Latest / The Financial Exchange Show / Big companies are getting smaller—and their CEOs want everyone to know it

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Big companies are getting smaller—and their CEOs want everyone to know it · The Financial Exchange Show

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1:05
Speaker 1: Zada and Mike Armstraw.
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Speaker 2: Kicking things off here. It's Chuck, Mike and Chucker with you,
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Speaker 2: and we've got stocks not really doing much of anything.
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Speaker 2: You're just trying to poke them with a stick and
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Speaker 2: see and if anything will happen. But pretty quiet out there.
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Speaker 2: The Dow is down seventeen points, less than a twentieth
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Speaker 2: of a percent. It's right, we're back to doing twentieths
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Speaker 2: of a percent again. The S and P five hundreds
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Speaker 2: up five points, little less than a tenth of a percent,
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Speaker 2: and the Nasdaq is up seventy points, about a third
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Speaker 2: of a percent. It's a pretty quiet, mixed trading. This
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Speaker 2: is probably gonna be the only real column that I
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Speaker 2: think we see this week because listen, it's not the
1:46
Speaker 2: super Bowl, but it's more like it, Mike and Chuck
1:51
Speaker 2: super Bowl. It's it's like a five game series that
1:55
Speaker 2: we've got this week. For the sport of your choosing.
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Speaker 2: Used to be baseball for me, bute. Honestly, in the
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Speaker 2: recent years, baseball's kind of fallen off a little bit.
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Speaker 2: But you got just it's a jammed week. Aside from
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Speaker 2: this on the economic data side of things, I'm not
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Speaker 2: even gonna tell you what day these things are. I'm
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Speaker 2: just gonna go through the list. Case still, our Home
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Speaker 2: Price Index FHFA Home Price Index, JOLT, job Openings, consumer Confidence, ADP,
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Speaker 2: Employment GDP, FED Meeting, core PCE, personal income, personal spending,
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Speaker 2: Employment cost Index, jobless claims, the Jobs Report, ISM, manufacturing.
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Speaker 2: That's all the economic data that we have this week
2:35
Speaker 2: on the earning side of things. And I'm just gonna
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Speaker 2: go with the big ones because I think about twenty
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Speaker 2: five percent of the S and P five hundred reports
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Speaker 2: this week. So I'm not gonna name all of them
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Speaker 2: because you didn't tune in to hear me list a
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Speaker 2: bunch of names. Instead. We've got Visa, Procter and Gamble,
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Speaker 2: United Health, Merk, Boeing, Waste Management, Starbucks, Ups, We've got Microsoft,
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Speaker 2: Meta Qualcom, ADP, American Electric Power, Ford, We've got Apple, Amazon, MasterCard, Abvy, Comcast,
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Speaker 2: Bristol Myers, Squibs, Southern Company, Coinbase, and we've got Insperity. Nope,
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Speaker 2: I just picked the smallest name on the gallas there.
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Speaker 2: But so you get a lot of earnings, a lot
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Speaker 2: of economic data. It's a big, big week here, and
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Speaker 2: the potential for a lot of movement in either direction,
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Speaker 2: depending on how all of this ends up shaking out.
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Speaker 3: We were talking earlier about the narrative that's dominating markets
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Speaker 3: right now, and I'm not sure that I have won,
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Speaker 3: but I think it's resilience. If there's a narrative that
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Speaker 3: has dominated markets so far, it's been the American economy
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Speaker 3: has proven out to be resilient in spite of uncertainty
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Speaker 3: around trade policy, in spite of potential for inflation and
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Speaker 3: deportations effect on all sorts of different labor markets. It
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Speaker 3: is the economy that has proven resilient. Employers have not fired,
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Speaker 3: they have not higher dramatically, but prices have not dramatic risen.
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Speaker 3: And so it's do we get more resilience. And you know,
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Speaker 3: there's a few different data points that are going to
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Speaker 3: come out, whether it's earnings or actual fundamental economic data
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Speaker 3: produced by the government, that are going to have the
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Speaker 3: ability to prove out or contradict that overall sentiment.
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Speaker 2: Yeah, the overall story is the economic data is fine,
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Speaker 2: those slowing modestly, and the AI spend is increased, and
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Speaker 2: so AI is once again powering a hot market to
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Speaker 2: new all time highs. There we have it. That's where
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Speaker 2: we are a peace in the Wall Street Journal, and
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Speaker 2: this gets it. One of the things that's been interesting
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Speaker 2: to see in kind of the stagnant, stagnant labor market.
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Speaker 2: CEO's trumpets smaller workforces as a sign of corporate health.
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Speaker 2: And this is interesting because normally, historically, when you say, hey,
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Speaker 2: our company is doing great, you say we grew our
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Speaker 2: head count to X number of people this year.
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Speaker 3: Yeah, it's not to say that you don't get like,
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Speaker 3: plenty of CEOs have been rewarded with higher stock prices
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Speaker 3: on the announcement of layoffs like that piece can be true,
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Speaker 3: but it does seem like a bit of a shift
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Speaker 3: in terms of CEOs wanting to point out that hey,
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Speaker 3: we're getting the same amount of work done with fewer
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Speaker 3: people on board.
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Speaker 2: It's kind of going back to the Zuck thought from
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Speaker 2: a couple of years ago. Remember they had their year
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Speaker 2: of efficiency. Yeah, it's kind of that approach here. And
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Speaker 2: I think the big question that's out there is historically
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Speaker 2: one of the biggest drivers of the US economy has
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Speaker 2: been household spending. Consumer spending, if you will. It becomes
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Speaker 2: harder to consume when you don't have a steady income,
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Speaker 2: and so I think the question that is out there
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Speaker 2: in my mind. And again this is not saying like
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Speaker 2: companies shouldn't do this. I'm not saying that. But Okay,
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Speaker 2: if enough companies start trying to slim down in order
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Speaker 2: to prove that their health and you know, efficient, how
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Speaker 2: does that impact the aggregate spending power of the American consumer? Yeah?
