Latest / The Financial Exchange Show / Is This the Setup for a Recession? Markets Stay Calm Amid Rising Risks

Transcript

Is This the Setup for a Recession? Markets Stay Calm Amid Rising Risks · The Financial Exchange Show

0:00
Speaker 1: The Financial Exchange is produced by Money Matters Radio and
0:03
Speaker 1: is hosted by employees of the Armstrong Advisory Group, a
0:05
Speaker 1: registered investment advisor. All opinions expressed are solely those of
0:09
Speaker 1: the hosts. Do not reflect the opinions of Armstrong Advisory
0:11
Speaker 1: or anyone else. Investments can lose money. This program does
0:14
Speaker 1: not offer any specific financial or investment advice. Please consult
0:17
Speaker 1: your own financial, tax, and estate planning advisors before making
0:20
Speaker 1: any investment decisions. Armstrong Advisory and the advertisers heard on
0:23
Speaker 1: this program do not endorse each other or their services.
0:26
Speaker 1: Armstrong and Money Matters Radio do not compensate each other
0:28
Speaker 1: for referrals and are not affiliated. This is the Financial
0:34
Speaker 1: Exchange with Mike Armstrong and Mark Vandetti. Your exclusive look
0:39
Speaker 1: at business and financial news affecting your day, your city,
0:43
Speaker 1: your world. Stay informed and up to date about economic
0:47
Speaker 1: and market trends, plus breaking business news every day. The
0:51
Speaker 1: Financial Exchange is a proud partner of the Disabled American
0:54
Speaker 1: Veterans Department of Massachusetts. Help us support our great American
0:58
Speaker 1: heroes by visiting das V five K dot Boston and
1:02
Speaker 1: making a donation Today. Face is the Financial Exchange with
1:06
Speaker 1: Mike Armstrong and Mark Vandetti.
1:10
Speaker 2: Good morning, Welcome back to the Financial Exchange. It's Mike,
1:13
Speaker 2: Mark and Tucker with you on a Tuesday where we've
1:15
Speaker 2: got equities again staging a rebound here the S and
1:20
Speaker 2: P five hundred currently up half a percent and Nasdaq
1:23
Speaker 2: up a bit more. As we look around at other
1:26
Speaker 2: areas of the market, Oil prices moving up but very
1:29
Speaker 2: slightly today, pretty stable ninety four dollars per barrel on
1:33
Speaker 2: the West Texas crude benchmark, Treasury yields moving slightly lowered
1:38
Speaker 2: to just under four point two percent, and taking a
1:44
Speaker 2: look at foreign exchange dollar appreciating slightly against most other
1:50
Speaker 2: currencies here in early trading. In terms of new news
1:55
Speaker 2: out of Iran, the Iran has targeted you AE energy
1:58
Speaker 2: infrastructure as a gas field was set ablaze and another
2:01
Speaker 2: tanker was struck near the Strait of Hormuz. I'm sure
2:06
Speaker 2: we'll have more and more coverage of all of that.
2:09
Speaker 2: The United States has been requesting assistance from China, NATO allies,
2:15
Speaker 2: among others in reopening the Strait of Hormuz. Thus far,
2:19
Speaker 2: you've seen outright declines from Japan, Germany and several others
2:26
Speaker 2: here In terms of being able to supply assets to
2:31
Speaker 2: do so, and frankly, whether that is a result of
2:37
Speaker 2: them unwilling, being unwilling to assist or frankly unable to
2:40
Speaker 2: assist due to lack of investment in their military. You know,
2:44
Speaker 2: we can talk about who's if you want to play
2:46
Speaker 2: the blame game, that's useful, but ultimately, their unwillingness and
2:51
Speaker 2: inability to assist in this is the reality.
2:54
Speaker 3: And beating them up over tariffs for the last year
2:56
Speaker 3: didn't make them more willing to assist.
2:58
Speaker 4: That's crazy.
2:59
Speaker 2: And you could also argue that failing to beat them
3:02
Speaker 2: up on their NATO spending has led to.
3:04
Speaker 3: I don't see how that if they had bigger you
3:06
Speaker 3: said that they had more capability, they'd be more willing
3:08
Speaker 3: to deploy it. In this case, I haven't heard any
3:10
Speaker 3: of them cite that as a reason fair. I know
3:13
Speaker 3: you're trying to be fair and balance. I respect that,
3:15
Speaker 3: but they seem to be enjoying it.
3:17
Speaker 2: Other breaking news yet, US counter Terrorism Director Joe Kent
3:21
Speaker 2: has resigned over the war as a protest to the
3:24
Speaker 2: war in Iran, claiming that Iran posed no imminent threat.
3:29
Speaker 2: Moving on from the events there, in Vidia is making
3:33
Speaker 2: a trillion dollar forecast at their annual product expo. So
3:37
Speaker 2: right now, what's going on here is the major event
3:41
Speaker 2: for Nvidia that comes once a year where in Vidia
3:44
Speaker 2: and many other showcase their different products and strategies for
3:48
Speaker 2: the upcoming year is being displayed, and Nvidia is trying
3:52
Speaker 2: to make a shift in their business from their traditional
3:57
Speaker 2: assets that have been designed for training AI models, which
4:00
Speaker 2: has been all the rage and all the focus for
4:02
Speaker 2: the last two years, to moving on to I guess,
4:06
Speaker 2: supporting those existing AI models and making them more efficient,
4:11
Speaker 2: more usable, and better at inference and what they do.
4:15
Speaker 2: And that requires a different type of chip that in Nvidia.
4:19
Speaker 2: How do I put this, because I don't think you
4:21
Speaker 2: can say that in Nvidia does not have a foothold there,
4:24
Speaker 2: but they do not have the same dominance that they
4:26
Speaker 2: do in the GPUs in this specific space. And so
4:31
Speaker 2: in Vidia is being asked, okay, you know, how are
4:33
Speaker 2: you going to ensure that you maintain leadership in this space?
4:37
Speaker 2: And their commitment is to as far as I can tell,
4:40
Speaker 2: their commitment that they're making is to pretty much outspend
4:43
Speaker 2: any competition of theirs so that they can continue to
4:45
Speaker 2: corner the market or nearly corner the market on every
4:49
Speaker 2: cutting edge semiconductor that gets sold to the AI industry.
