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Fed’s Next Move Gets Murkier After CPI Report · The Financial Exchange Show

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• 1:04
  Speaker 1: with Chuck Zotta and Mike Armstrong.
• 1:07
  Speaker 2: It is Chuck and Mike and Tucker. And at 8.30 a.m.
• 1:16
  Speaker 2: Eastern Time this morning, we received the August CPI data,
• 1:20
  Speaker 2: Consumer Price Index. The headline came in at 0.4% month-over-month.
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  Speaker 2: The core came in at 0.3%. Headline was in line
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  Speaker 2: with expectations. Core was just a smidgen hotter. It was
• 1:31
  Speaker 2: rounded up to 0.3%. We then also, the Cleveland Fed...
• 1:36
  Speaker 2: They always do their median CPI and trimmed mean CPI calculations.
• 1:41
  Speaker 2: Those both came in at 0.2% month over month, so
• 1:44
  Speaker 2: better than what we saw on the core. And so
• 1:47
  Speaker 2: this now, Michael, with that Cleveland Fed data, I got
• 1:52
  Speaker 2: to be honest.
• 1:53
  Speaker 3: Fed's not hiking.
• 1:54
  Speaker 4: I'm wondering if the Fed's not hiking.
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  Speaker 2: The other wrinkle in here that is, and again, I'm
• 2:00
  Speaker 2: not saying this is good or bad, but if the
• 2:03
  Speaker 2: Fed wanted to look for something to justify not hiking.
• 2:12
  Speaker 2: The big thing going around today is... So, super core inflation,
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  Speaker 2: which is... Again, it's inflation excluding housing, excluding shelter.
• 2:24
  Speaker 4: Like, okay, show me super core.
• 2:28
  Speaker 1: So.
• 2:30
  Speaker 4: Here's the thing.
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  Speaker 2: Supercore is up 0.51% month over month in August, which
• 2:34
  Speaker 2: everyone's paying attention to. But more than half of that,
• 2:39
  Speaker 2: 29 basis points of it. Can you guess what it
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  Speaker 2: came from, Michael? I'm guessing you can't.
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  Speaker 3: No.
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  Speaker 4: Tucker, any guesses?
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  Speaker 5: No.
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  Speaker 3: Sorry, this excludes food, energy, and housing? Yes.
• 2:54
  Speaker 4: Supercore.
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  Speaker 5: No.
• 2:57
  Speaker 3: No idea.
• 2:57
  Speaker 5: Yeah.
• 2:58
  Speaker 2: Wireless phone services that were up 5.9% for the month.
• 3:03
  Speaker 2: By the way, yours truly is well aware of this
• 3:06
  Speaker 2: because I got to tell you, Mike, I'm a little
• 3:09
  Speaker 2: upset with my wireless carrier.
• 3:11
  Speaker 6: Yeah, well, they promised you that they would never raise
• 3:13
  Speaker 6: your price, and then guess what they did?
• 3:15
  Speaker 4: They did.
• 3:16
  Speaker 2: I was a Sprint customer for a while because they
• 3:19
  Speaker 2: had the cheapest unlimited plan, and T-Mobile bought them several
• 3:22
  Speaker 2: years ago, probably like eight years ago now.
• 3:24
  Speaker 4: I don't even know.
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  Speaker 2: And part of the deal with the FTC or DOJ
• 3:29
  Speaker 2: or whoever it was, was that they couldn't raise prices
• 3:32
  Speaker 2: on existing customers of Sprint. And then I get a
• 3:36
  Speaker 2: notification earlier this summer, hey, guess what, we're raising your price.
• 3:38
  Speaker 2: And so my price went up $ 6 for the month, Michael. Now,
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  Speaker 2: it still is pretty cheap by most metrics, and so
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  Speaker 2: I'm going to hold on to it. But I got
• 3:50
  Speaker 2: to tell you, I was not happy about that. But yeah,
• 3:53
  Speaker 2: so wireless telephone service is up 6% for the month.
• 3:56
  Speaker 2: That is the big contributor, and it's a notoriously noisy series.
• 4:00
  Speaker 2: Just to give you an example, if you look at
• 4:03
  Speaker 2: the last three months of change here, May to June
• 4:06
  Speaker 2: was down 3.3%. June to July was up 0.6%. July
• 4:11
  Speaker 2: to August was up 5.9%. So it's not like it's
• 4:14
  Speaker 2: probably not going to go up 5.9% again next month.
• 4:17
  Speaker 1: Fair.
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  Speaker 2: Now, the counter to this is, okay, if that inflation
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  Speaker 2: didn't show up there, would it have just shown up
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  Speaker 2: somewhere else because people are still spending the money they're spending?
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  Speaker 1: Maybe.
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  Speaker 4: I don't know.
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  Speaker 2: I mean, it was something like cell phone service, whatever.
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  Speaker 2: But this now has the odds for next week being
• 4:33
  Speaker 2: an 87 percent chance of a Fed rate hike. And
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  Speaker 2: I got to tell you, this this could be a
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  Speaker 2: maybe like I could see. I could see the Fed saying, hey,
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  Speaker 2: this all came from because, again, now they're like talking
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  Speaker 2: about it as. well, it depends on what happens with
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  Speaker 2: this data point as opposed to taking the whole thing
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  Speaker 2: as a big composite. And if you're going to just
• 4:57
  Speaker 2: take one data point, then why wouldn't you take one
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  Speaker 2: little part of it? And so I could see the
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  Speaker 2: Fed being like, yeah, this was all phone bills this month.
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  Speaker 2: It won't repeat, so we're not going to hike.
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  Speaker 6: Yeah, pretty crazy to think about when, again, the Fed
• 5:09
  Speaker 6: won't have CPI for September, obviously, at this meeting because
• 5:15
  Speaker 6: it's the middle of September.
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  Speaker 3: But diesel prices... for the.
