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Why is the US trying to get between Argentina and China? · The Financial Exchange Show

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Speaker 1: Zada and Mark Fandetti.
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Speaker 2: Kicking things off here. It's Chuck, Mark and Tucker with you.
1:13
Speaker 2: And nothing too exciting happening in markets today, but the
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Speaker 2: little movement here and there. S and P five hundred
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Speaker 2: down eleven points, not even a quarter percent, Dow Jones
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Speaker 2: Industrial Average down eighty one points, not even a quarter percent.
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Speaker 2: Now's de Composite down one hundred and one points, almost
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Speaker 2: half a percent. So you get a little bit of
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Speaker 2: movement in the Nasdaq. Uh and we can talk about,
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Speaker 2: you know, kind of why that's happening as well. The
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Speaker 2: US ten year Treasury up nine tenths of a basis
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Speaker 2: point to three point nine seven to two percent. US
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Speaker 2: Dollar Index is down point zero two percent, so basically flat.
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Speaker 2: Not much movement on the dollar. Gold continuing its sell
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Speaker 2: off over the last couple of days, down another one
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Speaker 2: point nine to four percent, four nine dollars and twenty cents.
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Speaker 2: And we've got crude oil West Texas Intermediate up a
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Speaker 2: dollar thirty eight a barrel to two i'm sorry, to
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Speaker 2: fifty eight to sixty two at the moment, triple a
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Speaker 2: national average for gas prices moving back up. Some of
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Speaker 2: this due to continue to refinery outages in the Midwest,
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Speaker 2: but back up to three oh six and six ten.
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Speaker 2: So it looks like, at least for this week, we're
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Speaker 2: gonna have to put on hold the idea that the
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Speaker 2: nationwide average is gonna drop below three dollars a gallon.
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Speaker 2: Just can't quite get there at the moment. But that
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Speaker 2: is what is moving in markets broadly at the moment.
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Speaker 2: Let's talk a little bit about this piece from the
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Speaker 2: Wall Street Journal. It's a Wall Street Journal exclusive, and
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Speaker 2: I'll quote here Trump administration is pushing officials in Argentina
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Speaker 2: to limit China's influence over the distressed South American nation.
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Speaker 2: At the same time, the US and Wall Street banks
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Speaker 2: are working on a forty billion dollar lifeline for Buenos Aires.
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Speaker 2: And basically, like if if you look at the reporting
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Speaker 2: on this, the thinking in terms of, you know, the
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Speaker 2: question that I've asked, quite honestly, is Okaylake Argentina Mark
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Speaker 2: is it fair? That is it fair to say that
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Speaker 2: Argentina has one of the worst fiscal, monetary and governance
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Speaker 2: track records out of any country. That is, that's at
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Speaker 2: least one hundred years. They're serious.
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Speaker 3: One hundred twenty or so years ago, they were as
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Speaker 3: wealthy and per capita terms as the United States.
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Speaker 2: It's really the last hundred years that's kind of been
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Speaker 2: the problem.
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Speaker 3: That's always the kicker.
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Speaker 2: Yeah, just a future.
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Speaker 3: They've been a serial defaulter, and I'm not exaggerating that
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Speaker 3: might be understating how chronically ineptley they've managed their finances.
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Speaker 3: They oscillate from a center right government, which is i'll
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Speaker 3: characterize malay cut spending, get inflation under controled. He's done
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Speaker 3: those things. He's also pegged the PAYSO to the dollar YEP,
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Speaker 3: at what most analysts think is too high a level
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Speaker 3: for the PAYSO. Speculators are attacking it. That's why he
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Speaker 3: needs dollars. They're running out of dollars to pay the
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Speaker 3: IMF to cover the fifty million to pay foreign credit,
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Speaker 3: So you need to export to get dollars, or you
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Speaker 3: can get them from the IMF. That's where they got
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Speaker 3: the fifty million dollar loan from. We're apparently going to
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Speaker 3: give them another forty billion, twenty billion of which will
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Speaker 3: be guaranteed by taxpayers, all in an effort to push
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Speaker 3: up the value to keep the value of the PAYO
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Speaker 3: artificially high, which you need to do if you're an
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Speaker 3: Argentinian Argentinian policy maker to keep inflation under wraps low
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Speaker 3: at more pesos it takes to buy.
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Speaker 2: Argentine is a big importer of stuff that it needs,
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Speaker 2: and so when the paso devalues, it creates inflation, and
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Speaker 2: it's it's kind of this whole problem for them.
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Speaker 3: So now where and so this this is not new.
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Speaker 3: This happens every several years, this cycle of a center
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Speaker 3: right government coming in succeeding a parentist which was the
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Speaker 3: he was the FDR with a real authoritarian bent leader
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Speaker 3: of the forties and fifties. Okay, so they oscillate from
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Speaker 3: left wing parentist populist money printing government to center right
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Speaker 3: government which they have today. The center right government pegs
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Speaker 3: that beeso to keep inflation under control. Speculators attack the peg,
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Speaker 3: and invariably they have to devalue. In many cases they've defaulted.
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Speaker 3: We've seen this movie many times before, Chuck.
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Speaker 2: So you mentioned, Look, the US Treasury is now effectively
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Speaker 2: on the hook for about twenty billion dollars in a
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Speaker 2: currency swap theial out there, but they are also trying
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Speaker 2: to work with private investors to wrangle up another twenty billion,
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Speaker 2: and banks are naturally sitting there kind of like you
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Speaker 2: want us to do. What Now. The rationale for this,
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Speaker 2: as it's been laid out by a few people, is, hey,
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Speaker 2: look two things on this front. Number One, you want
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Speaker 2: to be able to counter Chinese influence in the region.
