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Infaltion or Unemployment. Which do Americans fear more? · The Financial Exchange Show

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  Speaker 1: and Mark VANDEDDI.
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  Speaker 2: Good Tuesday morning, and welcome back to the Financial Exchange
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  Speaker 2: on the busiest data week of the year here in
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  Speaker 2: twenty twenty five. As we've mentioned, we will have Visa
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  Speaker 2: earnings after the bell today, Tomorrow, Microsoft and Meta doing
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  Speaker 2: the same. Thursday, we'll be hearing from Apple and Amazon.
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  Speaker 2: Just with those four companies alone, you're talking about ten
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  Speaker 2: trillion dollars of mark cap reporting. I mentioned this yesterday,
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  Speaker 2: but approximately half of the total return the S and
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  Speaker 2: P five hundred this year has come from three companies,
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  Speaker 2: two of whom will be reporting tomorrow, Microsoft, Meta, and
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  Speaker 2: then the third one being in Video. Those three companies
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  Speaker 2: alone have contributed half of the total return to the
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  Speaker 2: S and P five hundred so far this year, or
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  Speaker 2: at least perhaps that was the first half of this year,
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  Speaker 2: I'm not sure which. We will have a Federal Reserve
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  Speaker 2: meeting tomorrow afternoon at two thirty pm, where they're widely
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  Speaker 2: anticipated to keep interest rates where they are today.
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  Speaker 3: We had a.
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  Speaker 2: Joltz report this morning on the state of the labor market,
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  Speaker 2: an ADP employment report coming tomorrow, a PCE Price Index
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  Speaker 2: report coming Thursday, and finally, the monthly Jobs report coming
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  Speaker 2: on Friday, so plenty to keep us busy. If you're
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  Speaker 2: going to skip a week of the financial exchange, choose
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  Speaker 2: another one here, because there's going to be a lot
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  Speaker 2: to go through that will I guess influence the narrative
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  Speaker 2: that is dominating markets and answer the angel question. Is
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  Speaker 2: this an economy that is heating up, growing still and
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  Speaker 2: at risk of inflation? Is it one that's just kind
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  Speaker 2: of flattening out here and stabilizing, or is it one
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  Speaker 2: where consumers are at the breaking point and you're on
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  Speaker 2: the cusp of seeing higher unemployment, lower consumer spending, and
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  Speaker 2: drive towards lower activity in generally, that's the the cusp
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  Speaker 2: of what everyone's trying to figure out with this data,
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  Speaker 2: As they always are.
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  Speaker 4: It seems like we have an embarrassment of riches with
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  Speaker 4: respect to data this week. The frustrating thing is that
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  Speaker 4: it may end up telling us nothing good. Even if
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  Speaker 4: there are some surprises, they may not be the start
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  Speaker 4: of new trends.
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  Speaker 3: Yep.
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  Speaker 4: It's just the nature of economic data. It's it's noisy.
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  Speaker 4: It's just it's based on sampling, so you don't really
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  Speaker 4: know what the true value of inflation or unemployment is
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  Speaker 4: until you have a chance to look back at it
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  Speaker 4: and smooth it out by taking using whatever averaging technique
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  Speaker 4: you think is best.
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  Speaker 2: You know, looking, as is often the case, you can't
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  Speaker 2: really tell much about the economy until you have it
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  Speaker 2: in your rear view mirror.
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  Speaker 3: T start to look at it.
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  Speaker 2: And twenty twenty four was I think pretty definitively defined
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  Speaker 2: by a slowing hiring market, a slowing labor market, unemployment
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  Speaker 2: ticking up to some degree.
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  Speaker 4: Coming off a breakneck pace. Then correct, it seems more
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  Speaker 4: like a normalization to me now looking at the past
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  Speaker 4: twelve months of trendless activity, generally.
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  Speaker 3: Could not agree more.
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  Speaker 2: It was a slowing that just brought us to a
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  Speaker 2: very normal pace of unemployment and job hiring. So I
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  Speaker 2: don't think there was anything, you know, overtly negative to
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  Speaker 2: write about it. But in the moment we were talking about, well,
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  Speaker 2: you usually when unemployment upticks this much, it can keep
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  Speaker 2: some remember that.
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  Speaker 4: That's another story. We talked about the story about COVID
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  Speaker 4: savings running out last hour and the panic that resulted
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  Speaker 4: from that gradual erosion in savings about two years ago.
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  Speaker 4: I haven't heard anything about it in a year.
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  Speaker 2: Right, those same stories were coming up again this year,
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  Speaker 2: it was questions of hey, is unemployment going to tick up?
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  Speaker 2: Are we going to see companies laying off in the
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  Speaker 2: face of tariffs? The answer has been, at least most
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  Speaker 2: recently right. The most recent jobs report saw a decrease
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  Speaker 2: in the overall unemployment rate, I think, further injecting some
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  Speaker 2: pressure on the federal reserve to hold steady where they
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  Speaker 2: are and not succumb to the pressure from the White House.
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  Speaker 2: So again, very important week for a whole bunch of
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  Speaker 2: different reasons, whole bunch of different data points, and a
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  Speaker 2: whole lot of corporate earnings. In addition to all that,
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  Speaker 2: we have a newly announced at least US and EU
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  Speaker 2: trade deal, which, among other things, is going to set
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  Speaker 2: a tariff rate cap at about fifteen percent. Big questions
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  Speaker 2: to be answered on things like steel, aluminum, copper, whether
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  Speaker 2: those will face the same terraff, what semiconductors, certain drugs
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  Speaker 2: are going to face.
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  Speaker 3: But giving some clarity to.
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  Speaker 2: US importers and EU exporters in terms of what sort
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  Speaker 2: of rate of tariffs they're going to face in the US.
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  Speaker 2: One piece that was mentioned here, and I'll quote directly
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  Speaker 2: from the announcement from the European Union on this announced
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  Speaker 2: trade deal. This is a separate bullet point quote promoting
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  Speaker 2: and facilitating mutual investments on both sides of the Atlantic.
