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Why do stocks typically drop in September? · The Financial Exchange Show

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Face is the Financial Exchange with Mike Armstrong and Mark Fandetti.
1:18
Speaker 2: Good morning, and welcome back to the Financial Exchange if
1:21
you're just joining us. Markets are in the midst of
1:23
a fairly broad based selloff here now off four hundred
1:26
and forty seven points, a little bit more than one percent.
1:29
S and P off about eighty closing in on one
1:31
and a half percent of the downside, and the Nasdaq
1:34
leading the way, off four hundred points about two and
1:36
a quarter percent.
1:39
Speaker 3: Don't really have any specific ideas what this related to.
1:43
Speaker 2: We had a week ism manufacturing survey this morning, obviously
1:47
this Friday. We'll have a jobs report next week, next
1:51
week or the week after we got the FED meeting.
1:52
I think it's the week after. So you know, a
1:56
lot going in here. And of course it is the
1:59
kickoff of tree in the month of September, and if
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you're not familiar, September happens to historically at least be
2:06
the worst month for stocks.
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Speaker 3: It's cursed.
2:08
Speaker 2: It's a cursed month for stocks, as as we all know.
2:12
I wouldn't necessarily recommend putting together investment strategy on that idea,
2:16
but can you talk a little bit to how markets
2:19
historically have performed during the month of September.
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Speaker 4: This definitely goes under the heading for what it is
2:25
worth because I don't have a plausible explanation.
2:28
Speaker 3: For this, so does anyone actually.
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Speaker 4: In fact, I was talking to Chuck Zotto this morning
2:31
about that. I asked him, have you ever heard a
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plausible reason for the September bultful performance? On average of September?
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And this is even when you take out nineteen twenty
2:41
nine and now the Black Monday or whatever that was,
2:45
whatever day of the week that was, it was in October.
2:47
It did it with nineteen eighty seven. But September has
2:50
historically been rocky as well, even when you take out
2:52
the worst years. What do we mean by rocky? If
2:55
you take stocks over the last one hundred years, we
2:58
have at least that much home quality data on equities.
3:02
Average returns of September in September are always in the
3:05
bottom two or three months of the year. For example,
3:09
in this decade, average returns for September negative five point
3:13
six percent. In the last decade point eight three percent.
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That's fourth from the bottom in the two thousands. So
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now I'm back three decades from the current September negative
3:23
two point two three percent. The only worst month in
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that decade was February two point six. So I'm not
3:27
going to put you through.
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Speaker 3: The record of this.
3:28
Speaker 4: You get the picture if you put the months in
3:30
order of returns by decade. September never period you want
3:33
to look at. September is always at the very bottom.
3:36
It's one of those close to calendar effect. Yeah, always
3:38
among the bottom, yep in terms of average returns. Your guest,
3:42
Mike is as good as much.
3:44
Speaker 3: Chuck didn't have a plausible theory either.
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Speaker 4: He threw out some explanations regarding when traders come back
3:49
from vacation and then reposition theah.
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Speaker 3: The idea is selling may and go away. That old
3:54
e factly.
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Speaker 4: Where that effect comes from, though that was a sixty
3:57
forty fifties sixties thing. And that effect when you know,
4:01
these effects tend to go away when people discover them
4:04
and publish them, because then traders act on them, and
4:08
it does away with the underlying cause or mechanism or
4:12
whatever at works but works until it gets publicized, but
4:15
arguably hasn't persists. It's again, there's a name for these anomalies.
4:21
Calendar effects us. The general term January is another one.
4:24
You've heard that stocks tend to go up in January, January, February,
4:27
and then again and later in the year. Is that
4:29
tied to the fact that people are selling in December
4:33
for tax loss so called harvesting reasons. You sell your losers,
4:36
offset your gains, and you get back into them in January.
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Speaker 3: At least that's a plausible theory.
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Speaker 4: That's small caps only, though interestingly it's not big companies.
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It's mostly smaller one so people that spend their time
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slicing and dicing the data to look for interesting patterns,
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not necessarily ones you can make money off of. But
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you know, anecdotes for conversation like this have pointed out,
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and it's easy to see that September is usually a
4:59
really tough month for equities. That doesn't we're not suggesting
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that anybody, like Mike said, base their investment strategy on it,
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although if you're looking to make a big buy, you
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might want to do it at the end of the month.
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I don't know who that would include a rollover into
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something I don't know, Mike, Is there any practical application
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for this.
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Speaker 3: I don't think so.
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Speaker 2: Because as we've talked about, these are averages, and so yeah,
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if you're looking to do this every single year, then
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maybe you can take advantage of it, but most of
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us aren't.
