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Boeing's stock drops after fatal South Korea crash · The Financial Exchange Show

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  Speaker 1: and Mark Fandetti.
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  Speaker 2: Kicking off the final couple days of twenty twenty four.
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  Speaker 2: It's Chuck, Mark and Talker with you, and we open
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  Speaker 2: today with a discussion of Boeing as Boeing shares this
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  Speaker 2: morning in early trading have found themselves sliding more than
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  Speaker 2: the broad index, which we'll get to what's going on
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  Speaker 2: there later, but Boeing shares down about four percent in
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  Speaker 2: trading today thus far, this following a crash of a
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  Speaker 2: seven thirty seven to eight hundred in South Korea over
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  Speaker 2: the weekend. And when we look at this couple things first,
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  Speaker 2: I don't know have either of you been following what's
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  Speaker 2: been going on with this story at all? Just the
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  Speaker 2: broad contours, So to anyone who's unfamiliar with it, A
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  Speaker 2: Jiju air South, who's a South Korean airline, they were
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  Speaker 2: operating a plane flying into I believe it was Muan
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  Speaker 2: Airport on I forget what day it was. It was
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  Speaker 2: a seven thirty seven eight hundred. For those of you
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  Speaker 2: who aren't familiar with the seven thirty seven eight hundred,
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  Speaker 2: it is not a new version of the seven thirty seven.
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  Speaker 2: This is instead a version that was made largely during
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  Speaker 2: if you look at you know, kind of when they
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  Speaker 2: you know, started making these, They started making them in
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  Speaker 2: the late nineties, I think ninety seven or ninety eight,
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  Speaker 2: and they continue to through the mid twenty ten. So
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  Speaker 2: this is a plane that you know, kind of had
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  Speaker 2: a twenty year span of being built. By and large,
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  Speaker 2: the seven thirty seven eight hundred pretty much the safest
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  Speaker 2: airplane in the history of commercial aviation by just about
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  Speaker 2: every metric. And so in looking at this, what happened
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  Speaker 2: here that again we don't know, you know, a ton
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  Speaker 2: of the details, but the plane was coming in for
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  Speaker 2: a landing, the tower reported the possibility of a bird strike,
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  Speaker 2: and the pilot then acknowledged, Hey, like, I think we've
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  Speaker 2: had a bird strike. They did a go around trying
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  Speaker 2: to land. For whatever reason, they were unable to deploy
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  Speaker 2: their landing gear. And one of the things on many
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  Speaker 2: commercial aircraft right now is if you do not have
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  Speaker 2: your landing gear deployed, there are systems built in to
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  Speaker 2: prevent you from deploying thrust reversers as well.
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  Speaker 3: When you land on an.
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  Speaker 2: Airplane, or when you land in an airplane, rather when
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  Speaker 2: you come down and finally, you know, land on the
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  Speaker 2: tarmac and try to stop. One of the things that
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  Speaker 2: you'll see happen is the back half of the engine
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  Speaker 2: basically opens up and reverses the thrust so that it
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  Speaker 2: is pushing forwards, stopping the plane. That was deliberate. The
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  Speaker 2: first time I said, I'm like, Dad, what the heck
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  Speaker 2: is this? I'm I guys, like the whole engine just
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  Speaker 2: felt no, like that's that's what's supposed to have.
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  Speaker 4: Transformer.
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  Speaker 2: Yeah, the first time I saw it, I was a
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  Speaker 2: little bit freaked out, quite honestly. But it is basically
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  Speaker 2: taking the thrust and throwing it forward to halt the
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  Speaker 2: plane rather than continuing to thrust back, so bowing airplanes.
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  Speaker 2: After an incident on a seven sixty seven, I think
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  Speaker 2: in the eighties or nineties, they developed systems so that
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  Speaker 2: you can't have the thrust reversers deploy unless the landing
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  Speaker 2: gear are deployed as well. So one of the theories that's
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  Speaker 2: going around on this is okay, because the landing gear
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  Speaker 2: couldn't deploy, they also couldn't engage thrust reversers, and they
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  Speaker 2: basically came in belly down to the runway and for
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  Speaker 2: some reason, and this is one that you know talking
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  Speaker 2: to the aviation people, I know that they have no
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  Speaker 2: answer for this. There was a big communication system mounted
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  Speaker 2: on a conc crete wall shortly after the end of
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  Speaker 2: the runway that the plane crashed into it and subsequently exploded,
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  Speaker 2: and that's where the people on it actually ended up dying.
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  Speaker 2: So Boeing stocked down four percent on the news of
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  Speaker 2: this crash. And we don't really know much to this point.
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  Speaker 2: But what I can tell you is that the seven
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  Speaker 2: thirty seven eight hundred, unlike the seven thirty seven Max
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  Speaker 2: which was involved in those two deadly crashes, because of
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  Speaker 2: how it was designed back and I think what was
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  Speaker 2: it twenty eighteen and twenty nineteen, the seven thirty seven
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  Speaker 2: eight hundred is pretty much at the top of the
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  Speaker 2: list in terms of the safest planes ever built for
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  Speaker 2: commercial aviation.
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  Speaker 3: And so.
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  Speaker 2: I think this is one where we need to see
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  Speaker 2: exactly what kind of information we get. But it's unclear
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  Speaker 2: that there's anything related to the design of this plane
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  Speaker 2: that's a problem. And furthermore, Boeing's not even building this
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  Speaker 2: specific plane anymore. So I'm trying to reconcile the stock
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  Speaker 2: price move other than hey, it's got Boeing in its name,
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  Speaker 2: and it's been bad before, so we're just nervous and
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  Speaker 2: we're gonna sell it now.
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  Speaker 5: Yeah, sounds like panic. I'm very uninitiated when it comes
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  Speaker 5: to this. I could not have given anything like the
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  Speaker 5: explanation you gave.
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  Speaker 4: Of that crash that said it is easy.
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  Speaker 5: There are more Boeing planes in the air than there
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  Speaker 5: have ever been, flying more miles than they've ever flown.
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  Speaker 2: They built Boeing just so you know that there are
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  Speaker 2: over five thousand of these planes, more than they've ever
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  Speaker 2: been right, that have been built.
