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How are tariffs impacting your personal finances · The Financial Exchange Show

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Speaker 1: Face is the Financial Exchange with Mike Armstrong and Mark Vandetti.
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Speaker 2: Good morning, Welcome back to the Financial Exchange. We've got
1:15
Speaker 2: markets in slightly negative territory as we open up the
1:19
Speaker 2: eleven o'clock hour of the show. We'll have a full
1:22
Speaker 2: recap for you in about half an hour. If you're
1:26
Speaker 2: first time listening to us, maybe here on SiriusXM as
1:30
Speaker 2: a first time listener. This is the Financial Exchanges, Mike,
1:33
Speaker 2: Mark and Tucker with you on a Tuesday, and here
1:35
Speaker 2: we talk about economic policy, Wall Street trends, and daily
1:39
Speaker 2: business news and how it affects the investment community. And
1:43
Speaker 2: two of those big stories for today are the retail
1:45
Speaker 2: sales numbers we received this morning at eight thirty am,
1:48
Speaker 2: plus the ongoing Federal Reserve meeting that is occurring as
1:51
Speaker 2: we speak. Starting with the retail sales numbers, pretty big decline,
1:55
Speaker 2: worse than anticipated. Never pay too much attention to any
2:00
Speaker 2: one data point. If we see this type of trend continuing,
2:04
Speaker 2: then it could be a sign of weakness. One thing
2:07
Speaker 2: that I saw just you know, come across the headlines
2:09
Speaker 2: here was that the restaurant and bar spending decline was
2:13
Speaker 2: the biggest decline month of a month decline we've seen
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Speaker 2: in two years so I think there's something to be
2:18
Speaker 2: said about that. I'm not sure exactly what, but most
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Speaker 2: had anticipated this to be a pretty weak report because
2:24
Speaker 2: of the strength that we saw in both March and
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Speaker 2: April on retail sales, as consumers were seemingly pulling purchases
2:31
Speaker 2: forward on things like cars, clothing, et cetera.
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Speaker 3: Yeah, erratic tariff policy, and that's the regime we're under
2:38
Speaker 3: right now. And maybe that's part of the strategy. But
2:41
Speaker 3: if part of the strategy is to infuse uncertainty into
2:45
Speaker 3: the economy, one of the results you get is more
2:48
Speaker 3: volatile and thus less interpretable economic data. The Fed, back
2:53
Speaker 3: to the point you made a second ago, they're meeting
2:55
Speaker 3: this week, they'll make an interest rate decision. The Fed's
2:58
Speaker 3: constantly trying to figure out where the economy is really at.
3:01
Speaker 3: What is the real trend in inflation, what's the real
3:03
Speaker 3: trend in economic growth? Is economic growth too fast? Is
3:08
Speaker 3: the economy running too hot? Will that push up inflation?
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Speaker 3: Or is the opposite happening? Do they need to ease policy.
3:14
Speaker 3: As a result, the FED is constantly trying to ascertain
3:15
Speaker 3: what the true state of the economy is, and this
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Speaker 3: helter skelter tariff policy makes that a lot harder.
3:21
Speaker 2: Mic At the same time, we have a Federal Reserve
3:24
Speaker 2: meeting on going. The press conference will occur tomorrow at
3:26
Speaker 2: two thirty pm, so all you excited Fed watchers can
3:30
Speaker 2: tune in wide. They anticipate the Fed will not make
3:33
Speaker 2: any moves at this Federal Reserve meeting, that this interest
3:36
Speaker 2: rate setting meeting, the current FED funds target between four
3:39
Speaker 2: and a quarter and four and a half percent at
3:42
Speaker 2: this point in time. Taking a look out at the
3:45
Speaker 2: next few meetings, so it's you know, tomorrow is the
3:47
Speaker 2: eighteenth of June. We'll have another one on July thirtieth.
3:50
Speaker 2: Every six weeks or so, very unlikely that the Fed
3:53
Speaker 2: cuts rates at that meeting either. When we take a
3:57
Speaker 2: look at September, that is the first meeting, you know,
4:01
Speaker 2: I'm taking a look at a tool from the Chicago
4:03
Speaker 2: Mercantile Exchange which allows you to take a look at
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Speaker 2: basically where people are betting that interest rates will go.