4:52
Speaker 4: And I got to.
4:54
Speaker 2: Say, tough to bet against the company that has as
4:58
Speaker 2: much cash on hand as does the flash Like, it's
5:01
Speaker 2: really tough to envision a scenario where some new startup
5:05
Speaker 2: comes out and says, oh, yeah, we made a semiconductor
5:10
Speaker 2: or a series of chips or a data center build
5:12
Speaker 2: out that is going to be more cost effective, more efficient,
5:16
Speaker 2: and better at inference than what Nvidia can produce for you.
5:19
Speaker 5: Yeah.
5:19
Speaker 3: I thin guess you could argue that their price, which
5:23
Speaker 3: is not outrageous relative to earnings, They're not one of
5:27
Speaker 3: these spectacularly optimistically valued companies. There's someone richly valued, right,
5:33
Speaker 3: but not unreasonably so. But I think investors probably assume
5:38
Speaker 3: that they'll maintain a lead, maybe not their current lead
5:41
Speaker 3: in the current sort of generation of chips yep, and
5:44
Speaker 3: do a little bit of innovating sort of on par
5:47
Speaker 3: with this This isn't very rigorous, but on par with
5:51
Speaker 3: sort of the market pace what other companies are are doing.
5:54
Speaker 2: Nonetheless, the stock price really since August of last year
5:58
Speaker 2: is bounced around but largely been steady. So on August
6:02
Speaker 2: eleventh of last year, the company was trading at one
6:04
Speaker 2: hundred and eighty two dollars six cents. We're now seeing
6:06
Speaker 2: at one hundred and eighty two thirty four. You did
6:09
Speaker 2: briefly get over two hundred dollars a share back in October,
6:11
Speaker 2: but other than that, you've basically been in a range
6:14
Speaker 2: of one hundred and seventy five to one hundred ninety
6:17
Speaker 2: dollars per share, and not much has been enough to
6:19
Speaker 2: quite move this company's stock. You know, during that period
6:24
Speaker 2: of time, you've had a slight loosening and restrictions on
6:26
Speaker 2: chip sales to China, You've had just increased demand. And
6:31
Speaker 2: I guess the one other part that I think has
6:32
Speaker 2: changed since August of last year is more of an
6:35
Speaker 2: acknowledgment that the tools themselves, which were you know, somewhat
6:41
Speaker 2: there was a narrative, in my opinion, for much of
6:45
Speaker 2: the first half of twenty twenty five, as well as
6:47
Speaker 2: probably twenty twenty four among some investors that hey, this
6:50
Speaker 2: technology that's being developed is you know, it's great, it's interesting,
6:54
Speaker 2: but is it really going to change the world in
6:57
Speaker 2: the way that AI executives are claiming. I think that
7:01
Speaker 2: narrative has shifted since you know Q four of last
7:04
Speaker 2: year or two. Wow, these tools actually are very impressive.
7:07
Speaker 2: Look at how it's going to demolish software companies. And
7:10
Speaker 2: yet it hasn't been quite enough to lift in Video
7:13
Speaker 2: stock up back to levels that they saw in Q
7:17
Speaker 2: four of twenty twenty five. So again, maybe that's logical,
7:22
Speaker 2: but it has not been you know that shift in
7:25
Speaker 2: narrative that I've detected around hey, that this really is
7:29
Speaker 2: here to stay. The technologies that are being developed really
7:31
Speaker 2: are going to disrupt existing companies and we will need
7:34
Speaker 2: even more semiconductors. Not quite enough to lift in Video's
7:37
Speaker 2: share price.
7:38
Speaker 3: Yeah, but their pe is close to forty, which is
7:41
Speaker 3: moderate by sector standards. So it's not like investors have
7:47
Speaker 3: soured on it, at least not of evaluation perspective. It's
7:49
Speaker 3: just not eye popping the way it used to be.
7:51
Speaker 4: The fact going to.
7:52
Speaker 2: It, Yeah, the fact is that in Nvidia, investors have
7:55
Speaker 2: become used to the idea that the stock pops ten
8:00
Speaker 2: percent on the earnings calls, and that is not what
8:02
Speaker 2: you've experienced over the last six months.
8:04
Speaker 3: It's all christ in the expectation of is this sort
8:07
Speaker 3: of makes sense?
8:08
Speaker 4: To me anyway.
8:08
Speaker 2: Yeah, let's take a quick break. When we return, we're
8:11
Speaker 2: going to be playing a little bit of trivia on
8:14
Speaker 2: the Financial Exchange and then moving to private credit and
8:17
Speaker 2: the potential blow ups there.
8:18
Speaker 1: Next, Market Insight, retirement strategies, real talk about Wall Street
8:23
Speaker 1: and economic trends, all live every day on our YouTube channel.
8:27
Speaker 1: Go to YouTube dot com slash the Financial Exchange Show.
8:30
Speaker 1: This is the Financial Exchange. The Financial Exchange is now
8:34
Speaker 1: available every day from eleven to noon non Serious EXMS
8:37
Speaker 1: Business Radio Channel one thirty two. Stay informed about the
8:41
Speaker 1: latest from Wall Street, fiscal policy, and breaking business news.
8:44
Speaker 1: Every day. The Financial Exchange is live on Serious Exms
8:48
Speaker 1: Business Radio Channel one thirty two. This is the Financial
8:52
Speaker 1: Exchange Radio Network.
8:56
Speaker 5: Remember you can watch the show live every day on
8:59
Speaker 5: our U page. We'll have breaking business news and all
9:02
Speaker 5: of our content is also archive, so if you want
9:05
Speaker 5: to go back and see an air interview or a
9:08
Speaker 5: discussion about a specific topic, it's all there with the
9:12
Speaker 5: click of a button. Just search the Financial Exchange on
9:16
Speaker 5: YouTube and be sure to hit that subscribe button. Time
9:19
Speaker 5: for trivia here on the Financial Exchange. And as we
9:22
Speaker 5: all know, today is Saint Patrick's Day, so let's do
9:25
Speaker 5: some trivia based on that according to our According to
9:30
Speaker 5: Irish lore, what animal did Saint Patrick drive out of Ireland?
