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Only 5% Off the Highs — Are Markets Ignoring the Risk? · The Financial Exchange Show

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Speaker 2: Yeah, Mortan, welcome back to the financial exchange. As we
1:13
Speaker 2: head into the eleven o'clock hour of the program, we've
1:15
Speaker 2: got markets marking a turnaround here. Compared to where they
1:20
Speaker 2: opened the S and P five hundred, I think opened
1:22
Speaker 2: down around three quarters of a percent, we're now down
1:26
Speaker 2: only one tenth of a percent. Dow Jones Industrial average
1:29
Speaker 2: in positive territory nasdak's still off about half a percent.
1:33
Speaker 2: When we take a look at the bond market, you
1:35
Speaker 2: do have the ten year yield moving up again to
1:38
Speaker 2: four point three seven eight percent, and mortgage rates, as
1:43
Speaker 2: I mentioned during the last segment of the show, up
1:45
Speaker 2: over or around six and a half percent. I suspect
1:48
Speaker 2: they will be over six and a half percent according
1:50
Speaker 2: to Mortgage News Daily tomorrow when we get the read
1:53
Speaker 2: on things. Taking a look at oil markets, likely the
1:57
Speaker 2: cause for some of the bounce in the ten year,
1:58
Speaker 2: you've got oil markets in West Texas crewed up about
2:01
Speaker 2: three percent two dollars and sixty eight cents a barrel
2:04
Speaker 2: to ninety dollars and eighty one cents. And so when
2:08
Speaker 2: we move over and take a look at gas price,
2:10
Speaker 2: is here national average for a gallon of gas now
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Speaker 2: sitting just shy of four dollars per gallon, three dollars
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Speaker 2: and ninety eight cents, Paul, anything else catching your eyes
2:21
Speaker 2: in terms of markets so far this morning. Obviously, volatility
2:25
Speaker 2: is the name of the game right now when it
2:28
Speaker 2: comes to these day to day bounces.
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Speaker 3: No nothing.
2:31
Speaker 2: I think the one point that I'll make on volatility
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Speaker 2: is while we have seen a fair bit of day
2:36
Speaker 2: to day and intra day swings, keep in mind right
2:41
Speaker 2: now that equity markets are five percent or so off
2:47
Speaker 2: of the highs that they reached before the war. That
2:49
Speaker 2: is tremendously important context to keep in mind here, because
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Speaker 2: I keep getting questions like where's the buying opportunity by
2:57
Speaker 2: the dip, And not to say that that opportunity didn't
3:00
Speaker 2: already present itself. It may we may have already bottomed.
3:03
Speaker 2: This war could wrap up and equity markets could rally
3:06
Speaker 2: on some new exciting AI news. But we are seeing
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Speaker 2: a number of things in the Middle East that we
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Speaker 2: have literally never seen. The blockage of the Strait of
3:16
Speaker 2: Horn moves is the big one, but you know a
3:18
Speaker 2: lot of things that have not been seen in any
3:20
Speaker 2: war in the Middle East before. And the fact that
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Speaker 2: the US equity markets remain around five percent or seven
3:29
Speaker 2: percent off their all time highs is somewhat surprising to me.
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Speaker 2: And you'll, again, I understand why there's a lot of
3:37
Speaker 2: by the dep mentality. There's a lot of the mentality
3:39
Speaker 2: here that you know, President Trump's going to pivot if
3:41
Speaker 2: things get too bad, and I fully understand where that
3:45
Speaker 2: comes from. But equity markets, again, in one of the
3:48
Speaker 2: biggest energy crises we've seen in decades, are off about
3:54
Speaker 2: five percent, and I find that very very interesting at
3:56
Speaker 2: this point. Absolutely, the US worker struggling in this job market.
4:01
Speaker 2: We've got a pair of articles here, one a gallop
4:03
Speaker 2: pull and two piece from the New York Times in
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Speaker 2: a pretty grim job market. And I'm really trying to
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Speaker 2: change my ways on this because I keep criticizing these
4:14
Speaker 2: pieces that are describing the job market as grim given
4:18
Speaker 2: the job market that I entered into and many of
4:21
Speaker 2: us entered into in the early twenty tens decade or
4:25
Speaker 2: late two thousands decade. But they bring up a bunch
4:29
Speaker 2: of valid points here about the say of the labor market,
4:32
Speaker 2: what is I guess, how would you describe the labor
4:35
Speaker 2: market as you see it today? Paul?
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Speaker 3: Right now, we've been in this sort of no hire,
4:40
Speaker 3: no fire labor market environment where companies are really trying
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Speaker 3: to focus internally on how can we do more with
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Speaker 3: our existing headcount and not bring on more employees. How
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Speaker 3: do we use new technologies to keep our headcount level
4:57
Speaker 3: or perhaps in some instances lessen our head count to
5:01
Speaker 3: be more productive. And as a result of that, where
5:04
Speaker 3: you're seeing particular areas of the labor market hit. The
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Speaker 3: unemployment rate for college graduates, like Mike was alluding to earlier,
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Speaker 3: soared to five point six percent at the age at
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Speaker 3: the end of last year. Those are ages between twenty
5:16
Speaker 3: two and twenty seven. That is sharply outpacing where we
5:21
Speaker 3: have overall US employments sitting around four point two percent
5:24
Speaker 3: at the time. And then in this gallupole, this talks
5:26
Speaker 3: about I'm a little I always have some skepticism with
5:30
Speaker 3: these poles as to how employees feel about the labor market,
5:34
Speaker 3: but the gallupole tries to look at just the overall
5:37
Speaker 3: job market pessimism or optimism at a given point in time.