• 5:19
  Speaker 6: Reading of September are going to be about 70 cents
• 5:22
  Speaker 6: higher than where they were for the August reading. And
• 5:24
  Speaker 6: they were already a massive contributor to overall inflation. I mean,
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  Speaker 6: they're just going to go substantially higher. I recognize the
• 5:32
  Speaker 6: Fed does not heavily weight diesel prices in probably any
• 5:35
  Speaker 6: of their models for inflation predictions, but boy, is it
• 5:40
  Speaker 6: tough to see them effectively. They're not lowering rates here,
• 5:46
  Speaker 6: but they, they are Defying expectations is the downside if
• 5:49
  Speaker 6: they do not hike at this meeting. They're effectively softening
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  Speaker 6: their stance on inflation.
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  Speaker 2: If they don't hike on Wednesday, I'm going with this.
• 5:58
  Speaker 2: I'm going with T-Mobile as being the proximate cause. A
• 6:03
  Speaker 2: pricing analyst flaps his wings in Bellevue, Washington, and the
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  Speaker 2: Fed doesn't hike.
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  Speaker 4: Let that sink in.
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  Speaker 6: What does the 10-year blow out to on that day?
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  Speaker 6: The very day... If they don't hike?
• 6:16
  Speaker 3: If they don't hike.
• 6:18
  Speaker 6: How big is the one-day– you can't predict where it'll
• 6:21
  Speaker 6: be because we don't know what it's going to do
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  Speaker 6: Monday and Tuesday.
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  Speaker 3: But Wednesday is the actual press conference.
• 6:26
  Speaker 6: And, like, I don't think it would be out of
• 6:28
  Speaker 6: the question to see a 20-basis point move in yields
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  Speaker 6: on the 10-year.
• 6:32
  Speaker 4: I was at 15. Yeah.
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  Speaker 2: You know, like, something along those lines. Like, right now
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  Speaker 2: we're at 495, basically. 5-1 doesn't feel inappropriate to me.
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  Speaker 6: Mm-hmm.
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  Speaker 4: Let's talk a little bit about Oracle. They reported earnings yesterday.
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  Speaker 2: The stock was up 8% in after hours and pre-market trading.
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  Speaker 2: As we sit here at this very moment in time,
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  Speaker 2: it has given all of that back and is now flat.
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  Speaker 6: That is rough for a day that the market's up
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  Speaker 6: a full percentage point. So Oracle's a $ 440 billion company, Chuck.
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  Speaker 6: Why do we care about this one in particular? And
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  Speaker 6: we did talk to.
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  Speaker 4: It was actually down 2% at one point today.
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  Speaker 5: Wow.
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  Speaker 6: We talked to Paul and Monica about them last week
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  Speaker 6: as well, and they are a pretty small company. They
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  Speaker 6: are not a massive $ 440 billion.
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  Speaker 3: They're not a small company.
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  Speaker 6: They're a massive company, but compared to the heavyweights that
• 7:26
  Speaker 6: are also spending in the AI space, they are pretty tiny.
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  Speaker 6: What is interesting about Oracle is they are probably the,
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  Speaker 6: can we call them a hyperscaler?
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  Speaker 5: Yeah.
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  Speaker 4: Oh, yeah, they absolutely are.
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  Speaker 6: They're definitely a hyperscaler, and they are the hyperscaler that
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  Speaker 6: can least afford to hyperscale.
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  Speaker 3: Yes, they... That's the interesting piece of Oracle.
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  Speaker 2: If you look at Microsoft, just as an example, Microsoft has,
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  Speaker 2: in the last 12 months, they have $ 331 billion in revenue.
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  Speaker 2: They have $ 133 billion in profit. Their free cash flow
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  Speaker 2: is $ 66 billion, even after all the CapEx that they've
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  Speaker 2: been doing.
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  Speaker 4: Meta, over the last 12 months.
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  Speaker 2: $ 228 billion in revenue, $ 68 billion in.
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  Speaker 4: Profit, $ 40 billion in free cash flow.
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  Speaker 5: Sure.
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  Speaker 4: Amazon.
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  Speaker 2: Amazon is $ 775 billion in revenue.
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  Speaker 4: Again, I know a lot of it is, you know, stuff,
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  Speaker 4: but whatever.
• 8:26
  Speaker 2: $ 775 billion in revenue, $ 135 billion in profit, negative $ 11
• 8:31
  Speaker 2: billion in free cash flow, just because, again, lower margins
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  Speaker 2: on the overall business, so they have negative free cash
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  Speaker 2: flow right now. Oracle.
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  Speaker 4: Oracle.
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  Speaker 2: Comes out and is like, yeah, we're going to be
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  Speaker 2: a hyperscaler, too. $ 71 billion in revenue. So, less than
• 8:48
  Speaker 2: a third of the next biggest one. $ 19 billion in profit.
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  Speaker 2: And negative $ 28 billion in free cash flow.
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  Speaker 3: Why?
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  Speaker 6: Because their capital expenditure plans for the year are $ 90
• 9:00
  Speaker 6: to $ 95 billion.
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  Speaker 7: So.
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  Speaker 4: This is the thing.
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  Speaker 2: They're going to have to either borrow or issue equity
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  Speaker 2: in order to do that. And they've got $ 148 billion
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  Speaker 2: in long-term debt right now. And there's a reason why,
• 9:19
  Speaker 2: if you look at the hyperscaler bonds, oracles are trading
• 9:21
  Speaker 2: at the biggest spread compared to treasuries because it's the
• 9:25
  Speaker 2: biggest potential credit risk out there. If you look at
• 9:28
  Speaker 2: credit default swaps on a five-year basis, most of the
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  Speaker 2: other ones are trading at like 50 basis points, oracles
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  Speaker 2: at like 200 basis points. So look, they had a
• 9:37
  Speaker 2: nice little quarter. It was good quarter beat expectations. Again,
• 9:41
  Speaker 2: we're up 8% at one point, almost 10% in pre-market trading.
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  Speaker 2: And as we sit here now, they are basically flat.
