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Is the Fed losing control? · The Financial Exchange Show

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Speaker 1: Veterans Development Corporation. This is the Financial Exchange with Chuck
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Speaker 1: Zada and Mike Armstrong.
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Speaker 2: Chuck, Mike and Tucker with you here the day after
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Speaker 2: some fireworks in the markets and a FED meeting.
1:19
Speaker 3: We're here to untangle what happened.
1:22
Speaker 2: And we got to start with that FED meeting because
1:25
Speaker 2: quite honestly, like you look at the path of the
1:28
Speaker 2: day and things were kind of just you know, humming along,
1:31
Speaker 2: you know, nothing big in ease direction.
1:34
Speaker 3: And then basically from two.
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Speaker 2: O'clock onward, Mike, we had a puke is the technical term,
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Speaker 2: and it was very very broad based, like there was
1:45
Speaker 2: nowhere that you could really hide in this market yesterday.
1:49
Speaker 4: There is one company in the NASZAC that was positive
1:52
Speaker 4: as of I think like three forty five and I
1:54
Speaker 4: think ten maybe nine in the S and P five
1:57
Speaker 4: hundred positive.
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Speaker 2: Yeah, like low dig it's ten or eleven was the
2:01
Speaker 2: last time that I looked, which was at like three
2:03
Speaker 2: p fifty nine. But markets were moving quite a bit
2:06
Speaker 2: from minute to minute.
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Speaker 4: So by the way, important debate here, Chuck, Yes, fireworks,
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Speaker 4: I think that's that's.
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Speaker 3: Too positive a term for what we saw.
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Speaker 4: I I have images of patriotism and positivity when I
2:18
Speaker 4: think of fireworks, so I think we need a negative
2:21
Speaker 4: version of that.
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Speaker 3: This was a uh it was it was loud. It
2:30
Speaker 3: was loud, but it was moving down, moving down. It
2:34
Speaker 3: was not enjoyable. It was a we'll come back to it.
2:42
Speaker 3: Do you see? What's what's the text.
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Speaker 5: Line at six one seven, six five?
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Speaker 3: The dying is a dying cat.
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Speaker 2: Okay, okay, because we haven't had the dead cat bounce yet,
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Speaker 2: is where you go? Yeah, yeah, okay, yes, yesterday was
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Speaker 2: the dying cat fall.
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Speaker 3: I guess is is the terminology that we'll use. Give
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Speaker 3: us something better if you can, if you can text
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Speaker 3: in please. So what we saw.
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Speaker 2: Was was a day where major markets effectively lost about
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Speaker 2: three percent each. The Russell two thousand was worse. International
3:13
Speaker 2: markets were getting hit as well. Basically everything was in
3:17
Speaker 2: free fall and people were pointing to, hey, what did
3:21
Speaker 2: the FED actually say that that could have led to this?
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Speaker 2: And here's what they said. Let's let's let's cover that. First,
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Speaker 2: the FED came out and they cut interest rates on
3:33
Speaker 2: the Fed Funds rate by a quarter percent, so nothing
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Speaker 2: unexpected on that front. The Fed also announced no changes
3:42
Speaker 2: to their bond buying program. Again nothing unexpected on that front.
3:48
Speaker 2: It was again kind of standard, you know, proceeding as normal.
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Speaker 2: What they did is they put out their Summary of
3:56
Speaker 2: Economic Projections, which they do every other FED meeting. They'll
4:00
Speaker 2: last one was in September. They do it four times
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Speaker 2: a year. It's March, June, September, and December, basically the
4:05
Speaker 2: last month of each quarter. And here's here's how the
4:09
Speaker 2: Summary of Economic Projections evolved. And this year is really
4:14
Speaker 2: not important because this year is basically done. They're telling
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Speaker 2: us what already happened. What's more important is, hey, what
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Speaker 2: are they telling us for next year?
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Speaker 3: In the longer term.
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Speaker 2: Next year, they said that real GDP so GDP after
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Speaker 2: inflation is going to come into two point one percent
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Speaker 2: instead of the two percent they expected in September. Now
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Speaker 2: remember that they're never exactly like right all the time
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Speaker 2: on this and in fact, the June projection, which they
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Speaker 2: revised down a lot of these in September, actually ended
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Speaker 2: up looking pretty good for the end of twenty twenty four.
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Speaker 2: So some of these, you know, quarter to quarter fluctuations
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Speaker 2: in their projection are kind of extraneous, like they.
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Speaker 3: Don't need to do them.
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Speaker 2: They think the unemployment rate next year, rather than ending
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Speaker 2: the year at four to four, is going to end
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Speaker 2: at just four to three. So unemployment's going to be lower,
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Speaker 2: growth is going to be higher. Pce E inflation they
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Speaker 2: think is going to still be two and a half
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Speaker 2: next year after being two four this year, So basically saying, hey,
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Speaker 2: we're not sure there's going to be too much movement
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Speaker 2: on inflation from where it is today. Core PCEE inflation
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Speaker 2: they think it's going to be a two five next year.
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Speaker 2: They're expecting it to be a two eight at the
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Speaker 2: end of this year. So core continuing to come down
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Speaker 2: a little bit, but the headline number not really budgeting
5:25
Speaker 2: because you don't have that, uh, that that helpful tail
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Speaker 2: wind from falling gas prices. Both of those are about
5:32
Speaker 2: a third of a percent higher than their September projection.
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Speaker 2: So inflation higher, growth higher, unemployment lower. So and pause
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Speaker 2: real quick before we get to interpretations. Yes, all of
5:44
Speaker 2: those things take you know, ignore markets and ignore investors
5:48
Speaker 2: for a moment. All of those things are indicative of
5:51
Speaker 2: a what strong economy? Yes, right, and they're not they're
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Speaker 2: not saying, hey, we're worried about recessions, so we're keeping
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Speaker 2: interest rates higher we're worried about exorbert high inflation, so
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Speaker 2: we're moving in now.
