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A Major Airline Is About to Collapse · The Financial Exchange Show

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Speaker 1: making a donation today. This is the Financial Exchange with
1:05
Speaker 1: Chuck Zada and Mike Armstraw.
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Speaker 2: Chuck, Mike and Tucker here with it and kicking things off. Today,
1:13
Speaker 2: we've got a little bit of movement happening across financial markets.
1:19
Speaker 2: S Andp's up about half percent, thirty eight points. The
1:22
Speaker 2: Dow is up about a half percent as well, two
1:25
Speaker 2: hundred and eighty four points, and now as that can
1:27
Speaker 2: posit up two hundred and eleven points a little less
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Speaker 2: than one percent, So all three major US indices are
1:33
Speaker 2: in the green. Tenuere Treasury UH pulling back a touch
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Speaker 2: after rising for most of this week. It's down one
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Speaker 2: point six bases points to four point three seven four percent.
1:43
Speaker 2: Dollar Index down point two one percent to ninety seven
1:47
Speaker 2: to seventy one. Gold is now up fifteen ninety one
1:50
Speaker 2: ounce after being down about forty bucks an ounce earlier
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Speaker 2: in trading. It's at forty six forty six, which is
1:55
Speaker 2: fun to say, fun to look at. And we've got
1:58
Speaker 2: crude oil West texts Inner Media down three point fifty
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Speaker 2: one a barrel to one oh one fifty four right now.
2:06
Speaker 2: And despite that, TRIPI national average for gas prices is
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Speaker 2: at four point thirty nine and two cents two tents
2:14
Speaker 2: in a set rather up nine point two cents overnight,
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Speaker 2: diesel moving up about eight cents as well. Diesel is
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Speaker 2: now twenty four cents away from a new all time high,
2:24
Speaker 2: where as the national average for regular gas is still
2:29
Speaker 2: about sixty two cents away from an all time high.
2:34
Speaker 2: A little bit of news that just popped up minutes ago.
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Speaker 2: Nine minutes ago, according to the Wall Street Journal their
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Speaker 2: exclusive report, Spirit Airlines prepares to shut down as rescue
2:48
Speaker 2: deal falls apart a big thing. They were hoping to
2:51
Speaker 2: get a five hundred million dollar loan from the federal
2:54
Speaker 2: government before running out of cash. It appears that, according
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Speaker 2: to the Journal's reporting, that is not likely to happen.
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Speaker 2: They have not been able to get support between bondholders
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Speaker 2: and the government to make it work, and so it
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Speaker 2: appears that they are getting close to a ceasing of
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Speaker 2: operations in the coming day. Shut it down, strip it
3:17
Speaker 2: for parts now. Anyone who followed their attempted merger with
3:20
Speaker 2: Jet Blue several years ago knows that despite the fact
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Speaker 2: that I'm a big believer in hey, we need more competition,
3:26
Speaker 2: I said at the time, Look, if you're not going
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Speaker 2: to allow these companies to merge, after allowing all of
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Speaker 2: the other major airlines to merge back in the early
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Speaker 2: two thousands. They're at a competitive disadvantage that is not
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Speaker 2: going to allow them to survive and lo and behold,
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Speaker 2: that's exactly where we are right now. We have different
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Speaker 2: sets of playing a different playing field for companies that
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Speaker 2: were able to merge between two thousand and five and
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Speaker 2: twenty fifteen and ones that tried to merge after. And
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Speaker 2: this is going to put one airline with fourteen thousand
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Speaker 2: employees out of business, and you've got others that are
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Speaker 2: looking around wondering if they're next. And that's just kind
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Speaker 2: of where we are right now.
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Speaker 3: Yeah, I don't really know how a Frontier and a
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Speaker 3: Jet Blue compete today. The twenty twenty four passenger volume
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Speaker 3: was about forty million U sorry, these are seat miles.
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Speaker 3: So Frontier Airlines had in twenty twenty four about forty
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Speaker 3: billion seat miles. United had three hundred.
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Speaker 2: Is that a lot? It's just three hundred million? Yes, Uh,
4:31
Speaker 2: these are billions of billion available, not three hundred seat miles.
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Speaker 2: Three hundred, three hundred billion.
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Speaker 3: American had two ninety three, Delta had two eighty eight,
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Speaker 3: like Southwest can still compete at nearly two hundred you.
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Speaker 2: Go tay a look at these other companies. They don't
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Speaker 2: have the scale. They just don't have the scale to
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Speaker 2: be able to do this. No, the only way that
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Speaker 2: that merger should have been not should not have been
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Speaker 2: approved is if you went to Delton said you got
4:56
Speaker 2: to figure out some way to make half of you
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Speaker 2: Northwest again, and go to Americans say half you's got
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Speaker 2: to be US Air, and you go to United and
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Speaker 2: say half u's gotta be Continental. Ill this Spirit again.
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Speaker 3: If assuming this Wall Street Journal reporting is true and accurate,
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Speaker 3: I mean they were. I flew them several times.
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Speaker 2: I did too.
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Speaker 3: My mother in law was nervous as heck on our
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Speaker 3: latest vacation when I booked her on Spirit because she
5:22
Speaker 3: was pretty sure it was gonna liquidate while we were
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Speaker 3: on vacation.
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Speaker 2: It didn't.