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Speaker 3: I mean that is the all important question. Right if
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Speaker 3: you have some of the worst case scenarios start to
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Speaker 3: play out as a reaction to artificial intelligence. Right, when
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Speaker 3: we've talked about the potential for this technology, it's been well,
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Speaker 3: what if it puts everybody out of a job? I've
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Speaker 3: always been suspect of that, but you could have periods
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Speaker 3: of time where that is the case. But it does
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Speaker 3: feel like in this moment, when artificial intelligence is the
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Speaker 3: thing that will get your stock price bid up and
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Speaker 3: we'll get you TV time if you're a CEO, that
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Speaker 3: the logical reaction would be, Okay, how can we do
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Speaker 3: more with less? And whether it's truly because of artificial
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Speaker 3: intelligence or not, how can we do it more with
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Speaker 3: less and convince the general public that it's due to
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Speaker 3: automation efficiency and artificial intelligence.
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Speaker 2: Yeah, I want to find a quote here from the
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Speaker 2: Service Now CEO because he had a where is it,
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Speaker 2: I'm just gonna stop and just let the music play now.
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Speaker 2: I don't have it front center. I should have bookmarked it,
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Speaker 2: but he had it really kind of direct quote about
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Speaker 2: how they're trying to use AI Service Now. If you're
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Speaker 2: not familiar with them, they operate a bunch of call
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Speaker 2: centers and like customer service centers, hence the name Service Now,
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Speaker 2: And he had a quote that quite literally was I'm
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Speaker 2: paraphrasing here, Hey, we're trying to get rid of some
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Speaker 2: of the jobs that people really hate and don't actually
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Speaker 2: want to work in, and so that's where we're going
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Speaker 2: to be using AI is getting rid of those jobs
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Speaker 2: that no one likes to do. But those jobs are
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Speaker 2: going to be gone once we do this. And I
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Speaker 2: thought that was, you know, really direct and really kind
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Speaker 2: of putting it out there as far as the approach.
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Speaker 2: And I think the only question is, hey, if that
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Speaker 2: can actually be done and then replicate it across different
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Speaker 2: industries and different segments, what do we do with this?
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Speaker 2: And it's not to say don't do this, because ultimately,
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Speaker 2: when we're talking about raising living standards, it's all about
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Speaker 2: being able to do more with fewer inputs. One of
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Speaker 2: my favorite stats of the twentieth century. At the beginning
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Speaker 2: of the twentieth century, there were seven million American farmers.
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Speaker 2: At the end, there were a million, and we still
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Speaker 2: were able to feed all of our people predominantly with food.
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Speaker 2: That's not important. The vast majority of American food is
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Speaker 2: not imported from overseas, and ultimately, for society as a whole,
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Speaker 2: it's a really good thing to not have to have
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Speaker 2: as many people working to feed us. If you're a
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Speaker 2: farmer and you happen to be listening, you're like, Chuck,
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Speaker 2: my job's really hard, and I would appreciate it if
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Speaker 2: you don't tell me that everyone else is doing great,
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Speaker 2: but my job's kind of hard these days. Totally get it,
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Speaker 2: and this gets it. The question snow gross exaggeration here.
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Speaker 2: If you could press one button at the start of
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Speaker 2: the morning and produce everything that's needed for the world,
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Speaker 2: that's great. But how do you allocate all of that out?
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Speaker 2: And how do you figure this out? It's a societal question,
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Speaker 2: not an economics one.
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Speaker 3: While we're talking about efficiencies and artificial intelligence, I was
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Speaker 3: listening to or read an interview over the weekend with
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Speaker 3: somebody working out of a Philippine call center, which, if
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Speaker 3: you're not familiar, Philippines is a frequent location for call
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Speaker 3: centers for US customers. They speak great English, and you know,
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Speaker 3: obviously low labor costs. There's been this talk of artificial
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Speaker 3: intelligence just replacing call centers. In this case, it didn't
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Speaker 3: sound like they actually were. But you know, when you
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Speaker 3: call up your average eight hundred number, you first get
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Speaker 3: that message this call maybe monitor recorded for quality training purposes.
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Speaker 3: What they're apparently doing in some of these call centers
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Speaker 3: now is having artificial intelligence not sample the calls, but
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Speaker 3: listen to every single call, provide immediate feedback to those
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Speaker 3: workers on tone, language, you know, all the sorts of
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Speaker 3: things that would go with, you know, working as a
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Speaker 3: call center representative, assigning a score grade to each of
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Speaker 3: the representatives to judge them on and in some cases,
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Speaker 3: which this was the one that I found absolutely wild,
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Speaker 3: laying them off.
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Speaker 4: Well yeah, I.
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Speaker 3: Mean not probably not directly laying them off, but you know,
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Speaker 3: providing the data you would need as an employer to
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Speaker 3: determine if you're gonna lay somebody off, yes, but actually
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Speaker 3: changing the person's voice live while on the phone with
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Speaker 3: somebody else.
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Speaker 2: Don't like that?
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Speaker 3: Remove an accent, don't like it. I don't like it either.
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Speaker 3: But these are some of the uses that we are
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Speaker 3: seeing in artificial intelligence. And again not what I expected
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Speaker 3: when I heard about a call center and artificial intelligence
10:48
Speaker 3: certainly not improving your quality of life if you work
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Speaker 3: in that call center, because quite literally, every single call
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Speaker 3: you are on is now being listened to and you're
10:56
Speaker 3: you know, the whole idea of being in customer service
10:58
Speaker 3: for a call center is okay, get prepared to get
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Speaker 3: yelled at for eight hours a day and not lose
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Speaker 3: it on the customer. That is the type of thing
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Speaker 3: that we are seeing artificial intelligence move into.