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Speaker 3: That's not what happened.
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Speaker 4: What happened yesterday is the Federal Reserve said, oh, we
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Speaker 4: thought we'd see a slowdown by now, we didn't get one.
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Speaker 4: In fact, we're revising our expectations for twenty twenty five
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Speaker 4: to the upside.
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Speaker 2: And so what you get out of this, and by
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Speaker 2: the way, this is nothing that was unexpected. I don't
6:19
Speaker 2: think that We've been talking for the last few months
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Speaker 2: about how the economic data has been looking better, and
6:24
Speaker 2: so you would expect the Fed to pick up on this,
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Speaker 2: and they kind of are the key difference, I think
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Speaker 2: in what we're seeing for their projections for next year.
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Speaker 2: This year, because of lower gas prices, the hotter economic
6:37
Speaker 2: growth is turning into a little bit hotter GDP. They
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Speaker 2: think it's gonna be two five this year instead of
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Speaker 2: the two that they have projected back in September. And
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Speaker 2: next year they think it's gonna show up with inflation
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Speaker 2: taking a little bit more of that and GDP taking
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Speaker 2: a back seat. Now again, it's not you know, crazy
6:54
Speaker 2: high inflation. We're not talking back to nine percent or
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Speaker 2: anything like that. They're just saying it's it's kind of
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Speaker 2: stalling a little bit, that the progress is slowing, and
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Speaker 2: so this is what you're you're gonna see here.
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Speaker 3: So here's where I have kind.
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Speaker 2: Of a little bit of a different view than the
7:12
Speaker 2: rest of the commentary on this is you then get
7:17
Speaker 2: all this chatter like, hey, like the Fed is completely
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Speaker 2: like surprise the market with you know, being more hawkish,
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Speaker 2: when all we were talking about and all we were
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Speaker 2: hearing from people for the last week Mike was the
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Speaker 2: Fed's gonna make a hawkish pivot?
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Speaker 3: Am I wrong?
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Speaker 4: That's what everyone described it as. We talked about it
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Speaker 4: as a hawkish rate cut. Yes, a hawkish rate cut
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Speaker 4: was the specific terminology. So it's it's not like this
7:39
Speaker 4: was unexpected. And so where I kind of get to
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Speaker 4: on this is, Hey, the Fed basically gave you what
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Speaker 4: you thought you were gonna get. And there's some differences
7:52
Speaker 4: around the edges, no doubt, but they gave you basically
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Speaker 4: what you thought you were gonna get. That doesn't really
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Speaker 4: cause a three percent daily sell off in my opinion?
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Speaker 3: Am I wrong?
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Speaker 4: No? And I've been trying to, you know, move around
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Speaker 4: my own thoughts on all of this too, and My
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Speaker 4: conclusion is maybe just very simply that pretty consistently, even
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Speaker 4: though we've expected the Fed to be hawkish, they've conveyed dubbishness,
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Speaker 4: and this time they didn't. It was a little bit
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Speaker 4: scrambled and messy in terms of the in terms of
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Speaker 4: the wording, but when you looked at the vote count,
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Speaker 4: when you looked at the expectations, they did not really
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Speaker 4: mince words this time. They did not say, well, we're
8:35
Speaker 4: looking at a few other parts of weakness. They pretty
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Speaker 4: much said, look, we're cutting rates, but don't expect a
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Speaker 4: whole lot more next year. And I think that that's
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Speaker 4: what they should have done, But in the back of
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Speaker 4: my mind, I was kind of like, will they actually
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Speaker 4: have the guts to go do it.
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Speaker 2: The piece that I come to on this also is
8:55
Speaker 2: from a market structure perspective. This couple weeks has been
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Speaker 2: really ugly, and this is we talked about this heading
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Speaker 2: in to yesterday. We've talked about it for the last
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Speaker 2: few days. Where the S and P five hundred has
9:10
Speaker 2: traded until yesterday in a one percent range for the
9:14
Speaker 2: entire month of December. But it's done this while most
9:18
Speaker 2: of the index has been selling off pretty strongly, and
9:22
Speaker 2: a few names Broadcom, Tesla, Apple held up decently, but
9:27
Speaker 2: Apple wasn't like chugging along that great. I think was
9:29
Speaker 2: up like two percent before yesterday, but Broadcom was up
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Speaker 2: like forty. Tesla was up twenty for the you know,
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Speaker 2: the last couple for the last week, and a small
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Speaker 2: handful of names have kind of been making the index
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Speaker 2: look better than it was. What we saw yesterday was, Hey,
9:44
Speaker 2: the rest of the market kind of continued puking. The
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Speaker 2: difference was the names that had been rallying, they puked
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Speaker 2: along with them. And that's something that I think we've
9:57
Speaker 2: just been talking about this for the last few days now,
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Speaker 2: where hey, like, this isn't sustainable in terms of, like,
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Speaker 2: you're not gonna see Tesla rally twenty percent a week forever,
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Speaker 2: because that's what it's done since the election.
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Speaker 3: It's not sustainable.
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Speaker 2: Man Like, it's it's great if you're a Tesla shareholder,
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Speaker 2: but you're not gonna make twenty percent a week forever.
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Speaker 3: It just it can't happen.
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Speaker 2: So I think part of this I look at and
10:25
Speaker 2: I say, yeah, this was a market that was a
10:27
Speaker 2: little bit dodgy. And we've also been saying, look, it's
10:30
Speaker 2: a market that's priced for perfection.