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Speaker 3: But look, they were consistently, consistently thirty to cheaper. Knew
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Speaker 3: what you were getting it was, you know, they didn't
5:33
Speaker 3: get pin it, seventy five bucks to carry on a bag,
5:36
Speaker 3: seventy five bucks to check one, you know, pay for
5:39
Speaker 3: everything he did.
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Speaker 2: But you know what was the model? Your knees were
5:42
Speaker 2: in your chest with like twenty five inches of pitch
5:45
Speaker 2: between the seats. Yeah, but like again, like no one
5:49
Speaker 2: made you fly that flight. You know it was okay,
5:53
Speaker 2: like great, like it's it's cheaper and fine, I'll hop on.
5:56
Speaker 2: But yeah, they just can't compete in a world where
5:59
Speaker 2: some mergers are allowed but theirs is not. I want
6:03
Speaker 2: to talk about this piece from ABC. It's titled some
6:06
Speaker 2: driver seeking workarounds as gas soares to highest prices in
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Speaker 2: four years. I was really wondering what these workarounds were.
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Speaker 2: Horse Well, I.
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Speaker 3: Sold my twenty thousand dollars card I bought a sixty
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Speaker 3: block last night.
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Speaker 2: I'll tell you what I did. I I thought that
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Speaker 2: maybe if I could put some coal in the blender,
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Speaker 2: I could make it into gas. And it turns out
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Speaker 2: that doesn't work. Uh huh. You can't just mix coal
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Speaker 2: and water in a blender and fill your tank with it.
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Speaker 2: That's that's a bad, bad approach. So yeah, I don't
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Speaker 2: think there are really workarounds. The closest I found to
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Speaker 2: a workaround is what some of these people do, I guess,
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Speaker 2: which is hey, basically, since the start of March, if
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Speaker 2: I get down to like three quarters of a tank,
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Speaker 2: I stop and fill up four gallons of gas because
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Speaker 2: it's gonna be cheaper than the next day. Well, people,
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Speaker 2: that's basically the only thing that like I I can do.
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Speaker 2: I mean, I can't store gas at my house. Yeah.
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Speaker 3: The solutions that these people were coming up with is like, well,
7:06
Speaker 3: I can only afford to put twenty bucks in my tank,
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Speaker 3: So I'm gonna put twenty bucks in my tank, and
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Speaker 3: that's gonna get me a lot less, you know, much
7:12
Speaker 3: shorter distance than it used to.
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Speaker 2: And that's not that's not a workaround, No, that's that's
7:17
Speaker 2: called supplying demand.
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Speaker 3: Yeah, a workaround would be you know, picking up your
7:25
Speaker 3: neighbor and driving to work together. But we don't like
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Speaker 3: our neighbors.
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Speaker 2: I like my neighbors. I think they're great. We did
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Speaker 2: have a text that came in on the topic. Companies
7:41
Speaker 2: should be encouraging their employees to work from home to
7:43
Speaker 2: reduce demand for oil and gas for commuters. In fact,
7:46
Speaker 2: if you talk to anyone who happens to live in Asia,
7:50
Speaker 2: it's not just being encouraged, it's being mandated in a
7:53
Speaker 2: lot of cases, either you know, partial or full work
7:56
Speaker 2: from home schedules, depending on the country and the specific layer. Here,
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Speaker 2: we're not there yet, just because the US being in
8:05
Speaker 2: the unique geographic and resource rich position that we happen
8:10
Speaker 2: to enjoy. We are able to avert some of what's
8:15
Speaker 2: gone on to this point. But we're going to get
8:17
Speaker 2: to a point where as long as Horror Moves remains closed,
8:20
Speaker 2: prices are going to continue moving up over the course
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Speaker 2: of the summer. There is no way around it. As
8:27
Speaker 2: long as Horror Moves remains closed.
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Speaker 3: Yeah, I mean, look, I like the idea of fewer
8:33
Speaker 3: drivers being on the road, but companies are not going to.
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Speaker 2: Do that out of the goodness of their own hearts.
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Speaker 3: If you want to, if you think it's worthwhile to
8:40
Speaker 3: provide a tax incentive to companies to say, hey, encourage
8:43
Speaker 3: your employees to get off the road and we will
8:46
Speaker 3: throw some money at you, then they'll do it. But
8:47
Speaker 3: they're just not going to say, yeah, you work from
8:50
Speaker 3: home because gas prices are higher.
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Speaker 2: Let's take a quick break and when we come back,
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Speaker 2: do wean to talk Zuck, Do we want to talk
8:59
Speaker 2: AI agents becoming day traders?
9:02
Speaker 3: Yeah, let's go to AI agent's peak. Okay traders, because
9:04
Speaker 3: that seems like a basket of fun. Quick break Trivia's
9:08
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Speaker 4: All right, It's up for sure to be here on
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Speaker 4: the Financial Exchange. And on this day. In nineteen thirty nine,
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10:45
Speaker 2: AI agents are becoming day traders, but gains are elusive.
10:53
Speaker 3: Is that because day trading gains are elusive? Or is
10:56
Speaker 3: that because AI agents are bad at it?
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Speaker 2: Well, it's both. I mean, look back the uh tech bubble,
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Speaker 2: I think that three out of every four Americans were
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Speaker 2: day traders. It wasn't that high actually, But look, everyone
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Speaker 2: thinks that they're going to, you know, be this great trader.