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Speaker 2: Number Two, Argentina is rich in mineral resources, and if
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Speaker 2: you can, you know, work with them, you can potentially
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Speaker 2: provide an additional supply of some of the stuff that
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Speaker 2: we get from China right now that you know, could
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Speaker 2: be held through another country that could be producing, another
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Speaker 2: country that is not as hostile to American interests. On
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Speaker 2: the first one, countering China, that the problem that I
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Speaker 2: have there is, look that there is no long storied
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Speaker 2: history of the United States in Argentina being like great
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Speaker 2: partners in doing anything for the last hundred years. And
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Speaker 2: because of Argentina's economic size at this point, it against
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Speaker 2: not particularly large, and we're not huge importers or exporters
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Speaker 2: from them. If you really wanted to counter Chinese influence
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Speaker 2: in South America, Brazil's probably you know, the place that
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Speaker 2: you would tend to look due to its size and
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Speaker 2: also vast mineral resources, and like you can kind of
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Speaker 2: go down the list there and the fact that it's
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Speaker 2: not Argentina. I mean, it's it's Brazil, which presents its
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Speaker 2: own slate of problems just from a ability and governance perspective.
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Speaker 2: But those are different, far different problems from what Argentina
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Speaker 2: faces on a fairly regular basis. So I think you're
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Speaker 2: left kind of looking at this saying, Hey, the upside
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Speaker 2: on this, if it were to work, is yes, you potentially,
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Speaker 2: you know, start to unlock another trading partner in the region.
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Speaker 2: But like gosh, I mean, it really doesn't seem like
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Speaker 2: there that's a long path. I mean, this is something
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Speaker 2: that's not going to be achieved in any sizeable way
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Speaker 2: in the next you know, three to five years, Like
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Speaker 2: this is a multi decade project to stabilize Argentina.
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Speaker 3: Malay Is party is facing elections in several days, which
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Speaker 3: is the reason they're desperately trying to keep the PAYESO.
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Speaker 2: They don't want infuation before the election.
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Speaker 3: Well, if there's a if there's a massive if they
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Speaker 3: let the peg go and it's a crawling peg, so
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Speaker 3: it goes up and it's not quite a it's not
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Speaker 3: a firm peg. It moves the band expands it by
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Speaker 3: like a percent a month or something, so they are
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Speaker 3: letting the PAYESO go down only in an orderly way.
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Speaker 3: If there's a massive successful attack in the payso before then,
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Speaker 3: it could be destabilizing and will certainly sour further sour
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Speaker 3: malays parties electoral chances and the regional elections coming up
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Speaker 3: in a few days. So we're just trying to desperately
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Speaker 3: get him to hold on for the next few days
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Speaker 3: through these extraordinary efforts, in addition to the swap line,
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Speaker 3: which is technically alone, but they could default on them. Correct,
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Speaker 3: That's where the risk gets yes, right, We've also bought
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Speaker 3: like a half a billion dollars in paysos directly, the
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Speaker 3: US Treasury has, so we're on the hook for an
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Speaker 3: increasing amount of money here for for unclear, very unclear
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Speaker 3: at this point political gains. The regime in Argentina could
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Speaker 3: change soon and we could end up with a party
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Speaker 3: effectively ruling the state because Malay will become neutered. If
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Speaker 3: opposition takes Congress their their equivalent of Congress, they may
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Speaker 3: not be friendly to us. So far, as far as
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Speaker 3: I know, we've got no assurances, never mind a written
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Speaker 3: agreement for rare earth minerals or anything along those lines, right.
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Speaker 2: And so the problem here is China does have deeper
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Speaker 2: ties with Argentina economically than we do. They are the
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Speaker 2: second biggest trading partner of Argentina behind Brazil. So Argentina,
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Speaker 2: on one hand is kind of like, hey, we can't
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Speaker 2: just stop that because we don't do anything with the
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Speaker 2: US and any sizeable scale right now. And that's kind
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Speaker 2: of a problem if you can't commit to fill that
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Speaker 2: gap from China at the moments.
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Speaker 3: Again, there's no political consensus in Argentina to move closer
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Speaker 3: to US.
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Speaker 2: You need that.
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Speaker 3: Malay is powerful. The chief executive there is powerful, but
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Speaker 3: he's not a dictator. Sure, And if power continues to
9:46
Speaker 3: tilt towards the parentis the left wing progressive print a
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Speaker 3: lot of money, be reckless fiscally party as it always
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Speaker 3: has historically correct center right president Malay now Macree before him,
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Speaker 3: has imposed reforms. Those reforms generate pain. People tolerate it
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Speaker 3: for so long, then they get sick of it, they
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Speaker 3: throw the center right government out, they swing back towards
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Speaker 3: the paradise. It's no different than people here switching from
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Speaker 3: Democrat to Republican based on sentiment they're they're they're feeling
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Speaker 3: about how the economy and how they are doing personally.
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Speaker 3: So without any assurances that there will be consistency in
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Speaker 3: dealing with the US as a result of US putting
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Speaker 3: forty billion effectively on the line, because we're going to
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Speaker 3: backstop the big banks if they if they hop on
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Speaker 3: this wagon with us, we have to, I say, we
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Speaker 3: have to. It'll be informal, but I presumably we're not
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Speaker 3: going to let a big bank go under because of
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Speaker 3: a bad bet in Argentina, which.
