Latest / The Financial Exchange Show / September Brings Inflation, Energy, and Fed Risks Back Into Focus

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September Brings Inflation, Energy, and Fed Risks Back Into Focus · The Financial Exchange Show

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  Speaker 1: is The Financial Exchange with Mike Armstrong and Paul Lane.
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  Speaker 2: Good morning. Hope everybody had a great long weekend. Some
• 1:14
  Speaker 2: Labor Day barbecues to attend and are back at it
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  Speaker 2: with some gusto because we've got a busy week here
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  Speaker 2: and only four days to cover it. We've got... Multiple
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  Speaker 2: inflation reports coming out this week. We're heading into a,
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  Speaker 2: excuse me, we're heading into a Fed meeting next week.
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  Speaker 2: We've got, is it Aura IPO-ing this week? I believe
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  Speaker 2: we've got other, let's see what other items are on
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  Speaker 2: the docket here. Oracle's reporting earnings this week. And Luke
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  Speaker 2: Cowa from Sherwood News joining us around 11 to talk
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  Speaker 2: about all of it and more. And we start with
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  Speaker 2: this story from the Wall Street Journal about, you know,
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  Speaker 2: the scariest month of the year here for investors, being September.
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  Speaker 2: The stock market's breezy summer is over, investors. Beware. By
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  Speaker 2: the way, Mike, Paul, and Tucker with you here on
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  Speaker 2: the Tuesday after Labor Day, and my voice sounds a
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  Speaker 2: little bit... It's struggling. Yeah, you don't sound great, Mike.
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  Speaker 2: If you're suspecting that somebody else is hosting the financial exchange,
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  Speaker 2: it is Mike. I just sound like I smoked a
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  Speaker 2: pack of cigarettes yesterday.
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  Speaker 3: Even more so, yes.
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  Speaker 2: Yeah, more than I usually sound like I smoked a
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  Speaker 2: pack of cigarettes I do this morning. So, you know,
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  Speaker 2: we do roll into September here, which I think most
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  Speaker 2: people know at this point, but I'll give you some stats.
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  Speaker 2: Our annual reminder. Yeah. Since 1928, September is the only
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  Speaker 2: month in the year in which the S & P
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  Speaker 2: 500 has finished lower more often than higher. It's the
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  Speaker 2: only one. This is all data from Citadel Securities, by
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  Speaker 2: the way. The index has closed lower. in 55% of
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  Speaker 2: those years over the last, what is that? 97 years
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  Speaker 2: that we've got through 2025, uh, with an average monthly
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  Speaker 2: return of minus 1.1% and an average sell-off of negative 4.7%.
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  Speaker 2: So if in those 55% of years where it was negative,
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  Speaker 2: the average sell-off was down 4.7%. So, I mean, you know,
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  Speaker 2: Home Depot's got the, uh, the, the Halloween decorations out.
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  Speaker 2: It is, it is a, scary time of year for investors.
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  Speaker 2: I'm being a bit facetious. I think most people should
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  Speaker 2: completely ignore these statistics. And before you tell me I'm wrong,
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  Speaker 2: you have to think about what this means. One, it
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  Speaker 2: does mean that 45% of the time, the S &
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  Speaker 2: P is positive for the month of September. It's nearly
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  Speaker 2: a coin flip as to which direction it's going to go,
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  Speaker 2: but because it's the only month of the year where
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  Speaker 2: it's on average negative, okay, we land there. Two, you
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  Speaker 2: have to think about what you would do. So if
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  Speaker 2: you're going to take the opinion, hey, this is going
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  Speaker 2: to continue, which no evidence that it will, but it
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  Speaker 2: has been the case for the last 100 years or so.
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  Speaker 2: If you're of the opinion that it's going to continue,
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  Speaker 2: you have to ask yourself, okay, so am I going
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  Speaker 2: to sell all of my stocks every August 31st and
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  Speaker 2: play that game? And how long am I willing to
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  Speaker 2: play that game? Because it's not as though you've got
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  Speaker 2: a magic coin that turns up tails 50%, 55% of
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  Speaker 2: the time, and you can just flip that coin a
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  Speaker 2: million times. No, you've got to, you know, only so
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  Speaker 2: many years as an investor to actually play this game,
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  Speaker 2: not to mention all the taxes involved. So I personally
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  Speaker 2: find these statistics interesting, but useless.
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  Speaker 1: Yep.
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  Speaker 2: Most people shouldn't act on them in any meaningful way.
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  Speaker 2: But it is, I suppose, something to be aware of
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  Speaker 2: because every news outlet that I'm seeing on TV and
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  Speaker 2: major publications like the are writing as though it's now
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  Speaker 2: spooky season for the S & P 500. And investors, beware,
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  Speaker 2: because it's the worst time of year for stocks.
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  Speaker 4: It's tradition for all the news publications. We do a
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  Speaker 4: similar one on the Santa Claus rally when that comes
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  Speaker 4: around at year end.
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  Speaker 2: There are numerous other.
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  Speaker 4: Examples like these. This one is most unique in that
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  Speaker 4: it actually has some statistical data behind it. Like that
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  Speaker 4: Santa Claus rally one that I mentioned before is more
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  Speaker 4: of a, it feels like sort of just a hearsay
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  Speaker 4: sort of just tradition to speak about, but there's not
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  Speaker 4: actually great evidence that serves it. I can recall offhand
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  Speaker 4: that I believe last year we had a positive month
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  Speaker 4: of September and to your point, 55-45 on the split.