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  Speaker 5: See, my mind as an uninitiated lay person immediately goes to, oh, geez,
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  Speaker 5: another problem with Boeing.
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  Speaker 4: But is that right? Is that fair?
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  Speaker 5: The incidents of incidents two different spellings involving Boeing planes
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  Speaker 5: might be as low as it's ever been. There's just
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  Speaker 5: so many flying so many miles now that it's inevitable
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  Speaker 5: that you'll hear about a Boeing accident every x number
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  Speaker 5: of weeks or months.
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  Speaker 4: Tragic, but inevitable.
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  Speaker 3: I mean, just to put this in perspective.
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  Speaker 2: And again, I don't know how many of these seven
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  Speaker 2: thirty seven eight hundreds are still flying, but the typical
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  Speaker 2: life cycle of a.
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  Speaker 3: Commercial airliner is thirty years.
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  Speaker 1: Wow.
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  Speaker 3: Generally they last thirty years.
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  Speaker 2: You have a mid cycle that there's all kinds of
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  Speaker 2: different maintenance that you do, but there's also there's a
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  Speaker 2: mid cycle refresh usually fifteen years in f major components
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  Speaker 2: and things like that. But thirty years is what airlines
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  Speaker 2: expect to get out of one of these. The first
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  Speaker 2: ones being built in ninety seven means you probably have
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  Speaker 2: most of these running. So even let's assume that it's
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  Speaker 2: like eighty percent of the five thousand that have been
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  Speaker 2: built that are still running seven thirty seven.
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  Speaker 3: Typically not a.
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  Speaker 2: Not Typically it is not a long haul airplane. You're
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  Speaker 2: not flying these things from New York to Tokyo. They
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  Speaker 2: don't have that kind of range. Their range is like
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  Speaker 2: thirty five hundred maybe like forty five hundred miles at most.
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  Speaker 2: And so generally, let's assume, out of the four thousand
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  Speaker 2: planes that might still be flying, let's say an average,
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  Speaker 2: you're getting three flights a day, because some of them
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  Speaker 2: are just you know, shuttling people back and forth from
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  Speaker 2: Boston to DC. Some of them might just be doing
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  Speaker 2: you know, Boston to LA, so they're just getting you know,
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  Speaker 2: two flights but let's say it's three flights a day
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  Speaker 2: on average, you got twelve thousand flights a day of
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  Speaker 2: these seven thirty sevens. Then each year there's four point
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  Speaker 2: four million flights of this plane. So I'm trying to
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  Speaker 2: just give some context as to look, these planes have
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  Speaker 2: probably flown forty fifty million flights without whatever happening here happening.
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  Speaker 2: So I don't really think this is a Boeing problem,
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  Speaker 2: And unlike you know what we saw with the Max,
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  Speaker 2: where it was, Hey, this is a Boeing problem and
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  Speaker 2: you've got to fix this. I don't know what this
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  Speaker 2: specific issue is here, but I also am not sure
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  Speaker 2: how it necessarily affects Boeing's business going forward.
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  Speaker 3: Is kind of where I've landed.
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  Speaker 5: Yeah, I think it's important to keep the numbers, the
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  Speaker 5: absolute numbers in mind here and the relatively small incidents
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  Speaker 5: of issues with bowing airplanes generally. I'm not excusing somebody
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  Speaker 5: who didn't put a bolt in where it should have been,
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  Speaker 5: but the relatively low incidence of issues at all, given
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  Speaker 5: the number of planes there are in the air and
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  Speaker 5: the number of miles these planes fly. I also add
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  Speaker 5: that whenever something happens in a less sophisticated economy. South
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  Speaker 5: Korea is rich, but not nearly as rich as we are.
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  Speaker 5: It's still an emerging market. Sure, you always wonder about
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  Speaker 5: human error. Are they trained to the stuff doesn't happen
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  Speaker 5: for the amount of jink. I don't want to jinx
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  Speaker 5: this here, but for the most part, this doesn't happen
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  Speaker 5: in US at airports, occasionally you have a rough landing.
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  Speaker 5: I don't ever recall somebody not being able to are
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  Speaker 5: failing to.
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  Speaker 4: Deploy the landing gear, So it could be a training thing.
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  Speaker 2: You do have stuff like this that still happens. I
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  Speaker 2: mean there are times I forget when exactly it was.
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  Speaker 2: There was one I think it was in either Colorado
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  Speaker 2: or Utah, maybe twelve fifteen years ago. Plane like landing
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  Speaker 2: gear did deploy, skid it off the runway. The only
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  Speaker 2: death was at the end of the runway was a road,
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  Speaker 2: like a regular road, you know, well past the runway
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  Speaker 2: that the planes skid it off and they hit a
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  Speaker 2: jeep and the the jeep was killed. That's crazy, and
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  Speaker 2: and so.
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  Speaker 5: I didn't I'll remember that it was.
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  Speaker 3: I forget exactly when it.
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  Speaker 4: Was about that's a bad day. I'll be right back
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  Speaker 4: she's gonna get some milk.
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  Speaker 2: Tough one there.
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  Speaker 3: All of a sudden, there's a tough one there.
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  Speaker 2: Yeah. So, in any case, this is what we're seeing
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  Speaker 2: with Boeing stock right now.
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  Speaker 3: Still not a ton of details. I'm sure we'll get more.
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  Speaker 2: Over the next few weeks here, but Boeing stock down
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  Speaker 2: north of four percent as a result, and.
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  Speaker 3: Nobody knows anything.
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  Speaker 5: That's only a typical overreaction. I'm gonna what sounds like
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  Speaker 5: a tangent, but I think it makes sense. Remember the
• 10:47
  Speaker 5: the the Remember it just happened two weeks ago, the
• 10:50
  Speaker 5: drone hysteria. People are mistaking Venus for drones, the constellation
• 10:55
  Speaker 5: or airplanes for drones, airplanes for drones. There were drones
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  Speaker 5: every they've all gone away now, not not uncoincidentally, as
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  Speaker 5: somebody else pointed out, Uh, since it's gotten cold out,
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  Speaker 5: people have stopped flying drones mischievously.
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  Speaker 4: Hysteria builds fast, and it's easy to.
