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Tariffs Overturned: A Turning Point for Markets and Fed Policy? · The Financial Exchange Show

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  Speaker 1: the Financial Exchange with Mike Armstrong, and Mark Vandetti.
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  Speaker 3: Good morning, Welcome back to the financial exchanges. Mike Armstrong,
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  Speaker 3: Mark Vandetti and Ben Kitchen with you on a Friday
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  Speaker 3: here with a lot.
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  Speaker 2: Of surprise breaking news.
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  Speaker 3: Thanks for tuning in as you prepare for Are we
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  Speaker 3: gonna get and I'm up in New Hampshire right now, guys,
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  Speaker 3: So we're gonna get some snow this evening.
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  Speaker 2: But a Sunday nor' easter?
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  Speaker 3: Is that what we're preparing for now?
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  Speaker 4: That's the words coming down, is it's gonna blanket. Especially
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  Speaker 4: if you're staying up in New Hampshire, you're probably gonna
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  Speaker 4: get hammered with snow.
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  Speaker 2: All right, good stuff, last one of the season. Maybe.
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  Speaker 3: Markets are moving this morning on the breaking news from
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  Speaker 3: about ten am of the US Supreme Court throwing out
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  Speaker 3: the tariffs from the Trump White House. Specifically, these are
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  Speaker 3: the reciprocal terrifts, which are the majority of the ones
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  Speaker 3: that have been used on a number of different country
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  Speaker 3: trees in order to in part incentivize them to negotiate
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  Speaker 3: with the United States on trade. Markets are moving this morning,
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  Speaker 3: the Nasdaq especially leading the way, up two hundred and
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  Speaker 3: fifty points one point one percent in early trading. We've
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  Speaker 3: got the SMP up two thirds of a percent forty
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  Speaker 3: four points, and the Dow Jones Industrial Average up one
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  Speaker 3: hundred and twenty six points, or one quarter of one percent.
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  Speaker 3: When we take a look at sector by sector here
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  Speaker 3: we do have communications services up two and three quarters
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  Speaker 3: a percent, consumer discretionary up one point one, technology up
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  Speaker 3: nine tenths of a percent here, so very much a
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  Speaker 3: risk on trade type day, Energy, healthcare, consumer staples and
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  Speaker 3: materials off still as sectors.
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  Speaker 2: In early trading.
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  Speaker 3: So far a lot that we still do not know
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  Speaker 3: about this Supreme Court ruling, but we do know that
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  Speaker 3: there was a six to three vote rejecting the tariffs
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  Speaker 3: that are being used on the emergency basis from the
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  Speaker 3: White House.
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  Speaker 2: They are throwing back to the lower courts the.
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  Speaker 3: Topic of how and on what time schedule to reimburse
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  Speaker 3: the estimated one hundred and seventy billion dollars that has
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  Speaker 3: been collected by the Treasury on these tariffs.
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  Speaker 2: And so a lot more to come here.
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  Speaker 3: But in the aggregate market, there's two pieces of information
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  Speaker 3: that we got this morning that were entirely new. There
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  Speaker 3: was the GDP report at eight thirty, and this Supreme
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  Speaker 3: Court ruling at ten am. When we take it all
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  Speaker 3: into context to think about the state of the economy
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  Speaker 3: as we head into we're really still in the early
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  Speaker 3: stages of twenty twenty six, but we've had a lot
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  Speaker 3: of discussion about inflation, unemployment, the direction of this economy.
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  Speaker 3: How do these breaking items, I guess, reshape our view
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  Speaker 3: on the direction of the economy right now.
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  Speaker 5: I'll answer that from the perspective of what does it
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  Speaker 5: mean for the FED? Otherwise it's like, well, what do
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  Speaker 5: you do with these numbers? So if you think about
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  Speaker 5: the FED as having a dashboard that has a spinometer
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  Speaker 5: on it, or maybe attack on is the better analogy,
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  Speaker 5: because you can get into that red zone when the
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  Speaker 5: economy's reving too high, and it appeared to be reving
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  Speaker 5: too high in the second and third quarter. Too high
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  Speaker 5: means way above what most researchers think is the economy's
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  Speaker 5: potential growth rate, which is somewhere around two percent. Third
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  Speaker 5: and fourth quarter, Mike, as you know, we had growth
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  Speaker 5: somewhere in the four percent range.
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  Speaker 3: That's right, mark, But why do experts put that speed
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  Speaker 3: limit on the economy. It's not a speed limit, but
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  Speaker 3: you know, and estimating in.
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  Speaker 5: Some ways it could be thought of. Yeah, that is
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  Speaker 5: a measure of the economy's ability to supply goods and services.
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  Speaker 5: The economy's productive capacity grows at about the rate of
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  Speaker 5: productivity plus the rate of the labor force. There's a
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  Speaker 5: little bit of math behind that, but it's very straightforward
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  Speaker 5: and when you add those two things together again, we
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  Speaker 5: don't need to get into the technicalities of it, just
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  Speaker 5: sort of take it at face value. That gives you
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  Speaker 5: the long run potential growth rate. There's some guesswork there
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  Speaker 5: on the productivity side. Labor force side is pretty much
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  Speaker 5: baked into the cake because population grows pretty predictably. That's
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  Speaker 5: how you get to potential GDP. That's also potential productive capacity.
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  Speaker 5: Those terms can be used, those phrases can be used interchangeably, Mike.
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  Speaker 5: So then there's the So I just described the supply
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  Speaker 5: side of the economy, there's also the demand side. That's
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  Speaker 5: something the FED can do nothing about the supply side.
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  Speaker 5: FED can influence the demand side. They can print money.
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  Speaker 5: That money makes its way to the economy. That stokes spending,
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  Speaker 5: which in turn pushes up you know, demand. So the
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  Speaker 5: FED can if it tries push demand above the economy's
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  Speaker 5: productive it can it can grow demand faster than the
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  Speaker 5: economy's productive capacity is growing? Said differently, demand is outpacing supply.