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  Speaker 4: But it is something that can be helpful perhaps from
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  Speaker 4: an emotional perspective for investors that, gee, typically this time
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  Speaker 4: can be a little bit more volatile than others. But
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  Speaker 4: that's the only real stock that anyone should put into
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  Speaker 4: it every time there are new things that you are
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  Speaker 4: trying to combat when you look at the market. So
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  Speaker 4: not something that should shake up anyone's portfolio, but just
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  Speaker 4: something to keep in mind.
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  Speaker 2: Well, markets are almost exactly flat from where we closed
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  Speaker 2: on Monday, August 31st. So not much movement yet. We
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  Speaker 2: do have equities in the negative So far today, we've
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  Speaker 2: got the Dow off 660 points, 1.25%, the S &
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  Speaker 2: P off 0.5%, and the Nasdaq off 0.5%. As well,
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  Speaker 2: we have energy prices that have been in the news
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  Speaker 2: quite a bit and we'll be talking about because it's
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  Speaker 2: going to be making its way into all parts of
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  Speaker 2: the show and the economy over the course of the
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  Speaker 2: next few months here. But oil prices up about 2%
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  Speaker 2: to $ 93. 29. Cents per barrel as the Houthi allies have
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  Speaker 2: attacked several Saudi energy facilities. We had an interview with, Tucker,
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  Speaker 2: you're going to have to remind me of his name,
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  Speaker 2: but a great guest on Friday.
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  Speaker 3: Of last week to talk about energy.
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  Speaker 2: Yeah, Tom Claus talked to us about the state of
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  Speaker 2: energy markets and his growing concern, especially about diesel.
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  Speaker 3: That interview is on our YouTube page, by the way.
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  Speaker 2: Thank you, Tucker.
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  Speaker 3: The Financial Exchange on YouTube.
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  Speaker 1: Subscribe.
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  Speaker 2: So as we head into the fall season here, a
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  Speaker 2: few things are relevant for diesel in particular. One, we're
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  Speaker 2: at an all-time high. September 7th, we sat at $ 5. 90
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  Speaker 2: a gallon on diesel. That is the highest ever recorded price.
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  Speaker 2: I don't know exactly where we are today, but around
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  Speaker 2: the same level.
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  Speaker 1: $ 5.
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  Speaker 4: 85, I thought I read this morning.
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  Speaker 2: Sure. So same general range. We are heading into harvest season.
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  Speaker 2: All those combines that you see if you are living
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  Speaker 2: somewhere outside of the Northeast where we don't really have
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  Speaker 2: combines or fields are running on diesel. And we are
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  Speaker 2: also heading into home heating season for certain parts of
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  Speaker 2: the country. And so definitely fuel prices on a lot
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  Speaker 2: of folks' minds here. And depending on where conflict goes
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  Speaker 2: in the Middle East, you know, Tom's point, one of
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  Speaker 2: Tom's points, he had many, but one of Tom's points
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  Speaker 2: was that the president, you know, love him, hate him,
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  Speaker 2: has done a pretty remarkable job talking down oil prices.
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  Speaker 2: When they've started to rally, he's made it very difficult
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  Speaker 2: for traders to kind of buy into that long-term direction
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  Speaker 2: for oil prices. And so you've had oil prices themselves
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  Speaker 2: relatively muted. What practically he's had a difficult time doing
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  Speaker 2: because nobody can talk down these prices is the actual
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  Speaker 2: distillate prices, because that's what people actually use. And that's
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  Speaker 2: actually where the market comes in. And so We're seeing
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  Speaker 2: crack spreads over $ 100 where a barrel of diesel is
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  Speaker 2: going for $ 100 more than a barrel of oil because
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  Speaker 2: a lot of the problem is on refinement capacity and
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  Speaker 2: the ability to move that stuff. So very interesting stuff
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  Speaker 2: heading into the fall season here. When it comes to
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  Speaker 2: the markets, I will just say, as we've talked about
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  Speaker 2: over and over again, markets are certainly expensive. Just since
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  Speaker 2: March 30th, which was the low for the year, the
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  Speaker 2: S & P has now rallied some 22%. Hmm. So
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  Speaker 2: I know year-to-date numbers are very different, but markets fell
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  Speaker 2: earlier on in the year out of concern of the
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  Speaker 2: conflict in Iran. Since that March 30th date, we've rallied
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  Speaker 2: about 22% to get to where we are now. We
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  Speaker 2: know the average statistics for markets and what they have entailed.
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  Speaker 2: It's not enough to personally scare me off, but yeah,
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  Speaker 2: certainly we head into This time of year where investors
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  Speaker 2: are focused on markets and returning from those summer holidays,
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  Speaker 2: and historically, that has not spelled the best news for markets.
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  Speaker 4: Yeah, up 13.5% year-to-date on the market, and we head
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  Speaker 4: into a period of time where If I were to
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  Speaker 4: summarize to someone who maybe doesn't follow this stuff as
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  Speaker 4: closely as we do, inflation is certainly on the minds
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  Speaker 4: of investors. And you've got the Federal Reserve meeting that
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  Speaker 4: we'll see on, is it the 19th? 16th. 16th that
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  Speaker 4: they get together again. And of course, AI trade, those
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  Speaker 4: are sort of the big blockbuster things to follow. And
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  Speaker 4: we'll get more information on the inflationary front on Thursday,
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  Speaker 4: I believe. Friday, we get the CPI report.
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  Speaker 2: Let's take a quick break, and when we return, we're
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  Speaker 2: going to be talking about that upcoming Fed meeting. the
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  Speaker 2: other factors that are going to be considered with it,
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  Speaker 2: and whether or not they should be playing politics with
• 10:07
  Speaker 2: that next Fed meeting, all next on The Financial Exchange.