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  Speaker 5: Jump to conclusions. I think we do, as you suggested,
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  Speaker 5: have to wait for the findings and think of all
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  Speaker 5: the reasons why this might not be representative of a
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  Speaker 5: bigger problem.
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  Speaker 3: Yeah.
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  Speaker 2: I think that's fair. Uh So, in any case, nobody
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  Speaker 2: knows anything on this. We'll see what ends up happening.
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  Speaker 2: I thought you were going to go somewhere else in
• 11:32
  Speaker 2: terms of you know, unfounded hysteria building, I don't know.
• 11:36
  Speaker 2: Like I remember as a kid, like at Halloween people
• 11:39
  Speaker 2: be like, hey, watch out for you know, razor blades
• 11:42
  Speaker 2: and apples.
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  Speaker 3: That's another example of who's.
• 11:44
  Speaker 2: Putting a freaking yeah, no one is right, a perfect example.
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  Speaker 2: Let's take a quick break here. When we come back,
• 11:51
  Speaker 2: we'll talk a little bit about what is going on
• 11:53
  Speaker 2: in the broader stock and bond markets as we head
• 11:56
  Speaker 2: towards year end.
• 11:58
  Speaker 1: Wall Street Watch update on the markets performance todate weekdays
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  Speaker 1: at ten thirty only here on the Financial Exchange Radio Network.
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  Speaker 2: Peace in the Wall Street Journal, War and the economy
• 13:00
  Speaker 2: going ask bonds and I just don't know that. I
• 13:05
  Speaker 2: buy this story from Bloomberg Opinion, and basically the premise
• 13:10
  Speaker 2: that it lays out is, hey, if you look at
• 13:16
  Speaker 2: you know how bond, you know a few different key
• 13:18
  Speaker 2: indicators on bonds, it'll tell you about what the economy
• 13:21
  Speaker 2: is going to be doing. And I find that not
• 13:25
  Speaker 2: plausible given the fact that the last few years bonds
• 13:28
  Speaker 2: have been completely wrong about where this economy has been going,
• 13:32
  Speaker 2: and in fact, the stock market has had a much
• 13:36
  Speaker 2: better bad on where things are going to be twelve
• 13:40
  Speaker 2: to eighteen months from now. I look back to twenty
• 13:42
  Speaker 2: twenty two, and the bond market was saying, hey, Fed's
• 13:45
  Speaker 2: not gonna have to raise rates. Meanwhile, stock started selling
• 13:48
  Speaker 2: off immediately in twenty two, being like, hey guys, there's
• 13:51
  Speaker 2: a problem and the Fed's gonna have to hike through
• 13:53
  Speaker 2: the roof. Then in twenty twenty two, twenty twenty three,
• 13:56
  Speaker 2: and twenty twenty four, you've had these predictions from the
• 13:59
  Speaker 2: bar being well, the Fed's gonna have to get aggressive
• 14:02
  Speaker 2: and cutting because the economy is heading into recession, and
• 14:05
  Speaker 2: stocks have said now we're good, We're gonna keep chugging along.
• 14:09
  Speaker 2: And the economy has not gone into recession. So I
• 14:12
  Speaker 2: know that there's this wisdom out there, this conventional wisdom
• 14:15
  Speaker 2: of Hey, the bond markets, the smart money and stock
• 14:18
  Speaker 2: traders are just a bunch of dumbos who are going
• 14:21
  Speaker 2: around and you know, pressing buttons willy nilly. The stock
• 14:26
  Speaker 2: markets had the better read on this economy for at
• 14:29
  Speaker 2: least the last three years.
• 14:30
  Speaker 5: Now, well, interest rates are set globally. We had, for example,
• 14:34
  Speaker 5: very low interest rates in the early two thousands because
• 14:36
  Speaker 5: there was a so called global savings glut. It was
• 14:38
  Speaker 5: a bit of a mystery. It became clear as time
• 14:40
  Speaker 5: went on. So normally all LSEQL low interest rates are
• 14:44
  Speaker 5: a sign of economic fragility. There is a sign of
• 14:47
  Speaker 5: economic ill health. You don't necessarily want low interest rates. No,
• 14:50
  Speaker 5: a growing robust economy conjures up a demand for loanable funds,
• 14:55
  Speaker 5: which puts up with pressure on real rates. Indeed, we've
• 14:58
  Speaker 5: had real rates that is after inflation rates, and we
• 15:01
  Speaker 5: can actually break rates up into a total interest rate
• 15:04
  Speaker 5: that we see in the newspaper every day and a
• 15:06
  Speaker 5: real interest rate that's thanks to Treasury inflation protected securities
• 15:09
  Speaker 5: which have a real yield associated with them. So we
• 15:14
  Speaker 5: know it's mostly real rates that have been driving the
• 15:16
  Speaker 5: recent rise in interest rates over the past few months.
• 15:19
  Speaker 5: That could be because of economic optimism, that could be
• 15:22
  Speaker 5: because of fears that the deficit will grow under the
• 15:25
  Speaker 5: next administration, or it could just be random or all
• 15:28
  Speaker 5: of the above.
• 15:29
  Speaker 3: Nobody knows.
• 15:30
  Speaker 2: Yeah, this also dovetails nicely into a story about what
• 15:35
  Speaker 2: we've seen, you know, kind of this year in hey,
• 15:38
  Speaker 2: where has money been flowing into in this market? And granted,
• 15:43
  Speaker 2: while it's not an asset class, is a type of security. ETFs,
• 15:47
  Speaker 2: Exchange traded funds have seen just a monster, monster inflow
• 15:53
  Speaker 2: this year, more than a trillion dollars moving into exchange
• 15:57
  Speaker 2: traded funds this year, and total assets now in US
• 16:02
  Speaker 2: based ETFs now reaches ten point six trillion dollars. That's
• 16:06
  Speaker 2: up more than thirty percent from the start of this year.