10:32
Speaker 3: Even if you just get.
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Speaker 2: Like a little deviation from what what's expected, that can
10:36
Speaker 2: be enough to upset the apple cart.
10:38
Speaker 4: Is there anything to the time of the year? Man, Like,
10:41
Speaker 4: is everybody on vacation already?
10:43
Speaker 3: Here's the thing.
10:44
Speaker 2: Normally, normally you would say a day like this doesn't
10:47
Speaker 2: usually happen heading into your end, right, just because everyone's
10:50
Speaker 2: kind of checked out. Yeah, and you just say like, yeah,
10:52
Speaker 2: like no one's really paying attention, Like everyone's kind of gone, like,
10:55
Speaker 2: you know, you get you know, the Santa Claus rally
10:58
Speaker 2: into the end of the year, and then you know,
11:00
Speaker 2: starting off the next year, that's kind of what people
11:02
Speaker 2: expect seasonally. So maybe this also just caught some people
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Speaker 2: by surprise. But at this point it's it's still too
11:11
Speaker 2: early to tell if this is going to turn into
11:13
Speaker 2: anything bigger or not.
11:16
Speaker 3: It has the potential to.
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Speaker 2: But you also saw by the end of the day
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Speaker 2: yesterday there was so much build up in hedging against
11:25
Speaker 2: it then, and once you get to some of these levels,
11:28
Speaker 2: you kind of say, Okay, it's kind of hard for
11:29
Speaker 2: it to go too much further unless some of those
11:31
Speaker 2: hedges unwind. We've seen a little bit of that unwinding
11:34
Speaker 2: this morning, and so maybe people were saying, okay, like
11:36
Speaker 2: is it safe to buy the dip because it's been
11:38
Speaker 2: like twelve hours or something? Again, who knows, but I'm
11:43
Speaker 2: not really buying. Hey, the FED did this because the
11:46
Speaker 2: Fed pretty much did what they expected, like what people expected,
11:49
Speaker 2: which was a hawkish cut. And I'm much more of
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Speaker 2: the opinion this was kind of a dodgy market and
11:55
Speaker 2: the FED was something that's closely followed, and when they
11:57
Speaker 2: deviated just a little bit on some of them of
12:00
Speaker 2: economic projections numbers, that was enough just to make the
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Speaker 2: market throw a fit for the afternoon.
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Speaker 3: And we'll see if it develops into something bigger.
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Speaker 2: Anything else to add on that before we uh, we
12:11
Speaker 2: kind of move forward.
12:12
Speaker 3: Like I do not.
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Speaker 4: I think there's more to say on markets and and
12:17
Speaker 4: I guess more importantly on what all this means for
12:19
Speaker 4: the everyday person outside of the stock market.
12:21
Speaker 3: But let's say quick break and.
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Speaker 4: We'll talk about a little bit more on the FED
12:25
Speaker 4: and interest rates next year on the Financial Exchange.
12:28
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Speaker 5: couple of text boys on your question as to an
13:34
Speaker 5: alternative to fireworks in regard to yesterday's good market sell off.
13:39
Speaker 5: Somebody said, A couple of people said dumpster fire. Somebody
13:44
Speaker 5: else said down boom down boom, and then the other
13:48
Speaker 5: other one was a fire sale rather than fireworks.
13:51
Speaker 3: I'm going fire sales. Fine, I'm going to modify dumpster fire.
13:55
Speaker 2: Yesterday was a dumpster explosion, a dumpsplosion if if you will, I.
14:01
Speaker 3: Won't, but thank you. Anyways, I've got it. Let's talk
14:08
Speaker 3: a little bit, Mike.
14:09
Speaker 2: You wanted to touch a little bit more on the FED
14:12
Speaker 2: and what they did yesterday and kind of how it
14:14
Speaker 2: affects individuals.
14:15
Speaker 4: Yeah, so I wanted to start with one main point,
14:18
Speaker 4: which is the FED started cutting rates mid September. That
14:21
Speaker 4: was the meaning that they first cut rates. If you recall,
14:24
Speaker 4: they were pretty worried about the unemployment situation. They went
14:26
Speaker 4: a full fifty basis point with one descent. A Donald
14:30
Speaker 4: Trump appointee to the FED voted against the fifty basis
14:33
Speaker 4: points downward, and they said, we're really acting to ensure
14:37
Speaker 4: this doesn't turn into something else. Since then, they've cut
14:39
Speaker 4: rates a full percentage point on those short term interest rates,
14:44
Speaker 4: which you know, make it so you earn a little
14:47
Speaker 4: bit less on money markets and CDs, but don't really
14:50
Speaker 4: do anything else. What you've seen in the meantime is
14:54
Speaker 4: the ten year Treasury yield as of the close yesterday
14:56
Speaker 4: has now served more than three quarters of a percent
15:00
Speaker 4: since the FED started cutting rates, and chuck this to
15:04
Speaker 4: you and I know is common sense, but for the
15:06
Speaker 4: average person out there, it makes no sense to them
15:08
Speaker 4: and to a lot of people that, hey, the FED
15:10
Speaker 4: is in the process of cutting interest rates, and yet
15:13
Speaker 4: my mortgage if I have, if I'm looking to buy
15:16
Speaker 4: a home, mortgage rates are getting more expensive. And so
15:19
Speaker 4: let's talk about that divergence. And also is that influencing
15:23
Speaker 4: what the Fed is choosing to do at this stage?
