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Why Dollar Doom Predictions Keep Missing the Point · The Financial Exchange Show

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Speaker 1: donation today. This is the Financial Exchange with Chuck Zada,
1:06
Speaker 1: and Mike Armstrong, Chuck.
1:09
Speaker 2: Mike Tucker here on the Financial Exchange, And as we
1:12
Speaker 2: kick things off, we've got equity markets rallying after you know,
1:17
Speaker 2: kind of just not really I don't know, not really
1:21
Speaker 2: a great week. A week week. We're gonna call it
1:24
Speaker 2: a call it what it is. But today we got
1:28
Speaker 2: the S and P five hundred up half a percent,
1:30
Speaker 2: dowse up three quarters of a percent, and asdak can
1:32
Speaker 2: posit up about half percent as well. So all the
1:35
Speaker 2: major US indices in the green today, which is always
1:37
Speaker 2: nice to see on a Friday. Like you, you want
1:40
Speaker 2: to end the week on a good note, even if
1:42
Speaker 2: the week didn't go particularly well for for markets. US
1:46
Speaker 2: tenure Treasury up three basis points to four point seven
1:48
Speaker 2: two eight percent, So even with the news of the
1:50
Speaker 2: increased buyback programs that was announced on Wednesday, treasury yields
1:55
Speaker 2: back above where they were at the close of Tuesday's trading,
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Speaker 2: So you've got that dynasm it could play even with
2:04
Speaker 2: interest rates rising today. Dollar index down point zho one percent,
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Speaker 2: so basically flat, but the dollars telling you I'm not
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Speaker 2: coming back with that. That's not happening. And concurrently, gold remember,
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Speaker 2: rising rates tend to put pressure on gold. Gold's up
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Speaker 2: another seventy four dollars an ounce today to forty six
2:18
Speaker 2: to forty six, so gold continuing to chug along as
2:22
Speaker 2: even with interest rates moving up across the yield curve. Today,
2:27
Speaker 2: Crude oil down twenty cents a barrel to eighty six
2:29
Speaker 2: to sixty three on West Texts intermediate triple a national average.
2:33
Speaker 2: For gas prices though up another half cent overnight to
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Speaker 2: four eleven, and diesel up another three cents to five
2:39
Speaker 2: point fifty seven. We are now just twenty four cents
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Speaker 2: away from all time highs on diesel, and I was
2:47
Speaker 2: taking a look at diesel crack spreads today, which are
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Speaker 2: now nosing above one hundred and three dollars and seventy
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Speaker 2: five cents. So based on what we're seeing on cracks
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Speaker 2: and on oil, diesel's probably getting into the I mean,
3:03
Speaker 2: we're at five point fifty seven now, you're probably in
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Speaker 2: the mid five sixties sometime early next week, and we'll
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Speaker 2: have to see where things go. But a real chance
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Speaker 2: that we hit all time highs on diesel in the
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Speaker 2: next two to three weeks if the status quo is
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Speaker 2: maintained in the Middle East and in Russia as well.
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Speaker 3: Chuck, my opinion, financial story of the week has been
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Speaker 3: the bestent Treasury reaction in the bond market. Yeah, we
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Speaker 3: see the financial story of like the second half of
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Speaker 3: the year.
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Speaker 2: Agreed, So.
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Speaker 3: Context wise, every time that there's turmoil in interest rates
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Speaker 3: in bond markets, every author out there starts talking about
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Speaker 3: the deficit again, and you know what's causing it. And
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Speaker 3: I want to acknowledge for a moment that we crossed
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Speaker 3: the forty trillion dollar threshold. So congratulations all US taxpayers.
3:55
Speaker 3: We now have forty trillion dollars worth of debt and
3:58
Speaker 3: that doubled from what was that How long did it
4:01
Speaker 3: take to double?
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Speaker 2: Ten years? No, I don't know something like that that long.
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Speaker 3: So you know, there's this new you know again set
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Speaker 3: of articles being printed about how the deficits driving all this.
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Speaker 3: I'll just take a moment to throw out other theories
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Speaker 3: that you know could be driving in straights higher. One
4:19
Speaker 3: would just be, you know, expected stock market returns. If
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Speaker 3: you think that you know we're headed to an extraordinary
4:27
Speaker 3: market expansion and excitement about AI, then you might say, hey,
4:31
Speaker 3: I'm going to demand higher interest on risk free assets
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Speaker 3: that have nothing to do with that.
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Speaker 2: In order to not play in that space.
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Speaker 3: It could have any number of different things to do
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Speaker 3: with economic expansion, inflation expectations, devaluation of the dollar, some
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Speaker 3: of which may or may not be related to the deficit.
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Speaker 3: But every time this happens, everyone starts, you know, rolling
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Speaker 3: out the h the deficit hawks and the bond vigilante
5:00
Speaker 3: vigilantes who are going to you know, tear markets apart
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Speaker 3: and dethrone the dollar and.
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Speaker 2: Not dethrown the dollar. Remember, if the bond vigilantes have
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Speaker 2: their way, higher bond yields are what maintained the dollar.
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Speaker 3: Yeah, true, or or it doesn't work and the dollar,
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Speaker 3: you know, is no longer the reserve currency.
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Speaker 2: And you know, I think all of these arguments are dumb. Yeah,
5:30
Speaker 2: are dumb.
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Speaker 3: I was trying to think of a nicer way to
5:32
Speaker 3: say it. But none of them really coordinate with each other.