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  Speaker 2: All right, Paul, as we head into mid-September here, as
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  Speaker 2: you mentioned, we will have a Federal Reserve meeting in,
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  Speaker 2: what is it, eight days, where they will set the
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  Speaker 2: stage for what comes next in terms of rates. And
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  Speaker 2: as we've talked about, you know, contextually on the show,
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  Speaker 2: a quarter percent move on interest rates quite nearly affects nobody.
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  Speaker 2: Has no real practical implications other than a signal to
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  Speaker 2: investors and the markets, and bless you, Tucker, about the
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  Speaker 2: concerns that they might have and the direction of things
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  Speaker 2: going forward. That's the real importance of one of these things,
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  Speaker 2: is less the actual movement itself and more the signal
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  Speaker 2: that it sends to investors. And so Before we talk
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  Speaker 2: about what they may or may not do, I want
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  Speaker 2: to give some context here. One, the labor market. With
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  Speaker 2: the report from Friday of last week, I understand if
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  Speaker 2: you were traveling for the holidays and missed it, but
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  Speaker 2: it was a, in terms of a headline number, a
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  Speaker 2: pretty barn burner number, 160 some odd thousand jobs created
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  Speaker 2: after a pretty weak showing for June and July in
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  Speaker 2: terms of job creation.
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  Speaker 4: Which were revised upwards.
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  Speaker 2: That was part of the positive news in the report.
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  Speaker 4: Correct.
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  Speaker 2: And so, I don't think this signaled a significantly tighter
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  Speaker 2: labor market. We didn't see the unemployment rate move at
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  Speaker 2: all in that reading. But it did, you know, really
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  Speaker 2: squash any of the concerns that people voiced in June, July. Like, oh,
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  Speaker 2: are we heading directionally in the wrong place with the
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  Speaker 2: labor market? August report seemingly told us no. We're now
• 12:30
  Speaker 2: on pace for about an average of 80,000 jobs created
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  Speaker 2: per month. Which is significantly better than what we saw
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  Speaker 2: in 2025 with only 10,000-ish jobs created every month. So
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  Speaker 2: labor market, I just don't know how to say this
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  Speaker 2: any other way. It's solid. It's solid in a way
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  Speaker 2: that historically is pretty rare. To see a 4.1% unemployment
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  Speaker 2: rate is pretty abnormal. Doesn't mean that everybody's got a job,
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  Speaker 2: but compared to decades past, It's a fairly tight labor
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  Speaker 2: market that most people that are looking for work are
• 13:02
  Speaker 2: able to find it, even if it's not in their
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  Speaker 2: particular field. I'll talk more about the labor market later.
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  Speaker 2: Friday of this week, we've got a CPI report. It's
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  Speaker 2: not the Fed's preferred measure of inflation, but they do
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  Speaker 2: look at it. We are anticipating, or at least the
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  Speaker 2: average economist is anticipating, that month over month we'll see
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  Speaker 2: prices jump again, up four-tenths of a percent, most of
• 13:23
  Speaker 2: that likely driven by gas prices shooting back up in
• 13:25
  Speaker 2: the month of August. When we even strip out those
• 13:29
  Speaker 2: gas prices, though, and food prices, we're still seeing expected
• 13:33
  Speaker 2: inflation in the 2.5% range, 2.4%, 3.4% on the headline,
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  Speaker 2: both of which are well above what the Fed really
• 13:42
  Speaker 2: seems to think is tolerable on the inflation front. And
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  Speaker 2: then the final contextual piece heading into this meeting was
• 13:48
  Speaker 2: the Truth Social post by the president on Friday of
• 13:51
  Speaker 2: last week after that jobs report, where in no uncertain terms,
• 13:55
  Speaker 2: he expressed his belief that That jobs report signified that
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  Speaker 2: the U.S. economy is very strong and, in his words,
• 14:05
  Speaker 2: deserving of lower interest rates. Unfortunately, for that viewpoint, it
• 14:12
  Speaker 2: directly contradicts economists' thinking on how inflation works and what
• 14:17
  Speaker 2: the Fed's job is, which, if you're getting solid employment reports,
• 14:22
  Speaker 2: it could lead to higher inflation. And so if you're
• 14:24
  Speaker 2: already running high inflation. You don't want to stoke that
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  Speaker 2: fire further by lowering interest rates. I don't know that
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  Speaker 2: the president's going to care about that argument, but nonetheless,
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  Speaker 2: it is, again, you know, his viewpoint on that directly
• 14:37
  Speaker 2: contradictory to pretty much everyone at the Fed's own thinking
• 14:41
  Speaker 2: about it. So there's the context as you head into
• 14:44
  Speaker 2: this meeting. And on the show Friday, after we saw
• 14:48
  Speaker 2: that Truth Social post, I openly wondered, hey, is there
• 14:52
  Speaker 2: anyone on the Federal Reserve Board of Governors who is
• 14:57
  Speaker 2: concerned about the credibility of the Fed enough to look
• 15:01
  Speaker 2: at that post from the president and want to do
• 15:03
  Speaker 2: the exact opposite? And Chuck's point was, if there is,
• 15:07
  Speaker 2: they shouldn't be at the Fed. Of course. And that's
• 15:10
  Speaker 2: a fair perspective, right? The job is serious enough that
• 15:14
  Speaker 2: you need to be prepared for political pressure and completely
• 15:17
  Speaker 2: ignore it. You need to be able to block out
• 15:19
  Speaker 2: the noise. You have to be able to completely ignore
• 15:21
  Speaker 2: it And there's quite a bit of evidence that the
• 15:23
  Speaker 2: Fed has done that pretty much all the time. Claudia
• 15:28
  Speaker 2: Somm has a piece this morning in Bloomberg, if you've
• 15:31
  Speaker 2: heard that name before. There's an economic rule that was
• 15:35
  Speaker 2: broken a couple of years ago called the Somm rule
• 15:38
  Speaker 2: in regard to changes in unemployment and predicting recessions. Nonetheless,
• 15:44
  Speaker 2: she points out that over the, what is that, a
• 15:46
  Speaker 2: 40-year time period between 1984 and 2024, the Fed changed
• 15:51
  Speaker 2: its target interest rate 45% of the time. And there's
• 15:56
  Speaker 2: this push to say, hey, we're heading into fall midterm elections.