5:41
Speaker 2: I do, actually, I find this to be somewhat relevant
5:45
Speaker 2: because oftentimes we'll cite these polls and there's no historical
5:48
Speaker 2: context for them, Like they interviewed a bunch people. This
5:50
Speaker 2: is how they feel, but we don't know how they
5:52
Speaker 2: felt five years ago, right, And so like some of
5:56
Speaker 2: these things we've just thrown out right. The Union Michigan's
5:59
Speaker 2: Consumer Sentiment Survey, we talk about it, but it's been
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Speaker 2: reflecting terrible numbers for years now that haven't really flipped up.
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Speaker 1: Right.
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Speaker 2: This is flipped a lot the survey responses that Gallup got,
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Speaker 2: I'll highlight one of them. In the fourth quarter of
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Speaker 2: twenty twenty five, twenty eight percent of US employees said
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Speaker 2: now is a quote good time to find a quality job,
6:20
Speaker 2: seventy two percent saying it's a bad time. In mid
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Speaker 2: twenty twenty two, seventy percent of workers were saying it's
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Speaker 2: a good time. That is a complete and utter reversal.
6:31
Speaker 2: Now they should have been twenty twenty two was a
6:33
Speaker 2: great time to find a job. There were bonuses, there
6:35
Speaker 2: were all sorts of things.
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Speaker 3: Yeah, I mean, we had quits rates that we hadn't
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Speaker 3: seen in fifty or sixty years in a labor market
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Speaker 3: that was trying to reset from a re one hundred
6:44
Speaker 3: percent starting of the economy.
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Speaker 2: But at least unlike the Michigan Sentiment Survey, which is
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Speaker 2: basically telling you that today the economy is just as
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Speaker 2: bad as it was in twenty twenty two, which is
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Speaker 2: obvious hogwash. This actually shows you, like, oh, yeah, people
6:56
Speaker 2: are perceiving that, yeah, the labor market has gotten worse,
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Speaker 2: and they're far less optimistic about it today than they
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Speaker 2: were a few years ago.
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Speaker 3: Noted, But I guess I don't even need this to
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Speaker 3: tell you that, just because if you look at the
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Speaker 3: unemployment rate, the hiring rate, the quits rate, like all
7:10
Speaker 3: three of those statistics will back that up to the
7:14
Speaker 3: one piece I will say in here an area that
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Speaker 3: I could sympathize with. I talked about the college graduates.
7:20
Speaker 3: That's an area where I do get the feedback that
7:23
Speaker 3: I can see why employers wouldn't want to bring on
7:26
Speaker 3: those associates, that there is a huge amount of hesitation.
7:29
Speaker 3: They're federal workers too, with everything that we've been dealing
7:31
Speaker 3: with with TSA and all those issues, and you look
7:35
Speaker 3: at just a swath of positions on the government level,
7:39
Speaker 3: or even educators on the municipal level, I can understand
7:42
Speaker 3: that the frustration that they have where there their wage increases.
7:46
Speaker 3: I don't believe have been commensurate with the inflation that
7:49
Speaker 3: we've seen over the last four or five years. So
7:51
Speaker 3: while that the galipola, it reflects that that there is
7:55
Speaker 3: a weakening sentiment from those federal and state workers. I
7:58
Speaker 3: get that, but in general, this is something that can
8:03
Speaker 3: be reflected in economic deata. I guess it's another point
8:07
Speaker 3: that's helpful to have.
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Speaker 2: Yeah. I think the other obvious point here is that
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Speaker 2: college educated and younger workers are the most pessimistic. Yeap, Yeah,
8:13
Speaker 2: if you work in one of those clerical type jobs,
8:15
Speaker 2: if you work in a investment banking role, I can
8:19
Speaker 2: see why you're pessimistic about the future. And if you
8:21
Speaker 2: don't have a job right now, I also see why
8:24
Speaker 2: you're pessimistic. Given what has happened with the job openings,
8:26
Speaker 2: given what's been happening from what I hear at job fairs,
8:30
Speaker 2: where fewer employers are showing up to look to hire.
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Speaker 2: There's a number of factors here that I do comprehend
8:36
Speaker 2: why that demo in particular would be concerned. On the
8:39
Speaker 2: other hand, if you are a gen xer, all of
8:45
Speaker 2: the really qualified baby boomers are starting to retire, all
8:48
Speaker 2: of that institutional knowledge is getting lost. You are concerned
8:52
Speaker 2: about agism, but you're finding yourself in a position where, hey,
8:55
Speaker 2: I've got decades of experience, All of the older folks
8:58
Speaker 2: in my company are starting to peel off here. I
9:02
Speaker 2: feel more needed now than I ever have in my career.
9:04
Speaker 2: So it is again I'm sensing some diverging feelings about
9:08
Speaker 2: all of this. Overall, I think beyond all of this,
9:12
Speaker 2: the threat that people are most concerned about seems to
9:16
Speaker 2: be artificial intelligence. For at least the white collar worker
9:20
Speaker 2: is okay, how do I scal up my knowledge? How
9:24
Speaker 2: do I make sure that I am a valuable resource
9:26
Speaker 2: to my employer so that I am not just on
9:29
Speaker 2: the chopping block for the next time they need to
9:32
Speaker 2: make their cordly earnings look good. So I do comprehend
9:35
Speaker 2: that concern, and frankly, people are right to be concerned.
9:38
Speaker 2: The pace of hiring has dropped off a ledge compared
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Speaker 2: to where we were over the last three years, and
9:45
Speaker 2: if you don't have a job right now, it's going
9:46
Speaker 2: to be increasingly difficult to find one. Definitely, that doesn't
9:49
Speaker 2: mean it's a worse job market than twenty ten or
9:51
Speaker 2: two thousand and nine or twenty eleven. It's a different
9:55
Speaker 2: job market, and it's going to represent its own unique challenges.