15:26
Speaker 2: Yeah, I'll try to do the simplest, most concise version
15:29
Speaker 2: of this. The FED manages the Fed Funds rate, which
15:32
Speaker 2: is an overnight lending rate. They don't manage anything in
15:35
Speaker 2: terms of longer term rates. The thirty year fixed rate
15:39
Speaker 2: mortgage is typically based on a spread to the ten
15:43
Speaker 2: year Treasury Because if you're a bank and you're lending money,
15:45
Speaker 2: you say, look, I can lend to the federal government
15:47
Speaker 2: at X. If I'm gonna lend to Mike Armstrong for
15:50
Speaker 2: twenty years longer, how much more do I demand in
15:53
Speaker 2: interest in order to do so? And so the reason
15:58
Speaker 2: why mortgage rates have gone up is because the economic
16:01
Speaker 2: data has improved, growth projections have gone up, and as such,
16:06
Speaker 2: projections for longer term interest rates have gone up as well.
16:10
Speaker 2: So when the economy is growing more quickly, longer term
16:14
Speaker 2: rates move up. Mortgage rates are part of that. If
16:16
Speaker 2: the economy were too slow, longer term rates would come down,
16:20
Speaker 2: and so would mortgage rates. That's it's kind of my
16:23
Speaker 2: my one minute spiel. Did did anything else to add
16:25
Speaker 2: on that?
16:26
Speaker 3: No? Not really. Now.
16:28
Speaker 4: The question the second question to that is, Okay, maybe
16:33
Speaker 4: they feel this way, maybe they don't, But does the
16:34
Speaker 4: FED field they're losing control of the long end of
16:36
Speaker 4: the curve, and you know what sort of messaging or
16:40
Speaker 4: is it influencing what they do in terms of their
16:42
Speaker 4: change to interest rates, setting policy and expectations for next year.
16:47
Speaker 3: It's kind of hard to say that they're losing control
16:51
Speaker 3: of the long end of the curve.
16:52
Speaker 2: Well, no, it's not that they never really had it.
16:56
Speaker 2: But like, losing control of the long end of the curve,
16:58
Speaker 2: in my opinion, is more than the long end going
17:01
Speaker 2: up by a quarter percent. You know, for for all
17:05
Speaker 2: the handwringing about this, even including today, the long end
17:10
Speaker 2: has moved to quarter percent in the last you know,
17:12
Speaker 2: couple of days here, and if you look at where
17:14
Speaker 2: the tenure treasury is right now at this very point
17:18
Speaker 2: in time, it's at the same place it was back
17:21
Speaker 2: in June and back in November. So yeah, you know,
17:27
Speaker 2: it's kind of a stretch to me to be like, hey,
17:29
Speaker 2: like the Fed's losing the long end of the curve, Well,
17:32
Speaker 2: does that mean they've lost it for you know, two
17:34
Speaker 2: thirds of this year, because the tenyure treasury at one
17:37
Speaker 2: point in April was as high as.
17:40
Speaker 3: Foreign almost four and three quarters.
17:42
Speaker 2: Percent dates at four five six, So yeah, there's been
17:47
Speaker 2: some upward movement there, and it's reflective of the idea that, hey,
17:51
Speaker 2: the FED might not keep interest rates, the FED might
17:55
Speaker 2: need to have interest rates higher than they are in
17:57
Speaker 2: the long term, and and you know, kind of buying
18:00
Speaker 2: into that idea, but losing control of the long end,
18:04
Speaker 2: in my opinion, would be, hey, does the long end
18:06
Speaker 2: go to like six or something like that, not four
18:09
Speaker 2: and a half?
18:09
Speaker 3: Right? Yeah, I think sometimes we.
18:13
Speaker 2: Just like to dramaticize it a bit exactly. You know,
18:16
Speaker 2: it's it's fun to do. I guess. Let's see what
18:20
Speaker 2: else as far as how this affects individuals, a couple
18:23
Speaker 2: other things we touched on briefly yesterday. If you have
18:26
Speaker 2: an adjustable rate mortgage that is based on the Fed
18:28
Speaker 2: funds rate, the prime rate, or the secured overnight financing
18:32
Speaker 2: rate so far, any of those typically adjust downward again
18:37
Speaker 2: immediately after. And so if you're coming up on a
18:40
Speaker 2: rate reset for an adjustable rate mortgage, if it's tied
18:43
Speaker 2: to one of those, it's gonna be a quarter percent
18:45
Speaker 2: lower than it would have been otherwise, not necessarily a
18:48
Speaker 2: quarter percent down from where your rate is today, right.
18:50
Speaker 2: Important to note that you still may move up, just
18:53
Speaker 2: not as much as you would have otherwise. Other things,
18:56
Speaker 2: credit card interest rates next billing cycle. Most of those
18:59
Speaker 2: are tied to the we've had funds rate or one
19:01
Speaker 2: of the other ones we mentioned. Those are going to
19:03
Speaker 2: be coming down by a quarter percent for you in
19:04
Speaker 2: those cases.
19:05
Speaker 4: Although an interesting one there too, because those rates have
19:07
Speaker 4: not moved down recently since the credit cards have been
19:09
Speaker 4: saying we're worried about restrictions on.
19:12
Speaker 3: Late payment fees and things like that.
19:14
Speaker 4: So it's just another one of those areas where everyone
19:15
Speaker 4: expected it to come down and it actually really didn't
19:18
Speaker 4: over the last few weeks.
19:20
Speaker 3: Anything else we want to touch on. It's directly fed related.
19:22
Speaker 4: No, let's move along, and we've got Wall Street Watch
19:25
Speaker 4: coming up next.
19:42
Speaker 1: Like us on Facebook and follow us on Twitter at
19:44
Speaker 1: TFE show. Breaking business news is always first right here
19:49
Speaker 1: on the Financial Exchange Radio Network. Time now for Wall
19:54
Speaker 1: Street Watch. A complete look at what's moving markets so
19:57
Speaker 1: far today right here on the Financial Liks James Radio Network.