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Speaker 3: Nobody's ever been able to concisely explain to me what
5:39
Speaker 3: might happen if that were to take place. And so
5:44
Speaker 3: we're left with this place where, Okay, let's assume that
5:48
Speaker 3: interest rates.
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Speaker 2: Decline a month from now. I don't know if they will.
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Speaker 3: Or won't, but if they did, what would you have
5:55
Speaker 3: to say about the deficit problem at that stage, because
5:57
Speaker 3: that's exactly what happened last fall.
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Speaker 2: Yes, and the deficit didn't go down last fall, it
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Speaker 2: continued to go up. I think the other piece, like
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Speaker 2: when we talk about the uh decline of the dollar
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Speaker 2: and people always like everyone loves to like link to
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Speaker 2: all these really crappily cited internet articles that don't know
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Speaker 2: anything about what they're talking about. So don't do that.
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Speaker 2: Don't be that person that spreads that stuff, because no
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Speaker 2: one likes that person. Here's the thing, Uh, the US
6:23
Speaker 2: dollar's demise has been predicted for decades, like better part
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Speaker 2: of decade years. I still remember back when I was
6:31
Speaker 2: starting out in this business and admittedly was dumb. Uh,
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Speaker 2: And you know, I would read some of these pieces
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Speaker 2: and be like, oh, like this sounds kind of spooky.
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Speaker 2: And here's the way that I look at it though. Uh.
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Speaker 2: If you are someone who believes that the US dollar
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Speaker 2: is is threatened, like it's it's reserve status is threatened,
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Speaker 2: and oh we're gonna use like some other currency and
6:53
Speaker 2: blah blah, there are a few things that I want
6:55
Speaker 2: you to think about. The first is, okay, if you
6:58
Speaker 2: really believe that what currency do you want to hold
7:02
Speaker 2: your like any money that you have in like you know,
7:06
Speaker 2: any anyone listening to our show Iraqi Denial. Most of
7:09
Speaker 2: you probably have US bank accounts, and my question would be, okay, like, so,
7:14
Speaker 2: do you want to take the dollars in your bank
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Speaker 2: account and like convert them into Chinese you want? Do
7:19
Speaker 2: you want to convert them euros? Do you want to
7:22
Speaker 2: convert them into euros? Do you want to convert them
7:24
Speaker 2: into end Do you want to convert them into rayal's?
7:27
Speaker 2: Do you want to convert them into pesos? If you can?
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Speaker 2: If you're not personally willing to do that, then full stop,
7:35
Speaker 2: like you're just worried about something in your head that
7:38
Speaker 2: you're not actually taking seriously because your actions are not
7:41
Speaker 2: matching up with what you're thinking about. But the second
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Speaker 2: piece is, Okay, if you're not willing to do that,
7:46
Speaker 2: why why would a multi billion dollar company be willing
7:51
Speaker 2: to do that? You know, let's let's say that you
7:54
Speaker 2: are I don't know your Delta Airlines as an example,
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Speaker 2: Do you suddenly demand to be and you want or gold? No?
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Speaker 2: Like that's that's dumb. That like that that made absolutely
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Speaker 2: no sense like you you don't. And so look, I'm
8:10
Speaker 2: not saying that the US dollar is perfect. Ultimately, here's
8:12
Speaker 2: the here's the secret. Any any of these currencies that
8:16
Speaker 2: are out there, they're all bound for the same place
8:18
Speaker 2: in the long run, which is the toilet. And that's
8:20
Speaker 2: that's fine. Like you can like, there's there's no problem
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Speaker 2: with that. What you have to understand is when people
8:27
Speaker 2: hear about, oh, like, you know, the dollar is gonna
8:29
Speaker 2: be replaced, but they immediately think of as like I'm
8:31
Speaker 2: gonna lose everything that I have, And That's just not
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Speaker 2: how it fundamentally works. It's just not how it fundamentally works.
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Speaker 2: In fact, the thing that you got to remember, a
8:41
Speaker 2: weaker dollar is actually, at least in the last twenty years,
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Speaker 2: a really good thing for you know, local asset prices.
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Speaker 2: Tends to be really good for the US stock market
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Speaker 2: in the short term. I'm not saying that this is
8:55
Speaker 2: good like overall, and it tends to be good for
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Speaker 2: other asset prices, hard assets and things like that. So
9:01
Speaker 2: I'm not saying that there's nothing wrong. Trust me, there's
9:05
Speaker 2: plenty wrong. The folks that get elected to the Senate
9:08
Speaker 2: this fall will be the first ones that have their
9:11
Speaker 2: term coincide with when Social Security is scheduled to run
9:14
Speaker 2: out of money. So, by the way, if you want
9:17
Speaker 2: to talk about the budget deficit, social Security is twenty
9:19
Speaker 2: two percent of our spending year to date and fiscal
9:21
Speaker 2: year twenty twenty six, Medicare is fifteen, Interest is fifteen,
9:26
Speaker 2: which means those three items. I did the math, so
9:28
Speaker 2: you don't have to they're fifty two percent of federal spending.
9:34
Speaker 2: How much is defense? The other Defense is thirteen and
9:39
Speaker 2: so like you're at sixty five percent of federal spending
9:41
Speaker 2: from those four categories. Like you you're not fixing this
9:46
Speaker 2: with like the Department of Education. You're not fixing this
9:50
Speaker 2: with DOT. You're not fixing it with DOA. You're not
9:53
Speaker 2: fixing it with DOE. Like, if you want to fix
9:56
Speaker 2: the budget, you gotta deal with Social Security, Medicare, Defense.