9:58
Speaker 2: Let's say quick break. When we we come back, we're
10:00
Speaker 2: playing a little bit of trivia here next on the
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Speaker 4: All right, time for trivia here on the Financial Exchange.
10:54
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Speaker 4: Nadella when he left Microsoft back in twenty fourteen. After
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Speaker 4: leaving Microsoft, Balmer bought a struggling NBA franchise for two
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Speaker 4: billion dollars. So our triviute question today, which NBA team
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Speaker 4: does Steve Balmer own? Once again? Which NBA team does
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Speaker 4: at six one seven three six two thirteen eighty five,
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12:07
Speaker 3: He pays his players pretty well.
12:09
Speaker 1: I heard.
12:10
Speaker 3: Yeah, there's.
12:13
Speaker 2: Allegedly America's chief financial officers are saying AI is coming
12:19
Speaker 2: for administrative jobs. And yeah it is, yep. If you
12:26
Speaker 2: work in data entry, if you work in compiling slide decks,
12:30
Speaker 2: if you.
12:30
Speaker 3: Were customer service. I was hired right out of college
12:33
Speaker 3: to do a call.
12:34
Speaker 2: Center customer service. Yeah, I guess so too. Probably you know.
12:39
Speaker 3: To reset a password, you can't have an AI agen
12:42
Speaker 3: figure that Yeah, a lot of stuff. I mean I
12:44
Speaker 3: did it with with style and flash, but I think.
12:46
Speaker 2: It can as I think you can pocket square and
12:50
Speaker 2: everything over the phone. But but yes, I do agree.
12:54
Speaker 2: I think CFOs are correct that AI is coming pretty
12:57
Speaker 2: quickly for administrative jobs. I don't know about all the
13:01
Speaker 2: other ones. I can see a few different paths now
13:05
Speaker 2: that I think we could go down, and both of
13:09
Speaker 2: which have concerning possible ends with not ends but outcomes.
13:13
Speaker 2: In the short term with AI, the pace at which
13:17
Speaker 2: AI has improved upon itself has been pretty darn impressive.
13:24
Speaker 2: Anybody that was using these things two years ago, Like
13:27
Speaker 2: do you remember adding asking it to do some basic math,
13:31
Speaker 2: or you know, asking about a famous person, and it
13:34
Speaker 2: would just get the math wrong and make stuff up
13:37
Speaker 2: about the famous person or even not so famous person,
13:40
Speaker 2: Like if if I did an AI query of myself
13:43
Speaker 2: back a few years ago, it would just make a
13:46
Speaker 2: whole bunch of stuff up about me that didn't you know,
13:50
Speaker 2: it didn't exist. And so the pace at which this
13:53
Speaker 2: stuff has advanced to hey, it can barely do math too. Yeah,
13:56
Speaker 2: I can code an entire website and get ninety five
13:59
Speaker 2: percent of it right and test it and do all
14:01
Speaker 2: this stuff. Very very impressive how dramatically it has improved,
14:05
Speaker 2: and if it continues to do so, it is going
14:10
Speaker 2: to replace a bunch of jobs. It is going to
14:12
Speaker 2: make a bunch of companies irrelevant and may justify the
14:17
Speaker 2: stock prices that people are paying right now. I think
14:21
Speaker 2: there's a path where that could happen. If it does,
14:24
Speaker 2: I do worry about a bunch of jobs, and I
14:27
Speaker 2: worry that in the intermediate, short to intermediate term you
14:31
Speaker 2: could have a period of time where there's major labor
14:33
Speaker 2: market disruption where a bunch of people. Globally, this is
14:37
Speaker 2: not just a US centric phenomenon, because there are countries
14:39
Speaker 2: that are far more reliant on you know, tech help
14:43
Speaker 2: and customer service jobs than the United States is. But
14:46
Speaker 2: you know, massive disruption possible if AI continues to improve
14:50
Speaker 2: at the pace it has been. I think that's a
14:52
Speaker 2: possible outcome. I don't think that's a long term outcome
14:55
Speaker 2: because eventually it corrects, right, labor market goes to put
14:59
Speaker 2: people don't have money to spend on and you can't
15:02
Speaker 2: keep investing in AI because you know all the products
15:04
Speaker 2: that you're developing, there's nobody to consume because nobody has
15:07
Speaker 2: any money. And it does correct. Eventually, new jobs get
15:10
Speaker 2: created that are using the AI tools.
15:13
Speaker 3: Workforces subject workforces are retrained into other areas that they
15:17
Speaker 3: need assistance in.
15:19
Speaker 2: But it might take a while. Yeah, if instead the
15:21
Speaker 2: AI development slows and hey, the tools that we have
15:26
Speaker 2: today are no significantly better than the ones that we
15:29
Speaker 2: have five years from now, then instead, I'm not of
15:32
Speaker 2: all that much concerned about the labor market, to be
15:35
Speaker 2: quite honest, Like, I see, Yeah, some jobs get eliminated,
15:39
Speaker 2: other ones get created, just like happened during the dot
15:41
Speaker 2: com bubble, just like happened with many other technologies throughout
15:44
Speaker 2: the course of history, and we probably don't go through
15:47
Speaker 2: this major labor market disruption that I'm worried about. In
15:51
Speaker 2: that case, though, I'm not sure the companies that are
15:53
Speaker 2: being bid through the roof right now are worth what
15:54
Speaker 2: people think they are.
