecting
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Speaker 3: attention to things like robots and robotaxies. They are currently
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Speaker 3: doing that test out in Austin, Texas, and so how
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Speaker 3: successful has it been. Are they able to expand that
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Speaker 3: in the near future. Those are questions that folks will
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Speaker 3: be raising on the analyst side of things, because Elon
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Speaker 3: Musk has been trying to do anything you can to
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Speaker 3: divert attention away from poor vehicle sales. On the alphabet
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Speaker 3: side of things, certainly they're going to tout the you know,
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Speaker 3: giant advertising business. The question that I have is what
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Speaker 3: is that company going to look like in a few years,
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Speaker 3: once this monopoly case makes its way all the way
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Speaker 3: through the court system, and is it broken up in
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Speaker 3: some meaningful way, and what does that look like ultimately?
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Speaker 4: Yeah, I mean you know where I stand on company earnings.
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Speaker 4: I'm going to buy the index fund and own it
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Speaker 4: for general Jenneral, I'm sorry, this is not This does
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Speaker 4: not make good.
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Speaker 2: It's not mark, it's not market.
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Speaker 4: I don't find it.
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Speaker 2: Well.
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Speaker 4: It's yes, because I talk to managers who in turn
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Speaker 4: employee analysts whose full time job it is to read
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Speaker 4: the tea leaves. So it's extraordinarily hard to do. First
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Speaker 4: of all, so I respect what they do. A certain
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Speaker 4: amount of humility is required you. I wouldn't rely on
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Speaker 4: anybody who didn't follow a company full time for any
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Speaker 4: kind of insight otherwise, which is regurgitating nothing but regurgitation,
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Speaker 4: which is.
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Speaker 2: Why I also do. I also don't really care much personally.
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Speaker 4: I was getting that mic I didn't want to be flip, But.
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Speaker 3: No, I too don't really have a vested interest in Hey,
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Speaker 3: is Google going to beat on their predicted earnings or
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Speaker 3: miss on their predicted arrights. I'm far more interested in
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Speaker 3: the commentary that we typically get from those CEOs about
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Speaker 3: how they feel about the broader business climate. I think
6:43
Speaker 3: that actually makes for interesting conversations. Let's you can't toss
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Speaker 3: it into a model.
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Speaker 4: Because you can't trust them. They're not They're not being objective.
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Speaker 4: They're either excusing their way bad idiosyncratic performance or talking
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Speaker 4: up or down a business for their own personal reasons.
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Speaker 4: I find it very hard to glean anything of good
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Speaker 4: predictive value. Think of like Jamie Diamond, sure somebody like that.
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Speaker 4: You get the usual suspects that get a lot of
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Speaker 4: media to guide.
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Speaker 3: What you can trust as CEO to do and represent
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Speaker 3: during a earnings call is to act in their company's
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Speaker 3: own best interest.
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Speaker 1: Yea.
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Speaker 3: And so if you just take that as the I
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Speaker 3: guess universe that you're operating from and say, okay, what
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Speaker 3: would these CEOs want to announce or bring to the
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Speaker 3: table in order to serve their own company's best interest
7:34
Speaker 3: and drive their stock price higher, it can actually.
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Speaker 2: Give you a framework for thinking about all of those things.
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Speaker 3: But I'm with you, Mark, Yeah, I mean, when Jamie
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Speaker 3: Diamond calls for the hurricane that is coming for the economy,
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Speaker 3: he's got his own reasons.
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Speaker 2: To be doing so, likely he.
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Speaker 3: Feels that his company is particularly well served by a
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Speaker 3: financial hurricane coming down the road, or.
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Speaker 4: He feels like, though, maybe that means issue more debt
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Speaker 4: now and his company's going to be underwriting some of that,
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Speaker 4: or it pushes up or down the cost of capital
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Speaker 4: his company benefits from may or may not benefit from that.
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Speaker 3: So thus far, you know, the previous week's earnings were
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Speaker 3: heavily in the financial sector, big banks reporting here and
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Speaker 3: there and again without getting into hey did Capital One
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Speaker 3: beat or miss on earnings, which I don't think most
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Speaker 3: people generally care about. I think one thing we can
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Speaker 3: say generally about the big banks was that they spoke
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Speaker 3: to improving appetite for business activity, and by that I
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Speaker 3: mean investment. Banking activity picked up in the second half
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Speaker 3: of the second quarter. Trading activity picked up in the
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Speaker 3: second half of the second quarter. While that doesn't indicate
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Speaker 3: much about what's to come for the future, that was
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Speaker 3: the main thing I took away from last week's earnings.
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Speaker 3: And we will see what we get out of this
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Speaker 3: week's earnings.
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Speaker 2: We won't get much.
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Speaker 3: The one area that I'm interested in when it comes
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Speaker 3: to a bunch of different companies is what are you
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Speaker 3: doing in reaction action to tariffs.
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Speaker 2: We won't get much of that from Tesla or Google.
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Speaker 3: We're really waiting on the likes of Amazon, Walmart and
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Speaker 3: others to give us their earnings reports and talk to
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Speaker 3: us about their pricing power and margins.