9:35
Speaker 5: Once again? According to Irish lore, what animal did Saint
9:39
Speaker 5: Patrick drive out of Ireland? Be the fourth person today
9:43
Speaker 5: to text us at six one seven three six to
9:46
Speaker 5: two thirteen eighty five with correct answer along with the
9:49
Speaker 5: keyword trivia, and you'll win a Financial Exchange Show T shirt.
9:53
Speaker 2: Once again.
9:54
Speaker 5: The fourth correct response to text us to the number
9:57
Speaker 5: six one seven three six two thirteen eighty five with
10:00
Speaker 5: the correct answer along with the keyword trivia will win
10:03
Speaker 5: that T shirt. See complete contest rules at Financial Exchange
10:07
Speaker 5: Show dot com mark.
10:08
Speaker 2: Prior to the events in Iran, there are two main
10:11
Speaker 2: market forces in the United States that I think investors
10:13
Speaker 2: were contending with. One was the infatuation over artificial intelligence.
10:18
Speaker 4: How much more is going to be spent there?
10:20
Speaker 2: The six hundred and fifty billion dollars from the major
10:23
Speaker 2: four spenders that we've covered Amazon, Microsoft, Meta and Alphabet,
10:27
Speaker 2: the disruption to certain software companies. The other factor that
10:31
Speaker 2: I think was looming and at least being paid attention
10:34
Speaker 2: to the likes of us, was the private credit space
10:38
Speaker 2: potential issues There signs of deterioration. Now we throw on
10:43
Speaker 2: top of that a you know, oil price spike and
10:47
Speaker 2: an inflation shock, and frankly, I find it miraculous that
10:51
Speaker 2: equities are only I've never seen or.
10:53
Speaker 3: Read about a confluence of events like we're experiencing now.
10:57
Speaker 3: Were you hard to compare time Richly, they're overvalued, arguably
11:02
Speaker 3: stock market by.
11:03
Speaker 2: At least by any any measures.
11:05
Speaker 3: Elevated inflation, fiscal policy that went off the rails a
11:10
Speaker 3: long time ago and has never regained its footing. By that,
11:13
Speaker 3: I mean huge deficits, even in peace time, such that
11:16
Speaker 3: we don't have room to expand them, probably without pushing
11:19
Speaker 3: up interest rates. Really mike a perfect storm that would
11:23
Speaker 3: test even the ablest of leaders and fed policymakers.
11:30
Speaker 2: Nonetheless, we've got equities that are less than five percent
11:32
Speaker 2: off their all time highs less than two percents away
11:34
Speaker 2: from where they were.
11:35
Speaker 4: Prior to the amazing Iran.
11:38
Speaker 2: But a lot being written again about private credit, and
11:41
Speaker 2: I think important to keep it front and center here
11:44
Speaker 2: in spite of all the other distractions that are out there.
11:47
Speaker 2: So peace being written today in Bloomberg, private credit is
11:50
Speaker 2: entering its musical chairs phase. I don't personally derive any
11:55
Speaker 2: positive connotations in spite of.
11:57
Speaker 3: That, Like, if this blows up, by the way, nobody's
11:59
Speaker 3: going to blame private credit if things, because markets are
12:02
Speaker 3: richly valued and stuff. It's going to be a footnote.
12:05
Speaker 2: But anyway, I'll read from the piece here. Every financial
12:08
Speaker 2: crisis has a moment usually identified only in retrospect, when
12:11
Speaker 2: an obscure product intended to mitigate risk spreads through what
12:15
Speaker 2: author Rick bookstab are called tightly coupled interconnections to cause
12:19
Speaker 2: widespread damage. He goes on to talk about, you know,
12:23
Speaker 2: subprime mortgages and other areas of other financial crises and
12:28
Speaker 2: makes the argument that the largely invisible private credit industry
12:33
Speaker 2: that has accumulated some estimated three trillion dollars worth of
12:37
Speaker 2: loans and investments into it is now becoming a little
12:40
Speaker 2: bit more public and we're seeing a little bit more
12:42
Speaker 2: of the of the reality of the space, as lawsuits
12:47
Speaker 2: between banks and private credit companies take place, as private
12:51
Speaker 2: credit companies have to restrict withdrawals. It's, of course, I mean,
12:57
Speaker 2: the mere nature of the industry that it is private
13:01
Speaker 2: credit makes it very difficult to assess what the potential
13:04
Speaker 2: risks are. So I don't want to talk about to
13:07
Speaker 2: what degree it could blow up because I don't think
13:10
Speaker 2: it's easy to understand that.
13:12
Speaker 4: Maybe, but if it were, sorry, what does blow up mean? Yeah?
13:14
Speaker 3: Private credit, what does it even mean? It means a
13:17
Speaker 3: lot of loans default yep, and then the owners of those,
13:20
Speaker 3: mostly institutional investors but increasingly retail as well, lose money.
13:26
Speaker 3: Is that going to have knock on effects? Or is
13:29
Speaker 3: it a consequence of a bigger disturbance.
13:32
Speaker 2: So let's talk about how it could have might have
13:34
Speaker 2: knock on effects, might not. The entire reason that this
13:37
Speaker 2: industry exists, by the way, is because POSTGFC, Dodd Frank
13:42
Speaker 2: and other rules that were passed made it so that we,
13:45
Speaker 2: as sidey said, we are not willing to allow these
13:49
Speaker 2: giant financial institutions that hold all of our cash, all
13:51
Speaker 2: of our deposits, and all of our future security in
13:55
Speaker 2: the way of you know, handling our paychecks every week.
13:58
Speaker 2: We're not willing to let them make such risky bets
14:01
Speaker 2: on different areas of the market. So make it so
14:03
Speaker 2: that they're not allowed to. And by and large, you know,
14:06
Speaker 2: I know, you know, we're going to talk about how
14:09
Speaker 2: you know, Western Alliance issuing Jeffrey's Financial But by and large,
14:13
Speaker 2: major banks, especially the too big to fail ones, do
14:16
Speaker 2: not have a lot of exposure here. But that does
14:19
Speaker 2: not mean that risk disappeared. It did not disappear, It
14:23
Speaker 2: just went elsewhere, right, I mean, there are other major
14:27
Speaker 2: financial institutions that we rely on to some degree that
14:31
Speaker 2: do have that same risk exposure.