• 16:01
  Speaker 2: Maybe they shouldn't really be doing anything here. Historically, in
• 16:06
  Speaker 2: the two-month period around federal elections, the Fed changed interest
• 16:10
  Speaker 2: rates 43% of the time. So I really take that
• 16:14
  Speaker 2: to mean that there is no evidence that the Federal
• 16:16
  Speaker 2: Reserve takes politics or elections into account when making their decisions.
• 16:22
  Speaker 2: And my hope would be that they don't this time either.
• 16:26
  Speaker 2: But I will say that the pressure on this Federal
• 16:31
  Speaker 2: Reserve and the Federal Reserve under Jay Powell is fairly unprecedented.
• 16:36
  Speaker 2: It is. At least in its publicity. How public it's become.
• 16:40
  Speaker 4: There's been instances historically where other presidents have put significant
• 16:43
  Speaker 4: pressure on Federal Reserve chairmen to make a certain decision
• 16:47
  Speaker 4: to bolster their politics. The Nixon era is one that
• 16:51
  Speaker 4: often gets referenced in some of the downfalls that can
• 16:55
  Speaker 4: occur as a result of that, but Largely, that seemed
• 16:59
  Speaker 4: to be more behind closed doors. And this is about
• 17:02
  Speaker 4: as public as you can make it. So the pressure
• 17:04
  Speaker 4: is significantly high. But the great architecture of the Federal
• 17:08
  Speaker 4: Reserve in general is its independence and what is so
• 17:12
  Speaker 4: sacred about it for people who follow the economy for
• 17:15
  Speaker 4: our job on a daily basis. It underpins the U.S.
• 17:19
  Speaker 4: financial system. And I can't reiterate enough, whether it's Democrat
• 17:23
  Speaker 4: or Republican in office, the Federal Reserve really needs to
• 17:27
  Speaker 4: adhere to this independence policy and focus on the tasks
• 17:31
  Speaker 4: at hand, which are keep inflation under control and keeping
• 17:34
  Speaker 4: the labor market stable.
• 17:36
  Speaker 1: In good shape.
• 17:37
  Speaker 4: And I too hope that all its members can ignore
• 17:41
  Speaker 4: this and brush to the side. The reassuring piece has
• 17:45
  Speaker 4: been that though the president has come after some, some
• 17:48
  Speaker 4: members and some of this stuff is still being worked
• 17:50
  Speaker 4: out with Lisa Cook, for example, but the Supreme court
• 17:53
  Speaker 4: did step in and at least state that he could
• 17:57
  Speaker 4: not fire Lisa Cook so hastily. So there are still
• 18:00
  Speaker 4: those protections in place and regardless of Democrat or Republican,
• 18:04
  Speaker 4: that is important for our economy and, So I hope
• 18:06
  Speaker 4: that continues to be the case here heading into this
• 18:08
  Speaker 4: next meeting.
• 18:09
  Speaker 2: Yeah, so in terms of this next meeting, just to
• 18:11
  Speaker 2: kind of get the predictions out of the way here,
• 18:14
  Speaker 2: a few weeks ago, or rather just a week or
• 18:18
  Speaker 2: two ago, the odds of a rate hike were pretty low.
• 18:22
  Speaker 2: I think it was... 35% prior to Warsh speaking on
• 18:25
  Speaker 2: the 28th. Yeah, so prior to Warsh speaking at Jackson Hole,
• 18:29
  Speaker 2: since that speech, plus since that labor market report, we're
• 18:32
  Speaker 2: now looking at nearly a 60% chance of a rate hike,
• 18:35
  Speaker 2: which is far from a certainty. I don't think people
• 18:39
  Speaker 2: have a real firm grasp on what this Fed is
• 18:41
  Speaker 2: going to do next week, which is reasonable. Like I said,
• 18:44
  Speaker 2: a single rate hike or cut or doing nothing, I
• 18:48
  Speaker 2: don't think really signifies much for the state of the economy.
• 18:52
  Speaker 2: But you can certainly understand why some pundits are out
• 18:56
  Speaker 2: there and some media is out there saying, hey, If
• 19:00
  Speaker 2: they do hike rates in September coming into the midterm elections,
• 19:04
  Speaker 2: what sort of political message does that send? And I
• 19:09
  Speaker 2: don't think the Fed will be sending any sort of
• 19:10
  Speaker 2: political message, but I can promise you that it will
• 19:13
  Speaker 2: be politicized if they do, in fact, hike rates going
• 19:17
  Speaker 2: into the midterm elections here. And so maybe very well justified.
• 19:22
  Speaker 2: I personally think they should hike rates, given what we're
• 19:24
  Speaker 2: seeing with inflation, but no doubt it would be politicized.
• 19:27
  Speaker 2: if they do so. Quick break. Wall Street Watch coming
• 19:29
  Speaker 2: up next.
• 19:39
  Speaker 1: Like us on Facebook and follow us on Twitter at
• 19:42
  Speaker 1: TFE Show. Breaking business news is always first right here
• 19:47
  Speaker 1: on the Financial Exchange Radio Network. Time now for Wall
• 19:51
  Speaker 1: Street Watch, tracking the stocks, the data, and the headlines
• 19:55
  Speaker 1: driving markets so far today, right here on the Financial
• 19:58
  Speaker 1: Exchange Radio Network.