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Speaker 2: No one wants to do that, So we're not gonna
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Speaker 2: do that, and that's that's fine, but ultimately it can
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Speaker 2: cause problems at some point. Is is it what's causing
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Speaker 2: like higher yields? Right now? I don't think so. Maybe
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Speaker 2: it's an ancillary factor, but no one really knows if
10:18
Speaker 2: we're being honest, like treasury moves on any particular day,
10:22
Speaker 2: especially by the way, like I think you gotta remember,
10:24
Speaker 2: you get towards the end of the month, like next week,
10:26
Speaker 2: you get all kinds of mechanical things that happen. There's
10:29
Speaker 2: companies that have to make end of month payments, either
10:31
Speaker 2: in dollars or you know, taking dollars in order to
10:33
Speaker 2: move them into a different currency. Like, all kinds of
10:35
Speaker 2: weird stuff happens end of month. So my big thing is,
10:41
Speaker 2: you gotta be humble on this stuff. And when I
10:43
Speaker 2: say like that, a lot of these things are like dumb,
10:47
Speaker 2: what I mean by that is that the certainty about
10:49
Speaker 2: them is dumb. Yeah, I don't think any of these
10:52
Speaker 2: things are inherently possible. But if there's one thing I've
10:56
Speaker 2: learned in seventeen years in financial services, being certain of
11:00
Speaker 2: anything is dumb. It's what it is. You gotta be
11:05
Speaker 2: humble otherwise the market will humble you, like it will
11:08
Speaker 2: absolutely rake you over the coals. I don't know why
11:13
Speaker 2: you would rake anything over coals, but someone must have
11:16
Speaker 2: at some point. So let's take a quick break. When
11:19
Speaker 2: we return, we have I know we've got a couple things.
11:22
Speaker 2: Let me make sure I get this right. We have
11:25
Speaker 2: trivia next, and then we're gonna be talking about artificial intelligence.
11:30
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Speaker 4: Which state was the first to be officially admitted to
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13:25
Speaker 2: Hey did you say the number? I'd like?
13:27
Speaker 4: Said something and then I just blacked out completely and
13:30
Speaker 4: forgot where I was. So I just wanted to get
13:32
Speaker 4: the number out there again.
13:33
Speaker 2: I'm glad I'm not the only one who does that sometimes.
13:35
Speaker 2: I literally just blacked out. I had one yesterday, where
13:40
Speaker 2: so I do.
13:41
Speaker 4: That in the shower too. I'll like shampoo and then
13:44
Speaker 4: I'll forget if I shampooed or not, so then I
13:46
Speaker 4: re shampoo just to be sure.
13:47
Speaker 2: That's what just happened to me. I had one on
13:51
Speaker 2: on Thursday morning where I had kind of a late
13:53
Speaker 2: night on on Wednesday, and.
13:56
Speaker 3: I always self driving the wrong side of the highway.
13:59
Speaker 3: What's that, I said, woke up driving on the wrong
14:01
Speaker 3: side of the highway.
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Speaker 2: No, not that late of a night, I I but
14:05
Speaker 2: like it was just like a short night's sleep. It
14:07
Speaker 2: wasn't ideal. And so I every morning when I when
14:10
Speaker 2: I get up, I sit at the counter and I have,
14:13
Speaker 2: you know, a bowl of cereal, and I'm I'm reading
14:15
Speaker 2: through stuff on my phone about like what's going on.
14:18
Speaker 2: And I'm sitting there and I'm like where did I
14:20
Speaker 2: put my phone? And I spent like five minutes looking
14:23
Speaker 2: for it in your hand, not even in my I
14:25
Speaker 2: was literally looking at it. I was literally reading it.
14:28
Speaker 2: I'm like, where is my phone? So occasionally the brain
14:32
Speaker 2: just doesn't wake up the same time the body does. Uh. Anthropic,
14:36
Speaker 2: according to a report from Bloomberg, expects to beat or
14:40
Speaker 2: match the size of SpaceX's record IPO. Okay, like, uh,
14:47
Speaker 2: good luck with that. It's a lot of money.
14:50
Speaker 3: So what's going on right now, anthropics touring the country,
14:53
Speaker 3: has their their leadership out there, Yeah, stoking the flames
14:59
Speaker 3: of interest in their IPO. This is what companies do
15:02
Speaker 3: before they go public, is they talk to investment managers
15:06
Speaker 3: and all sorts of organizations about interest in their shares.
15:11
Speaker 3: There's strict rules they have to follow on all of this,
15:14
Speaker 3: but they're trying to gauge how much interest there is
15:17
Speaker 3: in shares of this currently privately held company. The numbers
15:21
Speaker 3: that I had heard tossed out, I think only like
15:24
Speaker 3: eight weeks ago, were about half of what they are
15:27
Speaker 3: talking about today, which is, you know, if you're going
15:30
Speaker 3: to match or exceed SpaceX's IPO two trillion dollar valuations,
15:34
Speaker 3: seventy five billion dollars worth of shares hitting the market,
15:37
Speaker 3: the biggest ever IPO in history, that's a pretty high
15:42
Speaker 3: benchmark to clear.
15:45
Speaker 5: It is.