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Speaker 4: Weird thing is, it doesn't get as a finance type
5:25
would say, arbitraged your way. That's not quite what would
5:28
be the process at work. But so what do I
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mean by that? If you know stocks, if you know
5:33
and that is heavily qualified, are going to fall in September,
5:36
why wouldn't.
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Speaker 3: You make a bet to buying Yeah.
5:40
Speaker 4: Seldom short on August thirty first and buy back in one.
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People aren't doing that. They're not arbitraging, so to speak.
5:47
This the not quite the Again, the mechanism at work here,
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I'm oversimplifying, but the fact that that doesn't happen suggest
5:52
that it may just be too as you said, Mike,
5:54
unreliable and erratic also money off.
5:56
Speaker 2: Of Just beware, you know we're talking about averages. I
5:59
don't have they in front of me, but I can
6:01
certainly assume that there have been Septembers that have been
6:04
blockbusters for stocks as well. So do not just do
6:08
not just move that away and ignore that, because I'm
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sure that there have been moments in time as well,
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where September has just been a roaring months for stocks
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as it's just that averages have been worse. The big
6:21
topic of discussion over the next two months and then
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after the fact of the presidential election as well, is
6:27
going to be taxes. If you're unfamiliar, the Trump tax
6:30
cuts that were put into place in twenty seventeen are
6:35
due to expire in twenty twenty five. Why are they
6:36
due to expire. It had to do with the way
6:39
Congress works and funding for things like tax cuts. They
6:43
were required to sunset in order to meet some budget
6:45
requirements and in order to make the corporate tax cuts
6:49
that were placed permanent. And so when we talk about
6:52
the tax cuts that are going to go away, largely
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we aren't talking about corporate taxes. Those ones are set
6:56
at twenty one percent. Congress could choose to change them,
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but they are not due to automatically go up in
7:02
I don't know why I said automatically, so weird. There's
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a strange pronunciation. It was normal, automatically mean now you're
7:09
pointing it out now, Yeah, But everything else is due
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to revert back to those pre twenty seventeen methods of taxation,
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and the Wall Street Journal has a pretty interesting piece
7:20
here on just who would feel that the most, who
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would benefit the most if they get locked in, who
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would it be to the most detriment if they weren't.
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As you can imagine, those who would benefit the most
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on dollar or percentage terms, are the highest income earners
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in the country. You know, doesn't really matter where you live.
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If you're earning fifteen million dollars a year and the
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current tax cuts get locked in for another five years,
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you're going to benefit more than the person earning one
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hundred thousand dollars, even on a percentage basis or anything else.
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That's definitively the case. But along the edges there's some
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interesting stuff because remember that in states like Massachusetts, example,
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very high tax statement actually not as much as it
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used to be, but you know, higher tax state than
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say New Hampshire, you used to be able to deduct
8:09
a whole bunch of things like how much income taxes
8:11
you paid to the state of Massachusetts, how much taxes
8:13
you paid in real estate and X size and sales taxes.
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All of those things would come up onto your tax
8:18
return be itemized, and you would deduct them these days,
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that's capped to ten thousand dollars. And so who would
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benefit more from or sorry, who would be hurt by
8:29
the increase in taxation more somebody earning the same amount
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in New Hampshire versus Massachusetts. Well, actually, in all likelihood,
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the guy living in Massachusetts is probably going to be
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hurt a little bit less by tax rates going back
8:43
to their twenty seventeen norms than the person living in Massachusetts,
8:47
which is just kind of fascinating when we look at
8:50
all this stuff.
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Speaker 4: Oh, sorry, you gave me the assignment in the last
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segment on Big Septembers.
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Speaker 3: I'll tease that you just can't move on. Can you
9:00
ask me a question?
9:01
Speaker 4: You asked me a question.
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Speaker 3: What did you find when it came here?
9:04
Speaker 4: You're sure you want to switch gears? Because I feel like, yeah,
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you were really warming up to that. What were you
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talking about? I'm sorry, it was a really interesting point
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you made it. Just the whole thing eludes me though,
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because that wasn't really okay. So the point is the
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tax code there were different provisions. If it can interact
9:24
and the result can be counterintuitive. Can I just sum
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all that up with that effectively.
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Speaker 2: Effectively, what you would find is, if taxes revert back
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to where they were twenty seventeen, the higher tax state
9:38
you live in compared to the lower tax states are
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going to be slightly better off. If you earn the
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same amount of state by state and it all comes down.
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Speaker 4: To deduction, deduction would be restored the.