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Speaker 4: And I don't know they.
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Speaker 3: Just I feel like we talk about AI so frequently
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Speaker 3: here without actually understanding where it's being used, how it's
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Speaker 3: being used, the goods and bads and uglies of it.
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Speaker 3: And that was a new one for me that I
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Speaker 3: hadn't previously heard of, and I would imagine that it's
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Speaker 3: probably pretty universal when you're talking about large call centers that, yeah,
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Speaker 3: if you work in one these days, every single call
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Speaker 3: is being monitored by an artificial intelligence. I don't like it. Oh, yeah,
11:35
Speaker 3: it sucks, but I don't like it. Yeah, but that's but.
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Speaker 3: But as the employer of those people, you suddenly have
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Speaker 3: more data at your fingertips than you ever did did before.
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Speaker 4: I get the desire to have it.
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Speaker 2: I do, but I don't like it.
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Speaker 4: Yeah, comes a lot of downsides.
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Speaker 2: Let's take a quick break when we return. If the
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Speaker 2: AI lets us, uh, We're gonna do a little bit
11:57
Speaker 2: of trivia and then we'll talk about inflation after the US.
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Speaker 5: I had time for tribute here on the Financial Exchange
12:40
Speaker 5: and you probably heard this, but Friday night, Happy Gilmore
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Speaker 5: Too arrived on Netflix. The first Happy Gilmore movie hit
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Speaker 5: theaters back in nineteen ninety six and fans were stunned
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Speaker 5: and when a famous game show host showed up to
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Speaker 5: beat Happy Gilmore, beat down Happy Gilmore. In the trivia
12:59
Speaker 5: question today, which famous game show hosts had a memorable
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Speaker 5: cameo in the first Happy Gilmore?
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Speaker 2: Once again?
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Speaker 5: Which famous game show host had a memorable cameo in
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Speaker 5: the first Happy Gilmore? Be the ninth person today to
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13:30
Speaker 2: Let's talk a little bit here about this study that
13:34
Speaker 2: was conducted by Indeed, where pretty much what they did
13:38
Speaker 2: is using a bunch of the data that they have
13:40
Speaker 2: and this and that they tried to figure out, Hey,
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Speaker 2: what percentage of Americans actually are seeing their wages outpacing
13:48
Speaker 2: inflation over the last twelve months?
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Speaker 3: I aggregate, I believe they are wages outpacing inflation, right.
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Speaker 2: Yes, but obviously not everyone gets the same raise each
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Speaker 2: other of course, And so what indeed found is, according
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Speaker 2: to their estimates, about forty three percent of Americans had
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Speaker 2: their wage growth overshadowed by inflation in the last year.
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Speaker 2: And pretty much what you are seeing here is, and
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Speaker 2: I'll quote from this, while annual wage growth remains just
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Speaker 2: above the annual rate of inflation, which grew the two
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Speaker 2: point seven percent in June, the gap between the two
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Speaker 2: is the narrowest it's been in the last twelve months.
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Speaker 2: What do we do with this?
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Speaker 3: I was going to file it in the useless column.
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Speaker 3: I mean useless, I mean.
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Speaker 2: Like the specific percentage of Americans that are, you know,
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Speaker 2: struggling from a wage growth perspective. Is there a difference
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Speaker 2: between like forty three and forty eight and thirty eight?
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Speaker 2: Like I don't I don't know that that means anything.
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Speaker 3: But nor do I have any historical context for what
14:50
Speaker 3: this looked like in each of the last two decades. Correct,
14:53
Speaker 3: So you know, is it normal for forty three percent
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Speaker 3: of Americans to have their wages getting out paid by inflation?
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Speaker 3: I don't know. It might be, it probably is, Like
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Speaker 3: if you look at if you look at like historical data,
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Speaker 3: a lot of it in the twenty tens was okay,
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Speaker 3: wage growth is running two and a half to three
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Speaker 3: percent inflations one and a half to two.
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Speaker 2: There are definitely people in.
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Speaker 3: Yeah, it's always it's always pretty close, right, and that's
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Speaker 3: just because it's kind of how it works. I found
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Speaker 3: it interesting which types of jobs are seeing the biggest
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Speaker 3: wage growth? Like that that was interesting to me. Yeah,
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Speaker 3: what do we see there? So, electrical engineering topped in
15:27
Speaker 3: d's list of fastest growing wages six point three percent
15:31
Speaker 3: pay growth.
15:32
Speaker 4: Interesting.
15:32
Speaker 3: Legal jobs had a five point one percent bump. Marketing,
15:36
Speaker 3: project project management, math, and it operations.
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Speaker 2: What's a math job? Like? No one, no one goes
15:43
Speaker 2: into math.
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Speaker 3: No they don't.
15:45
Speaker 2: That's not it. So, like, what what does that mean?
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Speaker 4: Yeah, I don't know. Statistic You know, you can.
15:50
Speaker 2: Major in math, you can't work in math unless you're
15:53
Speaker 2: a high school teacher or a researcher of some sort.
15:57
Speaker 3: Yeah, I don't know how you major, and I don't
15:58
Speaker 3: know how you get an employment in math.
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Speaker 2: Can you find some good math jobs?
16:02
Speaker 5: I'm seeing teachers correct, teach, but that would be education,
16:06
Speaker 5: not in math.
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Speaker 2: So I'm just literally I'm wondering, how do they define
16:10
Speaker 2: a job in mathematics?
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Speaker 3: Physicians and surgeons led the way in slowest growing wage
16:16
Speaker 3: with only zero point eight percent increase driving jobs, so
16:21
Speaker 3: bus driver, truck driver, I guess, taxicab driver also pretty slow.