20:02
Speaker 5: Following yesterday's sell off where traders witnessed the SMP five
20:07
Speaker 5: hundred shit three percent, markets today are narrowly trading higher.
20:13
Speaker 5: The Dow yesterday also recorded its tenth straight losing session.
20:18
Speaker 5: At the moment, the Dow is up by about a
20:20
Speaker 5: third of a percent, or one hundred and thirty five points,
20:23
Speaker 5: SMP five hundred is up by about a quarter percent
20:26
Speaker 5: or fifteen points, and the Nasdaq is up by two
20:30
Speaker 5: tenths of a percent or forty points. Russell two thousand
20:33
Speaker 5: is up by nearly quarter percent or five points. Ten
20:35
Speaker 5: year Treasure reeled up by six basis points at four
20:39
Speaker 5: zero point five six percent, and crude oil is pretty
20:43
Speaker 5: flat today, trading at seventy dollars and fifty eight cents
20:46
Speaker 5: a barrel. Shares of Micron Technology sinking by eighteen percent
20:50
Speaker 5: after the chip maker posted disappointing second quarter guidance, citing
20:54
Speaker 5: weakness in consumer related ship markets. Micron's first quarter revenue
20:59
Speaker 5: came in line with expectations, while its earnings also beat estimates. Meanwhile,
21:04
Speaker 5: Darden Restaurants reported in earnings and revenue be for its
21:07
Speaker 5: fiscal second quarter. Darden saw stronger than expected same store
21:11
Speaker 5: sales growth at Olive Garden and Longhorn Steakhouse, and also
21:15
Speaker 5: hiked its full year revenue guidance. Darden shares are up
21:18
Speaker 5: by fourteen percent on the day. Elsewhere, Lamb Weston shares
21:22
Speaker 5: down by twenty percent after the French fries maker said
21:26
Speaker 5: it was replacing its chief executive and cut its guidance
21:30
Speaker 5: again as demand for frozen potato products weekends. Leonard's shares
21:34
Speaker 5: down by five percent after the home builder posted quarterly
21:37
Speaker 5: earnings that missed expectations. CarMax beat street forecast for its
21:42
Speaker 5: third quarter, sending that stock up by four percent. And
21:45
Speaker 5: after today's closing bell, we'll see earnings from Nike and FedEx.
21:50
Speaker 5: I'm Tucker Silva and that's Wall Street Watch. How could
21:53
Speaker 5: the demand for frozen potato products be weakening?
21:56
Speaker 3: Sky high? My household.
21:58
Speaker 2: I get one of those five pound bags of tater
22:00
Speaker 2: Tots from BJ's every three weeks, I think.
22:04
Speaker 3: And they're delicious. Might I add it's just for you.
22:08
Speaker 4: Yeah, so no two kids at home, they're eating vegetables
22:13
Speaker 4: chuck for dinner against tater tots every night.
22:15
Speaker 2: No, Mike, here, here's my actual weakness is like the
22:19
Speaker 2: giant like again Costco and BJ sized cheese at box. Okay, yeah,
22:24
Speaker 2: I buy one of those things, right. I let it
22:27
Speaker 2: sit for a few days. No one really touched it.
22:29
Speaker 2: I'm like, okay, I'll have a handful. I finished the
22:31
Speaker 2: thing by the end of the week. Ye myself. Yeah,
22:34
Speaker 2: it's it's it's not good. Let's talk a little bit
22:37
Speaker 2: about piece from CNBC this morning.
22:40
Speaker 3: Uh.
22:40
Speaker 2: Trump calls for bolishing the debt ceiling is the headline. Uh,
22:44
Speaker 2: And I will quote here. This was an interview with
22:47
Speaker 2: NBC News this morning. The Democrats have said they want
22:50
Speaker 2: to get rid of it. If they want to get
22:51
Speaker 2: rid of it, I would lead the charge, Mike.
22:54
Speaker 3: We have.
22:54
Speaker 2: We have led the charge on how stupid the debt
22:57
Speaker 2: ceiling is as a concept for years this show. We
23:01
Speaker 2: have If one thing comes out of this whole budget
23:05
Speaker 2: kerf fluffle, which, by the way, I have no idea
23:07
Speaker 2: how this is gonna end up resolving itself at any
23:09
Speaker 2: point in the near future. Now, if one good thing
23:11
Speaker 2: comes out of it, please let it be Congress legislating
23:15
Speaker 2: the debt ceiling out of existence as a thing, because
23:19
Speaker 2: there's absolutely no reason for it to exist.
23:22
Speaker 4: I one hundred percent agree. I think it is a
23:24
Speaker 4: dumb way to govern. We have been consistent on this. However,
23:29
Speaker 4: it's big. However, I would like everyone at home to
23:33
Speaker 4: check themselves for a minute and ask themselves, what would
23:36
Speaker 4: you be saying to the television if instead of a
23:39
Speaker 4: moniker with is it a moniker kyroon chyron flashing across
23:44
Speaker 4: the screen saying that Donald Trump calls for this cut,
23:46
Speaker 4: you would do if instead Elizabeth Warren, we're calling for
23:49
Speaker 4: it because she posted on Twitter thirty three minutes ago
23:53
Speaker 4: x thirty three minutes ago quote, I agree with President
23:55
Speaker 4: elect Trump that Congress should terminate the debt limit and
23:58
Speaker 4: never again governed by taking hostage taking. I bring this
24:02
Speaker 4: up because good again again. I agree that is great.