• 16:09
  Speaker 2: Remember that accounts for inflows plus the capital appreciation of
• 16:13
  Speaker 2: those ETFs, and it certainly seems like this is again
• 16:19
  Speaker 2: a trend that is continuing to you know, take hold
• 16:24
  Speaker 2: in markets. A key difference that we are seeing this
• 16:27
  Speaker 2: year is that you are seeing more money flowing into
• 16:31
  Speaker 2: actively managed ETFs as opposed to just passive ones that
• 16:35
  Speaker 2: track intoices. But you're also seeing all the weird stuff
• 16:40
  Speaker 2: that you see quite honestly near the top of bubbles
• 16:44
  Speaker 2: happening as well, where you have like, hey, here's a
• 16:46
  Speaker 2: three x levered Nvidia ETF that was just announced, or
• 16:50
  Speaker 2: here's you know, a three x levered micro Strategy ETF
• 16:54
  Speaker 2: that was just announced. And you know, some of the
• 16:57
  Speaker 2: stuff that you're seeing is not indicative of you know,
• 17:02
  Speaker 2: the security type being you know, a great vehicle, but
• 17:07
  Speaker 2: more just hey, this is how we figured out how
• 17:10
  Speaker 2: to capitalize on, you know, something bubbly in a few areas.
• 17:13
  Speaker 5: So what I think might be going on here is
• 17:14
  Speaker 5: you've got money slowly leaving four to one K plans.
• 17:18
  Speaker 5: This trend will change as the millennials salaries go up
• 17:22
  Speaker 5: enough that they can contribute meaningful amounts or will maybe halt.
• 17:26
  Speaker 5: But for the last several years four to one K assets.
• 17:28
  Speaker 5: It's compared to say individual retirement go on or IRA
• 17:31
  Speaker 5: assets for one K assets have been pretty static and
• 17:34
  Speaker 5: even falling. Four one ks don't use as many of
• 17:37
  Speaker 5: you know, if you own if you have a four
• 17:39
  Speaker 5: to one K balance, they don't use ads.
• 17:41
  Speaker 2: They have some.
• 17:42
  Speaker 5: Started to you can, but it gets problematic under the
• 17:46
  Speaker 5: law that four one k's under run by so it
• 17:49
  Speaker 5: never really took off. Yeah, they're mostly either mutual funds
• 17:52
  Speaker 5: or institutional versions of them suitable for big sophisticated investors
• 17:57
  Speaker 5: or their separate accounts or something exclusive you as an
• 18:00
  Speaker 5: investor in a big four oh one K plan. If
• 18:02
  Speaker 5: you work for a big company, that might be more common.
• 18:05
  Speaker 5: So my thinking on this is because the shift of
• 18:09
  Speaker 5: asset you use the word asset classes, we just mean
• 18:11
  Speaker 5: type of investment stocks versus bonds versus cash. This doesn't
• 18:14
  Speaker 5: represent overall a shift from stocks to bonds or vice versa.
• 18:18
  Speaker 5: It's more of a flow of money from four oh
• 18:20
  Speaker 5: one ks I think into iras as people retire that
• 18:25
  Speaker 5: roll their money over.
• 18:25
  Speaker 4: They want more control, so they move it to say
• 18:27
  Speaker 4: an IRA.
• 18:28
  Speaker 3: Baby boomer's retiring in larger numbers.
• 18:30
  Speaker 5: That might be part of it, and advisors like for
• 18:32
  Speaker 5: lots of different reasons, cost and liquidity and other reasons.
• 18:35
  Speaker 5: ETFs these exchange traded funds. So that's part of what's
• 18:38
  Speaker 5: happening here, and I would expect that to continue. ETFs
• 18:40
  Speaker 5: are becoming increasingly attractive relative to old, stodgy mutual funds.
• 18:45
  Speaker 2: There are some people out there that I know there
• 18:48
  Speaker 2: have been the thoughts of, hey, there's like a bubble
• 18:50
  Speaker 2: forming in ETFs. I've never quite understood what that means,
• 18:55
  Speaker 2: because they're just a vehicle, not an asset class or
• 18:58
  Speaker 2: a specific index, as you note. So I've struggled to
• 19:02
  Speaker 2: wrap my head around that. But it is something that
• 19:05
  Speaker 2: gets talked about. I just haven't been able to understand.
• 19:08
  Speaker 5: That's one of those phrases that if somebody uses it,
• 19:11
  Speaker 5: I slowly back away. This person may not understand the.
• 19:14
  Speaker 3: Different Why do you quickly back away.
• 19:17
  Speaker 5: When Ben Kitchen's in and he starts to no, I'm kidding.
• 19:21
  Speaker 5: So that may that may be indicative of somebody not
• 19:25
  Speaker 5: fully understanding the difference between a vehicle, as you say,
• 19:27
  Speaker 5: and an asset.
• 19:28
  Speaker 2: Cluss Quick break here, We've got Wall Street watch Next.
• 19:41
  Speaker 1: Like us on Facebook and follow us on Twitter at
• 19:44
  Speaker 1: TFE show. Breaking business news is always first right here
• 19:48
  Speaker 1: on the Financial Exchange Radio Network. Time now for Wall Street.
• 19:54
  Speaker 1: Watch a complete look at what's moving markets so far
• 19:57
  Speaker 1: today right here on the Financial Exchange Radio Network.
• 20:01
  Speaker 6: Well with twenty twenty four winding down, markets today.
• 20:05
  Speaker 3: Are in sell off mode.