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Speaker 2: I don't think so, but if but if it shows
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Speaker 2: upon an earning statement, it's like, hey, what's this? Well,
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Speaker 2: you know, Argentina, what are you gonna do?
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Speaker 3: Nothing anybody would, a person of sound mind would do
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Speaker 3: of their own free will.
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Speaker 2: That's insane.
10:53
Speaker 3: You're throwing good money after bad.
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Speaker 2: There's a there's a reason why the big US banks
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Speaker 2: don't normally take twenty billion dollars and be like, hey, Argentina,
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Speaker 2: we're willing to lend this to you, chuck.
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Speaker 3: Argentina has not been able to cat tap global capital
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Speaker 3: markets for almost a generation. I think since two thousand
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Speaker 3: and three.
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Speaker 2: They're viewed think they've had either two or three defaults
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Speaker 2: since they've had.
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Speaker 3: Three this century, I know for several in the preceding
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Speaker 3: fifty years. They're on the hook for another fifty billion,
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Speaker 3: as we talked about earlier from the IMF. I'm sorry,
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Speaker 3: we wish them well, but.
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Speaker 2: It's kind of like if you've got that like member
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Speaker 2: of your family who they're great, you love them, but
11:35
Speaker 2: they're just not good with money, and every time that
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Speaker 2: you make a loans them, you know it's really a
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Speaker 2: gift because you're not getting the money back. Yeah, that's
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Speaker 2: effectively what Argentina is from an economic perspective. It's it's
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Speaker 2: not that like, it's not that you don't want to
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Speaker 2: help the people or like help to promote stability there.
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Speaker 2: It's just there's no track record of the money being
11:59
Speaker 2: able to be utilized in any fashion that promotes stability
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Speaker 2: or the ability to pay it back.
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Speaker 3: And there's no there's no there's nothing remotely analogous to
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Speaker 3: a familial tie here either. We've explored very very little
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Speaker 3: to Argentina. We did the same thing from Mexico, by
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Speaker 3: the way, thirty years ago with mid nineties we used
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Speaker 3: money from the Exchange Stabilization Fund, which is what the
12:16
Speaker 3: Treasury's doing.
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Speaker 2: It's a kiddy.
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Speaker 3: Effectively, they swapped pesos Mexican pesos at the time for
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Speaker 3: US dollars. Mexico returned the dollars at the exchange rate
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Speaker 3: at the time of the deal, so it was a
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Speaker 3: loan that was paid back in full and it worked out.
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Speaker 3: But the circumstances there, as I was talking about with
12:32
Speaker 3: Mike yesterday, are very different. Mexico's a much bigger trading
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Speaker 3: partner like twenty x bigger right, and there we of
12:38
Speaker 3: course share border with Mexico, So a failed state Mexico
12:41
Speaker 3: is in nobody's interest Argentina harder to make the case.
12:46
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14:20
Speaker 2: Piece from The New York Times shutdown with no clear
14:23
Speaker 2: end poses new economic threat. And I don't think I'm
14:27
Speaker 2: quite there yet. I think that that's uh. I'm just
14:31
Speaker 2: not there quite honestly. But here's what I will say.
14:35
Speaker 2: The longest shutdown that we've ever had was thirty four
14:37
Speaker 2: days at the end of twenty eighteen, And do you
14:40
Speaker 2: see all these estimates that are out there that hey,
14:42
Speaker 2: for each week the shutdown goes, it's maybe a point
14:45
Speaker 2: one two point two percent hit to GDP. And I
14:48
Speaker 2: find those estimates kind of funny, to be honest, because
14:51
Speaker 2: most shutdowns last anywhere from one to six days. And
14:54
Speaker 2: so yeah, like, how do you even measure the impact
14:57
Speaker 2: of like a three day shutdown? You can't accurately do it.
15:03
Speaker 2: Beyond that, I think that there are some compounding forces
15:07
Speaker 2: at work here that mean that this doesn't move in
15:11
Speaker 2: a linear fashion, in that a one week shutdown relative
15:16
Speaker 2: to a two week shutdown might be you know, half
15:20
Speaker 2: as bad, but an eight weeks shutdown might not be
15:24
Speaker 2: four times as bad for the economy as a two
15:26
Speaker 2: week shutdown. It might be ten or fifteen times. Because
15:30
Speaker 2: here's the thing. Yeah, we talked about like government workers
15:33
Speaker 2: that are furloughed, and it's like, Okay, you're gonna get
15:35
Speaker 2: paid when you come back to work for that work
15:40
Speaker 2: or for that lack of work. Government contractors don't work
15:44
Speaker 2: the same way. If you are a private company that
15:46
Speaker 2: contracts with the federal government that doesn't have work going on,
15:52
Speaker 2: so you're not being paid by the federal government and
15:54
Speaker 2: you are not paying your workers. A couple things happen. First,
15:59
Speaker 2: You're probably not going to end up paying your workers
16:02
Speaker 2: for that time anyways, because you're not getting paid anything
16:04
Speaker 2: for work that you didn't do. You are a contracting firm,
16:07
Speaker 2: not a firm that is being paid, you know, an
16:11
Speaker 2: hourly rate as an employee. It's different. Like you have
16:15
Speaker 2: a fixed government contract to deliver X, Y, and z,
16:18
Speaker 2: you are not delivering it during that time. The federal
16:20
Speaker 2: government does not make you whole. If that's the case
16:25
Speaker 2: those contractors. If it's a two or three day window,
16:30
Speaker 2: nothing happens. If we're sitting here, and I don't think
16:34
Speaker 2: we will be, but who knows. If it's been sixty
16:37
Speaker 2: days and eighty percent of your work comes from government
16:40
Speaker 2: contracts and you haven't been paid, then how are you
16:43
Speaker 2: making payroll? Do you make the decision to lay people
16:45
Speaker 2: off for close your doors? These are the things that
16:48
Speaker 2: can happen as things go longer. So I think it's
16:51
Speaker 2: fair to say that to this point. Quite honestly, the
16:53
Speaker 2: economic impact in the aggregate is really minimal. I don't
16:59
Speaker 2: think there's much meat there. If we're sitting here at
17:02
Speaker 2: Thanksgiving and this thing is still going on. I don't
17:06
Speaker 2: know exactly what the impacts look like then, and I
17:09
Speaker 2: suspect that they move up in a fashion that looks
17:14
Speaker 2: more like an exponential curve than just a linear weekly price.