4:09
Speaker 2: That is the first meeting at which investors are betting
4:12
Speaker 2: that there is more than a fifty to fifty shot
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Speaker 2: of rates coming down. So I think I think that's
4:18
Speaker 2: the easiest way to summarize it. Is in terms of
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Speaker 2: where the money is lining up at the moment, it's hey,
4:23
Speaker 2: if there are rate cuts to come, they're not likely
4:26
Speaker 2: to happen until September, and even then they're expected to
4:29
Speaker 2: be relatively slight in their nature. I think the reality
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Speaker 2: here is if we get weakness in the labor market,
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Speaker 2: which we've started to see some and maybe we should
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Speaker 2: talk about that a bit. We've started to see some
4:43
Speaker 2: weakness in the labor market, we will need to see
4:46
Speaker 2: a fair bit more of that weakness before the Fed
4:48
Speaker 2: ends up cutting some interest.
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Speaker 3: Rates and weakness elsewhere too. We mentioned retail sales, which
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Speaker 3: is notoriously jumpy but potentially signaling a slow down and
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Speaker 3: spending way too soon to say. As you said, Mike,
4:59
Speaker 3: industrial reduction fell month over month, and it's been flat,
5:03
Speaker 3: still healthy, but it fell. So every little wiggle right
5:08
Speaker 3: now will be looked at through the lens of is
5:11
Speaker 3: this something the Fed needs to get ahead of? Normally
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Speaker 3: they'd like to because policy changes they influenced a very
5:18
Speaker 3: short term interest rate called the FED fund the Federal
5:20
Speaker 3: funds rate by controlling the money supply, like we talked
5:23
Speaker 3: about in the last hour. I won't rehash that, but
5:26
Speaker 3: their changes make their way through the economy. The changes
5:29
Speaker 3: in their main policy instrument, the Fed funds rate, makes
5:32
Speaker 3: its way through the economy very very slowly. So they
5:34
Speaker 3: need to make the decision to steer the economy in
5:37
Speaker 3: a different direction, or to maybe a better metaphor is
5:40
Speaker 3: to increase the throat, to put your foot on the
5:44
Speaker 3: pedal or the break, depending on what you want to do.
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Speaker 3: They need to think way ahead when they do that,
5:48
Speaker 3: and the war in the Middle East and tariff erratic
5:52
Speaker 3: tariff policy make that especially hard to do.
5:54
Speaker 2: We mentioned a bit of signs of labor market weakness,
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Speaker 2: and I guess I would point to a few things there.
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Speaker 2: One would be the continuing claims for unemployment, which have
6:03
Speaker 2: been climbing pretty much every week for the last several
6:07
Speaker 2: uh The unemployment rate, too, while has not jumped by
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Speaker 2: any meaningful by any meaningful way, you know, over the
6:14
Speaker 2: last few months, has very slowly climbed up from like
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Speaker 2: closer to four to one to closer to four to
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Speaker 2: three at this time.
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Speaker 3: If you want to go back even farther, we were
6:23
Speaker 3: at what three to four, right, So if.
6:24
Speaker 2: You're willing to go back to last last spring, yeah,
6:26
Speaker 2: we were substantially lower than where we are today.
6:30
Speaker 3: That was unnatural, by the way, I don't that was clearly.
6:33
Speaker 2: Below where we long term are likely to be. The
6:37
Speaker 2: question is, you know, is this the beginning of a trend?
6:39
Speaker 2: And there's two important factors that I think are worth
6:42
Speaker 2: talking about. The first one, the situation that young college
6:45
Speaker 2: graduates are facing, seems to be one of the one
6:49
Speaker 2: of the worst labor markets that they have faced in
6:52
Speaker 2: some time. And you know, I've heard stories about this
6:55
Speaker 2: here and there, but it's starting to show up in
6:57
Speaker 2: the data too. The Wall Street Journal refers to their
6:59
Speaker 2: seasonally adjusted data. I was able to pull non seasonally
7:03
Speaker 2: adjusted data, so I'm just going to look at May
7:06
Speaker 2: timeframes for the last few years to give people a
7:08
Speaker 2: sense of this. This is the unemployment rate for bachelor's
7:12
Speaker 2: degrees for folks that are between twenty and twenty four
7:15
Speaker 2: years old, so really trying to target that one demographic.