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  Speaker 5: Maybe that's the easiest way to put it. So now
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  Speaker 5: the Fed's got to decide do we put our foot
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  Speaker 5: on the break here? Do we cruise, do we put out?
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  Speaker 5: Do we just at the cruise control or do we
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  Speaker 5: actually hit the throttle. Do we hit the do we
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  Speaker 5: hit the gas pedal. They've been hitting the gas pedal
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  Speaker 5: for the past few months.
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  Speaker 3: I was going to say, when you line up the
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  Speaker 3: evidence of demand outstripping supply versus the other way around, like,
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  Speaker 3: where do we land on the different factors?
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  Speaker 2: Right? Go ahead? Sorry, we have a.
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  Speaker 3: You know, a labor market that has clearly cooled quite
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  Speaker 3: a bit, but we do still have.
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  Speaker 2: Elevated inflation readings.
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  Speaker 3: And I'm just very curious about if one hundred and
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  Speaker 3: seventy billion dollars gets tossed back into this economy along
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  Speaker 3: with the tax refunds that you know, groom according to
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  Speaker 3: the IRS by eleven percent, according to the President, by
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  Speaker 3: twenty percent year over year, what does that do to
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  Speaker 3: the to the equation of demand versus supply for the
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  Speaker 3: aggregate of the economy.
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  Speaker 5: The kind of lazy answer as well, all L sequel,
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  Speaker 5: which is a very problematic phrase, all L sequel And
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  Speaker 5: you were you already getting at this. You were just
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  Speaker 5: sort of egging me on in a in a healthy way.
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  Speaker 5: Of course, that increases demand. Is that enough to push
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  Speaker 5: inflation up? Is that enough to push the growth and
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  Speaker 5: demand above the growth in supply when you combine it
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  Speaker 5: with recent FED easing, and that FED easing is only
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  Speaker 5: now making its way into the economy because FED easing
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  Speaker 5: acts with long legs, as researchers like to say, long
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  Speaker 5: and variable lags. So Mike, I don't know. It depends
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  Speaker 5: on what's happening elsewhere in the economy. If we had
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  Speaker 5: this conversation yesterday, and I actually think we did have
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  Speaker 5: this conversation well like two days ago, and every time
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  Speaker 5: you and I talk, I would have said, I can't
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  Speaker 5: believe the FED is easing right now. Anybody who wants
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  Speaker 5: more easing is out of their gord. Economy's growing it twice.
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  Speaker 5: Potential unemployment is at four point three percent in historical terms.
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  Speaker 5: That's extremely low, notwithstanding the slowdown in payroll growth. There
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  Speaker 5: are other labor market indicators that suggest that things are
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  Speaker 5: just fine. Maybe not as gangbusters as they were two
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  Speaker 5: years ago, but just fine. Why would you ease right
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  Speaker 5: now with elevated inflation? I think just my opinion, and
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  Speaker 5: I'm not firm on this because more evidence could change
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  Speaker 5: your view or mine. There's a better argument for easing
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  Speaker 5: today now that we know. Fourth quarter GDP slowed pretty dramatically,
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  Speaker 5: and then twenty twenty five GDP was a lot slower.
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  Speaker 5: The rate of change at it, I mean, was a
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  Speaker 5: lot slower than twenty twenty four two point eight versus
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  Speaker 5: we had two point eight or two point nine and
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  Speaker 5: twenty twenty four, and in twenty twenty three and then
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  Speaker 5: twenty twenty five it dropped to two point two, which
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  Speaker 5: is still out of above potential that that supply growth
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  Speaker 5: that I was talking about earlier, Mike. But it's a
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  Speaker 5: lot slower than the prior year. So I feel less
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  Speaker 5: less bold in saying, well, the Fed should, if anything,
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  Speaker 5: be thinking about tightening right now than I felt yesterday.
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  Speaker 2: For what that's worth.
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  Speaker 3: How about Yeah, And granted this was a week or
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  Speaker 3: two ago, but I was listening to an interview with
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  Speaker 3: Adam Posen. If you're not familiar, than means the head
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  Speaker 3: of the Peterson Institute for International Economics, and Yeah, he
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  Speaker 3: boldly went out there and said, Yeah, I'm worried of
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  Speaker 3: four percent of inflation by your end.
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  Speaker 2: Yeah, he's like you.
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  Speaker 3: I'm guessing he has continued to reshape that, especially with
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  Speaker 3: the GDP and now the tariffy writing. But there are
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  Speaker 3: very mainstream serious economists who are genuinely concerned that this
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  Speaker 3: economy continues to run hot beyond capacity. Yes, and four
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  Speaker 3: percent inflation by your end. I don't want to say
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  Speaker 3: it would be a disaster, but it'd be pretty ugly.
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  Speaker 5: I don't know what inputs he's making into he used.
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  Speaker 5: Adam Posen is illuminary. He's one of the big figures
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  Speaker 5: in monetary economics. He's a former central banker and an
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  Speaker 5: accomplished academics. So he's one of those guys that when
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  Speaker 5: he speaks as you've suggested, he should be taken seriously.
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  Speaker 5: I don't know what assumptions he's using conventional models. Sure,
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  Speaker 5: it just depends on what assumptions he's making to get
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  Speaker 5: to that conclus like I could see that, I could
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  Speaker 5: also see the fourth quarter boding ill for future GDP
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  Speaker 5: because there's persistence to that statistic, meaning slowdowns can precipit
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  Speaker 5: take further slowdowns. Because the economy is a big complex thing.
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  Speaker 5: I could see the argument now for standing pat or
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  Speaker 5: I'm not in the easing camp yet, but you know,
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  Speaker 5: I wouldn't dismiss it out of hand.
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  Speaker 2: Let's take a quick break.
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  Speaker 3: When we come back, we're gonna be playing a little
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  Speaker 3: bit of trivia here next on the Financial Exchange, and
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  Speaker 3: then I want to talk about the underpinnings of the market.