17:18
Speaker 3: I think this is you just I think encapsulated in
17:21
Speaker 3: the way you just phrased it right there. The problem
17:23
Speaker 3: that comes that that attends trying to model something like this,
17:27
Speaker 3: we never hit the part of the relationship where it
17:31
Speaker 3: changes correct, so we don't know how to estimate what
17:34
Speaker 3: the relationship. I'm doing a little curvy thing with my hand.
17:38
Speaker 2: I know it's great for the radio listeners, because.
17:40
Speaker 3: Yeah, but with I think I don't think I could
17:43
Speaker 3: add anything to the way you just said it where
17:45
Speaker 3: other than to say that we, as an analyst, I
17:48
Speaker 3: have no way of telling you what the relationship no
17:51
Speaker 3: look like beyond a certain point, because you're effectively an
17:53
Speaker 3: uncharted waters.
17:54
Speaker 2: And we also don't know where that point is. Like
17:57
Speaker 2: it is point, it's those two things. It might be
18:00
Speaker 2: at forty five days, it might be at ninety days.
18:03
Speaker 2: Don't know where where that point is, and don't know
18:06
Speaker 2: what happens after it.
18:07
Speaker 3: So other than that, nothing to worry about.
18:10
Speaker 2: Well, it's like, how can you worry about it? It
18:14
Speaker 2: is to quote I believe it was Donald Rumsfeld. It's
18:18
Speaker 2: an unknown unknown you know, Yeah, it is.
18:21
Speaker 3: You sense that people are complacent. Market's been up for
18:24
Speaker 3: the president. It seems to like the shutdown because he's from.
18:27
Speaker 2: An economic perspective. No one in the aggregate it cares. Now,
18:31
Speaker 2: if you're listening to us and you're a government contractor
18:33
Speaker 2: or someone who's furloughed and you're not getting paid, you're
18:35
Speaker 2: sitting there, you like, chuck, This matters to me a lot.
18:38
Speaker 2: I hear you. I get that. I'm not saying it
18:40
Speaker 2: doesn't matter to individuals. What I am saying is that
18:44
Speaker 2: in the aggregate to this point, the economic impact has
18:47
Speaker 2: been minimal. But the longer this goes on, the bigger
18:52
Speaker 2: the chance that that goes from being minimal too meaningful,
18:56
Speaker 2: too significant.
18:57
Speaker 1: Yeah.
18:58
Speaker 3: And the rub here is that we won't be able
19:00
Speaker 3: to extrapolate from this experience. Probably like zuppose, after day
19:03
Speaker 3: sixty five, they're all different than go. Yeah, I don't
19:06
Speaker 3: know that because the sample is so small, we'll be
19:08
Speaker 3: able to take anything away from.
19:09
Speaker 2: This current estimate on internet betting markets. This one from
19:13
Speaker 2: Calci is the shutdown is the over under right now
19:17
Speaker 2: is forty days is where we are. We'll see quick
19:22
Speaker 2: break here when we return. We've got the trivia answer
19:26
Speaker 2: and Wall Street Watch.
19:32
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19:42
Speaker 1: Every day. It's the Financial Exchange on the Financial Exchange
19:46
Speaker 1: Radio Network. Time now for Wall Street Watch. A complete
19:51
Speaker 1: look at what's moving market so far today right here
19:55
Speaker 1: on the Financial Exchange Radio Network.
19:57
Speaker 4: As third quarter earning season continues to show bug long
20:00
Speaker 4: markets are now in negative territory. The Dow down by
20:04
Speaker 4: one hundred and thirty five points, or three tenths of
20:07
Speaker 4: one percent. SMP five hundred is down nearly half a percent,
20:10
Speaker 4: or about thirty points lower. NASDAK now selling off nearly
20:15
Speaker 4: one percent or two hundred and eighteen points at the moment.