7:19
Speaker 2: As of this May, that unemployment rate was six point
7:21
Speaker 2: one percent, again not seasonally adjusted. Go take a look
7:26
Speaker 2: at May of last year, you're looking at four point
7:30
Speaker 2: four percent and May of twenty twenty two, again four
7:35
Speaker 2: point eight percent. The labor market, I think it's fair
7:39
Speaker 2: to say that the labor market that this college graduate
7:43
Speaker 2: group is facing at the moment is akin to those
7:46
Speaker 2: that we were seeing in the early twenty tens. That's
7:49
Speaker 2: the last time, like I have to go back to
7:51
Speaker 2: May of twenty thirteen, would be the last time that
7:55
Speaker 2: the unemployment rate for college grads between the ages of
7:59
Speaker 2: twenty and twenty four was above six point one percent.
8:04
Speaker 2: And so I've been hearing these stories. I've been a
8:06
Speaker 2: little bit suspect of them, but I think it is
8:08
Speaker 2: fair to say at this point, and I don't know
8:10
Speaker 2: that I would lay the blame and want anyone cause,
8:13
Speaker 2: but the unemployment rate for those recent college grads looking
8:16
Speaker 2: for work in the white collar sector, it's a pretty
8:20
Speaker 2: difficult labor market to be looking at right now.
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Speaker 3: Yeah, I'm trying to get a sense for how much
8:25
Speaker 3: of this might be due to policy uncertainty. So the rate,
8:29
Speaker 3: and I'm just looking at seasonally seasonally adjusted. I'm not
8:32
Speaker 3: comparing month over month, same month, year over year, in
8:35
Speaker 3: which case it's okay to look at something that hasn't
8:37
Speaker 3: been bumped up or down for seasonal effects. So I'll
8:39
Speaker 3: look at the seasonally adjusted series overall, where what three
8:43
Speaker 3: point two percent for bachelor's degree. Did you use twenty
8:45
Speaker 3: five to thirty four? Were you in?
8:46
Speaker 2: I was at you're looking at ree college rads.
8:50
Speaker 3: It was going to take me two cent.
8:53
Speaker 2: There's two things that I can point to as part
8:55
Speaker 2: of this. One. I do think policy and economic uncertainty
8:59
Speaker 2: is leading to weaker hiring numbers on the vele.
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Speaker 3: Yeah, that's what I was trying to tease out, Mike. Yeah.
9:05
Speaker 3: The other piece, why do you say that though I'm
9:07
Speaker 3: looking at the series, I don't see a trend. Do
9:09
Speaker 3: they have this? Did they publish this in a seasonally
9:11
Speaker 3: adjusted series?
9:12
Speaker 2: I don't know. I don't think they do.
9:13
Speaker 3: Yeah, so very hard to discern a trend here. What
9:17
Speaker 3: makes you say that's that's the point I was hoping
9:19
Speaker 3: to make, but that I couldn't find the data Off
9:21
Speaker 3: the top of my head. I don't really see a
9:23
Speaker 3: trend that you could line up with recent Look. I
9:26
Speaker 3: buy the thesis. By the way, it's very plausible that
9:28
Speaker 3: people have got back on hiring, But I don't know
9:31
Speaker 3: that I would draw that conclusion from this data series.
9:33
Speaker 3: There doesn't appear to be any kind of.
9:34
Speaker 2: The other narrative that is, you know, playing out in
9:37
Speaker 2: this space is that AI is eating up some of
9:40
Speaker 2: the job demand and that plays into slower hiring. And
9:43
Speaker 2: I have no means of measuring that whatsoever, But when
9:47
Speaker 2: you listen to earnings calls, when you listen to interviews
9:50
Speaker 2: with CEOs, everything that they are talking about is we
9:54
Speaker 2: have now the automation tools to be able to do
9:57
Speaker 2: some of the work that the lower level were especials
10:01
Speaker 2: didn't want to do. So they just need fewer people's
10:05
Speaker 2: that's the story that people are saying, whether I'm hearing
10:07
Speaker 2: interviews from investment banker managers to CEOs, and that's a bigies,
10:12
Speaker 2: is that they are seeing that effect. Is that really
10:15
Speaker 2: playing into the unemployment rate? I don't know. I think
10:17
Speaker 2: it's going to take us a lot longer to really
10:19
Speaker 2: truly understand that. But that is the labor market that
10:22
Speaker 2: these folks are facing right now is one that is
10:25
Speaker 2: akin to what we were seeing in the early twenty tens.
10:28
Speaker 2: And so yeah, I'm not surprised now to hear the
10:32
Speaker 2: stories that I'm hearing from young.