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  Speaker 2: EU companies have expressed interest in investing at least six
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  Speaker 2: hundred billion dollars five hundred and fifty billion euro in
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  Speaker 2: various sectors in the United States by twenty twenty nine,
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  Speaker 2: further boosting the already significant two point four trillion dollars
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  Speaker 2: in existing investment. So this is one announced peace said
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  Speaker 2: the trade deal that the Trump administration did push and tout,
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  Speaker 2: it's a lot softer when promoted by the European Union,
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  Speaker 2: basically just saying, hey, you know, we already invest two
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  Speaker 2: point four trillion, and there might be some interest on
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  Speaker 2: the behalf of companies of investing more. But can you
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  Speaker 2: speak to a little bit about you know what we
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  Speaker 2: were talking about before the break, which was, you know,
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  Speaker 2: the difference between investment and another features yeah, surede deal.
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  Speaker 4: The point I wanted to make last hour is that
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  Speaker 4: you can't have a current account refers to the trade
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  Speaker 4: deficit or surplus capital account refers to the same thing.
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  Speaker 4: But with respect to investments, it is necessarily true due
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  Speaker 4: to double entry bookkeeping. Something we're all familiar with that.
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  Speaker 4: The current account deficit has to equal I'm leaving out
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  Speaker 4: a couple things, but they're sort of technical and small.
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  Speaker 4: Current account deficit has to equal the capital account surplus.
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  Speaker 4: A different way to say that is when I send
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  Speaker 4: a dollar abroad from buying, say a toyota that's made
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  Speaker 4: in Japan, that dollar goes into Toyota's coffers.
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  Speaker 3: What do they do with it?
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  Speaker 4: They buy a US treasury, They invested in a factory here.
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  Speaker 4: You see if you just if you picture that dollar
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  Speaker 4: going abroad then coming back, and you picture that as
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  Speaker 4: sort of an oval pattern, you see how that flow works.
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  Speaker 4: And when you aggregate up, so to speak, when you
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  Speaker 4: look at the total of all economic activity between two countries,
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  Speaker 4: it is the case that those two things must be equal.
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  Speaker 2: So so let me play that out in my plain
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  Speaker 2: dumb words, and then you can correct me.
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  Speaker 4: If I thought those were dumb words.
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  Speaker 3: Michael, thank you, No, no me.
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  Speaker 4: My example I thought was dumb.
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  Speaker 2: If American consumers are facing if American businesses rather are
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  Speaker 2: facing a fifteen percent import tax on European goods, it
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  Speaker 2: would pretty necessarily mean that Americans buy fewer of those
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  Speaker 2: European made.
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  Speaker 4: Goods pay more for them or more for.
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  Speaker 2: Them, so potentially, but it would seemingly be a pretty
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  Speaker 2: direct line to say, yeah, there'd be fewer dollars flowing
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  Speaker 2: into the European Union in the face of tariffs.
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  Speaker 4: That's the so less dollars to come back in the
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  Speaker 4: form of you're so yeah, that's sort of the point
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  Speaker 4: I was. The point I was trying to make was
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  Speaker 4: you can't both get more investment. And then they promised
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  Speaker 4: this with respect to Japan to five hundred. The White
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  Speaker 4: House loves the number five hundred billion there, that's right Noway,
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  Speaker 4: They've thrown it out multiple times in multiple contexts. Five
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  Speaker 4: hundred billion dollars in investment from Japan five or six
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  Speaker 4: hundred from the European Union. That will make the trade
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  Speaker 4: deficit worse, not better. Those dollars that they're recycling into
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  Speaker 4: our economy have to come from somewhere. The trade deficit,
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  Speaker 4: if it bothers you, it doesn't bother me. It generally
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  Speaker 4: doesn't bother economists. The trade deficit is a result of
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  Speaker 4: us not saving enough, not a result of unfair trade
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  Speaker 4: practices or any other boogeyman you want to throw out.
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  Speaker 4: There you can. You can generate so called trade deals
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  Speaker 4: until you're blue in the face. You can negotiate trade
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  Speaker 4: deals until you're blue in the face. You're not going
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  Speaker 4: to do anything about the so called trade deficit, just
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  Speaker 4: as we did not during Trump's first term, despite all
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  Speaker 4: the theatrics around trade negotiations with Mexico, Canada, Japan, and others.
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  Speaker 4: Trade deficit got worse until the recession hit, not better
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  Speaker 4: because of our savings deficit. If you like, we don't
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  Speaker 4: save enough to finance domestic investment opportunities. That is not intuitive.
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  Speaker 4: It probably doesn't even make sense if it's the first
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  Speaker 4: time you heard it, But it must be the case.
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  Speaker 2: Speaking beyond all of this stuff going on with the
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  Speaker 2: United States and the European Union and this hypothetical trade
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  Speaker 2: deal that has yet to be executed, but clearly both
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  Speaker 2: sides seeming.
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  Speaker 3: To agree on large aspects of it.
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  Speaker 4: Have we executed the other ones? By the way, do
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  Speaker 4: we have a trade deal with Japan? I'm asking, I'm.
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  Speaker 3: Being a little cheeky.
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  Speaker 2: We do not have an executed trade deal at Japan.
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  Speaker 2: I don't believe UK executed one with the UK, but
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  Speaker 2: it was.
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  Speaker 4: All that fanfare, no actual deal.
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  Speaker 2: We will see regardless the lesson. Actually, you know what,
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  Speaker 2: it's eleven to fifteen. We're gonna take a quick break.
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  Speaker 2: We're gonna do a little bit trivia when we come back.
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  Speaker 2: I want to get back to the Federal Reserve. They're
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  Speaker 2: in the middle of their hot debate around where interest
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  Speaker 2: rates should go, and I think there are some lessons
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  Speaker 2: over the last few years for the Federal Reserve and
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  Speaker 2: economists generally when it comes to inflation. Let's discuss that
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  Speaker 2: next year. On the Financial Exchange.