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  Speaker 2: They're just kind of floating around between down 1% and
• 9:53
  Speaker 2: up 1%, depending on the minute. And that is not
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  Speaker 2: suggestive of investor confidence in them being able to continue
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  Speaker 2: this if you can't hold your gains on a day
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  Speaker 2: when you report good earnings it's not the most encouraging.
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  Speaker 4: Thing Oracle.
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  Speaker 6: Is almost a David Goliath story here like they are
• 10:16
  Speaker 6: they have such execution risk to building this stuff out successfully.
• 10:23
  Speaker 3: Google, Microsoft, Amazon, those.
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  Speaker 6: Guys will survive if they make some mistakes in this.
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  Speaker 6: Oracle's got to execute perfectly to even survive as an entity.
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  Speaker 4: They do. Let's take a quick break here.
• 10:35
  Speaker 2: When we return, let's talk a little bit about Congress.
• 10:40
  Speaker 2: Maybe they're afraid of humanity being wiped out by AI
• 10:45
  Speaker 2: as well since they are part of humanity. And so
• 10:49
  Speaker 2: we're going to discuss what they're discussing next.
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  Speaker 4: Mike, we got a piece in the Wall Street Journal.
• 12:46
  Speaker 2: Congress is suddenly waking up to the AI doomsday threat.
• 12:52
  Speaker 6: Well, yeah, when somebody publishes an article that they think
• 12:54
  Speaker 6: it's a 10% chance that it's going to wipe out humanity,
• 12:57
  Speaker 6: I bet they did.
• 12:58
  Speaker 2: I don't know if this feels good to me or not.
• 13:02
  Speaker 2: I got to be honest with you. If I were
• 13:05
  Speaker 2: thinking of the group of people.
• 13:09
  Speaker 2: Least capable of dealing with the existential threat posed by AI?
• 13:16
  Speaker 3: Might be Congress.
• 13:17
  Speaker 4: It might be Congress.
• 13:18
  Speaker 3: Yeah. From the government, I'm here to help.
• 13:22
  Speaker 4: Look, let's be honest.
• 13:24
  Speaker 2: It's a bunch of people that are not tech savvy
• 13:27
  Speaker 2: and generally tend to be older. That's not who you
• 13:32
  Speaker 2: want regulating cutting-edge tech.
• 13:36
  Speaker 6: I guess the question is, what's the alternative? Like a
• 13:39
  Speaker 6: self-regulatory authority?
• 13:40
  Speaker 4: I don't know.
• 13:42
  Speaker 3: Like a FINRA for AI?
• 13:44
  Speaker 4: No, the answer is a younger Congress.
• 13:47
  Speaker 2: But we just love to keep putting 65-year-olds into old
• 13:52
  Speaker 2: buildings because we say old building and 65-year-old just goes
• 13:56
  Speaker 2: hand in hand. But I got to tell you, it
• 13:57
  Speaker 2: doesn't have to be that way. Like you could have...
• 14:01
  Speaker 2: I don't know, like 30 to 50 year olds. I'm
• 14:03
  Speaker 2: not saying you have to get like 22 year olds
• 14:05
  Speaker 2: in there. I think that's equally as dumb.
• 14:07
  Speaker 4: But I don't know.
• 14:09
  Speaker 2: Like how about people in like the prime of their lives,
• 14:12
  Speaker 2: like 30 to 50 and go like be in Congress,
• 14:16
  Speaker 2: you know?
• 14:17
  Speaker 1: Yeah.
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  Speaker 6: So with the understanding that that's not happening anytime soon,
• 14:21
  Speaker 6: I'm with you.
• 14:22
  Speaker 4: I'm just going to give up.
• 14:23
  Speaker 5: Yeah.
• 14:24
  Speaker 6: I'm just saying like, if you want to regulate AI,
• 14:26
  Speaker 6: it seems to me that it might be important to
• 14:28
  Speaker 6: do so. before the next election in 2026, because the
• 14:34
  Speaker 6: people that are running for Congress in... Sorry, the next
• 14:37
  Speaker 6: election in 2028, because the people that are running in
• 14:40
  Speaker 6: 2026 have already been selected, and they are old. I
• 14:46
  Speaker 6: don't know where else you go if you're trying to...
• 14:48
  Speaker 6: If you think that, hey, the AI... companies right now
• 14:52
  Speaker 6: are completely operating in the Wild West without any required
• 14:55
  Speaker 6: disclosure to anybody or without any standards as to what
• 14:58
  Speaker 6: they are supposed to report to police, such as an
• 15:02
  Speaker 6: AI communicating with a deranged person in Canada that then
• 15:07
  Speaker 6: goes and mass murders a bunch of people, and you
• 15:10
  Speaker 6: don't think that the threat to people's lives raised to
• 15:13
  Speaker 6: the level quite enough to inform the police about it.
• 15:15
  Speaker 6: I think I'm pretty comfortable saying that there should be
• 15:18
  Speaker 6: some degree of standards there that don't exist, some require disclosure,
• 15:24
  Speaker 6: and all of it's going to cost more money for
• 15:25
  Speaker 6: these companies. I think you might be able to create,
• 15:29
  Speaker 6: I'm not an expert on this as anybody listening knows,
• 15:32
  Speaker 6: but Chuck, the most recent AI breakout from ChatGPT that
• 15:37
  Speaker 6: made all the headlines where it hacked Hugging Face, right?
• 15:41
  Speaker 6: I think you might be able to make a compelling
• 15:43
  Speaker 6: argument that if you had more people actually watching what
• 15:46
  Speaker 6: these things were doing.
• 15:48
  Speaker 3: They may have detected it. I think part of the
• 15:50
  Speaker 3: problem is that nobody was actually looking.
• 15:52
  Speaker 6: And so I don't think Congress is going to write
• 15:55
  Speaker 6: the rules to actually fix that problem. But some degree
• 15:58
  Speaker 6: of responsibility on behalf of the companies when they do
• 16:01
  Speaker 6: stupid stuff would, I think, make me a little bit
• 16:04
  Speaker 6: more comfortable.
• 16:05
  Speaker 2: And Mike, the stuff about, you know, oh, this website
• 16:08
  Speaker 2: was hacked and that one was hacked.