10:33
Speaker 3: I buy the policy uncertainty explanation, I really do. I
10:36
Speaker 3: just didn't jump out to me looking at this series.
10:39
Speaker 3: You know, all of our economic policies right now, they're
10:42
Speaker 3: geared toward getting the economy to revert to some golden era,
10:47
Speaker 3: to use a popular expression, now, when everybody went to
10:50
Speaker 3: work with a lunch pail and screwed something into something
10:54
Speaker 3: else for a living. They're going to be even if
10:56
Speaker 3: you increase greatly the number of those jobs. And I
10:58
Speaker 3: would not argue that is desirable. It's about pay, not
11:02
Speaker 3: what you do with your hands, necessarily, but there's not
11:05
Speaker 3: going to be enough to go around. So people need
11:07
Speaker 3: to think real carefully about the unemployment implications of making
11:10
Speaker 3: the economy more manufacturing intensive.
11:12
Speaker 2: Let's take a quick break. When we come back, we're
11:14
Speaker 2: going to play trivia. But first Mark Hamrick from bankret
11:16
Speaker 2: joining us to talk specifically about that policy uncertainty and
11:19
Speaker 2: how Americans are thinking about tariffs. That's next on the
11:22
Speaker 2: Financial Exchange.
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12:08
Speaker 2: Joining us now is Mark Hamrick from Bancrea. Talked a
12:10
Speaker 2: little bit about a survey on American consumers and how
12:14
Speaker 2: they're feeling about tariffs and just the state of the
12:16
Speaker 2: economy generally. Mark, thank you for joining us. Appreciate it.
12:18
Speaker 1: Good to be with you.
12:19
Speaker 2: Mike. So obvious change in administration January of this year, and
12:24
Speaker 2: I'm interested to hear you know, you guys asked this
12:27
Speaker 2: question over and over when you ask Americans how they're
12:30
Speaker 2: feeling about the state and direction of the economy. How
12:33
Speaker 2: has that changed over the course of the last you know,
12:36
Speaker 2: six to eight months.
12:37
Speaker 4: I find this fascinating, Mike, And obviously I have a
12:41
Speaker 4: lot invested, so to speak, in the surveys we do.
12:44
Speaker 4: And I've resided in the Washington, DC area for about
12:47
Speaker 4: four decades, so you know, we are comfortably located outside
12:52
Speaker 4: the Beltway for what it's worth where I do my work.
12:55
Speaker 4: But I think there's a part of this won't support
13:00
Speaker 4: people and then I think there's a part of it
13:02
Speaker 4: that if you really bury your head in the details
13:05
Speaker 4: of it ends up being shocking, and that is that
13:08
Speaker 4: sixty five or rather fifty six percent of Americans I
13:12
Speaker 4: believe that the economy is on the wrong track. Okay,
13:15
Speaker 4: that's almost exactly what we found a year ago. But
13:20
Speaker 4: once you get beneath that headline number, it's the people
13:24
Speaker 4: who believe that that has changed dramatically, broadly speaking, And
13:29
Speaker 4: what the difference is was last year, those that thought
13:33
Speaker 4: things were going to wherever in a handbasket were Republicans.
13:37
Speaker 4: This year it goes completely the opposite. So we have
13:41
Speaker 4: Democrats who feel that way versus Republicans who are relatively confident.
13:48
Speaker 4: But I would say overall we did see fewer people
13:51
Speaker 4: who think the economy is on the right track. But
13:54
Speaker 4: I do find it amazing because obviously there's a lot
13:57
Speaker 4: at stake with the policy that any present and to
14:01
Speaker 4: the degree that they're engaged, elected officials on Capitol Hill
14:05
Speaker 4: agree too. But you know, you can sit back and say, well,
14:09
Speaker 4: how much about my personal life and even the broader
14:12
Speaker 4: economy has changed in twelve months. We know the risks
14:16
Speaker 4: are different, the sort of inputs with respect to policy
14:18
Speaker 4: are different, but as the economy really changed that much,
14:22
Speaker 4: And I think ultimately that's what I find most amazing
14:25
Speaker 4: about this kind of survey work.
14:27
Speaker 2: Yeah, I find it remarkable and also a bit unsurprising,
14:30
Speaker 2: given just that we see this reflected elsewhere. I remember
14:33
Speaker 2: looking at inflation expectations, for example, literally flipping after the
14:36
Speaker 2: election while staying at pretty much the same overall level
14:39
Speaker 2: as just Democrats thought that the inflation should be a
14:41
Speaker 2: lot worse, Republicans thought would be a lot better. When
14:44
Speaker 2: you dive into these.