14:35
Speaker 3: It's part of the shadow banking system, which is as
14:39
Speaker 3: big or bigger than the actual banking system. And the
14:41
Speaker 3: shadow banking system it sounds sinister, it's not. It just
14:44
Speaker 3: means it's outside the glow one maybe a little bit,
14:46
Speaker 3: it's outside the glare of regulatory spotlights.
14:50
Speaker 2: Here's my problem with all of this is, again, the
14:54
Speaker 2: Dodd Frank and all of these pieces were intended to
14:56
Speaker 2: set up a system where the giant financialtions that we
15:00
Speaker 2: rely on won't be sunk by another financial crisis. And
15:06
Speaker 2: I'm convinced that JP Morgan and Bank of America won't
15:09
Speaker 2: go belly up if private credit is a big issue,
15:12
Speaker 2: or I at least don't think so. But there are
15:14
Speaker 2: other financial institutions that everyone in America relies upon that could.
15:19
Speaker 3: Yeah, this is where the interconnections that Bookstabber writes about
15:23
Speaker 3: come into play. It's almost like when you're having a
15:25
Speaker 3: weird symptom and you go to the doctor and they
15:28
Speaker 3: can't connect it to anything, but as it turns out
15:29
Speaker 3: as a symptom of something systemic, but it's hard to
15:32
Speaker 3: see because the body's still a little bit mysterious. I'm
15:35
Speaker 3: way outside of my very narrow area of expertise here,
15:39
Speaker 3: but we've all experienced this. They couldn't figure out what
15:42
Speaker 3: was wrong, and then they established some connection that boy
15:45
Speaker 3: nobody thought to trace. And that's sort of what happens
15:48
Speaker 3: with private credit. A loan goes bad, a small investment
15:52
Speaker 3: manager fails, the bank that loan them, the money fails,
15:56
Speaker 3: the bank that loan that bank the money fails, and
15:59
Speaker 3: you can see the domino's hitting each other and getting
16:02
Speaker 3: successively larger. And in a way, that's what happened in
16:05
Speaker 3: eight oh nine.
16:06
Speaker 2: And to identify those institutions that I'm more worried about
16:10
Speaker 2: in this type of crisis, it's endowments.
16:12
Speaker 3: Okay, now you wouldn't how would they're losing money.
16:16
Speaker 4: I'm not sure how.
16:18
Speaker 2: Yeah, I'm not sure how them losing moneystemic financial tension.
16:22
Speaker 3: Okay, they have to dip into their reserves to pay benefits.
16:27
Speaker 2: Or worst case scenario, PBGC has to kick in.
16:30
Speaker 4: There you go.
16:31
Speaker 2: That's again if you have a real domino effect here,
16:33
Speaker 2: let's talk about reality.
16:34
Speaker 4: PVGC they don't have.
16:36
Speaker 3: Punch funds, don't allocate enough to private credit. They've been
16:38
Speaker 3: doing it for twenty years. Though sophisticated enough to do it.
16:41
Speaker 3: There are some late comers. But and it's it's a
16:43
Speaker 3: small portion of their portfolio.
16:45
Speaker 4: And the problem is, I'm asking more than I don't know.
16:48
Speaker 3: I'm telling you if it's if it's limited to private credit,
16:51
Speaker 3: and that is a huge If it's not going to
16:53
Speaker 3: impair any institutional investment pool's ability, I don't think to
16:56
Speaker 3: meet its obligations. The problem is it happens when everything
16:59
Speaker 3: else is crash. What are you gonna sell insurance companies
17:04
Speaker 3: they have a lot of high quality stuff in their
17:07
Speaker 3: general account. Again, if it's limited to private credit, ouch,
17:10
Speaker 3: we got to write a lot of this stuff down.
17:12
Speaker 3: But it shouldn't be existential. You know, this sounds naive
17:16
Speaker 3: because it's not going to happen in isolation, right, stocks
17:19
Speaker 3: are going to be falling at the same time and
17:21
Speaker 3: so forth.
17:21
Speaker 2: Yeah, I think that is the overall point that I
17:24
Speaker 2: have here is I don't think the banks are a problem.
17:28
Speaker 2: If a private endowment for Princeton, you know, takes a
17:31
Speaker 2: massive hit, I'm not sure how it affects every day Americans.
17:34
Speaker 2: But if pension plans because of a culmination of different factors,
17:37
Speaker 2: including private credit, take a massive hit, if insurance companies
17:41
Speaker 2: that provide life insurance to everyday Americans take a massive hit,
17:45
Speaker 2: are we sitting here saying, oh, those institutions are less
17:50
Speaker 2: systemically important to American society than giant banks.
17:54
Speaker 4: I'm not sure that you can.
17:56
Speaker 2: Sit here and say that accurately. And so I don't
17:59
Speaker 2: know that this will be the thing that sets off
18:01
Speaker 2: a crisis or contributes to one. But again, risk doesn't
18:06
Speaker 2: just disappear when you pass a new law. It migrates elsewhere,
18:10
Speaker 2: and it has migrated elsewhere, And as many have been writing,
18:14
Speaker 2: we are starting to see more and more of those
18:17
Speaker 2: entanglements and interconnections. And maybe it is a symptom of
18:20
Speaker 2: something worse.
18:20
Speaker 3: You just don't know the path that's gonna be. Like
18:22
Speaker 3: you dump a lot of snow on a roof and
18:24
Speaker 3: you just let it sit there, and you got ice
18:26
Speaker 3: dams and where's it gonna come in? Is it gonna
18:29
Speaker 3: come in the kitchen? No, it came in the It
18:31
Speaker 3: came in the bedroom closet. How the heck did the
18:34
Speaker 3: water find its way?
18:35
Speaker 4: You just don't.
18:35
Speaker 3: In retrospect, you can trace it and it's obvious, but
18:39
Speaker 3: you just don't know the channels it's gonna take beforehand.
18:43
Speaker 4: No, no, you don't.
18:44
Speaker 2: And again, the latest blow up on all this is
18:47
Speaker 2: that Western Alliance is now suing Jeffreys in you know,
18:51
Speaker 2: exposure to their private credit portfolio.
18:54
Speaker 4: All of this, there'll be a lot of that.
18:56
Speaker 2: All of this, by the way, in completely unsurprising news.
19:00
Speaker 2: The idea that all of this news is being made
19:03
Speaker 2: at the same time that these funds are trying to
19:05
Speaker 2: push their way into four oh one K plans is
19:08
Speaker 2: just so concerning to me.
19:10
Speaker 3: The big problem here, Mike, is the greed of these
19:12
Speaker 3: investment managers. They weren't content just to make tens of millions.
19:14
Speaker 3: They wanted to make hundreds and the only way to
19:16
Speaker 3: do that is to go to retail. If they had
19:18
Speaker 3: just been happy with their niche, and of course this
19:20
Speaker 3: is naive because nobody ever is in capital. Under capitalism,
19:23
Speaker 3: none of this would be an issue.
19:25
Speaker 2: Let's take a quick break. When we come back. Full
19:27
Speaker 2: market recap next with Wall Street Watch.
19:40
Speaker 1: Bringing the latest financial news straight.
19:43
Speaker 4: To your radio.
19:44
Speaker 1: Every day. It's the Financial Exchange on the Financial Exchange
19:48
Speaker 1: Radio Network telling out full wool Street Watch treking the stocks,
19:54
Speaker 1: the data, and the headlines driving markets so far today
19:57
Speaker 1: right here on the Financial Exchange Radio Network.
20:00
Speaker 5: Market's modestly adding to yesterday's rebound as the turmoil in
20:04
Speaker 5: the Middle East extends another day where oil remains volatile.
20:08
Speaker 5: Right now, the dows up just over a third of
20:11
Speaker 5: a percent, or one hundred and sixty four points. SMP
20:14
Speaker 5: five hundred dollarso up by about a third of a percent,
20:17
Speaker 5: NASDAK you guessed it up about a third of a
20:19
Speaker 5: percent or eighty four points higher. RUSS two thousand up
20:23
Speaker 5: nearly eight tenths of one percent, Tenure treasureeled down two
20:26
Speaker 5: basis points at four point two zero percent, and crude
20:30
Speaker 5: oil up about one and a half percent, trading right
20:33
Speaker 5: around ninety five dollars a barrel. And Vidia shares down
20:36
Speaker 5: modestly after CEO Jensen Wong said at the company's annual
20:40
Speaker 5: Developer conference yesterday that he expects orders for its AI
20:45
Speaker 5: chips to reach one trillion dollars through twenty twenty seven. Meanwhile,
20:49
Speaker 5: Uber shares are jumping five percent after the ride hailing
20:52
Speaker 5: company and Nvidia said they were expanding their self driving partnership. Elsewhere,
20:57
Speaker 5: Delta Airlines lifted its first quarter revenue growth guidance, calling
21:01
Speaker 5: for a high single digit expansion. In an interview with CNBC,
21:05
Speaker 5: CEO Ed Bashan said the company had taken a four
21:07
Speaker 5: hundred million dollars hit so far for the fourth quarter,
21:10
Speaker 5: but demand has been really, really great. Separately, American said
21:14
Speaker 5: in a securities filing that it now expects total revenue
21:17
Speaker 5: to increase by more than ten percent due to stronger
21:20
Speaker 5: than expected demand. Delta up by four percent, while American
21:24
Speaker 5: shares are up by over two percent. And after today's
21:27
Speaker 5: closing bell, we'll see earnings from apparel retailer Lululemon. I'm
21:33
Speaker 5: Tucker Silva and that is Wall Street Watch and what's
21:38
Speaker 5: my trivia here? In the previous segment, we asked you
21:41
Speaker 5: the trivia question. According to Irish lore, what animal did
21:45
Speaker 5: Saint Patrick drive out of Ireland? That'll be snakes. Donna
21:50
Speaker 5: from andover Mass is our winner today, taking home a
21:52
Speaker 5: financial exchange show t shirt. Congrats to Donna. We play
21:56
Speaker 5: trivia every day here on the Financial Exchange Complete contest
22:00
Speaker 5: rules at Financial exchange show dot com.
22:03
Speaker 2: Tax filing season is well underway, only about thirty days
22:07
Speaker 2: left to get those returns in on time or at
22:10
Speaker 2: least file your extension and so far the IRS last
22:14
Speaker 2: data point they released was a couple of weeks ago,
22:16
Speaker 2: but as of February twenty seventh, the average return was
22:20
Speaker 2: refund rather was three thousand, seven hundred and forty two dollars.
22:24
Speaker 2: That's up about eleven percent from the same period. During
22:27
Speaker 2: the twenty twenty five filing. In twenty twenty four, sorry,
22:32
Speaker 2: in twenty twenty three, the average refund was three thousand,
22:34
Speaker 2: four dollars. In twenty twenty four three thousand and fifty four.
22:37
Speaker 2: So a few things going on here. One number of
22:41
Speaker 2: tax changes went into effect at the beginning of last year,
22:44
Speaker 2: and instead of issuing new guidance, the IRS kept with
22:48
Speaker 2: their existing guidance, meaning that withholdings from your paycheck weren't
22:51
Speaker 2: adjusted for all of this. In terms of the big
22:56
Speaker 2: changes that are out there, and so where we are
22:58
Speaker 2: seeing particularly big refunds one seniors, especially making under let's
23:04
Speaker 2: call it one hundred and fifty thousand dollars of gross income.
23:06
Speaker 2: But you know, in the ideal scenario, if you're a
23:09
Speaker 2: senior that made one hundred and fifty thousand dollars of income,
23:13
Speaker 2: you still got the full new additional senior tax deduction.
23:16
Speaker 2: If you're both over the age of sixty five, that
23:19
Speaker 2: came to twelve thousand bucks for a married couple, and
23:22
Speaker 2: that offsets a whole bunch additional of your income, basically
23:26
Speaker 2: growing your your standard deduction substantially. But also folks that
23:30
Speaker 2: earn a lot of their income from tips or overtime
23:33
Speaker 2: all seeing benefits during this pay period or during this
23:36
Speaker 2: tax filing season, and so those refunds are up substantially.
23:40
Speaker 2: I think the question that I have this was pretty
23:43
Speaker 2: intentionally timed to coincide with the twenty twenty six election season.
23:50
Speaker 2: It is now being counteracted by the increases in gas prices.
23:54
Speaker 2: It does lend some cash into the system this time
23:57
Speaker 2: of year, which may be needed, but what does it
24:00
Speaker 2: actually do to the fundamentals of the economy. I'm not
24:02
Speaker 2: sure it's going to be as impactful as it may
24:05
Speaker 2: have otherwise been given the price shocks here. But when
24:10
Speaker 2: it comes to retirees especially and their tax scenarios, things
24:16
Speaker 2: change so dramatically for folks that are, you know, starting
24:20
Speaker 2: at the age of like fifty five, right through seventy five,
24:24
Speaker 2: that twenty to your time window does just have a
24:28
Speaker 2: whole bunch of change attached to it. First, you become
24:31
Speaker 2: fifty nine and a half and you're suddenly able to
24:34
Speaker 2: withdraw from retirement accounts that were for decades prior barred off,
24:38
Speaker 2: walled off from you without penalty. Sixty two comes around
24:42
Speaker 2: and you're eligible for Social Security. Sixty five comes around
24:46
Speaker 2: and you get this additional deduction plus eligibility for Medicare,
24:50
Speaker 2: and then by the time seventy five rules around seventy
24:52
Speaker 2: three for some folks, or if you were older than
24:55
Speaker 2: seventy and a half, and the required minimum distributions kick in.
25:00
Speaker 2: All the while, all things like your Social Security tax
25:03
Speaker 2: ability and your Medicare premiums are being driven by how
25:07
Speaker 2: much income you have. And what I think a lot
25:10
Speaker 2: of people ignore or just refuse to pay attention to,
25:14
Speaker 2: is that you actually, unlike when you're working, exercise a
25:17
Speaker 2: heck of a lot of control over what your tax
25:19
Speaker 2: return looks like once you retire, do I take money
25:24
Speaker 2: from my wrath my traditional four oh one K. Maybe
25:27
Speaker 2: I saved some money, or you know, we sold our
25:30
Speaker 2: home and there was leftover money. Should I be living
25:32
Speaker 2: off the cash in the bank and letting my investments
25:34
Speaker 2: continue to grow In that deferred account? You exercise a
25:39
Speaker 2: ton of control over what actually shows up on that
25:41
Speaker 2: tax return, and therefore everything that impacts your medicare premiums,
25:46
Speaker 2: to your Social Security tax ability, to your future required
25:50
Speaker 2: minimum distributions. It changes again at seventy five. Once you
25:54
Speaker 2: are seventy five, just like when you were working for
25:56
Speaker 2: a W two income, you're in in come that you
26:00
Speaker 2: are going to have to realize in your tax return
26:02
Speaker 2: is pretty much determined by the irs and there's not
26:05
Speaker 2: a whole bunch of, you know, finicky maneuvers you can
26:09
Speaker 2: take to avoid that. And so we in the financial
26:12
Speaker 2: planning industry really identify that fifty five to seventy five
26:15
Speaker 2: age demo to be a key planning time for folks
26:21
Speaker 2: that are heading to retirement. And again, it's not just
26:24
Speaker 2: about hey, how do I juice my returns? How do
26:27
Speaker 2: I allocate my portfolio properly? But how do I generate
26:29
Speaker 2: the best after tax return for the long term for
26:33
Speaker 2: my and my family's future. If you have questions about
26:37
Speaker 2: that tax efficient investment and financial planning strategy, there is
26:41
Speaker 2: a lot that goes into I. You know, rattled off
26:45
Speaker 2: a calendar of events that happens to folks as they retire,
26:48
Speaker 2: all of which get affected by how you choose to
26:51
Speaker 2: spend your own money, and it can have a dramatic
26:55
Speaker 2: effect on the overall tax liability that you pay over
26:59
Speaker 2: a lifetime. Nobody likes paying more taxes than they have to.
27:03
Speaker 2: If you have questions about how you can more efficiently
27:06
Speaker 2: strategize about your financial future, give the folks at Armstrong
27:10
Speaker 2: Advisory Group a call.
27:11
Speaker 4: We offer free.
27:11
Speaker 2: Consultations where we'll review what it is you're doing today
27:14
Speaker 2: and plan out a strategy with you. That numbers eight
27:17
Speaker 2: hundred three nine three for zero zero one. You can
27:21
Speaker 2: visit Armstrong Advisory dot com and book time for us
27:23
Speaker 2: to call you back there. But that phone number once
27:26
Speaker 2: again for your free conversation. It's eight hundred three nine
27:30
Speaker 2: three for zero zero one.
27:31
Speaker 1: The proceeding was paid for by Armstrong Advisory Group, a
27:34
Speaker 1: registered investment advisor. Nothing in the ad or in any
27:36
Speaker 1: Armstrong guide a specific financial, legal, or tax advice. Consult
27:40
Speaker 1: your own financial tax into state planning advisors before making
27:42
Speaker 1: any investment decisions. Armstrong may contact you to offer investment
27:45
Speaker 1: advisory services.
27:47
Speaker 2: All right, well, we just spoke about all the threats
27:50
Speaker 2: to the market and how we found it incredible that
27:52
Speaker 2: the markets remained as resilient. Now we get to talk
27:55
Speaker 2: about this Baron's article, which you know, we're just going
27:57
Speaker 2: to have to kind of hang on the wall here
27:59
Speaker 2: and see if they are ever correct about it. But
28:01
Speaker 2: here's the uh, here's the scare tactic article of the day.
28:04
Speaker 2: The stock market is hitting for a big drop. This
28:07
Speaker 2: isn't a case of the boy who cried wolf with
28:12
Speaker 2: a headline like that, Like, what what kind of timeline
28:14
Speaker 2: do we put on this? They have six months? Here
28:17
Speaker 2: are we willing to give them six months before you
28:19
Speaker 2: call bs if you don't get a twenty percent market correction,
28:22
Speaker 2: because you can't just let this thing go and play
28:25
Speaker 2: out forever. There's a there's a.
28:31
Speaker 4: What's this company's name?