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  Speaker 3: What's been going on underneath the surface of the S
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  Speaker 3: and P five hundred, because it has been a in
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  Speaker 3: some ways a relatively low volatility start to the year,
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  Speaker 3: but when you look under the surface and the shifts
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  Speaker 3: of the components, a big move this year for the
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  Speaker 3: S and P five hundred. So we're going to be
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  Speaker 3: talking about markets and trivia here next Financial Exchange.
• 10:46
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  Speaker 4: All right time now for trivia here on the Financial Exchange.
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  Speaker 4: Today's question today is Mitch McConnell's eighty fourth birthday. McConnell
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  Speaker 4: has been a member of the Senate since nineteen eighty five,
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  Speaker 4: and he is his state's longest serving senator in history.
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  Speaker 4: So your question today is which state does Mitch McConnell
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  Speaker 4: represent in the Senate? Which state does Mitch McConnell represent
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  Speaker 4: in the Senate? Be the third person who Texas at
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  Speaker 4: with the correct response along with the keyword trivia, and
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• 11:57
  Speaker 2: Is it easy Week here on the Financial Exchange, Ben?
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  Speaker 4: It was Ben forgot to write trivia until nine to
• 12:02
  Speaker 4: fifty five. So the first thing you didn't.
• 12:04
  Speaker 2: Said we're doing Wednesday's trivia question I was listening in.
• 12:09
  Speaker 4: It was what city popularized Buffalo Wings.
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  Speaker 3: Yeah, yeah, okay, easy Week here on the Financial Exchange,
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  Speaker 3: Thank you very much.
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  Speaker 4: I was just more curious to see how many people
• 12:19
  Speaker 4: would get that wrong.
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  Speaker 2: Yeah, okay, No, that's that's a fair point.
• 12:23
  Speaker 3: Ben's been getting picked on for doing too hard of
• 12:25
  Speaker 3: a trivia question recently, so he had to soften up.
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  Speaker 2: On all of you. So appreciate it. Ben, could have
• 12:30
  Speaker 2: been a trick question. I thought it was. What could
• 12:34
  Speaker 2: have been? Yeah, I suppose, Yeah, it wasn't it was. No, No,
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  Speaker 2: It's just pretty straightforward. It reminds me of.
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  Speaker 3: When they used to do on SNL that the fake Jeopardy,
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  Speaker 3: the celebrity Jeopardy. This condiment comes from mustard seeds, Mustard Seeds.
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  Speaker 2: Mark. When we went into.
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  Speaker 3: This year, we had a lot of stock market analysts
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  Speaker 3: talk about a great rotation in stocks and expecting investors
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  Speaker 3: to be taking their gains from some of the high flyers.
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  Speaker 2: For once, I'm seeing that the dominant narrative.
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  Speaker 3: That I heard, at least across financial circles is actually
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  Speaker 3: taking place. We've seen a pretty big rotation. Market Watch
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  Speaker 3: out with a piece this morning describing the rotation to
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  Speaker 3: some degree but also contextualizing it. And the point that
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  Speaker 3: I think they are attempting to make here is that
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  Speaker 3: they don't necessarily see it as a great signal for
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  Speaker 3: what could come, and of course, whenever you can point
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  Speaker 3: to data that keeps you company in two thousand and
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  Speaker 3: two thousand and nine, people tend to be quite worried.
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  Speaker 3: But talk to me about the context here of this
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  Speaker 3: rotation in stocks that we are experiencing in twenty twenty six.
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  Speaker 5: So far well on a very high level. Lower volatility
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  Speaker 5: sectors sometimes viewed as defensive sectors, where you'd want to
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  Speaker 5: be if market timing is your thing, and it probably
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  Speaker 5: shouldn't be, but some people like to play that game,
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  Speaker 5: like consumer staples companies like to a lesser extent, utilities
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  Speaker 5: and maybe real estate because they pay a high divid
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  Speaker 5: end their high income securities. On average, those could be
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  Speaker 5: viewed as more defensive sectors that tend to do well
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  Speaker 5: when the economy slows. So if all you knew, you
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  Speaker 5: didn't know anything about economic growth, you didn't know anything
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  Speaker 5: about the AI story or any of the other backdrop.
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  Speaker 5: If all you could see was the year to date
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  Speaker 5: performance of sectors in the S and P five hundred
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  Speaker 5: industry groups, you would see consumer staples up thirteen point
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  Speaker 5: one percent. What the heck all round to the nearest tenthyer,
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  Speaker 5: you would see energy up twenty three point six percent
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  Speaker 5: and real estate up nearly eight percent. Ditto with utilities.
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  Speaker 5: You would think, ooh, something maybe rotten in the stock market.
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  Speaker 5: That doesn't seem symptomatic of a healthy, growing economy, because
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  Speaker 5: you've got tech down four percent, consumer consumer discretionary excuse
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  Speaker 5: me companies down four and a half percent. Those are
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  Speaker 5: very growth sensitive sectors. Consumer communication services excuse me companies
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  Speaker 5: down nearly three percent. Mike, If that's all you knew,
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  Speaker 5: you might be a little bit worried. But we also
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  Speaker 5: know the economy continues to grow, and then unemployment remains
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  Speaker 5: very low. So maybe this is just a long overdue
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  Speaker 5: The sectors that are down this year, as you know
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  Speaker 5: very well, have been the standout out performers for several years,
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  Speaker 5: an unusually long streak, and perhaps this is just an
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  Speaker 5: overdue rebalancing.
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  Speaker 2: Yeah, and market Watch has this handy little charge.
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  Speaker 3: One way of looking at this, there's looking at the
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  Speaker 3: different sectors, as Mark just did. You can also do
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  Speaker 3: what's called equally weighting the standard and POREST five hundred.