24:06
Speaker 4: I think they should move away from it and just
24:09
Speaker 4: abolish the whole thing. But the inconsistency of Americans' views
24:14
Speaker 4: on fiscal responsibility is preposterous to me, and I guarantee
24:20
Speaker 4: there are so many people listening and watching TVs at
24:24
Speaker 4: home who are saying, yeah, because Trump said we should
24:26
Speaker 4: definitely get rid of the death ceiling, and had anyone
24:28
Speaker 4: else on the left said something as crazy as that,
24:31
Speaker 4: they would be throwing things at their television saying that
24:34
Speaker 4: the world is coming to an end. So I just
24:37
Speaker 4: asked that people take a step back and recognize when
24:40
Speaker 4: things are stupid ideas, we should just get rid of them,
24:42
Speaker 4: regardless of who's saying it.
24:44
Speaker 3: Should we talk.
24:45
Speaker 2: About daily savings time again? Now let's not we've done
24:49
Speaker 2: enough of that. Let's talk about this piece of New
24:51
Speaker 2: York Times. It is titled where does a quote remarkable
24:55
Speaker 2: US Economy go from?
24:56
Speaker 1: Here?
24:56
Speaker 2: The word remarkables and quotes because J Powell during his
24:59
Speaker 2: press comp friends yesterday, which I have to say, I
25:02
Speaker 2: watched about the first forty five minutes of it and
25:05
Speaker 2: then I just I gave up just because I couldn't
25:09
Speaker 2: do it anymore. Most Powell press conferences are pretty tight,
25:13
Speaker 2: with like a couple little missteps here and there that
25:15
Speaker 2: you pay attention to. And like you put your pencil
25:17
Speaker 2: down and you're like, oh, like this is one that
25:19
Speaker 2: I really want to make note of.
25:21
Speaker 3: Mike.
25:22
Speaker 2: As I was going through this, I got to a point,
25:26
Speaker 2: let's see one, two, three, like fifteen notes in after
25:29
Speaker 2: as I was writing, and I wrote, in big, all
25:32
Speaker 2: capital letters, note this press conference is completely contradictory, and
25:37
Speaker 2: Powell is afraid to be as hawkish as he needs
25:39
Speaker 2: to be to bring the long end in because like, again, Powell's.
25:42
Speaker 3: Kind of been dubbish.
25:43
Speaker 2: I think that the hawkishness and this has come from
25:45
Speaker 2: other members of the FED. Yeah, But one of the
25:48
Speaker 2: quotes that Powell did have is he says, look, the
25:50
Speaker 2: US economy has just been remarkable. And he's right on
25:54
Speaker 2: this because for better for worse, people have been predicting
25:59
Speaker 2: recession in the US economy for the last two years
26:02
Speaker 2: now hasn't happened. Hasn't happened, And there have been a
26:08
Speaker 2: number of signs where, you know, statistically every time this
26:11
Speaker 2: has happened, you know, we've talked about the som rule
26:13
Speaker 2: and some of these other things, and.
26:16
Speaker 3: You just haven't had the recession yet.
26:20
Speaker 2: And it's not to say that it'll never come, because
26:22
Speaker 2: recession always comes at some point. It's that the nature
26:26
Speaker 2: of humans to not be able to continue on something
26:28
Speaker 2: on a consistent track indefinitely. We're not robots, we're not
26:31
Speaker 2: ai we are real I.
26:34
Speaker 4: I think the longest period of time for a developed
26:39
Speaker 4: modern economy to not reach recession was in Australia and
26:42
Speaker 4: it ended in twenty twenty.
26:44
Speaker 3: But I think it was a good seventeen years. So
26:46
Speaker 3: anything's possible.
26:47
Speaker 2: Yeah, you can go a while, like certainly, but even
26:50
Speaker 2: then you got to have like the exact right conditions,
26:52
Speaker 2: which Australia's was, Hey, we make a lot of natural
26:55
Speaker 2: not make, we mine a lot of natural resources, and
26:58
Speaker 2: China's growing to our north and they need a lot
27:00
Speaker 2: of natural resourcesp worked out well for them, worked out
27:02
Speaker 2: great for them. So you know, the question is, hey,
27:06
Speaker 2: how long can the US economy keep defying the odds?
27:10
Speaker 2: And I think it's a really interesting question that we
27:13
Speaker 2: don't have a real answer to. But this business cycle
27:17
Speaker 2: has been completely different from all other ones that have
27:20
Speaker 2: come before, and I think we have to acknowledge the
27:23
Speaker 2: possibility that, hey, it's going to continue to play out differently.
27:27
Speaker 2: And even though some other things are now saying hey,
27:30
Speaker 2: like you got to be concerned about this because housing
27:33
Speaker 2: construction is continuing to decline, and you know, the labor
27:36
Speaker 2: market is showing some weakness. Hey, it doesn't mean that
27:39
Speaker 2: you're necessarily there yet, even if you're concerned about those things.
27:43
Speaker 4: Yeah, I was speaking to some folks yesterday, but I
27:45
Speaker 4: was doing some interviews and I was speaking to somebody
27:48
Speaker 4: off air about you know, hey, you know, are we
27:51
Speaker 4: heading for that recession? In the case that I was,
27:53
Speaker 4: the people I was speaking with, they both said, you know,
27:55
Speaker 4: they bought homes in the last year or two and
27:57
Speaker 4: are really hoping to refinance at some point, and when
27:59
Speaker 4: are we gonna get that session They know other people
28:01
Speaker 4: who are just saying, I'm not going to buy that
28:03
Speaker 4: house until we get that recession.
28:04
Speaker 3: And my point to them.