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Speaker 2: Let's take a quick break.
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Speaker 3: When we come back, I want to talk about this
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Speaker 3: market rally that has taken place since April ninth. Wall
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Speaker 3: Street Journal has a piece out this morning how the
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Speaker 3: US economy is regaining its swagger. Will be coming back
9:25
Speaker 3: with that next on the Financial Exchange.
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10:26
Speaker 3: In addition to earnings that we'll be hearing from this week,
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Speaker 3: we've got J. Powell speaking tomorrow at a banking conference.
10:32
Speaker 3: We've got existing home sales coming out Wednesday. Of course
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Speaker 3: Thursday are the weekly initial jobless claims that have shown
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Speaker 3: a fair bit of tempering I guess would be the
10:43
Speaker 3: description that I would give there That just not temperings
10:46
Speaker 3: might not be the right word, but there was an
10:48
Speaker 3: uptick for a while there, and that has come back
10:50
Speaker 3: down to a normal range of jobless claims. We've got
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Speaker 3: the US Services PMI new home sales coming Thursday as well,
10:59
Speaker 3: and then Friday some durable goods orders. So primarily we
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Speaker 3: are looking at the earnings this week, but we've got
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Speaker 3: a piece from the Wall Street Journal that I guess
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Speaker 3: kind of confirms some of the things that we've said
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Speaker 3: earlier this year and talks about the US economy and
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Speaker 3: primarily talks about the consumers within the US economy, because
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Speaker 3: largely that's what our economy is. We're not a huge
11:22
Speaker 3: manufacturing base anymore. We're not led by that stuff. We
11:25
Speaker 3: are led by what does the consumer decide to do
11:28
Speaker 3: with their paycheck. And by and large, after some fretting
11:32
Speaker 3: over tariffs and concern about the direction of the economy
11:35
Speaker 3: and a bunch of really negative consumer sentiment surveys, the
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Speaker 3: consumers woken up taking a look around and said, yeah,
11:42
Speaker 3: I still got a job. I'm still going to keep
11:43
Speaker 3: spending my money. That's basically how I would wrap up
11:46
Speaker 3: the entire Wall Street Journal piece here in terms of
11:49
Speaker 3: what has occurred over the last few months. And I
11:53
Speaker 3: say it reconfirms some of our own thinking, because we
11:56
Speaker 3: were talking throughout the course of the last year about
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Speaker 3: how consumers turned really negative, and you know, there are
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Speaker 3: pieces being written about, well, if that negativity turns into
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Speaker 3: a lack of spending, then we could get that recession
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Speaker 3: because of the consumer. And I think both you and
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Speaker 3: I kind of made the point that the consumer doesn't
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Speaker 3: pull back ahead of a recession. We've never had a
12:20
Speaker 3: recession that is caused by consumers saying, oh, we're suddenly
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Speaker 3: going to get more financially disciplined and save a bunch
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Speaker 3: more money. No, what usually happens is some crisis kicks
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Speaker 3: things off, It causes companies to lay off employees, and
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Speaker 3: then finally, in the eleventh hour, when that person no
12:37
Speaker 3: longer has the limit on their credit card to spend,
12:40
Speaker 3: they finally start pulling back on that spending at that stage.
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Speaker 3: But almost never ahead of a crisis. And I think, honestly,
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Speaker 3: that's what we're seeing here again.
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Speaker 4: Now, well, Gracie, spending can slow. Well, I'll just speak
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Speaker 4: to the facts. It's not really my opinion. Spending can
12:53
Speaker 4: slow ahead of recessions. I think most economists would attribute
12:59
Speaker 4: the big chunk of a decline to a decline in demand.
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Speaker 4: That's why the prescription for a recession is typically stoke
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Speaker 4: total demand aggregate demand, as a researcher would call it,
13:11
Speaker 4: through stimulus payments, through cutting interest rates, through uh, throw
13:16
Speaker 4: a tacky I'm sorry, I can't. I just can't do
13:19
Speaker 4: it with my voice in my I just I just yank,
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Speaker 4: very dramatically took my headphones.
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Speaker 3: We wear headphones in radio, and sometimes I just can't
13:27
Speaker 3: do it. When Mark here is his own voice, the.
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Speaker 4: Internet, the air conditioning gives me inter ear issues. So
13:31
Speaker 4: this time of year is brutal, and then you put
13:33
Speaker 4: those things on and it's like a little guy screaming,
13:37
Speaker 4: A little guy me, a little version of me screaming
13:39
Speaker 4: in my own head. Would you can imagine is a
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Speaker 4: very quick way to lead to insanity and probably criminal
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Speaker 4: convictions for various So tune into the financial exchange the
13:48
Speaker 4: next We're going to tune up the volume and spike
13:51
Speaker 4: Mark's coffee and then listen to himself. So yeah, I
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Speaker 4: mean I would disagree only to the extent. Well, I
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Speaker 4: would disagree entirely with what you said. I guess we
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Speaker 4: do watch the consumer closely. But you hintedate reasons why
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Speaker 4: spending is most in an accounting sense, most of GDP,
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Speaker 4: and just look at PCE changes year over year on
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Speaker 4: any database prior to recessions, and some are In some
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Speaker 4: instances there's no there's no obvious indication of a lead.