11:17
Speaker 2: I'm sure everyone thinks they're gonna be able to program
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Speaker 2: a great system so that their agent can be even
11:22
Speaker 2: better than them because it's not emotional and won't make
11:24
Speaker 2: the same mistakes that humans do. So I'm going to,
11:30
Speaker 2: you know, again, look at some of the situations they
11:33
Speaker 2: are described in this piece and be like oh okay,
11:36
Speaker 2: Like yeah, you've got some of these like viral posts
11:40
Speaker 2: that go out on social media about someone that made
11:42
Speaker 2: a five and sixty percent return in two days only,
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Speaker 2: and it was later debunked by another AI agent who
11:51
Speaker 2: proved that it didn't actually happen. So ultimately, look, here's
11:56
Speaker 2: the deal. If using an AI agent to trade is
12:01
Speaker 2: no different from setting up a trading strategy for yourself. Sure,
12:04
Speaker 2: if you can't describe what your edge is in fifteen seconds,
12:09
Speaker 2: you don't have one.
12:11
Speaker 3: And if you don't know how to day trade yourself,
12:15
Speaker 3: you're not going to be successful in training an AI
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Speaker 3: agent to do so. No, by the way, this story,
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Speaker 3: it does seem that the individual that they interviewed had
12:27
Speaker 3: some experience in day trading and trading options and.
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Speaker 2: Just was busy with his job and wanted to check
12:32
Speaker 2: that out.
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Speaker 3: But I found it funny that he was inspired by
12:36
Speaker 3: the anthropic experiment in which Claude controlled an office vending machine.
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Speaker 3: And I don't know if this is the same experiment
12:43
Speaker 3: that the Wall Street Journal reported on, but where your
12:46
Speaker 3: recall it gave away a free Sony PlayStation or a
12:50
Speaker 3: live fish, and was I think it was also convinced
12:55
Speaker 3: that it needed to, you know, kind of become a
12:57
Speaker 3: commie and give away everything.
12:58
Speaker 2: In the vending machine became communists.
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Speaker 3: I don't really know that that's the best example of
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Speaker 3: using for day trading or right like that inspired What
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Speaker 3: about that inspired you?
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Speaker 2: What if you're trading bought, decides it should be communist.
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Speaker 3: Just distribute all the profits equally to who you know,
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Speaker 3: you you, all the other traders.
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Speaker 2: You want communal ownership of what?
13:24
Speaker 1: Like?
13:24
Speaker 2: I just I can't even get there. Yeah, So I
13:27
Speaker 2: guess what are the takeaways? Though?
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Speaker 3: Because Chuck, I will say that every single piece of
13:33
Speaker 3: software that I'm using these days is telling me about
13:37
Speaker 3: the new AI tool that they have released or about
13:40
Speaker 3: to release, or plan to release in the not so
13:42
Speaker 3: distant future. And I think that some of these are
13:47
Speaker 3: going to be awfully useful, but it's all there's a
13:52
Speaker 3: lot of danger to.
13:53
Speaker 2: It's no different from any other tool. If you go
13:58
Speaker 2: and give a monkey a drill, it's probably gonna work
14:03
Speaker 2: out badly like a You're gonna have holes and all
14:06
Speaker 2: kinds of stuff be the monkey's probably gonna hurt itself.
14:08
Speaker 2: It's not gonna go well. If you train a person
14:13
Speaker 2: to use a drill appropriately, they can be hugely productive
14:18
Speaker 2: and do things that they couldn't do without that tool.
14:20
Speaker 2: And that technology. AI is no different except it just
14:25
Speaker 2: like again power tools, it acts as an amplifier. Like
14:28
Speaker 2: if if you could make a mistake with a hammer,
14:32
Speaker 2: you can make worse ones with a nail gun. AI
14:36
Speaker 2: is the same thing. If you can make math mistakes
14:38
Speaker 2: and trading mistakes us an excel, you can make worse
14:41
Speaker 2: ones using AI agents. You can also make better decisions
14:45
Speaker 2: potentially if like you have you know good processes. But
14:49
Speaker 2: ultimately it gets back to what is your skill set,
14:54
Speaker 2: and it's like, no thyself, no your limitations, know your
15:00
Speaker 2: what you're good at, and ultimately, for most people, trading
15:05
Speaker 2: is not something they're good at. It's just not.
15:09
Speaker 3: If you are evaluating your investment strategy. I know that
15:14
Speaker 3: there is a lot of infatuation on this moment in
15:17
Speaker 3: time right now, a lot of potential or already realized
15:22
Speaker 3: upside due to artificial intelligence, and I think an equal
15:25
Speaker 3: amount of concern about what that ultimately results in. If
15:29
Speaker 3: you're looking for some guidance, especially if you are talking
15:32
Speaker 3: about using that portfolio for your own life expenses sometime
15:36
Speaker 3: in the next decade, I'd really encourage you to get
15:39
Speaker 3: a second opinion, whether you're doing it yourself having somebody.
15:42
Speaker 2: Do it for you.
15:43
Speaker 3: You need to be asking these questions about what is
15:46
Speaker 3: my strategy and how does that strategy need to change
15:49
Speaker 3: as my life develops? If you like to book free
15:52
Speaker 3: consultation with the Armstrong Advisory Group to review that strategy.