16:27
Speaker 3: Arts and entertainment, software development. That's when we've talked about
16:30
Speaker 3: at length here software development, just seeing low hiring rates
16:34
Speaker 3: and big changes due to AI, beauty and wellness and
16:36
Speaker 3: logistics support rounding out the bottom categories according to Indeed, So,
16:41
Speaker 3: I don't know, there weren't well, other than math, there
16:44
Speaker 3: weren't huge, huge questions for me on the growth side.
16:49
Speaker 3: That was a little bit surprised, you know, given what
16:51
Speaker 3: we know about the lack of availability of healthcare in
16:55
Speaker 3: this country right now, or at least healthcare workers, that
16:59
Speaker 3: physicians and surgeons led the way in the slowest growth category.
17:02
Speaker 3: But I suppose when you're already at a pretty high starting
17:05
Speaker 3: point in a heavily looked at space.
17:07
Speaker 2: I suspect it's probably.
17:13
Speaker 5: No.
17:13
Speaker 2: I don't know enough about medical billing to be able
17:15
Speaker 2: to comment on it. I don't, so I'm just not
17:18
Speaker 2: going to.
17:18
Speaker 3: Yeah, fair enough, so again, interesting but useful. I don't
17:24
Speaker 3: know that it's useful. I mean, the counterpiece of this is, yeah,
17:27
Speaker 3: big chunk of Americans did not see their wages rise
17:31
Speaker 3: with the cost of living, but more than half did.
17:36
Speaker 2: This then takes us to this next piece here from
17:38
Speaker 2: CNBC titled even many high earning Americans don't feel wealthy.
17:43
Speaker 2: Here's why. And the answer is really really simple. They're
17:50
Speaker 2: around other people who make more money, and so they
17:54
Speaker 2: feel poor even though they're not actually poor.
17:57
Speaker 4: I like that summary.
17:59
Speaker 2: It's quite honestly.
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Speaker 3: Don't talk to somebody that makes a million bucks a
18:03
Speaker 3: year and they're going to feel like they're not keeping
18:05
Speaker 3: up with the neighbors that makes three million dollars.
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Speaker 2: This talks about how fourteen percent of all US households
18:09
Speaker 2: make two hundred thousand or more each year. Nearly two
18:11
Speaker 2: thirds of people with salaries over three hundred thousand struggle
18:14
Speaker 2: with credit card debt. Quite honestly, if you have a
18:17
Speaker 2: salary of over three hundred thousand dollars a year, there
18:20
Speaker 2: are seven point nine to five billion people on the
18:22
Speaker 2: planet who would trade places with you. Oh yeah, and
18:25
Speaker 2: so if you can't make it work, I'm not saying
18:28
Speaker 2: like anything bad about you as a person.
18:31
Speaker 4: Oh yeah. Lots of things could have led you to
18:32
Speaker 4: this corerect medical.
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Speaker 2: What I am saying is you need to figure out
18:37
Speaker 2: like where you go from here to get on better
18:40
Speaker 2: financial footing with that kind of income, because it gets
18:44
Speaker 2: really hard to make more than that once you're already there. Yeah,
18:48
Speaker 2: you know it's Hey, I went from making fifty thousand
18:50
Speaker 2: near to three hundred. Great, my salary went up six x.
18:53
Speaker 2: You're probably not going to be making one point eight
18:55
Speaker 2: million any time in your life because it's really freaking
18:58
Speaker 2: hard to make one point eight million dollars. Yeah. So
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Speaker 2: I think ultimately this is something that we all need
19:04
Speaker 2: to work on, because, look, we all struggle with it.
19:08
Speaker 2: I woke up this morning, and of course, you know,
19:11
Speaker 2: the first thing I do, because i'm, you know, human
19:12
Speaker 2: being in twenty twenty five, I look at my phone,
19:14
Speaker 2: which I know is stupid. I know I shouldn't do it,
19:16
Speaker 2: And I get an ad for you know, a shirt,
19:17
Speaker 2: and I'm like, oh, boys, should I buy that shirt?
19:19
Speaker 2: And immediately I'm like, no, Chuck, you're not cool anymore.
19:21
Speaker 2: You don't need to buy shirts. You need to wear shirts,
19:24
Speaker 2: but not buy shirts. Yeah, non cool, Chuck just walks
19:27
Speaker 2: around shirtless. We're the ones you already own. Don't buy more. Okay,
19:31
Speaker 2: got it? Quick break more shirts after this.
19:39
Speaker 1: Bringing the latest financial news straight to your radio. Every day.
19:44
Speaker 1: It's the Financial Exchange on the Financial Exchange Radio Network.
19:49
Speaker 1: Time now for Wall Street. Watch a complete look at
19:53
Speaker 1: what's moving market so far today right here on the
19:56
Speaker 1: Financial Exchange Radio Network.
20:04
Speaker 5: Markets are flat to kick off a jam packed week
20:06
Speaker 5: as investors react to a trade deal between the US
20:09
Speaker 5: and EU Ahead of Friday's trade deadline. President Trump this
20:12
Speaker 5: morning said the baseline teriff freight for the world would
20:15
Speaker 5: be in the range of fifteen to twenty percent. Right now,
20:19
Speaker 5: the Dow is off by only ten points, SMP five
20:23
Speaker 5: hundred is up only three points, Nasdaq is up by
20:26
Speaker 5: two tenths of one percent, or forty nine points higher.
20:29
Speaker 5: Russell two thousand is dipping by three points. Ten year
20:31
Speaker 5: treasurealed up two basis points at four point four to
20:34
Speaker 5: one four percent, and crude oil excuse me, sorry, and
20:39
Speaker 5: crude oil is up nearly two percent higher, trading at
20:41
Speaker 5: sixty six dollars and thirty five cents of barrel. Wall
20:44
Speaker 5: Street's readying for one of the busiest weeks of the year,
20:46
Speaker 5: where we'll see more mag seven earnings from Microsoft, Meta, Amazon, Apple,
20:51
Speaker 5: and many other major names. Outside of tech, including Visa,
20:54
Speaker 5: brock Tern, Gamble, Boeing, and Starbucks. As for the economic
20:58
Speaker 5: data calendar, we have a GDP reading, inflation reading jolts,
21:02
Speaker 5: and a jobs report on Friday. Oh, and we have
21:05
Speaker 5: a FED meeting on Wednesday. So very busy week ahead.