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Speaker 4: But in a lot of instances, yes, spending and the
14:21
Speaker 4: economy do slow down prior to formal recession, which is
14:25
Speaker 4: why all eyes are typically on the consumer. That said,
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Speaker 4: the biggest contributors to the declines in GDP relative to
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Speaker 4: GDP's trend in recessions are categories you wouldn't think of inventory,
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Speaker 4: non residential fixed investment, and i e. Business investment, not
14:44
Speaker 4: the biggies that you would think of. So I guess
14:46
Speaker 4: it's complicated.
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Speaker 3: So there there's this argument going on that, look, if
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Speaker 3: anything you could throw at this economy in terms of
14:56
Speaker 3: uncertainty could be thought of, it's been done.
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Speaker 2: This year.
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Speaker 3: We've had threats to the federal federal reserves independence, we
15:03
Speaker 3: have had tariffs thrown at the economy, and yet unemployment
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Speaker 3: hasn't spiked. We haven't seen a prolonged market down turn,
15:12
Speaker 3: although there was a twenty peces.
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Speaker 4: But those threats haven't been followed through on yet we haven't.
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Speaker 4: The full effect of tariffs hasn't been realized, not even close.
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Speaker 4: I've lost track of what tariffs have been implemented, at
15:23
Speaker 4: what rate, and where we are in all these alleged negotiations,
15:27
Speaker 4: So none of that has actually been followed through on.
15:30
Speaker 4: So the apprehension was there, but the realization or we
15:34
Speaker 4: haven't yet realized these fed independence is another example. Trump
15:38
Speaker 4: keeps threatening it because he likes has at a news
15:40
Speaker 4: but hasn't happened yet.
15:42
Speaker 3: I have a question that even to me seems borderline
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Speaker 3: crazy and irresponsible. So I'm just going to ask you
15:50
Speaker 3: if you think it's even plausible, which there's no way
15:52
Speaker 3: to know the answer to this question until you spend
15:55
Speaker 3: you know, decades looking back on the economy. Is the
16:01
Speaker 3: are the participants in the economy, the Federal Reserve, Congress,
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Speaker 3: the White House? Are we better at detecting, preventing, and
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Speaker 3: dealing with market collapses that now spill over to the
16:14
Speaker 3: real economy in a way that we weren't thirty years ago?
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Speaker 2: Because I think about.
16:20
Speaker 3: The recent versions of market fluctuations, and you know, you
16:25
Speaker 3: think about anything during the twenty tens, the twenty twenty
16:28
Speaker 3: COVID Christis.
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Speaker 4: I'm sorry, I'm gonna lose you. What was your question?
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Speaker 2: Again?
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Speaker 3: Are we as a US society, and I would put
16:36
Speaker 3: the power.
16:36
Speaker 4: Our policy makers, fiscal and monetary policy makers, Okay, are
16:40
Speaker 4: they better.
16:41
Speaker 3: At detecting, preventing, and dealing with market collapses from spilling
16:44
Speaker 3: over to the real economy. So you're going to look
16:46
Speaker 3: at twenty twenty and I look at twenty twenty five
16:49
Speaker 3: and twenty twenty two as a few instances where markets
16:52
Speaker 3: started really falling apart for pretty good reasons.
16:55
Speaker 4: Okay, So you're asking about financial markets in particular, are
16:57
Speaker 4: we better at keeping financial market ructions contained in financial markets.
17:02
Speaker 3: Because in eight I think it's fair to say that
17:05
Speaker 3: we didn't really have the tools to deal with that
17:08
Speaker 3: financial collapse spilling into the real economy. Same goes to
17:12
Speaker 3: the dot com bubble, right, you had this massive collapse
17:14
Speaker 3: in valuations in tech companies that spilled into the real
17:17
Speaker 3: economy with higher unemployment. We saw both of those things
17:22
Speaker 3: very briefly during the last two big market corrections, but
17:25
Speaker 3: they were in COVID extremely briefs, and in the last
17:29
Speaker 3: two events didn't really spill over.
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Speaker 4: Okay, So I think your view is shaped as are
17:34
Speaker 4: most of our reviews anybody under like, well, even in
17:37
Speaker 4: my age, well and in my fifties.
17:39
Speaker 3: And by the way, I'm very, very suspicious that this
17:41
Speaker 3: would be the case. I think, I think it's probably incorrect,
17:44
Speaker 3: but I think it's worth asking the question.
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Speaker 4: Okay, So most recessions up until the last couple were
17:49
Speaker 4: not these dramatic, single cause events. They were due to
17:53
Speaker 4: the FED increasing interest rates to cool the economy off
17:55
Speaker 4: to prevent inflation from getting too hot. With a couple
17:58
Speaker 4: of exceptions, most were, as I just described them, the
18:02
Speaker 4: Fed early on in an expansion, keeps monetary policy loose
18:06
Speaker 4: to keep unemployment coming down. That's its job basically, while
18:10
Speaker 4: keeping inflation contained. It's got a dual mandate, as you
18:13
Speaker 4: like to talk about. And then at some point it's
18:15
Speaker 4: got to tighten. That slows the economy and caused recessions.
