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Diesel Surge Pushes Inflation Risk Back Into Focus · The Financial Exchange Show

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  Speaker 1: is The Financial Exchange with Chuck Zada and Mike Armstrong.
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  Speaker 2: Chuck, Mike, Tucker with you here on The Financial Exchange.
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  Speaker 2: And we've got... A very modest sell-off taking place today.
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  Speaker 2: I know that, I gotta be honest, over the weekend,
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  Speaker 2: you know, I see what people are talking about on,
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  Speaker 2: you know, the old Twitter platform. I mean, again, I
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  Speaker 2: think that there's some interesting signals that you can get
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  Speaker 2: just from, you know, seeing what everyone's talking about. And my, oh, my,
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  Speaker 2: the sky was falling over the weekend. I got to
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  Speaker 2: tell you. You know, I had people talking about, oh,
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  Speaker 2: it's going to be Black Monday. Oh, it's going to,
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  Speaker 2: you know, it's going to be. And look, the day's
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  Speaker 2: not even halfway over, so who knows where this thing
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  Speaker 2: ends up. But 182 points on the Dow doesn't exactly
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  Speaker 2: scream Black Monday to me.
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  Speaker 3: I know.
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  Speaker 2: Not when the Dow's at 52.390.
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  Speaker 3: I'm talking about a third of a percent.
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  Speaker 2: You know. S & P, oh, S & P. Down
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  Speaker 2: two-thirds of a percent. Twice as bad as the Dow, Michael.
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  Speaker 3: Yes.
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  Speaker 2: The Nasdaq composite down three quarters of a percent. Again,
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  Speaker 2: none of this rises to the level of even being
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  Speaker 2: notable in any way, shape or form. So very modest
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  Speaker 2: sell off happening in U.S. equity markets right now. Bonds,
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  Speaker 2: 10 year treasury did touch five point oh one percent
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  Speaker 2: earlier today. It's back down to four nine seven seven now.
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  Speaker 2: So basically flat on the day. You've got the dollar
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  Speaker 2: index up 0.49% to 99.335. Gold off 2% today, down
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  Speaker 2: $ 91 an ounce to $ 43.
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  Speaker 4: 17.
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  Speaker 2: You've got crude oil up $ 3. 63 a barrel to $ 103. 68
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  Speaker 2: on West Texas Intermediate. Brent is knocking on the door
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  Speaker 2: of $ 110. And AAA national average for gas prices up 0.3%
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  Speaker 2: to $ 4. 31 and 0.6%. Diesel, though, up another $ 0. 03 to $ 6. 23.
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  Speaker 2: So Diesel's now up $ 0. 33 in a week and $ 0. 81
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  Speaker 2: in a month.
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  Speaker 3: Do either of you have a friend named Brent? Because
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  Speaker 3: I have a friend named Brent. I do have a
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  Speaker 3: friend named Brent. Every time we talk about it, I'm
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  Speaker 3: picturing him knocking on a door.
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  Speaker 2: Is he crude?
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  Speaker 3: No.
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  Speaker 2: He's refined?
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  Speaker 3: Yeah, he's a rather refined individual.
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  Speaker 5: Yeah.
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  Speaker 2: I feel like most Brents, like Brent.
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  Speaker 3: Right, yeah. You can't be a college dropout or a
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  Speaker 3: drunk with the name Brent.
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  Speaker 2: No, it's kind of like, you know, like, right, you
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  Speaker 2: don't meet many tads that are, you know.
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  Speaker 1: Right.
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  Speaker 3: Yeah.
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  Speaker 1: Yeah.
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  Speaker 3: So there's that. I was going to go down some
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  Speaker 3: other paths here, but I didn't want to offend anybody.
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  Speaker 2: I was waiting to see.
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  Speaker 3: I was thinking of Gertrude and trying to find a
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  Speaker 3: despicable way of describing Gertrude, and I decided not to
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  Speaker 3: go there.
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  Speaker 2: Guys, all of our names are jokes. Mine rhymes with nothing.
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  Speaker 2: I don't know what you're talking about. Do you know
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  Speaker 2: how many Upchuck jokes I've gotten in my life? The
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  Speaker 2: first time, hey, what's up, Chuck? And then someone giggles,
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  Speaker 2: and it's like... Yeah, I get it. Thanks, man. You know,
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  Speaker 2: like real original.
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  Speaker 3: My personal favorite has always been about my last name, Armstrong.
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  Speaker 3: And the nickname Leg Week was one of the more
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  Speaker 3: creative seventh grade nicknames I ever got.
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  Speaker 2: So I still use it. Yeah, I still use it.
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  Speaker 2: So it shows how mature we all are. You know,
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  Speaker 2: it's fine. It's in the name anyway. So we've got
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  Speaker 2: to talk about what's going on in oil because it
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  Speaker 2: continues to just be nuts.
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  Speaker 3: Frankly, that's where all the exciting stuff is. The exciting
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  Speaker 3: stuff is not happening in the stock market right now.
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  Speaker 3: It's bonds and it's energy. Yes.
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  Speaker 2: And you can live your entire life and you'll maybe
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  Speaker 2: see one oil market like this, maybe two, if you're
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  Speaker 2: lucky or unlucky, depending on how you want to look
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  Speaker 2: at it. So everything is broken right now in... the
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  Speaker 2: refined product market.
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  Speaker 3: And sometimes quite literally.
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  Speaker 2: It's basically, it's hard to see this getting better in
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  Speaker 2: the short term. Here's what's going on today. Joliet, Illinois
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  Speaker 2: has a big Exxon refinery that does 275,000 barrels a
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  Speaker 2: day of refining. There's a total power outage there. We
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  Speaker 2: don't know why. It's either on fire or it's flaring.
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  Speaker 2: Not because of anything nefarious, but when you're just running
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  Speaker 2: these facilities over max capacity for extended periods of time,
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  Speaker 2: something breaks and then you're just out of luck. So
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  Speaker 2: it's not just what you're seeing in diesel prices now.
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  Speaker 2: Diesel futures for October, now up another $ 0. 16 a gallon today,
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  Speaker 2: were basically screaming right towards $ 6. 50 a gallon on diesel.