• 15:48
  Speaker 3: So for those unfamiliar the S and P five hundred,
• 15:50
  Speaker 3: it's a market weight weighted index market cap weighted index rather,
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  Speaker 3: And so when you look at it right. The largest
• 15:57
  Speaker 3: companies that we always talk about, the likes of the Microsoft,
• 16:01
  Speaker 3: carry more weight in the index than say, your home
• 16:04
  Speaker 3: depots or you know, even smaller companies. What you can
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  Speaker 3: do alternatively is say, hey, we're going to take the
• 16:11
  Speaker 3: five hundred components of the S and P five hundred
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  Speaker 3: and give them an equal weight one fifth hundred one,
• 16:17
  Speaker 3: five hundredth apiece. And they point out in market Watch that, hey,
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  Speaker 3: you know, the years in which for the full calendar year,
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  Speaker 3: the equal weighted index has outperformed the market cap weighted
• 16:29
  Speaker 3: index include years like twenty twenty two, two thousand and nine,
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  Speaker 3: two thousand, you know, pretty ugly markets. For some reason,
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  Speaker 3: they then go on to ignore the fact that it
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  Speaker 3: also did so in two thousand and one, two thousand
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  Speaker 3: and two, two thousand and three, two thousand and four,
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  Speaker 3: two thousand and five, twenty ten, twenty thirteen, twenty sixteen.
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  Speaker 3: And so, while I think this moment is interesting, don't
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  Speaker 3: get me wrong. Right, we've seen that the you know,
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  Speaker 3: the darlings of them mark market for the last several years,
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  Speaker 3: the ones that have driven stock prices higher and driven
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  Speaker 3: valuations through the roof in US equities are among the
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  Speaker 3: worst performers, and yet we don't have the S and
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  Speaker 3: P five hundred really any lower than it was in October.
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  Speaker 2: That's fascinating to me. It is interesting.
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  Speaker 3: If you had told me that was going to occur,
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  Speaker 3: then I would have told you this market.
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  Speaker 2: Is going to be in a much worse place than
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  Speaker 2: it is right now.
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  Speaker 3: I'm not sure that we should use it as any
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  Speaker 3: sort of signal for you know, the idea that maybe
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  Speaker 3: we're in a recession right now, or that things are
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  Speaker 3: about to get worse, because there are plenty of markets
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  Speaker 3: over the course of the last thirty years where this
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  Speaker 3: has been the case.
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  Speaker 2: Uh.
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  Speaker 5: Yeah. You know, when you equal weight something, Mike, you
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  Speaker 5: have less of the big stuff. Not a surprise, right,
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  Speaker 5: You're chopping off at an artificially low level the representation
• 17:50
  Speaker 5: from the biggest companies, So it gives you a small
• 17:52
  Speaker 5: cap bias. Those biggest companies have also run up by
• 17:56
  Speaker 5: a lot, that's how they got big. So it gives
• 17:59
  Speaker 5: you a value you bias relative to growth companies. Sure,
• 18:02
  Speaker 5: it's it's good because you may have value and growth
• 18:06
  Speaker 5: and blend on your four to one k roster, or
• 18:08
  Speaker 5: they may be in your target date fund or your
• 18:10
  Speaker 5: your balanced fund, whatever your plan calls it, and you
• 18:13
  Speaker 5: may have wondered what does that mean. You may have small, mid,
• 18:16
  Speaker 5: and large sized company stock funds in your four to
• 18:19
  Speaker 5: one K roster. The equal weight approach will give you
• 18:22
  Speaker 5: more exposure to smaller, more value oriented companies, and that's
• 18:26
  Speaker 5: what explains its outperformance during the markets that you cited.
• 18:30
  Speaker 5: Those were favorable markets for smaller companies, favorable markets for
• 18:33
  Speaker 5: less growth oriented companies.
• 18:36
  Speaker 3: Another area where this divergence is particularly pronounced is right
• 18:41
  Speaker 3: within the tech sector itself.
• 18:42
  Speaker 2: Right, so we talk about the tech sector as though
• 18:44
  Speaker 2: it's one, you know, one big thing. It's not.
• 18:47
  Speaker 3: The Semiconductor index upright now for the year around nineteen
• 18:52
  Speaker 3: percent for what I think are pretty obvious reasons after
• 18:56
  Speaker 3: a twenty twenty five gain of forty percent, whereas the
• 19:00
  Speaker 3: tech software sector down twenty two percent. Again, these are
• 19:04
  Speaker 3: stories we've talked about at length already, But what I
• 19:07
  Speaker 3: am encouraged to see is that finally investors seem to
• 19:09
  Speaker 3: be a little bit more detailed in their analysis of
• 19:15
  Speaker 3: what is going to happen because of artificial intelligence, rather
• 19:18
  Speaker 3: than just every company semi related to tech is.
• 19:21
  Speaker 2: Going to go through the roof because of AI. We've
• 19:23
  Speaker 2: got to take a quick break.
• 19:24
  Speaker 3: When we come back, Wall Street Watch is next here
• 19:27
  Speaker 3: on the Financial Exchange.
• 19:46
  Speaker 1: Bringing the latest financial news straight to your radio every day.
• 19:50
  Speaker 1: It's the Financial Exchange on the Financial Exchange Radio Network.
• 19:56
  Speaker 1: Time now for Wall Street Watch. A complete look at
• 20:00
  Speaker 1: what's moving markets so far today right here on the
• 20:03
  Speaker 1: Financial Exchange Radio Network.