15:55
Speaker 3: Well, that would be really concerning from a It would
15:58
Speaker 3: be a it would be a killer from a perspective,
16:00
Speaker 3: because you're right, there's been so much investment in this
16:03
Speaker 3: space that if there were for any reason plateauing of
16:07
Speaker 3: technological advancement in this field over the course next fivest
16:11
Speaker 3: years and you don't get those significant improvements, than anybody
16:14
Speaker 3: who owns a four to one K plan and is
16:16
Speaker 3: invested in large cap equities is going to take a
16:18
Speaker 3: significant hit because those valuations are going to point really decimating.
16:23
Speaker 2: I see these two paths, and maybe there's a middle
16:25
Speaker 2: path that I'm not fully familiar with. There probably is,
16:28
Speaker 2: But can't you see those two extreme paths either, Yeah,
16:31
Speaker 2: this thing keeps taking off, and yes, those software companies
16:34
Speaker 2: that are under threat right now might be screwed and
16:37
Speaker 2: they get a significant hit and people lose their jobs.
16:40
Speaker 2: It also could be that, yeah, the early advancements that
16:43
Speaker 2: were made were the big advancements, and the next advancements
16:46
Speaker 2: that get made just make it slightly more energy efficient
16:49
Speaker 2: or slightly faster to do the same computing, and we
16:52
Speaker 2: don't have these massive changes. I could see either one
16:56
Speaker 2: of those taking place. There's also, like you said, probably
16:59
Speaker 2: a middle path that we fall well. But those are
17:02
Speaker 2: the ones that concern me, right, Like, either of those
17:04
Speaker 2: extremes are what concerns me about this moment.
17:06
Speaker 3: Yeah, I tend to lead to the middling one because
17:09
Speaker 3: usually when you look back at these new technologies, it's
17:12
Speaker 3: not just a straight yes or no, failure or not success.
17:16
Speaker 3: It usually is kind of blends of both, but we
17:18
Speaker 3: still see that's what makes it fun coming in every.
17:21
Speaker 2: Day Social Security does not allow most Americans to build wealth.
17:24
Speaker 2: It wasn't designed to, mister Fink. Larry Fink was not
17:29
Speaker 2: insulting so Security as a whole. He was acknowledging that
17:33
Speaker 2: there has not been a single government program that was
17:35
Speaker 2: better at fighting poverty and preventing poverty in history. But
17:41
Speaker 2: I think he's, as most leaders out there, is acknowledging
17:45
Speaker 2: for a moment that we do have a Social Security
17:48
Speaker 2: trust fund that is on a path to financial calamity.
17:53
Speaker 3: Mm hmm.
17:54
Speaker 2: That's the reality. I'm not overstating it. The trust fund
17:57
Speaker 2: goes bust somewhere in the next six to nine years,
18:02
Speaker 2: depending on, you know, how everything plays out. And so he's,
18:07
Speaker 2: you know, he's as the CEO of the largest investment
18:09
Speaker 2: company in the world, with his own self interest, is saying,
18:12
Speaker 2: why not take some money and put it into stocks
18:14
Speaker 2: that company, maybe like Blackrock, could go and manage on
18:18
Speaker 2: behalf of the everyday Americans. And I'm comfortable saying two things. One,
18:24
Speaker 2: Larry Fink is completely self interested by making these comments,
18:27
Speaker 2: and Blackrock would almost definitely stand to benefit substantially should
18:32
Speaker 2: the Social Security Administration start to invest Trust Fund assets
18:35
Speaker 2: into stocks. And it might not be a terrible idea.
18:39
Speaker 3: It's not necessarily a terrible idea, but I don't know
18:42
Speaker 3: if that's not the biggest issue that needs to be
18:45
Speaker 3: resolved on the subject is the investment of the Social
18:48
Speaker 3: Security Fund.
18:48
Speaker 2: You could just invest all of it in the stock
18:50
Speaker 2: market tomorrow and the stock marke can do extremely well,
18:53
Speaker 2: and you're still running out of money in the.
18:54
Speaker 3: Short Yeah, my son has a small five twenty nine
18:57
Speaker 3: account I've put together, but that some that's there is
19:00
Speaker 3: not going to be enough, even if dramatic returns are
19:04
Speaker 3: generated on it. There's not a lot of money in there.
19:05
Speaker 3: And so the same problem here is you need to
19:08
Speaker 3: find ways to get more money into the fund. Let's
19:12
Speaker 3: start with that, and then we can talk about how
19:14
Speaker 3: to invest it more efficiently, because there's not enough money
19:17
Speaker 3: in there even with tremendous investment returns to solve this problem.
19:20
Speaker 2: That is correct. We have markets here that have turned
19:23
Speaker 2: a corner. We've got the SMP up slightly on the day.
19:26
Speaker 2: We're going to take quick break and then we're gonna
19:28
Speaker 2: get a full market recap along with the trivia winner.
19:30
Speaker 2: Next on the Financial Exchange.
19:46
Speaker 1: Bringing the latest financial news straight to your radio. Every day.
19:51
Speaker 1: It's the Financial Exchange on the Financial Exchange Radio Network
19:57
Speaker 1: telling out full whoa Street watch, checking this the data
20:01
Speaker 1: in the headlines driving markets so far today, Right here
20:04
Speaker 1: on the Financial Exchange Radio Network.
20:06
Speaker 4: I'm seeing some shoppy trading on Wall Street to this
20:08
Speaker 4: point where equity markets are clawing back earlier losses. This
20:12
Speaker 4: comes one day after President Trump's social media posts saying
20:15
Speaker 4: the US and Iran we're having productive talks right now.