9:48
Speaker 3: General conclusion that I'm coming to.
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Speaker 2: So if you live in New Jersey or New York
9:53
and earn the same amount as somebody you're living in Texas,
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you actually won't be hurt quite as bad as that
9:58
person living in Texas because of all of these all
10:01
of these other things, So your net change and tax
10:03
rate that you end up paying will not be quite
10:05
as severe. When we come back, Mark is going to
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inform us of September is that presumably have had outside
10:12
spears returns.
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10:31
Speaker 3: Mark.
10:31
Speaker 2: Before the break, we were talking a bit about the
10:34
month of September and how it's been a notoriously bad
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month for stocks on average, and really doesn't matter which
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decade you look at, going back one hundred years, taking
10:43
a look at it, September has just been a not
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always the worst month for stocks, but a.
10:48
Speaker 3: On average bad month for stocks.
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Speaker 2: Averages are just that they're statistics. They're averages, and it
10:56
does not explain all scenarios. And so I asked you
10:58
to come up with some some exceptions to the rule.
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Speaker 3: Here you find any.
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Speaker 4: I did see. I think you asked the right question,
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and here's one way to answer it. As you pointed out,
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on average, September is bad, but half the time, I've
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got one hundred years worth of data here and in
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exactly half of the Septembers, so call it fifty. I'm
11:21
actually rounding just a little bit. It's ninety eight years
11:24
in about half the time September has actually been positive.
11:27
That many of those have just been really small. So
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to confuse things further, you get a fifty to fifty
11:32
chance if this frequency is any and if you want
11:35
to rely on historical frequencies, and why not, they're the
11:38
only record we have for this type of thing. Half
11:43
the time it's actually been positive. But the negatives have
11:46
been so large that they tend to drown out when
11:48
you're calculating averages. So if you were inclined to bet frequencies,
11:54
you'd say it's a coin toss, if you were inclined
11:57
to wait returns according to the magnitude the average, as
12:02
you pointed out, Mike, make September look really weak.
12:05
Speaker 3: So I don't know what to make of this.
12:07
Speaker 2: I don't either, and it's just one of those interesting
12:09
anomalies that I have a very tough time attributing any
12:11
sort of reasoning to. The Only thing that comes to
12:14
mind is the sell and man go away adage, which
12:17
really changed over the last several decades with the adventive
12:21
you know, the way we have that a phrase appeared
12:24
to have waned significantly. So I have no real explanation
12:27
of why this happens. It does continue to happen. But
12:29
as Mark points out, averages and statistics that they can
12:32
tell any story you want, and if you want to
12:34
tell the opposite story, well, more than half of occasion September.
12:37
Speaker 3: Is actually positive for stocks, albeit slightly.
12:39
Speaker 4: That's that's one way to look at it. There have
12:41
been some monster drawdowns to use finance terminology, which just
12:44
means a big drop nineteen thirty one September negative thirty percent.
12:48
I'm laughing now only because it's not relevant to us.
12:51
I don't think a nineteen thirty seven, which was this
12:54
in the midst of a recession, the last one before
12:57
the Second World War, down fourteen plus percent. Yeah, nineteen
13:00
thirty in the midst of the depression, the very worst
13:02
of it, down thirteen percent. And then there are some
13:04
biggies on the opposite side, though not as many, which
13:07
explains the negative average. Again for what that's worth.
13:10
Speaker 2: The New York Times asks has the spread of tipping
13:12
reached its limit? And don't count on it. I actually
13:15
listened to a Donald Trump campaign ad on tipping the
13:19
other day and clearly, I mean, you know, for those
13:23
of us that live in Massachusets, we don't see as
13:24
much of this stuff if you live in compared to
13:26
if you live in New Hampshire or you know, another swing.
13:28
Speaker 4: With the political argument, I get that he and Harris
13:31
both want to eliminate federal taxes on tips, but how
13:34
do they frame that.
13:36
Speaker 3: We want to win the state of Nevada.
13:39
Speaker 4: Okay, That's what I'm getting at. It's so it's such
13:41
a crass grab for votes in the service industry. How
13:45
do you frame that as a more as an issue
13:47
of national interest, something we all a citizens should care about.
13:51
Speaker 3: Let me think about it.
13:51
Speaker 4: Did you were you moved by anything in the ad?
13:54
Speaker 2: No?
13:54
Speaker 3: I wasn't.
13:55
Speaker 2: I think if you were to really pin somebody down,
13:57
here's what they would say is, look, three decades ago,
14:00
we didn't have as much business going through on credit cards.
14:04
Generally speaking, people tipped with cash and right, wrong or indifferent.