• 19:59
  Speaker 3: Markets in negative territory as inflation takes center stage this
• 20:04
  Speaker 3: week with the CPI reading on Friday, rising energy prices
• 20:08
  Speaker 3: also continue to garner much attention. Right now, the Dow
• 20:12
  Speaker 3: is down 1.25%, selling off 666 points. S & P
• 20:13
  Speaker 3: 500 down about 0.5% or 35 points lower. NASDAQ down
• 20:15
  Speaker 3: about 0.5% as well as 118 points off. Russell 2000
• 20:17
  Speaker 3: is down 0.4%. 10-year treasury yield is flat at 4.792%.
• 20:33
  Speaker 3: Crude oil is up 2% higher, trading at $ 93 a barrel,
• 20:36
  Speaker 3: while Brent's, the international benchmark, is nearing $ 100, now at $ 98.
• 20:45
  Speaker 3: Breaking news last hour after Qualcomm announced it has signed
• 20:48
  Speaker 3: up Amazon as a data center chip customer, a deal
• 20:51
  Speaker 3: that will span multiple generations. It gives Amazon the right
• 20:55
  Speaker 3: to acquire as much as $ 4 billion in shares, Qualcomm
• 20:58
  Speaker 3: up 5%, while Amazon is down by 1%. Meanwhile, Novartis
• 21:03
  Speaker 3: dropping 13% after the drugmaker said an experimental medicine failed
• 21:08
  Speaker 3: to reduce cardiovascular risk in a late-stage clinical trial. Amgen
• 21:12
  Speaker 3: and Eli Lilly are seeing sympathy losses. They, too, are
• 21:16
  Speaker 3: working on rival treatments. Elsewhere, fuel cell maker Bloom Energy
• 21:21
  Speaker 3: will join the S & P 500 later this month,
• 21:23
  Speaker 3: sending shares up by 8% and Boston Scientific down by
• 21:28
  Speaker 3: 3% after the medical device maker said a recent cyber
• 21:32
  Speaker 3: attack likely impacted sales and profit targets for 2026. I'm
• 21:38
  Speaker 3: Tucker Silva. That is Wall Street Watch.
• 21:40
  Speaker 2: Paul, like I mentioned last week, we saw a Solid
• 21:44
  Speaker 2: jobs report, a fair number of jobs creation revisions to
• 21:47
  Speaker 2: the previous two months. Expectations were for around 50,000 jobs created.
• 21:53
  Speaker 2: We got over 150,000 jobs created. So solid numbers. We're
• 21:58
  Speaker 2: now seeing average job creation for 2026 in the 80,000 range,
• 22:03
  Speaker 2: which is up from about 10,000 jobs a month in 2025.
• 22:09
  Speaker 2: And what's particularly remarkable about some of these things, I think,
• 22:13
  Speaker 2: So when we take a look at the size of
• 22:15
  Speaker 2: the labor force, which gets estimated by the BLS, in 2024,
• 22:21
  Speaker 2: the labor force grew by about one and a third
• 22:23
  Speaker 2: million people. In 2025, it grew by nearly three and
• 22:27
  Speaker 2: a third million. In 2026 so far, it's actually shrunk
• 22:30
  Speaker 2: by nearly 700,000 people.
• 22:31
  Speaker 3: Wow.
• 22:31
  Speaker 1: That's crazy.
• 22:33
  Speaker 2: Primarily fewer people entering the country and deportations is where
• 22:38
  Speaker 2: that's coming from. And by the way, that's 700,000 number
• 22:42
  Speaker 2: is substantially higher if you're looking at different time periods.
• 22:44
  Speaker 2: I'm just looking at year to date what's happened with
• 22:47
  Speaker 2: the size of the labor force. I guess I take
• 22:52
  Speaker 2: that all to mean that while I hear the complaints
• 22:56
  Speaker 2: about the labor market, I just want to put into
• 22:59
  Speaker 2: context here that having an unemployment rate of 4.1% is
• 23:06
  Speaker 2: exceptionally rare. It is really, really rare to be seeing
• 23:12
  Speaker 2: a unemployment rate below like 4.5%. And I'm going to
• 23:17
  Speaker 2: try and pull up the chart here and pick out
• 23:19
  Speaker 2: the time periods when we've actually seen something as convincing
• 23:23
  Speaker 2: as this. So you know, in the last couple of decades,
• 23:26
  Speaker 2: you've got to go back to the late 2010s. That's
• 23:28
  Speaker 2: the last time that we saw unemployment as low as
• 23:31
  Speaker 2: we did. Now you didn't pass that level until about 2018.
• 23:37
  Speaker 2: That's when we got below 4% for a brief period
• 23:39
  Speaker 2: of time or floated around there. Obviously in, you know,
• 23:42
  Speaker 2: early 2020s, we were there as well during this, you know,
• 23:45
  Speaker 2: three and a half percent COVID. Yeah. Three, four, I
• 23:48
  Speaker 2: think is where we got. Um, You didn't get there
• 23:52
  Speaker 2: much in the 90s or 2000s. You maybe had a
• 23:55
  Speaker 2: few months there where you were down below there. Before that,
• 23:59
  Speaker 2: you had to go back to the late 60s. So
• 24:02
  Speaker 2: from 1970 to 99, there was no period where you
• 24:07
  Speaker 2: got as low on the unemployment rate as we are
• 24:09
  Speaker 2: right now. And you rarely saw it any time over
• 24:12
  Speaker 2: the last quarter century. And so- Every time we talk
• 24:15
  Speaker 2: about the labor market, I get texted. Text the show
• 24:20
  Speaker 2: at 617-362-1385. I recognize that it is a difficult job
• 24:24
  Speaker 2: market for some. I've especially heard that from rising or
• 24:28
  Speaker 2: graduating seniors in college who are entering the labor force
• 24:31
  Speaker 2: looking for specific jobs in their fields. And it is
• 24:34
  Speaker 2: a very low turnover labor market, and I think that
• 24:37
  Speaker 2: needs to be acknowledged too. But this is a contextually...