20:19
Speaker 4: The Dow now up about a quarter percent, or one
20:21
Speaker 4: hundred and twenty five points, SMP five hundred is edging higher,
20:26
Speaker 4: is mostly flat, NASDAC down four ten seven percent or
20:30
Speaker 4: eighty nine points lower, Rust of two thousand up half
20:33
Speaker 4: a percent ten youre Treasure reeled up three basis points
20:36
Speaker 4: at four point three seven percent, and crude oil up
20:39
Speaker 4: three percent higher today trading right around ninety one dollars
20:43
Speaker 4: a barrel. Tesla reported its first monthly sales increase in
20:47
Speaker 4: Europe and more than a year, where it faces strong
20:49
Speaker 4: competition from Chinese ev maker byd Tesla stock is up
20:53
Speaker 4: about one percent. Meanwhile, The Financial Times reported that Japan's
20:57
Speaker 4: second largest lender, somy So Mitomo Mitsui Financial Group, is
21:02
Speaker 4: working on plans for a possible takeover of investment bank Jeffreys.
21:06
Speaker 4: Jeffrey stock is rising nearly four percent now Elsewhere, Apollo
21:10
Speaker 4: Global Management stock falling about one percent after a filing
21:14
Speaker 4: with the SEC revealed the asset management company will limit
21:17
Speaker 4: withdrawals from its flagship private credit fund to less than
21:20
Speaker 4: half of requests. Este Latta share sinking over eight percent
21:25
Speaker 4: after the Wall Street Journal report of the beauty Giant
21:27
Speaker 4: is in talks to acquire Spanish perfume maker Pweak Brands
21:31
Speaker 4: and video game retailer game Stop. We will report earnings
21:36
Speaker 4: after today's closing bell. I'm Tucker Silva and that is
21:39
Speaker 4: Wall Street. Watching the previous segment, we asked you the
21:42
Speaker 4: trivia question, which NBA team does Steve Balmer own. That'll
21:46
Speaker 4: be the La Clippers. Peter and Sandwich Mass is our
21:49
Speaker 4: winner today, taking home the Financial Exchange Show t shirt.
21:52
Speaker 4: Congrats to Peter and we play trivia every day here
21:55
Speaker 4: on the Financial Exchange. See complete contest rules at Financial Exchange.
22:01
Speaker 2: Paul I have fantastic news for you.
22:05
Speaker 3: I wish my mic was on what's that mic?
22:08
Speaker 2: Fantastic news coming your way, Paul. I have a strategy
22:13
Speaker 2: brought to us by a morning star that over the
22:15
Speaker 2: last thirty six years, had you implemented, would have allowed
22:19
Speaker 2: you to nearly triple the return of the S and P.
22:23
Speaker 2: Five hundred And it only requires you to do something
22:26
Speaker 2: ten times over those thirty six years.
22:28
Speaker 3: I'm all yours.
22:30
Speaker 2: You just have to somehow miraculously miss the worst ten
22:35
Speaker 2: days of the stock market over the last ten years
22:38
Speaker 2: or thirty six years, and you will nearly triple your
22:41
Speaker 2: return by managing to time when the downturn is coming
22:46
Speaker 2: with your crystal ball. With that, I mean, ten ten
22:49
Speaker 2: days work over the course of thirty six years is
22:52
Speaker 2: going to allow my portfolio to have grown by forty
22:55
Speaker 2: four hundred percent over the last thirty six years. That
22:58
Speaker 2: is pretty incredible. I don't see any problems.
23:01
Speaker 3: Now I have two full proof plants. One was my
23:03
Speaker 3: perfect bracket where Warren Buffet's going to pay me a
23:06
Speaker 3: billion dollars yea, And now I got this. Now I've
23:08
Speaker 3: got to get rich schemes going.
23:12
Speaker 2: So people all are aware that, yeah, if you manage
23:16
Speaker 2: to just pick the good days and avoid the bad days,
23:18
Speaker 2: then you can really have a much a much better
23:23
Speaker 2: return on your portfolio. The problem is that both you
23:28
Speaker 2: and I and everybody else in this industry have been
23:30
Speaker 2: doing this for quite some time, and no one's ever
23:32
Speaker 2: met somebody that has successfully missed the down days while
23:35
Speaker 2: capturing the up days at the same time. And by
23:37
Speaker 2: the way, those giant downturns are often very close to
23:43
Speaker 2: the giant upswings that you have to take, that you
23:45
Speaker 2: have to participate in in order to make this strategy work. So,
23:48
Speaker 2: for an example, the third worst day in the last
23:52
Speaker 2: thirty six years occurred on October fifteenth of two thousand
23:55
Speaker 2: and eight, when the S and P lost nine percent.
23:59
Speaker 2: One of the best days during the last period of
24:01
Speaker 2: time was October thirteenth of the same year, when it
24:04
Speaker 2: gained eleven point six percent. March sixteenth of twenty twenty
24:08
Speaker 2: worst single day down nearly twelve percent lo and behold
24:14
Speaker 2: three days prior March thirteenth of twenty twenty twenty twenty
24:18
Speaker 2: up nine and a quarter percent. So let me put
24:22
Speaker 2: it bluntly as the as the article itself actually does too,
24:27
Speaker 2: you could hypothetically beat the stock market substantially by ditching
24:31
Speaker 2: the worst days and participating in all the best ones.
24:34
Speaker 2: You won't. You will have no capability to do this
24:38
Speaker 2: because it is entirely unpredictable and nobody has the means
24:41
Speaker 2: of doing so. Paul, this is obviously you know, I've
24:46
Speaker 2: been speaking tongue in cheek. This is not going to
24:48
Speaker 2: be a successful portfolio or retirement strategy for anybody, but
24:52
Speaker 2: I think people do, and for a good reason. Fear
24:56
Speaker 2: markets like the ones that we are talking about here,
24:59
Speaker 2: where yes days the stock market can and has as
25:03
Speaker 2: recently as six years ago, dropped by twelve percent in
25:06
Speaker 2: a single day. So where do we go for a
25:10
Speaker 2: more successful strategy to ensure that you have enough to
25:13
Speaker 2: retire down the road?