21:09
Speaker 5: Several energy companies seeing gains on the day in reaction
21:13
Speaker 5: to the US EU trade deal, with the EU agreed
21:16
Speaker 5: to buy seven hundred and fifty billion dollars worth of
21:19
Speaker 5: US energy, including liquefied natural gas, Venture Global, New Fortress Energy,
21:24
Speaker 5: and Shanaire Energy stocks are up anywhere between two and
21:28
Speaker 5: five percent. Meanwhile, South Korea Samsung Electronics inked a sixteen
21:34
Speaker 5: and a half billion dollar deal with Tesla to manufacture
21:37
Speaker 5: AI chips for the EV maker in Texas. CEO Elon
21:41
Speaker 5: Musk confirmed the deal, saying Samsung's new facilities in Texas
21:45
Speaker 5: will be dedicated to making the company's next gen AI
21:49
Speaker 5: six chip. Tesla shares are up nearly three percent, while
21:52
Speaker 5: Samstung Samsung stock jumped about seven percent higher. And JP
21:57
Speaker 5: Morgan upgraded Nike to overweight from new utul, saying the
22:01
Speaker 5: athletic shoemaker can recover over the next several years, Nike
22:05
Speaker 5: shares are up nearly four percent on that upgrade. I'm
22:08
Speaker 5: Tucker Silva and that is Wall Street Watch. And in
22:11
Speaker 5: the previous segment we asked the trivia question which famous
22:15
Speaker 5: game show how host had a memorable cameo and happy
22:18
Speaker 5: gilmour one that would, of course be Bob Barker Scott
22:22
Speaker 5: and wallfam is our winner today taking on the Financial
22:25
Speaker 5: Looks Shane Show t shirt, and we played trivia every
22:27
Speaker 5: day here in the Financial Exchange see complete contest rules
22:31
Speaker 5: at Financial Looks Change show dot com.
22:34
Speaker 2: Piece in the Wall Street Journal, Americans see their four
22:36
Speaker 2: to one K is not just as nest eggs, but
22:39
Speaker 2: as rainy day funds. And what it talks about is
22:42
Speaker 2: the fact that four point eight percent of Americans took
22:46
Speaker 2: hardship withdrawals from four to one K plans last year.
22:50
Speaker 2: That is significantly up from the pre pandemic average of
22:55
Speaker 2: about two percent. This according to data out of Vanguard,
22:59
Speaker 2: who gets an awful lot of information on four to
23:01
Speaker 2: one cases to manage a whole bunch of one of
23:03
Speaker 2: the largest.
23:03
Speaker 3: Four one K providers out there. I've been struggling with
23:06
Speaker 3: what to make of this chuck. It's a relatively low
23:10
Speaker 3: unemployment environment, so I don't think it's largely from people
23:13
Speaker 3: that are laid off taking hardship withdrawals. It is seemingly
23:17
Speaker 3: significantly higher than where it was pre pandemic.
23:20
Speaker 4: A few things are true at the same time.
23:22
Speaker 3: One, inflation has been really bad, credit card debts have been,
23:26
Speaker 3: you know, increasing. There's been a number of those things
23:29
Speaker 3: that have been true at the same time. Over the
23:34
Speaker 3: course of the last decade, we've had a lot more
23:36
Speaker 3: companies participating in auto enrollment, auto increases in four o
23:40
Speaker 3: one k's, and so folks who might not have had
23:42
Speaker 3: a four oh one K ten years ago now suddenly
23:45
Speaker 3: do and have a larger portion of their wealth in
23:47
Speaker 3: that four to one K. So maybe this is not
23:50
Speaker 3: some blip on the radar. Maybe it's the new norm.
23:53
Speaker 3: But I don't know. I'm not I'm not sure that
23:56
Speaker 3: it is a sign of diar economic circumstances, but it
24:00
Speaker 3: also could be.
24:02
Speaker 2: I would agree, and I don't like to get I
24:07
Speaker 2: don't like to get too judgmental on this stuff for
24:10
Speaker 2: a couple of reasons, the first being when I was
24:12
Speaker 2: in my twenties, I pulled a bunch of money out
24:14
Speaker 2: of my four to one K. Now I was doing
24:15
Speaker 2: it to buy a house, so it was for you know,
24:17
Speaker 2: a down payment on a house because quite honestly, I
24:20
Speaker 2: didn't have any other money floating around, sure like it
24:23
Speaker 2: was my only option. So I don't like to just
24:27
Speaker 2: be like, oh, like, you should never do this because
24:30
Speaker 2: a I did it myself, and be I don't know,
24:32
Speaker 2: you know the context of why anyone else it is
24:35
Speaker 2: necessarily doing this.
24:37
Speaker 3: I can I think we can say that there can
24:39
Speaker 3: be good reasons to pull money out of a four
24:41
Speaker 3: oh one K and pay the penalty. Correct The example
24:44
Speaker 3: is given of, you know, someone running up a whole
24:46
Speaker 3: bunch of debt and needing the four oh one K
24:49
Speaker 3: money to pay it off. I'm not sure that's a
24:51
Speaker 3: good idea or not. If it's a home equity line
24:53
Speaker 3: of credit at like eight percent interest, probably not. If
24:55
Speaker 3: it's credit credit card, then it might be probably make
24:59
Speaker 3: sense they go through another person that this somebody you
25:03
Speaker 3: know who's TikTok famous about pulling all the money out
25:06
Speaker 3: of his four oh one K and sailing the world
25:08
Speaker 3: with his cat. Normally I'd say pretty bad idea, but
25:10
Speaker 3: he was also diagnosed with like a life changing illness
25:13
Speaker 3: that is going to apparently ruin his spine in a
25:15
Speaker 3: few years.