• 16:09
  Speaker 4: Those get the big headlines and everything.
• 16:14
  Speaker 2: Did you or anyone else happen to catch what Anthropic
• 16:17
  Speaker 2: published yesterday around 9.30 a.m.
• 16:20
  Speaker 4: About how people have tried to misuse Claude?
• 16:23
  Speaker 3: Yeah, I've seen the headlines. I haven't seen the details
• 16:25
  Speaker 3: of what they found.
• 16:26
  Speaker 2: Let me read the details just of one, just because
• 16:29
  Speaker 2: one of them happens to be tied into something that
• 16:31
  Speaker 2: we've talked about.
• 16:34
  Speaker 4: Quite a bit.
• 16:36
  Speaker 2: This is right here. I guess this is probably just
• 16:39
  Speaker 2: how the nomenclature internally is. GTG 34007, disrupting two Iranian
• 16:45
  Speaker 2: nexus actors building surveillance systems and malicious Firefox browsing extension.
• 16:51
  Speaker 4: Okay, I'm interested. Tell me more.
• 16:53
  Speaker 2: We assessed with high confidence that the units were associated
• 16:56
  Speaker 2: with Iranian paramilitary domestic security entities. Oh, so Quad was
• 17:01
  Speaker 2: being used by, like, Iranian paramilitaries.
• 17:05
  Speaker 4: That's good. Let's continue.
• 17:06
  Speaker 2: The actors used Claude to generate outputs for state security customers,
• 17:10
  Speaker 2: and we identified evidence the actors responded to tastings from
• 17:13
  Speaker 2: senior Iranian government officials.
• 17:16
  Speaker 4: Okay. Okay, that's not great. Let's see.
• 17:19
  Speaker 2: We also found evidence that the units vetted candidates for
• 17:22
  Speaker 2: official positions on behalf of the Iranian government. So basically,
• 17:26
  Speaker 2: they were taking, like, dossiers and plugging them in and
• 17:28
  Speaker 2: being like, hey, should this person be, like, in this role? Okay,
• 17:34
  Speaker 2: let's see what else we've got here.
• 17:37
  Speaker 4: Let's see.
• 17:38
  Speaker 2: A separate actor co-located within one unit turned Claude's custom
• 17:42
  Speaker 2: skills feature into a voice-cloning propaganda factory, cloning the voices
• 17:46
  Speaker 2: of three Iranian writers and preparing narratives in advance for
• 17:49
  Speaker 2: the Supreme Leader's succession.
• 17:51
  Speaker 3: Good.
• 17:53
  Speaker 2: So, like, literally creating fake voices that sound like prominent
• 17:58
  Speaker 2: Iranian writers in.
• 18:01
  Speaker 4: Order to make it easier to.
• 18:04
  Speaker 2: Have someone succeed the now-deceased Supreme Leader.
• 18:07
  Speaker 3: And guess what? While a bank would be in a
• 18:09
  Speaker 3: lot of trouble for.
• 18:12
  Speaker 6: Any financial support or any of this sort of stuff,
• 18:15
  Speaker 6: it's not terribly clear to me that what Anthropic allowed
• 18:18
  Speaker 6: to happen here was illegal in any way.
• 18:23
  Speaker 2: I mean, I'm sure that the entities using it are
• 18:25
  Speaker 2: sanctioned in some way, shape, or form.
• 18:26
  Speaker 3: But are they sanctioned from using technology?
• 18:29
  Speaker 4: No idea.
• 18:30
  Speaker 3: Right?
• 18:31
  Speaker 6: They're sanctioned from having an American bank account.
• 18:33
  Speaker 3: Or a bank account pretty much anywhere that wants to
• 18:35
  Speaker 3: touch U.S.
• 18:36
  Speaker 4: Dollars.
• 18:38
  Speaker 6: They're not sanctioned from accessing the Internet or necessarily technology
• 18:45
  Speaker 6: that's produced in the United States.
• 18:47
  Speaker 2: Another one here, like just not that this is front
• 18:48
  Speaker 2: and center, but I just I find this stuff wild.
• 18:51
  Speaker 2: In Mali, there's all like the. Things are just a
• 18:55
  Speaker 2: mess there. They basically created a national interception and surveillance
• 19:01
  Speaker 2: platform for the state intelligence service to track 25 million
• 19:06
  Speaker 2: unique SIM cards within the country.
• 19:08
  Speaker 4: It's like, what?
• 19:14
  Speaker 2: Okay, now, again, like, Anthropic identified these things and shut
• 19:17
  Speaker 2: them down eventually.
• 19:19
  Speaker 5: Sure.
• 19:19
  Speaker 4: But it wasn't like it didn't happen immediately. Nor did
• 19:23
  Speaker 4: it prevent it from happening.
• 19:25
  Speaker 2: No, so it's kind of like, man, this stuff is
• 19:29
  Speaker 2: not just going to be used by good actors. Let's
• 19:32
  Speaker 2: take a quick break here, and we've got the trivia
• 19:34
  Speaker 2: answer next.
• 19:39
  Speaker 1: Bringing the latest financial news straight to your radio every day.
• 19:44
  Speaker 1: It's the Financial Exchange on the Financial Exchange Radio Network.
• 19:40
  Speaker 1: We'll be right back.
• 20:10
  Speaker 7: Leading to speculation that the Fed may hike rates next week.
• 20:14
  Speaker 7: Right now, the Dow is up 1% to 526 points higher.