25:14
Speaker 3: You know, Mike, I got this question from a client
25:17
Speaker 3: yesterday where he had mentioned he was approaching retirement and
25:20
Speaker 3: wanted to talk about potentially de risking his portfolio because
25:23
Speaker 3: everything that was going.
25:24
Speaker 2: On in the market, and what did that mean to him?
25:26
Speaker 2: And so what what did de risking mean in his mind?
25:29
Speaker 2: Asking you?
25:30
Speaker 3: He was he was asking if we should be taking
25:32
Speaker 3: less risks in the in the form that would take
25:34
Speaker 3: is selling off some of the socks in his portfolio
25:37
Speaker 3: and putting more of them into bonds. And so what
25:39
Speaker 3: I immediately said, before assessing anything regarding what is going
25:43
Speaker 3: on in markets on a given day, was client, we
25:46
Speaker 3: need to sit down and have a meeting that we're
25:48
Speaker 3: going to have this afternoon and focus on your situation,
25:51
Speaker 3: what retirement looks like for you, and what your needs
25:54
Speaker 3: are from this portfolio before we can assess whether or
25:57
Speaker 3: not we should take some risk off the table. Because
25:59
Speaker 3: everyone sits situation is different and everyone's income needs from
26:02
Speaker 3: their portfolio are going to differ. And so that to
26:05
Speaker 3: me is usually the basis of having the conversation. First,
26:08
Speaker 3: I didn't blindly just say to them, you're right, you're retiring,
26:10
Speaker 3: it's time to de risk the portfolio. There needs to
26:13
Speaker 3: be more context in the situation.
26:14
Speaker 2: Yeah, So I look at it as two ways. One,
26:17
Speaker 2: if you are making investment decisions at all, and this
26:21
Speaker 2: isn't just changes to your allocation, it is what is
26:23
Speaker 2: the right allocation to have, there are some guard rails
26:27
Speaker 2: and the financial plan you know you're assumed withdrawals as
26:31
Speaker 2: you were talking about, should serve as the guard rails
26:35
Speaker 2: on the high end and the low end. Of what
26:36
Speaker 2: you can afford to do with your portfolio, and a
26:39
Speaker 2: good financial advisor wi'll tell you that, like, hey, these
26:41
Speaker 2: are the guard rails. This is the range at which
26:44
Speaker 2: you can accomplish your goals with a high degree of
26:48
Speaker 2: risk and likely a higher degree of return, and a
26:50
Speaker 2: lower degree of risk and a likely lower degree of return.
26:53
Speaker 2: Then the second step is to ask yourself, Okay, now,
26:57
Speaker 2: let me put myself in the position of the retired
26:59
Speaker 2: person who's lifting entirely off of Social Security and this portfolio.
27:04
Speaker 2: How much can I stomach? So it's it's guardrails set up.
27:09
Speaker 2: And then okay, where am I going to be most
27:13
Speaker 2: comfortable in one of these events? Because you know what,
27:16
Speaker 2: I can talk all about guardrails and financial history and
27:19
Speaker 2: the worst days and the best days in the stock
27:21
Speaker 2: market and long recessions, short recessions, market downturns. If I
27:27
Speaker 2: talk my face blue and you know you the investors
27:30
Speaker 2: still say sounds good, I don't care sell everything, then
27:33
Speaker 2: guess what. Nobody's done their job here, and you're still
27:35
Speaker 2: coming out with a worst outcome. So this is the
27:39
Speaker 2: complexity of managing a portfolio, specifically in retirement, when your
27:45
Speaker 2: entire worldview begins to change. How much longer am I
27:49
Speaker 2: going to live? What if I don't have enough money
27:51
Speaker 2: to you know, support my kids, my grandchildren? What if
27:56
Speaker 2: my you know, wife gets sick? Am I going to
27:57
Speaker 2: have enough money? It becomes such a bigger focus when
28:01
Speaker 2: you are not day to day focusing on making that
28:04
Speaker 2: next dollar and saving for retirement, but instead ensuring that
28:06
Speaker 2: it lasts. If you don't have a framework for determining
28:11
Speaker 2: what's the right allocation for me, that's a red flag
28:16
Speaker 2: to me. Yeah, like, maybe you do have a framework
28:18
Speaker 2: and you've thought it through. But if you haven't, if
28:20
Speaker 2: it's just been set it, forget it and don't worry
28:22
Speaker 2: about it. I'm telling you that you need to have
28:24
Speaker 2: a better framework for how you are going to allocate
28:27
Speaker 2: your assets to make sure they last for you. If
28:30
Speaker 2: you want some help establishing that framework and working with
28:34
Speaker 2: a professional who does that for a living and can
28:36
Speaker 2: deliver or attempt to deliver some of that peace of
28:39
Speaker 2: mind to you, give the folks at Armstrong Advisory Group
28:42
Speaker 2: a call the numbers eight hundred three nine three for
28:44
Speaker 2: zero zero one. You can book a time for us
28:47
Speaker 2: to call you back at Armstrong Advisory dot com as well,
28:50
Speaker 2: but once again that phone number eight hundred three nine
28:53
Speaker 2: three for zero zero one.
28:55
Speaker 1: The proceeding was paid for by Armstrong Advisory Group, a
28:57
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29:00
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29:03
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29:06
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29:31
Speaker 4: Hey, if you got questions for our new segment called
29:34
Speaker 4: the Money Matters mail Bag, here's what you gotta do.