15:45
Speaker 2: And the other piece is the revenue growth that they
15:48
Speaker 2: saw earlier this year is slowing down. You know, so
15:52
Speaker 2: it's kind of like, okay, like what are you actually
15:53
Speaker 2: getting for this? It's not unlike SpaceX. Was SpaceX slowing
15:59
Speaker 2: down or was it just like not that impressive? Like
16:04
Speaker 2: don't get me wrong, Like look they're growing up what
16:06
Speaker 2: like thirty percent year over year, I think, which is
16:08
Speaker 2: it's fine, Like it's not nothing. But when you know
16:11
Speaker 2: you're pricing things how they are, okay, like you know,
16:13
Speaker 2: you gotta you know, you gotta have some real meat
16:16
Speaker 2: behind that. And look, maybe with some of the acquisitions
16:18
Speaker 2: they've made, like Cursor, maybe they will. So again, let's
16:21
Speaker 2: let's see where things go. The piece that's buried in
16:24
Speaker 2: this that I despise. Uh and again I don't use
16:29
Speaker 2: that word lightly. I'll quote here. And Theropic is considering
16:33
Speaker 2: adopting a so called super voting shares that would give
16:35
Speaker 2: chief executive officer Dario Mode, who owns about a two
16:38
Speaker 2: percent stake, and his fellow co founders, greater control over
16:41
Speaker 2: the company. A person familiar with the matter said, this
16:44
Speaker 2: is the same kind of stuff that Zuck does. It's
16:46
Speaker 2: the same kind of stuff that elon. Like, this is
16:50
Speaker 2: the stuff that really bothers me from a corporate governance perspective. Yea,
16:54
Speaker 2: because it basically means that if if they end up
16:57
Speaker 2: going that route, okay, like, yeah, he does own more
17:01
Speaker 2: than two percent of the company, but he and a
17:03
Speaker 2: couple other you know, key partners can basically never be
17:06
Speaker 2: ousted because they have controlling stakes of voting shares, And
17:11
Speaker 2: that really bothers me from a corporate governance perspective, And
17:15
Speaker 2: I just I can't stand when companies do this because hey, look,
17:19
Speaker 2: if you really believe that you're the guy, then don't
17:23
Speaker 2: sell your shares to the public. Well not even no, like,
17:26
Speaker 2: not even that. Then put your money where your mouth
17:28
Speaker 2: is and do such a good job that the board
17:29
Speaker 2: will never fire you, or hey, like do what Steve
17:33
Speaker 2: Jobs did. Great, the board fired me. Okay, I'll go
17:36
Speaker 2: start another company. And when you guys come crawling back
17:38
Speaker 2: to me in five years for me to save you,
17:40
Speaker 2: then I'll save you. You know. Like, but if if
17:44
Speaker 2: you're not the guy, then we got to know that
17:46
Speaker 2: you're not the guy and be able to get rid
17:48
Speaker 2: of you. So the super voting stuff really bothers me
17:52
Speaker 2: more more than any talk about the valuation or whatever. Look,
17:56
Speaker 2: there's plenty of hype here. I understand why these kinds
17:58
Speaker 2: of valuations are being Are they legitimate in terms of like,
18:03
Speaker 2: are these companies gonna be worth it? You got no
18:05
Speaker 2: idea what's gonna look like five years now? I have
18:07
Speaker 2: no idea of two trillion is you know, crazy high
18:10
Speaker 2: or crazy low, which is why these companies are investing
18:13
Speaker 2: as much as they are because the upside if this
18:15
Speaker 2: works the way they hope is insane. But the stuff
18:19
Speaker 2: that bothers me is like, look, if you really think
18:22
Speaker 2: you're like the guy to run the company, then you
18:25
Speaker 2: don't need the super voting share so that you can
18:27
Speaker 2: never be voted out. Man, yep, like either like either
18:31
Speaker 2: actually believe in yourself or don't don't do this way.
18:35
Speaker 2: You're like, yeah, like, I'm the only one who can
18:37
Speaker 2: lead us, which is why you can never vote me out. No,
18:41
Speaker 2: then you're actually not the only.
18:42
Speaker 3: One who can lead us. You've just given us no
18:45
Speaker 3: other option. Yeah, I do not like it either. Plenty
18:51
Speaker 3: of companies do it. They would be a very good company.
18:54
Speaker 3: But it does leave a little bit of well, it
18:59
Speaker 3: leaves you as a share holder with a very little
19:01
Speaker 3: control over the direction of the company's future.
19:04
Speaker 2: So we head towards the bottom of the hour. Stocks
19:05
Speaker 2: remain positive. SMP's up thirty five points, downs up three
19:08
Speaker 2: to ninety three. Now's that can posit up one hundred.
19:11
Speaker 2: Tenure Treasury still up three point eight basis points to
19:14
Speaker 2: four point seventy three six percent, and gold is still
19:17
Speaker 2: catching a bid, up another eighty two dollars an ounce
19:20
Speaker 2: to forty six fifty three. We're gonna take a quick break.
19:25
Speaker 2: When we return, we've got the trivia answer and Wall
19:29
Speaker 2: Street Watch next.
19:32
Speaker 6: Okay, bringing the latest financial news straight to your radio.
19:42
Speaker 6: Every day, It's the Financial Exchange on the Financial Exchange
19:46
Speaker 6: Radio Network.
19:48
Speaker 1: Tell you now full whoa Street Watch tracking the stocks,
19:52
Speaker 1: the data, and the headlines driving markets. So far today,
19:55
Speaker 1: right here on the Financial Exchange Radio.
19:57
Speaker 4: Network, markets are trading a positive territory to put a
20:01
Speaker 4: bow on a pretty chaotic week as Wall Street continues
20:05
Speaker 4: to assess the bond buy back made by the Treasury
20:08
Speaker 4: this week.