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Speaker 3: hundred three nine three four zero zero one.
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Speaker 1: The proceeding was paid for by Armstrong Advisory Group, a
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16:32
Speaker 2: Let's see, do we want to talk anything about Meta.
16:35
Speaker 2: I've kind of had enough AI in Meta for the week. Yeah,
16:38
Speaker 2: we've been beaten. I just I can't wait take my break. Yeah,
16:41
Speaker 2: I can't. I can't do any more, zuck at the moment.
16:46
Speaker 2: Can we talk about Warren Buffett calling sports betting a
16:49
Speaker 2: tax on stupidity? Yeah, let's talk about this. So Warren Buffett,
16:55
Speaker 2: who no longer is in the CEO chair at was
16:59
Speaker 2: his retirement effective immediately or is it a freak won't
17:04
Speaker 2: be run in the next meeting. In any case, Warren
17:07
Speaker 2: Buffett not a big fan of gambling. You know his
17:13
Speaker 2: quotes here to the extent that states raise money from
17:15
Speaker 2: people who the dollar really means something to them. It
17:18
Speaker 2: actually relieves the taxes on me or other rich people.
17:21
Speaker 2: It's not direct, but it's the net effect, which is true.
17:24
Speaker 3: Go look at the originations of the lottery systems across
17:27
Speaker 3: state by state. Massachusetts, yes, one of the first on
17:32
Speaker 3: that front, and to really leverage it, and it is
17:34
Speaker 3: a largely reaggressive tax. It is played more by those
17:38
Speaker 3: in poverty and does dramatically relieve state, state, in town budgets.
17:44
Speaker 2: And so Buffett, you know, goes on to say, look,
17:45
Speaker 2: I don't like things that make suckers out of people.
17:47
Speaker 2: I don't think the function of the government is to
17:49
Speaker 2: put play its people for suckers. And look, there's a
17:53
Speaker 2: reason why so many states have legalized sports gambling. Now.
17:57
Speaker 2: It's not because they love it. It's because they love
18:00
Speaker 2: the tax revenue from it. And the fact is between
18:04
Speaker 2: the tax revenue that remember, the tax revenue is generated
18:07
Speaker 2: by the gambling companies that you know and end up
18:12
Speaker 2: paying it ultimately, like when you factor in the fact
18:15
Speaker 2: that those companies last time I checked, in order to
18:18
Speaker 2: stay in business, Mike, you need to make money, right
18:20
Speaker 2: as far as I know you, so, in order to
18:22
Speaker 2: make money and then have money to pass on in
18:24
Speaker 2: the form of taxes. It means that gambling is not
18:27
Speaker 2: a zero sum game. It is a game that is
18:29
Speaker 2: inherently rigged against the broad population of gamblers. Like you
18:34
Speaker 2: just look at how the lines are set, and that
18:36
Speaker 2: is basically how it works. And so it's a situation
18:41
Speaker 2: where the data that's come out is pretty much that
18:45
Speaker 2: like a very tiny sliver of people are the big
18:48
Speaker 2: winners and pretty much, Tucker, I forget what the distribution is. Is
18:51
Speaker 2: it like ninety percent of people end up being losers
18:53
Speaker 2: in the sports gambling ecosystem.
18:55
Speaker 4: Sounds about right, especially meleely.
18:57
Speaker 2: It feels like that, doesn't it. Huh? Sorry, go ahead.
19:04
Speaker 2: In any case, I think the big thing here that
19:08
Speaker 2: I keep coming back to because again, you talk to
19:10
Speaker 2: any male in their twenties and they're like, yep, most
19:13
Speaker 2: of my friends have sports gambling debt. If you want
19:16
Speaker 2: to have it legalized, it's fine. But I think we're
19:19
Speaker 2: really kind of borderline destroying parts of society by allowing
19:24
Speaker 2: you to just have it on your phone, And I
19:25
Speaker 2: think you sho have to go into a nice, fun,
19:27
Speaker 2: cool sports book and do it there, because it's just
19:30
Speaker 2: less dangerous.
19:31
Speaker 3: To being able to sit in your same it supposed
19:32
Speaker 3: to ignore the addictive piece of it.
19:34
Speaker 2: Quick Break Wall Street Watching Trivia Answer.
19:36
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20:00
Speaker 4: Well, they is starting off in positive territory of strong
20:04
Speaker 4: earnings in tech continued to lift market sentiment. Right now,
20:07
Speaker 4: the Dow is up a tenth of a percent, SMP
20:09
Speaker 4: five hundred up two thirds of a percent, Nasdaq now
20:12
Speaker 4: up over one percent or two hundred and seventy six points,
20:15
Speaker 4: RUSS two thousand edging about a tenth of a percent higher,
20:19
Speaker 4: Tenure Treasure Reel down one basis point at four point
20:21
Speaker 4: three seven six percent, and oil down three percent today
20:25
Speaker 4: trading right around one hundred and one dollars a barrel,
20:29
Speaker 4: breaking news this hour after the Wall Street Journal reported
20:31
Speaker 4: that Spirit Airlines is preparing to shut down after the
20:34
Speaker 4: budget airline had been hoping to finalize a five hundred
20:37
Speaker 4: million dollar lifeline from the government before running out of cash. Meanwhile,
20:41
Speaker 4: Applestock is gaining four percent after the tech giant reported
20:45
Speaker 4: its iPhone revenue climb twenty one point seven percent to
20:48
Speaker 4: nearly fifty seven billion dollars in the previous quarter. Elsewhere,
20:52
Speaker 4: sand dis shares are up modestly after the data storage
20:54
Speaker 4: company beat earnings expectations and offered stronger than expected guidance.