• 20:06
  Speaker 4: Markets are positive right now. The Dow Jones is up
• 20:10
  Speaker 4: just under a tenth of a percent, the S and
• 20:12
  Speaker 4: P five hundreds up four tenths of a percent, and
• 20:14
  Speaker 4: the Nasdaq is up a little over seven tenths of
• 20:18
  Speaker 4: percent as markets continue to react to the GDP data
• 20:22
  Speaker 4: that was released this morning that came in well under
• 20:24
  Speaker 4: expectations and the major announcement that came just before ten
• 20:28
  Speaker 4: o'clock that Trump's global tariffs have been struck down by
• 20:31
  Speaker 4: the Supreme Court. Moving on to others, Blue Capital Blue
• 20:37
  Speaker 4: Owl Capital shares are off by two percent, a day
• 20:39
  Speaker 4: after the private market and Alternative Assets manager fell five
• 20:42
  Speaker 4: point nine percent following the sale of one point four
• 20:45
  Speaker 4: billion dollars in loans. Residential real estate sales platform open
• 20:50
  Speaker 4: Door Technology is seeing shares rise over ten percent. Fourth
• 20:54
  Speaker 4: quarter revenue of seven hundred and thirty six million dollars,
• 20:57
  Speaker 4: beat the LSEG consensus estimate of five one hundred and
• 21:00
  Speaker 4: forty nine million dollars. Management said that the company is
• 21:03
  Speaker 4: driving to adjusted net income positive by the end of
• 21:06
  Speaker 4: twenty twenty six, measured on a twelve month go forward basis.
• 21:11
  Speaker 4: Cloud storage company Dropbox reported fourth quarter adjusted earnings of
• 21:15
  Speaker 4: sixty eight cents per share, narrowly beating the LSG consensus
• 21:19
  Speaker 4: of sixty seven cents per share. Revenue for the period
• 21:22
  Speaker 4: was six hundred and thirty six million dollars, surpassing the
• 21:24
  Speaker 4: street's call for six hundred and twenty nine million dollars.
• 21:27
  Speaker 4: Shares are currently up one point five percent. Casual dining
• 21:31
  Speaker 4: chain Texas Roadhouse is down two and a half percent.
• 21:34
  Speaker 4: Texas Roadhouse said that comparable sales at its company restaurants
• 21:38
  Speaker 4: in the first seven weeks the first quarter of the
• 21:40
  Speaker 4: twenty twenty six fiscal year increased eight point two percent
• 21:44
  Speaker 4: from the year ago period. And finally, Live Nation Entertainment
• 21:48
  Speaker 4: posted strong fourth quarter results, sending shares up five percent.
• 21:52
  Speaker 4: Live Nation reported six point three one billion dollars in
• 21:55
  Speaker 4: revenue for the period, exceeding the six point one to
• 21:58
  Speaker 4: one billion dollars estimates from analysts. I am Ben Kitchen
• 22:02
  Speaker 4: and that is Wall Street Watch paying off trivia from earlier.
• 22:05
  Speaker 4: The question we had was which state does Mitch McConnell
• 22:10
  Speaker 4: represent in the Senate? Your answer Kentucky. Our winner today
• 22:14
  Speaker 4: is Rob from Westbroo. Rob will be taking home a
• 22:17
  Speaker 4: Financial Exchange Show t shirt. We play trivia here every
• 22:21
  Speaker 4: day on the Financial Exchange. You can visit the Financial
• 22:24
  Speaker 4: Exchange dot com.
• 22:27
  Speaker 3: Mark I want to talk about trading hours on Wall Street,
• 22:31
  Speaker 3: which seems like a highly niche subject, but there's a
• 22:34
  Speaker 3: piece and Market Watch about how tokenized securities are going
• 22:40
  Speaker 3: to effectively make it so you can trade twenty four
• 22:43
  Speaker 3: hours a day, seven days a week in basically cryptocurrency
• 22:48
  Speaker 3: tokens that represent individual stocks and track the price of them. Now,
• 22:52
  Speaker 3: I don't want to get into the details of the
• 22:53
  Speaker 3: technology because quite honestly, I don't understand all the details
• 22:56
  Speaker 3: of the technology.
• 22:57
  Speaker 2: But I do know that this has been around for
• 22:59
  Speaker 2: a while, and.
• 23:00
  Speaker 3: Generally speaking, regulators don't seem all that concerned about it.
• 23:06
  Speaker 3: Regardless of where that piece goes, I think what seems
• 23:10
  Speaker 3: likely to me is if this continues and the stock
• 23:14
  Speaker 3: exchanges want to remain relevant.
• 23:16
  Speaker 2: They'll probably push.
• 23:17
  Speaker 3: For extended trading hours and allow for individual investors to
• 23:23
  Speaker 3: move on stocks twenty four hours a day, or at
• 23:25
  Speaker 3: least more hours of the day than are currently allowed.
• 23:28
  Speaker 3: Trading hours on exchanges right now are nine thirty to
• 23:31
  Speaker 3: four pm for those unfamiliar, I'm just.
• 23:35
  Speaker 2: Curious your thoughts on the positives and negatives here. It
• 23:38
  Speaker 2: reminds me of an negative.
• 23:39
  Speaker 3: I remember seeing a decade ago of a woman out
• 23:42
  Speaker 3: to dinner talking with her friend about finances of some
• 23:46
  Speaker 3: sort and placing a trade in after markets on her
• 23:50
  Speaker 3: phone while at dinner with somebody, and I remember looking
• 23:54
  Speaker 3: at it me like, who precisely other than the brokerage
• 23:57
  Speaker 3: do they see this benefiting?
• 24:00
  Speaker 2: But what did your take on it? Too?
• 24:02
  Speaker 5: Well, Mike, I'm old fashioned. I believe that most investors
• 24:07
  Speaker 5: are well served by buying a.
• 24:09
  Speaker 2: Draw wagon, but.
• 24:12
  Speaker 5: Old fact that too, most investors are well served doing
• 24:16
  Speaker 5: exactly what your four O one K allows you to do,
• 24:19
  Speaker 5: averaging into a well diversified, low cost basket of companies, small, mid, large,
• 24:26
  Speaker 5: foreign US growth value blend, and some bond allocation depending
• 24:32
  Speaker 5: on your age and risk tolerance. That I can tell
• 24:36
  Speaker 5: you a lot of evidence backs up being a very
• 24:40
  Speaker 5: fruitful long term strategy. You're averaging in, you're buying more
• 24:43
  Speaker 5: shares when markets go down, and you're benefiting from the
• 24:46
  Speaker 5: natural tendency of stocks to rise with the economy. That's
• 24:51
  Speaker 5: that's as close to free lunch as investors have the
• 24:56
  Speaker 5: power of diversifying dollar cost averaging using local cost vehicles.