14:09
A lot of service workers didn't declare all those cash
14:11
tips as wages, and so they weren't being They should
14:15
have been taxed on them, but they weren't declaring them.
14:17
And if you worked that you know, nostalgic summer job
14:20
where you were working in the the ice cream stand
14:23
outside the public swimming pool, you didn't pay cash, you know,
14:27
you didn't pay tax.
14:29
Speaker 4: Oh my gosh, that's the argument.
14:30
Speaker 3: I mean, nobody's ever said it, but I mean just
14:34
came up with that.
14:35
Speaker 4: I think that's excellent.
14:36
Speaker 3: That's very We've talked about this because but isn't it
14:39
isn't that a.
14:39
Speaker 4: Little like saying, you know, it was easier to cheat
14:40
on your taxes before brokerage firms had to report your
14:43
gains and losses.
14:43
Speaker 3: Hundreds of the Feds.
14:44
Speaker 4: Isn't that the same So we're just going to exempt
14:46
gains and losses because we know a lot of you
14:47
weren't reporting them. Isn't that the same thing? Isn't that
14:49
the same logic?
14:50
Speaker 1: Oh?
14:50
Speaker 3: Yeah, it is.
14:51
Speaker 2: And my problem if it were just a uh, you know,
14:56
really cheap way to go after the state in Nevada,
14:59
I would at least say, okay, well, you know that's
15:02
politics and do away with it. The problem is this
15:04
is going to make something that everybody already hates a
15:07
whole lot worse. And I'm just gonna continue to talk
15:10
about this because I hate the state of tipping in
15:12
the United States right now and where it's gotten to
15:15
where if I go to Fenway Park and you know,
15:18
I pick out my own beer and have to sit
15:20
in a line of a bunch of people all trying
15:22
to get the same beer, and then a woman comes
15:24
around and opens them because according to state law, you
15:27
have to have your beer opened by somebody in you know,
15:30
these types of event venues.
15:33
Speaker 3: If that happens, then all.
15:35
Speaker 2: Of a sudden, I get a little screen turned around
15:38
and I'm asked to tip that person, and that is
15:41
already the case around here, right, and a bunch of
15:43
places where I wouldn't normally expect to tip, you're being
15:48
asked to tip. And if you go and make taxes
15:53
on tip zero.
15:56
Speaker 3: What do you think is going to happen? Everyone is
15:59
going to want tips.
16:01
Speaker 2: Everyone is going to be pushing you to tip thirty
16:03
percent instead of twenty five percent. Employers are going to
16:06
be changing salaries to favor tips more, and we're going
16:11
to be faced with an even larger scenario where you're
16:14
being asked to tip. And I've talked about this before too,
16:17
but you know they're talking about this in the context
16:20
of Okay.
16:21
Speaker 3: It's service workers.
16:22
Speaker 2: And so if you work in a service industry, that's
16:25
the industry where you can exempt tax on tips. So
16:27
you're not going to be able to go buy, you know,
16:29
an outfit from Dick's Sporting Goods, and that's not a
16:33
service industry. That's a good industry. You're not going to
16:35
be able to add a tip on there and avoid taxes.
16:38
But think about all the service industries that exist out
16:41
there that don't currently collect tips because there's no tax
16:45
advantage to doing so. You and I work in one
16:48
mark is the you know, is the investment and mutual
16:51
fund industry not a service industry?
16:55
Speaker 3: I would think so? Is the tax preparation industry not
16:59
a service industry? Absolutely?
17:02
Speaker 1: So.
17:03
Speaker 2: What I envision is a world in which every industry
17:07
out there that can possibly qualify as a service industry
17:11
completely changing their compensation structures to drive a dump truck
17:15
through a loophole, as always happens, in order to avoid taxes.
17:19
It's just so incredibly stupid as a policy.
17:22
Speaker 4: Yeah, it's it's just nakedly political.
17:26
Speaker 3: That's it.
17:26
Speaker 4: There's no other rational there's no economically.
17:28
Speaker 2: Nakedly political with no one stepping in and saying, hey,
17:33
has anyone thought about the downside of this. We're facing
17:36
a social security problem that is going to go belly up,
17:38
and within a decade we're facing problems with Medicare. There's
17:41
not a single candidate out there talking about how we
17:44
solve any of these problems. Both candidates have committed to
17:46
no cuts to Social Security or Medicare and no way
17:49
of funding the programs.
17:50
Speaker 3: More it's lunacy, and we're talking about exempting tax on tips.
17:55
That's such a stupid idea.