18:18
Speaker 4: Up until the nineteen nineties, that was the textbook.
18:20
Speaker 2: That's the way it was taught to power sessions happen.
18:23
Speaker 4: Yeah, the Fed at some point has to cool the economy.
18:26
Speaker 4: That generally results in recession. We're getting I see close
18:29
Speaker 4: to the break here, so I won't elaborate too much
18:32
Speaker 4: other than to say I think our views are now
18:34
Speaker 4: shaped by this sort of shocking, dramatic, discrete, easily identifiable,
18:40
Speaker 4: however you want to describe them, causes of the recent recession.
18:43
Speaker 4: So we're looking for a crisis.
18:44
Speaker 2: COVID, GFC tech bubble.
18:46
Speaker 4: Yeah, it's been three real, big conspicuous Virtually everybody agrees
18:51
Speaker 4: on them, though not everybody agrees on the timing and
18:53
Speaker 4: causes of the of the proximate trigger, and that's dulled
18:57
Speaker 4: us I think to the more Monday causes of recession,
19:01
Speaker 4: which is just the FED hikes spending slows down, there's
19:05
Speaker 4: inertia in GDP growth, and that results in growth slowing
19:09
Speaker 4: more than the Fed intended. Then you get recession.
19:12
Speaker 3: Let's take a quick break here on the Financial Exchange.
19:15
Speaker 3: We've got Wall Street Watch coming up when we come back,
19:19
Speaker 3: heading towards that August first tariff deadline, and the news
19:23
Speaker 3: seems to be changing a little bit out of Europe
19:25
Speaker 3: over the weekend. We'll be cover that next here on
19:27
Speaker 3: the Financial Exchange.
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 at what's moving market so
19:55
Speaker 1: far today right here on the Financial Exchange Radio Network.
20:00
Speaker 5: Oh, you have another busy week on tap for markets
20:03
Speaker 5: with earning season at the forefront.
20:06
Speaker 2: We're major names.
20:07
Speaker 5: Including Tesla, Alphabet, Intel, IBM, Coca Cola, and many many
20:11
Speaker 5: more will report their results right now. SMP five hunderd
20:15
Speaker 5: NASDAK have hit fresh record highs. The Dow is up
20:19
Speaker 5: by four tenths of one percent, or one hundred and
20:21
Speaker 5: seventy three points. SMP five hundred is up just over
20:25
Speaker 5: half a percent higher thirty four points Nasdak up by
20:28
Speaker 5: nearly nine tenths of one percent, or one hundred and
20:31
Speaker 5: seventy nine points, Russell two thousand up six tenths of
20:34
Speaker 5: one percent to fourteen points ten year treasure Field retreating
20:38
Speaker 5: seven basis points. Today a four point three five six
20:42
Speaker 5: percent DAN crude oil is off eight tenths of one percent,
20:46
Speaker 5: trading in sixty six dollars in seventy eight cents a barrel.
20:49
Speaker 5: Verizon reported better than expected earnings and revenue for the
20:53
Speaker 5: second quarter, with the telecommunications giant also raised its annual
20:57
Speaker 5: earnings forecast, sending matstock four percent higher. Meanwhile, pizza chain
21:02
Speaker 5: Domino saw its same store sales climb three point four
21:05
Speaker 5: percent during the previous quarter, handily beating forecast of two
21:09
Speaker 5: point two percent. While Domino's revenue met expectations for the period,
21:14
Speaker 5: its earnings did miss. Domino shares a down over one percent. Elsewhere,
21:19
Speaker 5: jeep maker Stalantis swung to a net loss in the
21:22
Speaker 5: first half of the year, taking an earnings hit of
21:25
Speaker 5: about three hundred and fifty million dollars from US tariffs.
21:29
Speaker 5: Steel producer Cleveland Cliffs posted a smaller than expected quarterly
21:33
Speaker 5: net loss, sending matstock jumping ten percent higher. Core weave
21:37
Speaker 5: up by four percent after it said plans to sell
21:40
Speaker 5: one and a half billion dollars worth of bonds. Block
21:43
Speaker 5: shares up eight percent following news that the parent company
21:46
Speaker 5: to Cat to the Cash app will officially join the
21:49
Speaker 5: S and P five hundred on July twenty third, replacing
21:52
Speaker 5: Hess and Target was downgraded by Barclays to underway from
21:56
Speaker 5: equal weight, where the financial firm said it expects that
21:59
Speaker 5: sales at the retailer will continue to underperform without a
22:03
Speaker 5: bigger strategic shift. Target share is mostly flat so far today.
22:07
Speaker 5: I'm Tucker Silvan, that's Wall Street Watch.
22:10
Speaker 2: You know.
22:10
Speaker 3: We tease the name Stillantis so frequently, and I've never
22:13
Speaker 3: actually looked up why they went with this silly name
22:17
Speaker 3: for a car company, but it was the It was
22:20
Speaker 3: the combination of Fiat Chrysler and PSA is at Pougeot Pougeot.
22:27
Speaker 3: I don't know whenever they combined these companies. The name
22:31
Speaker 3: Stillantis is derived from the Latin verb stello, meaning to
22:35
Speaker 3: brighten with stars, which is how they came up with
22:39
Speaker 3: a name that sounds like some sort of fungal disease.
22:43
Speaker 3: So I think the naming was a mistake, but at
22:46
Speaker 3: least we can do a little bit of explanation of
22:48
Speaker 3: how they came up with it, according to According to
22:50
Speaker 3: ai Mark, I asked you the question before the break
22:54
Speaker 3: of are we, and by we I mean policymakers of
22:58
Speaker 3: different sorts better at preventing financial crisis the crises from
23:03
Speaker 3: spilling over into the real accounty.
23:05
Speaker 4: I think yeah, you'd rely on monetary policy for that.
23:08
Speaker 4: So fiscal policy is what Congress and the president do,
23:11
Speaker 4: taxing spending. Just to make the distinction, because like President
23:14
Speaker 4: Kennedy didn't know this, he had to use the fact
23:17
Speaker 4: that monetary policy, which starts with an M, was the
23:20
Speaker 4: name of the guy that ran the FED, Miller. That's
23:21
Speaker 4: how Kennedy. So don't feel bad if you don't get
23:23
Speaker 4: the difference. Kennedy, who was pretty damn smart, didn't remember
23:25
Speaker 4: this or didn't think it was important enough to commit
23:29
Speaker 4: to memory. For what that's worth, So you'd rely on
23:32
Speaker 4: monetary policy to offset the effects of a cataclysm coming
23:36
Speaker 4: from capital markets, a stock market crash or something like that.
23:40
Speaker 4: The textbook example in the modern era is what the
23:42
Speaker 4: FED did in nineteen eighty seven. Now and the S
23:45
Speaker 4: and P crash twenty plus percent in one day. People naturally,
23:48
Speaker 4: Great Depression was still fresh in people's many practitioners' minds
23:52
Speaker 4: in that decade. As odd as that sounds, it was
23:56
Speaker 4: sixty years removed, but that the parallel people went to.
24:02
Speaker 4: The FED was not as vocal as it is today.
24:05
Speaker 4: Didn't announce this to the world, but behind the scenes,
24:07
Speaker 4: Green Spans scrambled to make sure banks had liquidity and
24:09
Speaker 4: that they knew that the FED would backstop them, and
24:12
Speaker 4: arguably that prevented we had a slight economic slowdown in
24:16
Speaker 4: the following year late nineteen eighties, but arguably prevented much
24:19
Speaker 4: worse from happening. So since then, monetary policy makers have
24:23
Speaker 4: been sort of keenly aware of how crunches and capital
24:27
Speaker 4: markets can result in seizing up in credit markets, and
24:31
Speaker 4: how important it is to stave that off by dumping
24:33
Speaker 4: money into the economy effectively, and they did that quite
24:37
Speaker 4: effectively in eight nine, preventing what could have been a
24:41
Speaker 4: repeat of the Great Depression. Probably there's some criticism that
24:44
Speaker 4: fiscal policy, that's taxing and spending policy didn't quite do enough.
24:48
Speaker 4: So I think we are better in that monetary policy makers,
24:51
Speaker 4: and one guy to thank for This is Ben Bernanke.
24:54
Speaker 4: He pioneered We think of him as a FED chair,
24:55
Speaker 4: but before that he was a researcher for which he
24:58
Speaker 4: won an Obel prize after his stint at the FED,
25:01
Speaker 4: and he pioneered how our thinking as to how shocks
25:05
Speaker 4: in the banking sector can make their way into the
25:08
Speaker 4: real economy and what monetary policy.
25:10
Speaker 1: Can do about it.
25:11
Speaker 2: So is your answer yes or no?
25:13
Speaker 4: That would be a big yes, Mike, That'd be a
25:15
Speaker 4: five minute.
25:16
Speaker 2: We are slightly better in monetary.
25:18
Speaker 4: Policy makers, as evidence by the fact that we haven't
25:20
Speaker 4: had a repeat of the Great Depression.
25:22
Speaker 3: There is a massive downside to all of this, by
25:25
Speaker 3: the way, which moral hazard. Yeah, we have made the
25:28
Speaker 3: decision to society basically socialized big losses in markets to
25:32
Speaker 3: prevent a big spillover into a Great depression, which has
25:36
Speaker 3: manifested a number of different ways, but one of them
25:38
Speaker 3: being huge deficits and perhaps the overuse of fiscal stimulus.
25:43
Speaker 2: Oh, no question, regardless of the impact on deficiite.
25:46
Speaker 4: I don't mean to do a victory lab I mean
25:48
Speaker 4: to sound like I was doing a I'm saying only
25:50
Speaker 4: that the FED has done a better is more aware
25:53
Speaker 4: of the need to contain cataclysms that come out of
25:57
Speaker 4: capital markets, keep them in capital mark's prevent them from
26:00
Speaker 4: affecting if they can the real economy. The downside to
26:03
Speaker 4: that is these bailouts upon bailouts have resulted in a
26:08
Speaker 4: lot of moral hazard in the private sector, people taking
26:11
Speaker 4: risks they would otherwise because those risks are going to
26:13
Speaker 4: get socialized, as we saw with the banks in eight
26:16
Speaker 4: oh nine. Another downside is the federal government running up
26:21
Speaker 4: far more debt than they would have had the Fed
26:23
Speaker 4: not stepped into buy it all in Q eight in
26:25
Speaker 4: O eight oh nine through QE, and that.
26:29
Speaker 2: Could result how that blows up? Is that so? Yeah,
26:31
Speaker 2: in fifty years.
26:31
Speaker 4: We might look back and say, boy, were those And
26:34
Speaker 4: a lot of people say it now, and I tend
26:35
Speaker 4: to agree that bailouts were probably a mistake. In fifty years,
26:40
Speaker 4: if the US government debt gets to the point where
26:42
Speaker 4: it dramatically raises interest rates and imperils the reserve status
26:47
Speaker 4: of the dollar, all of this will be looked upon
26:50
Speaker 4: with a lot of scorn. So history is going to
26:52
Speaker 4: time will tell.
26:54
Speaker 3: The negotiations between the United States and European Union regarding
26:57
Speaker 3: tariffs are continuing, how However, the EU trade triefs have
27:04
Speaker 3: been taking a bit of a step back and preparing
27:06
Speaker 3: for worst case scenarios. It seemed, based on some reporting
27:10
Speaker 3: that the USAU were heading towards an agreement that would
27:13
Speaker 3: have kept baseline tariffs at ten percent. Since that rumors
27:20
Speaker 3: of those deals came to the White House, there's been
27:23
Speaker 3: a bit of a reversal there, President Trump pushing apparently
27:26
Speaker 3: for more concessions, including a higher baseline tariff on European goods.
27:31
Speaker 3: As a result, unsurprisingly, it's pushing some within that negotiating
27:35
Speaker 3: block to draw a harder line. And it seems like
27:39
Speaker 3: the politics of France and Germany, which were pretty different
27:43
Speaker 3: in regard to tariffs, at least on the surface, France
27:47
Speaker 3: being much more hawkish, Germany being much more dubvish. In
27:49
Speaker 3: the negotiations, Germany seems to be coming around towards the
27:53
Speaker 3: French view on all of this, which is, Okay, we
27:56
Speaker 3: don't know if we will be able to drive the
27:57
Speaker 3: deal that we need to, so let's make sure we
27:59
Speaker 3: have taliatory measures prepared. What those look like hard to say,
28:05
Speaker 3: but my guess would be that if we the United
28:10
Speaker 3: States end up hitting Europe hard with tariffs on goods
28:13
Speaker 3: coming from Europe to the US, the logical step for
28:16
Speaker 3: them would be to look at things with a harder eye,
28:19
Speaker 3: like digital service taxes on big US tech companies, because
28:23
Speaker 3: while there is a massive imbalance and trade of goods
28:26
Speaker 3: between the US and Europe, the United States supplies much
28:29
Speaker 3: more in the way of services to Europe than they
28:32
Speaker 3: do the United States. And so certainly if we have
28:35
Speaker 3: an escalating trade war between Europe and the US, things
28:38
Speaker 3: like whiskey and agricultural products will get hit with tariffs.
28:42
Speaker 3: But largely if they actually want to hit the United
28:45
Speaker 3: States in the areas where it'll hurt for markets, it's
28:48
Speaker 3: going after companies like Amazon, Google, Meta and others. And
28:53
Speaker 3: that's what's apparently being discussed on the European Union side.
28:57
Speaker 3: Not that any of this will necessarily happen. We've gotten
28:59
Speaker 3: to the the edge of chaos quite a few times
29:03
Speaker 3: now this year, and we have backed away from it.
29:05
Speaker 3: But that's the news to break on European Union and
29:09
Speaker 3: US trade negotiations from over the weekend. Let's take a
29:12
Speaker 3: quick break. When we come back. I want to talk
29:15
Speaker 3: a bit about a piece from the Wall Street Journal,
29:17
Speaker 3: what a late career layoff looks like in America in
29:21
Speaker 3: five charts.
29:21
Speaker 2: That's next here on the Financial Exchange.
29:24
Speaker 1: Missed one of our shows. Catch up anytime by asking
29:27
Speaker 1: your Alexis Smart speaker to play the Financial Exchange. This
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29:53
Speaker 2: The Wall Street Journal has say, I think a really
29:55
Speaker 2: good piece on.
29:58
Speaker 3: Working Americans later in there, career Layoffs, Expectations for retirement.
30:03
Speaker 3: It covers a whole bunch of subjects, but it dives
30:06
Speaker 3: into one thing that I think most Americans are aware of,
30:10
Speaker 3: which is agism in the workplace and the inability for
30:14
Speaker 3: older workers to find new work after fact. It comes
30:17
Speaker 3: from many different places. I don't know all of it.