• 20:16
  Speaker 7: S & P 500 also up over 1% or 81
• 20:17
  Speaker 7: points up. NASDAQ up about 1.3% or 336 points. Russell
• 20:18
  Speaker 7: 2000 is up over half a percent. Ten-year Treasury yield
• 20:21
  Speaker 7: down one basis point at 4.932%. Crude oil down 3%
• 20:24
  Speaker 7: at $ 99, while Brent is down hovering right around $ 105
• 20:39
  Speaker 7: a barrel. Oracle reported stronger-than-expected quarterly profit and revenue. With
• 20:44
  Speaker 7: the company's cloud infrastructure business more than doubled, Oracle up slightly,
• 20:48
  Speaker 7: sticking with software where Adobe is down modestly. After the
• 20:52
  Speaker 7: company's current quarter, guidance came roughly in line with estimates. However,
• 20:55
  Speaker 7: the company said its shift to a freemium business model
• 20:58
  Speaker 7: could slow near-term revenue growth. Elsewhere, shares in furniture retailer
• 21:04
  Speaker 7: RH are slightly down after the company's revenue and profit
• 21:07
  Speaker 7: beat expectations, while its full-year guidance was also better than expected.
• 21:12
  Speaker 7: And Kroger shares are up 2% despite the grocery store
• 21:15
  Speaker 7: chain posting mixed second quarter results, beating on earnings but
• 21:20
  Speaker 7: missing on revenue. I'm Tucker Silver, and that is Wall
• 21:23
  Speaker 7: Street Watch. And in the previous segment, we asked you
• 21:25
  Speaker 7: the trivia question, what is the best-selling video game of
• 21:28
  Speaker 7: all time? That would be Minecraft, which has sold over
• 21:32
  Speaker 7: 400 million copies, beating out Tetris in Grand Theft Auto V.
• 21:40
  Speaker 7: Ed and Falmouth is our winner today, taking home a
• 21:42
  Speaker 7: Financial Exchange Show t-shirt. Congrats to Ed. We play trivia
• 21:47
  Speaker 7: every Friday here on the Financial Exchange. See complete contest
• 21:50
  Speaker 7: rules at FinancialExchangeShow.com.
• 21:53
  Speaker 4: All right.
• 21:55
  Speaker 2: Uh, let's talk a little bit about the future of
• 21:58
  Speaker 2: retirement because market watch has a piece here. It's titled
• 22:02
  Speaker 2: the future of retirement work till you die.
• 22:05
  Speaker 5: Yeah.
• 22:06
  Speaker 6: So this is, um, part of a new book, uh,
• 22:10
  Speaker 6: called the rise and fall of retirement in the United States.
• 22:13
  Speaker 4: It's part of a book tour.
• 22:14
  Speaker 6: Um, it's by this guy named Lawrence Samuel, who I
• 22:18
  Speaker 6: haven't read before. He is, uh, a PhD in American Studies.
• 22:24
  Speaker 6: He's got a master's in English. He was a Smithsonian
• 22:28
  Speaker 6: Institution Fellow and has some interesting things, it seems, to
• 22:32
  Speaker 6: talk about the history of American culture. And I have
• 22:35
  Speaker 6: no idea why we should take his word on what's
• 22:38
  Speaker 6: going to happen in the future.
• 22:39
  Speaker 4: I agree.
• 22:42
  Speaker 6: I get the sense that the only reason this piece
• 22:46
  Speaker 6: was published is because he said something pretty inflammatory, which
• 22:49
  Speaker 6: is that There's not going to be Social Security in
• 22:51
  Speaker 6: the future.
• 22:53
  Speaker 3: That'll get somebody's attention.
• 22:55
  Speaker 6: I don't know what he's basing that off of, given
• 22:56
  Speaker 6: that the math says that even in a few years,
• 22:59
  Speaker 6: if Congress does nothing, Social Security would still be funded
• 23:03
  Speaker 6: with approximately three quarters to 80 percent of what is
• 23:07
  Speaker 6: currently being paid. So I'm not sure how he jumps
• 23:11
  Speaker 6: to no Social Security down the road. But that seems
• 23:17
  Speaker 6: alarmist and maybe the only reason that it's being published
• 23:20
  Speaker 6: in MarketWatch.
• 23:21
  Speaker 4: I would tend to agree.
• 23:24
  Speaker 7: Leaving your IRA to your children may sound like the
• 23:27
  Speaker 7: obvious choice, but how they receive that money could have
• 23:30
  Speaker 7: important tax consequences. Cushing and Dolan has a new guide
• 23:34
  Speaker 7: called Why Name Your State an IRA Beneficiary. Under current rules,
• 23:37
  Speaker 7: most adult children who inherit an IRA must withdraw the
• 23:41
  Speaker 7: money within 10 years. That can mean taking retirement distributions
• 23:45
  Speaker 7: while they're still working and earning income, potentially creating a
• 23:49
  Speaker 7: larger tax bill. That's one reason why your IRA beneficiary
• 23:53
  Speaker 7: should be part of your overall estate plan. Who receives
• 23:57
  Speaker 7: the account, how they receive it, and the tax consequences
• 24:00
  Speaker 7: that may follow all deserve careful consideration. Get Cushing and
• 24:07
  Speaker 7: Dolan's new guide called Why Name Your Estate an IRA
• 24:11
  Speaker 7: Beneficiary by calling 866-848-5699. That number again, 866-848-5699. Or you
• 24:14
  Speaker 7: can request the guide from their website, LegalExchangeShow.com.
• 24:26
  Speaker 1: The proceeding was paid for and the views expressed are
• 24:28
  Speaker 1: solely those of Cushing and Dolan. Cushing and Dolan and
• 24:30
  Speaker 1: or Armstrong Advisory may contact you offering legal or investment services.
• 24:34
  Speaker 1: Cushing and Armstrong do not endorse each other and are
• 24:36
  Speaker 1: not affiliated.
• 24:37
  Speaker 4: Mike, I want.
• 24:38
  Speaker 2: To hop forward actually to the last piece in the
• 24:40
  Speaker 2: stack just because I think this is a great one actually.
• 24:43
  Speaker 4: It's from the.
• 24:44
  Speaker 2: Wall Street Journal. College athletes used to live in dorms.
• 24:47
  Speaker 2: Now they're buying million-dollar homes. And this is talking mostly
• 24:51
  Speaker 2: about college football players that are getting significant name, image,
• 24:55
  Speaker 2: and likeness NIL deals. And there are a couple things
• 24:59
  Speaker 2: that I take from this. First, the more I read
• 25:01
  Speaker 2: this piece.