25:17
Speaker 2: Yeah, go ahead, take it out, Like do you have
25:19
Speaker 2: ering a life jacket for the cat?
25:21
Speaker 3: Uh?
25:21
Speaker 4: Good question.
25:23
Speaker 3: So there can be circumstances where this is a good idea.
25:28
Speaker 3: The problem is when you see the rate of these
25:31
Speaker 3: types of withdrawals increasing from the low twos to the
25:34
Speaker 3: high fours, that to me indicates something beyond the one
25:38
Speaker 3: off good decisions that are being made.
25:40
Speaker 2: Let me ask you this. One of the big things
25:42
Speaker 2: that has bumped up that's noted in here is automatic enrollments.
25:46
Speaker 2: So there are more Americans that are automatically enrolled in
25:49
Speaker 2: four to one K plans now than before. Do we
25:53
Speaker 2: think that maybe on the margin, those extra those people
25:55
Speaker 2: who are now contributing when they leave the job they say, oh, yeah,
26:00
Speaker 2: of course, I'm gonna go use that and maybe it'll
26:02
Speaker 2: bridge me until my next job or something like that.
26:04
Speaker 4: You know, it very well could be.
26:06
Speaker 3: And the it is cited specifically that many people who
26:10
Speaker 3: switch jobs end up just cashing out their four one ks, which,
26:14
Speaker 3: to be clear, it's a bad idea, but one third
26:16
Speaker 3: of people who leave jobs annually end up liquidating their
26:19
Speaker 3: four or one K plans and paying the taxes and penalties.
26:21
Speaker 2: Let me ask one more question, just because this is
26:23
Speaker 2: one that I it just popped into my head and
26:26
Speaker 2: I don't want to lose it, because I think it's
26:27
Speaker 2: a good one ten percent penalty for withdrawals before age
26:31
Speaker 2: fifty nine and a half just right, too high or
26:36
Speaker 2: too low and depends on what you're trying to incentivize, obviously,
26:43
Speaker 2: but here like just like thinking it out. If you
26:46
Speaker 2: let's say you doubled that to a twenty percent penalty,
26:49
Speaker 2: you're telling people don't touch this until fifty nine and
26:52
Speaker 2: a half. If you lower it, let's say, like, let's
26:56
Speaker 2: be honest, there could be a compelling reason why you
26:58
Speaker 2: say we don't need this penalty. Get rid of it,
27:02
Speaker 2: and there shouldn't be any more people are going to
27:04
Speaker 2: take that money out now. More tax revenue is raised
27:07
Speaker 2: today at the cost of retirement stability down the road,
27:11
Speaker 2: which is going.
27:11
Speaker 3: To fall on all of us as taxpayers. So I
27:13
Speaker 3: do struggle with it, but I am I can't. I
27:17
Speaker 3: don't think I would be in favor of raising it
27:18
Speaker 3: because the people who are going to pay that penalty
27:21
Speaker 3: are the ones that can at least afford it.
27:22
Speaker 2: To be really clear, here's where I would go. I
27:25
Speaker 2: would say lifetime whatever take make it fifty thousand. You
27:32
Speaker 2: have a lifetime fifty thousand dollars exemption from early withdrawal
27:36
Speaker 2: penalties if you've got to use it for whatever you want. Yeah, fun,
27:42
Speaker 2: buying a house, paying off medical debt, buying a car. Great,
27:45
Speaker 2: you got fifty thousand with penalty and penalty free withdraws.
27:49
Speaker 2: You go above that, penalties double whatever. Your tax bracket
27:52
Speaker 2: is so complicated, complicated but fun. Yeah, but at least
27:59
Speaker 2: has logic to it and gives people, hey, stuff happens. Yeah,
28:03
Speaker 2: Like we don't. I don't want to penalize someone who
28:06
Speaker 2: that's their only savings.
28:08
Speaker 3: Right Do I pay the ten percent of penalty? Or
28:10
Speaker 3: do I lose my home?
28:11
Speaker 2: Right?
28:12
Speaker 1: Right?
28:12
Speaker 3: Those are those are really serious questions. Four oh one
28:17
Speaker 3: k's in all of these retirement plans are immensely complicated.
28:21
Speaker 2: Right.
28:21
Speaker 3: We only kind of scratch the surface on some of
28:23
Speaker 3: these hardship withdrawals. But for instance, you know, there's a
28:26
Speaker 3: lot of Americans who are actually able to tap this
28:28
Speaker 3: penalty free at fifty five if they hit certain circumstances,
28:32
Speaker 3: largely losing their jobs. There are other exceptions if you
28:36
Speaker 3: are having a medical emergency or buying your first home.
28:39
Speaker 3: As Chuck mentioned, how you use that for a one
28:43
Speaker 3: K look, it is a break in the tax code.
28:46
Speaker 2: It is.
28:46
Speaker 3: It is a specifically written in break in there to
28:51
Speaker 3: benefit you in particular. And if you don't feel like
28:53
Speaker 3: you are maximizing that tax gift that the IRS is
28:57
Speaker 3: giving you, whether it's a traditional or WROTH for a
28:59
Speaker 3: one K employer plan, please give the folks at Armstrong
29:01
Speaker 3: Advisory Group a call so we can look at your
29:03
Speaker 3: personal financial situation and evaluate how you're using it today
29:07
Speaker 3: and how you should be using it going forward. There
29:10
Speaker 3: are immense benefits that come from these employer plans, but
29:14
Speaker 3: very few people maximize those benefits. The numbers eight hundred
29:17
Speaker 3: three nine three four zero zero one for the Armstrong
29:20
Speaker 3: Advisory Group. Again that numbers eight hundred three nine three
29:23
Speaker 3: four zero zero one.