29:37
Speaker 2: Just give us a call.
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30:07
Speaker 2: Thirty three ninety three double nine to four triple three.
30:10
Speaker 2: Got it, Yeah, it's because it's a tough one.
30:15
Speaker 3: It's a really good number.
30:16
Speaker 2: It is a good number. You got all the same digits.
30:19
Speaker 2: I actually really like the number. I also like saying
30:22
Speaker 2: phone numbers in weird ways that nobody can understand. Sacer
30:25
Speaker 2: Let time, Paul, what do you have?
30:27
Speaker 3: Pro Pedel is raising fifteen million dollars as if investors
30:33
Speaker 3: been in the supports us growth. The reason I'm bringing
30:35
Speaker 3: this up, Padel, It is a hybrid of tennis and squash.
30:39
Speaker 3: I recently played it several times.
30:43
Speaker 2: Squash.
30:43
Speaker 3: Yeah, So the way that it works is pick a ball,
30:46
Speaker 3: I would say small est court tennis bigger court size wise,
30:50
Speaker 3: it's right in the middle between the two, a pickaball
30:52
Speaker 3: court and a tennis court. The Padel court is in
30:54
Speaker 3: the middle of those two. The reason that.
30:56
Speaker 2: You're playing against a wall why squash.
30:58
Speaker 3: The reason that hash squash elements to it is the
31:01
Speaker 3: back wall of it is a glass wall like you
31:05
Speaker 3: would see in squash, so that you can hit the ball,
31:09
Speaker 3: it can bounce, rebound off the wall, you can still
31:11
Speaker 3: live play it. At that point. The serving is underhand,
31:17
Speaker 3: similar to that of pick a ball, so.
31:19
Speaker 4: You're surrounded by glass like a racket ball court.
31:23
Speaker 3: Correct except except it's expensive. It feels like I was riding
31:28
Speaker 3: some of it's coattails playing, but it is not. It
31:32
Speaker 3: is is loud. This is not going to be this uh,
31:35
Speaker 3: you know, get it out of my neighborhood thing. Because
31:37
Speaker 3: typically what you need to have is for a pretty
31:41
Speaker 3: sizable court, you need to have the glass backing, and
31:44
Speaker 3: around the New England area, it's going to be indoor
31:46
Speaker 3: if you want to be able to play it all
31:48
Speaker 3: year round. So you're talking about big warehouse structures in
31:51
Speaker 3: order to have these clubs. But I bring it up
31:53
Speaker 3: that it is the next sort of pick a ball
31:56
Speaker 3: that has gotten a lot of popularity throughout the unit.
31:59
Speaker 3: It's just starting to trickle its way through the United States.
32:02
Speaker 3: It has raised money for its new league. There's supposedly
32:07
Speaker 3: a target for twenty thousand courts, the US Padel Association
32:10
Speaker 3: said over the course of the next you know, decade
32:14
Speaker 3: or so, sorry, the next four or five years.
32:16
Speaker 2: I'm probably wrong, but I'm gonna say not gonna happen.
32:18
Speaker 3: I Well, my question is who's gonna make money the
32:21
Speaker 3: pickaball investments. I remember, Brady, all these guys are investing
32:24
Speaker 3: in and the same thing is in this piece. Here
32:26
Speaker 3: there's Derek Jeter and Serena Williams investing in these leagues
32:29
Speaker 3: like here, where are they gonna get their money?
32:30
Speaker 2: Baby boomers can't afford it, and or a lot of
32:33
Speaker 2: baby boomers can't afford it in the same way they
32:34
Speaker 2: can't pick a ball, and they're gonna hurt themselves in
32:37
Speaker 2: ways that they won't pick a ball.
32:38
Speaker 3: Allegedly it was better on the joints, but I don't
32:40
Speaker 3: know how that's possible, because you definitely run a lot
32:42
Speaker 3: more than you and pack.
32:43
Speaker 2: I've played squash before. I just face planted into the
32:45
Speaker 2: glass wall like every thirty seconds. Granted I'm an uncoordinated moron,
32:50
Speaker 2: So like there's something to that. Anybody that's listening that
32:53
Speaker 2: knows me understands why I might be, you know, concerned
32:55
Speaker 2: about these people. But yeah, I don't say it. I
32:57
Speaker 2: don't see it. Take it. I mean, and pick a
33:00
Speaker 2: ball was all the rage during COVID. I was playing
33:02
Speaker 2: it in my driveway. You can't do that with this sport.
33:05
Speaker 2: I don't know. I don't know.
33:06
Speaker 3: You cannot know, you cannot. It's become really popular in
33:09
Speaker 3: Europe and South America, and apparently it's making its way
33:11
Speaker 3: over to the US. But we'll see. I don't think
33:14
Speaker 3: it will be as all encompassing as the pickleball world.
33:17
Speaker 3: Like you said, a little hard to get on those courts.
33:20
Speaker 2: Bad idea of the day. Home insurance crisis could use
33:23
Speaker 2: a public assist. So here's the story. Home insurance is
33:28
Speaker 2: getting pretty expensive. It's getting pretty expensive because where we build,
33:35
Speaker 2: homes keep flooding and getting hit by hurricanes, and so
33:40
Speaker 2: insurance companies keep having to oh, sorry, I forgot wildfires.