20:10
Speaker 2: Right now, the Dow is.
20:12
Speaker 4: Up three quarters of a percent or four hundred points higher,
20:14
Speaker 4: SMP five hundred up over half a percent or forty
20:17
Speaker 4: points higher. Nasdaq is up half a percent as well,
20:21
Speaker 4: or one hundred and thirty points higher. RUSS two thousand
20:24
Speaker 4: up half a percent, Tenure Treasure reeled is up three
20:27
Speaker 4: basis points at four point seventy three percent, and oil
20:31
Speaker 4: is dipping, trading right around eighty six dollars barrel. Bitcoin
20:35
Speaker 4: heading for its best week in more than three years
20:37
Speaker 4: and now trading at seventy seven thousand dollars. Crypto stocks
20:41
Speaker 4: including Strategy, Coinbase, and Robinhood are all seeing substantial gains
20:45
Speaker 4: in reaction to that gain. Meanwhile, Shears and Ross Stores
20:50
Speaker 4: are climbing over four percent after the off price retailer
20:53
Speaker 4: hiked it's full of your outlook on higher demand from
20:55
Speaker 4: new and existing customers. Sticking with retail, where BJ's wholesale
21:00
Speaker 4: the Club is up by three percent after the company
21:03
Speaker 4: posted better than expected quarterly results, where it's revenue jump
21:06
Speaker 4: sixteen percent as budget conscious shoppers were in search of value.
21:11
Speaker 4: Bjay's also increased its full year adjusted earnings forecast, and
21:14
Speaker 4: according to Bloomberg, Broadcom is in talks with lenders to
21:18
Speaker 4: raise more than sixty billion dollars in debt from an
21:21
Speaker 4: AI chip financing deal that will benefit Anthropic and other companies.
21:26
Speaker 4: Broadcom is up over one percent on Tucker Silvan that
21:31
Speaker 4: is Wall Street Watch. In the previous segment, we asked
21:33
Speaker 4: you the trivia question which state was the first to
21:36
Speaker 4: be officially admitted to the Union. That would, of course
21:40
Speaker 4: be Delaware. I mean Delaware, yes, And Roberto from Tulsa,
21:47
Speaker 4: Oklahoma is our winner Today, Roberto's listening on Serius XM
21:51
Speaker 4: taking home a Financial Exchange show t shirt, and we
21:54
Speaker 4: played trivia every day here on the Financial Exchange. See
21:57
Speaker 4: complete contest rules at financial chainshow dot com.
22:02
Speaker 2: Which state do you think has the most unusual or
22:05
Speaker 2: the most unexpected admission date?
22:09
Speaker 7: What?
22:10
Speaker 2: What? What state? I heard you has the most unusual
22:15
Speaker 2: admission date to the Union. It's not Massachusets. Massachusetts was
22:19
Speaker 2: I think sixth Yeah, New York, New York was in
22:24
Speaker 2: the top ten. Maybe it was like top eleven or twelve,
22:27
Speaker 2: so it was, it was, it was in there, Pennsylvania.
22:30
Speaker 2: I don't know, Chuck, what do you got? The one
22:33
Speaker 2: that again, like you got to think about it. The
22:36
Speaker 2: one that always gets me, uh is Maine, which people
22:40
Speaker 2: don't realize that, like a lot of people outside of
22:42
Speaker 2: Maine and New England don't realize that Maine was part
22:45
Speaker 2: of Massachusetts for yeah, most of its time. Uh, there's
22:49
Speaker 2: actually like some you know, long running you know, resentment
22:53
Speaker 2: on both sides. I think about Maine. But Maine didn't
22:56
Speaker 2: become its own state until eighteen twenty. It was part
22:59
Speaker 2: of mass Choosets until then. Then immediately became a state
23:03
Speaker 2: that was admitted to the Union shortly after it became
23:06
Speaker 2: its own state. But that one always gets me because,
23:10
Speaker 2: like you look at the states that surround it in
23:12
Speaker 2: terms of, you know, the order of admission, and it's
23:15
Speaker 2: surrounded by Illinois, Alabama, Missouri, and Arkansas, which makes sense.
23:19
Speaker 2: It's like, oh yeah, we're going like south and west,
23:21
Speaker 2: and then Main's just right in there, and you're like,
23:23
Speaker 2: wait a minute, what what gives And it's because Main
23:27
Speaker 2: used to be part of Massachusetts until eighteen twenty. So
23:32
Speaker 2: there's that happy two hundred and twenty sixth birthday Maine
23:34
Speaker 2: or two hundred and sixth birthday. It's great piece in
23:37
Speaker 2: the Wall Street Journal. When your bumper four oh one
23:40
Speaker 2: K is a tax problem waiting to happen.
23:43
Speaker 3: If you have a bumper port four oh one k,
23:46
Speaker 3: it's a pretty good problem to have.
23:48
Speaker 2: You know. There's no old quote that I like to use.
23:50
Speaker 2: I don't know who had it originally, but everyone's got
23:53
Speaker 2: money problems. Warren Buffett's got money problems. Guy who was
23:59
Speaker 2: you know, completely broke has money problems. You want Warren
24:02
Speaker 2: Buffett's money problems? Yeah? Yeah.