17:57
Speaker 2: Even if you don't care about the fiscal situation, even
18:00
if you just don't like tipping, it is a stupid
18:02
policy because we're gonna all have to now be forced
18:04
to ask to tip more than we already do.
18:06
Speaker 3: It's just just as you can tell, gets me a
18:09
little bit upset.
18:15
Speaker 1: Bringing the latest financial news straight to your radio every day.
18:19
It's the Financial Exchange on the Financial Exchange Radio Network.
18:25
This is your home for the most comprehensive coverage of
18:28
the economy and the trends on Wall Street. Face is
18:31
the Financial Exchange Radio Network.
18:35
Speaker 2: But in any case, peace from CNBC a recession could
18:38
up end plans for people approaching retirement. Taking these steps
18:41
can help, Experts say, I will I sometimes criticize CNBC
18:46
pieces about portfolios and that type of thing, but I
18:50
will say, actually, I'll ask you, Mark, when do you
18:53
think is the most common time that I hear from
18:56
people about making portfolio changes?
19:00
Speaker 4: Specifically to the center question, Mark, how often? How many
19:05
times a day do you think I look in the mirror? Oh,
19:07
I don't know, my okay, so I'm sorry. Your question
19:10
was how many times?
19:10
Speaker 2: How how many people do when do you think most
19:14
financial advisors hear from their clients about making portfolio changes.
19:17
Speaker 4: Of course when markets are in distress, of course, which
19:19
is exactly the wrong time. It's exact a heart attack
19:22
when you get chess pains. No, no, you want to
19:24
be thinking about it before, right.
19:25
Speaker 2: Okay, precisely, And look, this is very natural. And look,
19:30
most people I think, ask about it and wonder about it,
19:34
and then ultimately usually follow the advice of their professionals.
19:39
But look, there's a lot of people that don't have
19:41
that type of professional in place when it comes to
19:43
the management of their assets. And there's a lot of
19:46
folks out there today that probably have not lived through
19:50
a serious, prolonged recession, is what I'm going to call it. Right,
19:54
there are plenty of investors out there who did not
19:57
have enough money to speak of back in two thousand
19:59
and eight to be worried about the impact of a
20:02
fifty percent draw down on fifty five percent draw down
20:05
on the S and P five hundred, I forget what the.
20:07
Speaker 4: Steep at the bottom?
20:08
Speaker 2: More than fifty That is the answer, And so here's
20:12
the information. The appropriate time to be thinking about what
20:16
would happen in the event of a recession is when
20:18
markets are close to or at all time highs, right
20:21
The worst time to be doing it is when they're
20:24
already in a free fall and you're trying to assess,
20:26
can I pay next week's bills because I just lost
20:28
my job. Like, the appropriate time to be asking these
20:32
questions is, Hey, when markets are, you know, hitting new
20:37
all time highs. And I granted that's not happening today.
20:39
You've got a bit of a sell off going.
20:41
Speaker 3: On right now.
20:41
Speaker 2: But if you haven't sat down and actually thought about, like, Okay,
20:46
I am at this stage of life and maybe I
20:50
am ten years from retirement, or I'm ten months from retirement,
20:54
or I've got money that I eventually want to use
20:58
to buy a home. What you need to ask yourself is, Okay,
21:02
if I had to stop working, maybe it's because I'm
21:06
planning to retire. Maybe it's because I get laid off
21:09
in the event of a recession. Am I set up
21:12
correctly or at least explainably with my investments to support
21:17
that change. That's what I really think of, and everybody
21:20
thinks of, you know, the market downturn impact in a recession,
21:23
and that is important, but almost nobody thinks that, Hey,
21:29
a period of unemployment is going to impact me. People
21:32
tend to put the blinders on when it comes to
21:34
the impact on an economic downturn with their own personal situation.
21:38
And that's what I would alert people to is, you know,
21:41
if you follow some basic rules, you can set up
21:43
your portfolio in a pretty proper way to handle a downturn.
21:48
And it's not going to be outrageously.
21:51
Speaker 3: Complicated, I guess would be my point.
21:53
Speaker 2: But a frequently people just don't address those issues and
21:57
they assume that they'll be able to remain in forever
22:01
and b very few people assess the damage that a
22:04
job loss can have, for instance, on their own personal
22:06
financial situation and set up their portfolio for that possibility.
22:11
If you fall into this category, if you haven't, say,
22:15
asked your financial professional, hey, in the event of a
22:18
forty percent market draw down, like, what do we do?
22:21
Speaker 3: What's the plan? How are we going to handle it?