• 20:08
  Speaker 6: The Dow down by six hundred and sixty points, or
• 20:11
  Speaker 6: over one and a half percent. SMP five hundred also
• 20:14
  Speaker 6: down over one and a half percent, or ninety three points,
• 20:18
  Speaker 6: and the Nasdaq is down over one and a half
• 20:21
  Speaker 6: percent as well, or three hundred and forty points. Russell
• 20:24
  Speaker 6: two thousand down one in three quarters of a percent,
• 20:27
  Speaker 6: or about forty points lower. Ten year Treasury yield is
• 20:31
  Speaker 6: down by seven basis points now at four point five
• 20:34
  Speaker 6: four percent, and crude oil actually up today, up over
• 20:38
  Speaker 6: three quarters of a percent, trading at seventy one dollars
• 20:40
  Speaker 6: in twenty one cents a barrel. Boeing shares down by
• 20:44
  Speaker 6: four percent, as we discussed earlier in the show, Following
• 20:47
  Speaker 6: the weekend crash of a Jiuju airplane killing one hundred
• 20:50
  Speaker 6: and eighty one people on board with two survivors, South
• 20:53
  Speaker 6: Korea ordered an inspection of all Boeing seven thirty seven
• 20:57
  Speaker 6: eight hundred aircrafts. Meanwhile, shares in Microstrate down by seven
• 21:01
  Speaker 6: percent after the company disclosed the sale of more than
• 21:04
  Speaker 6: five hundred and ninety two thousand shares, raising about two
• 21:07
  Speaker 6: hundred and nine million dollars in proceeds. Micro Strategy also
• 21:11
  Speaker 6: disclosed the cash from that sale funded the purchase of
• 21:14
  Speaker 6: more than twenty one hundred bitcoins. Elsewhere, VeriSign shares down
• 21:19
  Speaker 6: by over half a percent. Last week, Berkshire Hathaway disclosed
• 21:22
  Speaker 6: it purchased more than one hundred and forty thousand shares
• 21:25
  Speaker 6: of the domain registry service company Pallunteer Technologies, down by
• 21:30
  Speaker 6: over two percent. That stock has had a massive rally
• 21:33
  Speaker 6: of about three hundred and sixty percent so far this year,
• 21:37
  Speaker 6: and added almost eighteen percent in December alone, after earlier
• 21:42
  Speaker 6: extending an army contract worth up to six hundred and
• 21:45
  Speaker 6: nineteen million dollars. In breaking news as of half an
• 21:49
  Speaker 6: hour ago, the New York Stocks Exchange will be closed
• 21:53
  Speaker 6: on January ninth to honor the late informer president Jimmy Carter.
• 21:58
  Speaker 6: So once again, equity markets on Nuary ninth will be
• 22:01
  Speaker 6: closed to honor Jimmy Carter I'm Tucker Silvan, that's Wall Street.
• 22:05
  Speaker 2: Watch taking a look just at markets here. One of
• 22:08
  Speaker 2: the things that I'm seeing right now is if you
• 22:13
  Speaker 2: look at the S and P five hundred and its components,
• 22:16
  Speaker 2: markets at Tucker set are getting I believe the proper
• 22:19
  Speaker 2: term is puky this morning. Right now, we have six
• 22:24
  Speaker 2: issues out of the S and P five hundred that
• 22:27
  Speaker 2: are in positive territory.
• 22:29
  Speaker 3: There's no rhyme or reason.
• 22:31
  Speaker 2: There's something called EQT Corporation, something called Katerra Energy, Devon Energy,
• 22:37
  Speaker 2: Bath and Body Works, Diamondback Energy, and Occidental Petroleum. So
• 22:41
  Speaker 2: a little bit of energy stuff, you know, holding up
• 22:42
  Speaker 2: better for you know, probably because there's a cold front
• 22:45
  Speaker 2: coming in in the next couple of weeks. But if
• 22:48
  Speaker 2: you go back and look at this historically, one of
• 22:53
  Speaker 2: the metrics that you can look at is kind of okay,
• 22:55
  Speaker 2: what's the difference in the number of advancing stocks on
• 22:59
  Speaker 2: the day and the number of declining ones? And right
• 23:01
  Speaker 2: now there's a four hundred and ninety one issue difference,
• 23:05
  Speaker 2: saying that, hey, there are four hundred and ninety one
• 23:08
  Speaker 2: more declines than there are.
• 23:10
  Speaker 3: Gains happening today.
• 23:12
  Speaker 2: I went back and I pulled the data to the
• 23:13
  Speaker 2: data I have only goes back to October of nineteen
• 23:17
  Speaker 2: ninety eight, so I've got twenty six years of data
• 23:19
  Speaker 2: on this. There have only been eighteen instances where that
• 23:23
  Speaker 2: advanced mindus declined number has been greater than four hundred
• 23:27
  Speaker 2: and ninety in the negative direction. Basically, so, in terms
• 23:32
  Speaker 2: of what you're seeing, this is today one of the
• 23:35
  Speaker 2: broadest selloffs that you will see in markets. It's not
• 23:38
  Speaker 2: the steepest, you know, stocks right now down about one
• 23:41
  Speaker 2: and a half percent, but it's basically affecting the entire market.
• 23:47
  Speaker 2: And I know everyone likes to try to ascribe, you know,
• 23:50
  Speaker 2: some reason for this, like, oh, it's because of you know,
• 23:54
  Speaker 2: X on guys, the last week of trading in a
• 23:58
  Speaker 2: year is generally completely useless for telling you anything, same
• 24:04
  Speaker 2: as like the first week, but the last week's particularly
• 24:06
  Speaker 2: useless just because no one's here, and by here, I
• 24:12
  Speaker 2: mean no one is actually trading anything for any particular
• 24:18
  Speaker 2: reason in the last week. The volumes that you see,
• 24:22
  Speaker 2: like last week, just as an example, the volumes that
• 24:26
  Speaker 2: you saw are like half of what they normally are.
• 24:29
  Speaker 2: There's no one in the office of you know, big
• 24:32
  Speaker 2: hedge funds and pe firms and this and that. So what,
• 24:35
  Speaker 2: you know, what's the reason for this? Heck, if I
• 24:37
  Speaker 2: know that, there's no news today, nothing, nothing's happened today.
• 24:42
  Speaker 2: There's no new policy that we're learning about. There's no
• 24:45
  Speaker 2: new uh you know, horrible story about everyone's defaulting on
• 24:49
  Speaker 2: this or that. It's just hey, no one's trading and
• 24:53
  Speaker 2: who knows what this is. It's also the end of
• 24:55
  Speaker 2: the year, so you get all kinds of weird stuff.
• 24:57
  Speaker 2: You know. We talk about how sometimes at the end
• 24:59
  Speaker 2: of months or quarters, you can get end of month rebalancing,
• 25:02
  Speaker 2: a quarter, you could have some end of year rebalancing
• 25:05
  Speaker 2: for pension funds where they just said, okay, like, hey,
• 25:08
  Speaker 2: our equities are up this year. We're just gonna do
• 25:10
  Speaker 2: a sell of that and go and buy some bonds.
• 25:12
  Speaker 2: And you have no idea if there's any you know,
• 25:15
  Speaker 2: story behind it other than yeah, it's the end of
• 25:17
  Speaker 2: the year and our equities did well and we got
• 25:19
  Speaker 2: to sell someone.