24:06
Speaker 3: If I had to take my pick, that's that's where
24:09
Speaker 3: I would go. So what they're actually referring to here
24:12
Speaker 3: is a phenomenon that you may or may not be
24:14
Speaker 3: familiar with, but that at seventy five these days, for
24:20
Speaker 3: anybody that's born, what is it after nineteen sixty, I
24:24
Speaker 3: believe it is is going to have a required distribution
24:29
Speaker 3: from there for one k ira any of those tax
24:32
Speaker 3: deferred retirement accounts. And what they're referring to here is
24:36
Speaker 3: that is, you know, the tax problem that could happen
24:39
Speaker 3: is those forced distributions, or even if they're not forced,
24:42
Speaker 3: just voluntary distributions.
24:44
Speaker 2: That you might want to take.
24:45
Speaker 3: Right, Hey, we're buying a new house this year, and
24:50
Speaker 3: we are hoping to you know, buy it and then
24:54
Speaker 3: sell our existing home rather than try and do that
24:57
Speaker 3: fun maneuver where you sell it buy it same time,
25:00
Speaker 3: have some sort of lease back and all that mess. Well,
25:03
Speaker 3: how are you going to do it if all of
25:04
Speaker 3: your money is in a four oh one k or
25:06
Speaker 3: and ira? It's pretty it's pretty darn difficult to do.
25:10
Speaker 3: And so that's the tax problem that a lot of
25:12
Speaker 3: folks face is I've done an excellent job saving for retirement,
25:18
Speaker 3: but it's all in this pre tax bucket and so
25:22
Speaker 3: not only do I have a future RMD required minimum
25:26
Speaker 3: distribution tax scenario that's developing.
25:29
Speaker 2: But if I have any.
25:31
Speaker 3: You know, plans that diverge from the expected state of things,
25:36
Speaker 3: and I need more money in one year, then I'm
25:39
Speaker 3: going to burn myself from a tax type. So I mean,
25:42
Speaker 3: I hesitate to tell people, though, Chuck, that they shouldn't
25:45
Speaker 3: be saving as much as humanly possible into their four
25:47
Speaker 3: O one K is because for the vast majority of people,
25:50
Speaker 3: they're not going to get to the point where it's
25:52
Speaker 3: too much.
25:53
Speaker 2: I think the question that gets asked an awful lot
25:56
Speaker 2: and the one that is worth considering now that they're
25:58
Speaker 2: basically not standard, but they're they're in just about every
26:01
Speaker 2: four to one K in America is traditional four to
26:03
Speaker 2: one K versus wroth. Yeah, you know that that's the
26:07
Speaker 2: one worth asking And most of the time, again we
26:09
Speaker 2: come back to the idea of being humble. Do any
26:13
Speaker 2: of us actually know, like, if if you are young
26:16
Speaker 2: and listening to this, now define young is under forty five, okay,
26:20
Speaker 2: because it makes me still qualify as young. Yeah, right,
26:24
Speaker 2: thank you. If you're young and listening to this, do
26:28
Speaker 2: you know what tax rates are going to look like?
26:29
Speaker 2: When you retire, I sure don't. No, the conventional answer is, okay,
26:35
Speaker 2: if your tax rate now is going to be lower
26:38
Speaker 2: than when you retire, you do the wroth. If your
26:40
Speaker 2: tax rate now is higher than when you retire, you
26:42
Speaker 2: do the traditional. So I think if you don't know
26:45
Speaker 2: where tax rates are going to be, because none of
26:48
Speaker 2: us do, then the obvious answer is okay, you can
26:53
Speaker 2: hedge your bets and send part of your retirement contribution
26:56
Speaker 2: to the traditional and part to the wroth. That can
27:00
Speaker 2: skew based on your personal thoughts on where that difference
27:05
Speaker 2: in tax rates may be. So maybe you say, okay,
27:08
Speaker 2: I'll do fifty percent into the row, fifty into the traditional.
27:12
Speaker 2: Maybe you're seventy five twenty five one way. But that's
27:14
Speaker 2: a way that you can approach this as well, to
27:17
Speaker 2: manage different tax qualifications for different buckets of money as
27:20
Speaker 2: you get older. Yeah.
27:21
Speaker 3: Here here in New England, there's another added factor there
27:24
Speaker 3: of so many people in this area live in one
27:28
Speaker 3: state and work in another, or work short company that's
27:30
Speaker 3: in another. And so I know plenty of folks who
27:32
Speaker 3: live in southern New Hampshire, for example, but get taxed
27:35
Speaker 3: in Massachusetts because that's where they derive their work income. Okay,
27:39
Speaker 3: that adds to the factor of what tax rate am
27:41
Speaker 3: I going to be in when I retire, because I
27:44
Speaker 3: might be able to avoid Massachusetts income taxes by funding
27:48
Speaker 3: a traditional four oh one K, and then avoid it
27:51
Speaker 3: on the way out by not living in Massachusetts. A
27:54
Speaker 3: little tougher if you live in Oklahoma City, for example,
27:56
Speaker 3: where you know you're hours from another city where you
27:59
Speaker 3: might work, but entirely possible when you are talking about
28:04
Speaker 3: Rhode Island, Connecticut, New York City. These are all very
28:09
Speaker 3: different types of places where your tax rates can vary
28:12
Speaker 3: a lot.
28:13
Speaker 2: Depending on where you work and live.
28:15
Speaker 3: If you are in that planning stage of still funding
28:21
Speaker 3: that retirement account and trying to figure out which the
28:24
Speaker 3: right what the right funding mechanism is.
28:27
Speaker 2: Give the folks at Armstrong a call.
28:29
Speaker 3: I know that's not what you think about when you
28:31
Speaker 3: think about, Hey, investment management and retirement planning, but it
28:35
Speaker 3: plays a crucial role in far too many of us
28:38
Speaker 3: are just on the autopilot.