30:21
Speaker 3: I don't know that all of it is the most
30:22
Speaker 3: obvious one, which is, oh, that's sixty year old. It's
30:25
Speaker 3: not going to have the technology skills to be able
30:26
Speaker 3: to do the job, so don't go higher him or her.
30:29
Speaker 3: I think it comes from a place of when you
30:32
Speaker 3: do get laid off in your sixties, you're towards the
30:34
Speaker 3: top of your career income expectations. There is frequently the
30:39
Speaker 3: act of oh, well, this person's you know, managed thirty people,
30:43
Speaker 3: they're not going to want to take this individual contributor
30:46
Speaker 3: type role. There's all of those things that play in
30:49
Speaker 3: but it can be extremely disruptive. And one thing that
30:53
Speaker 3: I found really really interesting here that the journal was
30:56
Speaker 3: able to put together. They surveyed folks in terms of, hey,
31:01
Speaker 3: what's your expectation for retirement. Are you anticipating a kind
31:06
Speaker 3: of gradual transition into retirement where you start slowing down
31:10
Speaker 3: from a fifty to a forty to a thirty hour
31:12
Speaker 3: work week, or are you looking at like a full stop?
31:15
Speaker 3: And what they found was that while working, half of
31:21
Speaker 3: the people they surveyed, which was twenty eight hundred adults,
31:24
Speaker 3: were expecting a gradual transition, when in reality, only about
31:30
Speaker 3: eighteen percent of those realized a gradual transition after they retired.
31:34
Speaker 3: And so there's a bit of a difference between expectations
31:38
Speaker 3: and reality here, which I don't find terribly surprising, because
31:41
Speaker 3: when you do see buyout packages or layoffs, they do
31:44
Speaker 3: oftentimes target a specific earnings range, right, I think of
31:50
Speaker 3: layoff packages or buyout packages for example, that I've heard
31:53
Speaker 3: of before where you say, okay, take your age plus
31:57
Speaker 3: your years of service with the company, and if they
31:59
Speaker 3: add up to over sixty, for example, then we're going
32:03
Speaker 3: to offer you this buyout package of you know, your
32:05
Speaker 3: your ownership in the company, and things along those lines.
32:09
Speaker 3: And so oftentimes it is paired with that full stop,
32:12
Speaker 3: whether people are ready for it or not. The other
32:15
Speaker 3: realities that they point to in here just speak to
32:18
Speaker 3: what we already discussed, which is it's a lot tougher
32:21
Speaker 3: to find a job once you are over the age
32:24
Speaker 3: of fifty and laid off than it is when you are, say,
32:29
Speaker 3: in your thirties and in a different spot in your career.
32:31
Speaker 3: Among people who are between the age of fifty to
32:35
Speaker 3: sixty five, fourteen percent were laid off for another four
32:38
Speaker 3: percent were laid off more than once, and of those
32:41
Speaker 3: a quarter never found a new job. So it speaks
32:46
Speaker 3: to that reality. And I bring this up because obviously
32:49
Speaker 3: we've all known somebody firsthand who's gone through this, and
32:53
Speaker 3: there's a number of things that I think really everybody over.
32:56
Speaker 2: The age of fifty should be doing.
32:58
Speaker 3: To prepare for the possibility of not retiring under your
33:05
Speaker 3: own terms. It's kind of how I would describe it one. Emotionally,
33:10
Speaker 3: it can just be a massive shock to the system
33:12
Speaker 3: to you have all of you, you know, your long
33:15
Speaker 3: career put together in a package and then to be
33:18
Speaker 3: forced out the door when you're not prepared for it
33:21
Speaker 3: can just be really really damaging to confidence and a
33:24
Speaker 3: whole bunch of other things. And you know, push people
33:26
Speaker 3: into retirement that they're not prepared for. But what we
33:30
Speaker 3: focus with our clients on is making sure that that
33:33
Speaker 3: financial preparation work is done right. If I lose my
33:37
Speaker 3: job at age sixty and I still have kids under
33:41
Speaker 3: the age of twenty five in my house, how am
33:43
Speaker 3: I going to provide health insurance for my family? What
33:46
Speaker 3: am I going to look at? Am I going to
33:48
Speaker 3: do a career change to something that's less paying but
33:51
Speaker 3: does provide health insurance? What do my options look like
33:53
Speaker 3: in that case? Do I have enough saved in non
33:57
Speaker 3: retirement accounts where if I do get laid off, I
33:59
Speaker 3: can can afford to still pay my mortgage or pay
34:02
Speaker 3: my rent, or you know, get by in the case
34:05
Speaker 3: that you know, I do lose my job in some way,
34:09
Speaker 3: shape or form, and then you know, obviously this goes
34:13
Speaker 3: without saying, but that just thought preparation of.
34:18
Speaker 2: If I did.