• 25:00
  Speaker 5: It's going to be a combination of those things, Mike,
• 25:03
  Speaker 5: not one or the other. Not market timing when you
• 25:06
  Speaker 5: are feeling jittery, as hard as that is to do,
• 25:09
  Speaker 5: sometimes to avoid that urge. That's the only proven investment strategy.
• 25:15
  Speaker 5: The rest of this stuff, to me, it's gambling. It
• 25:18
  Speaker 5: sounds like it could. I don't think anybody's going to
• 25:20
  Speaker 5: use tokenized exposure to equities as a long term vehicle.
• 25:23
  Speaker 5: Why would you When you can buy an index fund
• 25:25
  Speaker 5: from one of the major providers that have been doing
• 25:27
  Speaker 5: it for decades for fractions of a fraction of a percent,
• 25:32
  Speaker 5: why would you use those instead of various vehicles that
• 25:36
  Speaker 5: are virtually free virtually not.
• 25:39
  Speaker 2: I think the.
• 25:39
  Speaker 3: Point that actually makes about all this beyond what you
• 25:42
  Speaker 3: have already done, which is which are all excellent points, Mark,
• 25:44
  Speaker 3: is whenever I hear about a new financial product of
• 25:49
  Speaker 3: any sort, and this goes into that category. Right, they're
• 25:51
  Speaker 3: tokenized equities that trade twenty four to seven.
• 25:54
  Speaker 2: Right.
• 25:54
  Speaker 3: But you know, we could talk about the boomer candy
• 25:56
  Speaker 3: that was making headlines from last year. Which are these
• 25:58
  Speaker 3: new funds that do all sorts of new things or
• 26:02
  Speaker 3: any new financial product. The first very question that you
• 26:06
  Speaker 3: need to ask yourself is why is this being created
• 26:10
  Speaker 3: at this point in time and who is it truly
• 26:13
  Speaker 3: going to benefit? Because nine times out of ten, you know,
• 26:17
  Speaker 3: I work for a financial company. I've worked for other
• 26:19
  Speaker 3: financial companies. I'm not saying they are evil places, but
• 26:22
  Speaker 3: they build financial products so that they can make more money,
• 26:25
  Speaker 3: plain and simple.
• 26:26
  Speaker 2: It doesn't like not everybody.
• 26:27
  Speaker 5: There are some guys in those business who wear and
• 26:29
  Speaker 5: girls and women who wear the white hats. You know,
• 26:33
  Speaker 5: we do other stuff in our day job. People who
• 26:35
  Speaker 5: do stuff like we do are one of them. We're
• 26:37
  Speaker 5: wearing the white hats. We try to protect our clients
• 26:39
  Speaker 5: from fads, from paying too much, from falling for good salesmanship.
• 26:44
  Speaker 5: And it's not hard, sorry gout.
• 26:47
  Speaker 3: And so to that point, whenever something like this comes out,
• 26:49
  Speaker 3: just it's not to say you can't make money on it.
• 26:51
  Speaker 3: It's not to say that somebody might have an edge
• 26:53
  Speaker 3: in this market of niche that I don't understand, but
• 26:56
  Speaker 3: really ask yourself before you go in place a bunch
• 26:59
  Speaker 3: of your life safe into something that you don't fully comprehend,
• 27:03
  Speaker 3: who is this standing here to benefit? And am I
• 27:06
  Speaker 3: certain it's me? Because that's a pretty important basic question
• 27:10
  Speaker 3: to answer before you go risk some of your life
• 27:13
  Speaker 3: savings into some cool new fad that might end up
• 27:16
  Speaker 3: being a fad. If you have questions like that, if
• 27:19
  Speaker 3: you've done so in the past and you've regretted it,
• 27:21
  Speaker 3: or if you've done so in the past and made
• 27:23
  Speaker 3: a whole bunch of money and are concerned about protecting it,
• 27:26
  Speaker 3: please call an expert and talk to a financial advisor
• 27:29
  Speaker 3: about the strategy that's going to work best for your
• 27:31
  Speaker 3: long term future. If you'd like to chat with the
• 27:33
  Speaker 3: one of the ones at Armstrong Advisory Group, we'd love
• 27:36
  Speaker 3: to chat to. Our numbers eight hundred three nine three
• 27:39
  Speaker 3: for zero zero one for the Armstrong Advisory Group. You
• 27:43
  Speaker 3: can book a time for us to call you back
• 27:44
  Speaker 3: to at Armstrong Advisory dot com. But the phone number
• 27:48
  Speaker 3: is eight hundred three nine three for zero zero one.
• 27:53
  Speaker 3: We've got markets continuing to move here, nasdak now up
• 27:56
  Speaker 3: nine tenths of a percent, s and P five hundred
• 27:59
  Speaker 3: up a little bit more than half a percent, and
• 28:01
  Speaker 3: the Dow Jones Industrial average still up about one fifth
• 28:04
  Speaker 3: of a percent in spite of everything going on in
• 28:06
  Speaker 3: Iran oil markets barely budging off four tenths of a
• 28:09
  Speaker 3: percent so far in trading. We've got to take a
• 28:12
  Speaker 3: quick break, but when we come back, Paul and Monica
• 28:15
  Speaker 3: from Baron's joining us to talk about FIGMA.
• 28:18
  Speaker 2: Here on the Financial Exchange. That's next.
• 28:20
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• 28:56
  Speaker 2: Ladies and Gentlemen the Weekend.
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  Speaker 4: This segment of the Financial Exchange is brought to you
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  Speaker 4: by the US Virgin Islands Department of Tourism. Experience America's
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• 29:34
  Speaker 2: I guess now.
• 29:35
  Speaker 3: Is Baron's Paul Lamonaga to talk a bit about Figma,
• 29:38
  Speaker 3: one of the big big IPOs from twenty twenty five,
• 29:42
  Speaker 3: And well, if I'm not mistaken, I would think that
• 29:44
  Speaker 3: a lot of companies kind of pointed to this IPO
• 29:47
  Speaker 3: as a reason for why they might consider bringing their
• 29:50
  Speaker 3: company public in twenty twenty six. Am I too off
• 29:54
  Speaker 3: based on that one? Am I overstating how big their
• 29:55
  Speaker 3: IPO went off? No?
• 29:57
  Speaker 2: I don't think you are.
• 29:58
  Speaker 6: I mean you look at the performance on day one,
• 30:03
  Speaker 6: shares shot up two hundred and fifty percent, really showing
• 30:08
  Speaker 6: how much demand there was pent up interest in some
• 30:13
  Speaker 6: of these tech companies that had been sitting on the sidelines.
• 30:16
  Speaker 6: And if you remember with Figma, Figma was a company
• 30:19
  Speaker 6: that its rival Adobe had agreed to buy a couple
• 30:22
  Speaker 6: of years ago, but then the deal had to be
• 30:25
  Speaker 6: scuttled because of anti trust concerns. When Figma went public
• 30:29
  Speaker 6: on day one, its valuation was in excess of that
• 30:33
  Speaker 6: twenty billion dollars that Adobe wanted to buy it for.
• 30:36
  Speaker 6: It's been a much different story in the month since then, though.
• 30:41
  Speaker 3: Yeah, so talk to us about that, because recently they
• 30:43
  Speaker 3: were trading right back around their IPO price. So clearly
• 30:47
  Speaker 3: some investor concern about this company who does all sorts
• 30:51
  Speaker 3: of user experience, user design work. And to me, what
• 30:57
  Speaker 3: I have a tough time differentiating with is hey, is
• 31:00
  Speaker 3: this one of the new AI disruptors that is going
• 31:02
  Speaker 3: to disrupt the existing software space or are these new
• 31:06
  Speaker 3: tools from applications like chat, GPT and like Claude going
• 31:12
  Speaker 3: to disrupt this you know, still relatively young and new company.
• 31:16
  Speaker 6: Yeah, that is a great question. I think that the
• 31:19
  Speaker 6: sell off that we have seen this year, with the
• 31:22
  Speaker 6: stock falling below its IPO price. It was a knee
• 31:25
  Speaker 6: jerk reaction that we've seen with other software companies including Adobe,
• 31:28
  Speaker 6: that AI is going to be the death now for
• 31:32
  Speaker 6: companies like pig Man, I think that was an overreaction.
• 31:35
  Speaker 6: For one, Figma has partnerships with Chat, GPT, Open Ai,
• 31:40
  Speaker 6: also with Google, Gemini, and they just announced a new
• 31:43
  Speaker 6: one with Anthropic and Claude. And the company reported earnings
• 31:48
  Speaker 6: this week and revenue growth was forty percent year every year,
• 31:51
  Speaker 6: accelerating from you know, prior quarters. So they are clearly
• 31:57
  Speaker 6: not in an environment where demand and is drawing up
• 32:02
  Speaker 6: just yet. So I think some of the concerns because
• 32:05
  Speaker 6: of the stocks valuation after it had its huge surge
• 32:09
  Speaker 6: on day one, that probably led to the big pullback.
• 32:12
  Speaker 6: But you know, make no mistake, AI is still a threat,
• 32:16
  Speaker 6: and there are also worries about other more nimble software companies.
• 32:21
  Speaker 6: Canva is one that also is big in design software
• 32:25
  Speaker 6: and they are rumored to be another IPO candidate later
• 32:28
  Speaker 6: this year, so maybe they steal some thunder from Pigma
• 32:31
  Speaker 6: as well.
• 32:32
  Speaker 3: It seems to me that every week a new industry
• 32:35
  Speaker 3: is being looked at critically when it comes to how
• 32:38
  Speaker 3: AI is going to disrupt their business. First, we had
• 32:40
  Speaker 3: the software as a service business. The next week we
• 32:42
  Speaker 3: had major financial services companies taking a hit. The week
• 32:46
  Speaker 3: after that, it was a former karaoke company that developed
• 32:50
  Speaker 3: a tool to run logistics better than some of the
• 32:53
  Speaker 3: major logistics.
• 32:54
  Speaker 2: Providers out there.
• 32:56
  Speaker 3: How in your mind does the average person try and
• 32:59
  Speaker 3: discern between their companies who are going to be the
• 33:03
  Speaker 3: disruptors and who are going to be disrupted in these spaces,
• 33:06
  Speaker 3: because it seems pretty WILLI and illy at this point.
• 33:08
  Speaker 6: Yeah, I think right now there is the inverse of
• 33:13
  Speaker 6: all of the AI excitement that we used to have,
• 33:16
  Speaker 6: you know, about a year ago, or you know, in
• 33:18
  Speaker 6: the maybe the past couple of years. Ever really since
• 33:21
  Speaker 6: the advent of chat GPT, there have been this notion that,
• 33:26
  Speaker 6: you know, companies like Nvidia and other chip firms they
• 33:28
  Speaker 6: were going to have insatiable demand from the hyperscalers, your
• 33:32
  Speaker 6: companies like Microsoft and in Alphabet and Amazon. But you know,
• 33:35
  Speaker 6: I think investors are now asking the right questions and
• 33:38
  Speaker 6: being more discerning. Not everyone's going to be an AI winner.