28:06
Speaker 4: Was, look, every indicator that every economist has used to
28:09
Speaker 4: try and whip out the crystal ball and define when
28:12
Speaker 4: we're going to get a recession has broken down over
28:15
Speaker 4: the last several years and doesn't work. And it has
28:17
Speaker 4: not worked at least in the same way. And so
28:21
Speaker 4: I still hear and see from people absolutely in the
28:24
Speaker 4: back of their mind hoping for that next recession, which
28:27
Speaker 4: is crazy because there's like a one to ten chance
28:29
Speaker 4: that you lose your.
28:29
Speaker 3: Job in that case.
28:30
Speaker 4: But I still see it pretty consistently, and I still
28:34
Speaker 4: hear from folks like, yeah, I'm just waiting for the
28:37
Speaker 4: recession to come. And look, this period of time has
28:40
Speaker 4: been remarkable from an economic standpoint in the United States,
28:43
Speaker 4: defying not only all historical expectations, but defying trends across
28:49
Speaker 4: the rest of the globe. And it's I do think
28:53
Speaker 4: that remarkable is a fair word here, even if maybe J.
28:55
Speaker 4: Powell had a pretty tough time actually connecting the dots
28:59
Speaker 4: yesterday the meeting.
29:00
Speaker 2: It was a tough press conference, I gotta tell you,
29:03
Speaker 2: and I feel for Ja because like he was just
29:05
Speaker 2: not in his element. You could tell right from the
29:08
Speaker 2: get go where he was trying to convey a hawkish
29:11
Speaker 2: message but kept slipping into ubishness by the end of
29:14
Speaker 2: his sentences.
29:15
Speaker 4: Is that just because of his nature? Do you think
29:17
Speaker 4: is he just not prepared to be hawkish? I mean,
29:21
Speaker 4: he pulled it off in twenty twenty two, but he
29:23
Speaker 4: was late to the game and struggled with it.
29:26
Speaker 2: I think the big thing is, remember Powell was appointed
29:29
Speaker 2: It was twenty seventeen when he was appointed writer was
29:32
Speaker 2: early twenty eighteen.
29:32
Speaker 3: I can't remember. It was pretty immediate. I don't know.
29:37
Speaker 3: I'm just trying to take a look to see when
29:39
Speaker 3: it was.
29:39
Speaker 2: Yeah, So Powell was appointed back in twenty eighteen, and
29:44
Speaker 2: remember Powell, at the end of twenty eighteen, the FED
29:46
Speaker 2: was engaged in a rate hiking cycle in the back
29:49
Speaker 2: end of that year.
29:50
Speaker 3: It wasn't a particularly steep one.
29:52
Speaker 2: It was nothing like what they went through in you know,
29:54
Speaker 2: twenty twenty two and twenty three, but it was a
29:56
Speaker 2: rate hiking cycle, and they were also running off the
29:59
Speaker 2: balance sheet, and the end of twenty eighteen, the market
30:03
Speaker 2: for the basically the whole fourth quarter just kind of
30:06
Speaker 2: puked and it was exacerbated on Christmas Eve, where Steve Maduchian,
30:10
Speaker 2: it was Treasury secretary at the time, comes out and
30:12
Speaker 2: is like, hey, guys, everyone, we want you to know
30:15
Speaker 2: that the health and safety of the financial system is fine.
30:18
Speaker 2: It never kind of looked around and goes, well, we
30:20
Speaker 2: weren't asking questions, but should we be, Steve, And like
30:25
Speaker 2: two weeks later, Powell comes out and goes, yeah, we
30:28
Speaker 2: were on autopilot. He had the famous quote like we're
30:30
Speaker 2: on autopilot with the balance sheet. A couple weeks later,
30:33
Speaker 2: he comes out, we're gonna stop running the balance sheet
30:36
Speaker 2: off and the FED never hiked again in that cycle.
30:38
Speaker 2: They never said they were never gonna hike again, but
30:40
Speaker 2: they never did. And so I think Powell's like first
30:44
Speaker 2: year formative experience as a FED chair because remember he
30:51
Speaker 2: was someone who you know, didn't have a ton of
30:54
Speaker 2: experience at the FED. I mean, he had been in
30:57
Speaker 2: the private sector for quite a while. He was on
31:00
Speaker 2: the FED Board of Governors for six years beforehand, but
31:04
Speaker 2: again it was not, you know, something where he had
31:06
Speaker 2: he had been in an active role for an extended
31:09
Speaker 2: period of time.
31:10
Speaker 3: In his first year as FED chair, he gets just
31:13
Speaker 3: whacked like that.
31:15
Speaker 2: I think it it's something where whatever fight you fought
31:19
Speaker 2: during kind of that those formative years in a role,
31:22
Speaker 2: he kind of always default back to that. And the
31:25
Speaker 2: first fight that he had to deal with was, man,
31:27
Speaker 2: I got too hawkish and and things got you know,
31:30
Speaker 2: kind of dodgy when I was not expecting it. And
31:33
Speaker 2: so I think he just kind of defaults back to
31:34
Speaker 2: dubbishness because he got spooked by that.
31:38
Speaker 3: And I don't blame him.
31:39
Speaker 2: I mean, again, the secretary is coming out like yeah,
31:43
Speaker 2: the financial plumbing is good, and you're like, what, we
31:46
Speaker 2: didn't think there was a We just thought this was
31:47
Speaker 2: a bear market, and you're telling us that the plumbing
31:49
Speaker 2: might have been a problem.
31:51
Speaker 3: Gosh, what was going on? So I think that that
31:54
Speaker 3: tempered him a little bit.
31:56
Speaker 2: Take a quick break, and when we come back, we'll
31:59
Speaker 2: talk talk about how the incoming president may be influencing
32:03
Speaker 2: fit policy even though he's not president yet.