33:43
Speaker 2: They keep burning the homes down too, and so insurance
33:46
Speaker 2: companies are left there sitting saying I just had to
33:49
Speaker 2: pay out hundreds of millions of dollars. I'm going to
33:52
Speaker 2: raise prices. The argument from the author here is, hey,
33:56
Speaker 2: if we just have a public federal option for a
34:00
Speaker 2: reinsurance company to cover US home insurers, then it will
34:04
Speaker 2: make home insurance more affordable. Yes, yes, it will, because
34:09
Speaker 2: the US government will be subsidizing it and therefore absorbing
34:14
Speaker 2: the risk of all of the problematic building scenarios that
34:19
Speaker 2: we have where people keep building homes in pretty places
34:23
Speaker 2: where they burn down and get flooded every few years. Well,
34:26
Speaker 2: this is a dumb idea.
34:27
Speaker 3: Well, they build up the house and market once. Well
34:29
Speaker 3: I why not do it again? No, I agree with you.
34:31
Speaker 2: I agree with see the flood insurance program. We have
34:35
Speaker 2: a national flood insurance program. I am a customer of
34:38
Speaker 2: the flood insurance program. Do you know why they make
34:40
Speaker 2: you because well, hey, yes, my mortgage broker, my mortgage company,
34:44
Speaker 2: does force me to have a flood flood insurance policy.
34:47
Speaker 2: But the reason I have it is because it costs
34:50
Speaker 2: twelve hundred dollars a year to afford my beautiful home
34:53
Speaker 2: in Massachusetts, because it's close to a river. That policy
34:58
Speaker 2: is only available no insurance company out that would write it,
35:01
Speaker 2: But the National Flood Insurance Program has backed it up
35:04
Speaker 2: to say, yeah, you're barely in a flood plane, so
35:06
Speaker 2: go ahead. By the way, my backyard floods every summer.
35:11
Speaker 2: I am a flood risk. And the only reason that
35:14
Speaker 2: owning the home in that space is doable is because
35:17
Speaker 2: the national government says, hey, we're going to subsidize mic
35:19
Speaker 2: armstrances flood insurance policy. It's a bad idea very costly
35:25
Speaker 2: go see Florida. Florida has had to do this because
35:28
Speaker 2: they don't want to drive people out of the state
35:31
Speaker 2: insurance companies were starting to leave the state, and they've
35:35
Speaker 2: had to step in and become the insurer of last resort.
35:37
Speaker 2: Now it hasn't completely collapsed there. They have pushed through
35:41
Speaker 2: premium increases enough to allow for insurance to come back
35:44
Speaker 2: into the state. They've made some reforms to the lawsuits
35:47
Speaker 2: that were being filed in the state of Florida. But
35:50
Speaker 2: we do not want that on a national level. You
35:53
Speaker 2: want insurance companies. I hate them as much as everybody
35:57
Speaker 2: else does. Don't get me wrong, I recognize why. And
36:00
Speaker 2: surance companies are unpopular. They reject claims all the time,
36:02
Speaker 2: they're difficult to deal with. There were your worst nightmare
36:05
Speaker 2: in your time of crisis. I agree with all of
36:08
Speaker 2: those things. Having the federal government to be the insurance
36:11
Speaker 2: company instead is a stupid idea that is going to
36:14
Speaker 2: make matters worse. Don't do it, Oh, don't do it.
36:18
Speaker 3: You need choices, You need different options out there. You
36:20
Speaker 3: can't just have one shop stop. Particularly a federal government
36:24
Speaker 3: running a whole program can be a little scary for
36:27
Speaker 3: them to jump in there.
36:28
Speaker 2: Then what you're going to have is you're gonna have
36:29
Speaker 2: politicians determining insurance rates. Guess what if you're a politician
36:34
Speaker 2: from Florida, you are going to push for the maps
36:37
Speaker 2: to be drawn in a way that benefits your constituents
36:40
Speaker 2: rather than the current scenario, which again not perfect. But
36:44
Speaker 2: the insurance companies are looking around there and saying, yeah,
36:47
Speaker 2: coastal home in New Hampshire, sorry, not interested in insuring
36:50
Speaker 2: because it's going to be underwater in seven years. If
36:53
Speaker 2: you instead have politicians elected officials saying no, we get
36:57
Speaker 2: to be the ones to set all of this, then
36:59
Speaker 2: you are once again interfering in free markets. You are
37:02
Speaker 2: going to be subsidizing home insurance rates for the riskiest
37:05
Speaker 2: of borrowers, the riskiest of owners, and I guess you
37:10
Speaker 2: know you're going to just disrupt free markets and cause
37:15
Speaker 2: an ineffective and deficit growing insurance problem for you know,
37:22
Speaker 2: all of the United States. Do you live in a
37:23
Speaker 2: non flood prone area, You should hate this idea because
37:26
Speaker 2: you're going to subsidize.
37:27
Speaker 3: Oh my goodness, that would be awful. But I don't
37:30
Speaker 3: really know what the real solution is because these natural
37:32
Speaker 3: disasters aren't going anywhere in some of these coastal areas.
37:35
Speaker 2: The real solution is our insurance across the board should
37:37
Speaker 2: cost a heck of a lot more than it does already. Mike,
37:40
Speaker 2: are you crazy.
37:41
Speaker 3: I'll let them hear you like.
37:42
Speaker 2: That's the reality. Guys. You want to live on the coast,
37:45
Speaker 2: in those beautiful areas where your home floods, your neighborhood
37:48
Speaker 2: floods every seven years, should be a lot more expensive
37:50
Speaker 2: than it currently is. It's all the time we have
37:52
Speaker 2: for the financial exchange. I'm clearly heated. I need to
37:54
Speaker 2: sit in some Americandish taking a while. Markets are in
37:58
Speaker 2: mixed territory. SMP in doubt up, Nasdaq down a little bit.
38:01
Speaker 2: We're gonna take a quick break for the next twenty
38:03
Speaker 2: two hours, but we will be back at it tomorrow.
38:05
Speaker 2: Have a great rest of day.