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  Speaker 2: Mark, we have a piece from Barons today about the
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  Speaker 2: Federal Reserve and American consumers feelings about inflation. Do you
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  Speaker 2: think it's fair for me to conclude that, generally speaking,
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  Speaker 2: it seems Americans hate inflation more than they hate unemployment.
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  Speaker 4: I don't know they would say yes, we would say yes,
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  Speaker 4: I would right now based on the PTSD, we're all
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  Speaker 4: suffering from the most recent surgeon inflation. But and it's
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  Speaker 4: good that you frame it that way, because that is
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  Speaker 4: the trade off. Right in the last hour, I use
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  Speaker 4: my new analogy, which is the feed is a thermostat.
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  Speaker 4: When the economy gets too hot, it cools it off.
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  Speaker 4: When the economy gets too cold, it heats it up.
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  Speaker 4: And two cold means unemployment going up or beyond the
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  Speaker 4: so called natural rate. Too hot means unemployment that's too low,
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  Speaker 4: which we may have had in twenty twenty two, twenty
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  Speaker 4: twenty three, we may even have it today. I don't know.
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  Speaker 4: Underlying inflation remains high. So right now, if you were
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  Speaker 4: to start the FED from scratch and people were to
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  Speaker 4: vote on it, they would say, put all your weight
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  Speaker 4: on inflation. Don't worry about anything else. We hate it.
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  Speaker 4: But ask people after a big recession, which tends to
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  Speaker 4: put down with pressure on inflation, and they may want
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  Speaker 4: the FED to do more, as the FED did even
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  Speaker 4: in nineteen eighty two eighty three under Paul Voker, who's
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  Speaker 4: the famed sort of iron FED chairman who broke the
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  Speaker 4: back of inflation at the cost of recession, and he
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  Speaker 4: tolerated all the political fallout boloney. He he ended the
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  Speaker 4: inflation flight prematurely in nineteen eighty one due to recession,
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  Speaker 4: and he started easing in eighty two eighty three as
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  Speaker 4: soon as he could. So, Mike, it depends, I think
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  Speaker 4: on our most recent experience.
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  Speaker 3: Yeah, I think it does.
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  Speaker 2: I think what you can say about inflation versus unemployment, right,
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  Speaker 2: if we consider those to be dueling priorities of the
• 13:53
  Speaker 2: federal reserves they are by law, they can really you know,
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  Speaker 2: they have a tough time, you know, successfully can trolling both.
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  Speaker 2: I guess at the same time, right, you have tools
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  Speaker 2: that will either affect one or the other gender.
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  Speaker 4: There are very limited assumptions that get you to the
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  Speaker 4: one researcher calls it the divine coincidence. If you stabilize one,
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  Speaker 4: the other tends to go the other direction. No, No,
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  Speaker 4: you could. You could stabilize if you keep an eye.
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  Speaker 4: If you get inflation at its natural it's at your
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  Speaker 4: target ofs a two percent, unemployment will settle at its
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  Speaker 4: natural rates. But that doesn't actually happen.
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  Speaker 1: It's theoretical.
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  Speaker 2: So the answerest to why Americans seem to hate inflation more.
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  Speaker 2: I think I would explain simply, you know, if it
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  Speaker 2: ends up being the case, it would be inflation affects everybody.
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  Speaker 3: Unemployment in the.
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  Speaker 2: Very worst case scenarios tends to affect what one in
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  Speaker 2: twelve people one in ten.
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  Speaker 4: I mean, are bad for your equities, They're bad for
• 14:51
  Speaker 4: your check even if you do have a job. I
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  Speaker 4: would submit that if we do have another recession, a
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  Speaker 4: deep one, and we can talk about the variation in
• 14:59
  Speaker 4: rece It's an interesting topic in and of itself that
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  Speaker 4: no two are alike.
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  Speaker 2: So is there a lesson here, maybe a lesson for
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  Speaker 2: the Federal Reserve for J. Powell as he's you know, yeah,
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  Speaker 2: figuring out policy.
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  Speaker 3: There seems to be a moment.
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  Speaker 2: Right now at least where Americans hate inflation a lot
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  Speaker 2: more than anything else. I would say it's the compelling
• 15:21
  Speaker 2: reason or one of the main compelling reasons that Joe
• 15:23
  Speaker 2: Biden was voted out of office and Trump won the election.
• 15:28
  Speaker 2: They certainly seem to have a big distaste for inflation.
• 15:31
  Speaker 2: What's the what's the lesson, if any for the Federal
• 15:32
  Speaker 2: Reserve in terms of their guidance policy?
• 15:34
  Speaker 4: Might it depends policy? The Federal Reserve and institution is independent.
• 15:39
  Speaker 4: That's a good setup for controlling inflation, for not letting
• 15:43
  Speaker 4: monetary policy, which is what the Fed does. Decisions be
• 15:46
  Speaker 4: dictated by political consideration. So there's the institutional setup, but
• 15:50
  Speaker 4: the White House and many in Congress is not just
• 15:52
  Speaker 4: the Trump administration. Many Republicans are determined for some reason,
• 15:57
  Speaker 4: some reason that just it totally escapes me because it's
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  Speaker 4: insane to tinker with that arrangement. So there's the institutional
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  Speaker 4: arrangement which is kind of hard coded but can be changed.
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  Speaker 4: And then there's policymaker. I'll this called disposition or taste.
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  Speaker 4: How much you have an inflation fighter? Are they really
• 16:13
  Speaker 4: and so to answer your question, depends on how you
• 16:15
  Speaker 4: think the recent inflation experience will affect those two parameters.
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  Speaker 4: One institutional which the White House seems determined to break
• 16:23
  Speaker 4: for some unknown, inexplicable, insane reason, and the other being
• 16:27
  Speaker 4: what kind of FED chair? Even if they keep the
• 16:29
  Speaker 4: institutional structure intact, what kind of FED chair are we
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  Speaker 4: going to get? How is? How are his or her
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  Speaker 4: inflation priorities shaped by the recent inflation experience?
