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What do Delta, Kohl's, and Dick's Sporting Goods have in common? · The Financial Exchange Show

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  Speaker 1: and Mark Vandetti.
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  Speaker 2: Good morning, Welcome back to the Financial Exchange.
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  Speaker 3: We've got read.
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  Speaker 2: Across the board here as we open up the eleven
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  Speaker 2: o'clock hour, partly potentially guessing here in response to Donald
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  Speaker 2: Trump's announcements of a doubling of the teriff rates on
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  Speaker 2: Canadian steel and aluminum, which was in response to the
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  Speaker 2: announcement of terrorists or I don't know, you don't call
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  Speaker 2: him tariffs when you're talking about exports, but the export
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  Speaker 2: tax on electricity coming from Ontario down to parts of
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  Speaker 2: the northern United States where they supply that from that
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  Speaker 2: is I've.
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  Speaker 4: Actually never heard of that before, the notion of an X.
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  Speaker 4: I can't think of an example where it's been applied
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  Speaker 4: export tex a meaningful way. I'm sure it happens at
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  Speaker 4: the time, it's just very selective.
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  Speaker 2: So in any case, that was announced this more via
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  Speaker 2: a post on truth social quote from was this twitter
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  Speaker 2: x social media's social media posts, let's call it quote
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  Speaker 2: based on Ontario, Canada placing a twenty five percent tariff
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  Speaker 2: on electricity coming into the United States. I've instructed my
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  Speaker 2: Secretary of Commerce to add an additional twenty five percent
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  Speaker 2: tariff to fifty percent on all steel and aluminum coming
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  Speaker 2: into the United States from Canada, so very clearly drawing
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  Speaker 2: the connection between those two.
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  Speaker 4: So now the rationale is tit for tat?
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  Speaker 1: Correct?
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  Speaker 4: Now International economics has all these great little phrases, tit
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  Speaker 4: for tats one of probably the best and most straightforward.
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  Speaker 4: So it's no longer national security, raising revenue bringing jobs
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  Speaker 4: back to America. Now is just we're angry, okay.
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  Speaker 3: Structors making sure. Yeah, it seems like it.
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  Speaker 4: Makes sense of policy such as it is.
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  Speaker 2: Doubt currently off four hundred and eighty eight points a
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  Speaker 2: little bit more than one percent. S and P off
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  Speaker 2: now thirty five points, two thirds of one percent, NASDAK
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  Speaker 2: only down sixteen points, a little bit less than one ten.
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  Speaker 3: Of a percent.
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  Speaker 2: These things have been bouncing around all morning, so we
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  Speaker 2: will see how it develops. But that is on top
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  Speaker 2: of the sell off yesterday, which you probably saw because
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  Speaker 2: it was reported.
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  Speaker 3: Just about everywhere.
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  Speaker 2: Nasdaq off four percent, worse day for the Nasdaq since
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  Speaker 2: twenty twenty two. Both S and P and Dow Jones
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  Speaker 2: Industrial average yesterday off by two percent or more. Taking
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  Speaker 2: a look at other markets here, we have oil prices
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  Speaker 2: moving up again today after moving down yesterday a little
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  Speaker 2: bit more than a little bit less than nine tenths
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  Speaker 2: of a percent in early trading, West Texas creuse sitting
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  Speaker 2: now at sixty six dollars sixty one cents per barrel.
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  Speaker 2: Bonds also reversing themselves from the moves yesterday, the yield
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  Speaker 2: and the two year treasure ten year treasury rather moving
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  Speaker 2: up to four point two three four. And then I
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  Speaker 2: did want to check on the mortgage rate and see
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  Speaker 2: if they reacted to yesterday's move into bonds. Yes, we've
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  Speaker 2: got the average thirty year fixed rate mortgage now sitting
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  Speaker 2: at six point seven to two percent, according to Mortgage
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  Speaker 2: News Daily. Anything else catching your eye so far in trading, Mark.
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  Speaker 4: No, I think you's a bit well, Mikeel.
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  Speaker 2: What do Coals, Delta, and Dick Sporting Goods have in common?
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  Speaker 3: Damn near nothing is the answer.
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  Speaker 2: They have almost nothing in common, but all three are
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  Speaker 2: hinting at revenue hits from global economic uncertainty that is upcoming.
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  Speaker 4: The answer was going to say place is Tucker was
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  Speaker 4: banned from, but I.
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  Speaker 3: Don't know.
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  Speaker 4: That was not true. Only two out of those three.
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  Speaker 5: Uh.
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  Speaker 2: The stock price for Coals this morning, moving down twenty
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  Speaker 2: one percent, Delta Airlines moving down close to nine percent,
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  Speaker 2: Dick Sporting Goods moving down about four percent, And like
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  Speaker 2: I said, all of them are on these profit warnings
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  Speaker 2: that the companies have issued here. Like I said, I
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  Speaker 2: don't think that these companies have a ton in common
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  Speaker 2: other than interacting directly with consumers. And I suppose you
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  Speaker 2: could argue that in all three cases they are probably
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  Speaker 2: on these slightly more aff flew inside Coals and Delta
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  Speaker 2: dominating that a little bit more than Dick Sporting Goods,
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  Speaker 2: but all of them really speaking to a combination of
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  Speaker 2: increased costs from tariffs that would be on the Coals
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  Speaker 2: and Dick Sporting good side, as they most definitely source
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  Speaker 2: a lot of their material from Mexico, can probably less
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  Speaker 2: so Canada, but Mexico China to name a couple of.
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  Speaker 3: Places where they could face.
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  Speaker 2: Additional costs incoming, and then really just speaking to a
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  Speaker 2: decrease in consumer demand. By the way, I was trying
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  Speaker 2: to pull up Dick Sporting Goods stock price and accidentally
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  Speaker 2: got Dick stocking Stuffers, which was not what I was
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  Speaker 2: looking for from Google. So I was bragging yesterday about
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  Speaker 2: how it is good at search, but I failed pretty
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  Speaker 2: miserably on that, but all three companies reporting a pretty
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  Speaker 2: big drop in what they believe will be their first
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  Speaker 2: quarter profits. And again I bring it up because these companies,
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  Speaker 2: on the surface have nothing to do with each other.
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  Speaker 2: They're very, very different companies in terms of what they
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  Speaker 2: are providing. Right One is providing physical goods. Two of
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  Speaker 2: them rather are providing physical goods that you buy for
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  Speaker 2: all sorts of reasons, sporting sports season heating up things
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  Speaker 2: along those lines and saying that hey, we're not really
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  Speaker 2: looking at the same types of sales, and Delta saying
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  Speaker 2: that they could now expect quarterly revenue to rise by
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  Speaker 2: at least three percent from a year ago, but that
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  Speaker 2: was down from a gain of about seven percent that
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  Speaker 2: they projected only two months ago. And look, when it
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  Speaker 2: comes to these types of projections, I think very often
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  Speaker 2: companies try and overdo it a bit to get bad
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  Speaker 2: news out of the way and then hopefully beat on
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  Speaker 2: those reset expectations. But I also don't think Delta would
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  Speaker 2: be saying any of this stuff unless they were actually
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  Speaker 2: seeing a decrease in people shopping for tickets and really
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  Speaker 2: looking at those vacation plans coming up in twenty turt.
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  Speaker 4: Of setting expectation setting a lower expectations bar. I don't know.
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  Speaker 4: Those three companies do have one thing in common, and
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  Speaker 4: that's exposure to the US economy. Yeah, that's something I
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  Speaker 4: have in common with every publicly and private, for that matter,
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  Speaker 4: privately held company in the United States, and would probably
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  Speaker 4: behoove everybody to update their forecasts in response to the
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  Speaker 4: near universal agreement that growth will slow.
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  Speaker 3: Things that I don't think are causing it.
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  Speaker 2: For Delta Airlines, a Raymond James analyst had said in
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  Speaker 2: a note last week that they had lost some momentum
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  Speaker 2: from bad weather in February, as well as customer anxiety
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  Speaker 2: from the airplane that remember the plane that flipped in Toronto.
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  Speaker 3: Sure none of you saw this?
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  Speaker 2: Yeah yeah, like flipped over on the runway. Oh yeah, yeah,
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  Speaker 2: that was a Delta operated plane. I do not suspect
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  Speaker 2: that that caused any sort of customer anxiety when it
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  Speaker 2: comes to flying with Delta Airlines. So I think most
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  Speaker 2: of what we are seeing. Again, you can have weather impacts,
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  Speaker 2: but those are not long lasting or substantial. I think
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  Speaker 2: most of what you're seeing here is what we've been
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  Speaker 2: talking about. A massive portion of spending has been coming
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  Speaker 2: from those people who feel wealthier, not because they are
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  Speaker 2: earning a whole lot more in terms of their Social
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  Speaker 2: Security checks or their raises they got at work. They
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  Speaker 2: are feeling wealthier because when they go look at Zillo
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  Speaker 2: at the price of their home, when they log into
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  Speaker 2: their four oh one K or their investment portfolio with
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  Speaker 2: their manager, they have seen what a like forty fifty
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  Speaker 2: percent combined increase or thirty to forty percent combined increase
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  Speaker 2: over the last couple of years here, and they are
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  Speaker 2: feeling like, hey, I can afford that extra trip to Europe.
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  Speaker 2: I can afford that vacation that I wasn't otherwise planning
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  Speaker 2: on taking. And if that probably hasn't gone away yet,
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  Speaker 2: but if that feeling starts to dissipate, then yeah, Companies
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  Speaker 2: like Delta who have really shifted their business towards a
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  Speaker 2: higher income and luxury traveler, or Cohal's or even Dick
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  Speaker 2: Sporting Goods, those are companies that can take it on
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  Speaker 2: the chin here, whereas a dollar general might you know,
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  Speaker 2: just kind of keep chugging along.
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  Speaker 4: That makes as much sense as any other general explanation.
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  Speaker 2: Let's take a quick break when we come back. We're
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  Speaker 2: and then another big change at a major airline end
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  Speaker 2: of an era here for Southwest Airlines. We'll be covering
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  Speaker 2: that next year on the Financial Exchange.
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  Speaker 2: It's amazing how you have to kind of adapt your
• 11:18
  Speaker 2: life to that sort of thing. My my younger brother
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  Speaker 2: lived and worked in South Korea for a period of time,
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  Speaker 2: and he if he wanted to exercise outside, he'd have
• 11:28
  Speaker 2: to check the weather report to see if it was
• 11:31
  Speaker 2: safe to breathe in the air.
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  Speaker 4: They did that in LA for a long time. I
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  Speaker 4: don't think they do have I don't think they have
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  Speaker 4: to do that anymore. But ozone, well you still have
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  Speaker 4: os a warning from short a time, right, But LA
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  Speaker 4: was worse thirty years ago. Yeah, forty fifty years ago.
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  Speaker 2: Uh, end of an era over at Southwest Airlines. The stock,
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  Speaker 2: by the way, which has been kind of hammered over
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  Speaker 2: the last year, is moving up big today while the
• 11:53
  Speaker 2: market's moving down. So so good news for shareholders this
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  Speaker 2: morning with Southwest Airlines stock tick or symple luv moving
• 11:59
  Speaker 2: up six and a half percent in early trading. That
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  Speaker 2: still brings their total return over the last year to
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  Speaker 2: negative eleven percent. But Southwest Airlines will no longer allow
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  Speaker 2: bags to fly free, so you know, rough day for
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  Speaker 2: all of us that kind of associated Southwest with that
• 12:17
  Speaker 2: more relaxed booking process and cancellation process and moving away
• 12:22
  Speaker 2: from the bags fly free tagline which was so centric
• 12:27
  Speaker 2: to the company that they actually trademarked the phrase bags
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  Speaker 2: fly Free and devoted an entire section of their fiftieth
• 12:34
  Speaker 2: anniversary book to the tagline bags fly Free. But nonetheless
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  Speaker 2: end of an era when it comes to that Bags
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  Speaker 2: will only fly free on their now top tier fare
• 12:43
  Speaker 2: price that you can book, they will also so this
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  Speaker 2: is for bookings made on or after May twenty eighth.
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  Speaker 2: Only those customers at the airline's top loyalty status and
• 12:52
  Speaker 2: those buying its prices tickets will be allowed to check
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  Speaker 2: two bags for free. The other big change that will
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  Speaker 2: be occurring here is that, uh, they're going to start
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  Speaker 2: offering you know, lower class tiers in addition, so uh
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  Speaker 2: charging passengers for the check luggage and basic economy tickets
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  Speaker 2: being sold. We've heard hints of the traditional boarding process, which,
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  Speaker 2: by the way, I hate going away. I know people
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  Speaker 2: some people absolutely love the boarding process with the grouping.
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  Speaker 3: Yeah, just does not.
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  Speaker 2: Work if you're trying to fly with children, is my
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  Speaker 2: main complaint about it. So maybe I shouldn't have had kids.
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  Speaker 2: I'm sure that's fantastic.
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  Speaker 4: The only reason, hey, idiot, you didn't have to have kids.
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  Speaker 3: Southwest is just fine, thank you.
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  Speaker 4: I had all kinds of offers, but the Southwest was
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  Speaker 4: the deal. I'm sorry, I can't.
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  Speaker 3: I and my frequent flyer miles.
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  Speaker 4: Never flew for free. We all just.
• 13:45
  Speaker 3: Hate fled in the ticket price.
• 13:47
  Speaker 4: We all just paid for them. So I like the
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  Speaker 4: idea of charging people for what they use.
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  Speaker 3: So I do as well.
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  Speaker 2: It's kind of a basic economic theory here is like
• 13:56
  Speaker 2: you know, usage taxes and things like that tend to
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  Speaker 2: be more efficient. My complaint about it is very simply
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  Speaker 2: that Southwest Airlines, by my estimations, in a couple of years,
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  Speaker 2: is just going to look like every other major airline
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  Speaker 2: out there, and there's no real differentiator between any of them.
• 14:12
  Speaker 3: At that point, you can.
• 14:13
  Speaker 2: Probably start to buy upgraded tickets with more leg room
• 14:16
  Speaker 2: first class tickets on Southwest is what I believe will
• 14:19
  Speaker 2: be coming over the course.
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  Speaker 3: Of the few year, next few years.
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  Speaker 2: And I don't know if that's I don't know if
• 14:24
  Speaker 2: that's because that's clearly that's where the market has driven things.
• 14:29
  Speaker 2: But when you have a I guess, when you have
• 14:32
  Speaker 2: a market that is so regulated that very few companies
• 14:35
  Speaker 2: can exist in it, that that competition is relatively limited
• 14:39
  Speaker 2: because of the massive capital expenditures that go into starting
• 14:43
  Speaker 2: up an airline. I think the market kind of does
• 14:46
  Speaker 2: drive everyone to look similar in a lot of ways.
• 14:50
  Speaker 3: I compare to the podditing industry.
• 14:52
  Speaker 2: You know, like, what can I really tell in terms
• 14:55
  Speaker 2: of a difference if I walk into a Wells Fargo,
• 14:57
  Speaker 2: JP Morgan, or Bank of America.
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  Speaker 3: What's the diff.
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  Speaker 2: Diferentiator other than Wells Fargo's you know, brand reputation being
• 15:04
  Speaker 2: ruined from years and years of bad corporate controls and
• 15:08
  Speaker 2: ripping off customers. You can't differentiate between any of them.
• 15:11
  Speaker 2: And I think it's a similar effect, like when you
• 15:13
  Speaker 2: get to such a massive scale, everybody starts to look alike.
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  Speaker 4: But that is the key point. Like with any really
• 15:23
  Speaker 4: capitally capital intensive transportation, they're all capital intensive. That's not
• 15:29
  Speaker 4: a great way to put it, you know what I'm
• 15:31
  Speaker 4: trying to say, They're really what are you going to do?
• 15:34
  Speaker 4: Fly backwards? Like there's only one way to Planes are
• 15:39
  Speaker 4: all shaped the same way.
• 15:40
  Speaker 3: They're really fascinating innovation.
• 15:42
  Speaker 4: Yeah, so yeah, only really one way to skin that.
• 15:47
  Speaker 2: This is a lot in response to the effort by
• 15:52
  Speaker 2: Elliott management to take a bit of control of the
• 15:54
  Speaker 2: company and drive some change there because it has been
• 15:56
  Speaker 2: dramatically underperforming over the last few years, and a lot
• 15:59
  Speaker 2: of it has been pointed at is, hey, look, you've
• 16:02
  Speaker 2: been the traditional low cost value carrier at a time
• 16:06
  Speaker 2: when Americans haven't cared as much about that type of travel.
• 16:09
  Speaker 2: People have been spending extra money on perks like first
• 16:12
  Speaker 2: class or business class seats, upgrades of all sorts, early boarding,
• 16:16
  Speaker 2: and Southwest fundamentally didn't have that to offer. I guess
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  Speaker 2: my main concern is now you're pivoting, and it's coming
• 16:24
  Speaker 2: out a time when Delta is telling us that, hey,
• 16:26
  Speaker 2: those same perks that we were selling everybody on don't
• 16:29
  Speaker 2: seem to be working quite as well as they once did.
• 16:31
  Speaker 2: So we'll see what this looks like for Southwest, But
• 16:34
  Speaker 2: I do think for those shareholders, probably a step in
• 16:37
  Speaker 2: the right direction, because the benefit that American, Delta and
• 16:41
  Speaker 2: others have had is if you want to buy the
• 16:44
  Speaker 2: cheapest ticket out there, you can buy the basic economy fair,
• 16:47
  Speaker 2: We'll stick you in a middle seat, you won't get
• 16:48
  Speaker 2: any bags, and they'll be.
• 16:49
  Speaker 3: Pretty darn cheap.
• 16:50
  Speaker 2: If you want to buy the luxury flying experience, then
• 16:53
  Speaker 2: you'll have one flight attendant for every four travelers. We'll
• 16:57
  Speaker 2: cook you a nice meal the booze you want, and
• 17:01
  Speaker 2: you can pay up for that. And Southwest, on the
• 17:03
  Speaker 2: other hand, has had one offering you stand in line
• 17:06
  Speaker 2: with everybody else you get on when you get on,
• 17:08
  Speaker 2: and there's no first class seats, and that clearly hasn't
• 17:12
  Speaker 2: been working.
• 17:12
  Speaker 4: The awkward flight attendant, how do you stick? You know
• 17:19
  Speaker 4: they all have. They're allowed to let their person out,
• 17:21
  Speaker 4: big mistake by the way, they're allowed to bring their
• 17:23
  Speaker 4: personalities to the safety announcements and other announcements at all.
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  Speaker 3: I feel like that all came Southwest too.
• 17:30
  Speaker 4: We all awkwardly laugh.
• 17:32
  Speaker 5: I just like the video explanation ones like just play
• 17:35
  Speaker 5: me a video and yeah, everybody shut up.
• 17:37
  Speaker 3: You know, I like the flight attendants working on their
• 17:41
  Speaker 3: stand up routine. I can appreciate it.
• 17:43
  Speaker 4: It's fine for the fact that our lives, I'm sorry, Tuck,
• 17:47
  Speaker 4: no God, our lives are in their hands. You want
• 17:50
  Speaker 4: to work on stand up, do it on open mic night.
• 17:53
  Speaker 3: It's the pilot's given me a stand up routine. I've
• 17:55
  Speaker 3: got more of an issue. But you know what if
• 17:57
  Speaker 3: if it's the flight yeah, yeah, they kind of.
• 18:00
  Speaker 4: I'm glad that they like their job, but Yeah, it's hard,
• 18:03
  Speaker 4: as you say, Mike, to differentiate yourself. Delta tried it,
• 18:07
  Speaker 4: landing upside down easier to get your stuff out of
• 18:10
  Speaker 4: the overhead. If people didn't like it.
• 18:13
  Speaker 2: Yeah, that's a different kind of stand up routine for
• 18:15
  Speaker 2: an airline. I'm not as much in favor of that one.
• 18:18
  Speaker 2: Governor Healy launching an energy affordability agenda with fifty dollars
• 18:21
  Speaker 2: electric bill credits that ought to solve the issue. You know,
• 18:24
  Speaker 2: our favorite solution to when prices get too high is
• 18:27
  Speaker 2: just to give people money to pay for those two
• 18:29
  Speaker 2: high prices. The funny part about this to me is
• 18:33
  Speaker 2: that if you go and actually look at what's been
• 18:35
  Speaker 2: driving electricity rates up here in Massachusetts specifically, and this
• 18:39
  Speaker 2: is more of a Massachusetts than anywhere else story, it's
• 18:42
  Speaker 2: the state mandated programs such as mass Save that are
• 18:47
  Speaker 2: causing the massive increase in pricing. It is not because
• 18:51
  Speaker 2: gas rates are through the roof. It's not because electricity
• 18:54
  Speaker 2: transmission isn't coming from Canada anymore. That all could happen.
• 18:58
  Speaker 2: But what you're seeing here right now in terms of
• 19:01
  Speaker 2: price increasing is because we as a state have said
• 19:05
  Speaker 2: that we want to provide tax credits and work to
• 19:09
  Speaker 2: be done on people's homes to make heating and cooling
• 19:12
  Speaker 2: more efficient in those homes, so that the system as
• 19:15
  Speaker 2: a whole is more efficient.
• 19:16
  Speaker 3: Ten twenty years.
• 19:17
  Speaker 4: No income qualification.
• 19:18
  Speaker 2: No income qualification, by the way, and that is driving
• 19:21
  Speaker 2: up prices for all consumers. So I guess if you
• 19:23
  Speaker 2: want to fix that by giving everyone fifty dollars. It
• 19:25
  Speaker 2: seems like a dumb solution to me, but you can
• 19:28
  Speaker 2: go ahead and do so.
• 19:29
  Speaker 3: Quick break. We'll have the trivia winner when we come back.
• 19:42
  Speaker 1: Bringing the latest financial news straight to your radio. Every day,
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• 19:52
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• 20:01
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• 20:04
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• 20:07
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• 20:17
  Speaker 5: Chrivia question today was of the twenty most polluted cities.
• 20:22
  Speaker 5: How many are in Asia? Of the twenty, that'll be
• 20:25
  Speaker 5: nineteen all in Asia. The only city on the list
• 20:29
  Speaker 5: not in Asia is the capital of African country Chad
• 20:34
  Speaker 5: Matt and Franklin Mass is our winner today, taking home
• 20:37
  Speaker 5: a Financial Exchange Show t shirt. Congrats to Matt. We
• 20:40
  Speaker 5: play trivia every day here on the Financial Exchange ce
• 20:44
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• 20:47
  Speaker 2: Com, Americans wanted to take a hands on approach to investing.
• 20:51
  Speaker 2: You've seen a dramatic improvement in terms of the i think,
• 20:56
  Speaker 2: quality of investment platforms available to the general public, as
• 21:00
  Speaker 2: well as a dramatic cost reduction for the general public
• 21:03
  Speaker 2: to invest in all sorts of different vehicles.
• 21:05
  Speaker 5: Right.
• 21:05
  Speaker 2: We talked about the revolution of Vanguard and the Index
• 21:09
  Speaker 2: Fund and how dramatically that brought down prices, but that
• 21:11
  Speaker 2: was that was mainly like a nineties two thousands consideration, right.
• 21:15
  Speaker 2: I mean, Vanguard has been along for quite some time,
• 21:17
  Speaker 2: but that was when they really started to have a
• 21:19
  Speaker 2: big impact. The more recent effect has been the you know,
• 21:23
  Speaker 2: the Robinhood effect, if you will, of trading costs coming
• 21:25
  Speaker 2: down for the average investor and.
• 21:27
  Speaker 4: A different one's good ones. I'm gonna it was kind
• 21:32
  Speaker 4: of not great. I'm not going to judge it. I
• 21:34
  Speaker 4: like speculating with a little bit of money as much
• 21:36
  Speaker 4: as the next stupid person. When I'm feeling stupid because
• 21:41
  Speaker 4: we all know it is stupid, and sometimes you get lucky.
• 21:43
  Speaker 4: It's fun, but it's mostly stupid. Those tools you mentioned, though,
• 21:46
  Speaker 4: that allowed people to use institutional quality techniques best practices,
• 21:52
  Speaker 4: so called modern portfolio theory. We've all heard the term
• 21:56
  Speaker 4: asset allocation, some of us have for an optimal asset
• 21:59
  Speaker 4: allocation goes back to the fifties. Computers didn't make it
• 22:02
  Speaker 4: possible until the nineties. By nineteen ninety nine we all
• 22:05
  Speaker 4: had it on our desktop. It's gotten a little bit
• 22:07
  Speaker 4: cheaper since then, and so of index funds, but not
• 22:09
  Speaker 4: much so. Not much has really happened in the last
• 22:12
  Speaker 4: thirty years. The benefits now are kind of on the margin.
• 22:16
  Speaker 2: Would you would you agree, yeah, I think you know,
• 22:18
  Speaker 2: the difference between a five dollars trade to a zero
• 22:21
  Speaker 2: dollar trade for most investors should make zero difference whatsoever
• 22:24
  Speaker 2: in the long term outcome. Who it really benefits as
• 22:27
  Speaker 2: a high foquency trader who quite honestly, you know, may
• 22:32
  Speaker 2: or may not do a great job of it on
• 22:34
  Speaker 2: average if I'm giving an honest self assessment or an
• 22:37
  Speaker 2: honest assessment of the overall situation. But in any case,
• 22:41
  Speaker 2: in twenty nineteen, about twenty one percent of investors self
• 22:44
  Speaker 2: identified as self directed investors. That's now up to about
• 22:49
  Speaker 2: a third of investors as of twenty twenty four. In contrast,
• 22:54
  Speaker 2: back down in twenty nineteen, you had eighty eight percent
• 22:57
  Speaker 2: of investors identifying as having financial advisors investment advisors. That's
• 23:01
  Speaker 2: now down to seventy nine percent during that same period
• 23:04
  Speaker 2: of time, so a pretty dramatic shift. Those add up
• 23:06
  Speaker 2: to more than one hundred percent because many people have both. Right,
• 23:09
  Speaker 2: you might have a financial advisor and then also have
• 23:12
  Speaker 2: your own self directed account or your personal for okay,
• 23:14
  Speaker 2: which is self directed. There can be a number of
• 23:16
  Speaker 2: different things there that lead that, but the overall trend
• 23:19
  Speaker 2: has been more people feeling comfortable with managing their own investments.
• 23:23
  Speaker 4: They could be using a computer based tool, so which
• 23:26
  Speaker 4: doesn't count as a finance It's a.
• 23:28
  Speaker 2: Good question, right, if you're using like Betterment, one of
• 23:30
  Speaker 2: those robo advisors, is that self.
• 23:32
  Speaker 4: Directed or guidelines sometimes even specific advice cheap sometimes even
• 23:36
  Speaker 4: free if you're a member. Also, they could be using
• 23:40
  Speaker 4: a managed portfolio of some kind, a target date fund
• 23:43
  Speaker 4: in a four h one K, and they were target
• 23:44
  Speaker 4: date funds for I RaSE too obviously, so they might
• 23:46
  Speaker 4: be getting professional management without necessarily working with an advisor
• 23:49
  Speaker 4: and get most of the services that they need at
• 23:52
  Speaker 4: their stage in life. They'll find as they get older
• 23:54
  Speaker 4: their needs get more complex, they probably ought to work
• 23:56
  Speaker 4: with a professional.
• 23:57
  Speaker 2: My question would be, is most of this shift coming
• 23:59
  Speaker 2: from teen technological and cost improvement, which there has been
• 24:02
  Speaker 2: plenty of over the course of the last forty years,
• 24:05
  Speaker 2: or is most of this coming from what has been
• 24:10
  Speaker 2: pretty inarguably one of the best fifteen year time periods
• 24:13
  Speaker 2: for stocks ever, right, what you top decile and.
• 24:17
  Speaker 4: Level of comfort and self management? You mean the level
• 24:19
  Speaker 4: of comfort with self management is what you mean.
• 24:21
  Speaker 2: If you throw a dart at the wall and every
• 24:22
  Speaker 2: time it returns positive over the last fifteen years, it
• 24:25
  Speaker 2: becomes pretty easy to be confident about being.
• 24:27
  Speaker 4: Probably both, Mike, but I tend to think that many
• 24:29
  Speaker 4: of these people are using even if they're not aware
• 24:32
  Speaker 4: of it. They have a model in their head because
• 24:34
  Speaker 4: they saw a four toh one K fact sheet for
• 24:36
  Speaker 4: a target date fund and they know that, Well, I
• 24:39
  Speaker 4: take my age and I subtract, I subtract my age
• 24:43
  Speaker 4: from one hundred and arrive at my proper equity percentage
• 24:48
  Speaker 4: and stuff like that. They know these rules with them now.
• 24:50
  Speaker 4: They either cut it in four A one K basics
• 24:52
  Speaker 4: when they join their company, or they gut it in college,
• 24:54
  Speaker 4: or they've heard it on a show like this, So
• 24:57
  Speaker 4: they're using institutional techn whether or not they're aware of it.
• 25:02
  Speaker 4: I think that's probably part of it too.
• 25:04
  Speaker 2: People who know me might be surprised to hear me
• 25:06
  Speaker 2: say this, but I'm the first person to say that.
• 25:08
  Speaker 2: I genuinely don't believe that every single person needs a
• 25:11
  Speaker 2: financial advisor or needs a money manager. I think there's
• 25:14
  Speaker 2: a lot of confusion about those two different jobs because
• 25:16
  Speaker 2: they are not one and the same. But I'll be
• 25:19
  Speaker 2: the first one to you take that approach that not
• 25:22
  Speaker 2: every single person needs a financial advisor. Some people need
• 25:26
  Speaker 2: a financial advisor and don't need an investment manager.
• 25:28
  Speaker 3: Some people it's the reverse, right.
• 25:30
  Speaker 2: Some people are pretty good about budgeting, planning, understanding the
• 25:34
  Speaker 2: tax code, and horrible about navigating the emotional parts of investing,
• 25:39
  Speaker 2: and so need one versus the other.
• 25:41
  Speaker 3: But there are there's.
• 25:44
  Speaker 2: Clearly a growing comfortability with self managing portfolios, and I'll
• 25:49
  Speaker 2: be fascinated to see how that may shift the next
• 25:52
  Speaker 2: time we have a real recession, right, it's been in
• 25:56
  Speaker 2: my you know, in my word, it's a good sixteen
• 25:58
  Speaker 2: years since we've had a real receipt and I'm not
• 26:00
  Speaker 2: counting twenty twenty because it was very brief and pretty
• 26:03
  Speaker 2: self induced, and people came out of it considerably better
• 26:06
  Speaker 2: on the average immediately following it, and that's not the
• 26:10
  Speaker 2: case with the average downturn inequity markets. If you have
• 26:14
  Speaker 2: questions about what can a financial advisor do, what are
• 26:19
  Speaker 2: the different models, what are the different ways of getting
• 26:22
  Speaker 2: or compensating a financial advisor versus an investment manager, because
• 26:26
  Speaker 2: there are multiple ways, right. Some advisors work on a
• 26:29
  Speaker 2: hourly basis, Some have a just a long term commitment
• 26:34
  Speaker 2: to you where you charge an investment management fee. Others
• 26:38
  Speaker 2: charge a retainer and build that way. If you have
• 26:42
  Speaker 2: questions about the makeup of a financial advisor, what type
• 26:45
  Speaker 2: of advice they typically actually deliver, what the job looks like,
• 26:48
  Speaker 2: and the different types, We've got a brand new guide
• 26:51
  Speaker 2: from the Armstrong Advisory Group on this specific subject.
• 26:54
  Speaker 3: If you have questions like that.
• 26:56
  Speaker 2: Want to better understand what it is that this universe
• 26:59
  Speaker 2: has to offer and doesn't have to offer, and frankly,
• 27:03
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• 27:05
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• 27:08
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• 27:11
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• 27:21
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• 27:26
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• 27:29
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• 27:32
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• 27:35
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• 27:37
  Speaker 2: Tesla stock seeing a little bit of a bounce back today,
• 27:39
  Speaker 2: but was off I believe a full fifteen percentage points
• 27:43
  Speaker 2: in yesterday's trading. Since December seventeenth, when the company's stock
• 27:48
  Speaker 2: price most recently peaked, it's erased more than half of
• 27:52
  Speaker 2: its total market value in trading thus far, year to date,
• 27:56
  Speaker 2: it's down nearly forty percent, and just over the weekend,
• 28:00
  Speaker 2: Larry Cudler, in an interview with Elon Musk, asked him, Hey,
• 28:04
  Speaker 2: how are you managing these two things right? Your pet
• 28:07
  Speaker 2: project of working at Doze, running doge, cutting government spending
• 28:12
  Speaker 2: alongside running SpaceX X formerly Twitter, as well as Tesla.
• 28:17
  Speaker 2: Where are these getting your attention? And his answer, once
• 28:21
  Speaker 2: again from a CEO, was a pretty transparent one, which was, Hey,
• 28:25
  Speaker 2: it's getting pretty difficult to.
• 28:26
  Speaker 3: Do all these things at the same time.
• 28:28
  Speaker 2: I don't think that's necessarily why Tesla's stock price is
• 28:31
  Speaker 2: struggling so much. There's been a very clear backlash against
• 28:35
  Speaker 2: Elon Musk among some of his most dedicated buyers of
• 28:39
  Speaker 2: these vehicles over the course of the last few months,
• 28:41
  Speaker 2: and that's continuing to play out alongside with a lot
• 28:46
  Speaker 2: more competition than the car company faced five years ago.
• 28:49
  Speaker 2: But nonetheless stock price suffering pretty dramatically so far this year.
• 28:54
  Speaker 4: I guess he's made a choice. He's wealthy enough or
• 28:57
  Speaker 4: his shareholders wealthy enough. They'll make that decision over time.
• 29:02
  Speaker 4: There are structural issues he's facing, aging product line, robotaxis
• 29:06
  Speaker 4: promises may not delivered upon right, so he's got the
• 29:10
  Speaker 4: they're the structural business concerns, Mike, and then there's the
• 29:12
  Speaker 4: polarizing political role, and he's chosen to play the political
• 29:16
  Speaker 4: role in a polarizing way. He could take a green
• 29:18
  Speaker 4: eye shade approach to this, just be working diligently behind
• 29:21
  Speaker 4: the scenes sending out reports. Instead, he is inserting himself
• 29:26
  Speaker 4: into every imaginable debate in every imaginable facet of our lives, economically, social.
• 29:34
  Speaker 4: So it's just weird to me that someone with such
• 29:37
  Speaker 4: a personal stake, and in whom a lot of people
• 29:39
  Speaker 4: have placed a considerable portion, presumably their own wealth and
• 29:42
  Speaker 4: trust in that he's chosen to be so polarizing about things.
• 29:47
  Speaker 2: It's interesting too as a shareholder, because in many circumstances
• 29:51
  Speaker 2: you might say, look that this this guy has a
• 29:53
  Speaker 2: fiduciary duty to his shareholders to pay more attention to
• 29:56
  Speaker 2: the company. Do we want to find somebody else?
• 29:59
  Speaker 3: But Tesl is So.
• 30:03
  Speaker 2: We've talked about it before, right even before his involvement
• 30:05
  Speaker 2: with the Trump administration. The company is so inexorably tied
• 30:08
  Speaker 2: to Elon Musk himself, right, The movement of the stock
• 30:11
  Speaker 2: price so tied to people's fascination and excitement about Elon
• 30:16
  Speaker 2: Musk that I'm not sure that anyone else can turn
• 30:19
  Speaker 2: it around.
• 30:19
  Speaker 3: In any way.
• 30:20
  Speaker 2: Right, Tesla is Elon Musk. Elon Musk is Tesla, and
• 30:25
  Speaker 2: we can't really man that's true. I mean, if this
• 30:27
  Speaker 2: continues to push. You've already seen you know, half of
• 30:30
  Speaker 2: the market value wiped away here from Tesla. I'm not seeing,
• 30:34
  Speaker 2: you know, I saw Donald Trump speak yesterday about how
• 30:37
  Speaker 2: he plans to buy a Tesla personally, but I'm not
• 30:40
  Speaker 2: seeing this big shift from say.
• 30:42
  Speaker 4: Where's he going to drive it around the West Wing?
• 30:45
  Speaker 4: He'll never drive again, nor should he. He's probably probably
• 30:47
  Speaker 4: hasn't been wheel of anything other than a golf cart,
• 30:50
  Speaker 4: nor would I be if I had his worth.
• 30:52
  Speaker 2: President to know, you're a very long time Nonetheless, what
• 30:55
  Speaker 2: I what I mean by that is you have not
• 30:57
  Speaker 2: to this point seen a big shift in demand from say,
• 31:01
  Speaker 2: Trump supporting Republicans say now I'm going to go buy
• 31:03
  Speaker 2: an ev specifically a Tesla. Maybe that is what we
• 31:06
  Speaker 2: get here over the course of the next few months,
• 31:08
  Speaker 2: but so far, instead, what you've seen is a pretty
• 31:11
  Speaker 2: big backlash from the traditional buyers, which were, you know,
• 31:14
  Speaker 2: coastal Democrats.
• 31:15
  Speaker 4: Why would you want to alienate your core constituency. There
• 31:18
  Speaker 4: might be a bigger game afoot here.
• 31:20
  Speaker 3: I don't think so.
• 31:21
  Speaker 2: I think genuinely he's guy's worth a ton of money,
• 31:24
  Speaker 2: and he's doing what he believes in.
• 31:26
  Speaker 4: But he's such a recent convert to fiscal conservatism, yes,
• 31:32
  Speaker 4: although I don't think he's necessarily fiscally conservative. The way
• 31:35
  Speaker 4: they're cutting spending requires action of Congress to be uh sustained.
• 31:42
  Speaker 4: But I just I just don't know. This is the
• 31:44
  Speaker 4: biggest head scratcher of my lifetime. And what's Henry Ford too?
• 31:49
  Speaker 2: What motivates has always kind of confused me, right Like,
• 31:52
  Speaker 2: I never thought of him as a big He's an
• 31:55
  Speaker 2: American patriot.
• 31:56
  Speaker 3: I never thought of him as I think far he
• 31:59
  Speaker 3: was a.
• 31:59
  Speaker 4: Climate change though, Mike, he was a green revolution that
• 32:02
  Speaker 4: label I was solidly progressive.
• 32:04
  Speaker 3: Even that label.
• 32:05
  Speaker 2: I've struggled to slap on him as a big environmentalist,
• 32:08
  Speaker 2: you know what.
• 32:09
  Speaker 3: I know that that one. I know that that was
• 32:12
  Speaker 3: a big push.
• 32:13
  Speaker 2: But I think that that I think that that label
• 32:15
  Speaker 2: was largely put on him rather than him hoisting.
• 32:18
  Speaker 4: The no go back and listen to read his public remarks.
• 32:22
  Speaker 4: Listen to his speeches. For his public remarks from two
• 32:25
  Speaker 4: thousand and nine up until only like two years ago,
• 32:28
  Speaker 4: he was a died in the wool advocate of the
• 32:31
  Speaker 4: so called green energy revolution and arguably progressive on other
• 32:35
  Speaker 4: topics that he chose to speak about. Something changed his mind.
• 32:38
  Speaker 4: I'm not saying we aren't entitled to change our minds,
• 32:41
  Speaker 4: though it's a little odd to me, being about his age,
• 32:43
  Speaker 4: to think you could do such a one eighty. I
• 32:45
  Speaker 4: remember when I thought I'm pretty libertarian. I was twenty.
• 32:48
  Speaker 4: I had the insight. It was in a polypsy class.
• 32:50
  Speaker 4: We generally remember when we have a big ideological transition,
• 32:55
  Speaker 4: like what what did it for him? What was the
• 32:57
  Speaker 4: road to Damascus event? I want to know what hit
• 33:00
  Speaker 4: his on switch. Some say it was Biden dissing him.
• 33:04
  Speaker 2: Could be, could be We've got to take a quick
• 33:06
  Speaker 2: break when we come back. Stack Roulette here on the
• 33:09
  Speaker 2: Financial Exchange.
• 33:11
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• 33:18
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• 33:24
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• 33:28
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• 33:30
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• 33:46
  Speaker 3: What do you have for us for stack Roulette this morning? Mark?
• 33:49
  Speaker 4: Here's a trade war angle I hadn't considered. This comes
• 33:51
  Speaker 4: from Bloomberg. The headline is by Canada Pressure builds. I
• 33:55
  Speaker 4: pause because it's in quotes by Canada pressure builds on
• 33:57
  Speaker 4: one point six trillion in pension pod and one angle
• 34:03
  Speaker 4: acrom of the acrimony shall we say that's building between
• 34:07
  Speaker 4: the United States and Canada and other countries too, is
• 34:10
  Speaker 4: their pension funds could stop buying US equities or liquidate
• 34:14
  Speaker 4: US equities. So overall these are just big public funds.
• 34:17
  Speaker 4: They fund teachers and public safety and other public pension funds.
• 34:22
  Speaker 4: So they invest like we all do, in stocks and
• 34:25
  Speaker 4: bonds and usually more exotic stuff too. But Canada's public
• 34:29
  Speaker 4: pension funds, just the large ones accounted for in this
• 34:32
  Speaker 4: Bloomberg article, hold about six hundred billion inequities. That's a
• 34:37
  Speaker 4: little bit more than they hold in Canadian equities. What
• 34:39
  Speaker 4: if they decided to diversify out of that, just like
• 34:41
  Speaker 4: out of spite or maybe out of prudence, if they
• 34:43
  Speaker 4: think US growth will slow because of the policies we're pursuing.
• 34:47
  Speaker 2: I think when it comes to countries like Canada, there's
• 34:50
  Speaker 2: a big difference between the spite and prudence argument. Right
• 34:53
  Speaker 2: if you're talking about China, tomorrow is huging pinkins, say
• 34:55
  Speaker 2: never buy another You.
• 34:56
  Speaker 4: Can't motivate a fiduciary. You have to have some pretext, right,
• 35:00
  Speaker 4: it has to be that it's not prudent all.
• 35:01
  Speaker 2: However, if Canadian Parliament comes and says Canadian pension funds
• 35:06
  Speaker 2: may not hold us equity so long as we have
• 35:08
  Speaker 2: this battle going on, or provincial governors go and say that,
• 35:12
  Speaker 2: that's a bit of a different story. And so I
• 35:13
  Speaker 2: don't think there would be something that would occur overnight,
• 35:16
  Speaker 2: because you're right, like, you know, if a investment manager
• 35:19
  Speaker 2: of a pension fund is acting with spite rather than
• 35:23
  Speaker 2: their fiduciary obligation, they'll be gone.
• 35:25
  Speaker 4: To But that's under the law. Here, the point you
• 35:26
  Speaker 4: just made is the key one, which is that is
• 35:28
  Speaker 4: can China could change like releasing the precise that would
• 35:33
  Speaker 4: be interesting if it happened there elsewhere, And here it's
• 35:37
  Speaker 4: just a it's a knock on effective trade wars that
• 35:39
  Speaker 4: I hadn't thought about.
• 35:40
  Speaker 2: It's certainly a weapon that I wouldn't have put into
• 35:44
  Speaker 2: the typical hands of another developed democratic nation, right China, Like, yeah, all.
• 35:49
  Speaker 3: Bets are off.
• 35:50
  Speaker 2: You know, you go to bark a trade war with China,
• 35:52
  Speaker 2: They're going to open investigations into individuals, They're going to
• 35:57
  Speaker 2: you know, arrest Americans there, you're gonna have all sorts
• 35:59
  Speaker 2: of things with Canada.
• 36:01
  Speaker 3: Yeah, you wouldn't.
• 36:01
  Speaker 2: You wouldn't necessarily expect a result like that. But it's
• 36:04
  Speaker 2: gotten pretty ugly pretty quickly here. We will see how
• 36:07
  Speaker 2: it develops over over the coming months. These unpopular mortgages
• 36:11
  Speaker 2: may be the key to affordable housing. Adjustable rate mortgages
• 36:15
  Speaker 2: is what they're talking about here. I don't think that
• 36:17
  Speaker 2: that's going to be the key to affordable housing. The
• 36:19
  Speaker 2: key to affordable housing will be building a whole crep
• 36:22
  Speaker 2: ton more housing. Adjustable rate mortgages were once a very
• 36:26
  Speaker 2: popular method of buying homes up up prior to the
• 36:30
  Speaker 2: Great Financial Crisis, used to account for around a fifth
• 36:33
  Speaker 2: of outstanding mortgages. Since the Financial crisis, it's been a
• 36:37
  Speaker 2: very small percentage of them. It looks to me like
• 36:41
  Speaker 2: you can get a you know, five to one arm
• 36:43
  Speaker 2: right now for somewhere in the you know, high fives,
• 36:47
  Speaker 2: low sixes, which is a pretty substantial discount to a
• 36:50
  Speaker 2: thirty year fixed rate mortgage. But look, I think recent
• 36:54
  Speaker 2: history is what stings the most, and where where people
• 36:57
  Speaker 2: got left hold in the bag was on those adjustable
• 37:00
  Speaker 2: rate mortgages or other products.
• 37:03
  Speaker 3: That just did not work out.
• 37:06
  Speaker 2: I guess adjustable rate mortgages weren't the real problem in
• 37:08
  Speaker 2: the Great Financial Crisis. It was more the multiple loans
• 37:13
  Speaker 2: on multiple properties without any verification of.
• 37:15
  Speaker 3: Income and things along those lines.
• 37:17
  Speaker 2: But nonetheless, I just don't know that there's going to
• 37:20
  Speaker 2: be any long term big appetite from Americans to go
• 37:24
  Speaker 2: get an adjustable rate mortgage in the short term.
• 37:27
  Speaker 4: To your point, given the current balance of or imbalance
• 37:29
  Speaker 4: of demand and supply, that's where the problem lies. I'm
• 37:33
  Speaker 4: going to continue to take the contrary and position on
• 37:35
  Speaker 4: this and say this, We're going to be saying in
• 37:36
  Speaker 4: five years, this is just me being a little bit
• 37:38
  Speaker 4: silly for the wall Tucker, for the sticker wall. This
• 37:41
  Speaker 4: problem is going to fix itself. We're not going to
• 37:43
  Speaker 4: believe in cost thought that. We're not going to believe
• 37:45
  Speaker 4: we thought that it was a supply problem. Demand will
• 37:47
  Speaker 4: We'll have a recession, might be deeper than we'd like
• 37:49
  Speaker 4: or want. Demand will collapse, the problem will be fixed.
• 37:54
  Speaker 4: That's my sort of outlandish, fringy prediction for the wall.
• 37:57
  Speaker 4: For what it's worth you.
• 37:58
  Speaker 2: If I may well, will somehow try to measure that
• 38:01
  Speaker 2: or come up with how we can measure that five years.
• 38:03
  Speaker 3: From now markets in mixed territory again.
• 38:06
  Speaker 2: We've got the NASDAC now up a third of a percent,
• 38:08
  Speaker 2: SMP down a third, Dow down three hundred and thirty
• 38:11
  Speaker 2: five points, or eight tents of a percent. As we
• 38:13
  Speaker 2: hit the noon hour here, we'll have a full market
• 38:16
  Speaker 2: recap and a heck of a lot more tomorrow here
• 38:18
  Speaker 2: on the Financial Exchange