14:46
Speaker 4: I just staught you on that for a second.
14:47
Speaker 1: Pace.
14:47
Speaker 2: Yeah.
14:48
Speaker 4: The one thing University of Michigan survey people tell us
14:52
Speaker 4: is that on the tariffs there is broader agreement than
14:56
Speaker 4: you might think, and so on the Bank Great survey,
14:58
Speaker 4: for example, five percent of Americans believe the tariffs will
15:02
Speaker 4: have a negative impact on their personal finances eighteen percent
15:06
Speaker 4: eighteen percent, so fewer than one in five say it
15:08
Speaker 4: would be positive, and then seven percent say no impact,
15:12
Speaker 4: in ten percent say they don't know. I think maybe
15:14
Speaker 4: the last ten percent are among the more honest, but
15:18
Speaker 4: I think that I think that there's actually more of
15:20
Speaker 4: a universal take on the tariffs than there might have
15:22
Speaker 4: been on let's say, you know, overblown federal spending, where
15:29
Speaker 4: you know that's actually been something that both parties have
15:32
Speaker 4: been enabling.
15:33
Speaker 2: That's one piece that I have found interesting is just
15:36
Speaker 2: in my mind how well Americans have perceived the realities
15:40
Speaker 2: of tariffs, of driving prices higher, and who exactly pays
15:43
Speaker 2: for them? Given all the misinformation that's been out there,
15:46
Speaker 2: What did you find in terms of did you find
15:48
Speaker 2: I guess a big partisan divide on feelings about tariffs
15:52
Speaker 2: and how it is going to impact people's finances.
15:55
Speaker 4: Well, let's you know, I would say less so than
15:58
Speaker 4: we might have guessed. And so, for example, for those
16:01
Speaker 4: that believe taris will have a negative impact on their
16:03
Speaker 4: personal finances, essentially you had nine of ten Democrats feeling
16:08
Speaker 4: that way, and yet you had nearly half of Republicans
16:13
Speaker 4: feeling that way and sixty two percent of independence. I
16:17
Speaker 4: think part of the problem with political identification these days
16:21
Speaker 4: is I feel like this would have been one of
16:23
Speaker 4: those old Saturday morning multiplication rock derivatives where it'd be like,
16:27
Speaker 4: what is a Republican right? It's like, it's not what
16:30
Speaker 4: your grandfather used to be. If your grandfather was a Republican,
16:34
Speaker 4: and the SAME's true to some, but to a lesser
16:36
Speaker 4: degree with respect to the people who identify as Democrats.
16:39
Speaker 4: Think Joe Biden versus Bernie Sanders. Right, So you know,
16:44
Speaker 4: I guess people are still wearing the political jerseys in
16:47
Speaker 4: the stands. But perhaps, as with so much of our society,
16:52
Speaker 4: the gulf that divides those who have different opinions about
16:56
Speaker 4: a variety of things has widened.
17:00
Speaker 2: Last quick question here. I know, when I think about
17:03
Speaker 2: tariffs and the potential benefit that has been touted, it's
17:06
Speaker 2: to the labor market and manufacturing, and so I think
17:09
Speaker 2: of a potential benefit to future generations from that. What
17:12
Speaker 2: did you find in terms of age changes and their
17:14
Speaker 2: views on teriffs, because I hesitate to find a whole
17:17
Speaker 2: lot of benefits, for instance, to a seventy year old
17:19
Speaker 2: who's already retired when it comes to jobs coming back
17:22
Speaker 2: to the US.
17:23
Speaker 4: Well, I would say broadly that our survey found that
17:29
Speaker 4: people who are younger are less optimistic, right, And so
17:35
Speaker 4: part of that has to do with the fact that
17:39
Speaker 4: those who are more established with their personal finances are
17:44
Speaker 4: less concerned and probably feel like they can weather the
17:49
Speaker 4: proverbial storm a little bit better, and I think that
17:52
Speaker 4: probably is among the more significant takeaways from the survey.
17:57
Speaker 2: In general. Mark Hamerck from Bankage. Today they talk about
18:01
Speaker 2: their survey of Americans finances and their personal views on tariff.
18:04
Speaker 2: Thanks so much for joining us, Mark, really great study.
18:06
Speaker 2: I appreciate it. We'll talk to you again soon.