22:24
Speaker 2: It's not necessarily that things need to change, It's just
22:27
that you should have the answer at your fingertips to
22:30
what happens in the event of that eventuality, because it
22:34
is kind of eventuality. It's never happened in the United States,
22:38
where we've gone forever or even for a very extended
22:42
you know, the longest period of time ever without a
22:44
twenty percent market draw down, I believe, was the one
22:46
we just went through from two thousand and nine through
22:51
twenty twenty. So these types of things are regular, they
22:55
occur frequently in markets. They are a feature, not a bug,
22:58
and they will happen again in all likelihood. And if
23:00
you haven't asked that question, the time to do so
23:03
was yesterday. The second best time to do so is now,
23:06
and start to assess those things and at least again
23:09
understand how you would expect things to react with your
23:12
personal financial situation in the event of a recession.
23:15
Speaker 3: No guarantee that we're going to get there this year,
23:17
next year, or.
23:18
Speaker 2: Any period of time, but almost to guarantee that it
23:20
will happen again in your lifetime. If you have questions
23:23
along those lines, please give us a call at the
23:25
Armstrong Advisory Group. The phone numbers eight hundred three nine
23:28
three for zero zero one. We offer free consultations at
23:32
all of our offices scattered throughout New England. The phone number,
23:35
once again for the Armstrong Advisory Group, it's eight hundred
23:38
three nine three for zero zero one.
23:41
Speaker 1: The proceeding was paid for by Armstrong Advisory Group, a
23:44
registered investment advisor. Nothing in the ad or in any
23:46
Armstrong guide a specific financial, legal, or tax advice. Consult
23:49
your own financial, tax, and estate planning advisors before making
23:52
any investment decisions. Armstrong make contact you to offer investment
23:55
advisory services.
23:57
Speaker 2: Got any vacations planned coming up this month or next
24:00
mark at any hotels.
24:02
Speaker 3: Anywhere around the country, Stay at home.
24:06
Speaker 2: Ten thousand plus hotel workers, including housekeepers, front desk staff,
24:10
and servers, went on strike across the US on Sunday
24:13
after contract negotiations have stalled. The workers are citing low
24:18
wages as well as a desire to reverse some of
24:22
the COVID era staffing and service cuts in hotels. If
24:27
you haven't stayed at a hotel in the last few years,
24:29
the general trend that I have experienced is for fewer
24:34
services and reduced staff. And I think what happened here
24:39
not terribly surprising. During COVID, people didn't really want housekeeping
24:44
staff entering their room in between stays, and a lot
24:48
of people kind of got used to that status quo,
24:50
and so a lot of hotel managers have said, hey,
24:52
maybe we don't need to tidy rooms every single day.
24:55
Maybe they don't need their beds made at this hotel
24:58
brand compared to obviously, if you're staying at the Ritz Carlton,
25:02
it's a very different story. You're going to have, you know,
25:04
housekeeping every day, You're going to have, you know, a different.
25:07
Speaker 3: Type of experience than if you're staying at a Hilton.
25:10
Speaker 2: But a lot of those still high end hotel brands
25:13
have said, no, we don't need these services every day,
25:15
and that's led to reduce staff, which I'm sure also
25:19
puts some stress on the remaining existing staff. Ultimately, though,
25:24
I would imagine that this all comes down to wages,
25:27
and that will be the key negotiating factor is how
25:31
much am I getting paid?
25:32
Speaker 3: And you know, if it's enough, I'll do the job.
25:36
Speaker 4: Yeah, it doesn't say there's anything else about their contract
25:39
that they're looking to renegotiate here, for example, benefits, retirement,
25:42
short care, that kind of stuff. It looks like this
25:44
is the main bone of contention, or maybe the exclusive
25:46
one is wages.
25:47
Speaker 2: I also don't see hotels going back to where we
25:49
were before, right like, if you are the owner of
25:52
Hilton brands or I don't know name, you're a hotel
25:55
brand that before Covid used to do daily housekeeping, or
26:00
had beefed up staff at the front desk and all
26:03
these different services that were part of the hotel experience.
26:06
I do recognize that there's a difference in brands, and
26:08
some are going to provide that, but I think a
26:10
lot of them are just saying, why would we go
26:13
back to that? And as a consumer, I have no
26:16
expectation of it, Nor do I really want to have
26:20
somebody or I don't want to pay for the extra
26:23
experience of having somebody come in and tidy up in
26:25
between my stay. I just I have no desire for that.
26:28
I don't need it, and I don't think that hotels
26:30
are going to bring it back. And I know that's
26:32
part of what's mentioned here, but I just don't see
26:34
it happening anytime soon.
26:36
Speaker 3: I don't know.