28:41
Speaker 2: Hey, I started this job.
28:42
Speaker 3: Ten years ago, and you know they selected the funds
28:46
Speaker 3: for me, and it's just been a slow increase over time.
28:49
Speaker 3: If your life has changed as much as my mine
28:52
Speaker 3: has over the last decade, then you need to take
28:54
Speaker 3: a more critical look at this than just putting it
28:56
Speaker 3: on autopilot. The numbers eight hundred and three nine three,
29:00
Speaker 3: zero zero one. We offer free consultations all across New
29:03
Speaker 3: England via zoom in person pretty much every state across
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29:10
Speaker 3: to learn more. Armstrong Advisory dot Com or eight hundred
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29:16
Speaker 1: The proceeding was paid for by Armstrong Advisory Group, a
29:19
Speaker 1: registered investment advisor. Nothing in the ad or in any
29:21
Speaker 1: Armstrong guide a specific financial, legal, or tax advice. Consult
29:25
Speaker 1: your own financial, tax into state planning advisors before making
29:27
Speaker 1: any investment decisions. Armstrong may contact you to offer investment
29:30
Speaker 1: advisory services.
29:32
Speaker 2: Take a quick break here. When we return, we're joined
29:34
Speaker 2: by Paul Almonica from Baron's Next.
29:38
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30:06
Speaker 6: Ladies and gentlemen, the weekend a promise.
30:15
Speaker 2: We're now joined by the one, the only Paula Monica
30:19
Speaker 2: from Barons. There might be other Polo Monicas in the world,
30:22
Speaker 2: but not from Barons. There are not paul doing today.
30:27
Speaker 5: I'm good, Thanks, How are you doing well.
30:30
Speaker 2: So we've seen in recent weeks a flurry of US
30:35
Speaker 2: IPOs that people have been excited about, most notably SpaceX
30:39
Speaker 2: You've got other ones coming down the road, but also
30:43
Speaker 2: China has seen a number of IPOs that have gone
30:48
Speaker 2: gangbusters with you know, some of these up have five
30:50
Speaker 2: six percent on their first day, kind of reminiscent of
30:53
Speaker 2: what it used to be like back in the dot
30:54
Speaker 2: com bubble, where you could, you know, quadruple your money
30:57
Speaker 2: in the first day of trading on IPOs. And I'm
31:00
Speaker 2: curious what's driving the excitement about these Chinese companies here.
31:05
Speaker 7: Yeah, it's great too, in particular of interest Unitry Robotics
31:09
Speaker 7: humanoid robotics so competes with Tesla in that regard. That
31:14
Speaker 7: was up over four sixty percent on its first day
31:18
Speaker 7: and cxm Ai Chip company also surging nearly five hundred
31:26
Speaker 7: percent last month.
31:28
Speaker 5: When it debuted.
31:30
Speaker 7: I think you're right in some respects that the one
31:33
Speaker 7: notable comparison to the late nineties is that a lot
31:36
Speaker 7: of those companies on China are pricing their shares at
31:40
Speaker 7: a very low conservative price to attract retail investors, and
31:45
Speaker 7: that is reminiscent of what happened in the late nineties
31:48
Speaker 7: with some companies that no longer exist. The big difference, though,
31:53
Speaker 7: is that the listing standards in China and on Shanghai
31:58
Speaker 7: Star Market where these companies are trading, are much more stringent,
32:04
Speaker 7: and it takes a longer time for companies to get
32:07
Speaker 7: through all the regulatory hurdles and hoops and pass muster
32:11
Speaker 7: before they can begin trading.
32:13
Speaker 5: So people quoted in.
32:15
Speaker 7: The story talk about how the companies will price the
32:19
Speaker 7: offerings conservatively to try and get approval, and that does
32:23
Speaker 7: leave lead to these big pops, But these are not
32:26
Speaker 7: fly by night companies like the dot coms of yesteryear.
32:31
Speaker 2: Paul, When you look at the overall performance of Chinese
32:35
Speaker 2: equity markets in the last five ten years, you know,
32:39
Speaker 2: I'm just looking at the MSCI China to Return Index
32:44
Speaker 2: index total return Chinese markets effectively flat over the last
32:48
Speaker 2: five years, whereas the S and P five hundred has
32:51
Speaker 2: almost doubled. What is getting investors so excited about these
32:55
Speaker 2: given the overall lackluster performance that we've seen in Chinese
32:59
Speaker 2: markets for the last five years.
33:01
Speaker 5: Yeah, it's a fantastic question.
33:02
Speaker 7: I think the excitement is largely surrounding the expectation that
33:07
Speaker 7: Beijing wants to be a leader in industries like chips,
33:12
Speaker 7: in industries like robotics. So these are companies that are
33:19
Speaker 7: designed or are going to be set up to do
33:22
Speaker 7: well by you know, the state run economy that essentially
33:26
Speaker 7: is China. But you have to keep in mind, and
33:29
Speaker 7: I think this is one of the reasons why Chinese
33:31
Speaker 7: stocks maybe under had lagged the US over the past
33:34
Speaker 7: couple of years. There are always going to be concerns
33:37
Speaker 7: about when the Chinese government decides to change its mind
33:40
Speaker 7: and be more strict and enforced regulations. And you know,
33:46
Speaker 7: the days of where's Jack Ma Remember when we were
33:49
Speaker 7: all wondering where the founder of Ali Baba, one of
33:52
Speaker 7: the most prominent companies and has a US stock listing.