18:08
Speaker 4: Always a pleasure. Thanks for having me all right.
18:10
Speaker 5: Time for trivia here on the Financial Exchange and on
18:12
Speaker 5: this day. Back in two thousand and three, Moneyball, a
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18:25
Speaker 5: movie trivia question Today, who portrayed Billy Bean in the
18:29
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Speaker 5: Moneyball Movie? Be the fifth person today to text us
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Speaker 5: at six one seven three six two thirteen eighty five
18:39
Speaker 5: with the correct answer, and you win a Financial Exchange
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Speaker 5: Show T shirt once again. The fifth correct response to
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18:54
Speaker 2: Oil price is continuing to shoot up here. We've got
18:57
Speaker 2: the price of West Texas crewed approaching seventy four dollars
19:00
Speaker 2: a barrel, up two and two thirds of a percent
19:04
Speaker 2: on this Tuesday morning. We had retail sales this morning.
19:07
Speaker 2: That's driving markets a bit, and the pending FED meeting
19:10
Speaker 2: as well. We are going to take a quick break
19:12
Speaker 2: here at which point talker is gonna have a full
19:14
Speaker 2: market recap with Wall Street Watch. But suffice to say,
19:18
Speaker 2: echoes across the board down slightly as we reach the
19:21
Speaker 2: noon hour here on the Financial Exchange Quick Break. We'll
19:24
Speaker 2: be right back with that next.
19:40
Speaker 1: Bringing the latest financial news straight to your radio. Every day.
19:44
Speaker 1: It's the Financial Exchange on the Financial Exchange Radio Network.
19:50
Speaker 1: Time now for Wall Street Watch a complete look at
19:53
Speaker 1: what's moving markets so far today. Right here on the
19:56
Speaker 1: Financial Exchange Radio Network.
19:58
Speaker 5: Markets are pulling back lightly after yesterday's gains as Wall
20:02
Speaker 5: Street continues to keep a close eye in developments in
20:05
Speaker 5: the Middle East. Investors also sifting through a week May
20:08
Speaker 5: retail sales report where retail sales fell zero point nine
20:12
Speaker 5: percent last month, worse than estimates of a drop of
20:15
Speaker 5: zero point six percent. Right now, Dow is off by
20:18
Speaker 5: a quarter percent, SMP five hundred is off nearly four
20:22
Speaker 5: tenths of one percent, and the NASDAC is also down
20:25
Speaker 5: by four tenths of one percent. Russell two thousand is
20:28
Speaker 5: off by about a quarter percent, only four points lower.
20:31
Speaker 5: Ten year Treasure reeled down by three basis points, now
20:34
Speaker 5: a four point four to two percent, and crude oil
20:36
Speaker 5: up over two and a half percent higher, trading as
20:39
Speaker 5: seventy three dollars in sixty six cents a barrel. Solar
20:42
Speaker 5: stocks taking a big hit today after the Senates version
20:45
Speaker 5: of Trump's tax bill would phase out renewable energy incentives
20:50
Speaker 5: and phase energy. First Solar and sun Run are among
20:53
Speaker 5: the biggest losers on that news. Meanwhile, home builder Leonard
20:57
Speaker 5: posted mixed quarterly results where its revenue came in strong
21:00
Speaker 5: longer than expected, sending that stock up nearly one percent. Elsewhere,
21:04
Speaker 5: Craft heignds set of plans to remove artificial dies from
21:07
Speaker 5: its US products before the end of twenty twenty seven.
21:10
Speaker 5: The move comes as the Trump administration is pushing to
21:13
Speaker 5: strip artificial dies from the US food supply. Craft shares
21:16
Speaker 5: are up by one percent. Pharmaceutical company Eli Lilly agreed
21:21
Speaker 5: to buy gene editing startup Verve Therapeutics for about one
21:24
Speaker 5: billion dollars sending Verves shares surging by seventy six percent.
21:29
Speaker 2: Now.
21:30
Speaker 5: Reddit shares up by about eight percent after the social
21:33
Speaker 5: media company debuted new AI powered advertising tools, and the
21:37
Speaker 5: Wall Street Journal reported that tensions between Microsoft and OpenAI
21:41
Speaker 5: have reached a boiling point over the future of their
21:44
Speaker 5: AI partnership. Microsoft shares are down by about a half
21:47
Speaker 5: a percent. I'm Tucker Silva and that is Wall Street
21:51
Speaker 5: Watch trivia question we asked in the previous segment excuse me,
21:56
Speaker 5: who portrayed Billy Bean?