20:18
Speaker 4: Rustles on thousand, down one point three percent. Ten year
20:23
Speaker 4: treasure real this flat at three point nine six six percent,
20:27
Speaker 4: and crude oil up about two percent higher, trading at
20:30
Speaker 4: fifty eight dollars and thirty six cents a barrel. Netflix
20:33
Speaker 4: reported third quarter earnings that disappointed. While its revenue match
20:37
Speaker 4: street estimates, the streaming giant cut its expected operating margin
20:41
Speaker 4: for the year to twenty nine percent, setting an expense
20:45
Speaker 4: related to a dispute with Brazilian tax authorities. Netflix shares
20:49
Speaker 4: it down about ten percent. Following up on a developing
20:52
Speaker 4: story where CNBC is reporting that Warner Brothers Discovery rejected
20:57
Speaker 4: three paramount sky Dance offers as a few Cold's broad
21:00
Speaker 4: buyout interest. Yesterday's reports said Warner had received unsolicited interest
21:06
Speaker 4: from multiple parties. Warner Brothers shares are up about one percent. Meanwhile,
21:11
Speaker 4: Beyond Meat is the latest meme stock with wild gains
21:14
Speaker 4: this week. Yesterday, shares in the plant based meat alternative
21:18
Speaker 4: company rocketed one hundred and forty percent higher after it's
21:22
Speaker 4: signed a deal with Walmart to expand distribution. Earlier this week,
21:27
Speaker 4: Round Hill Investments added the stock to its meme stock.
21:31
Speaker 4: ETF shares are quite volatile today, now up twenty nine percent. Today,
21:37
Speaker 4: it's at its GM Forward event. General Motors announced a
21:41
Speaker 4: suite of new software initiatives for its vehicles over the
21:44
Speaker 4: next three years, including an in vehicle AI system from
21:48
Speaker 4: Google and a driver assistant system which will allow drivers
21:52
Speaker 4: to be hands free and take their eyes off the
21:54
Speaker 4: road under certain circumstances. In twenty twenty eight, GM is
21:59
Speaker 4: up about a half a pent in after today's close,
22:02
Speaker 4: we'll see earnings from Tesla. I'm Tucker Silva and that
22:05
Speaker 4: is Wall Street Watch. And in the previous segment, we
22:07
Speaker 4: asked the trivia question in two thousand, which internet company
22:11
Speaker 4: merged with Time Warner. They'll be aol. Robin from Elliot,
22:16
Speaker 4: Maine is our winner today taking on a Financial Exchange
22:19
Speaker 4: Show t shirt. Congrats to Robin, and we play trivia
22:22
Speaker 4: every day here in the Financial Exchange See complete contest
22:25
Speaker 4: rules at Financial Exchange Show dot com.
22:27
Speaker 2: Tucker, the time that you were talking beyond me went
22:29
Speaker 2: from being up twenty nine percent, up fifteen percent just to.
22:32
Speaker 4: Yeah, and last hour is up one hundred percent, just to.
22:34
Speaker 2: Give a sense of the volatility there. This is, by
22:37
Speaker 2: the way, is a company that in Q four of
22:40
Speaker 2: twenty one had done four hundred and sixty four million
22:43
Speaker 2: dollars in revenue in the prior twelve months. It now
22:46
Speaker 2: has done three hundred and one million dollars in the
22:48
Speaker 2: revenue in the prior twelve months, So revenue is declining
22:51
Speaker 2: at about a ten percent a year clip. The company
22:56
Speaker 2: is free cash flow negative to the tune of one
22:58
Speaker 2: hundred and twenty five million dollars in get a free
23:00
Speaker 2: cash flow in the last year and as one hundred
23:03
Speaker 2: million dollars in cash on hand, and yet you're seeing
23:07
Speaker 2: this kind of activity. To me, it says only one thing.
23:11
Speaker 2: Fed's got a hike. Yeah, it is a tribute.
23:14
Speaker 3: I know you're being half I'm always being like.
23:18
Speaker 2: Joking, sly silly.
23:19
Speaker 3: No I said the same thing a couple times yesterday,
23:22
Speaker 3: and Mike Armstrong probably just zones me out at this point.
23:26
Speaker 3: But yeah, it is symptomatic, chuck. If you look at
23:28
Speaker 3: the bankruptcies by lenders who making loans they shouldn't have
23:32
Speaker 3: been making. You look at record I stock prices, you
23:34
Speaker 3: look at the until very recent massive run up in
23:39
Speaker 3: precious metals. There are a number of symptoms, including financial conditions,
23:44
Speaker 3: which the FED does directly control. We have indices that
23:47
Speaker 3: measure those. They're at all time accommodative levels.
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Speaker 2: Go ahead, do those do those financial conditions measures suck?
24:00
Speaker 1: Well?
24:00
Speaker 2: Like you know, just like hey, are stocks upper down?
24:05
Speaker 4: Well?
24:05
Speaker 3: Stocks? Are stocks are part of the index, but they're
24:08
Speaker 3: acutely aware of the feedback, right, the circular reasoning that
24:15
Speaker 3: could result from that feedback, so they have to be
24:17
Speaker 3: part of it. Because the FED looks at it, and
24:20
Speaker 3: when stocks go up, firms do have more capital. That's
24:22
Speaker 3: the whole point of going public. But there's other stuff
24:25
Speaker 3: in there too, bank lenders, stringency or liberality, by that,
24:31
Speaker 3: how willing they are to extend credit, stuff like that.
24:33
Speaker 3: So I guess you could even throw that out because
24:35
Speaker 3: it's problematic. But by any measure, financial conditions are quite accommodative.
24:41
Speaker 3: Markets are very frothy. The word bubbles getting now that
24:44
Speaker 3: we may not be in a bubble, A bubble being
24:46
Speaker 3: circumstances whereby prices are so far removed from fundamentals they
24:50
Speaker 3: couldn't possibly be justified by a serious person using a
24:53
Speaker 3: computer under any circumstances. Well, you don't know if you're
24:55
Speaker 3: in a bubble until what I mean, Yeah, I'm not
24:57
Speaker 3: passing judgment. I'm just saying you hear the word a lot,
24:59
Speaker 3: but don't know till after the fact.