33:56
Speaker 5: You know where where was he I mean that's something
33:59
Speaker 5: that you're never going to have in the US.
34:02
Speaker 7: For all of the craziness that can happen in Washington sometimes,
34:07
Speaker 7: particularly in the past couple of years, I don't think
34:10
Speaker 7: you're ever going to have an environment where people are
34:11
Speaker 7: going to say, where's Tim Cook, Where's Jensen Wang? You know,
34:16
Speaker 7: where's you know, David Solomon at Golden Sachs. I mean,
34:20
Speaker 7: CEOs are pretty prominent in the United States. Where's Elon Musk?
34:23
Speaker 7: You know, where is it Elon Musk. That's not going
34:26
Speaker 7: to happen to the same extent in the US. That's
34:29
Speaker 7: always going to be I think a risk for investors
34:32
Speaker 7: looking at Chinese stocks. And it's also important with these
34:35
Speaker 7: companies that I'm talking about, you can't even probably get
34:38
Speaker 7: in easily as a US investor. These are companies that
34:41
Speaker 7: are designed really for the domestic trader in China.
34:45
Speaker 5: There are ETFs to know on them.
34:46
Speaker 7: So that's the best way if you're interested in these companies.
34:50
Speaker 2: You outlined one of the risks, which is, okay, maybe
34:52
Speaker 2: the business becomes, you know, less favored by the Chinese government.
34:56
Speaker 2: But another one is, hey, what if the Chinese government
34:59
Speaker 2: incentivized them to overproduce, driving profits down, because that's something
35:03
Speaker 2: that we see in quite a few of these industries,
35:05
Speaker 2: the most recent one being look what we're seeing with
35:07
Speaker 2: a lot of these Chinese ev makers where they've produced
35:10
Speaker 2: too many vehicles and yes, like they're trying to sell
35:13
Speaker 2: them cheaply overseas now, but part of that is because
35:16
Speaker 2: they can't sell them all domestically.
35:18
Speaker 5: Yeah, it's a great question.
35:20
Speaker 7: I think that there are always going to be concerns
35:23
Speaker 7: about what Chinese or companies are doing, not just for
35:28
Speaker 7: their own economic benefit, but what it means for the
35:31
Speaker 7: economies of the US and competition and what that means politically.
35:34
Speaker 7: So you know, you look at things like deep Seek
35:38
Speaker 7: and some of these chip companies as well. They may
35:41
Speaker 7: look to undercut the likes of Nvidia and Broadcom and
35:46
Speaker 7: other major American chip giants because that's a smart political
35:52
Speaker 7: thing to be, but that isn't necessarily going to be
35:57
Speaker 7: great for the stock prices of some of these Chinese
36:00
Speaker 7: companies that are going public if they have to take
36:02
Speaker 7: a margin hit for the greater political games that Beijing
36:07
Speaker 7: is trying to accomplish.
36:09
Speaker 2: Very good, Paul, appreciate you joining us today, and I
36:12
Speaker 2: hope you have a fantastic weekend.
36:17
Speaker 5: Thanks a lot, same to you guys.
36:19
Speaker 2: That is paul A Monica with Baron's talking about some
36:21
Speaker 2: of the recent Chinese IPOs. Mike, what do you got
36:25
Speaker 2: for me that we haven't covered yet?
36:26
Speaker 3: Chuck, your talk of the Chinese automobile industry reminded me
36:30
Speaker 3: of another over built boom bust bubble industry in China,
36:35
Speaker 3: which was their real estate market. The founder of China's
36:38
Speaker 3: Evergrand Group remember Evergrand, Yeah, the liquidated property developer. He
36:44
Speaker 3: was sentenced to life in prison on Thursday by a
36:46
Speaker 3: Chinese court.
36:47
Speaker 5: Oh.
36:48
Speaker 3: He pled guilty to several charges including fraud, corporate bribery,
36:52
Speaker 3: and illegally taking public deposits, all of which will probably
36:56
Speaker 3: be true. But really what happened here is is he
37:03
Speaker 3: pushed the expansion of Yeah. He made the Chinese government
37:06
Speaker 3: look bad by doing exactly what they wanted him to do,
37:09
Speaker 3: which was expand real estate at a very dramatic rate,
37:12
Speaker 3: and then when it all went bad, they needed a
37:16
Speaker 3: scapegoat would be my read on this. So his former
37:20
Speaker 3: companies were fined a total of two point three billion.
37:22
Speaker 3: He lost everything. He's going to spend the rest of
37:24
Speaker 3: his life in a Chinese prison. But you know, reality
37:29
Speaker 3: here is you do run by the Chinese government. See
37:33
Speaker 3: you later, You'll never be here. Heard from again.
37:35
Speaker 2: Yeah it's again. I'm not entirely surprised by this story, unfortunately.
37:43
Speaker 2: Taking a look at markets as we head towards the top
37:45
Speaker 2: of the hour, equity markets stretching their legs top side
37:48
Speaker 2: right now Dows up almost one percent, four hundred and
37:50
Speaker 2: seventy three points, the S and P of fifty two
37:53
Speaker 2: points about two thirds of a percent, and the Nasdak
37:55
Speaker 2: composite up one eighty six right now, up about three
38:00
Speaker 2: quarters of a percent. There So, equities in the green
38:03
Speaker 2: bond still selling off a little bit. Dollar is flat.
38:07
Speaker 2: Hope y'all have a great weekend and we'll see you
38:11
Speaker 2: back here on Monday on the Financial Exchange