• 25:02
  Speaker 4: Actually, no. First, good for them.
• 25:04
  Speaker 2: As someone who was a very bad college football player,
• 25:08
  Speaker 2: I believe that the very good ones should be able
• 25:10
  Speaker 2: to monetize their talents, and the NCAA prevented them from
• 25:13
  Speaker 2: doing so for the last 80 years. I think it's
• 25:16
  Speaker 2: great that all this money is finally flowing to college athletes.
• 25:19
  Speaker 2: Having said that, the system is obviously broken, and we
• 25:22
  Speaker 2: need to clean it up and fix it so that
• 25:26
  Speaker 2: it's actually all above water and, you know, it works
• 25:30
  Speaker 2: because right now it doesn't really. But I find two
• 25:34
  Speaker 2: things really interesting about this piece. The first is you've
• 25:37
  Speaker 2: got a bunch of college kids that are like, hey,
• 25:38
  Speaker 2: I think real estate is going to be a good
• 25:40
  Speaker 2: investment and so I don't just want to, like, blow
• 25:41
  Speaker 2: this money. Man, they are so much more mature than
• 25:45
  Speaker 2: I was at 19 years old. Like, golly gee willikers,
• 25:50
  Speaker 2: I don't know that I would have been anywhere near
• 25:52
  Speaker 2: as responsible if you had handed me $ 2 million when
• 25:54
  Speaker 2: I was 19. Maybe I would have, but in any case,
• 25:58
  Speaker 2: I think it's really great. The other piece that I
• 26:01
  Speaker 2: think is interesting. Mike, did you look at any of
• 26:03
  Speaker 2: the pictures of the houses in this?
• 26:06
  Speaker 3: I mean, a few of them were quite luxurious and gorgeous, but.
• 26:10
  Speaker 2: So, on the outside, they generally are. And even, like,
• 26:13
  Speaker 2: you know, the kitchens look nice. But you go down and, like,
• 26:17
  Speaker 2: one of the pictures is a... I think it's an
• 26:21
  Speaker 2: offensive lineman who's sitting in a bedroom of the house
• 26:23
  Speaker 2: that he bought. Mm-hmm. And man, the bedroom of that
• 26:27
  Speaker 2: house still just looks like a college kid's bedroom. It's
• 26:29
  Speaker 2: a bunch of sports posters on the wall. It's a
• 26:32
  Speaker 2: bed with one pillow on it with Walmart sheets. It's
• 26:37
  Speaker 2: just completely that vibe still. There's another one that is
• 26:44
  Speaker 2: from the kitchen of the same house.
• 26:46
  Speaker 3: With one couch in it.
• 26:48
  Speaker 4: It's just a giant.
• 26:49
  Speaker 2: You know, like, leather couch with, you know, a million
• 26:54
  Speaker 2: footrests and a TV and nothing else in the room.
• 26:56
  Speaker 3: Let's be clear, that's pleather.
• 26:58
  Speaker 4: Yes.
• 26:59
  Speaker 7: It looks like the movers brought in the couch and
• 27:00
  Speaker 7: they're like, where do you want it? And he's like, ah,
• 27:02
  Speaker 7: just right there. And they didn't even straighten it out.
• 27:04
  Speaker 4: It's not even straight.
• 27:04
  Speaker 2: It's just, like, at a random angle sticking out. So
• 27:07
  Speaker 2: I do love the fact that they're buying, like, houses
• 27:10
  Speaker 2: for hundreds of thousands or millions of dollars and still
• 27:13
  Speaker 2: just decorating it like a 19-year-old kid's dorm room.
• 27:16
  Speaker 3: Well, I mean, of course. Like, you know, they're not
• 27:19
  Speaker 3: going to suddenly.
• 27:20
  Speaker 6: Be 30 years old with spouses that have any sort
• 27:26
  Speaker 6: of design sense if they are getting paid a lot
• 27:31
  Speaker 6: of money for playing college football.
• 27:33
  Speaker 2: I just really enjoy it, and I also enjoy that
• 27:36
  Speaker 2: one of the guys profiled in this is a kicker,
• 27:39
  Speaker 2: Michael Salgado-Medina, who kicks for the University of Arizona, bought
• 27:45
  Speaker 2: a $ 370, 000 three-bedroom home four miles from campus, and so
• 27:49
  Speaker 2: it's nice to see that even the kickers are getting paid, Michael.
• 27:53
  Speaker 2: Always happy to see that. Let's take a quick break.
• 27:56
  Speaker 2: When we return, we're going to be joined by Paul
• 27:58
  Speaker 2: LaMonica from Barron's next.
• 28:01
  Speaker 1: The Financial Exchange is live on Sirius XM's Business Radio
• 28:05
  Speaker 1: Channel 132, weekdays from 11 to noon. Get the latest
• 28:09
  Speaker 1: business and financial news from across the country and around
• 28:12
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• 28:14
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• 28:18
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• 28:21
  Speaker 1: This is The Financial Exchange Radio Network. Subscribe now to
• 28:27
  Speaker 1: our YouTube page where you'll find daily interviews and full
• 28:29
  Speaker 1: shows of the Financial Exchange. We'll get you caught up
• 28:32
  Speaker 1: on anything and everything you might have missed right here
• 28:35
  Speaker 1: on the Financial Exchange. Ladies and gentlemen, the weekend.
• 28:46
  Speaker 2: As promised, we are now joined by the one, the
• 28:50
  Speaker 2: only Paul Monica from Barron's.
• 28:53
  Speaker 4: Paul, how are you doing today?
• 28:55
  Speaker 5: Good, thanks. How are you guys doing?
• 28:58
  Speaker 4: We're doing well.
• 28:59
  Speaker 2: And I wanted to talk to you about this piece
• 29:00
  Speaker 2: that you had from yesterday. It's titled, A University's Distaste
• 29:04
  Speaker 2: for Hedge Funds Created This New ETF.
• 29:07
  Speaker 4: It's Still Risky.