25:01
Speaker 2: Sometimes you do know during the fact. Actually, like in
25:05
Speaker 2: twenty twenty one, got to say we called it. We
25:08
Speaker 2: were like, hey, all these SPACs are getting out of control.
25:10
Speaker 2: We got you know, Trevor Milton pushing you know, Uh,
25:12
Speaker 2: that's so fringy though, No, no, but we were like, listen,
25:15
Speaker 2: there is like, what's happening in evs looked bubbly. Yeah,
25:19
Speaker 2: And it turned out it was yeah, because you had
25:22
Speaker 2: companies that had never made a vehicle. They were being
25:24
Speaker 2: valued at like fifty billion dollars okay, and you're like, guy,
25:28
Speaker 2: this is kind of a problem today. If you want
25:30
Speaker 2: to know where it is, it's some of the AI
25:33
Speaker 2: adjacent stuff fair enough, I won't even say like AI,
25:36
Speaker 2: but the stuff where it's like, hey, we're gonna maybe
25:39
Speaker 2: make small modular nuclear reactors and we've never made one
25:44
Speaker 2: and we're valued at tens of billions of dollars.
25:46
Speaker 3: Okay, So you're gonna have little bubbles like pockets micro
25:49
Speaker 3: bubble talking about Yeah, that's fine, that's actually great way
25:51
Speaker 3: to think about it. So you just described a few
25:53
Speaker 3: that are so detached from any reasonable estimate of present
25:57
Speaker 3: value of future cash flows that yeah, it's probably a bubble.
26:00
Speaker 3: I'm talking about the broad market, but people are throwing
26:02
Speaker 3: the word bubble around with respect to the stock market
26:04
Speaker 3: as a whole. Because Schuller, so called Chiller pe and
26:06
Speaker 3: other measures of price to long term inflation adjusted earnings
26:10
Speaker 3: are nearly as high as they've ever been. The only
26:13
Speaker 3: comparison point being the so called dot com bubble. So
26:17
Speaker 3: by any measure, Chuck, things look quite frothy and elevate
26:20
Speaker 3: underlying inflation trend inflation. We I use medium for that
26:23
Speaker 3: because it's the go to metric for researchers. There are others, though,
26:28
Speaker 3: measures of the of the trend and inflation that filters
26:32
Speaker 3: out the noise attendant with month to month data that
26:35
Speaker 3: point to ongoing elevated inflation. So it's a little odd
26:39
Speaker 3: unless you have a very strong belief, which Fed Governor
26:41
Speaker 3: Waller does, as one of the stories in our stack
26:44
Speaker 3: talks about that the labor market is weakening quickly. Unless
26:48
Speaker 3: you have very high confidence in that belief, it's unclear
26:51
Speaker 3: why the that should be easy, folks.
26:52
Speaker 2: The Armstrong Advisory Group has a guide available this month.
26:56
Speaker 2: It's titled Understanding Required minimum Distributions. AH good old rmds. Well,
27:02
Speaker 2: if you've got questions about rmds and your financial situation,
27:07
Speaker 2: this is the guy that can help give you some
27:09
Speaker 2: answers about whether or not you need to take rmds,
27:13
Speaker 2: about how big those rm ds may or may not be,
27:16
Speaker 2: and what can the penalties be in the event that
27:19
Speaker 2: you don't take an R and D when you're supposed to.
27:21
Speaker 2: There are little less than seventy days left in twenty
27:25
Speaker 2: twenty two. I'm twenty twenty two, Tucker. Can you like
27:30
Speaker 2: hit the reset button on me? Or something like? What
27:32
Speaker 2: just happened? Plus three? Did I just glitch back three years? Well,
27:36
Speaker 2: but my goodness, it's only about seventy days left in
27:40
Speaker 2: twenty twenty five, Thank you very much. And so in
27:44
Speaker 2: order to make sure that you've got things buttoned up,
27:47
Speaker 2: this guy is a great place to start again. It's
27:49
Speaker 2: titled Understanding Required Minimum Distributions. The rules surrounding them have
27:54
Speaker 2: changed a number of times in the last five or
27:56
Speaker 2: six years, and this guy can give you some of
27:58
Speaker 2: the information to help make you this help make decisions
28:01
Speaker 2: for yourself about do I need to take an arm
28:04
Speaker 2: D this year? How much is it going to be?
28:06
Speaker 2: And what do I do? Then? The guide again is
28:09
Speaker 2: titled Understanding required minimum Distribution. There are two ways that
28:13
Speaker 2: you can request it. First is by going to Armstrong
28:15
Speaker 2: Advisory dot Com. There's a button there where you can
28:18
Speaker 2: request it. Second, you can call eight hundred three nine
28:21
Speaker 2: three for zero zero one.
28:24
Speaker 1: The proceeding was paid for by Armstrong advisory group a
28:27
Speaker 1: registered investment advisor. Nothing in the ad or in any
28:29
Speaker 1: Armstrong guide a specific financial, legal, or tax advice. Consult
28:33
Speaker 1: your own financial, tax into state planning advisors before making
28:35
Speaker 1: any investment decisions. Armstrong may contact you to offer investment
28:38
Speaker 1: advisory services.
28:40
Speaker 2: Mark, I want to skip ahead and talk about health
28:42
Speaker 2: insurance here, just because Tucker put a couple of health
28:44
Speaker 2: insurance pieces in the stack, and I don't want to
28:46
Speaker 2: just save him for stack roulette. I'm going to start
28:49
Speaker 2: with this Wall Street Journal one. The average cost of
28:52
Speaker 2: a family health insurance plan is now twenty seven thousand dollars.
28:56
Speaker 2: That's according to the Kaiser Family Foundation. And I have
29:02
Speaker 2: a few different thoughts about this. The first is everyone
29:09
Speaker 2: loves to hate insurance companies, but no one ever like
29:11
Speaker 2: says like how they would fix it or run an
29:13
Speaker 2: insurance company themselves that would be better. I'm not saying
29:17
Speaker 2: that insurance companies are like great, like raw ra Ye insurance,
29:20
Speaker 2: but what I am saying is, okay, like tell me
29:23
Speaker 2: how you would fix this so that things are cheaper,
29:25
Speaker 2: and most people can't actually do that. The problem that
29:30
Speaker 2: we have, in my opinion, is not that health insurance
29:35
Speaker 2: is too expensive. It's that incomes are too low relative
29:39
Speaker 2: to overall health care spending. And specifically, like when you
29:42
Speaker 2: look at healthcare spending as a percentage of GDP, it's
29:45
Speaker 2: been on a freaking rocket ship for the last forty years.
29:50
Speaker 2: It's just gone up and up and up. So it's
29:52
Speaker 2: a bigger portion of our spending is going towards health
29:55
Speaker 2: care and it's not happening with improvements in outcomes the
29:59
Speaker 2: way that you would exp It's not like life spans
30:02
Speaker 2: have dramatically increased during that time. And so the place
30:07
Speaker 2: where I get to on this is and again, like
30:11
Speaker 2: people have looked at trying to fix this, and everyone
30:14
Speaker 2: basically it comes to the same conclusion, which is like,
30:17
Speaker 2: don't know what to do, but it's a mess because
30:19
Speaker 2: you basically have this hybrid of let's take the worst
30:23
Speaker 2: parts of public health care and the worst parts of
30:26
Speaker 2: private health care and put them together. And that's what
30:29
Speaker 2: the US healthcare system basically looks like. It's, hey, we
30:34
Speaker 2: have to expand coverage to cover more people, but we're
30:37
Speaker 2: not going to do anything to increase the supply of
30:39
Speaker 2: doctors because forget if it's the American Medical Association or
30:43
Speaker 2: whoever it is it's one of the big doctor groups
30:46
Speaker 2: limits the number of med school residency spots that you have,
30:50
Speaker 2: and so you can't get enough doctors that are trained,
30:53
Speaker 2: which means mark according to supply and demand, if you
30:57
Speaker 2: increase demand for healthcare, but don't increase apply for healthcare,
31:01
Speaker 2: what happens. Prices should go up to ration and they
31:04
Speaker 2: tend services. Okay, and and so you have And that's
31:08
Speaker 2: just one example. But basically what you have, you've got
31:11
Speaker 2: a whole mess. It's not the insurance company's fault that
31:14
Speaker 2: these prices are this high. It's the overall system as
31:19
Speaker 2: a whole. Is why this is happening, Because there is
31:24
Speaker 2: nothing out there that says, hey, like, here's how we're
31:28
Speaker 2: going to make sure that you know, pricing is being
31:30
Speaker 2: you know, effectively implemented. There's not enough competition in many states.
31:35
Speaker 2: You look at the New England region where our show
31:37
Speaker 2: is based, just as an example, you have one or
31:39
Speaker 2: two large conglomerates that basically run like healthcare systems now
31:43
Speaker 2: and there's not a ton of competition out there on
31:45
Speaker 2: pricing and things like that. And it's just a very
31:49
Speaker 2: messy situation. So it's not to say like, oh, like
31:53
Speaker 2: insurance plans are like properly priced, like get over it.
31:56
Speaker 2: When I'm what I'm more saying is, no, this is
31:58
Speaker 2: a problem, but the insurance cost is the symptom of
32:03
Speaker 2: the problem. It's not actually cause of it.
32:05
Speaker 3: No, you're absolutely right.
32:06
Speaker 2: We not the cause of it.
32:07
Speaker 3: Yeah, we spend twice as much. I'm just dividing here
32:10
Speaker 3: personal consumption expenditures, that is spending on healthcare, dividing that
32:14
Speaker 3: by total spending. We spend about twice as much as
32:17
Speaker 3: we did in nineteen eighty on healthcare today. And as
32:21
Speaker 3: you point out, and we don't live twice, we're just
32:22
Speaker 3: we're advancing like which.
32:24
Speaker 2: We wouldn't expect to Yeah, no, but no, Yeah.
32:26
Speaker 3: You're absolutely right. The gains we're making are I'm sure special.
32:32
Speaker 3: You know healthcare economist would say, no, you're getting this
32:34
Speaker 3: all wrong in terms of terminology. But the gains we're
32:37
Speaker 3: making are really really incremental. We're picking up you know,
32:40
Speaker 3: inches here as opposed to yards in earlier waves of innovation.
32:45
Speaker 2: And this is also before we even get to the
32:49
Speaker 2: issues with you know, we're talking now about improving quantity
32:52
Speaker 2: of life in terms of life span. Are we seeing
32:56
Speaker 2: like what are we seeing in terms of quality of life,
32:58
Speaker 2: like even for folks who maybe living longer, is the
33:01
Speaker 2: quality diminished because of you? X Y. I don't even
33:05
Speaker 2: know how you measure it. So let's take a quick break,
33:08
Speaker 2: and then when we come back, let's do stack roulette
33:10
Speaker 2: and talk about something more uplifting than twenty seven thousand
33:13
Speaker 2: dollars for health insurance.
33:15
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34:26
Speaker 2: Mark. I got to start off with a piece that
34:29
Speaker 2: I just found a little while agoes. You guys, what
34:35
Speaker 2: just happened? What?
34:36
Speaker 1: Oh?
34:36
Speaker 2: Sorry, my my sound? You can't hear anything? No, you,
34:41
Speaker 2: I can hear you loud. Don't about something? Maybe I
34:43
Speaker 2: just like lean the wrong way or something. No, I
34:46
Speaker 2: hear you being okay. Anyways, you guys remember the AWS
34:50
Speaker 2: outage from Monday? Oh? Yeah, yeah, you forget? Uh did
34:53
Speaker 2: you have your sleep disrupted by it? No? It's interesting
34:58
Speaker 2: because there's a company by the name of eight Sleep,
35:01
Speaker 2: and I wasn't familiar with them before this. The number
35:04
Speaker 2: eight yes, eight eight sleep, Yeah, well like seven eight nine. Anyways,
35:11
Speaker 2: it's this company called eight Sleep and what they do
35:13
Speaker 2: They make this like little portable thing that sits next
35:16
Speaker 2: to your bed. And then a cover for your bed,
35:19
Speaker 2: and it can heat and cool your bed to the
35:22
Speaker 2: right temperature if you're like a hot or cool sleeper cool.
35:25
Speaker 2: It's a smart bed. And this thing, by the way,
35:28
Speaker 2: costs for you know, a king sized bed. It's thirty
35:31
Speaker 2: three hundred dollars, not for like the mattress or the
35:35
Speaker 2: bed or anything. This is the cover and the cooling thing.
35:39
Speaker 2: But it basically like then monitors and heats and cools
35:42
Speaker 2: as you need. I don't know that this is useful
35:44
Speaker 2: in any way, shape or form, but it's a product,
35:46
Speaker 2: and so it exists. When AWS went down, these smart
35:51
Speaker 2: beds run on AWS, and so basically the whatever setting
35:56
Speaker 2: things were stuck on is the one that it just
35:58
Speaker 2: ended on. And so like these smart beds pretty much
36:03
Speaker 2: ended up either like overheating in a lot of cases
36:05
Speaker 2: are overcooling, and so people were just like either freezing
36:08
Speaker 2: or like so hot. And it obviously then gets to
36:12
Speaker 2: the question of okay, if if a simple AWS outage
36:17
Speaker 2: can turn your smart bed into an oven. I don't
36:22
Speaker 2: know that we're quite ready for self driving cars that
36:25
Speaker 2: use cloud based technology to be like driving us around here.
36:29
Speaker 2: I'm just not sure I'm comfortable with it. It's like
36:32
Speaker 2: we should, you know, slow down a little bit. You know,
36:35
Speaker 2: if your smart bed is being bricked by an AWS outage,
36:40
Speaker 2: maybe we should just take it a little slower on
36:42
Speaker 2: the whole self driving vehicles thing.
36:45
Speaker 4: I mean, there are appliances that operate in Wi Fi
36:49
Speaker 4: technology too, Like, oh, I'm sure that some of these
36:51
Speaker 4: fridges and ovens, like washing machines, for some reason, they
36:55
Speaker 4: have to have Internet connected.
36:56
Speaker 2: Honestly, why does everything need to be connected? Now? Now
37:00
Speaker 2: I understand like some things, but here's like washing machines
37:03
Speaker 2: is a great example. Unless like I can push a
37:08
Speaker 2: button and have the laundry moved from the washing machine
37:11
Speaker 2: to the dryer, right, which would be useful.
37:14
Speaker 1: Nice?
37:14
Speaker 2: Actually, what do I need like my washing machine on
37:17
Speaker 2: my phone?
37:18
Speaker 1: For?
37:18
Speaker 2: Am I gonna be like yeah, run it again? No,
37:21
Speaker 2: Like that's kind of dumb. You know how long your
37:24
Speaker 2: wash takes? Oh, hey, I'm gonna be home in a
37:27
Speaker 2: little bit. Turn the oven on. Gee, that seems kind
37:30
Speaker 2: of dangerous being like on the road, you're not home
37:33
Speaker 2: and you're just turning the oven on. Maybe you shouldn't
37:35
Speaker 2: do that, just wait, right, Like you know that there's
37:39
Speaker 2: there's stuff that you can do on all this Now,
37:42
Speaker 2: there are other things that I think could be like
37:43
Speaker 2: useful from a smart technology perspective, but like my fridge
37:49
Speaker 2: doesn't need to be connected to the.
37:51
Speaker 4: Internet, Well you gotta see if you have milk in
37:53
Speaker 4: there or not, Chuck, Why.
37:55
Speaker 2: Don't I just use my eyes in my hand? I can?
37:58
Speaker 2: I can? I can open this called a door and
38:01
Speaker 2: be like, hey, milk, you're there. Oh you're not. I'm
38:05
Speaker 2: gonna go out and get one of your friends. We're
38:09
Speaker 2: done for the day. We do have Tesla earnings after
38:13
Speaker 2: the Belt today, so we'll be covering that on tomorrow's
38:15
Speaker 2: show and can't wait to see y' all then