21:59
Speaker 1: Sorry?
21:59
Speaker 3: Sorry?
22:00
Speaker 5: Trivia question was who portrayed Billy Bean in the Moneyball movie?
22:04
Speaker 5: That would, of course be Brad Pitt. Bill from Stone
22:08
Speaker 5: and Mass is our winner today taking on the Financial
22:11
Speaker 5: Exchange show t shirt. Congrats to Bill and we play
22:13
Speaker 5: trivia every day here on the Financial Exchange. See complete
22:17
Speaker 5: contest rules at Financial Exchange showed dot Com.
22:21
Speaker 2: Market piece in New York Times today or sorry, I
22:24
Speaker 2: think this was actually yesterday, but how to draw down
22:26
Speaker 2: your retirement savings when the markets are gyrating. I want
22:29
Speaker 2: to talk to you about a call I got from
22:31
Speaker 2: a client just last week. Actually, she needed to replace
22:37
Speaker 2: something in her home and it was you know, relatively
22:39
Speaker 2: big purchase, and she said, you know, I knew about
22:43
Speaker 2: this back in March and April, but I just didn't
22:45
Speaker 2: I didn't want to take the money out because I
22:46
Speaker 2: was worried that the you know, I saw that the
22:48
Speaker 2: bucket was down, I didn't want to touch it. And
22:52
Speaker 2: I think that was misguided. And I explained to her why,
22:55
Speaker 2: and we talked about it. But I think it is
22:57
Speaker 2: a common sentiment that people have, like, oh, I don't
22:59
Speaker 2: want to touch my money when when my investments are moving
23:03
Speaker 2: around one way or the other, or my investments are
23:05
Speaker 2: moving down, because for most people, it's not just one bucket.
23:13
Speaker 2: And I think that's that's the point that I would
23:14
Speaker 2: make in this. It's also the point of why some,
23:17
Speaker 2: you know, savings accumulation tools like target date funds and
23:22
Speaker 2: retirement plans are not always the best distribution tool, because
23:25
Speaker 2: in that case, you might just have one bucket that
23:27
Speaker 2: you can draw from. But let's can you talk to
23:30
Speaker 2: me about I guess that sequence of returns risk and
23:33
Speaker 2: how investment managers generally mitigate some of that risk with portfolios,
23:38
Speaker 2: because yeah, she's right, if everything she had was in
23:43
Speaker 2: I don't know, tech stocks, and and you know vehicle
23:48
Speaker 2: companies back in April of twenty twenty five, selling at
23:51
Speaker 2: that point in time would have been pretty rough in
23:54
Speaker 2: terms of the losses you might have taken.
23:56
Speaker 3: So you brought up a couple different issues. One is
23:57
Speaker 3: maybe how you should invest when you're or near draw
24:00
Speaker 3: down or when you think you might have an expense coming,
24:03
Speaker 3: whether it's college education, fixing a leaky roof, buying a
24:06
Speaker 3: new car, whatever. The other is the vehicle that you're
24:10
Speaker 3: invested in. Allow you to designate which fun are you
24:13
Speaker 3: going to take your money from? Four one ks sometimes
24:15
Speaker 3: do sometimes don't call your plan administrator, Vanguard, Fidelity, Trow,
24:20
Speaker 3: whoever your record keeper is. I use plan administrator synonymous
24:23
Speaker 3: with to mean the same thing is record keeper. See
24:26
Speaker 3: what your plan allows. Sometimes smaller plans don't allow you
24:29
Speaker 3: to target a particular fund to take money out of,
24:32
Speaker 3: because you want to take money out of something like cash,
24:34
Speaker 3: which is designed to be money good in all environments,
24:37
Speaker 3: money market or so called stable value.
24:39
Speaker 2: Yeah, many times I've seen you plan providers talk about, Yeah,
24:42
Speaker 2: your only option for withdrawal is pro rata. You must
24:45
Speaker 2: take from everything, and that's.
24:46
Speaker 3: A bummer when it comes to needing money in that
24:49
Speaker 3: is a drawback, as you said, Mike, of long term
24:52
Speaker 3: retirement savings vehicles, which, as you also said, are not
24:55
Speaker 3: versatile enough to meet the needs of somebody who's in
24:59
Speaker 3: drawdown phase, who's no longer accumulating but rather taking money
25:02
Speaker 3: out the oftentimes, excuse me, some are, but most aren't.