• 29:09
  Speaker 2: What's the university and what's the hedge fund that, I'm sorry,
• 29:13
  Speaker 2: and what is the ETF that was created for them?
• 29:17
  Speaker 5: Yeah. So it's the University of California, their very large,
• 29:23
  Speaker 5: substantial endowment, which is about almost $ 30 billion of more
• 29:31
  Speaker 5: than $ 235 billion in total investments. And what's interesting is
• 29:36
  Speaker 5: that State Street has a new UCI. Investments 9010 Endowment
• 29:43
  Speaker 5: Strategy Index ETF, which follows this endowment model. And what
• 29:48
  Speaker 5: the University of California does that is somewhat different than
• 29:53
  Speaker 5: other endowments around the country is that They pretty much
• 29:57
  Speaker 5: just have this plain vanilla approach of 90% in the
• 30:02
  Speaker 5: S & P 500 and the other 10% in investment-grade
• 30:10
  Speaker 5: corporate bonds. So the notion here is that they aren't
• 30:15
  Speaker 5: looking to take on the type of risks that you
• 30:18
  Speaker 5: would get from alternative assets such as commodities or hedge funds.
• 30:23
  Speaker 5: The head of this portfolio says that they've been burned
• 30:27
  Speaker 5: before by having hedged assets that didn't really actually hedge
• 30:32
  Speaker 5: them against risk during significant market downturns. So that's why
• 30:39
  Speaker 5: they're all in on the S & P 500. Obviously,
• 30:43
  Speaker 5: the big question here, though, is, Is investing in the
• 30:47
  Speaker 5: broader market really risk-free, given that there's so much emphasis
• 30:52
  Speaker 5: now on AI stocks as part of the S &
• 30:57
  Speaker 5: P 500? It's just so concentrated.
• 30:59
  Speaker 2: Another thing, I was reading a number of different ETF
• 31:03
  Speaker 2: experts who had picked up on this in the last
• 31:05
  Speaker 2: week as well. And one thing that a couple of
• 31:08
  Speaker 2: them said was, Basically, look, a 90-10 portfolio is kind
• 31:13
  Speaker 2: of useless to the average individual investor because 10% in
• 31:18
  Speaker 2: bonds doesn't really give you much cushion when things hit
• 31:22
  Speaker 2: the fan. But it does subtract from your annual returns
• 31:26
  Speaker 2: in a pretty meaningful way in the long run. So
• 31:28
  Speaker 2: why would an average investor want to own a 90-10
• 31:32
  Speaker 2: strategy in this fashion?
• 31:34
  Speaker 5: Yeah, it's a great question there. I mean, depending on
• 31:38
  Speaker 5: your age and your tolerance for risk, you may not
• 31:42
  Speaker 5: want even as small a percentage of fixed income securities
• 31:47
  Speaker 5: as 10%. Obviously, if you are a more conservative investor
• 31:53
  Speaker 5: that is nearing retirement age, then the classic 60-40 model
• 32:00
  Speaker 5: or something Closer to that would make more sense. You'd
• 32:03
  Speaker 5: want more income. You'd want more bonds. But I think
• 32:05
  Speaker 5: the biggest issue right now is that by having this
• 32:09
  Speaker 5: index strategy as opposed to, say, active stock picking, it
• 32:14
  Speaker 5: does beg the question of, are you getting too much
• 32:18
  Speaker 5: concentration in the likes of Alphabet, Microsoft, Amazon, all the
• 32:26
  Speaker 5: companies that are really leveraged to that AI trade. And,
• 32:31
  Speaker 5: you know, what's interesting is that there's an actually there's
• 32:33
  Speaker 5: another ETF from the fund company Cambria that is, quote unquote,
• 32:39
  Speaker 5: endowment style ETFs. And they actually invest in a mix
• 32:45
  Speaker 5: of treasury bonds, equities, commodities, managed futures, and individual stocks.
• 32:50
  Speaker 5: And when you look at some of the bigger stocks
• 32:52
  Speaker 5: that are in this ETF, yes, NVIDIA is in there
• 32:56
  Speaker 5: because it's NVIDIA. Find a fund that doesn't own NVIDIA.
• 32:59
  Speaker 5: But it also has CSX, the railroad company, JP Morgan Chase.
• 33:03
  Speaker 5: So it's not just the AI tech trade.
• 33:07
  Speaker 2: Paul, what about just the idea that, look, what endowments
• 33:09
  Speaker 2: need from their investments are fundamentally different from what individuals do.
• 33:13
  Speaker 2: Endowments are managing a portfolio to be able to basically
• 33:18
  Speaker 2: provide certain expenses on an annual basis.
• 33:21
  Speaker 4: To a broad group of people, not for one individual.
• 33:26
  Speaker 5: Yeah, I think that there is merit to the argument
• 33:29
  Speaker 5: that why should an individual investor follow a strategy that
• 33:34
  Speaker 5: is inherently profitable? designed for a much different needs. Obviously,
• 33:42
  Speaker 5: what a large university like or university system like the
• 33:46
  Speaker 5: University of California you know, requires, you know, from their
• 33:50
  Speaker 5: investment portfolio differs from what you and I or even,
• 33:54
  Speaker 5: you know, institutional investors that, you know, don't have those
• 33:59
  Speaker 5: obligations that large, you know, public educational institutions have or
• 34:05
  Speaker 5: even private for that matter. And, you know, there's the
• 34:07
  Speaker 5: Yale model as well, which is what a lot, I think,
• 34:11
  Speaker 5: of other universities follow that has that more diverse, you know,
• 34:17
  Speaker 5: investing model of alternatives, you know, even though University of
• 34:22
  Speaker 5: California is, you know, not a fan of the alternative
• 34:26
  Speaker 5: model saying that hedge funds don't really work for that.
• 34:29
  Speaker 4: Very good.
• 34:30
  Speaker 2: Paul, appreciate you joining us today. And I hope you
• 34:33
  Speaker 2: have a fantastic weekend.
• 34:35
  Speaker 7: Yep.