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  Speaker 2: And absent any change, of course, either in the Middle East,
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  Speaker 2: in Russia, or in China, there's basically nothing that you
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  Speaker 2: can do in order to change that. Quite honestly, for
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  Speaker 2: the month of October, you can't change it. It's set
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  Speaker 2: in stone. any extra diesel that's produced by the world
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  Speaker 2: today isn't getting to the United States before October anyways.
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  Speaker 6: Yeah.
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  Speaker 3: So best case scenario, we're looking at a fix in 2027,
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  Speaker 3: it seems.
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  Speaker 2: Maybe late 26th, like November, December, maybe is like, and
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  Speaker 2: that's if like everything clears up today, which I got
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  Speaker 2: to be honest, doesn't really seem like it's going to.
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  Speaker 7: Right.
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  Speaker 3: I mean, the president himself has said that he does
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  Speaker 3: not resolving anything with Iran until after the midterms.
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  Speaker 2: So you've got diesel that legitimately has a chance, I
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  Speaker 2: would say, by the end of the month to hit
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  Speaker 2: $ 7 a gallon nationally. In California, by the way, which,
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  Speaker 2: do you know where, like, basically your fruits and vegetables
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  Speaker 2: come from?
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  Speaker 3: Yeah.
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  Speaker 2: It's California. I think it's like two-thirds of vegetables and
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  Speaker 2: one-third of fruits, or maybe it's the other way. I
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  Speaker 2: can't remember which.
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  Speaker 3: So you've got that. You've also got a.
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  Speaker 2: California diesel's at $ 8.
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  Speaker 3: 15 right now.
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  Speaker 2: 8.15 is California. California diesel is up $ 1. 25 in the
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  Speaker 2: last month. Tom Closet, who we had on from Gulf
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  Speaker 2: Oil a couple weeks ago, had a tweet today that said, look,
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  Speaker 2: if you see like you're going down the highway and
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  Speaker 2: you see a truck carrying a load of diesel, at
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  Speaker 2: the beginning of the year, that truck was worth $ 30, 000. Today,
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  Speaker 2: it's worth 50, the diesel in it.
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  Speaker 4: Yeah.
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  Speaker 2: That's the deal that you have. And remember, this seeps
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  Speaker 2: in everywhere. Diesel transports everything in the United States. And
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  Speaker 2: so these are going to be costs that end up
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  Speaker 2: being passed on to end buyers of products. And we
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  Speaker 2: are absolutely screaming towards $ 7 diesel right now nationally. And
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  Speaker 2: $ 8 to $ 9 are not out of the question, depending
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  Speaker 2: on how the next month or two go.
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  Speaker 3: I can't really think of a worse possible time for
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  Speaker 3: this to be happening.
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  Speaker 2: It couldn't happen at any other time because this is
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  Speaker 2: the highest volume buying. This is the heaviest diesel usage
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  Speaker 2: time of the year. This wouldn't happen any other time
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  Speaker 2: of year. It's like this is basically it.
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  Speaker 3: You're stocking shelves for the holidays. You are beginning in
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  Speaker 3: Maine and other parts of the north to heat your homes.
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  Speaker 3: And it is, yeah, all culminating in the highest diesel
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  Speaker 3: and home heating oil prices that we have again. Price
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  Speaker 3: is interesting. Ever seen.
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  Speaker 2: Look, we're at the point now. It's not just the high.
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  Speaker 2: We're 10% over the previous high. I mean, we're not
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  Speaker 2: talking about just like sneaking over now. The previous high
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  Speaker 2: was 561. We're at 623 and heading for 650. So
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  Speaker 2: this is where we stand as it relates right now. Gasoline,
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  Speaker 2: there's some tightness as well. Again, we're up to 431.
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  Speaker 2: We were at 407 a month ago. It's based on
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  Speaker 2: what I've heard from, again, there are people that are
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  Speaker 2: way more plugged into this stuff than I am. I
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  Speaker 2: don't know that we necessarily clear all time highs in
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  Speaker 2: gasoline just because we're winding down the heavy summer driving season.
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  Speaker 2: And so there's just not as much demand, whereas we're
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  Speaker 2: ramping into max diesel demand right now at like the
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  Speaker 2: next four weeks are it. Like, the next four weeks
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  Speaker 2: are the heaviest, and then there's still kind of plateaus and, like,
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  Speaker 2: stays there until Thanksgiving, and then it starts to wind down. But, yeah, it's, again,
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  Speaker 2: I've never seen anything like this. This is the stuff
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  Speaker 2: that you are seeing in oil markets. Like, in terms
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  Speaker 2: of the tightness, here are some of the ways that
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  Speaker 2: we measure the tightness. On the refined product side, it's
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  Speaker 2: through what we call crack spreads. How much does it
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  Speaker 2: cost to buy the crude, and how much do you
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  Speaker 2: receive for the product that you produce? Diesel crack spreads
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  Speaker 2: normally are between like $ 25 and $ 35 a barrel, meaning, okay,
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  Speaker 2: normally you pay $ 65 for a barrel, you produce your diesel,
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  Speaker 2: and you sell it for $ 100, just as an example.
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  Speaker 2: That's a $ 35 crack spread. As of right now, diesel cracks,
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  Speaker 2: $ 113 a barrel. Good time to be a refiner. That's
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  Speaker 2: the crack, which means the barrel itself is going for
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  Speaker 2: like $ 215 right now. The other way that you tell
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  Speaker 2: on any of these in terms of, hey, how tight
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  Speaker 2: is the market is, are through what we call time spreads.
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  Speaker 2: And time spread is a fancy way of saying, hey,
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  Speaker 2: what is the, you know, nearest month futures price for crude?
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  Speaker 2: And then what does it look like if you go out,
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  Speaker 2: you know, one month or six months from there? So
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  Speaker 2: as an example, the November Brent crude contract is at 108.27
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  Speaker 2: right now. The December one, so this is a one
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  Speaker 2: to two month spread, is at $ 102.
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  Speaker 3: 62.
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  Speaker 2: Now, a couple important things. This does not mean that
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  Speaker 2: the price of crude is projected to go down by December.