• 24:44
  Speaker 2: tremendous labor market. There's just no other way to describe it.
• 24:48
  Speaker 2: There have been better ones, but very few throughout U.S. history.
• 24:51
  Speaker 4: No, what's so challenging about this labor market is the
• 24:56
  Speaker 4: recent phenomenon that you alluded to of it's low hire,
• 24:59
  Speaker 4: low fire. So for anyone who's looking for a job
• 25:03
  Speaker 4: because they've been laid off or displaced or that new
• 25:06
  Speaker 4: entrant piece that you mentioned, it has been challenging for
• 25:09
  Speaker 4: them to find work. There are many people, though, that
• 25:12
  Speaker 4: do fall in that category of sort of staying put
• 25:16
  Speaker 4: in their current job and have had no issues with
• 25:20
  Speaker 4: being laid off. There are some sectors that have been
• 25:23
  Speaker 4: hit harder than others. But broadly speaking, you have people
• 25:26
  Speaker 4: that have a reasonable amount of job security. It's just
• 25:29
  Speaker 4: difficult if you want to shift around. And that points
• 25:32
  Speaker 4: to One of the articles that we have in the
• 25:34
  Speaker 4: stack here today where the quits rate, which basically tracks
• 25:37
  Speaker 4: this phenomenon that I'm speaking of, in terms of job
• 25:40
  Speaker 4: mobility in the country, it had peaked during the COVID
• 25:44
  Speaker 4: era of 21 and 22, around 3%, where we were
• 25:47
  Speaker 4: seeing just tremendous turnover of people job hopping per pay increases.
• 25:52
  Speaker 4: It's now kind of plummeted to 1.9%, which is levels
• 25:56
  Speaker 4: that we haven't seen since sort of the post great
• 26:00
  Speaker 4: financial crisis period of the early 2010s, early 2012, 2013 era.
• 26:08
  Speaker 2: Of time.
• 26:09
  Speaker 4: But ultimately, the concern that the economy has at the
• 26:13
  Speaker 4: moment is less so on the labor market, is really
• 26:16
  Speaker 4: more on the inflationary front. The labor market continues to
• 26:20
  Speaker 4: chug along just okay.
• 26:21
  Speaker 2: Yeah. And by the way, that quits rate, while low
• 26:24
  Speaker 2: compared to recent standards, is usually right around that 2% range.
• 26:29
  Speaker 2: We've got 26 years worth of data here, and it's
• 26:32
  Speaker 2: fluctuated between like 1.8 and 2.2 the vast majority of
• 26:35
  Speaker 2: the time. So we're in a pretty normal place. I
• 26:38
  Speaker 2: think one area that's especially shining for the labor market
• 26:41
  Speaker 2: happens to be those Americans without college degrees. We are seeing,
• 26:47
  Speaker 2: so I have to be clear here, it has almost
• 26:51
  Speaker 2: always been easier to get a job with a college degree.
• 26:54
  Speaker 2: The unemployment rate has always been lower for working age
• 26:58
  Speaker 2: folks with a college degree. But that gap has narrowed recently.
• 27:02
  Speaker 2: And so what we are seeing here that I found
• 27:05
  Speaker 2: telling was that in the 25 to 54 years, the
• 27:09
  Speaker 2: unemployment rate for degree holders in their prime working years,
• 27:15
  Speaker 2: so again, 25 to 54, averaged 2.7% for the last
• 27:19
  Speaker 2: 12 months. That is well below the 3.6% for workers
• 27:24
  Speaker 2: with just some college education, and then 4.7% for people
• 27:28
  Speaker 2: with a high school diploma only. So again, not to
• 27:32
  Speaker 2: say that it is easier to find a job if
• 27:35
  Speaker 2: you don't have a high school degree or if you
• 27:36
  Speaker 2: don't have a college degree, that's not what we're saying here,
• 27:39
  Speaker 2: but that gap used to be a lot higher and
• 27:41
  Speaker 2: has historically been quite a bit higher. And I think
• 27:44
  Speaker 2: it comes from a part of what we're seeing here,
• 27:46
  Speaker 2: which is, you know, a bit of a surge in
• 27:50
  Speaker 2: demand for all sorts of healthcare workers, a bit of
• 27:53
  Speaker 2: a surge in demand for construction sector as well. Um,
• 27:57
  Speaker 2: the manufacturing sector as a whole has not increased employment.
• 28:00
  Speaker 2: And I think a lot of that has to do
• 28:02
  Speaker 2: with tariffs, but, um, if we anticipate more and more
• 28:07
  Speaker 2: construction spending due to the data center boom, then this
• 28:11
  Speaker 2: could actually improve. Again, does not say anything for the
• 28:15
  Speaker 2: kid who just graduated from, you know....
• 28:19
  Speaker 4: BU, Northeastern.
• 28:21
  Speaker 2: Yeah, I guess I was about to say like MIT
• 28:24
  Speaker 2: with a coding degree, but I think if you have
• 28:25
  Speaker 2: a coding degree from MIT, you're still going to be fine. But,
• 28:28
  Speaker 2: you know, what's the next tier down from that? Like
• 28:32
  Speaker 2: WPI with that same degree... It may be a challenge
• 28:36
  Speaker 2: right now to find that job, given what we are
• 28:39
  Speaker 2: seeing in some sectors of the economy. But the unemployment
• 28:43
  Speaker 2: and the employment situation generally, while slow moving and very
• 28:47
  Speaker 2: low turnover, is a good one that the Fed is
• 28:50
  Speaker 2: very much going to set aside and say there is
• 28:54
  Speaker 2: nothing that we need to do here. I don't think
• 28:56
  Speaker 2: it's necessarily indicating higher inflation because wage growth isn't spiking,
• 28:59
  Speaker 2: but it's definitely not telling them that they need to
• 29:02
  Speaker 2: do anything to cut rates.
• 29:03
  Speaker 1: Yeah.
• 29:04
  Speaker 2: Let's take a quick break. When we come back, got
• 29:06
  Speaker 2: to finally talk about oil markets and the surge we're
• 29:09
  Speaker 2: seeing in pricing today, what it means for the average
• 29:12
  Speaker 2: American family as we head into the last few months
• 29:14
  Speaker 2: of the year here. Quick break. We'll be right back
• 29:16
  Speaker 2: with oil next.
• 29:18
  Speaker 1: Remember, you can watch the show live every day on
• 29:21
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• 29:24
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• 29:28
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• 29:56
  Speaker 2: Well, we're seeing oil prices shoot up again today in
• 29:59
  Speaker 2: the wake of some attacks on Saudi energy infrastructure here.
• 30:04
  Speaker 2: We've got oil prices. Let's take a look as we
• 30:06
  Speaker 2: sit now. Brent up about 1%, pushing $ 98 a barrel.
• 30:11
  Speaker 2: West Texas crude up about 1.6%, closing in on $ 93
• 30:17
  Speaker 2: a barrel. The big news, though, however, for this whole
• 30:19
  Speaker 2: year has not so much been about oil prices themselves,
• 30:22
  Speaker 2: but rather what it gets turned into. and that's where
• 30:25
  Speaker 2: the problems have been specifically with diesel, which is now
• 30:30
  Speaker 2: sitting at all-time highs ever. And I don't think I
• 30:33
  Speaker 2: need to go through this again, but the concern for you, me,
• 30:39
  Speaker 2: the Federal Reserve, the president, everybody in politics is that
• 30:42
  Speaker 2: diesel is the stuff that really feeds into everything else.
• 30:45
  Speaker 2: I know gasoline prices are the ones that are front
• 30:48
  Speaker 2: and center. We all care about gasoline prices, but if
• 30:51
  Speaker 2: you care about grocery prices and I don't even know
• 30:56
  Speaker 2: what to say. Everything that you purchase, diesel prices more
• 31:00
  Speaker 2: directly affect that. We are going to soon head into
• 31:03
  Speaker 2: this time of year where all of the retailers, if
• 31:06
  Speaker 2: they haven't already, are shipping all the stuff that they
• 31:09
  Speaker 2: ordered from China throughout the rest of the country to
• 31:12
  Speaker 2: stock up for the holiday shop for Christmas holiday season.
• 31:16
  Speaker 2: All of that is going to lead to higher delivery charges.
• 31:19
  Speaker 2: I would not be surprised. I think that our interview
• 31:22
  Speaker 2: from Friday of last week actually mentioned specifically that, you know,
• 31:26
  Speaker 2: be prepared for fuel surcharges in different types of purchases
• 31:30
  Speaker 2: once again, because we are now at those levels that,
• 31:34
  Speaker 2: you know, all sorts of retailers and others have no
• 31:38
  Speaker 2: choice but to deliver those higher prices, food prices. Specifically,
• 31:42
  Speaker 2: I mentioned earlier, we're heading into harvest season. How do
• 31:44
  Speaker 2: you run all those combines but with diesel fuel? And
• 31:48
  Speaker 2: it's not looking good.
• 31:49
  Speaker 4: What's stunning is it hasn't been worse than... I would
• 31:53
  Speaker 4: have anticipated that it would have been worse than we're
• 31:55
  Speaker 4: actually seeing. And a lot of that is due to
• 31:58
  Speaker 4: China sort of being able to call some of its
• 32:00
  Speaker 4: demand down and the global energy markets not getting to...
• 32:04
  Speaker 4: I'm not saying it hasn't been significant price increase, but
• 32:07
  Speaker 4: I would have thought the turmoil would have been even
• 32:10
  Speaker 4: greater than it has been in September here. We sit five,
• 32:14
  Speaker 4: six months into this thing. because of some factors that
• 32:17
  Speaker 4: weren't initially anticipated that we would be even higher.
• 32:21
  Speaker 2: But that's, that's where, you know, on oil prices, we're
• 32:23
  Speaker 2: talking a lot about speculation, right? You know, a lot
• 32:26
  Speaker 2: of people trade oil on things like diesel. It's not
• 32:30
  Speaker 2: so much, it's supply and demand, right? What's coming in,
• 32:32
  Speaker 2: what's going out. And while the Chinese, you know, ceasing
• 32:36
  Speaker 2: a lot of their purchases of foreign oil have brought
• 32:40
  Speaker 2: or helped oil prices, not probably go as high as
• 32:43
  Speaker 2: they might've otherwise. they're also not exporting any of their
• 32:46
  Speaker 2: diesel or gasoline or jet fuel. They basically said it's
• 32:49
  Speaker 2: all staying in country. Russia has done the same due to, uh,
• 32:53
  Speaker 2: strikes on their refining facilities by Ukrainian drones. And so
• 32:57
  Speaker 2: we are sitting in this weird world where, yeah, oil prices, uh,
• 33:01
  Speaker 2: have been kind of talked down by, uh, a whole
• 33:05
  Speaker 2: lot of people, including the president, but the stuff that
• 33:08
  Speaker 2: actually goes into your vehicle can't help but move higher on, uh,
• 33:14
  Speaker 2: just everything that we're seeing out there, which is a
• 33:17
  Speaker 2: difficult environment for refining the stuff and getting it to market.
• 33:20
  Speaker 2: So we will see what all this means. Kind of
• 33:23
  Speaker 2: crossing our fingers here in the Northeast for a mild
• 33:27
  Speaker 2: winter because I actually don't know, I think it's something
• 33:30
  Speaker 2: like a third of homes in New England are heated
• 33:33
  Speaker 2: with home heating oil, which just chemically has pretty much
• 33:36
  Speaker 2: the exact same makeup as diesel fuel and the prices
• 33:40
  Speaker 2: are tied very close together. So That's all you can
• 33:43
  Speaker 2: do at this stage. Cross your fingers a little bit
• 33:44
  Speaker 2: and see what happens. But diesel prices, as I mentioned yesterday,
• 33:48
  Speaker 2: hitting new all-time highs.
• 33:50
  Speaker 3: Leaving your IRA to your children may sound like the
• 33:54
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• 34:40
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• 34:40
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• 34:53
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• 34:55
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• 35:00
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• 35:03
  Speaker 2: Paul, the Journal's reporting that Besant's yen bet is paying off,
• 35:07
  Speaker 2: at least for the time being. What's that mean? Why
• 35:11
  Speaker 2: should I care?
• 35:11
  Speaker 4: Yeah, the reason that we should care here domestically, many
• 35:16
  Speaker 4: of us, I'm sure, don't keep close tabs on what
• 35:18
  Speaker 4: happens with the yen, but The reason that Besson stepped
• 35:21
  Speaker 4: in in the first place is that Japan is the
• 35:23
  Speaker 4: single largest foreign holder of U.S.
• 35:25
  Speaker 2: Treasuries.
• 35:26
  Speaker 4: They have about $ 1. 1 trillion in Treasuries that they sit on.
• 35:29
  Speaker 4: If they were to get in a situation like they
• 35:32
  Speaker 4: were going to be dealing with in July where their currency,
• 35:35
  Speaker 4: the yen, had really plummeted significantly. In order to prop
• 35:39
  Speaker 4: that up, a logical sort of way to do that
• 35:42
  Speaker 4: would be to sell off a lot of their U.S.
• 35:44
  Speaker 4: treasuries and put that money back into buying the yen
• 35:48
  Speaker 4: to boost its demand and have it rally back up.
• 35:51
  Speaker 4: that would create an issue for us here domestically for
• 35:53
  Speaker 4: those people who are looking to buy property and mortgages.
• 35:57
  Speaker 4: That would create an abundance of supply or a significant
• 36:01
  Speaker 4: sell-off of U.S. Treasuries, putting pressure on U.S. interest rates,
• 36:04
  Speaker 4: and so as a result, increasing borrowing costs here. So
• 36:07
  Speaker 4: what Besson had done is that he had stepped in
• 36:10
  Speaker 4: to ensure that he would sell euros from the U.S.
• 36:15
  Speaker 4: stash to buy yen, and since then, The yen has
• 36:19
  Speaker 4: come off a seven-month high just recently here. It's now
• 36:23
  Speaker 4: a dollar will buy you 154 yen as of Tuesday.
• 36:27
  Speaker 4: That number was 164 in late July. So it's paid
• 36:33
  Speaker 4: off in the short term here. That's something that hasn't
• 36:35
  Speaker 4: really been a playbook measure for the U.S. and Japan
• 36:40
  Speaker 4: to intervene in currency since the 90s, but so far
• 36:43
  Speaker 4: in the short term has paid off.
• 36:44
  Speaker 2: I'll tell you, this does seem to be front and
• 36:46
  Speaker 2: center right now. We seemingly have gone through maybe three
• 36:50
  Speaker 2: different market cycles so far this year. We kicked off
• 36:52
  Speaker 2: the year in late February with the beginning of strikes
• 36:58
  Speaker 2: on Iran and war with Iran, energy supplies, what's going
• 37:01
  Speaker 2: to happen there, oil prices shooting up to levels not
• 37:05
  Speaker 2: seen in quite some time. That kind of took a
• 37:07
  Speaker 2: back seat as we moved past the worst potential outcomes
• 37:12
  Speaker 2: and AI once again was in the driver's seat for
• 37:15
  Speaker 2: markets for a while. At least in terms of media attention,
• 37:19
  Speaker 2: maybe just because we are through earnings season now, the
• 37:22
  Speaker 2: focus seems to be on interest rates, currency risk, Federal Reserve, Treasury,
• 37:30
  Speaker 2: and the setup that we have going into all of this.
• 37:33
  Speaker 2: I'm sure it'll pivot again at some point. But right now,
• 37:37
  Speaker 2: the thing that investors seem very focused on is this
• 37:40
  Speaker 2: perceived conflict between the Treasury and the Fed, renewed concerns
• 37:46
  Speaker 2: about the deficit that I'm guessing are probably misplaced at
• 37:49
  Speaker 2: this exact moment in time, at least in terms of
• 37:52
  Speaker 2: it causing a near and soon downturn. I have a
• 37:58
  Speaker 2: tough time believing that we should be worried about it
• 37:59
  Speaker 2: from that perspective. But moves like this on the yen
• 38:03
  Speaker 2: are proving very relevant right now for what happens in rates.
• 38:08
  Speaker 2: Quick break. A lot more to cover in the second
• 38:10
  Speaker 2: hour of the Financial Exchange. Stay tuned. We will be
• 38:12
  Speaker 2: right back.