• 25:20
  Speaker 3: We're gonna do that before the end of the year.
• 25:21
  Speaker 2: Okay.
• 25:22
  Speaker 4: Yeah.
• 25:23
  Speaker 2: So I generally find trying to ascribe meaning to you know,
• 25:30
  Speaker 2: stock moves in general is kind of fool hardy trying
• 25:33
  Speaker 2: to do it in the last week of a year
• 25:36
  Speaker 2: is useless, Like, I have no idea why this is
• 25:39
  Speaker 2: happening today. Trying to pretend like I do is you know,
• 25:44
  Speaker 2: would be just me trying to sound smarter, and quite honestly,
• 25:49
  Speaker 2: no one knows why this is happening today. Doesn't mean
• 25:51
  Speaker 2: there could be more volatility in the future. Maybe maybe not.
• 25:55
  Speaker 2: And I think you just have to wait until we
• 25:58
  Speaker 2: get into next week, because guess what a lot of
• 26:02
  Speaker 2: people took off the first you know, the last couple
• 26:04
  Speaker 2: of days of this year as well the first couple
• 26:07
  Speaker 2: of days in next year. Like the number of people
• 26:08
  Speaker 2: that are not working in the financial business on this
• 26:12
  Speaker 2: Thursday and Friday is high. So I just don't know
• 26:17
  Speaker 2: that you can read anything into what's happening this week.
• 26:20
  Speaker 5: Yeah, I think it's a good reminder that movements, even
• 26:22
  Speaker 5: large ones. Number one, they're always more frequent in historical
• 26:27
  Speaker 5: context than you think movements like this if you go
• 26:29
  Speaker 5: back about one hundred years, So I'll use Yahoo Finance
• 26:33
  Speaker 5: data here, just calculate the daily change and then ask
• 26:36
  Speaker 5: how often has the daily change been less than or
• 26:39
  Speaker 5: equal to I'll just pick one point five percent, and it's.
• 26:42
  Speaker 2: About six percent. Oh sorry, Okay, you want to go now,
• 26:45
  Speaker 2: I'm sorry, No, you blew it.
• 26:46
  Speaker 3: It's fine.
• 26:47
  Speaker 4: I totally did. What would you have guessed?
• 26:49
  Speaker 2: Though, I would have guessed like four, maybe five.
• 26:51
  Speaker 5: I would have said more, I thought. Honestly, I checked
• 26:54
  Speaker 5: it twice. I'm like six percent once every other.
• 26:57
  Speaker 2: Just because I know. We pulled the data on how
• 26:59
  Speaker 2: often it's down two percent earlier this year when people
• 27:01
  Speaker 2: were freaking out in August, and I think that was
• 27:03
  Speaker 2: like two or three percent of the time, So it's
• 27:05
  Speaker 2: I don't know.
• 27:06
  Speaker 5: Yeah, okay, so it's not infrequent. You should expect pullbacks
• 27:09
  Speaker 5: like this once every few to several weeks. Past couple
• 27:13
  Speaker 5: of years have been unusually calm, so we're spoiled, you
• 27:17
  Speaker 5: could say, not uncommon when stocks caught by a lot,
• 27:19
  Speaker 5: they're actually less volatile. But the larger point I think
• 27:22
  Speaker 5: is one you've already made, which is movements are often random.
• 27:27
  Speaker 5: They're noise. If you like, you can make up explanations,
• 27:32
  Speaker 5: and the media's job is to do that. The headline
• 27:34
  Speaker 5: always says stocks fall on deficit jitters of course or something,
• 27:38
  Speaker 5: because it's reporter's job to tell a story. It's our job,
• 27:41
  Speaker 5: to an extent to tell a story. That doesn't mean
• 27:43
  Speaker 5: the story's right, So be skeped. Unless there's a big,
• 27:46
  Speaker 5: obvious catalyst at country X invades country why stocks fall
• 27:50
  Speaker 5: by five percent? You don't need to do too much
• 27:53
  Speaker 5: investigating to connect X with Y in that case.
• 27:56
  Speaker 4: Otherwise you should be skeptical. Like you said, Juck, I.
• 27:58
  Speaker 3: Think anyone new invading today.
• 28:01
  Speaker 4: I haven't checked.
• 28:01
  Speaker 5: I shouldn't I keep jinks on us by making fun
• 28:04
  Speaker 5: of calamities here, but not to mind not.
• 28:06
  Speaker 2: I don't think there's been a tucker any new invasions today.
• 28:10
  Speaker 1: Not this.
• 28:10
  Speaker 4: Have we forced Russia to invade anybody today?
• 28:14
  Speaker 5: I'm being sarcastic.
• 28:15
  Speaker 1: There's something.
• 28:15
  Speaker 2: I don't think there have been any new invasions today.
• 28:17
  Speaker 2: So that's listen. You know how on job sites they
• 28:20
  Speaker 2: have you know, number of days since last accident. We
• 28:23
  Speaker 2: should keep you know, a number of days since last
• 28:25
  Speaker 2: invasion count or something like that. Number of days since
• 28:29
  Speaker 2: last bear market at least something along those lines.
• 28:32
  Speaker 4: That's not a bad metric to keep track.
• 28:35
  Speaker 3: Of someone, does it?
• 28:37
  Speaker 1: You know?
• 28:38
  Speaker 2: They you always see the pieces published, Hey, this is
• 28:40
  Speaker 2: the longest bull market back in the twenty tens and
• 28:43
  Speaker 2: things like that. But yeah, look, sometimes stocks just go
• 28:47
  Speaker 2: down and you have no idea why they did. It's
• 28:50
  Speaker 2: trying to find meeting in every movement of the stock
• 28:53
  Speaker 2: market is like trying to find meeting in every bat
• 28:56
  Speaker 2: that a player has in you know, major League Baseball
• 28:59
  Speaker 2: each year. It's look, sometimes they just strike out.
• 29:02
  Speaker 3: That's just what it is.
• 29:03
  Speaker 2: It doesn't mean anything. It's just they struck out. Or hey,
• 29:06
  Speaker 2: they hit a home run. Doesn't mean that they're gonna
• 29:08
  Speaker 2: hit one every time. It's just sometimes there's just randomness.