34:20
Speaker 3: Lose my job, would I be financially and mentally prepared
34:25
Speaker 3: for it? I think is a big hump to get over,
34:27
Speaker 3: and I can tell you, at least from my perspective,
34:30
Speaker 3: getting over the financial hump first allows you to think
34:33
Speaker 3: about those other positive sides of all this too. Just
34:36
Speaker 3: going into work knowing, hey, I'm sixty two years old,
34:40
Speaker 3: and if the company goes through a big layoff round
34:42
Speaker 3: and I don't have a job anymore, I know that
34:45
Speaker 3: I'm financially secure enough to live the rest of my
34:47
Speaker 3: life and provide for my family delivers a huge peace
34:50
Speaker 3: of mind and allows people to think about those other
34:53
Speaker 3: broader benefits of retirement. If you find yourself in this
34:57
Speaker 3: camp of hey, I am over the age of fifty,
35:01
Speaker 3: I am, you know, working in a career that could
35:05
Speaker 3: be affected by layoffs, right, I mean, some people just aren't.
35:07
Speaker 2: Right if you're if.
35:09
Speaker 3: You're working in the construction sector, it seems unlikely to
35:15
Speaker 3: me right now that you're going to face a downside.
35:17
Speaker 3: If you're working manufacturing semiconductor facilities. You know, there are
35:21
Speaker 3: a lot of areas that just aren't subject to this
35:23
Speaker 3: type of thing. Healthcare might be another one, but there
35:26
Speaker 3: are plenty where you know unexpected economic downturns can affect
35:30
Speaker 3: those jobs. Government workers was another one where people never
35:32
Speaker 3: thought they'd be subject to layoffs and suddenly were this year.
35:35
Speaker 3: Give the folks at Armstrong Advisory Group of calls so
35:37
Speaker 3: we can develop a plan with you to handle those
35:41
Speaker 3: potential unforeseen circumstances. The numbers eight hundred three nine three
35:46
Speaker 3: for zero zero one. Don't bury your head in the sand,
35:49
Speaker 3: build a plan so you're prepared for the future. Eight
35:51
Speaker 3: hundred three nine three four zero zero one.
35:55
Speaker 1: The proceeding was paid for by Armstrong Advisory Group, a
35:58
Speaker 1: registered investment advisor. Nothing in the or in any Armstrong
36:01
Speaker 1: guide a specific financial, legal, or tax advice. Consult your
36:03
Speaker 1: own financial, tax into state planning advisors before making any
36:06
Speaker 1: investment decisions. Armstrong may contact you to offer investment advisory services.
36:10
Speaker 3: Mark This number shocked me. Nearly fifteen hundred startups worldwide
36:15
Speaker 3: are currently boasting evaluation of a billion dollars or more,
36:19
Speaker 3: according to Bain. As such, more and more companies are
36:24
Speaker 3: trying to find ways to provide access into private markets
36:28
Speaker 3: before these companies go public and I'm sure you're aware
36:33
Speaker 3: of this trend, right, there are fewer publicly traded companies
36:36
Speaker 3: today than there were in the past.
36:38
Speaker 2: There's a number of different.
36:39
Speaker 3: Reasons behind that. I recognize that that is a change.
36:44
Speaker 3: I don't know that it's a problem. I'm really unsure
36:47
Speaker 3: about the solutions that are being touted for this quote
36:51
Speaker 3: unquote problem that faces US markets.
36:53
Speaker 4: Yeah, for a number of reasons. The number of companies
36:57
Speaker 4: available to you on a public exchange have fallen by
36:59
Speaker 4: about half since the nineteen nineties.
37:01
Speaker 2: That's a big it's a big drop, huge.
37:04
Speaker 4: And that it's a reflection of a broader trend. It's
37:07
Speaker 4: expensive to list publicly, it's it subjects you.
37:10
Speaker 2: To not only a first but it's like you know, ongoing.
37:13
Speaker 4: Yeah, that's the oversight, yeah, part of it, and it
37:16
Speaker 4: might interfere with your plans to grow the business in
37:21
Speaker 4: whatever that means for an individual business because because of
37:24
Speaker 4: the oversight required of publicly traded companies in the structure
37:27
Speaker 4: that publicly traded companies have to conform to. So there's
37:31
Speaker 4: this and we're going to run up against the break here.
37:33
Speaker 4: There's really not enough time to discuss private equity and
37:35
Speaker 4: what it means for four oh one K plans, but
37:37
Speaker 4: broadly speaking, institutional investors, pensions endowments over the past roughly
37:42
Speaker 4: thirty years again since the mid nineties have allocated increasingly
37:46
Speaker 4: to private companies, companies that aren't listed, and they involve
37:51
Speaker 4: different risks, different considerations. You know, you can't just get
37:55
Speaker 4: at your money like you can if you're invested in
37:57
Speaker 4: the stock index fund. Thus, the decision whether or not
38:02
Speaker 4: to use such a fun gets pretty complicated for an
38:04
Speaker 4: individual investor, but there are ways around that.
38:06
Speaker 2: Let's take a quick break.
38:07
Speaker 3: Markets pretty strongly in positive positive territory, with the NAZAC
38:11
Speaker 3: leading the way up three quarters of a percent. We'll
38:13
Speaker 3: have a full update for you in the next hour
38:16
Speaker 3: the Financial Exchange.
38:17
Speaker 2: Stay tuned, folks,