• 34:36
  Speaker 5: Same to you guys. Really appreciate it. Thanks a lot.
• 34:38
  Speaker 4: Absolutely.
• 34:39
  Speaker 2: That is Paul LaMonica from Barron's talking about that new
• 34:44
  Speaker 2: exchange traded fund.
• 34:46
  Speaker 4: Mike, what do you got for Stack Roulette?
• 34:48
  Speaker 6: I want to talk about fast food restaurants and their
• 34:51
  Speaker 6: latest shift. So McDonald's and several other fast food places
• 34:55
  Speaker 6: have spent a fair bit of effort trying to at
• 34:59
  Speaker 6: least test out fewer humans in their stores, whether it's
• 35:03
  Speaker 6: testing out AI drive-thrus or digitized menus that you can
• 35:09
  Speaker 6: order off of in the stores.
• 35:11
  Speaker 3: And what they are.
• 35:13
  Speaker 6: Pivoting to now is more friendlier humans in the stores.
• 35:17
  Speaker 6: They are trying to train their staff to, I think,
• 35:19
  Speaker 6: take a page out of the Starbucks model that's been
• 35:22
  Speaker 6: shifted quite a bit recently where, Chuck, you don't drink coffee,
• 35:26
  Speaker 6: but there is a distinct difference today compared to about
• 35:29
  Speaker 6: three years ago when you walk into a Starbucks, they
• 35:32
  Speaker 6: are trying to get their baristas to Put a smile
• 35:35
  Speaker 6: on and say, welcome in. We're happy to see you.
• 35:38
  Speaker 6: And McDonald's is trying to follow suit with that.
• 35:41
  Speaker 4: Can we talk about that for a second?
• 35:44
  Speaker 3: The fake friendliness? No.
• 35:46
  Speaker 4: Okay. Welcome in.
• 35:47
  Speaker 3: Oh.
• 35:50
  Speaker 4: Where did that come from? I don't know. Everyone says
• 35:53
  Speaker 4: it now.
• 35:55
  Speaker 7: Some corporate meeting table.
• 35:57
  Speaker 4: It's not. A real phrase.
• 36:01
  Speaker 2: And adding the in doesn't add anything to it. I'm
• 36:07
  Speaker 2: all for evolving language over time. Those of you who
• 36:09
  Speaker 2: listen to our show, we come up with all kinds
• 36:12
  Speaker 2: of words on this show.
• 36:13
  Speaker 3: But Chuck's not a fan of welcome in.
• 36:14
  Speaker 2: Well, because it doesn't accomplish anything. We invented the term
• 36:17
  Speaker 2: intermediatory because we needed something between transitory and permanent.
• 36:21
  Speaker 6: Intermediatory filled the niche. What do you want the barista
• 36:25
  Speaker 6: to say when you walk in the door?
• 36:26
  Speaker 7: Hi, how are you?
• 36:28
  Speaker 4: Or just welcome. I know I'm in your building.
• 36:35
  Speaker 7: Every time you guys walk in the studio, I'm going
• 36:37
  Speaker 7: to say welcome.
• 36:39
  Speaker 2: When someone comes into your house, if someone rings the
• 36:42
  Speaker 2: doorbell at your house, you don't go like, hello out there.
• 36:47
  Speaker 4: No, you're like, hey. Get off my porch. You're just like,
• 36:53
  Speaker 4: it's an extra word that contributes nothing.
• 36:55
  Speaker 6: Okay, so beyond the phrasing of this, If you guys
• 36:58
  Speaker 6: walk into a McDonald's and there's no line at either
• 37:00
  Speaker 6: the kiosk or the counter, which one are you going to?
• 37:04
  Speaker 3: Kiosk. Counter. All day.
• 37:07
  Speaker 1: Oh, counter, yeah.
• 37:09
  Speaker 7: I can't get over the awkwardness of the person staring
• 37:11
  Speaker 7: at me at the kiosk.
• 37:13
  Speaker 1: If there's no line.
• 37:14
  Speaker 6: See, this is a key difference between my wife and I.
• 37:16
  Speaker 6: The kiosk doesn't have a person at it.
• 37:19
  Speaker 4: No, he's asking.
• 37:20
  Speaker 3: Yeah, versus the counter.
• 37:22
  Speaker 4: I go to the kiosk.
• 37:23
  Speaker 3: Yeah, understood. And Tucker's talking about the person behind the counter.
• 37:26
  Speaker 7: Looking at you like, Because they're human.
• 37:30
  Speaker 4: Oh, I just put the kiosk between me and them.
• 37:32
  Speaker 6: So my wife and I, we took the family to
• 37:34
  Speaker 6: Chick-fil-A the other week, and we were in the parking lot,
• 37:37
  Speaker 6: and I was like, let's just go in and order.
• 37:39
  Speaker 6: And my wife insisted on pulling up the app and
• 37:41
  Speaker 6: doing it on the app because she despises interacting with
• 37:45
  Speaker 6: human beings.
• 37:46
  Speaker 3: And the two of us are very different on that perspective.
• 37:48
  Speaker 4: I will.
• 37:49
  Speaker 6: If I have time, I want to go in and
• 37:52
  Speaker 6: interact with a human being for some reason. Michael used
• 37:54
  Speaker 6: to go back and cook the fries. Yeah, I just
• 37:57
  Speaker 6: welcome myself back, pour myself a beer at the bar.
• 37:59
  Speaker 4: He welcomes himself in.
• 38:01
  Speaker 1: Is beer a McDonald's?
• 38:03
  Speaker 2: My view, it's not the human interaction. It's much more
• 38:07
  Speaker 2: if I'm putting in my request on the kiosk, I
• 38:10
  Speaker 2: know it's going to be captured correctly.
• 38:12
  Speaker 3: That's fair.
• 38:12
  Speaker 2: That's fair. Stocks remain very positive as we wrap things up.
• 38:17
  Speaker 4: We're done for the day, done for the week. We'll
• 38:19
  Speaker 4: see you Monday. Fed week next week. Get ready.