29:25
Speaker 1: The proceeding was paid for by Armstrong Advisory Group, a
29:28
Speaker 1: registered investment advisor. Nothing in the ad or in any
29:30
Speaker 1: Armstrong guide a specific financial, legal or tax advice. Consult
29:34
Speaker 1: your own financial tax into state planning advisors before making
29:36
Speaker 1: any investment decisions. Armstrong may contact you to offer investment
29:39
Speaker 1: advisory services.
29:42
Speaker 2: Piece in the Wall Street Journal. It's titled Welcome to
29:45
Speaker 2: the grocery Store where prices change one hundred times a day.
29:49
Speaker 3: Is that prices on one item change one hundred times
29:51
Speaker 3: a day or across the grocery store to prices change
29:54
Speaker 3: one hundred times a day? Either way, I'm not enthusiastic
29:57
Speaker 3: either way.
29:58
Speaker 2: It's talking about how you've got these electron shelf labels
30:01
Speaker 2: that can just be mass updated and so they you know,
30:04
Speaker 2: propagate out the new pricing. And companies can do this
30:07
Speaker 2: based on you know, competitor pricing. How many people are
30:10
Speaker 2: walking through an aisle, this, that whatever.
30:12
Speaker 3: There's there's a CEO in Norway who's talking about it,
30:15
Speaker 3: and he gives the most innocent version of it. We
30:17
Speaker 3: lower the price maybe ten cents, and then our competitors
30:20
Speaker 3: do the same, and it kind of gets to.
30:21
Speaker 4: Be a race to the bottom.
30:22
Speaker 2: And my answer is I really doubt it. And I
30:24
Speaker 2: got to tell you this sucks, Like I'm sorry, this sucks.
30:28
Speaker 2: This is the same as like, oh, you want to
30:31
Speaker 2: buy an airline ticket and we know that your IP
30:34
Speaker 2: address is currently coming from like a wealthy zip code,
30:37
Speaker 2: You're going to get the expensive tickets. Like, all this
30:40
Speaker 2: micro targeting to try to maximize corporate profit at the
30:44
Speaker 2: expense of not actually improving your product sucks. I'm sorry.
30:49
Speaker 3: Like, it's not going to be a race to the
30:50
Speaker 3: bottom on price. No, it's going to be Oh, what
30:54
Speaker 3: is it outside now? Eighty five degrees? Guess what?
30:57
Speaker 4: Water battles every three degrees.
30:59
Speaker 3: That the prices increase at that the temperature increases. Bump
31:02
Speaker 3: up ice cream prices.
31:03
Speaker 4: And water bottles. Oh it started to rain in a thunderstorm.
31:06
Speaker 3: Okay, we're going to be jacking up those poncho prices immediately,
31:09
Speaker 3: and we don't need to send somebody out to go
31:11
Speaker 3: and you know, shuffle the price deck on those because
31:15
Speaker 3: it's super easy with these digital price decks.
31:17
Speaker 2: This is not making more money because you run a
31:21
Speaker 2: better company.
31:24
Speaker 3: You're evaluating people's willingness to pay a certain price.
31:27
Speaker 2: Yes, and that to me, I don't know why it
31:32
Speaker 2: feels wrong, but it's just you're not winning based on
31:35
Speaker 2: the merits of your product or your offering or your execution.
31:40
Speaker 2: You're just winning based on.
31:42
Speaker 3: I think why it feels wrong is because we were
31:44
Speaker 3: only used to it in discretionary places like airline tickets
31:47
Speaker 3: and hotels. We're not used to it in somewhere as
31:49
Speaker 3: basic as a grocery store, where it is a necessity.
31:53
Speaker 2: Now, on the other hand, I've been to two bars
31:56
Speaker 2: that do this. One of them was called it like
31:58
Speaker 2: the stock market, and it's really cool because they cut
32:02
Speaker 2: the prices on the stuff that no one's buying, and
32:05
Speaker 2: the stuff that everyone likes they raise it up. And
32:07
Speaker 2: it's kind of cool because the whole vibe is, Oh,
32:10
Speaker 2: I'm trying to get the best deal on alcohol, which
32:12
Speaker 2: one am I gonna buy? But that is kind of
32:15
Speaker 2: like a whole game like that. The whole premise of
32:17
Speaker 2: the bar is buying into that. Yeah, plus you're drinking,
32:20
Speaker 2: so you're like, okay whatever.
32:21
Speaker 3: Anyways, Yeah, at grocery stores, I am. I do think
32:26
Speaker 3: by the way, it's coming, I don't think there's much
32:29
Speaker 3: we can do about it.
32:29
Speaker 2: I think it's heading our way.
32:32
Speaker 3: And that's what you will see is, yeah, price prices
32:36
Speaker 3: move based on weather, based on all sorts of other factors,
32:40
Speaker 3: and they move immediately. And this was I mean, this
32:44
Speaker 3: is the dream of any CEO to be able to
32:46
Speaker 3: dynamically price your goods this way based on you know,
32:49
Speaker 3: that's the whole economics view is like, hey, you know,
32:52
Speaker 3: you want to hit that price. That is the perfect
32:54
Speaker 3: equilibrium between somebody's willingness to pay and the supply of
32:59
Speaker 3: the good.
32:59
Speaker 2: That you have.
33:01
Speaker 3: It feels a lot worse when it's in something as
33:04
Speaker 3: it's getting as grocery.
33:06
Speaker 2: He's just getting really dystopian. Man. It's just, hey, you know,
33:10
Speaker 2: like I want to be at the beach, like with
33:12
Speaker 2: a coconut and just hanging out. And that's where we
33:16
Speaker 2: should be going in life because it should be getting easier,
33:18
Speaker 2: and instead you're trying to slap me with an extra
33:19
Speaker 2: five cents on the tomatoes because I got a big
33:23
Speaker 2: head or something like that.