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  Speaker 2: I think logically, were I a member of the Federal
• 16:43
  Speaker 2: Reserve Board or J. Powell himself, I would be more
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  Speaker 2: worried about screwing things up on inflation than I would
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  Speaker 2: be about causing a recession right now?
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  Speaker 3: Why?
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  Speaker 2: I think it's pretty clear that another bout of bad
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  Speaker 2: inflation after what we saw on twenty twenty two would
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  Speaker 2: be politically disastrous for many members of Congress.
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  Speaker 3: It would also.
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  Speaker 2: Erode the public's confidence in your ability to do the job.
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  Speaker 2: Compared to policy that results in a drop in employment.
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  Speaker 4: Things are related. You really can't look at one variable
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  Speaker 4: without looking at the other. If you do screw up
• 17:22
  Speaker 4: on the inflation front, you end up with inflation that's
• 17:23
  Speaker 4: too high. It costs economic output. Typically, it doesn't seem
• 17:27
  Speaker 4: to have in this most recent episode, which is interesting
• 17:29
  Speaker 4: but a slightly different topic. It's costly to bring inflation down.
• 17:32
  Speaker 4: It's called the so called sacrifice ratio. So you don't
• 17:35
  Speaker 4: want to let that run out of control. At the
• 17:36
  Speaker 4: same time, if you let unemployment run up too high,
• 17:38
  Speaker 4: if you're monomaniacally focused on inflation, high unemployment can raise
• 17:43
  Speaker 4: the non inflationary rate of unemployment. That's not a widely
• 17:47
  Speaker 4: accepted idea, but researchers have found that there's something to it.
• 17:52
  Speaker 4: So I don't really have an answer for you, Mike.
• 17:55
  Speaker 4: You just need good judgment to balance those two forces,
• 17:57
  Speaker 4: and good institutions, which we have right now but which
• 18:00
  Speaker 4: some politicians are are stupidly threatening.
• 18:03
  Speaker 3: I agree.
• 18:04
  Speaker 2: I guess my overall conclusion, though, is I could envision
• 18:08
  Speaker 2: a scenario where the FED is biased towards higher rates
• 18:12
  Speaker 2: right now, both due to political pressure to bring them
• 18:16
  Speaker 2: lower and recent experience. The recent experience is high inflation
• 18:21
  Speaker 2: really pisses everybody off.
• 18:22
  Speaker 3: And if you're.
• 18:23
  Speaker 2: Trying to maintain confidence in your independence, then you want
• 18:28
  Speaker 2: to push back against what the White House is doing.
• 18:30
  Speaker 2: And if you want to maintain the public's confidence that
• 18:33
  Speaker 2: you actually can control inflation, you can't let it go
• 18:36
  Speaker 2: wild again over the next couple of years because of
• 18:38
  Speaker 2: recent experience. And so I don't know. I just see
• 18:41
  Speaker 2: a compelling reason why board members would want to have
• 18:44
  Speaker 2: a bias towards higher interest rates right now, regardless of
• 18:48
  Speaker 2: what the data is, which I think justifies those higher
• 18:51
  Speaker 2: rates and what the pressure campaign looks like from the
• 18:53
  Speaker 2: White House.
• 18:54
  Speaker 4: Yeah, and it's not just fear. Money supply increases do
• 18:57
  Speaker 4: pass through to prices more quickly when inflation has been
• 19:01
  Speaker 4: high recently. That's kind of a technical point, but it
• 19:04
  Speaker 4: makes sense. Monetary policy, which is what the Fed does,
• 19:07
  Speaker 4: does not work as well stimulating demand coming off a
• 19:11
  Speaker 4: recent bout of inflation because people perceive the increase in
• 19:14
  Speaker 4: the money supply for what it is future inflation. A
• 19:18
  Speaker 4: bit of a technical point, but sure, hope and the
• 19:20
  Speaker 4: Fed knows this. They've got much more capable researchers than
• 19:22
  Speaker 4: I am.
• 19:24
  Speaker 2: Amidst this busy week that markets have turned negative for
• 19:27
  Speaker 2: the day, We're gonna take a quick braver when we
• 19:28
  Speaker 2: come back. Full market update with Wall Street Watch, bringing.
• 19:41
  Speaker 1: The latest financial news straight to your radio every day.
• 19:45
  Speaker 1: It's the Financial Exchange on the Financial Exchange Radio Network.
• 19:51
  Speaker 1: Time now for Wall Street Watch. A complete look at
• 19:54
  Speaker 1: what's moving markets so far today right here on the
• 19:57
  Speaker 1: Financial Exchange Radio Network.
• 20:00
  Speaker 5: Markets have turned negative by midday with a busy week
• 20:03
  Speaker 5: on tap as investors sift through a new batch of
• 20:05
  Speaker 5: second quarter earnings in addition to the latest job openings data,
• 20:10
  Speaker 5: with the JILT report posted earlier this morning. At the moment,
• 20:15
  Speaker 5: the Dow is down by nearly half a percent, or
• 20:17
  Speaker 5: two hundred and twelve points. SMP five hundred is down
• 20:20
  Speaker 5: by two tenths of one percent or thirteen points. Nasdaq
• 20:24
  Speaker 5: also off by two tents of one percent or forty
• 20:26
  Speaker 5: seven points lower. Rusting two thousand is off by about
• 20:29
  Speaker 5: a quarter percent or five points lower. Ten year treasureeled
• 20:33
  Speaker 5: is down by six basis points, now at four point
• 20:36
  Speaker 5: three five two percent, and crude oil up over one
• 20:39
  Speaker 5: percent higher. Trading it's sixty seven dollars in fifty three
• 20:42
  Speaker 5: cents a barrel. Novo NORDES share is plunging twenty two
• 20:46
  Speaker 5: percent after the Danish pharmaceutical giant cut its full year
• 20:49
  Speaker 5: of guidance, citing weaker growth expectations for its blockbuster obesity
• 20:54
  Speaker 5: drug we GOVI. Meanwhile, Union Pacific in Norfolk Southern officially
• 20:58
  Speaker 5: announced they are merging and it's two hundred and fifty
• 21:00
  Speaker 5: billion dollar stock and cash agreement, creating the first transcontinental railroad.