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  Speaker 2: What this means is that there is so much demand
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  Speaker 2: for crude in November that buyers are willing to pay
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  Speaker 2: $ 6 more than having to wait until December in order
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  Speaker 2: to get it. A normally shaped crude curve is something
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  Speaker 2: where November might be like called $ 70 and December is
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  Speaker 2: $ 70 and 10 cents. So it's normally an upward sloping curve.
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  Speaker 2: The reason why that curve is normally upward sloping. If
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  Speaker 2: you are selling crude, you got all kinds of carrying
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  Speaker 2: costs associated with it. If you got to hold that,
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  Speaker 2: you got to pay to store it, to insure it,
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  Speaker 2: to operate your facility, all this stuff. And so you say, yeah,
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  Speaker 2: if you don't want delivery until now, you got to wait.
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  Speaker 2: In this case, we got this backward aided curve. And
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  Speaker 2: it's telling you that this market is incredibly tight. We're
• 11:41
  Speaker 2: going to stick with a little bit of chatter about energy.
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  Speaker 2: We're going to take a quick break. When we return,
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  Speaker 2: Andy Critchlow, the head of energy news at Dow Jones Energy,
• 11:49
  Speaker 2: joins us next.
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  Speaker 2: As promised, we are now joined by Andy Critchlow, the
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  Speaker 2: head of Energy News at Dow Jones Energy. Andy, thanks
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  Speaker 2: so much for joining us today. We appreciate it.
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  Speaker 5: Thanks for having me on the show. Lots to talk about.
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  Speaker 2: Quite a bit. And I want to start with what's
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  Speaker 2: been kind of my main focus over the last month
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  Speaker 2: or two, which has been what's been going on with diesel.
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  Speaker 2: It seems to be the area of the refined product
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  Speaker 2: market that is in tightest supply right now. Is that
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  Speaker 2: an accurate statement? And what do we see developing over
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  Speaker 2: the coming months?
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  Speaker 6: Yeah, that's very much an accurate statement. You know, you've
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  Speaker 6: got record prices in certain parts of the US.
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  Speaker 5: I think we've.
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  Speaker 6: Got diesel at over $ 9 a gallon in California. A
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  Speaker 6: lot of people concerned it's going to push above $ 10
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  Speaker 6: a gallon. These are historic prices for diesel in the US. And,
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  Speaker 6: you know, the bottom line is it just shows how
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  Speaker 6: all energy markets are interconnected. Yeah, there's some structural issues
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  Speaker 6: around the refining system in the US that have contributed
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  Speaker 6: to this.
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  Speaker 5: But overall, it's about tightness in the market.
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  Speaker 6: When the US is exporting so much of its middle
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  Speaker 6: distillates into Europe to make up for that export ban
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  Speaker 6: that the Russians have on European shipments, it just means
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  Speaker 6: more products are flowing out of the US at a
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  Speaker 6: time when markets are really tight. So that's going to
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  Speaker 6: push up prices for consumers. Inflation is a aftermath of that.
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  Speaker 6: And It just shows that all these geopolitical events, they
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  Speaker 6: can hit home very hard in domestic markets.
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  Speaker 2: Have you heard any chatter of a U.S. export ban
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  Speaker 2: on refined product or crude? And what would the impact
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  Speaker 2: be if we did see that happen here?
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  Speaker 6: Well, certainly for European markets, an export ban from the U.S.
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  Speaker 5: Would be catastrophic.
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  Speaker 6: And certainly a lot of analysts are now talking about
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  Speaker 6: this as an option for the administration, of course. There's
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  Speaker 6: only so many things the administration can now start to
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  Speaker 6: do to put a lid on prices, especially when it
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  Speaker 6: kind of breaks out of just being isolated to crude markets.
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  Speaker 6: And of course, the buffers that were in place heading
• 14:31
  Speaker 6: into this crisis, we talk about the Strategic Petroleum Reserve,
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  Speaker 6: which is now down to historic lows that we haven't
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  Speaker 6: seen since the 1980s. You know, that can only have
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  Speaker 6: a certain impact. And ultimately, the government's running out of tools. So,
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  Speaker 6: you know, when you look at the volumes of middle
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  Speaker 6: distillates being exported, it kind of makes sense that you
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  Speaker 6: would start to regulate that a little bit to protect
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  Speaker 6: domestic markets. Of course, this administration wouldn't be the first
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  Speaker 6: to introduce restraints on flows of energy. Of course, the
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  Speaker 6: Jones Act, that's what it was designed to do originally.
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  Speaker 6: So do we see a return to that? I think
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  Speaker 6: it could be definitely on the cards.
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  Speaker 2: When we look at the high price of diesel and
• 15:13
  Speaker 2: how that factors into the economy more broadly, what are
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  Speaker 2: the most important impacts that that has on different parts
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  Speaker 2: of the world economy?
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  Speaker 5: Yeah, I mean, agriculture first.
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  Speaker 6: 20% to 30% of farm gate prices are down to
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  Speaker 6: diesel costs. That's to run tractors, heavy machinery. It's to
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  Speaker 6: dry crops in big storehouses. Diesel is a massive input
• 15:36
  Speaker 6: to agricultural prices. It's going to affect farm gates, and
• 15:39
  Speaker 6: that's going to directly feed through to consumer price inflation globally,
• 15:43
  Speaker 6: higher food costs. The outcome of that is that central
• 15:46
  Speaker 6: bankers now all over the world are talking about higher
• 15:50
  Speaker 6: interest rates. We've just had the Bank of England looking
• 15:53
  Speaker 6: at it here. Do we see another round of interest
• 15:57
  Speaker 6: rate rises across the globe as a consequence of this
• 15:59
  Speaker 6: to put a lid on inflation? But certainly agriculture is
• 16:04
  Speaker 6: a big hit. Transportation, of course, diesel is the main
• 16:07
  Speaker 6: fuel used for freight goods transportation, be it on road.