33:24
Speaker 3: We haven't gotten there. They're not gonna read Chuck's baldness.
33:28
Speaker 3: And it's humming, bumping up. I'm telling you, I know
33:31
Speaker 3: they we're putting shampoo prices on sale because it's Chuck
33:33
Speaker 3: walking down there, going than Tucker.
33:35
Speaker 2: They're gonna like, this is where we're going though, Mike,
33:38
Speaker 2: it's gonna be a ball. Guy is walking by and
33:42
Speaker 2: we know we're gonna screw him somehow. Let's take a
33:47
Speaker 2: quick break when we come back at stack Roulette.
33:50
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34:52
Speaker 3: Mike, if you ever been quished, I have never been
34:54
Speaker 3: quished so far as I know, and I didn't know
34:57
Speaker 3: the term quishing until today.
35:01
Speaker 2: So what quishing refers to is a QR code that
35:05
Speaker 2: is put somewhere that leads to a bad place, something
35:09
Speaker 2: where cyber criminals want to steal your information. Typically.
35:13
Speaker 3: So if you've heard the term phishing, I believe that
35:15
Speaker 3: we are taking phishing and applying it to a QR
35:18
Speaker 3: code here.
35:18
Speaker 2: So we put a QU at the beginning of it,
35:20
Speaker 2: because every QS to have a U after it, except
35:22
Speaker 2: for weird words, and so that's where we get quishing.
35:27
Speaker 2: And the big thing is, you never know before you
35:30
Speaker 2: scan a QR code whether it's going to a legit
35:33
Speaker 2: source or not. There's a pretty good chance if you're
35:35
Speaker 2: using your Netflix app on your TV, you're going to
35:38
Speaker 2: be probably going to be okay.
35:40
Speaker 3: Scanning a QR code on the pump at the gas station,
35:44
Speaker 3: good luck.
35:44
Speaker 2: Not necessarily legit.
35:46
Speaker 3: And so this is a smart scam, honestly. Yeah, Like
35:50
Speaker 3: we all got so used to using QR codes over
35:52
Speaker 3: the course of COVID.
35:54
Speaker 1: Uh.
35:55
Speaker 3: Like, I don't think my parents had ever scanned a
35:58
Speaker 3: QR code until they had to dining out somewhere and
36:01
Speaker 3: there was QR codes instead of menus, And so suddenly
36:04
Speaker 3: the entire baby boomer generation especially is used to using
36:07
Speaker 3: QR codes, but also probably lulled into a false sense
36:10
Speaker 3: of security about when and where they can use them safely.
36:13
Speaker 2: Yeah. According to nord VPN, twenty six million Americans have
36:16
Speaker 2: already been directed to malicious sites by QR codes that
36:20
Speaker 2: are taking you to malicious sites.
36:25
Speaker 4: Yeah.
36:25
Speaker 3: So I don't know how to tell people to beware
36:28
Speaker 3: about this other than don't scan things with your phone
36:32
Speaker 3: unless you actually know who put that thing out there. Yeah,
36:36
Speaker 3: don't stick. You know, It's like I tell my little children, like,
36:39
Speaker 3: you know, don't don't put that in your mouth, don't
36:41
Speaker 3: look it, don't look it. Come on, don't scan. You
36:43
Speaker 3: don't know where that was from, you know, don't scan it.
36:47
Speaker 3: Saving for college once felt essential. Some parents rethinking their plans,
36:51
Speaker 3: specifically some hesitance to use five twenty nine plans, which
36:54
Speaker 3: I would argue is coming. Get that that hesitance anyway
36:56
Speaker 3: coming at the worst possible time, probably because of miss understanding,
37:00
Speaker 3: but for good reason. Parents are a little bit suspicious
37:03
Speaker 3: of Hey, will my kid actually want to go to college?
37:05
Speaker 3: Are they going to get their money's worth? There's a
37:07
Speaker 3: lot more being talked about that these days. I would
37:10
Speaker 3: make the case that with the changes that the Trump
37:12
Speaker 3: administration has just made to college lending, with the increasing
37:17
Speaker 3: cost of college, and now with the flexibility of how
37:19
Speaker 3: five twenty nine plans are be able to be able
37:21
Speaker 3: to use, excuse me that there are very few people
37:26
Speaker 3: in the United States who are in danger of ever
37:28
Speaker 3: overfunding a five twenty nine plan these days. It seems
37:32
Speaker 3: very rare to me that that's going to be the case.
37:34
Speaker 3: And I think that's the primary concern people have, is
37:36
Speaker 3: the lack of flexibility when it comes to funding one
37:39
Speaker 3: of these. And I would say that those concerns are
37:41
Speaker 3: overblown based on how easily it can be used.
37:44
Speaker 4: Now.
37:44
Speaker 2: Yeah, I think there was a reasonable case, maybe like
37:47
Speaker 2: eight to ten years ago, where you could say, hey,
37:50
Speaker 2: who knows what's going to happen with student loan debt,
37:52
Speaker 2: and could some of it be forgiven in this that
37:55
Speaker 2: that ships will have sailed. Yeah, And so at this point,
38:00
Speaker 2: the downside risk is, Okay, you don't use this for
38:02
Speaker 2: college or higher education, Yes, like you'd have to take
38:06
Speaker 2: a ten percent penalty to use it for something else,
38:08
Speaker 2: or you can always just roll it over to the
38:10
Speaker 2: grandkids eventually, because you can always change the beneficiary on
38:13
Speaker 2: a five to twenty nine plan or distribute out to
38:15
Speaker 2: roth correct quick break for the entire rest of the day,
38:18
Speaker 2: a busy Tuesday tomorrow. We'll see you then