20:59
Speaker 4: Western Digital also impressed with its quarterly profit, yet the
21:02
Speaker 4: stock is down over two percent. Elsewhere, Elastian stock ralling
21:06
Speaker 4: twenty three percent after the software company reported strong cloud
21:10
Speaker 4: growth in data center revenue. Roadblocks cut its full year guidance,
21:14
Speaker 4: has efforts to boost its safety features weight on its
21:17
Speaker 4: latest quarterly results. Shares in the video game maker tanking
21:20
Speaker 4: by fifteen percent, and social media company Reddit reported double
21:25
Speaker 4: digit sales growth in AD revenue and boosted sales and profit.
21:30
Speaker 4: That stock is up by eleven percent. I'm Tucker Silva,
21:35
Speaker 4: and that is Wall Street watching. In the previous segment,
21:37
Speaker 4: we asked you the trivia question which actor is the
21:41
Speaker 4: only one to have won an Academy Award for their performance.
21:44
Speaker 2: In a Batman movie?
21:47
Speaker 4: And that would, of course be Heath Ledger as the
21:49
Speaker 4: Joker in the Dark Night. And Chris from Pelham, New
21:53
Speaker 4: Hampshire is our winner today taking home the Financial Exchange
21:55
Speaker 4: Show t shirt. Congrats to Chris, and we played trivia
21:59
Speaker 4: every day here on the Financial Exchange. See complete contest
22:03
Speaker 4: rules at Financial Exchange Show dot com.
22:06
Speaker 2: The mails here, here's the mail that the mails. It
22:09
Speaker 2: makes big one, the wag matail. When it comes. I
22:12
Speaker 2: want the whal bag.
22:15
Speaker 1: You've got questions, We've got answers. It's time for the
22:18
Speaker 1: Money Matters Mailbag. We are tackling your calls and emails
22:22
Speaker 1: on everything from economic policy to global markets and everything
22:26
Speaker 1: in between. Leave us a voicemail at three three nine
22:28
Speaker 1: three nine nine four three three three and you might
22:31
Speaker 1: hear it on the show. You can also email your
22:33
Speaker 1: question to TFE Show at gmail dot com. Now it's
22:38
Speaker 1: time for the Money Matters mail bag.
22:40
Speaker 4: All right, let's get right to the Money Matters mail
22:43
Speaker 4: bag here in the Financial Exchange. That's your chance to
22:46
Speaker 4: ask Chuck and my questions that you might have in
22:50
Speaker 4: the old noggin. So uh, let's get to it here.
22:52
Speaker 4: Tony and fall River has a question for Chuck and Mike.
22:57
Speaker 4: Tony says, I am thirty years old, have been invested
23:00
Speaker 4: since I was eighteen. I have multiple investment accounts, and
23:04
Speaker 4: I'm wondering if it's better to consolidate for higher compounding
23:07
Speaker 4: possibilities or keep them separate.
23:11
Speaker 2: Good question. Can I address that? Michael? Please do so here.
23:15
Speaker 2: Here's the big thing is multiple investment accounts. They don't
23:19
Speaker 2: compound faster or slower depending on where you hold them.
23:23
Speaker 2: There are different reasons to keep things in different accounts.
23:26
Speaker 2: For example, sometimes you have to just because of tax considerations.
23:30
Speaker 2: You can't just, you know, combine a roth IRA with
23:32
Speaker 2: an after tax account, or you can't just combine a
23:36
Speaker 2: traditional IRA with a roth There are tax considerations for
23:39
Speaker 2: doing so. Beyond that, occasionally you run into situations where
23:43
Speaker 2: it makes sense to have certain accounts that are separated
23:49
Speaker 2: because maybe certain ones give you access to certain types
23:52
Speaker 2: of investments that you can't access in other ones, and
23:56
Speaker 2: so you might choose to keep them separated that way.
23:58
Speaker 2: From a personal perspective, sometimes just when it comes to
24:01
Speaker 2: different financial accounts, whether it's investment or bank accounts. I
24:05
Speaker 2: keep them separated just so that I can very easily see, like, okay,
24:08
Speaker 2: here's my bucket that I have for X or Y
24:11
Speaker 2: or z, and so it can make sense to have
24:13
Speaker 2: things fashion that way.
24:15
Speaker 3: But I have gotten this question about compounding before, because
24:17
Speaker 3: it's true, right, the more money you have, the bigger
24:21
Speaker 3: the compounding rate. But if you already have the funds right,
24:23
Speaker 3: like just play and simple, you have two accounts where
24:25
Speaker 3: one thousand dollars and each of them get a ten
24:29
Speaker 3: percent return, you've made one hundred dollars in each of
24:31
Speaker 3: those two accounts. If you put them together and you've
24:34
Speaker 3: got two thousand dollars and achieve a ten percent return, yes,
24:37
Speaker 3: you've made the same two hundred dollars, just in one
24:39
Speaker 3: place rather than two.