• 33:42
  Speaker 6: Companies may have to slow their spending because until there's
• 33:45
  Speaker 6: a legitimate ROI on AI services, these types of companies
• 33:50
  Speaker 6: aren't going to keep spending indefinitely waiting for AI to
• 33:55
  Speaker 6: lead to rewards. But that being said, we may have
• 33:58
  Speaker 6: had the needs over reaction. And there are companies you mentioned,
• 34:04
  Speaker 6: you know, all the other industries that have been hit,
• 34:07
  Speaker 6: you know, door Dash I think is another good example,
• 34:11
  Speaker 6: a you know, services provider. Their stock got hit on
• 34:15
  Speaker 6: worries that AI was going to be a problem for them,
• 34:20
  Speaker 6: and you know, their earnings this week were pretty solid
• 34:23
  Speaker 6: and their CEO talked about how, yeah, they're getting traffic
• 34:27
  Speaker 6: from large language models and AI services in the same
• 34:31
  Speaker 6: way that Google and Facebook fed them traffic as well.
• 34:35
  Speaker 6: You know, Google and Facebook obviously didn't kill delivery services.
• 34:41
  Speaker 6: I think that your investors have to really discern and
• 34:45
  Speaker 6: look at the numbers and figure out for themselves whether
• 34:47
  Speaker 6: or not a company is getting destroyed and possibly going
• 34:51
  Speaker 6: to be obsolete by AI, or if AI can be
• 34:54
  Speaker 6: a partner.
• 34:55
  Speaker 2: Two related but separate questions, Paul.
• 34:57
  Speaker 3: One, you mentioned they did surprise on earnings, how did
• 35:00
  Speaker 3: the company stock react in this week?
• 35:03
  Speaker 2: And then two, what is your take now on.
• 35:07
  Speaker 3: The market for IPOs in twenty twenty six, our company
• 35:10
  Speaker 3: has taken a second look at and rethinking their what
• 35:13
  Speaker 3: seemed like stated plans to rush to markets.
• 35:16
  Speaker 2: Yeah.
• 35:17
  Speaker 6: With regards to Pigma, the stock rallied ahead of earnings,
• 35:21
  Speaker 6: partly because of that Claude news that they announced, but
• 35:25
  Speaker 6: also the earnings again, revenue growth was so strong. The
• 35:29
  Speaker 6: stock did rally again after the results came out.
• 35:32
  Speaker 2: Last I checked.
• 35:33
  Speaker 6: They were up today.
• 35:34
  Speaker 2: Also.
• 35:35
  Speaker 6: With regards to IPOs more broadly, I think again it's
• 35:38
  Speaker 6: a good sign that investors are being more discerning. You're
• 35:41
  Speaker 6: not seeing every single IPO go up willy nilly, but
• 35:45
  Speaker 6: it's been fascinating because you've had some companies once upon
• 35:48
  Speaker 6: a farm, for example.
• 35:50
  Speaker 2: The baby food firm.
• 35:51
  Speaker 6: You know, the Jennifer Garner's an investor in Bob's Discount
• 35:55
  Speaker 6: furniture consumer companies have actually done well. Both those stocks
• 35:58
  Speaker 6: are up. But I think it's safe to say that investors,
• 36:01
  Speaker 6: both retail and probably institutional are waiting. Dare I say,
• 36:06
  Speaker 6: salivating for the mega unicorns that could be going public
• 36:10
  Speaker 6: this year, and that could be SpaceX, that could be
• 36:13
  Speaker 6: open AI, could be anthropic, but also firms like data Bricks.
• 36:17
  Speaker 6: I mentioned Canva rival to Figma they're a possible IPO
• 36:21
  Speaker 6: candidate as well. So I think as long as the
• 36:23
  Speaker 6: broader market holds up, even though volatility may be here
• 36:27
  Speaker 6: to stay, you're going to see the quality companies that
• 36:30
  Speaker 6: investors want that are very, very significantly large probably look
• 36:36
  Speaker 6: to go out, especially because they have AI plans of
• 36:39
  Speaker 6: their own to fund, especially if you're talking about space
• 36:43
  Speaker 6: X with data centers in space.
• 36:44
  Speaker 2: And of course open AI and Anthropic a lot to
• 36:47
  Speaker 2: be excited about.
• 36:48
  Speaker 3: Paul Lamonica from Baron's joining us today, talk about Pigma.
• 36:52
  Speaker 3: Have a great weekend, Paul, and good luck with this
• 36:54
  Speaker 3: nor'easter barn down.
• 36:56
  Speaker 6: Yes exactly, we'll see how bad it is. It's wintry mix.
• 37:00
  Speaker 2: Diks, Paul, thank you, Mark before we move on.
• 37:05
  Speaker 3: And I know we're closing in on the end of
• 37:07
  Speaker 3: the program here, but I thought worth mentioning.
• 37:09
  Speaker 2: The White House has put out their.
• 37:11
  Speaker 3: Final thinking on the real estate ban for corporate investors.
• 37:16
  Speaker 3: They want to ban any investor with currently more than
• 37:19
  Speaker 3: one hundred single family homes from being able to buy
• 37:23
  Speaker 3: single families going forward. They would put in exemptions for
• 37:26
  Speaker 3: investors who build or heavily remodel those homes. So I
• 37:31
  Speaker 3: don't know how broad that is. But we've talked at
• 37:33
  Speaker 3: length about all of the moves that the White House
• 37:36
  Speaker 3: is attempting to make on home affordability, and this is
• 37:40
  Speaker 3: another one that they are toying with, among the others
• 37:43
  Speaker 3: of trying to bring down mortgage rates, fifty year mortgages,
• 37:46
  Speaker 3: all sorts of other proposals that have been brought out there.
• 37:49
  Speaker 3: This one again worth mentioning, I think, only because the
• 37:52
  Speaker 3: White House has finalized their recommendations to Congress for what
• 37:56
  Speaker 3: they want to see. That's all the time we have
• 37:58
  Speaker 3: for today's financial exchange. We've got markets still in positive territories.
• 38:03
  Speaker 3: We close out the show with the NASDAC leading the
• 38:05
  Speaker 3: way up one point one percent. We'll be right back
• 38:08
  Speaker 3: at it after this weekend. Have a great weekend, stay warm,
• 38:13
  Speaker 3: be safe, and we will see on Monday.