25:06
Speaker 2: The strategy or analogy that I've heard of before is
25:08
Speaker 2: kind of this bucketed approach, right where you have different
25:11
Speaker 2: buckets of risk for different types of goals. And if
25:14
Speaker 2: that's helpful to think about, then I think that's a
25:16
Speaker 2: useful tool to think about of Oh, yeah, you know,
25:19
Speaker 2: I don't need to worry about running up a credit
25:21
Speaker 2: card to pay my bills when I've got this investment portfolio,
25:24
Speaker 2: because while the sum total could be down, I know
25:27
Speaker 2: that I've got the lower risk, the less volatile bucket
25:30
Speaker 2: to draw down at certain points in time, thereby allowing
25:34
Speaker 2: me to still manage all of this in a logical fashion.
25:37
Speaker 2: Whereas you know, there are tools out there that don't
25:41
Speaker 2: allow that type of strategy. But I think this all
25:44
Speaker 2: comes back to something that we've talked about many times.
25:48
Speaker 2: There are different stages of life that are in my
25:51
Speaker 2: mind pretty critical for doing some sort of investment in
25:54
Speaker 2: financial planning. One of them is around the family formation time.
25:58
Speaker 2: There's just a lot of questions about starting a family,
26:01
Speaker 2: getting married, buying a home, having kids. In terms of
26:05
Speaker 2: all sorts of financial decisions that need to be made,
26:08
Speaker 2: there's the pre and post retirement stage, which I generally
26:11
Speaker 2: think of as a fifteen to twenty year window around retirement,
26:15
Speaker 2: where there's just a ton of different investment and financial
26:19
Speaker 2: decisions that have to be made. And then there's the
26:21
Speaker 2: end of life planning that requires a ton of forward
26:27
Speaker 2: thinking and a ton of potential tax issues that can
26:31
Speaker 2: come up, especially if we're talking about you know, expensive
26:34
Speaker 2: medical care and things along those lines. But this one
26:37
Speaker 2: around drawing down out of say a four to oh
26:39
Speaker 2: one k or a retirement account is really critical to
26:44
Speaker 2: your long term ability to have this money last a lifetime.
26:50
Speaker 2: And if you are assessing that or asking yourself that
26:53
Speaker 2: very question, hey, how would I draw this down? Which
26:56
Speaker 2: bucket of money should I access first? Should it be
26:59
Speaker 2: my four oh one kre or what's this roth here?
27:01
Speaker 1: For?
27:02
Speaker 2: Why do I have the money that we use when
27:04
Speaker 2: we downsold the whole, when we downsize the home, When
27:07
Speaker 2: am I going to use that bucket. That is what
27:09
Speaker 2: the folks at Armstrong Advisory Group help guide you through
27:12
Speaker 2: on top of the investment side of it. It's an
27:14
Speaker 2: important part, but it's not the only important piece. If
27:18
Speaker 2: you have questions along those lines, please call us for
27:20
Speaker 2: a free consultation with the Armstrong Advisory Group. The phone
27:23
Speaker 2: number is eight hundred three nine three for zero zero one. Again,
27:27
Speaker 2: that's the number four the Armstrong Advisory Group and the
27:29
Speaker 2: numbers eight hundred three nine three four zero zero one.
27:34
Speaker 1: The proceeding was paid for by Armstrong Advisory Group, a
27:36
Speaker 1: registered investment advisor. Nothing in the ad or in any
27:39
Speaker 1: Armstrong guide a specific financial, legal or tax advice. Consult
27:42
Speaker 1: your own financial, tax into state planning advisors before making
27:45
Speaker 1: any investment decisions. Armstrong may contact you to offer investment
27:48
Speaker 1: advisory services.
27:50
Speaker 2: Credit scores are on the decline for millions of US
27:52
Speaker 2: student loan borrowers as collections have restarted as of this year.
27:56
Speaker 2: In the first three months of twenty twenty five, two
27:59
Speaker 2: point two million student loan recipients saw their scores dropped
28:02
Speaker 2: by one hundred points. An additional one million had drops
28:05
Speaker 2: of one hundred and fifty points or more. So three
28:07
Speaker 2: point three million adults seeing their credit scores declined by
28:10
Speaker 2: at least one hundred points. We have wage garnishment going
28:14
Speaker 2: into place. