Latest / The Financial Exchange Show / AI Risk, Bond Signals, and the Housing Reality Check

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AI Risk, Bond Signals, and the Housing Reality Check · The Financial Exchange Show

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Speaker 1: is The Financial Exchange with Chuck Zotta and Mike Armstrong.
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Speaker 2: Chuck, Mike, and Tucker with you here. It's a Monday.
1:17
Speaker 2: And if we take a look at what's going on
1:19
Speaker 2: in markets, I just want to point out that equity
1:23
Speaker 2: markets were once again kind of in one of these
1:24
Speaker 2: plateau and chop areas that nothing bad is happening, but
1:29
Speaker 2: it's just okay. Markets have been kind of stuck for
1:31
Speaker 2: a couple of months now. We've seen this a few
1:35
Speaker 2: times in the last couple of years. In fact, this
1:39
Speaker 2: year we've seen it twice already. We saw once the
1:41
Speaker 2: first couple months of the year, S & P 500
1:43
Speaker 2: was stuck between 6,800 and 7,000, chopped around for a
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Speaker 2: little bit, finally fell about 10%. And then everyone got
1:51
Speaker 2: all excited about AI when it became, you know, obvious that, hey, like,
1:55
Speaker 2: AI can actually do some good things in addition to
1:57
Speaker 2: all of the concerns. And it rallied, you know, basically
2:01
Speaker 2: like 20% from start of April through early June. It
2:05
Speaker 2: then chopped around in, you know, kind of June through
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Speaker 2: early August. before having a big run-up at the start
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Speaker 2: of August. And now we've just kind of been chopping
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Speaker 2: again for a couple months. The S & P hasn't
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Speaker 2: really gone anywhere bad. I think the furthest we got
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Speaker 2: down was maybe like 4% intraday. We didn't even close
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Speaker 2: all the way down there. And right now we sit
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Speaker 2: about 1.25% off all-time highs, with the S & P
2:30
Speaker 2: at 77.24 right now. So stocks are up about 1%
2:33
Speaker 2: today on the S & P, 0.5% on the Dow, 1.5%
2:34
Speaker 2: on the NASDAQ. We've got bonds catching a little bit
2:40
Speaker 2: of a bid. The 10-year treasury down 3.3 basis points
2:43
Speaker 2: to 4.963%. Dollar index finding its footing as well, continuing
2:48
Speaker 2: to strengthen over the last week or so, up another 0.16%
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Speaker 2: to 100.085. Gold is off $ 50 now. It's to 43.74.
2:52
Speaker 2: Gold's just been, again, kind of chopping for the last
2:55
Speaker 2: little bit here. It had that big run up in
3:04
Speaker 2: August and then kind of slid and now has just
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Speaker 2: been range bound for the last couple weeks between about $ 4, 250
3:11
Speaker 2: and $ 4, 400. So just kind of looking for that next move,
3:16
Speaker 2: whether it be up or down. We'll see exactly how
3:19
Speaker 2: things break there. On the energy side of things. Crude oil,
3:24
Speaker 2: West Texas Intermediate down $ 4. 80 a barrel to $ 95. 50. So
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Speaker 2: some good news there on hope that you will see
3:31
Speaker 2: the Saudi East-West pipeline starting to get some capacity back
3:36
Speaker 2: in the coming days. You do have gas holding steady
3:39
Speaker 2: at $ 4. 47 and diesel up $ 0. 01 to $ 6. 51. Expect to
3:43
Speaker 2: see a little bit of nationwide relief on the diesel
3:46
Speaker 2: side of things with ExxonMobil's Joliet refinery spooling back up now. Basically,
3:52
Speaker 2: what we're seeing in the Midwest is that wholesale prices
3:55
Speaker 2: on diesel should be coming down or are coming down,
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Speaker 2: and that should translate into some relief at the pump there.
4:02
Speaker 2: A week ago, diesel was at $ 6. 15, and Michigan is
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Speaker 2: an example. Today, it's at $ 6. 81, which is, again, just
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Speaker 2: an insane move in a week. That should come back
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Speaker 2: down into the 620 to 630 range this week. So nationally,
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Speaker 2: I think that when you look at it, we're at 651.
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Speaker 2: Maybe get some relief down into the 635, 640 range
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Speaker 2: in the coming week there. But again, that's not enough
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Speaker 2: to really help, given that a month ago we were
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Speaker 2: still at 557 and a year ago we were at 369.
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Speaker 2: So it's tough to see with the current state of
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Speaker 2: play worldwide. that you're going to get diesel back to,
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Speaker 2: you know, below, I struggle to see a path in
4:43
Speaker 2: the short term for it to get below like five
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Speaker 2: 55 75, even in a best case scenario, but Hey,
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Speaker 2: we'll see how things go. And at least the good
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Speaker 2: news is this week, we should see those diesel prices
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Speaker 2: coming down a little bit, a lot bit in the
4:56
Speaker 2: Midwest piece in the wall street journal, why it's so
5:00
Speaker 2: hard to work out what the bond market is telling us. Subheader,
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Speaker 2: did bond yields rise because the economy is strong or
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Speaker 2: because America's credibility is on the line? Well, the fact
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Speaker 2: of the matter is that you never know until after
5:12
Speaker 2: the fact.
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Speaker 3: Well, I think their point is that even after the fact,
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Speaker 3: it's kind of hard to know right now.
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Speaker 2: No, here's the thing. I think that there's two tells
5:22
Speaker 2: that you look for in the bond market, and it's
5:25
Speaker 2: cross-asset signals that you get between other parts of the
5:28
Speaker 2: market to tell you what's going on. If bond yields
5:31
Speaker 2: are rising, but the dollar is falling and gold is rising,
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Speaker 2: that's telling you that America has a credibility problem. We
5:39
Speaker 2: know this because with any sovereign, when they have a
5:42
Speaker 2: credibility problem with their currency or really with their currency
5:46
Speaker 2: and their fiscal situation, Liz Truss was prime minister of
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Speaker 2: the UK for, was it 11 days? Did she make
5:54
Speaker 2: it two weeks? It's a very short period of time.
5:59
Speaker 2: Let me see how many days it was. I want
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Speaker 2: to make sure I get this right.
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Speaker 1: 49. 49.
6:04
Speaker 2: That's like 30 days longer than I thought it was.
6:08
Speaker 2: How many Scaramoochies is that? Two and a half? I
6:13
Speaker 2: believe that's two and a half or three Scaramoochies. So,
6:16
Speaker 2: in any case, Liz Truss was Prime Minister of the
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Speaker 2: UK for 45 days. Oh, he was 10 days. 10 days. Okay,
6:22
Speaker 2: so it's almost five Scaramoochies.
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Speaker 3: 4.9.
6:24
Speaker 2: I forgot about him entirely. It's my favorite period of time, Michael. So,
6:31
Speaker 2: it's five Scaramoochies to a Truss, and then, you know,
6:35
Speaker 2: how many Trusses to a Bobby Valentine? Something like that.
6:39
Speaker 2: In any case, so Liz Truss was Prime Minister for
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Speaker 2: 49 days. The reason why her tenure was that short
6:45
Speaker 2: is that she proposed, or rather her, I think it's what,
6:49
Speaker 2: the ex-checker to the Treasury in the UK, proposed this
6:53
Speaker 2: absolutely asinine budget that had British yields just blowing out
6:58
Speaker 2: to the top side in a very short period of time.
7:00
Speaker 2: And at the same time as that, the pound was
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Speaker 2: falling because it was no, we're not staying away from
7:08
Speaker 2: your bonds because the economy's strong in Britain. We're staying
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Speaker 2: away because we don't want any part of this, your currency, bonds,
7:16
Speaker 2: or anything else. And so in the United States, and
7:19
Speaker 2: I have a screen that I have set up just
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Speaker 2: to look at this on a daily basis, it's okay,
7:27
Speaker 2: if bond yields are moving up, are we similarly seeing
7:32
Speaker 2: the dollar weakening? And are we seeing gold strengthening? And
7:36
Speaker 2: just as an example today, today's the exact opposite. Today's
7:38
Speaker 2: exactly what you want to see if you have a
7:41
Speaker 2: belief in the U.S. fiscal system, financial system. Yields are down.
7:46
Speaker 2: The 10-year's gone from just north of 5 to 4.96.
7:50
Speaker 2: The dollar index, despite yields being down, dollar index is
7:53
Speaker 2: up a little bit. And gold is down just a
7:55
Speaker 2: little bit today. So, again, it's one day. But today,
8:00
Speaker 2: the message that markets are sending is, hey... We're comfortable
8:04
Speaker 2: with the U.S. fiscal situation and how things look there.
8:09
Speaker 2: So let's take a look at a larger picture.
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Speaker 3: We know what has happened with yields since the outbreak
8:15
Speaker 3: of war in Iran.
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Speaker 2: Let's look at year-to-date. Sure. Year-to-date's a good one because, again,
8:19
Speaker 2: if you do this day-to-day, you're going to drive yourself batty.
8:23
Speaker 2: So year-to-date, 10-year Treasury has gone from about 4.2% up
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Speaker 2: to 4.96%. So yield's up.
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Speaker 3: Yep.
8:28
Speaker 2: Got it. The dollar.
8:33
Speaker 2: Has gone from... Hang on, I gotta get this little mark.
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Speaker 2: Dollar's gone from 98 up to 100. Yield's up, dollar up. Okay,
8:43
Speaker 2: we're good there. Gold has gone from... Gold's flat on
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Speaker 2: the year. Hasn't moved.
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Speaker 3: Doesn't seem a lot like a challenge to the United
8:52
Speaker 3: States fiscal situation.
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Speaker 2: And this is why when people panic about, like, oh,
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Speaker 2: yield's going up means they're nervous about, like, you know, the... Well,
9:01
Speaker 2: if the dollar's going up with it, then it just
9:04
Speaker 2: means that the economy is experiencing more nominal growth and
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Speaker 2: money is flowing in in order to capitalize on that
9:10
Speaker 2: nominal growth. That nominal growth could turn into either inflation
9:15
Speaker 2: or real growth. And I think this is why, even
9:18
Speaker 2: with the dollar being up, gold is flat this year
9:20
Speaker 2: is because we're seeing higher inflation now than we were
9:22
Speaker 2: at the beginning of the year. That squares that circle
9:25
Speaker 2: for me. Like, it makes it all make sense.
9:28
Speaker 3: But.
9:29
Speaker 2: I don't look at the moves that we're seeing in
9:30
Speaker 2: the bond market this year as a whole as being, oh,
9:35
Speaker 2: like the bond market's panicking because of the U.S. debt
9:38
Speaker 2: situation or this and that. Are there instances that I
9:42
Speaker 2: can point to where over short time periods it's done that? Sure.
9:45
Speaker 2: End of August, or I'm sorry, end of July, dollar
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Speaker 2: went from 101 down to 99 at the same time
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Speaker 2: that the 10-year went from 45 to 47. And gold
9:54
Speaker 2: blew out topside also.
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Speaker 3: Yeah. Yeah.
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Speaker 2: That Kevin Warsh press conference at the end of July?
10:00
Speaker 2: wasn't good. But guess what? He had another one last week,
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Speaker 2: and no one's panicking right now. So this is why
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Speaker 2: I think you have to zoom out a little bit.
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Speaker 2: We get so focused on, like, oh, what did this
10:12
Speaker 2: do today? The message from markets this year, there's more
10:16
Speaker 2: nominal growth in the U.S., a little more of it's
10:20
Speaker 2: being absorbed by inflation, which is not great, which is
10:22
Speaker 2: why gold is still finding a bid. But the dollar
10:25
Speaker 2: has strengthened, which suggests that people are not avoiding the
10:28
Speaker 2: dollar for transactions or for safekeeping.
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Speaker 3: So I would agree with all of that. What I
10:34
Speaker 3: think would be the wrong conclusion, then, would be to
10:35
Speaker 3: say that the deficit doesn't matter.
10:37
Speaker 2: Correct.
10:38
Speaker 3: Here is the case for the deficit really mattering under
10:42
Speaker 3: that threshold and that guideline. If that narrative does turn
10:49
Speaker 3: To the world is concerned about the U.S. fiscal situation
10:53
Speaker 3: for any number of reasons. It's military might. It's level
10:58
Speaker 3: of deficits. It's tax rate. It's inflation rate. Any of
11:01
Speaker 3: those reasons could be driving it. Turning that ship could
11:05
Speaker 3: be impossible. And it could come very rapidly. Or if
11:09
Speaker 3: not impossible, then extraordinarily painful.
11:12
Speaker 2: Right?
11:12
Speaker 1: Yeah.
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Speaker 3: You mentioned you've seen bursts of that here and there,
11:16
Speaker 3: such as when Kevin Warsh gave a pretty bad press conference, right?
11:20
Speaker 3: If you get all of a sudden the world focused on, hey,
11:23
Speaker 3: we're not sure we trust the U.S. 's debt anymore,
11:27
Speaker 3: that is a tremendously difficult ship to right.
11:33
Speaker 2: So, yeah, just because it.
11:34
Speaker 3: Hasn't happened, I don't think, yeah, nobody should conclude that
11:38
Speaker 3: it won't happen or that we shouldn't worry about it happening.
11:41
Speaker 2: Let's take a quick break here. When we return, we're
11:46
Speaker 2: going to talk about the apartment rental market next.
11:51
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12:43
Speaker 2: Peace in the Wall Street Journal. Apartment landlords have a
12:46
Speaker 2: $ 2 trillion debt problem that is only getting worse. Hey.
12:51
Speaker 3: Are we just going to write this article about every
12:53
Speaker 3: single sector of our economy?
12:54
Speaker 2: Yeah, I can't deal with it, Michael.
12:56
Speaker 3: So do office landlords, as do AI tech companies. So
13:01
Speaker 3: do fast food restaurants and.
13:06
Speaker 2: Thank you, Chuck. It does remind me of.
13:09
Speaker 3: one thing which uh warsh was asked about at the
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Speaker 3: most recent press conference.
13:14
Speaker 2: There are two.
13:16
Speaker 3: Neutral interest rates neutral interest rate is the hypothetical hypothetical
13:21
Speaker 3: interest rate i've.
13:22
Speaker 2: Thought about this i i think this is a horrible
13:25
Speaker 2: concept for him to bring up yeah he didn't he
13:28
Speaker 2: was asked about it no but he gave his answer
13:31
Speaker 2: and i thought it was a bad answer.
13:32
Speaker 3: Okay um the point is that higher interest rates right
13:36
Speaker 3: now are tremendously difficult for everyone other than the AI
13:42
Speaker 3: sector to deal with at the moment.
13:43
Speaker 4: Sure.
13:44
Speaker 2: That's, that's my idea of two neutral rates. The problem
13:48
Speaker 2: is the idea of the neutral rate doesn't mean that
13:51
Speaker 2: interest rates always act the same on every part of
13:54
Speaker 2: the economy.
13:55
Speaker 3: It's a neutral rate for the gross economy, not one
13:58
Speaker 3: sector or one person per person. But, uh, Yes, apartment
14:03
Speaker 3: landlords did build a whole lot of apartments or bought
14:07
Speaker 3: a bunch of apartments that were built by builders over
14:10
Speaker 3: the course of the early 2020s at really low interest rates,
14:13
Speaker 3: just like all of us. Unlike all of us, they
14:16
Speaker 3: do not generally borrow on a 30-year fixed-rate schedule.
14:20
Speaker 2: Correct.
14:20
Speaker 3: Because banks don't need to offer that loan to builders,
14:23
Speaker 3: so why would they? And so, yeah, a bunch of
14:27
Speaker 3: them are going to see those debts back. need to
14:30
Speaker 3: be refinanced over the coming years. And just like anybody
14:33
Speaker 3: else who has a variable rate loan or is selling
14:36
Speaker 3: their home and buying a new one, the new rates
14:37
Speaker 3: aren't so good.
14:40
Speaker 2: Which is why I think it's going to be fine.
14:43
Speaker 1: Right.
14:43
Speaker 3: I cannot look at anything in the housing sector and
14:46
Speaker 3: get worried about, well, just get worried about it at all.
14:51
Speaker 3: There's nothing in the housing sector other than the lack
14:53
Speaker 3: of construction that concerns me right now at the macro level.
14:57
Speaker 2: Mike, do you know anyone who works in banking? Like
15:00
Speaker 2: conventional banking. Do banks like foreclosing on properties?
15:06
Speaker 3: No, it's not their favorite.
15:08
Speaker 2: They don't want to own a property. Especially post- Great recession.
15:15
Speaker 3: They have no interest in that. They learned some really
15:17
Speaker 3: tough lessons about that process in the period of about
15:20
Speaker 3: 2010 through 2013.
15:22
Speaker 2: So people will be like, well, there's $ 1. 8 trillion in
15:26
Speaker 2: debt coming due in the next decade in the landlord market.
15:28
Speaker 2: Do you know what happened? How are they going to
15:30
Speaker 2: roll these up to these higher rates? Here's how they're
15:32
Speaker 2: going to do it. The bank's going to sit down
15:34
Speaker 2: with them. They're going to say, what can you pay
15:35
Speaker 2: over what time frame? Okay, let's meet somewhere in the middle.
15:38
Speaker 2: Can you pay that? Sure, we can. They're going to
15:40
Speaker 2: raise the rents and they'll pay it.
15:42
Speaker 3: Right. This is precisely what happened with office space, by
15:44
Speaker 3: the way. They're going to negotiate it. We talked about this.
15:47
Speaker 2: Exactly. Coming out of the pandemic, everyone and their grandma
15:51
Speaker 2: was like.
15:51
Speaker 3: I'm.
15:54
Speaker 2: Trying to think of the best way to phrase this.
15:57
Speaker 2: Everyone and their grandma was like, well, all of these
16:01
Speaker 2: office buildings... People built them back in the 2010s. No
16:06
Speaker 2: one's going to be using them in the 2020s. All
16:09
Speaker 2: of that debt. Remember, commercial real estate debt. It's going
16:13
Speaker 2: to sink our economy. Has anyone heard a thing about
16:16
Speaker 2: it in the last three years? And these are all
16:19
Speaker 2: loans that have matured over that time. And it's not
16:21
Speaker 2: to say that individual properties are still worth what they
16:24
Speaker 2: were before. We've talked about this in particular. City of Boston,
16:27
Speaker 2: where our show's nearly based out of, The city of
16:31
Speaker 2: Boston gets a ton of property tax revenue from commercial
16:34
Speaker 2: real estate valuations. God. Those have been absolutely— Previously.
16:39
Speaker 1: Right.
16:39
Speaker 2: Those have been decimated by it. So it's not to
16:41
Speaker 2: say there haven't been any consequences, but it is to
16:44
Speaker 2: say the consequences have not been broad enough to affect
16:47
Speaker 2: the trajectory of the U.S. economy. This is probably going
16:52
Speaker 2: to be the same thing because banks are not going
16:54
Speaker 2: to say, well, you were paying us a million before.
16:56
Speaker 2: Now we need two or we're going to foreclose on you. No,
17:00
Speaker 2: banks don't want to own a 200-family building.
17:04
Speaker 4: No.
17:04
Speaker 2: They don't know what to do with it. They don't
17:06
Speaker 2: have a rental department. They don't know what to do
17:08
Speaker 2: with that. They're going to say, okay, you can't pay
17:10
Speaker 2: us $ 2 million. How much can you do? Great, you
17:13
Speaker 2: can do $ 1. 2 million next year, $ 1. 4 million the year
17:15
Speaker 2: after that, and we'll step you up over eight years,
17:17
Speaker 2: start raising your rents.
17:18
Speaker 3: What is true, during the early 2020s, we did, it
17:22
Speaker 3: delayed a little bit because of COVID, but a bunch
17:24
Speaker 3: of new apartments came into the market.
17:27
Speaker 1: Sure.
17:27
Speaker 3: Not around here. But across Texas, across different parts of
17:31
Speaker 3: the country, mainly the Sunbelt, a lot of multifamily units
17:35
Speaker 3: came online. And those rents have not been ratcheting up
17:39
Speaker 3: as much as perhaps those owners would have liked. And
17:43
Speaker 3: this will compound that effect. And you could very likely
17:46
Speaker 3: see some bankruptcies in this space. And I don't really
17:49
Speaker 3: think it's going to be much of a problem for
17:52
Speaker 3: the broader economy.
17:54
Speaker 2: Peace in the Wall Street Journal as well. Why the
17:56
Speaker 2: best price on your next car is getting harder to find.
18:00
Speaker 3: Because the owners of those cars, specifically the designers and
18:06
Speaker 3: manufacturers of those cars, are trying to obfuscate the real price.
18:10
Speaker 2: Which, I gotta say, doesn't this feel... I was going
18:18
Speaker 2: to say it feels like there should be some antitrust
18:20
Speaker 2: issues here when the dealers are prohibited from stating a
18:25
Speaker 2: certain price because the manufacturer won't allow them to.
18:29
Speaker 3: Yeah, so specifically what's happening here is Stellantis, bless you,
18:35
Speaker 3: is prohibiting their dealers from marking down the price of
18:38
Speaker 3: their vehicles below a certain point because they don't want
18:40
Speaker 3: them to look cheap on the new market. So you
18:43
Speaker 3: can sell the car for below that price, but you
18:45
Speaker 3: may not advertise it below... the price that Stellantis is
18:49
Speaker 3: telling you, which, yeah, I'm with you. I can't look
18:54
Speaker 3: at the auto market, though, and be as concerned about
18:56
Speaker 3: monopoly as I am with other areas. But it does
18:59
Speaker 3: seem pretty anti-competitive. That is damning with faint praise if
19:03
Speaker 3: I've ever heard it.
19:05
Speaker 2: Well, this isn't as screwed up as this industry in
19:07
Speaker 2: terms of concentration, so, yeah, that's kind of where we've
19:11
Speaker 2: gotten to.
19:11
Speaker 3: I just don't think there's all that much consumer harm
19:15
Speaker 3: by this.
19:17
Speaker 2: No, I don't either because ultimately, I mean.
19:20
Speaker 3: You can still go negotiate. Everybody knows you can negotiate.
19:23
Speaker 2: We all understand how the car buying process works right now.
19:26
Speaker 2: You got to go talk to the guy who talks
19:28
Speaker 2: to his manager, who talks to his manager, who says, no,
19:31
Speaker 2: you can't do that. Finance with us. Quick break here.
19:35
Speaker 2: Wall Street Watch is next.
19:39
Speaker 1: Bringing the latest financial news straight to your radio every day.
19:43
Speaker 1: It's the Financial Exchange on the Financial Exchange Radio Network.
19:40
Speaker 1: We're on to a new week and markets are in
19:41
Speaker 1: rally mode as oil prices retreat. Right now the Dow
19:43
Speaker 1: is up 0.4% or 213 points higher.
20:09
Speaker 4: S & P 500 up over 1%, 79 points up.
20:10
Speaker 4: NASDAQ is up 1.6% to 429 points higher. Russell 2000
20:11
Speaker 4: is up about two-thirds of 1%. Ten-year Treasury yield down
20:14
Speaker 4: three basis points at 4.963%. Crude oil down over 4.5%
20:16
Speaker 4: to trading $ 95 a barrel, while Brent is down 3%
20:17
Speaker 4: to trade at $ 100 a barrel. According to the Wall
20:34
Speaker 4: Street Journal, Paramount has reached a settlement with a group
20:37
Speaker 4: of state attorneys general, an agreement that clears the way
20:40
Speaker 4: for an $ 81 billion merger with Warner Brothers Discovery. As
20:44
Speaker 4: part of the agreement, Paramount will avoid having to sell
20:48
Speaker 4: cable channels. Both Paramount and Warner are rallying 10% on
20:52
Speaker 4: that news. Meanwhile, shares in Rare Earth Minerals Development Company
20:57
Speaker 4: Critical Metals are surging 10%. 36% after President Trump announced
21:01
Speaker 4: a security agreement over Greenland that relieves pressure from U.S.
21:05
Speaker 4: maneuvering to control the Danish territory. Critical Metals has a
21:09
Speaker 4: project in Greenland. An Accenture stock is climbing about 2.5%
21:13
Speaker 4: after the professional services company said it would partner with
21:17
Speaker 4: Anthropic and evaluate the AI company's models. Both companies would
21:21
Speaker 4: also invest at least $ 1 billion for building capacity in
21:25
Speaker 4: that area. I'm Tucker Sildon. That is Wall Street Watch.
21:31
Speaker 2: Here's the New York Times. Out of work and too
21:33
Speaker 2: young for Medicare, here is what to consider. What should
21:37
Speaker 2: be considered, Michael? Go back to work. There's no good
21:43
Speaker 2: answer based on the current cost of health care in
21:46
Speaker 2: the United States right now.
21:48
Speaker 3: It is tremendously, tremendously difficult out there. So for anyone
21:51
Speaker 3: that's not familiar, at 65... You do become eligible for
21:55
Speaker 3: Medicare if you're disabled or otherwise in tough shape. It
22:00
Speaker 3: can be a different set of rules that apply to you.
22:03
Speaker 3: But generally speaking, if you are of good health and
22:08
Speaker 3: have money, your Medicare eligibility, your health insurance provided by
22:11
Speaker 3: the government eligibility starts at age 65. There can be
22:15
Speaker 3: exceptions if you work for a state government or the
22:18
Speaker 3: military or the federal government. But generally speaking for most
22:21
Speaker 3: of us, 65 is that crucial age.
22:24
Speaker 2: Which a lot of.
22:25
Speaker 3: People, for a number of different reasons, can't or don't
22:29
Speaker 3: want to work until that point in time.
22:31
Speaker 2: Yes. So, this piece goes through the different options that
22:35
Speaker 2: are available for someone who is no longer working. Hey,
22:39
Speaker 2: how do you cover your health insurance during that time?
22:42
Speaker 2: Choice number one is, okay, like, if you're married to
22:45
Speaker 2: someone who can add you to their plan, go on theirs. Well, yeah. Yes, obviously.
22:49
Speaker 2: That'd be great. That would be perfect. Got it. Well,
22:52
Speaker 2: what if you're not married or what if your spouse
22:54
Speaker 2: isn't working or any other reason why you can't do that?
22:58
Speaker 2: You have up to 60 days to sign up for
23:02
Speaker 2: an Affordable Care Act plan through the health insurance marketplace.
23:07
Speaker 2: This does come with some subsidies that stop at a
23:12
Speaker 2: household income of about $ 64, 000 for a single person. and $ 132, 000
23:17
Speaker 2: in income for a family of four. So, again, you
23:24
Speaker 2: can potentially find some options there, but remember the income thresholds,
23:28
Speaker 2: if you have, again, a spouse who might be working
23:29
Speaker 2: or other source of income, you're not necessarily going to
23:33
Speaker 2: get a ton of help there, depending on what things
23:37
Speaker 2: look like. And remember, if you're talking about a plan
23:41
Speaker 2: for a couple, again, you're probably talking... depending on the
23:47
Speaker 2: exact type of plan in the state, I would say
23:50
Speaker 2: ballpark is expected to be at least a couple thousand
23:53
Speaker 2: bucks a month.
23:53
Speaker 3: So if you're interested, KFF.org, the Kaiser Foundation, has an
23:59
Speaker 3: estimator that you can use.
24:01
Speaker 2: I use it frequently with folks.
24:03
Speaker 3: So out of curiosity, I just ran an example. We
24:07
Speaker 3: are broadcasting this program from Massachusetts, specifically in Needham. And
24:11
Speaker 3: so I ran an analysis. In 2026 dollars, if you
24:14
Speaker 3: had $ 100, 000 worth of income, no coverage available from a
24:19
Speaker 3: spouse's job, and two adults age 63 looking for health insurance,
24:24
Speaker 3: no children, the estimated cost of what they call a
24:28
Speaker 3: silver plan is.
24:28
Speaker 2: $ 1, 674 per month.
24:30
Speaker 3: So silver plan is not your Highest end plan, obviously. $ 20, 000
24:37
Speaker 3: approximately per year. You're getting zero financial help with an
24:40
Speaker 3: income of that threshold. And that's where you are right now.
24:49
Speaker 3: And that is pretty onerous, right? When you compare it
24:52
Speaker 3: to Medicare, for example, right, where you're a few hundred
24:55
Speaker 3: bucks a month, shelling out a couple grand a month
24:59
Speaker 3: is quite a bit.
25:02
Speaker 2: The question becomes, obviously.
25:05
Speaker 3: This is, for most people, one of the single biggest
25:08
Speaker 3: costs that they have to face if they are considering
25:11
Speaker 3: retiring early or lose their job early. If you're on COBRA,
25:16
Speaker 3: the program that you're eligible for, if you lose your
25:18
Speaker 3: job and can stay on the health insurance for a
25:20
Speaker 3: period of time, that's generally not any more affordable for people.
25:23
Speaker 3: And so evaluating these costs in the context of your
25:28
Speaker 3: general finances is is a pretty critical thing to evaluate
25:31
Speaker 3: if you're looking at maybe retiring before full Medicare age.
25:37
Speaker 3: By the way, there can be ways of restructuring your
25:40
Speaker 3: assets to make your income look lower on paper than
25:44
Speaker 3: it might otherwise be. If you've got IRAs plus a
25:47
Speaker 3: savings account, one of them is going to show up
25:49
Speaker 3: and count towards income. The other one is not. They're
25:52
Speaker 3: both going to pay your bills. So for a lot
25:54
Speaker 3: of folks, it's, hey, I'm 58 years old now. I
25:57
Speaker 3: want to set myself up to be able to do
25:59
Speaker 3: this at 63, how do I need to save? What's
26:03
Speaker 3: the right bucket of money for money to go into
26:05
Speaker 3: to ensure that I'm not shelling out 20 to $ 30, 000
26:10
Speaker 3: a year for health insurance at that stage of life?
26:13
Speaker 3: If you have those questions, if you're trying to make
26:15
Speaker 3: that evaluation, can I retire early? Or what if I
26:18
Speaker 3: have no choice? What do my finances look like? And
26:21
Speaker 3: how can I position them to be in better shape
26:23
Speaker 3: for the future? Call us at Armstrong Advisory Group. We
26:26
Speaker 3: work with clients on this type of question. day in,
26:29
Speaker 3: day out, and it affects a lot of people. The
26:32
Speaker 3: subsidies have all changed over the years. Medicare rules change
26:35
Speaker 3: every year, and prices change every year. If you have
26:38
Speaker 3: questions like that, 800-393-4001, or you can check us out
26:40
Speaker 3: at armstrongadvisory.com.
26:45
Speaker 1: The proceeding was paid for by Armstrong Advisory Group, a
26:47
Speaker 1: registered investment advisor. Nothing in the ad or in any
26:50
Speaker 1: Armstrong guide is specific financial, legal, or tax advice. Consult
26:53
Speaker 1: your own financial, tax, and estate planning advisors before making
26:56
Speaker 1: any investment decisions. Armstrong may contact you to offer investment
26:59
Speaker 1: advisory services.
27:01
Speaker 2: Let's see. Do we want to talk about Disney?
27:04
Speaker 1: No.
27:04
Speaker 3: I want to talk about AI becoming too interconnected to fail, Chuck.
27:09
Speaker 2: Yeah, this is a good one. I have no idea
27:12
Speaker 2: what that means. I do. Okay.
27:14
Speaker 3: Tell me why or how AI could become too interconnected
27:19
Speaker 3: to fail. Are we talking about the company's investments in
27:22
Speaker 3: each other? Are we referring to maybe how it could
27:26
Speaker 3: become too interconnected into our critical infrastructure to fail? Whenever
27:31
Speaker 3: I hear too interconnected to fail, I think banking industry
27:35
Speaker 3: in 2018.
27:37
Speaker 2: What this piece is getting at and what I think
27:39
Speaker 2: its core idea is, is look, there's so much money
27:42
Speaker 2: flowing between so few entities that have so much power
27:47
Speaker 2: in markets right now that if AI were to end
27:53
Speaker 2: up proving that it's not all that we think it
27:55
Speaker 2: could be.
27:56
Speaker 3: Or shut down from some outside reason such as Congress.
28:00
Speaker 4: Sure.
28:01
Speaker 2: Then it could cause catastrophic damage to the U.S. and
28:05
Speaker 2: world economy in doing so.
28:07
Speaker 3: I would buy that. We should also not do much
28:11
Speaker 3: to prevent that.
28:12
Speaker 2: No, here's the thing. Do you guys ever watch No
28:16
Speaker 2: Country for Old Men? Yep. There's a line that Javier
28:20
Speaker 2: Bardem says at one point. He goes, if your rule
28:23
Speaker 2: was such that it brought you to this point, then
28:26
Speaker 2: what use was the rule anyways? And I guess what
28:30
Speaker 2: I get to is, hey, if the rules that we've
28:34
Speaker 2: built that have gotten AI to this point, if we
28:39
Speaker 2: think that those rules are good... But they turn out
28:42
Speaker 2: to be bad. Well, we don't jump in to save
28:44
Speaker 2: the whole thing just because it went bad. It would
28:47
Speaker 2: hurt markets. You can't do that. You can't say, okay,
28:51
Speaker 2: it's capitalism and the rewards accrue to them when things
28:55
Speaker 2: go well. But then as soon as things go badly, well,
28:58
Speaker 2: we've got to stop it and save them because now
29:01
Speaker 2: it could damage everything.
29:02
Speaker 3: Critical things, I think, for investors to understand right now.
29:06
Speaker 2: If that's really the case... Then these companies need to
29:09
Speaker 2: be broken up right now. Yeah. And not just broken up,
29:12
Speaker 2: but the risk needs to be adequately distributed such that, hey,
29:16
Speaker 2: if different parts of that ecosystem do fail, then the
29:20
Speaker 2: whole thing doesn't come down. What kinds of things could
29:23
Speaker 2: we talk about there?
29:24
Speaker 3: I don't know.
29:24
Speaker 2: Should NVIDIA still be able to just... go out and
29:29
Speaker 2: buy any company that it wants without regulators even blinking
29:32
Speaker 2: at it?
29:33
Speaker 3: Or force their customers to only buy from them and.
29:40
Speaker 3: Not build out their own chip business. There's a bunch
29:43
Speaker 3: of things.
29:43
Speaker 2: Or should NVIDIA be able to take stakes in its
29:45
Speaker 2: own customers at this point? These are real questions that
29:48
Speaker 2: we should be asking, but we're not because we're just saying, hey,
29:52
Speaker 2: it's AI and it's good. I'm not saying that. I'm
29:54
Speaker 2: just saying you're saying that. We as a society are.
29:56
Speaker 2: As a society, like... We're not actually doing anything about this.
30:01
Speaker 2: And so I will be not surprised, but I will
30:08
Speaker 2: be just as despondent as during kind of the financial
30:12
Speaker 2: crisis if this comes to like an AI crisis. And
30:15
Speaker 2: our answer is. Bail them out. Well, we got to
30:17
Speaker 2: bail out the AI companies. That would be disgusting. It
30:20
Speaker 2: would be, but it feels like that's where we're going
30:23
Speaker 2: to go at some point. Only because, guys, the AI
30:26
Speaker 2: companies are already trying to pre-sell that.
30:28
Speaker 1: Yeah.
30:29
Speaker 2: We've already heard Sam Altman and other guys talking about
30:32
Speaker 2: a federal backstop for AI companies.
30:35
Speaker 3: Yeah, they want federally backed loans, things along those lines,
30:39
Speaker 3: which we just shouldn't do.
30:40
Speaker 2: Right. You want a federally backed loan? Well, I want
30:44
Speaker 2: a few unicorns on top of it, too. And hey,
30:46
Speaker 2: how about I could use a beer or two on
30:48
Speaker 2: the weekend?
30:49
Speaker 3: So things to know about the U.S. stock market right
30:52
Speaker 3: now I think are pretty important that people understand. The
30:55
Speaker 3: S & P 500, what most people use to track
30:59
Speaker 3: the greater context of the stock market.
31:03
Speaker 2: About a third of that is tech companies? Yeah, let
31:07
Speaker 2: me get you an accurate number just because I find
31:09
Speaker 2: it's important to be accurate on this. Yeah, if you
31:13
Speaker 2: look at specific sector-by-sector breakdown, 39% is tech. Okay, so
31:16
Speaker 2: 39% of the S & P 500 is tech companies.
31:18
Speaker 3: Almost all, except for one of the biggest, Apple companies,
31:26
Speaker 3: are making very big investments into artificial intelligence, either as
31:31
Speaker 3: a vendor that supplies the industry or a company that
31:34
Speaker 3: invests in it. Think Microsoft. If you go take a
31:37
Speaker 3: look at other sectors, the communications services sector, which nobody
31:41
Speaker 3: thinks of, but those largest two companies there would be Meta,
31:45
Speaker 3: Facebook's parent company, and Alphabet, Google's parent company. When you
31:49
Speaker 3: go look at consumer discretionary, the biggest company there would
31:52
Speaker 3: happen to be Amazon. Another massive... AI-focused company right now.
31:58
Speaker 3: And so depending on your estimate of things, I think
32:01
Speaker 3: you can pretty easily attribute about 40% of the market
32:04
Speaker 3: cap of the S & P 500 to being invested
32:10
Speaker 3: in some way, shape, or form in AI, whether it's
32:13
Speaker 3: supplying it with products or investing dollars in building data
32:17
Speaker 3: centers or That's the story.
32:18
Speaker 2: It's not hard to get there.
32:20
Speaker 3: If you want to go toss in the other companies
32:23
Speaker 3: like utilities that could benefit from the electricity usage.
32:26
Speaker 2: Let's be honest, they're nothing.
32:27
Speaker 3: Or industrials that are building out the stuff like Caterpillar
32:32
Speaker 3: or the other companies that could, financials even, that could
32:37
Speaker 3: be benefiting from future IPOs. Those could add a few
32:41
Speaker 3: percentage points. But I think that's the critical piece to
32:43
Speaker 3: understand is that you can pretty easily attribute around 40%
32:48
Speaker 3: of the market capitalization of the S & P 500
32:51
Speaker 3: as very interconnected into the AI system right now. And
32:55
Speaker 3: that has benefited tremendously returns in S & P 500.
32:59
Speaker 2: The safest this market has been over the last four
33:02
Speaker 2: years has been every time that those companies are ripping.
33:07
Speaker 2: Whenever this market's gotten into trouble in the last four
33:09
Speaker 2: years has been when they have struggled. We've seen this
33:12
Speaker 2: on a few different instances. The problem is, at some point,
33:18
Speaker 2: those companies are not going to be able to grow
33:20
Speaker 2: the way they've been growing. I don't know when that is,
33:24
Speaker 2: but nothing grows at 100% a year. We're not going
33:27
Speaker 2: to be the United States of Amazon. We're not going
33:31
Speaker 2: to be the United States of NVIDIA. It's just not possible.
33:36
Speaker 2: Elon Musk talking about, well, we're going to do $ 10
33:37
Speaker 2: trillion in revenue. By 2030, and Elon agreeing with it,
33:45
Speaker 2: it's like, okay, so SpaceX is going to be 20%
33:48
Speaker 2: of the U.S. economy?
33:48
Speaker 3: Right.
33:52
Speaker 2: We've got to be honest about this in that, hey,
33:56
Speaker 2: AI has been a tremendous boost to the economy, but
34:00
Speaker 2: if it ever starts to falter, there's some real risks
34:03
Speaker 2: there to markets and the broader economy as a whole
34:06
Speaker 2: that are really dangerous and that feel like we're going
34:09
Speaker 2: to end up with bailouts, in my opinion, which I
34:12
Speaker 2: think sucks. We'll see if we actually get there. I
34:15
Speaker 2: hope we don't, but we'll see what happens. Quick break.
34:18
Speaker 2: We've got Stack Roulette next.
34:21
Speaker 1: Smart financial talk whenever you want. Find the Financial Exchange
34:25
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34:27
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34:30
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34:35
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34:43
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34:53
Speaker 2: Mike, what do you got for Stack Roulette?
34:54
Speaker 3: I want to talk about the emotions of being a
34:58
Speaker 3: first-time homebuyer and, you know, the struggles that people are
35:01
Speaker 3: dealing with.
35:02
Speaker 2: Oh, man. Like, fully....
35:06
Speaker 3: I'm almost not even in a place to comment given
35:08
Speaker 3: how well-timed my own home-purchasing experience has been, right? Like,
35:13
Speaker 3: I bought my first place in the early 2010s. I
35:16
Speaker 3: bought my most.
35:17
Speaker 2: Recent home at a mortgage rate of 3.25%. Like, I am.
35:23
Speaker 3: Not a person to attest to the difficulties of buying
35:25
Speaker 3: a home. No, people don't like you.
35:26
Speaker 2: I got lucky. Yeah.
35:28
Speaker 3: But I also hear about the impossibility of it today.
35:32
Speaker 3: And while I can feel that, get that emotion, it's not, right?
35:39
Speaker 3: If you are truly intent on being a homeowner, what
35:43
Speaker 3: it means is settle it. And this piece from the
35:46
Speaker 3: journal goes through this couple who was renting in downtown Seattle,
35:50
Speaker 3: couldn't afford Seattle, so went to a town nearby where
35:55
Speaker 3: the median home price is a little bit more than
35:57
Speaker 3: half of what you see in greater Seattle, and they
36:01
Speaker 3: were able to pull it off. Is it the perfect
36:04
Speaker 3: home for them? No, it doesn't really seem like it.
36:06
Speaker 3: It's less space than even their apartment was, but the
36:09
Speaker 3: mortgage payment is approximately what their rent was, and they
36:12
Speaker 3: had to settle. I think to me, the biggest reason
36:15
Speaker 3: people can't do this is because buyer's remorse on any
36:20
Speaker 3: purchase is tough. But when you're talking about the single
36:24
Speaker 3: biggest purchase of your life, having any sort of buyer's
36:29
Speaker 3: remorse is a pretty rough feeling. And so I think it's,
36:32
Speaker 3: I think it's nerves and that piece and that's fine, right?
36:36
Speaker 3: Like a lot of people should not make that, uh,
36:40
Speaker 3: that settlement that, that, uh, negotiation with themselves of buying
36:45
Speaker 3: a home that they aren't going to like because that
36:46
Speaker 3: buyer's remorse on a quarter of a million or half
36:49
Speaker 3: a million dollar property is a pretty tough pill to swallow.
36:53
Speaker 3: But I think it plays a massive piece in people's
36:56
Speaker 3: just unwillingness to settle.
36:59
Speaker 2: I got to tell you, I've owned three properties in
37:01
Speaker 2: my life. Every single time that I bought one that
37:05
Speaker 2: I moved into, I had buyer's remorse immediately. Sure. I
37:09
Speaker 2: still remember the first time that I actually took out
37:11
Speaker 2: a mortgage. And I'm sitting there in the place, and
37:14
Speaker 2: there's nothing in there yet, because my stuff hasn't even
37:17
Speaker 2: moved in. And I'm just like, I think I was 27,
37:20
Speaker 2: maybe 28 years old. No, I was 29? I was
37:23
Speaker 2: in my late 20s. And I remember just thinking to myself,
37:28
Speaker 2: I'm like, who's the idiot that approved a loan to
37:31
Speaker 2: me for this much money? Because I'm like, I don't
37:36
Speaker 2: know how I can pay this off. And then, like,
37:38
Speaker 2: a month later, the ceiling, it was a two-floor, like,
37:42
Speaker 2: basement and first-floor apartment or condo, I guess. And the
37:47
Speaker 2: ceiling and the first floor just collapsed at one point,
37:49
Speaker 2: and all this water started pouring out of it. Yeah.
37:52
Speaker 2: And I'm looking at it, and I'm like, what the
37:54
Speaker 2: heck did I do?
37:55
Speaker 3: Mm-hmm.
37:57
Speaker 2: And again, part of it was like, you settled. Okay,
37:59
Speaker 2: it's in a city. It's a basement first floor apartment
38:01
Speaker 2: that has some water problems and a unit upstairs that
38:05
Speaker 2: I don't even know who they are and who to
38:07
Speaker 2: talk to about this. So yeah, you got to settle
38:10
Speaker 2: a bit at first. I don't know. You work your
38:13
Speaker 2: way through and you figure it out the best you can.
38:15
Speaker 2: None of us really know what we're doing. Let's take
38:17
Speaker 2: a quick break for the entire day. We're going to
38:19
Speaker 2: see you tomorrow on Tuesday on the Financial Exchange.