26:37
Speaker 4: Yeah, I don't know enough about the particulars of contract
26:39
negotiations in this case to say, but there's nothing you
26:42
can do about broad market trends. They are what they are,
26:44
and everybody's going to learn to live with that. That
26:46
is a very superficial it's not even worthy of being
26:49
called an insight. I'm sorry, I just.
26:51
Speaker 2: Let's take a quick break when we come back, a
26:53
little bit of stack roulette here on the financial exchange,
27:01
or perhaps we'll have.
27:02
Speaker 3: A computer freeze and yeah, yeah, get back, let's do
27:04
that off. Let's have it when your computer freezes. It's
27:07
just great for me, especially live radio. Stambis stand bikes.
27:11
Speaker 2: Dow off right now four hundred and forty nine points
27:14
about one percent, the S and P currently off about
27:16
eighty one points, about one point four percent, the Nasdaq
27:19
leaning the way down about four hundred.
27:20
Speaker 3: And twenty two points or two point four.
27:22
Speaker 2: Percent, the Rustle two thousand, your smaller cap names off
27:25
about forty five points or two percent as well. Taking
27:28
a look at you know, interest rates at the moment,
27:31
you do have the yield and the ten year treasury
27:33
down further about three and three point eight five percent
27:37
on the ten year yield, and the price of oil
27:39
falling substantially as well here raising a lot of the
27:42
games that we've seen oil down below seventy one bucks
27:46
a barrel, off three point nine percent today on China
27:51
demand and an OPEC output hike. So we're going to
27:55
take a quick break here and when we come back
27:58
a bit of stack Roulette on the Financial Exchange.
28:00
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29:01
Speaker 3: Time for a bit of stack roulette, Mark, do you
29:02
want to kick things off here? What do you have
29:04
for you? Yeah?
29:04
Speaker 4: This is an interesting fact, at least to me. Gen
29:06
Z workers. So this is people born between nineteen I
29:12
just lost it, nineteen ninety seven excuse me, and twenty twelve,
29:16
as distinguished from millennials, which is nineteen eighty to nineteen Well,
29:20
I guess it should be nineteen ninety six. This is
29:22
ninety four here, these dates don't exactly line up. And
29:24
then before that is my generation gen X, prior to that,
29:27
my parents, the baby boomers, et cetera. These gen Z
29:29
folks again, born between nineteen ninety seven and twenty twelve,
29:33
will outnumber Baby Boomers in the workforce, not overall population,
29:38
though it's closing this year. There's seventy million Gen Z ers.
29:41
Speaker 3: That makes sense.
29:42
Speaker 4: So the point of this article, which is in the
29:43
Wall Street Journal, is that these younger people who grew
29:47
up with technology that to some of us still feels
29:50
kind of novel, they're having trouble assimilating and adjusting to
29:56
learning how to work the way that prior generations did.
29:59
They they're in the office less, for example, Yeah, partly
30:03
due to COVID, partly due to remote trends that were
30:06
in place even before COVID.
30:07
Speaker 2: You could convince me that this is a little bit
30:09
more severe this time because of COVID and the work
30:12
from home. But I would imagine that this same piece
30:15
was written when millennials entered the workforce, was written when
30:17
Gen xers entered the workforce. There's always this learning curve
30:21
for the new generation of people that do things differently.
30:24
One of the more interesting things that I've heard about
30:27
maybe it's not gen Z, maybe it's the generation younger,
30:29
or maybe it is gen Z.
30:32
Speaker 3: They're typing skills suck. I'm gonna lead typer.
30:35
Speaker 2: Just I wouldn't have thought about this, but like you
30:38
and I, I'm guessing you Mark two had like a
30:40
typing course in high school.
30:41
Speaker 3: Yep, sure, absolutely, I tasted it.
30:43
Speaker 2: They ditched all those they got rid of them because
30:45
they figured, like, hey, this younger generation is constantly on digital,
30:49
you know, they're constantly using their phones, using computers. They're
30:52
going to learn to type on their own. I think
30:54
was the theory. And turns out that that's just not
30:56
the case. You know, obviously, we use phones a lot
30:59
more than keyboards, and the youngest generation kind of sucks
31:02
at typing.
31:03
Speaker 5: I mean, all the tablets have attachable keyboards.
31:07
Speaker 3: Again, like, what are they thinking to get rid of that?
31:10
Speaker 2: Yeah, I don't know why they got rid of the
31:12
typing courses, but apparently that younger generation.
31:14
Speaker 3: Just sucks that.