32:06
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32:13
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32:29
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32:38
Speaker 2: Wall Street Journal has a piece today Mike is titled
32:40
Speaker 2: Trump isn't President yet, but He's already spooking the Fed.
32:43
Speaker 3: How so well?
32:44
Speaker 4: This is the first time that I think they've acknowledged,
32:46
Speaker 4: although not explicitly, that campaign pledges on the Trump administration
32:52
Speaker 4: could have some inflationary impact when all is said and done.
32:55
Speaker 4: Now they did not come out and say that. They
32:57
Speaker 4: did not say we're revising our models based on all
32:59
Speaker 4: of this. But when you look at some of the
33:02
Speaker 4: details here, it's tough for me to say that this
33:05
Speaker 4: is just purely based on data trends that we've seen
33:09
Speaker 4: change from September to December.
33:11
Speaker 3: Meeting expectations.
33:12
Speaker 4: Now, for inflation, we talked about this coming in at
33:15
Speaker 4: two point five percent. That's up from the two point
33:18
Speaker 4: two that was previously expected. And so again Jerme Powell
33:23
Speaker 4: did not come out here and say, hey, due to
33:25
Speaker 4: tax cuts that the Trump administration wants to put into place,
33:28
Speaker 4: we are changing our rate setting policy. But it did
33:32
Speaker 4: sound like several voting members kind of were beginning to
33:35
Speaker 4: factor that type of thing in. Would you am I
33:39
Speaker 4: misreading some of it, because that that's I don't know
33:41
Speaker 4: that that's what a lot of the financial.
33:43
Speaker 3: Journalism is seemingly interpreting.
33:46
Speaker 4: And I just have a tough time believing that a
33:49
Speaker 4: bunch of you know how many voting members or you know,
33:52
Speaker 4: members of the Fed are all just covering their eyes
33:55
Speaker 4: and saying, we don't know what's going to happen under
33:56
Speaker 4: the Trump administration.
33:57
Speaker 2: Still, yeah, I could see the if they're trying to
34:01
Speaker 2: split hairs. I could see them saying, hey, we're not
34:04
Speaker 2: adjusting our policy because of things we don't know yet,
34:07
Speaker 2: but we may adjust our economic projections because of things
34:10
Speaker 2: we don't know yet.
34:11
Speaker 4: Right, And I think that's where it is at the moment.
34:14
Speaker 4: They're no longer I don't think Jern Powell came out
34:17
Speaker 4: and clearly and said in the same way that you know,
34:20
Speaker 4: we'll act on these things when we see them and
34:22
Speaker 4: not guess as to what the future is like, just
34:25
Speaker 4: not saying that is enough to indicate that, yeah, they
34:27
Speaker 4: might be factoring in some of these things, and they should,
34:30
Speaker 4: Like I don't think you should try and project what
34:33
Speaker 4: the tariff.
34:33
Speaker 3: Policy is going to be.
34:35
Speaker 4: But if you sit here and say, oh, yeah, we
34:37
Speaker 4: still think taxes are going up in twenty twenty six,
34:39
Speaker 4: that's silly and nonsense. That's an irresponsible forecast that they
34:43
Speaker 4: would be putting out. So it makes total sense that
34:46
Speaker 4: they are doing all this. Is it setting things up
34:49
Speaker 4: for a big battle between the Fed and the White House,
34:52
Speaker 4: And I think that's a bit of a stretch at
34:54
Speaker 4: this stage when you're trying to project out folks want
34:57
Speaker 4: to talk to you about the December guide from the
34:59
Speaker 4: ar Armstrong Advisory Group. This is a great one, especially
35:03
Speaker 4: if you might be a do it yourself and by
35:05
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35:08
Speaker 4: managing your own personal portfolio or finances heading into twenty
35:12
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35:13
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35:16
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35:22
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35:23
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35:26
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35:29
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35:33
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35:37
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35:43
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35:45
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36:16
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36:51
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36:55
Speaker 2: Mike, I want to talk two Amazon stories here. One,
37:00
Speaker 2: Amazon is delaying their return to office mandate for thousands
37:04
Speaker 2: of workers due to space. Now that's that's the headline
37:08
Speaker 2: from Bloomberg. So my question is what did Space do
37:11
Speaker 2: to Amazon? Like, I think that there's an office missing
37:15
Speaker 2: there because Space didn't didn't do anything.
37:19
Speaker 3: But here's the thing, Like, didn't they just announce this
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Speaker 3: three months ago.
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Speaker 4: Yeah, they just said, hey, you get your butts back
37:24
Speaker 4: to work or we're firing you.
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Speaker 3: And then not have enough. Well, a bunch of people quit.
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Speaker 3: Now you're saying we don't have enough room for you.
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Speaker 2: Well two reads one this one, Amazon didn't realize they
37:37
Speaker 2: didn't have.
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Speaker 3: Enough space, which is a bad look for Amazon. Two.
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Speaker 2: Amazon hoped that more people would quit from the return
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Speaker 2: to office mandate. They didn't, and now they've got to
37:48
Speaker 2: either a find office space for them, which means paying
37:51
Speaker 2: more money, or b lay them off and pay severance,
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Speaker 2: which they didn't want to in the first place. Either way,
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Speaker 2: it's not really a great look for Amazon because you
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Speaker 2: just told everyone to come back.
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Speaker 4: And now you're like, hey, I'm just envisioning someone getting
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Speaker 4: their office and desk moved to storage. B.
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Speaker 3: It's just a classic office space situation. It is it is.
38:14
Speaker 3: Let's take a quick break here.
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Speaker 2: We got our two coming up in just a little bit.
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Speaker 2: We'll be talking federal budget when we kick things off.
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Speaker 3: There