28:32
Speaker 2: Gavical researches. Antole Kaletski is quoted. I find the complacency
28:38
Speaker 2: of US equity investors both shocking and yet unsurprising. Can
28:43
Speaker 2: it really be both. Can you both be shocked and
28:46
Speaker 2: unsurprised about something? Just you know, just it doesn't really
28:51
Speaker 2: make sense to me that I would be shocked by
28:53
Speaker 2: a turn of events and yet unsurprised. Those those two
28:57
Speaker 2: seem in direct opposition as far as I am concerned,
29:00
Speaker 2: and listen, there were a bunch of threats to the
29:03
Speaker 2: market before the events in Iran. Equity prices The only
29:08
Speaker 2: few occasions where they have been more expensive than right
29:11
Speaker 2: now in US modern history were right prior to the
29:14
Speaker 2: dot com bubble, and in twenty twenty one, when there
29:17
Speaker 2: was more cash floating around this economy and market than
29:20
Speaker 2: we had ever seen before. There were threats from all
29:24
Speaker 2: of that was partially caused by the AI infatuation that
29:27
Speaker 2: has occurred. There are threats coming from private credit, and
29:30
Speaker 2: there are now threats caused by a potential inflation shock
29:34
Speaker 2: due to oil prices and other factors. All of those,
29:37
Speaker 2: I think, elevate the risk of a market downturn, perhaps
29:41
Speaker 2: even a severe one. They elevate the risk of recession,
29:44
Speaker 2: and I myself have no idea if it's going to
29:46
Speaker 2: happen or not. Well, there is no way with any
29:49
Speaker 2: degree of certainty to use this and this article other
29:53
Speaker 2: than stoking some fear, does not give you any actionable
29:57
Speaker 2: ideas of what to do with this information.
30:00
Speaker 3: Well, there's nothing you can do. I've never personally seen
30:04
Speaker 3: or read about more hazards occurring simultaneously, high valuations, elevated inflation,
30:10
Speaker 3: zero job growth last year is measured by payrolls, So
30:14
Speaker 3: the Fed in a precarious position, no fiscal policy room
30:18
Speaker 3: to maneuver, and we're larding on top of that big
30:24
Speaker 3: risk cake an oil price shock, war with an uncertain
30:28
Speaker 3: duration enhanced you political uncertainty. I've never heard or read
30:34
Speaker 3: about in the modern era any cocktail like this, But
30:39
Speaker 3: that doesn't mean we won't navigate it successfully.
30:42
Speaker 4: Doesn't.
30:42
Speaker 3: If you view equity markets as having some predictive ability,
30:46
Speaker 3: and most researchers do, though many are quick to point
30:50
Speaker 3: out that they register a lot of false positives in
30:53
Speaker 3: terms of recessions and stuff like that, you'd say, well,
30:57
Speaker 3: the average investor thinks that we're going to come through
30:59
Speaker 3: this without a major economic contraction. I think some increase
31:03
Speaker 3: in inflation is inevitable, some slow down in growth is
31:07
Speaker 3: inevitable because of the oil price shock. That's probably all
31:11
Speaker 3: you can hang your hat on. I don't know if
31:13
Speaker 3: it's going to be enough. That alone, viewed sort of
31:17
Speaker 3: through a conventional economic lens, is not enough to generate
31:21
Speaker 3: recession prediction with like high probability. But one or two
31:25
Speaker 3: other things go wrong.
31:26
Speaker 2: Of course, let's take a quick break when we come back.
31:29
Speaker 2: A little bit of stack Roulette is next on the
31:31
Speaker 2: Financial Exchange.
31:33
Speaker 1: Text us at six one seven three six two one
31:35
Speaker 1: three eighty five with your comments and questions about today's
31:37
Speaker 1: show and let us know what you think about the
31:39
Speaker 1: stories we are covering. This is the Financial Exchange Radio Network.
31:45
Speaker 1: Follow the Financial Exchange on Instagram for market insight clips,
31:49
Speaker 1: reels and daily money doc This is the Financial Exchange
31:52
Speaker 1: Radio Network.
31:55
Speaker 5: The Money Matters mail Bag is coming this week to
31:58
Speaker 5: the Financial looks Change. It's a new segment. It's your
32:02
Speaker 5: chance to ask the questions about business and the economy
32:05
Speaker 5: that you want answers to. So all you have to
32:07
Speaker 5: do is call us at three three nine three nine
32:11
Speaker 5: nine four three three three and leave your voicemail anytime
32:16
Speaker 5: day or night. That's three three nine three nine nine
32:20
Speaker 5: four triple three, or email us to TFV show at
32:25
Speaker 5: gmail dot com and we may use your question on
32:28
Speaker 5: the show.
32:29
Speaker 2: During that segment, time for a bit of stack roulette, Mark,
32:32
Speaker 2: what do you have for us this fine Tuesday.
32:34
Speaker 3: Story in the Globe Everyone's leaving? Why more of the
32:38
Speaker 3: wealthy are moving from Massachusetts to other states? The article
32:42
Speaker 3: talks about a number of changes. For example, the millionaire
32:46
Speaker 3: tags not a change, but in the case of the
32:50
Speaker 3: estate tax, which they also talk about in that the
32:53
Speaker 3: general environment as being less I don't know, welcoming, hospitable
32:56
Speaker 3: to wealthy, affordabaxpayers. Affordability is an issue, but salaries are higher,
33:01
Speaker 3: So it's like you can't say, well, a lot of
33:03
Speaker 3: people are moving from Massachusetts to Florida. That's true, but
33:06
Speaker 3: they might be retirees for the most part, seeking lower
33:09
Speaker 3: cost of living. Keep in mind that our salaries are
33:12
Speaker 3: higher and job opportunities now, unemployment's gone up in Massachusetts
33:16
Speaker 3: over the past year, higher than the national We're way
33:19
Speaker 3: above the national rate by like appoint in or something.
33:22
Speaker 4: But you and I have both talked about the phenomenon.
33:24
Speaker 2: We know people personally who live in Rhode Island live
33:26
Speaker 2: in New Hampshire and commute to the Boston area because
33:29
Speaker 2: of those very high wages. So the phenomena is true,
33:32
Speaker 2: and yeah, that's not new continues to collect the income
33:35
Speaker 2: tax on those individuals.
33:36
Speaker 3: It would be it would be a long time before
33:38
Speaker 3: we gave up some of our structural advantages, university system
33:42
Speaker 3: and the little hubs that radiate out resulting from all
33:47
Speaker 3: that intellectual capital that we have. It would take a
33:50
Speaker 3: lot more than a couple percentage point change in a
33:53
Speaker 3: marginal tax rate.
33:54
Speaker 4: I think to do that.
33:55
Speaker 3: The fellow they interview here is makes the point himself,
34:01
Speaker 3: our social infrastructure here is really really strong.
34:04
Speaker 4: Yeah.
34:05
Speaker 2: So one of the people interviewed as a investment financial
34:08
Speaker 2: advisor that advises high net worth individuals, those you probably
34:12
Speaker 2: impacted by it.
34:13
Speaker 3: That's not a random stamp.
34:15
Speaker 2: And his point is that half of my Massachusetts clients
34:18
Speaker 2: over the last five years have either left or are
34:19
Speaker 2: planning to leave. I when the millionaire's tax was proposed
34:25
Speaker 2: and then voted on and adopted, I made this point,
34:29
Speaker 2: which is people will leave because of it. My concern
34:33
Speaker 2: is that if you're making ten million dollars a year,
34:36
Speaker 2: you are extremely mobile.
34:37
Speaker 4: You may run a business.
34:39
Speaker 2: I doubt there are a lot of When we look
34:41
Speaker 2: at the percentage or the total pool of people earning
34:45
Speaker 2: more than a million dollars, I'd be willing to bet
34:47
Speaker 2: that the vast majority of them do not derive that
34:49
Speaker 2: income from W two's I'd imagine most of them are
34:52
Speaker 2: business owners of some sort, self employed of some sort,
34:54
Speaker 2: would be my guess. I am purely guessing here, but
34:57
Speaker 2: that's that's my assumption and concern was, Look, if you
35:01
Speaker 2: drive those people out, then you may drive jobs away
35:06
Speaker 2: with them. The point that I'll make is it hasn't
35:08
Speaker 2: happened so far. Right, Like this guy talks about his
35:11
Speaker 2: clients having left or making plans to leave, we talk
35:14
Speaker 2: about the number of people moving to Florida or New
35:17
Speaker 2: Hampshire has increased. But in terms of the pure numbers,
35:21
Speaker 2: the revenue that's being generated by this millionnaire's tax is
35:24
Speaker 2: above expectation still, and so that doesn't surprise me. I
35:28
Speaker 2: always figured this would be a slow bleed, but I
35:32
Speaker 2: have to continue to point that out right. The point
35:35
Speaker 2: that I made at the time was pretty much, anywhere
35:38
Speaker 2: you live in Massachusetts other than the Islands and the Cape,
35:42
Speaker 2: you can get to another state within forty five minutes.
35:46
Speaker 2: And so if you're making ten million dollars a year
35:48
Speaker 2: in the Commonwealth, of Massachusetts. Maybe you don't care. Maybe
35:50
Speaker 2: you just say, hey, I've got sny to afford it.
35:53
Speaker 2: But I think a lot of people are going to say, yeah,
35:55
Speaker 2: I'll just pack up and move.
35:57
Speaker 3: Some might be able to, some are very mobile. But
35:59
Speaker 3: if you run a bit business and access to a
36:01
Speaker 3: good talent pool, a highly educated talent pool is important
36:04
Speaker 3: to you, you got to stay here. Now. You don't want
36:06
Speaker 3: to pluck too many feathers off The goose that laid
36:08
Speaker 3: the golden egg is one analogy that they use here.
36:12
Speaker 3: So the question is how many feathers is too many?
36:15
Speaker 3: I would I would prefer we not have passed the
36:17
Speaker 3: Millionaire's TSK. I would prefer we had lowered our state
36:20
Speaker 3: income tax rate to five percent, like we all voted
36:22
Speaker 3: on twenty plus years ago. Now it never happened for
36:26
Speaker 3: some reason. I would prefer less regulation to more, But
36:29
Speaker 3: we would have to move much farther down the road
36:32
Speaker 3: of punitive taxation and just overweening government. And I don't
36:36
Speaker 3: sense that our leadership is inclined to go in that direction. Heale.
36:40
Speaker 3: You may not like her politics, but she seems like
36:42
Speaker 3: a pragmatist to me, So I don't think there's any
36:45
Speaker 3: danger of us losing our sort of pole position as
36:48
Speaker 3: among the wealthiest states in the country for a very
36:51
Speaker 3: very long time, like a couple of generations, and it
36:53
Speaker 3: would take it would have. It would take a huge
36:54
Speaker 3: economic cataclysm coupled with a bunch of very bad policy
36:58
Speaker 3: decisions to do that.
36:59
Speaker 2: I do tend to agree. I don't think this is
37:01
Speaker 2: something that happens overnight. But when we talk about millionaire's
37:04
Speaker 2: tax now this year likely to be voting on rent control,
37:07
Speaker 2: when we talk about you know, some of the major
37:10
Speaker 2: employers in the state being focused on medical research, and
37:14
Speaker 2: you know, higher education those under threat as well, I
37:18
Speaker 2: think there is at least a formula there where you say, okay,
37:23
Speaker 2: I can at least comprehend why in the short term
37:25
Speaker 2: the unemployment rate is climbed up faster than the national mike.
37:27
Speaker 3: For thirty years we grew. In nineteen seventy we had
37:30
Speaker 3: the same per capita income as Ohio. It would have
37:33
Speaker 3: been a coin toss as to which state was going
37:36
Speaker 3: to profit more from the late twentieth century early twenty
37:40
Speaker 3: first century infotech economy. Well, if you had known that,
37:44
Speaker 3: of course, you would have said Massachusetts. But now our
37:46
Speaker 3: per capita income is fifty percent higher than Oh more
37:50
Speaker 3: than that, we've blown them away. A little bit of
37:53
Speaker 3: closing of gaps like and this is true of mass
37:56
Speaker 3: houssett versus Many States, and California versus Many States. Little
37:59
Speaker 3: closing of that wouldn't be surprising.
38:01
Speaker 2: Let's take a quick break for the rest of the day.
38:03
Speaker 2: Markets are open and remain in positive territory, although they've
38:07
Speaker 2: weakened since we opened up at ten am. SMP now
38:10
Speaker 2: up twenty three points, or a third of one percent.
38:13
Speaker 2: We will be back at it tomorrow for a full recap.
38:15
Speaker 2: For you, have a great rest of your day, folks.
38:17
Speaker 2: We'll catch you then.