31:15
Speaker 2: But again, whenever I read stories like this, like oh,
31:18
the baby boomers can't figure out the gen zs, my
31:21
answer is always, well.
31:22
Speaker 4: Old people have never been able to figure out younger people.
31:24
Speaker 1: I know.
31:25
Speaker 2: And as you said, and you don't need to write
31:27
like you don't need to understand your every aspect of
31:31
your gen Z coworker.
31:32
Speaker 3: You just need to make sure that you can work.
31:34
Speaker 2: Together, like understand what motivates the person and learn a
31:38
little bit about them and it'll be fine.
31:39
Speaker 4: Yeah, I've not seen any issues here. We've got some
31:42
terrific younger people who assimilated quickly, use the same tools,
31:46
follow the same practices with absolutely no friction. Yeah, but
31:50
apparently it's a I've seen this documented elsewhere.
31:53
Speaker 3: Yeah, it's a broad a problem.
31:55
Speaker 2: Speaking of that younger generation gen Z, they want an
31:59
inheritance and and their baby boomer parents are saying good
32:02
luck with that. So according to the study, the study
32:05
found that thirty eight percent of gen Zers and thirty
32:07
two percent of millennials expect to inherit money or assets,
32:11
but only twenty two percent of boomers say they expect to.
32:13
Speaker 3: Leave an inheritance.
32:15
Speaker 2: I would imagine that on both sides this is a
32:17
little bit false. On the baby boomer side, I would
32:19
imagine more than one fifth end up do end up
32:22
leaving something of an inheritance, if nothing else. Their homes
32:25
are worth a whole lot of money and it's the
32:26
largest homeowner generation out there.
32:28
Speaker 3: And then as well, on the gen Zers and millennials, I.
32:32
Speaker 2: Would guess that their expectations of how much they might
32:34
inherit inherit is probably too high. One thing that I
32:39
think will be the big disruptor here and why it
32:42
makes an inheritance so unpredictable. Like if you're a gen
32:45
Zer or a millennial out there, I can imagine looking
32:48
at your parents and saying, man, these guys are wealthy.
32:52
They've got money in there four one K. Their home
32:54
is worth a tremendous amount of money compared to where
32:57
it was before they've paid off their mortgage, or they're
32:59
about too and you're right, like they baby boomer generation
33:03
does have a lot of wealth. What people are across
33:07
the board failing to account for is health. I genuinely
33:11
think this is the This is the great equalizer, the
33:14
great unpredictable piece here, which is, if you are healthy
33:19
and live a long time, at some point in your life,
33:22
you are very likely to need help just you know,
33:27
maybe you have a stroke and you're immobile, maybe you
33:29
know some form of help. If you don't pass away
33:32
in your sleep of a heart attack, you're going to
33:33
need health care help. And according to Boston College who
33:36
did this you know, long term care study, they looked
33:39
at thousands of people over their lifetime and they found
33:42
that approximately eighty percent actually more than that. It depends
33:47
on your marital status. That's how they break it down.
33:49
But you know, only nineteen percent of married women who
33:55
you know they studied needed no long term care assistance.
34:00
Speaker 3: It's tiny most of them needed it.
34:03
Speaker 2: And so my point here would just be, if you
34:06
have an expectation of an inheritance and you actually like care,
34:11
you know about how your parents' health develops, have some
34:13
conversations well ahead of time about how that's going to work.
34:17
Because the default if none of this happens, for I
34:19
think a lot of the baby pgenera boomber generation who
34:22
just are really independent and want to take care of
34:24
themselves is I'll just find a way to pay for this,
34:27
and I'm not gonna I'm not gonna burden my kids
34:29
with it. And by the way, you know, paying for
34:31
a nurse to come into your home and provide that
34:33
type of care is extraordinarily expensive. And so that's where
34:37
I think a lot of these expectations about what an
34:40
inheritance will be are are going to be disrupted because
34:44
of the cost of long term care. And it's not
34:46
everybody that lands in a nursing home. It's just that,
34:49
you know, we're all living longer, and that ends up
34:53
costing a whole lot of money and is going to
34:55
eat into those inheritances and probably.
34:57
Speaker 3: Does away with a lot of them. Would be my guess.
35:00
Speaker 2: All the time we have for today's financial exchange, but
35:03
will be right back at it tomorrow.
35:05
Speaker 3: We do get some job opening data tomorrow.
35:08
Speaker 2: Markets broadly down across the board, with the NASDAC leading
35:12
the way, off two point four percent, but even the
35:14
Dow off more than one percent. We'll have a full
35:16
recap tomorrow. Folks have a great rest of your day,
35:18
and we will talk to you then