24:41
Speaker 2: Now, there are sometimes when consolidating accounts can help, just
24:44
Speaker 2: in terms of record keeping and understanding where everything is.
24:48
Speaker 2: Lower fees. Sometimes sometimes you can end up with lower fees.
24:51
Speaker 2: Sometimes you might move to an account that has, you know,
24:53
Speaker 2: additional services that other ones might not offer. So these
24:57
Speaker 2: are some of the considerations. It's not a a binary
25:01
Speaker 2: black and white like yes, always do this or no,
25:04
Speaker 2: always do that, but there are valid reasons in some
25:07
Speaker 2: situations to consolidate valid ones to not But ultimately that
25:13
Speaker 2: shouldn't be something that influences your overall ability to compound
25:17
Speaker 2: that portfolio.
25:18
Speaker 4: Agreed, all right, next question here to the Money Matters
25:22
Speaker 4: mail bag. Chris sent us an email to tfe Show
25:27
Speaker 4: at gmail dot com with this question, is a wroth
25:30
Speaker 4: conversion as exposed to market swings as much as an
25:34
Speaker 4: equity rich traditional IRA or a four to one K?
25:38
Speaker 3: So good question, and I think a pretty common one.
25:42
Speaker 3: But I think you're maybe mixing up a couple of
25:44
Speaker 3: concepts here. So when we talk about a roth conversion,
25:48
Speaker 3: we're talking about simply taking investments out of one shell
25:55
Speaker 3: and putting them into a different shell that holds those investments.
25:59
Speaker 3: And you know it'll surprise people. But can you take
26:03
Speaker 3: your wroth your converted assets into a wroth IRA and
26:07
Speaker 3: buy CDs with it? Yes, you can, in which case, no,
26:12
Speaker 3: I would expect that there would be no market swings
26:14
Speaker 3: if you have an FDIC and short CD holding your.
26:17
Speaker 2: Wroth IRA assets.
26:18
Speaker 3: Not that that is what I'm recommending anyone do, but
26:22
Speaker 3: the wroth versus the traditional four oh one K or
26:25
Speaker 3: the IRA, or any of these buckets are merely shells
26:29
Speaker 3: to hold different investments, and you can completely customize, if
26:33
Speaker 3: you so choose, what degree of risk you are willing
26:36
Speaker 3: to take in one bucket versus another. Now, there's a
26:39
Speaker 3: bunch of considerations that you need to think about there,
26:42
Speaker 3: in one of them being Hey, I now have a
26:45
Speaker 3: bucket a shell that will never be taxed again in
26:48
Speaker 3: my life, and one that will every penny that comes
26:52
Speaker 3: out of it be taxed, And so should I be
26:54
Speaker 3: investing differently in one versus the other? My guess would
26:57
Speaker 3: be probably yes, But it's highly dependent on your own specifics.
27:00
Speaker 2: Yah An you can add on that. No, it's understanding.
27:03
Speaker 2: One is the rapper, the other is the candy bar
27:05
Speaker 2: that goes inside it. All right.
27:09
Speaker 4: The final question when this week's edition of the Money
27:13
Speaker 4: Matters mail Bag is the following, what are the advantages
27:17
Speaker 4: of broad market and income oriented ETFs over mutual funds
27:23
Speaker 4: and a tax advantaged IRA?
27:26
Speaker 2: So again, kind of a very big broad question. Uh, Look,
27:33
Speaker 2: quite honestly, it's going to depend an awful lot on
27:37
Speaker 2: specific products and including again, mutual fund versus ETF is
27:42
Speaker 2: kind of a difference of rappers. There are some functional
27:45
Speaker 2: differences as well, but hey, ultimately it's going to be
27:50
Speaker 2: what is actually inside of there that makes some key differences.
27:53
Speaker 2: If you're talking about having it inside a retirement account,
27:57
Speaker 2: there aren't really any tax differences in that case because
28:00
Speaker 2: none of the money is taxed until you are withdrawing funds.
28:03
Speaker 2: So ETFs and mutual funds can have some differences in
28:06
Speaker 2: taxation amongst investments that are held inside of them, but
28:12
Speaker 2: beyond that, it's really going to depend on the specific product,
28:15
Speaker 2: the fee structure, how it's constructed, where the income's coming from.
28:20
Speaker 2: There's a lot that goes into that entire conversation there.
28:25
Speaker 3: Yeah, I was trying to find some averages, because averages
28:28
Speaker 3: can kill you because this is not how you should
28:31
Speaker 3: run things. But on average, exchange traded funds are less
28:35
Speaker 3: expensive in terms of their expense ratio than a mutual fund. However,
28:44
Speaker 3: averages can beat you up because there are mutual funds
28:47
Speaker 3: that are substantially cheaper than atfs. It just depends on
28:51
Speaker 3: what your strategy is and what you are going for,
28:53
Speaker 3: So on average, I'd be comfortable saying that the advantages
28:57
Speaker 3: of broad market and income oriented ETFs is probably one
29:01
Speaker 3: of cost to the shareholder. But there are a lot
29:04
Speaker 3: of exceptions to that general narrative.
29:08
Speaker 2: Anything else in the mail bag.
29:09
Speaker 4: That's it for this week's edition of the Money Matters
29:12
Speaker 4: mail Bag. And again, if you have questions for Chuck
29:14
Speaker 4: and Mike, shoot us an email to TFE Show at
29:17
Speaker 4: gmail dot com, or we can leave us a voicemail
29:19
Speaker 4: at three three nine three nine nine four triple three.
29:24
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29:28
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29:31
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29:34
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29:43
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29:46
Speaker 1: Radio Network. Ladies and gentlemen. The weekend.
30:01
Speaker 2: As promised, we are now joined by the one, the
30:04
Speaker 2: Only Paul A Monica. I actually don't There might be
30:08
Speaker 2: another Poul Monica somewhere, but he doesn't join us. Each
30:11
Speaker 2: and every Friday. Is the Paul.
30:13
Speaker 1: On the planet.
30:14
Speaker 4: Paul am is the I checked?
30:15
Speaker 2: We have another Paul that hosts occasionally? Yes, is it
30:19
Speaker 2: this one no different. Paul. Okay, lame mister Lamonica, how
30:23
Speaker 2: you doing?
30:24
Speaker 5: Thank you. I've checked before, I've googled myself. There are
30:29
Speaker 5: other people on the planet with my name. Whether or
30:32
Speaker 5: not there are any other Paul Richard lamonicas I I
30:35
Speaker 5: do not know.
30:36
Speaker 2: Well, I appreciate you doing the research for us too.
30:38
Speaker 2: Weank you to confirm, Paul, you did some research on
30:41
Speaker 2: CBS as well. This is a company that I don't
30:45
Speaker 2: want to say, has been you know, left for dead
30:46
Speaker 2: for the last twelve thirteen years, but just hasn't really
30:50
Speaker 2: gone anywhere. And I'm curious your take as to will
30:54
Speaker 2: it still continue to go nowhere or is there somewhere
30:57
Speaker 2: for it to go.
30:57
Speaker 5: Now Yeah, I think you could take the case that
31:01
Speaker 5: there is somewhere for CBS to go, and and that
31:05
Speaker 5: hopefully could be up, not down or flat. The stock
31:10
Speaker 5: is relatively cheap, you know, particularly compared to some of
31:15
Speaker 5: its insurance rivals like United Health and Humana. And yes,
31:19
Speaker 5: I said insurance because even though CBS, you know, probably
31:22
Speaker 5: most consumers know it as a drug store chain, it
31:26
Speaker 5: also owns Etna, obviously owns care Mark, as well several
31:31
Speaker 5: other businesses within the healthcare ecosystem. So I think that's
31:37
Speaker 5: one of the reasons why it's had this discount. There
31:40
Speaker 5: is this complexity that you know, some investors have argued
31:46
Speaker 5: maybe you penalizing the company, and there had been talk
31:50
Speaker 5: in the past about, you know, a possible breakup, but
31:53
Speaker 5: that seems to have you know, dived down right now.
31:56
Speaker 2: I guess the part for me that is is interesting
31:58
Speaker 2: is look, as you know, we all know that the
32:01
Speaker 2: thing that ultimately drives a company in the long term
32:03
Speaker 2: is going to be earnings growth. And the thing that's
32:07
Speaker 2: wild is that CBS right now does around four hundred
32:10
Speaker 2: billion dollars in revenue and they're trailing twelve month net
32:13
Speaker 2: income was about two billion dollars, not not very much.
32:18
Speaker 2: It's kind of wild to me that their net income
32:20
Speaker 2: is basically in the same place that it was back
32:23
Speaker 2: in two thousand and five, two thousand and six, when
32:26
Speaker 2: revenue is a tenth of this size. So what's their
32:28
Speaker 2: path to like turning all of this revenue into profit
32:32
Speaker 2: actually instead of just having it getting eaten up by
32:34
Speaker 2: expenses all the time.
32:36
Speaker 5: Yeah, No, it's a great question. I think that there
32:39
Speaker 5: are some hopes that the medicare advantage you know, rebates
32:46
Speaker 5: that you had been a concern that there was going
32:51
Speaker 5: to be a much smaller payments from the government to
32:58
Speaker 5: AT as well as the insurance rivals. They're not going
33:01
Speaker 5: to be as tiny as hope. There's going to be
33:05
Speaker 5: a bit of an increase this year about two point
33:07
Speaker 5: five percent compared to you know what had been expected
33:10
Speaker 5: to be you know flat. So that should hope boost margins,
33:15
Speaker 5: you know, going forward. And I think CBS also could
33:19
Speaker 5: benefit from some of the turmoil within the retail pharmacy industry.
33:23
Speaker 5: I mean, Walgreens has had some issues and is scaling back, right,
33:27
Speaker 5: aid has gone away. You could argue that, yes, now, uh,
33:32
Speaker 5: CBS's competition is less about pure play drug store chains
33:37
Speaker 5: and more about Amazon and Walmart. But you know, I
33:40
Speaker 5: think CBS still holding in there, you know, and that
33:43
Speaker 5: you could see you know, earnings, you know, growth pick
33:47
Speaker 5: up in the latter half of this year.
33:50
Speaker 2: Paul, what about the idea that like CVS is we're
33:52
Speaker 2: going to become the place that people go for just
33:55
Speaker 2: you know, random medical this in that it feels to
33:59
Speaker 2: me that that has really panned out, and instead you've
34:01
Speaker 2: got all of these urgent care places that have popped
34:04
Speaker 2: up instead. Are they still trying to make more inroads
34:07
Speaker 2: into becoming just an overall health center.
34:10
Speaker 5: Yeah, definitely, without a question. I mean, obviously they still
34:13
Speaker 5: have the Minute Clinics. I think a lot of people
34:16
Speaker 5: probably have gotten vaccinated there. They have a primary care
34:20
Speaker 5: center brand Oak Street Health. They have an in services
34:23
Speaker 5: home provider named Signify Health that they bought. So CBS
34:27
Speaker 5: is clearly of the mindset that being a one stop
34:32
Speaker 5: chop for consumers' healthcare needs when they can do things
34:36
Speaker 5: that don't involve maybe a specialist care, is the right
34:42
Speaker 5: way to go. The question, you know, clearly is going
34:46
Speaker 5: to be whether or not having all these businesses eventually,
34:49
Speaker 5: to your point, turn into more steady and higher levels
34:54
Speaker 5: of earnings growth. If not, then maybe there will be
34:57
Speaker 5: calls once again to break up the company split up.
35:00
Speaker 5: You know, that's something that you know, Karen Lynch, the
35:03
Speaker 5: former CEO, faced, but you know, once she stepped down
35:08
Speaker 5: a few years ago, the new CEO has been pretty
35:11
Speaker 5: adamant that, uh, you know, CBS is going to stay intact.
35:14
Speaker 5: It's not gonna be breaking up.
35:16
Speaker 2: Very good, Paul, appreciate you joining us today and I
35:19
Speaker 2: hope you have a fantastic weekend. You got any uh
35:22
Speaker 2: any any Derby picks for us?
35:26
Speaker 5: I do not. I think my Derby pick is that
35:29
Speaker 5: I need to go to the grocery store and get
35:31
Speaker 5: some mint because I already have the bourbon so I
35:33
Speaker 5: can make my own mint Tulia.
35:35
Speaker 2: There you go. I do uh. I believe that the
35:37
Speaker 2: the Bowpost guys have a horse running. I think it's
35:40
Speaker 2: emerging market this year, so uh hey, there you go.
35:44
Speaker 2: I don't know anything about horse racing as fodder was matters,
35:48
Speaker 2: you know about as far as I go on.
35:50
Speaker 5: Also, Berkshire hat the way weekend.
35:52
Speaker 2: Oh that's right, you converge.
35:53
Speaker 1: Ye.
35:54
Speaker 5: Let's see that no horse named after Warren Buffett, that
35:57
Speaker 5: would be the pick to go with.
35:58
Speaker 2: Yeah, if you had an Oracle of Omaha horse, which
36:01
Speaker 2: would be a great name for a horse too. I
36:03
Speaker 2: got a side. Yeah, the Oracle of Kentucky. Derby's is
36:09
Speaker 2: what city is that in?
36:10
Speaker 5: Uh, Louisville.
36:12
Speaker 2: It's it's in Louisville, the Oracle of Louisville. It's got
36:14
Speaker 2: a nice ring to it. Yeah, Paul, appreciate you joining us.
36:17
Speaker 2: Have a great weekend.
36:19
Speaker 5: Thank you very much. You guys.
36:21
Speaker 2: Can I share a quick Derby story for you.
36:23
Speaker 1: Sure.
36:23
Speaker 2: Yeah. So buddy of mine who I used to live
36:26
Speaker 2: with back in like ten fifteen years ago, right after college,
36:31
Speaker 2: he was for work. He was going to uh Omaha
36:34
Speaker 2: for the Berkshire Annual meeting. Did you wear a Giant Hat?
36:37
Speaker 2: And afterwards he was going to Mexico for some due
36:40
Speaker 2: diligence on a company that he was researching. He called
36:44
Speaker 2: me from Omaha on the day of the Kentucky Derby,
36:48
Speaker 2: so on the Saturday, and he had forgotten his passport
36:53
Speaker 2: in his room and so it was like, I don't know,
36:57
Speaker 2: four o'clock and like I was at a Kentucky dirty party,
37:00
Speaker 2: and so I was like, okay, Like what do you
37:01
Speaker 2: want me to do. He's like, I've already talked to United.
37:05
Speaker 2: They have a cargo terminal at Logan. You need to
37:08
Speaker 2: bring the passport to them, give it to this guy,
37:12
Speaker 2: you know, Hank or whatever, and he's gonna get it
37:14
Speaker 2: on the United flight that goes overnight to Omaha so
37:18
Speaker 2: that I can pick it up at the cargo terminal
37:20
Speaker 2: there and get to Mexico with no problems. Did it work?
37:25
Speaker 2: I think? So I found the passport sprinted to Logan
37:30
Speaker 2: dropped the thing off got back for the Derby, and
37:33
Speaker 2: I'm assuming he made it to Mexico because I never
37:36
Speaker 2: heard anything else on it. Never heard from him again.
37:38
Speaker 2: In fact, no that you mention it. I never did.
37:42
Speaker 2: Hank just took his passport. It's never heard from Hank either.
37:47
Speaker 2: But to uh, it's kind of wild. But uh, let's
37:55
Speaker 2: take a quick break for the entire weekend. Hope you
37:57
Speaker 2: all do have a great Berkshire Annual Meeting weekend and
38:00
Speaker 2: Kentucky Derby Kentucky Derby Race weekend. Gobys, we'll see you
38:05
Speaker 2: on Monday.