• 16:11
  Speaker 6: Very low sulfur fuel oil, which is effectively diesel, is
• 16:14
  Speaker 6: a primary fuel for marine shipping globally. So anything that
• 16:18
  Speaker 6: needs to get from the factory gate to the shop floor,
• 16:23
  Speaker 6: it needs diesel. And so that's why it's called the
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  Speaker 6: backbone of the economy.
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  Speaker 2: We've been talking a lot about the refined product side
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  Speaker 2: of things here, but let's talk also about what we're
• 16:31
  Speaker 2: seeing in crude, where the big story over the last
• 16:34
  Speaker 2: few days, the striking of the Saudi East-West pipeline late
• 16:39
  Speaker 2: last week that now has the potential to be offline for,
• 16:43
  Speaker 2: you know, again, we don't know exactly how long or
• 16:46
  Speaker 2: what kind of flows can be restored in the interim.
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  Speaker 2: How big of an impact can this have on the
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  Speaker 2: crude side of things?
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  Speaker 5: Yeah, it's a massive deal.
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  Speaker 6: I mean, You know, we've heard the Secretary of Energy,
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  Speaker 6: Chris Wright, talk about about 10 million barrels a day
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  Speaker 6: of liquids coming out of the Strait of Hormuz now.
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  Speaker 5: So that's about 10 percent of world supply.
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  Speaker 6: The East-West pipeline can handle 7 million barrels, but in
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  Speaker 6: realistic terms is probably handling about 5 million barrels a
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  Speaker 6: day of Saudi crude. that's Arab light. It's the kind
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  Speaker 6: of crude oil that is very much in high demand
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  Speaker 6: in Asia. We're already seeing a rush for feedstock from
• 17:24
  Speaker 6: Asian refiners, especially those teapot refineries in China. That's the
• 17:28
  Speaker 6: independent refineries that fall outside the government system. And they're
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  Speaker 6: very much a balancing act in terms of driving growth
• 17:36
  Speaker 6: in Asia. And if they can't get that feedstock as
• 17:39
  Speaker 6: a consequence of what's happening in Saudi Arabia. There's very
• 17:41
  Speaker 6: few options now where you can go. We've seen these
• 17:43
  Speaker 6: teapot refineries looking at Colombia, looking at different supplies in
• 17:47
  Speaker 6: West Africa to make up for the lost capacity out
• 17:50
  Speaker 6: of the Middle East. But again, it comes back to
• 17:52
  Speaker 6: that narrative that the world's running out of buffers.
• 17:55
  Speaker 2: Very good. Andy, we appreciate you joining us today. Thank
• 17:57
  Speaker 2: you so much for the time. And we look forward
• 18:00
  Speaker 2: to catching up with you again soon.
• 18:02
  Speaker 5: Yeah, thanks very much. Thanks for having me on the show.
• 18:04
  Speaker 2: That is Andy Critchlow. He is the head of energy
• 18:07
  Speaker 2: news at Dow Jones Energy. Mike, anything else that you
• 18:10
  Speaker 2: want to touch on as it relates to what we're
• 18:13
  Speaker 2: seeing in energy markets?
• 18:15
  Speaker 3: I don't think so, Chuck. It's just we are heading
• 18:17
  Speaker 3: for a period here that it's very difficult to divert from.
• 18:20
  Speaker 3: And I guess the piece that will be interesting to
• 18:24
  Speaker 3: me is how Kevin Warsh at the Fed does speak
• 18:26
  Speaker 3: about it. They do tend to try to look through
• 18:30
  Speaker 3: these sorts of things. But When you're talking about record
• 18:34
  Speaker 3: high diesel prices, that's very different than talking about what
• 18:37
  Speaker 3: could be a temporary spike in gasoline prices.
• 18:40
  Speaker 2: Yeah, the Fed, again, the reason why when we look
• 18:47
  Speaker 2: at the inflation side of things, we have this core
• 18:49
  Speaker 2: end headline is because the Fed generally tries to exclude
• 18:53
  Speaker 2: food and fuel from calculations because they can be really volatile.
• 18:56
  Speaker 2: I mean, we've seen this this year where one month
• 18:59
  Speaker 2: you've got energy prices up 10, another month later in
• 19:01
  Speaker 2: the year, they're down 10. But when things seep in
• 19:05
  Speaker 2: more broadly and kind of lose containment, this is the
• 19:09
  Speaker 2: situation that you end up with because of rising diesel
• 19:12
  Speaker 2: prices in particular is you tend to end up with
• 19:16
  Speaker 2: that core print moving higher as well. So it's not
• 19:19
  Speaker 2: just contained into that energy number. It kind of breaks
• 19:23
  Speaker 2: containment and filters into the rest of the data. Let's
• 19:26
  Speaker 2: take a quick break here. When we return, we've got
• 19:29
  Speaker 2: Wall Street Watch.
• 19:40
  Speaker 7: Bringing the latest financial news straight to your radio every day.
• 19:44
  Speaker 7: It's the Financial Exchange on the Financial Exchange Radio Network.
• 19:50
  Speaker 7: Time now for Wall Street Watch.
• 19:53
  Speaker 1: Tracking the stocks, the data, and the headlines driving markets
• 19:56
  Speaker 1: so far today. Right here on the Financial Exchange Radio Network.
• 20:00
  Speaker 4: Tech is pulling back today after AI leaders proposed to
• 20:03
  Speaker 4: slow down the technology's development to hone in on safety separately.
• 20:07
  Speaker 4: Ten-year treasury yield hit 5% for the first time since 2023.
• 20:12
  Speaker 4: as traders ready for the conclusion to the Fed's meeting
• 20:15
  Speaker 4: on Wednesday. Right now, the Dow is down about a
• 20:17
  Speaker 4: third of a percent, or 161 points off.
• 20:20
  Speaker 2: S & P.
• 20:21
  Speaker 4: 500 is retreating half a percent, or 37 points lower.
• 20:24
  Speaker 4: NASDAQ is now down half a percent, or 140 points.
• 20:29
  Speaker 4: Ross 2000 is down about two-thirds of a percent. 10-year
• 20:33
  Speaker 4: Treasury yield is down one basis point at 4.959%. And
• 20:35
  Speaker 4: crude oil is up 3% at 103%, while Brent is
• 20:42
  Speaker 4: up 3% as well at $ 1.
• 20:44
  Speaker 2: 08.
• 20:46
  Speaker 4: Several chip makers seeing their stocks slide on the day
• 20:49
  Speaker 4: in reaction to the call for a slowdown in AI development.
• 20:52
  Speaker 4: Nvidia down by 3%, while Intel, AMD, and Marvell Technology
• 20:56
  Speaker 4: are down about 6%. Cybersecurity, however, seeing a nice little rally.
• 21:03
  Speaker 4: Palo Alto Networks and CrowdStrike are rallying anywhere between 12%
• 21:06
  Speaker 4: and 15%. Meanwhile, several energy stocks are seeing gains as
• 21:12
  Speaker 4: oil prices continue to rise due to increased tensions in
• 21:15
  Speaker 4: the Middle East. Diamondback Energy and APA are up about 2%,
• 21:20
  Speaker 4: while ExxonMobil and Chevron are up modestly. And after today's
• 21:24
  Speaker 4: closing bell, we'll see earnings from Dave and Buster's. I'm
• 21:29
  Speaker 4: Tucker Silva, and that is Wall Street Watch.
• 21:32
  Speaker 2: We got a piece in the Wall Street Journal today,
• 21:34
  Speaker 2: how to protect your nest egg when inflation is ballooning.
• 21:40
  Speaker 2: How do we do it, Michael?
• 21:41
  Speaker 3: Well, there's a few different methods, but I do want
• 21:44
  Speaker 3: to start with something that we have talked about before.
• 21:47
  Speaker 3: When I look at folks in their retirement, on average,
• 21:51
  Speaker 3: the bigger threat than markets falling apart, a market crash,
• 21:54
  Speaker 3: to their retirement success is inflation.
• 21:57
  Speaker 5: Right.
• 21:58
  Speaker 2: Everyone gets nervous about the market crash because it's no
• 22:02
  Speaker 2: different from, you know, we get nervous about the great
• 22:04
  Speaker 2: white shark or the lightning striking us or, you know...
• 22:07
  Speaker 2: When in reality, the stuff that gets us is heart disease. Hey,
• 22:11
  Speaker 2: we had one too many M & Ms or 100
• 22:14
  Speaker 2: too many M & Ms a day for, you know,
• 22:16
  Speaker 2: 100 years and not 100 years. But you get my
• 22:19
  Speaker 2: point in that horrible analogy I just tried to make.
• 22:21
  Speaker 3: Yeah. You're scared of the flashy stuff, not of the
• 22:24
  Speaker 3: stuff that actually kills you. And inflation is the type
• 22:26
  Speaker 3: of thing that kills you. The Wall Street Journal then
• 22:28
  Speaker 3: lays out the argument for tips. So. I think we
• 22:32
  Speaker 3: could do some quick justice to reminding folks of what
• 22:35
  Speaker 3: tips are. I don't actually know, Chuck, how long have
• 22:37
  Speaker 3: tips been around?
• 22:39
  Speaker 2: I want to say since the 1990s, maybe 1980s, but
• 22:41
  Speaker 2: let me take a look.
• 22:43
  Speaker 3: So these are obligations of the U.S. government. They are
• 22:47
  Speaker 3: bonds that are issued by the Treasury, and they are
• 22:49
  Speaker 3: protected against that very notion of inflation. And so long
• 22:55
  Speaker 3: as the government... Well, so long as the government does
• 22:58
  Speaker 3: two things continue to 1997 for the U S thank
• 23:01
  Speaker 3: you calculate inflation via the same method and doesn't, you know,
• 23:04
  Speaker 3: change the rules around how tips work to make them
• 23:07
  Speaker 3: less desirable. And so long as the government doesn't default,
• 23:10
  Speaker 3: you have this assured guarantee from the United States government that, Hey,
• 23:14
  Speaker 3: the interest that you receive will be protected against the
• 23:17
  Speaker 3: cost of inflation over a certain time period under which
• 23:20
  Speaker 3: you buy tips. Um, They aren't the only means of
• 23:24
  Speaker 3: protecting your nest egg against inflation. But, you know, the
• 23:27
  Speaker 3: article lays out a few different pieces here as to
• 23:29
  Speaker 3: how they could be valuable. You know, maybe you're buying
• 23:32
  Speaker 3: a home in a couple of years and you're worried
• 23:33
  Speaker 3: about inflation with your down payment. OK, that is that
• 23:36
  Speaker 3: is a means of which you can protect the inflation
• 23:39
  Speaker 3: protected value of that money that you're saving up.
• 23:43
  Speaker 2: Yeah, and I think that when we look at, you know,
• 23:47
  Speaker 2: kind of the approaches that you can take, again, I
• 23:50
  Speaker 2: think that any specific investments, you really need to do
• 23:54
  Speaker 2: the work on your own side to figure out what's
• 23:56
  Speaker 2: my time horizon, you know, what is my risk tolerance,
• 24:00
  Speaker 2: you know, what are my objectives, actually, because you read
• 24:03
  Speaker 2: a piece like this, and you're like, oh, I got
• 24:06
  Speaker 2: to invest in tips and then like.
• 24:07
  Speaker 3: Yeah, they solve all of my problems.
• 24:08
  Speaker 2: And then like you realize, okay, maybe they don't necessarily.
• 24:12
  Speaker 2: And you have to understand like the specific reason why
• 24:15
  Speaker 2: you're buying them and what they do because in particular, look,
• 24:20
  Speaker 2: one of the things that gets talked about right now
• 24:22
  Speaker 2: just on tips as an example is, hey, like tips,
• 24:25
  Speaker 2: like if you buy 30-year tips today, the real interest
• 24:28
  Speaker 2: rate on them is north of 3%. You're like, oh, great. Well,
• 24:32
  Speaker 2: if you go out and buy a TIPS ETF, you
• 24:34
  Speaker 2: are not buying that 30-year inflation protection. You're buying an
• 24:39
  Speaker 2: ETF that might rotate through different TIPS that are available
• 24:45
  Speaker 2: as they come to market in order to hold a
• 24:48
  Speaker 2: certain maturity in perpetuity instead of holding one through maturity.
• 24:53
  Speaker 2: So then you say, okay, now I need to go
• 24:55
  Speaker 2: and find how do I buy an individual TIPS bond?
• 24:57
  Speaker 2: And Like, it can get very complicated very quickly to
• 25:01
  Speaker 2: understand exactly what it is that you are trying to
• 25:05
  Speaker 2: do and how to actually do it. Because if all
• 25:08
  Speaker 2: you take from a piece like this is, ooh, I
• 25:10
  Speaker 2: should own TIPS, and you just, like, find the first thing,
• 25:13
  Speaker 2: which might be like a TIPS ETF or mutual fund,
• 25:16
  Speaker 2: it doesn't necessarily satisfy what you are trying to do, actually.
• 25:20
  Speaker 3: Okay, I thought there was just one lesson in this piece.
• 25:22
  Speaker 3: There's two. Lesson number one, if you're going to go
• 25:26
  Speaker 3: invest a bunch of your life savings into any And
• 25:30
  Speaker 3: I'm going to expand it beyond investments. Whether you're going
• 25:33
  Speaker 3: to put it in a CD, which is an FDIC
• 25:35
  Speaker 3: insured deposit, or whether you're going to do something as
• 25:37
  Speaker 3: complicated as invest in a new asset class because of
• 25:40
  Speaker 3: a Wall Street Journal article, you had darn well better
• 25:43
  Speaker 3: understand what it is that you actually own.
• 25:46
  Speaker 1: Yes.
• 25:48
  Speaker 3: Just number one piece of advice, I think, when it
• 25:50
  Speaker 3: comes to investing. The number two piece, though, is that
• 25:55
  Speaker 3: for a number of reasons... inflation is an underappreciated risk
• 26:00
  Speaker 3: for retirees, in part because we haven't seen the type
• 26:03
  Speaker 3: of real concerning inflation that retirees should worry about in
• 26:07
  Speaker 3: about 50 years. Other than 2022, it hasn't really existed
• 26:11
  Speaker 3: in that way. And so, A, it's underappreciated because of that. B,
• 26:15
  Speaker 3: it's just not seemingly as scary as a market crash.
• 26:19
  Speaker 3: But I'm once again here to tell you that in
• 26:22
  Speaker 3: terms of the risks to folks' real situation, it would
• 26:25
  Speaker 3: be inflation running just a little bit hotter than it
• 26:28
  Speaker 3: might have otherwise that can really disrupt things. If you
• 26:33
  Speaker 3: are evaluating your own retirement and you are trying to prioritize, hey,
• 26:38
  Speaker 3: how do I invest these funds to ensure that they
• 26:41
  Speaker 3: last a lifetime? Maybe I'm really aggressive with my investments.
• 26:44
  Speaker 3: Maybe I'm really conservative with them. In either case, we'd
• 26:48
  Speaker 3: love to offer you a second opinion. You can book
• 26:50
  Speaker 3: a time for us to give you a ring, schedule
• 26:52
  Speaker 3: a Zoom call, whatever works best for you. By calling
• 26:56
  Speaker 3: us at 800-393-4001. You can also go to armstrongadvisory.com where
• 27:02
  Speaker 3: you can book an appointment directly. But that phone number,
• 27:05
  Speaker 3: once again, is 800-393-4001.
• 27:07
  Speaker 1: The proceeding was paid for by Armstrong Advisory Group, a
• 27:12
  Speaker 1: registered investment advisor. Nothing in the ad or in any
• 27:14
  Speaker 1: Armstrong guide is specific financial, legal, or tax advice. Consult
• 27:18
  Speaker 1: your own financial, tax, and estate planning advisors before making
• 27:20
  Speaker 1: any investment decisions. Armstrong may contact you to offer investment
• 27:23
  Speaker 1: advisory services.
• 27:26
  Speaker 2: Mike, let's talk a little bit about Social Security cost
• 27:28
  Speaker 2: of living adjustments. We've got a piece here in MarketWatch
• 27:33
  Speaker 2: that according to who? Yeah, here we go. The Committee
• 27:39
  Speaker 2: for a Responsible Federal Budget thinks that the COLA forecast
• 27:42
  Speaker 2: for this year comes in at 3.4%, up to a 3.6%
• 27:47
  Speaker 2: forecast from AARP.
• 27:49
  Speaker 3: And I think we'll know in November because that's, I
• 27:52
  Speaker 3: believe it's, oh no, sorry. The official announcement comes October
• 27:56
  Speaker 3: 14th because they measure it through the price difference through September.
• 27:59
  Speaker 2: Yeah, it's the three-month CPI for basically like Q3 versus
• 28:02
  Speaker 2: Q3 of the prior year. And so for the average person,
• 28:06
  Speaker 2: that would mean an additional $ 71 per month if it
• 28:11
  Speaker 2: came in at that 3.4%.
• 28:14
  Speaker 3: So long as it doesn't all get eaten up by
• 28:16
  Speaker 3: additional Medicare costs.
• 28:17
  Speaker 2: Correct. And this is the rub on this because when
• 28:21
  Speaker 2: you look at Medicare premiums for Part B, they've been jumpy,
• 28:28
  Speaker 2: I think is the way that I would phrase it
• 28:33
  Speaker 2: in terms of what we've seen the last couple of years. Like,
• 28:35
  Speaker 2: as an example... The 2026 jump was a $ 17. 90 increase
• 28:42
  Speaker 2: from 2025. And obviously, if you have higher incomes and
• 28:46
  Speaker 2: get caught by those higher IRMA brackets, you can end
• 28:49
  Speaker 2: up seeing an even larger jump. We've had other years
• 28:52
  Speaker 2: where there's basically been no change. So again, it's been
• 28:55
  Speaker 2: very jumpy. But I suspect, based on just kind of
• 29:01
  Speaker 2: what we're seeing elsewhere in the health insurance ecosystem... I
• 29:06
  Speaker 2: suspect we're heading towards a larger hop this year as well.
• 29:11
  Speaker 2: There's not a direct one-to-one correlation or anything like that.
• 29:15
  Speaker 2: But the reasons why you typically see a big jump
• 29:19
  Speaker 2: in the cost of typical private health insurance and would
• 29:22
  Speaker 2: in part be, they tend to match up pretty well.
• 29:26
  Speaker 2: And so, okay, if we're talking about 7%, 8%, 9%,
• 29:28
  Speaker 2: 10% jumps for health insurance.
• 29:34
  Speaker 2: It wouldn't be surprising to see a large jump in
• 29:36
  Speaker 2: Medicare Part B costs as well. Let's take a quick break.
• 29:40
  Speaker 2: When we return, let's do a little bit of Stack Roulette.
• 29:43
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• 29:47
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• 29:51
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• 29:54
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• 30:00
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• 30:03
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• 30:22
  Speaker 4: Remember, you can watch the show live on YouTube every
• 30:26
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• 30:28
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• 30:44
  Speaker 2: Michael, what do you have for me for Stack Roulette today?
• 30:47
  Speaker 3: I have the annoying story of social media influencers. And
• 30:54
  Speaker 3: we commented last week about how the idea of quitting
• 30:57
  Speaker 3: your job to be a paid influencer and focus on
• 31:01
  Speaker 3: content creation just wasn't really an opportunity that existed 20
• 31:05
  Speaker 3: years ago and just, you know, finding that interesting. But
• 31:08
  Speaker 3: as you can imagine, as competition has increased in order
• 31:11
  Speaker 3: to get anyone to pay attention to you, uh, you
• 31:14
  Speaker 3: need to go more and more extreme. And the New
• 31:17
  Speaker 3: York times documents, this isn't funny. I'm sorry for laughing
• 31:21
  Speaker 3: at 2021 case where Trevor Jacob, a former us Olympic
• 31:25
  Speaker 3: snowboarder flew a 1940 Taylor craft plane over, uh, Southern
• 31:30
  Speaker 3: California and, pretended that it was going to crash, jumped
• 31:38
  Speaker 3: out of it with a parachute, recorded the whole thing
• 31:40
  Speaker 3: in a 13-minute video, and was charged with a federal
• 31:43
  Speaker 3: crime for doing so because it wasn't going to crash.
• 31:46
  Speaker 3: It was all about trying to get followers on social media,
• 31:48
  Speaker 3: which quickly dissipated. He served a fairly lengthy federal prison
• 31:54
  Speaker 3: sentence for his stunt and is interviewed as a part
• 31:58
  Speaker 3: of this, talking about how much he regrets his actions,
• 32:01
  Speaker 3: which Again, how much of a lunatic do you have
• 32:04
  Speaker 3: to be to intentionally crash a plane for social media views?
• 32:08
  Speaker 3: But more and more, I feel like I am just
• 32:12
  Speaker 3: running into this where, look, if you want to make
• 32:15
  Speaker 3: an idiot of yourself by dancing to a TikTok video
• 32:17
  Speaker 3: in the middle of the street, I don't really have
• 32:19
  Speaker 3: a problem with it. But for instance, a friend of
• 32:22
  Speaker 3: mine was in New York over the weekend in Central
• 32:25
  Speaker 3: Park and was stopped to ask if they would participate
• 32:28
  Speaker 3: in their TikTok and Instagram channel to do an interview
• 32:32
  Speaker 3: about this thing. And it's like, can we just all
• 32:35
  Speaker 3: admit that we want to be left alone in public spaces?
• 32:37
  Speaker 3: I don't want video recording of me. I don't want
• 32:41
  Speaker 3: you to be wearing your meta glasses and pretty discreetly
• 32:45
  Speaker 3: recording me. And that idea of just being able to
• 32:48
  Speaker 3: be anonymous in public, whether we're talking about social media
• 32:52
  Speaker 3: or flock cameras, whatever route you want to take here,
• 32:55
  Speaker 3: is just disturbingly gone in 2026. Yeah, it really sucks.
• 33:02
  Speaker 3: I don't know any other way to put it. It does.
• 33:05
  Speaker 2: And here's the thing. It's one thing if someone coming
• 33:12
  Speaker 2: up to you and being like, hey, can you participate
• 33:14
  Speaker 2: in my TikTok?
• 33:15
  Speaker 3: At least I have the option to refuse.
• 33:17
  Speaker 2: Kind of annoying or whatever. The bothersome stuff to me is, look,
• 33:21
  Speaker 2: as much as we all like to think that we're perfect,
• 33:24
  Speaker 2: we've all had some crap days.
• 33:26
  Speaker 3: Sure.
• 33:27
  Speaker 2: We've all had times where in public or even, you know,
• 33:32
  Speaker 2: on the phone with customer service or wherever it might be,
• 33:35
  Speaker 2: where we've said or acted in ways that, in hindsight,
• 33:38
  Speaker 2: we're like, oh, I was not who I should be
• 33:42
  Speaker 2: in that situation. And we all hope that we don't
• 33:46
  Speaker 2: get judged on who we are in those worst days.
• 33:49
  Speaker 2: But the problem is it becomes more and more public-facing
• 33:54
  Speaker 2: as everything gets recorded without any consent and without any knowledge.
• 33:59
  Speaker 3: And so....
• 34:01
  Speaker 2: Yes, I get the people like, well, if you're just
• 34:03
  Speaker 2: on your best behavior... We're not robots. We're not automatons.
• 34:08
  Speaker 2: People make mistakes. I tell my kids this all the time,
• 34:13
  Speaker 2: that none of us are perfect, and I'm no different.
• 34:15
  Speaker 3: Unfortunately for your kids and my kids, they're going to
• 34:18
  Speaker 3: need to be.
• 34:19
  Speaker 2: And that sucks for them.
• 34:21
  Speaker 1: It is.
• 34:21
  Speaker 2: It is the worst. I can't stand that, because me.
• 34:25
  Speaker 2: I'm an adult. I can handle it at this point.
• 34:29
  Speaker 2: If I say something, I'm big enough to be like,
• 34:32
  Speaker 2: you know what? That was wrong. I shouldn't have done that.
• 34:35
  Speaker 2: They're trying to figure it out for the first time.
• 34:37
  Speaker 2: And I was given grace when I was in my
• 34:41
  Speaker 2: teens and early 20s that I don't think they're going
• 34:43
  Speaker 2: to get.
• 34:44
  Speaker 3: They're not going to.
• 34:44
  Speaker 2: And I think that sucks for them.
• 34:46
  Speaker 3: Yeah, I distinctly remember being in high school at a
• 34:48
  Speaker 3: party where they whispered there was alcohol involved at this party.
• 34:52
  Speaker 7: There was what?
• 34:54
  Speaker 3: And one of our friends had the genius idea to
• 34:56
  Speaker 3: take a physical camcorder, like, you know, what we had
• 35:00
  Speaker 3: back in the day, and he duct taped it to
• 35:01
  Speaker 3: a helmet and wore the helmet around for the entire party.
• 35:04
  Speaker 2: We would do it with, like, a GoPro in college.
• 35:05
  Speaker 2: And then we were like, wait, why are we doing this?
• 35:08
  Speaker 3: This is dumb. And then we watched it and we
• 35:09
  Speaker 3: were like, oh, this is terrible. We should have never
• 35:11
  Speaker 3: done this.
• 35:12
  Speaker 6: Delete.
• 35:13
  Speaker 3: Destroyed the video, I hope. Just the idea of that
• 35:18
  Speaker 3: is so foreign now to a teenager, right? Like, You
• 35:23
  Speaker 3: have to assume now that everywhere you go in social situations,
• 35:26
  Speaker 3: you are being recorded and just.
• 35:29
  Speaker 1: A terrible environment.
• 35:31
  Speaker 2: Which means you don't get to actually grow into being
• 35:33
  Speaker 2: a person because if you're afraid to make the mistake,
• 35:35
  Speaker 2: you don't get the opportunity to learn from it.
• 35:37
  Speaker 4: I actually have an interesting example of this. A few
• 35:42
  Speaker 4: months ago, my friend group, and we're all in our
• 35:45
  Speaker 4: mid to late 30s, we went to an event at
• 35:48
  Speaker 4: a club. Before the club hours, if you will. So, like,
• 35:52
  Speaker 4: the club opens at 10. We were there from, like,
• 35:55
  Speaker 4: 8 to 10.
• 35:55
  Speaker 2: This was the old person club. Pretty much.
• 35:58
  Speaker 7: 8 to 10.
• 35:58
  Speaker 2: Like, you don't want to be there until 2.
• 36:00
  Speaker 4: So, like, once 10 o'clock opened, the younger generation came in. So, like,
• 36:05
  Speaker 4: the low 20s came in.
• 36:07
  Speaker 3: Yeah.
• 36:08
  Speaker 4: Our friend group started to, like, dance and, you know,
• 36:12
  Speaker 4: do club stuff and, you know, have fun. And we
• 36:16
  Speaker 4: couldn't help but notice that the younger generation... We're all
• 36:19
  Speaker 4: standing around, timid, and not wanting to partake. And we
• 36:24
  Speaker 4: were all like, are they just afraid of getting recorded
• 36:27
  Speaker 4: and being embarrassed on social media? They were very hesitant
• 36:30
  Speaker 4: to have fun.
• 36:31
  Speaker 2: It could be that.
• 36:32
  Speaker 3: It's got that vibe. It could be that you were
• 36:34
  Speaker 3: drinking since five and they hadn't been, Tucker. I don't know.
• 36:36
  Speaker 3: Either of those things. No, no.
• 36:38
  Speaker 2: We were like sloppy or anything.
• 36:39
  Speaker 3: I'm joking.
• 36:40
  Speaker 4: But it was just interesting. They were all kind of
• 36:43
  Speaker 4: just on their phones and kind of like doing their own.
• 36:45
  Speaker 4: It felt like a middle school dance in that generation.
• 36:48
  Speaker 2: It was interesting.
• 36:49
  Speaker 6: I don't know.
• 36:50
  Speaker 2: The counter to it is you look at what's going
• 36:53
  Speaker 2: on in baseball this year with the tarps off thing,
• 36:55
  Speaker 2: and you've got a bunch of guys just willing to
• 36:57
  Speaker 2: take their shirts off and go crazy at baseball games.
• 37:00
  Speaker 4: And broadcast on TV.
• 37:02
  Speaker 2: It's hard to tell, but my big point is, look,
• 37:04
  Speaker 2: we're all human. If all you're going to do is
• 37:07
  Speaker 2: take a video of me and try to use it
• 37:09
  Speaker 2: for your social media, that just means you're not an
• 37:13
  Speaker 2: interesting enough person to do anything with yourself. It just
• 37:17
  Speaker 2: felt like they were too timid to be embarrassed, potentially.
• 37:21
  Speaker 3: But also, don't try to be so interesting that you
• 37:24
  Speaker 3: intentionally crash a plane.
• 37:26
  Speaker 2: Right, there's a happy medium between me needing to be
• 37:29
  Speaker 2: interesting for you and you crashing a plane to try
• 37:32
  Speaker 2: to be interesting.
• 37:33
  Speaker 3: Right, yeah. You're bordering on domestic terrorism on that one.
• 37:39
  Speaker 2: If you have to crash a plane to try to
• 37:41
  Speaker 2: be interesting... You shouldn't be an influencer. There's another line
• 37:45
  Speaker 2: of work for you. You could be a stuntman. You
• 37:50
  Speaker 2: could be a.
• 37:53
  Speaker 3: Stuntman.
• 37:53
  Speaker 2: That's pretty much it. You could do that. Again, not
• 37:59
  Speaker 2: all of us are meant to be influencers. I'm certainly not.
• 38:06
  Speaker 2: It's getting a little problematic. We'll figure it out, though.
• 38:09
  Speaker 2: This is what we do. You identify the problem and
• 38:12
  Speaker 2: you figure it out, and then you ignore it for
• 38:14
  Speaker 2: the rest of your life. Let's take a quick break
• 38:17
  Speaker 2: for the rest of the day. We're back tomorrow with
• 38:19
  Speaker 2: more Financial Exchange.