• 29:12
  Speaker 2: And I know we don't like that when it comes
• 29:14
  Speaker 2: to markets, because we like to think that we're in
• 29:16
  Speaker 2: control of them, but we're not.
• 29:19
  Speaker 5: It's good to know, though, whether or not how big
• 29:21
  Speaker 5: the random variation or chance component is whatever you're talking about.
• 29:25
  Speaker 5: If a guy strikes out ten times in a row,
• 29:27
  Speaker 5: that's probably a skill problem.
• 29:30
  Speaker 2: Maybe not.
• 29:30
  Speaker 5: I don't know what the stats are on length of
• 29:33
  Speaker 5: bad at bats, but you can still based domains. Got
• 29:38
  Speaker 5: y'all no where I'm going.
• 29:39
  Speaker 2: Same with stocks, Like you can't tell anything from any
• 29:42
  Speaker 2: one particular outcome, that's right, But if you look at
• 29:45
  Speaker 2: larger and larger data sets of outcomes, you can start
• 29:48
  Speaker 2: to have more predictive ability.
• 29:49
  Speaker 5: Yeah, it could be indicative if this happens every day
• 29:52
  Speaker 5: for the next two weeks, what's happening today, you know,
• 29:54
  Speaker 5: then Houston, we may have a problem.
• 29:55
  Speaker 1: Right.
• 29:56
  Speaker 2: People look at you know, Gerrodmeo, coach to the Patriots,
• 29:59
  Speaker 2: and they're like, well, here are some of the coaches
• 30:01
  Speaker 2: that started badly in you know, their first you know,
• 30:03
  Speaker 2: sixteen games. Okay, tell me about the other like two hundred,
• 30:07
  Speaker 2: because it's it's unlikely that a coach that starts for
• 30:11
  Speaker 2: you know, three and thirteen becomes Who are the guys
• 30:16
  Speaker 2: that get talked about like this. It's like the Niners
• 30:18
  Speaker 2: guy was Joe Walsher, not Joe be Something Walsh, Belichick,
• 30:23
  Speaker 2: Bill Walsh Parcels is in that group. Yeah. The fact
• 30:28
  Speaker 2: is most most people in anything at you know, the
• 30:32
  Speaker 2: professional level, that start badly, they tend to end badly
• 30:35
  Speaker 2: because like they're just not good enough ultimately.
• 30:38
  Speaker 6: So Bill Walsh, Bill Parcels, Andy Reid, Chuck Noll, Tom Landry,
• 30:41
  Speaker 6: Jimmy Johnson, Bill Belichick were all like horrible records in
• 30:44
  Speaker 6: the rookie year of coaching.
• 30:47
  Speaker 2: There are also like one hundred and fifty other ones
• 30:49
  Speaker 2: that have had bad records that did not go on
• 30:51
  Speaker 2: the hose. Those are the exceptions seeing the list of
• 30:54
  Speaker 2: the rule, not seeing a list of.
• 30:55
  Speaker 3: The good coaches for their first year coaching.
• 30:58
  Speaker 6: Right O'Connell thirteen in four and won the NFC North
• 31:03
  Speaker 6: demech O Ryan's in his first year as the Houston
• 31:05
  Speaker 6: Texans head coach.
• 31:06
  Speaker 2: A little bit of a step back by Houston.
• 31:08
  Speaker 6: Nobody's matching those guys, though, But it doesn't fit there
• 31:10
  Speaker 6: in any case.
• 31:11
  Speaker 2: The point I'm trying to make is make a great point.
• 31:14
  Speaker 2: You need a larger sample size to look at these things,
• 31:18
  Speaker 2: and the small sample doesn't tell you anything.
• 31:20
  Speaker 5: You need to see the failures too. And the bias
• 31:23
  Speaker 5: in these data sets is the sample. The failures get
• 31:26
  Speaker 5: thrown out. You see this with mutual fun performance. If
• 31:29
  Speaker 5: finance people call it survivor bias, I don't know why
• 31:32
  Speaker 5: they have to give a separate name to it. It's
• 31:33
  Speaker 5: just sample bias. You hear it every day when somebody says, well,
• 31:37
  Speaker 5: Einstein didn't go to gret Heap. He did, but not
• 31:39
  Speaker 5: right away. When Einstein did his paper, he was working
• 31:41
  Speaker 5: as a patent clerk. That doesn't mean his famous relativity
• 31:44
  Speaker 5: paper or whatever it was.
• 31:45
  Speaker 1: Yeah, I'm not a physicist.
• 31:46
  Speaker 5: But you know what I'm talking about.
• 31:48
  Speaker 4: He was working as a path and clerk.
• 31:49
  Speaker 2: There's a great book by Alan Lightman called Einstein's Dreams.
• 31:52
  Speaker 2: It takes you through all that stuff. It's great.
• 31:54
  Speaker 5: I will not be reading that.
• 31:55
  Speaker 3: It's honestly, it's one of my it's one of my
• 31:57
  Speaker 3: favorite books.
• 31:58
  Speaker 2: I read it like every five to ten years, because
• 32:00
  Speaker 2: you get something new out of a book when you
• 32:01
  Speaker 2: read it more often.
• 32:02
  Speaker 4: It's true.
• 32:03
  Speaker 2: So, but yeah, it's Look, today markets are down doesn't
• 32:09
  Speaker 2: necessarily mean anything about tomorrow. There have been the one
• 32:12
  Speaker 2: Here's one thing that you can say about volatility is
• 32:17
  Speaker 2: the data does suggest that volatility begets more volatility.
• 32:22
  Speaker 1: Oh sure, yeah.
• 32:23
  Speaker 2: However it does not say in which direction it does.
• 32:28
  Speaker 2: This is why, this is why all of the studies
• 32:31
  Speaker 2: that say, hey, if if you're trying to time the
• 32:34
  Speaker 2: market and you miss the five best trading days of
• 32:37
  Speaker 2: the year, you're gonna be you know, like you'll be horrible,
• 32:40
  Speaker 2: like you'll have horrible performance. Well, the fact is the
• 32:43
  Speaker 2: five best trading days of the year usually come in
• 32:45
  Speaker 2: pretty close conjunction to the five worst. So it's unlikely
• 32:48
  Speaker 2: that you would just miss the five best because they're
• 32:51
  Speaker 2: typically stacked up pretty close to each other. It's just
• 32:53
  Speaker 2: the volatility goes in either direction. So it's why I
• 32:57
  Speaker 2: hate that those studies where oh gee, if if you
• 32:59
  Speaker 2: miss the five best days, you'd have no perform Well,
• 33:02
  Speaker 2: how would you miss? Just like now we're saying that
• 33:04
  Speaker 2: you're just gonna miss the five best days by the
• 33:07
  Speaker 2: five worst, But you'd also have to have the five
• 33:10
  Speaker 2: best occur like exactly when you're missing. Now you're saying
• 33:13
  Speaker 2: you're just gonna miss those and nothing else. And that's
• 33:16
  Speaker 2: unlikely given how we know how volatility begets more volatility.
• 33:20
  Speaker 2: Thus concludes Introduction to Statistics. Please hand in your final
• 33:25
  Speaker 2: papers at the head of the class when you're leaving.
• 33:29
  Speaker 2: We'll take a quick break here when we come back.
• 33:32
  Speaker 2: Do you want to talk FED or housing?
• 33:34
  Speaker 1: Mark?
• 33:35
  Speaker 2: I always want to talk fed.
• 33:36
  Speaker 3: Okay, we'll talk FED when we return.
• 33:39
  Speaker 1: The Financial Exchange streams live on YouTube. Like our page
• 33:43
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• 33:45
  Speaker 1: Long Face is the Financial Exchange Radio Network. If you
• 33:50
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• 33:53
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• 33:56
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• 33:58
  Speaker 1: Financial Exchange. This is your home for breaking business and
• 34:02
  Speaker 1: financial news. This is the Financial Exchange radio network.
• 34:13
  Speaker 2: Piece in Bloomberg Opinion, the FED has to fix its
• 34:15
  Speaker 2: communication problem. Mark. What is the Fed's communication problem? Tim?
• 34:19
  Speaker 4: I would characterize it as too much information?
• 34:23
  Speaker 1: This is the.
• 34:25
  Speaker 5: Columnist here. It specifically picks on the so called dot plot,
• 34:29
  Speaker 5: among other things. But it's that every twelve week projection
• 34:34
  Speaker 5: we get for inflation growth on employment one year out,
• 34:38
  Speaker 5: two years out, and then several years out. That projection
• 34:42
  Speaker 5: represents the view of the median or the one in
• 34:45
  Speaker 5: the middle member, not necessarily the view of the board.
• 34:49
  Speaker 5: So it's inherently confusing as a result. And then of
• 34:52
  Speaker 5: course the dot plot has been all over the place
• 34:55
  Speaker 5: or just playing wrong, to be unkind about it lately,
• 34:59
  Speaker 5: it's not helping to inform inflation expectations or anybody's view.
• 35:02
  Speaker 5: I don't think of what the feed is going to
• 35:03
  Speaker 5: do because it's so unreliable. Unreliable excuse me, so crook.
• 35:06
  Speaker 5: The columnist here says, let's just get rid of it.
• 35:09
  Speaker 5: I would I would agree with that and second him
• 35:12
  Speaker 5: and say enough with the press conferences and everything else.
• 35:14
  Speaker 5: Keep the statement short and sweet and informative and educational
• 35:18
  Speaker 5: and ended at that. But this, of course would be
• 35:21
  Speaker 5: a move in the right direction.
• 35:22
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• 36:20
  Speaker 1: The proceeding was paid for and the views expressed are
• 36:22
  Speaker 1: solely those of Cushing and Dolan. Cushing and Dolan and
• 36:24
  Speaker 1: or Armstrong Advisory may contact you offering legal or investment services.
• 36:28
  Speaker 1: Cushing and Armstrong do not endorse each other and are
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  Speaker 1: not affiliated.
• 36:31
  Speaker 2: Mark just finishing up talking about the FED here in
• 36:34
  Speaker 2: terms of their communication beyond just the stuff that's mentioned
• 36:40
  Speaker 2: in here.
• 36:40
  Speaker 3: I have a problem with.
• 36:43
  Speaker 2: So many scheduled speeches from FED officials, you know, Like
• 36:48
  Speaker 2: I agree, you go through a normal week and we've
• 36:50
  Speaker 2: counted it. It's like you got like twelve to fifteen
• 36:52
  Speaker 2: of these things each week, and hey, it it does
• 36:57
  Speaker 2: two things. First, it diminishes the value of each word
• 36:59
  Speaker 2: spoke because they're just you know, getting lost out there.
• 37:02
  Speaker 2: We all then try to parse each and everyone looking
• 37:05
  Speaker 2: for that, you know, one little glimmer of all, like
• 37:08
  Speaker 2: I could get the edge based on what they're saying,
• 37:10
  Speaker 2: and here's what they really mean by this. And also
• 37:14
  Speaker 2: because they're talking so much, I think it makes them
• 37:17
  Speaker 2: think they have to say something sometimes when really, most
• 37:21
  Speaker 2: of the time, the best thing to do with an
• 37:23
  Speaker 2: economy is nothing. Like you don't need to be constantly
• 37:26
  Speaker 2: poking and prodding it, saying, you know, is it dead yet? Jim,
• 37:30
  Speaker 2: Like you can just leave it be sometimes, right.
• 37:36
  Speaker 5: Bob Rubin, Clinton's Treasury secretary, he was not making monetary policy.
• 37:41
  Speaker 5: That's the Fed, not the Treasury, of course, but when
• 37:43
  Speaker 5: asked about the dollar, he would famously, and it kind
• 37:46
  Speaker 5: of became a running gag, say a strong dollar is
• 37:48
  Speaker 5: in the United States interest, full stop, no more comments.
• 37:51
  Speaker 5: Don't confuse people. It's when people get cutesy like.
• 37:55
  Speaker 2: That's why I've said I wouldn'im if I were president, legitimately,
• 38:00
  Speaker 2: I would name Bill Belichick as my bed chair.
• 38:04
  Speaker 4: Or make him at least watch Belichick.
• 38:07
  Speaker 3: We're on to the January meeting. That's all it is.
• 38:11
  Speaker 2: You don't need to say so much. Quick break here.
• 38:13
  Speaker 2: We got our two coming up in just a little bit.