• 21:05
  Speaker 5: Both stocks however, are down by three percent. Elsewhere, Procter
• 21:10
  Speaker 5: and Gamble posted stronger than expected quarterly results and reiterated
• 21:14
  Speaker 5: that tariffs could add one billion dollars to its annual costs.
• 21:18
  Speaker 5: The maker of Tied detergent said it is also seeing
• 21:21
  Speaker 5: slower consumer spending that stock is up modestly. The Wall
• 21:25
  Speaker 5: Street Journal is reporting that JP Morgan Chase is in
• 21:28
  Speaker 5: advanced talks to take over Apple's credit card program, with
• 21:31
  Speaker 5: Apple telling JP Morgan it is the Tech giants preferred
• 21:35
  Speaker 5: choice to replace Golden Sacks as its card partner. Appliance
• 21:39
  Speaker 5: maker Whirlpool stock is sinking ten percent after a missed
• 21:43
  Speaker 5: second quarter forecast due to tariff pressure. The company also
• 21:47
  Speaker 5: projected full year adjusted earnings that were below estimates and
• 21:50
  Speaker 5: slashed its divin end. Furthermore, Bank of America down grade
• 21:54
  Speaker 5: to the stock and after today's closing belt we'll see
• 21:57
  Speaker 5: earnings from Visa Booking Holding and Starbucks. I'm Tucker Silva
• 22:02
  Speaker 5: and that is Wall Street Watch. And in the previous segment,
• 22:05
  Speaker 5: we asked you the trivia question which Ben and Jerry's
• 22:09
  Speaker 5: flavor was named after a popular rock star. That would,
• 22:12
  Speaker 5: of course be Cherry Garcia Lou from Weymouth, Mass is
• 22:16
  Speaker 5: our winner today taking all the Financial Exchange Show t shirt.
• 22:19
  Speaker 5: Congrats to Lou and we play trivia every day here
• 22:22
  Speaker 5: in the Financial Exchange See complete contest rules at Financial
• 22:27
  Speaker 5: Exchange Show dot com.
• 22:28
  Speaker 3: Have you guys been to the graveyard at Ben and Jerry's.
• 22:36
  Speaker 5: Oh where they retire flavors?
• 22:38
  Speaker 3: Yeah?
• 22:38
  Speaker 5: Oh no, I haven't.
• 22:39
  Speaker 3: Pretty cool and no where you go with that one?
• 22:41
  Speaker 2: A genuine graveyard at the Ben and Jerry's Factor in Vermont,
• 22:44
  Speaker 2: and you, you know, walk up into this shaded area
• 22:46
  Speaker 2: and there's a bunch of gravestones for the flavors that
• 22:49
  Speaker 2: they've discontinued.
• 22:50
  Speaker 3: Wow, exciting. Stop if you're making your way through through from.
• 22:55
  Speaker 4: A little morbid.
• 22:56
  Speaker 2: Yeah, yeah, but I like that a little more baity
• 22:59
  Speaker 2: combined with my joy.
• 23:00
  Speaker 3: IREA like that. Yeah. Well, dark.
• 23:04
  Speaker 2: Top earners are falling behind on credit card and car
• 23:07
  Speaker 2: payments at a faster pace than their lower income constituents. Specifically,
• 23:11
  Speaker 2: delinquencies on credit card and car payment debts have increased
• 23:17
  Speaker 2: for those making at least one hundred and fifty grand
• 23:19
  Speaker 2: a year. That's jumped by almost twenty percent over the
• 23:22
  Speaker 2: last two years. That compares to a jump of about
• 23:27
  Speaker 2: nine to eleven percent for those between forty five and
• 23:30
  Speaker 2: one hundred and fifty grand, and a smaller jump for
• 23:33
  Speaker 2: those making less than forty five thousand dollars. It does
• 23:35
  Speaker 2: not tell you that a majority a large portion of
• 23:39
  Speaker 2: those people are delinquent. It just shows you that, over
• 23:43
  Speaker 2: the last two years that specific income demographics financial situation
• 23:47
  Speaker 2: has worsened faster than those on the lower income scale,
• 23:51
  Speaker 2: which I don't find immensely surprising. But we have been
• 23:57
  Speaker 2: covering a litany of stories in the last few days
• 23:59
  Speaker 2: of how higher income Americans are falling behind and really
• 24:04
  Speaker 2: catching up to the bad financial situations that their lower
• 24:07
  Speaker 2: income constituents are already in. And I mean, other than
• 24:12
  Speaker 2: the plain boring inflation story, which we hit over the
• 24:16
  Speaker 2: head pretty frequently, what I see here is just a basic,
• 24:21
  Speaker 2: a basic reality of most households that I see.
• 24:25
  Speaker 3: Which is.
• 24:27
  Speaker 2: Americans spend what they're taking in, and we're particularly bad
• 24:32
  Speaker 2: at the financial discipline involved in saving for one's future,
• 24:36
  Speaker 2: and so things that I see all the time, right,
• 24:38
  Speaker 2: I mean, my first job out of college, I think
• 24:41
  Speaker 2: I was earning forty something thousand a year, and as
• 24:46
  Speaker 2: that income ratcheted up, I changed my lifestyle a little bit.
• 24:50
  Speaker 2: But we see this take into extremes. Right, you land
• 24:53
  Speaker 2: that new job paying one hundred and twenty grand instead
• 24:56
  Speaker 2: of where you were before, and it's okay, I'm trading
• 24:59
  Speaker 2: in the civic for the I don't know what's a
• 25:01
  Speaker 2: cool car, guys, Hummer.
• 25:06
  Speaker 1: It's a big jump.
• 25:08
  Speaker 3: But that's where I think a lot of this comes from.
• 25:12
  Speaker 2: Is it's not that costs have gotten so prohibitively high
• 25:16
  Speaker 2: that you can't possibly live on one hundred and fifty
• 25:19
  Speaker 2: thousand dollars a year. It's the keeping up with the
• 25:21
  Speaker 2: Joneses effect. I think many people are guilty of this,
• 25:26
  Speaker 2: and we're seeing it play out in credit markets of
• 25:29
  Speaker 2: all different sorts. None of this, to me is alarming
• 25:32
  Speaker 2: to the point of watch out. The economy is about
• 25:35
  Speaker 2: to fall apart. We seem to be on trend lines
• 25:38
  Speaker 2: for delinquencies and defaults in the credit card and auto
• 25:42
  Speaker 2: loan space that we were in prior to COVID. So
• 25:45
  Speaker 2: it's more just getting back on that trend line, maybe
• 25:48
  Speaker 2: a little bit exacerbated. But on the individual micro level,
• 25:53
  Speaker 2: it speaks to an unhealthy financial status, which again nothing new,
• 25:58
  Speaker 2: But if you are trying to save for your retirement
• 26:01
  Speaker 2: and you're running up credit card debts and sitting on
• 26:06
  Speaker 2: a seven year car loan that you're underwater on. It
• 26:08
  Speaker 2: doesn't speak to a really sound financial situation. I know
• 26:12
  Speaker 2: that that's where a lot of folks are. This is
• 26:16
  Speaker 2: combined with what I would deem to be a fairly
• 26:19
  Speaker 2: unstable future social safety net. Right we talk about the
• 26:24
  Speaker 2: Social Security program funding and the lack thereof come twenty
• 26:28
  Speaker 2: thirty three, and so I guess what I would drive
• 26:31
  Speaker 2: home to folks is if you are on the verge
• 26:35
  Speaker 2: of being in this position and staring down retirement sometime
• 26:39
  Speaker 2: in the next fifteen years, it is time to get
• 26:43
  Speaker 2: that financial house in order. And that can include doing
• 26:46
  Speaker 2: all sorts of things that would seem counterintuitive.
• 26:48
  Speaker 3: It can involve.
• 26:50
  Speaker 2: Taking money out of investment accounts earlier than you anticipated
• 26:54
  Speaker 2: in order to get your financial house in order. It
• 26:56
  Speaker 2: can involve prioritizing a rainy day fund and over four
• 27:00
  Speaker 2: one K savings. And I think the important thing is
• 27:04
  Speaker 2: having an understanding of where you are and where you'll
• 27:06
  Speaker 2: need to get to to get into a firm financial
• 27:10
  Speaker 2: footing where you can frankly sleep at night but also
• 27:13
  Speaker 2: have the confidence to be able to say, yeah, if
• 27:16
  Speaker 2: I continue to do this over the course of the
• 27:17
  Speaker 2: next few years, I will get to the place that
• 27:19
  Speaker 2: I need to be. If you're finding yourself in any
• 27:23
  Speaker 2: of those positions where you could just use a little
• 27:25
  Speaker 2: bit more clarity around where you do need to get
• 27:27
  Speaker 2: to give the folks at Armstrong Advisor Group a call
• 27:30
  Speaker 2: numbers eight hundred three nine three four zero zero one.
• 27:33
  Speaker 2: We work with clients day in and day out to
• 27:35
  Speaker 2: manage their personal financial scenario to ensure a sound retirement.
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• 27:43
  Speaker 1: The proceeding was paid for by Armstrong Advisory Group, a
• 27:45
  Speaker 1: registered investment advisor. Nothing in the ad or in any
• 27:48
  Speaker 1: Armstrong guide a specific financial, legal, or tax advice. Consult
• 27:51
  Speaker 1: your own financial, tax, and estate planning advisors before making
• 27:54
  Speaker 1: any investment decisions. Armstrong make contact you to offer investment
• 27:57
  Speaker 1: advisory services.
• 27:58
  Speaker 2: Wall Street Journal has another story about college grads not
• 28:01
  Speaker 2: being able to find work due to AI, and I'm
• 28:03
  Speaker 2: just tired of this story.
• 28:04
  Speaker 3: It might be true.
• 28:06
  Speaker 2: Unemployment rate is bumped up pretty significantly compared to the
• 28:10
  Speaker 2: twenty eighteen twenty nineteen level for young people with a
• 28:14
  Speaker 2: bachelor's degree. I think we have to give it more
• 28:16
  Speaker 2: time to know. So I'm gonna skip that story, all
• 28:17
  Speaker 2: right with you, Mark, AI might be taking jobs away
• 28:21
  Speaker 2: from twenty two year old college grads.
• 28:23
  Speaker 3: We'll know in a few years whether or not it's true.
• 28:24
  Speaker 3: We'll get back to it.
• 28:25
  Speaker 4: Well, it'll take jobs away from lower skilled people.
• 28:28
  Speaker 2: Hypothetically you're lower skilled. I assume yep, I would think so,
• 28:31
  Speaker 2: So we'll see if it plays out that way. I
• 28:33
  Speaker 2: do want to talk about the economics of electricity because
• 28:40
  Speaker 2: I find this one to be developing in an interesting way.
• 28:44
  Speaker 2: If you're not aware, AI runs on a ton of electricity.
• 28:48
  Speaker 2: A bunch of tech companies are going to utility companies
• 28:50
  Speaker 2: and saying we need an immense amount of power, build
• 28:53
  Speaker 2: it out for us, and those utilities are trying to
• 28:56
  Speaker 2: manage this overall situation. But it's a pretty plain and
• 28:59
  Speaker 2: simple supplying demand story. You have very rapidly a bunch
• 29:05
  Speaker 2: of new demand for electricity and utility companies in a
• 29:08
  Speaker 2: position where they are unable to dramatically increase supply in
• 29:12
  Speaker 2: a short period of time, and so prices are rising,
• 29:15
  Speaker 2: and already you're starting to see some frustration on the
• 29:18
  Speaker 2: part of consumers. To cite a few pieces here. Edison
• 29:24
  Speaker 2: Electric Institutes, which is an industry trade group, expects that
• 29:27
  Speaker 2: utilities will invest nearly two hundred three billion dollars each
• 29:30
  Speaker 2: year in twenty twenty five and twenty twenty six. That'd
• 29:33
  Speaker 2: be substantially more than any period since two thousand when
• 29:36
  Speaker 2: they began tracking all of this information. And it seems
• 29:42
  Speaker 2: to me at least that there's no way all this
• 29:44
  Speaker 2: can happen without prices rising somewhere, and that's going to
• 29:50
  Speaker 2: be I think miscategorizing in many cases. There's a quote
• 29:54
  Speaker 2: here from a Virginia rate payer saying the people of
• 29:57
  Speaker 2: the Commonwealth of Virginia were not asked and advanced about
• 30:00
  Speaker 2: subsidizing data centers with our energy bills.
• 30:03
  Speaker 3: And it's an interesting quote.
• 30:05
  Speaker 2: I'm sure it's going to get a lot of play,
• 30:07
  Speaker 2: and I think other people are going to phrase it
• 30:08
  Speaker 2: that way. But to this point, as far as I know,
• 30:11
  Speaker 2: American households aren't subsidizing energy bills. What we would describe
• 30:15
  Speaker 2: this as is prices rising for everyone because more people
• 30:19
  Speaker 2: want electricity, and so prices for individual consumers and probably
• 30:23
  Speaker 2: businesses are going to go up.
• 30:26
  Speaker 4: Yeah, presumably we all benefit from whatever innovations and resulting
• 30:33
  Speaker 4: productivity improvements come from AI better.
• 30:36
  Speaker 3: Yeah right, yeah, we're better. Yeah, that's true.
• 30:39
  Speaker 4: That's certainly what the stock market seems to be pricing in.
• 30:42
  Speaker 3: But yeah, I mean, this seems to be I don't know.
• 30:46
  Speaker 2: We'll see how each state handles it, right, I mean, hypothetically,
• 30:49
  Speaker 2: if the Commonwealth of Virginia wanted to, they could set
• 30:52
  Speaker 2: a dramatically higher rate for business electricity demand than consumer electricity.
• 30:57
  Speaker 4: Demand, but then they'll pass it through to us.
• 31:00
  Speaker 2: They probably would end up doing so, and frankly, if
• 31:04
  Speaker 2: they did so, I would imagine some of those data
• 31:06
  Speaker 2: centers we'll just say, well, thanks, but we'll go build
• 31:08
  Speaker 2: this thing in Texas instead. And so overall, I think
• 31:12
  Speaker 2: what you have over the next few years is a
• 31:13
  Speaker 2: massive buildout of electricity generation capability, but in the short term,
• 31:18
  Speaker 2: a whole bunch of increases in electricity prices for what
• 31:21
  Speaker 2: is for many folks already a pretty high price point.
• 31:24
  Speaker 4: I think it's doable, and you can do it relatively cleanly,
• 31:27
  Speaker 4: though not risklessly with nuclear power. That's certainly a big
• 31:31
  Speaker 4: theme among what.
• 31:33
  Speaker 2: The utility companies start worried about is, hey, what if
• 31:36
  Speaker 2: we build all this stuff out and then three years
• 31:38
  Speaker 2: from now, nobody's talking about AI anymore, and these data
• 31:40
  Speaker 2: centers shut down.
• 31:43
  Speaker 3: It's a legitimate concern.
• 31:44
  Speaker 4: Then we'd have really cheap electricity, then.
• 31:46
  Speaker 3: Really cheap electricity and bankrupt utility companies probably.
• 31:49
  Speaker 4: Yeah, I'm okay with those stuff getting left behind, as
• 31:54
  Speaker 4: long as it's we'd have a lot of useful infrastructure.
• 31:56
  Speaker 4: I would take the risk, yeah, and we get society
• 31:59
  Speaker 4: dirty risk, take it take and then we can take
• 32:01
  Speaker 4: all the dirty energy sources offline and we'd be again.
• 32:05
  Speaker 4: Nuclear power is not risk free, but people have really
• 32:07
  Speaker 4: warmed up to it. I think over the past they have.
• 32:10
  Speaker 4: Fukushima obviously put a pall, cast a pall, but I
• 32:15
  Speaker 4: think we'd bounce back.
• 32:16
  Speaker 3: Let's take a quick break when we come back. But
• 32:19
  Speaker 3: if stack Roulette is next.
• 32:22
  Speaker 1: Here the Financial Exchange every day from eleven to noon
• 32:25
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• 32:28
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• 32:31
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• 32:50
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• 32:55
  Speaker 5: Now it's a great time to register for the DAV
• 32:58
  Speaker 5: five k, taking place Saturday November eighth at Fort Independence
• 33:02
  Speaker 5: on Castle Island. The reason has sold out each of
• 33:05
  Speaker 5: the past four years, and slots are continuing to fill
• 33:07
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• 33:11
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• 33:14
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• 33:19
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• 33:23
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• 33:27
  Speaker 3: Market's time for some stacker that what do you have
• 33:29
  Speaker 3: for us?
• 33:29
  Speaker 4: Now we'll end on good news, Mike, we didn't talk
• 33:33
  Speaker 4: about this data point. There was a consumer con We
• 33:35
  Speaker 4: were joking in the first hour about the bevy of
• 33:37
  Speaker 4: data and god forbid anything else get released this week. Well,
• 33:40
  Speaker 4: something did slip bias consumer confidence reported I think after
• 33:44
  Speaker 4: we started the show today. Inching up is the Conference Board,
• 33:47
  Speaker 4: which is the entity, the private entity that collects this
• 33:51
  Speaker 4: and other surveys inging up a little bit in July.
• 33:55
  Speaker 4: It's not quite where The index number itself is not
• 33:57
  Speaker 4: really interpretable it's sort of hard to understand if I told
• 34:00
  Speaker 4: you it was ninety seven point two. Well, so what
• 34:03
  Speaker 4: is one hundred good? Is ninety bad? Where was it
• 34:06
  Speaker 4: six months ago? That's really the more relevant question relative
• 34:09
  Speaker 4: to the disastrous April What was its second roll out?
• 34:13
  Speaker 4: What was Liberation Day April?
• 34:14
  Speaker 3: Second? Yeah?
• 34:15
  Speaker 4: Okay, Relative to the trough and recent confidence that occurred
• 34:20
  Speaker 4: not long after that disastrous series of announcements, confidence has
• 34:26
  Speaker 4: come up. Not quite where it was at the end
• 34:27
  Speaker 4: of last year, but it's come up. It's stabilized, which
• 34:30
  Speaker 4: is good for spending prospects to the extent this is predictive,
• 34:34
  Speaker 4: and its record there is kind of mixed and expectations
• 34:37
  Speaker 4: about the future state of the economy six months out
• 34:41
  Speaker 4: improved somewhat too, so not where they were last year.
• 34:44
  Speaker 4: I refer to confidence and expectations there, but a nice
• 34:47
  Speaker 4: bounce off the bottom following the Liberation Day fiasco.
• 34:52
  Speaker 2: Then I'll try and stick with some good news data
• 34:54
  Speaker 2: as well. If I think from most people, this is
• 34:57
  Speaker 2: good news. The piece of home price incre seems to
• 35:00
  Speaker 2: be finally slowing down. Home prices in the twenty major
• 35:04
  Speaker 2: US metro markets that the Case Shiller Home Price Index measures,
• 35:08
  Speaker 2: we're up two point eight percent in the last twelve
• 35:11
  Speaker 2: months ending in September. That's still a lot, but a
• 35:18
  Speaker 2: significant deceleration in home price growth compared to three point
• 35:21
  Speaker 2: four percent where we were previously, in the slowest increase
• 35:24
  Speaker 2: that we've seen in two years now. Of course, most
• 35:26
  Speaker 2: Americans are looking at the fact that the national Case
• 35:29
  Speaker 2: Shiller Index is up more than fifty five percent since
• 35:32
  Speaker 2: January of twenty twenty, so that's probably the highlight. But
• 35:36
  Speaker 2: taking a look at the twenty cities that they measure here,
• 35:39
  Speaker 2: we had a few winners in terms of home price increases.
• 35:42
  Speaker 2: New York was the biggest gain seven point four percent
• 35:46
  Speaker 2: year over year price growth, followed by Detroit, Cleveland, and
• 35:52
  Speaker 2: Boston all falling in the high fours. In terms of
• 35:55
  Speaker 2: those home price increases changes from the last year, Boston
• 35:58
  Speaker 2: came in at four point six percent, Cleveland four eight,
• 36:00
  Speaker 2: Detroit four point nine. In terms of where you might
• 36:03
  Speaker 2: be getting some deals, Tampa prices fell some two point
• 36:06
  Speaker 2: four percent year over year, San Francisco fell by six
• 36:10
  Speaker 2: tens of a percent, as did Dallas, and then Denver
• 36:13
  Speaker 2: was basically flat year over year in terms of overall
• 36:16
  Speaker 2: home prices. Home price changes. Again, all of this is
• 36:20
  Speaker 2: in the context of finally what's starting to be a
• 36:25
  Speaker 2: bit more normalized home environment, at least home sale environment.
• 36:29
  Speaker 2: But again, we've had a growing population over the course
• 36:33
  Speaker 2: of the last five years, obviously, and the number of
• 36:36
  Speaker 2: homes for sale is just now getting in the same
• 36:40
  Speaker 2: ballpark as where we were prior to COVID, and so
• 36:44
  Speaker 2: I think, you know, a bit more to go here,
• 36:46
  Speaker 2: but you're starting to see some pretty obvious trends in
• 36:49
  Speaker 2: terms of where prices are likely to go, and the
• 36:52
  Speaker 2: answer seems to be enlarged toasts of the country, including Florida, Texas, California, Colorado, Tennessee.
• 37:00
  Speaker 3: A lot of those Sun belt states very likely to.
• 37:03
  Speaker 2: See home price declines over the next twelve months based
• 37:06
  Speaker 2: on what we are now seeing with inventories that are
• 37:09
  Speaker 2: in many cases eclipsing home inventories.
• 37:13
  Speaker 4: What's the economy picks up?
• 37:15
  Speaker 2: Yeah, I mean there is, it's solid right now, But
• 37:17
  Speaker 2: possible that this reverse is You're gonna think.
• 37:19
  Speaker 4: Although supply and demand, what's happening to the demand curve?
• 37:23
  Speaker 2: Yeah, and so yeah, hypothetically that could reverse that general direction.
• 37:28
  Speaker 2: But given how dramatically over the course of this year,
• 37:31
  Speaker 2: that we've seen the number of homes.
• 37:33
  Speaker 3: For sale increase. Nationally, it's one story.
• 37:36
  Speaker 2: But locally in those markets, tough for me to see
• 37:38
  Speaker 2: how that situation reverses itself in the short term. It
• 37:42
  Speaker 2: improves in the short term, but again, if you bought
• 37:44
  Speaker 2: one of these houses, even in Florida back in twenty nineteen,
• 37:48
  Speaker 2: you're probably not complaining all that much, would be my guess.
• 37:51
  Speaker 3: Markets remain in negative territory slightly. So.
• 37:55
  Speaker 2: We've got the Dow, SMP, and NASDAC all in the red.
• 37:58
  Speaker 2: Dow off one hundred and eighty six points four tenths
• 38:00
  Speaker 2: of a percent, s and P off eight points a
• 38:02
  Speaker 2: little bit more than a tenth of a percent, in
• 38:04
  Speaker 2: the Nasdaq down twenty one almost exactly a tenth of
• 38:07
  Speaker 2: a percent. We'll have another busy show tomorrow, folks, tune
• 38:09
  Speaker 2: in and stay cool out there. Have a great rest
• 38:12
  Speaker 2: of your day.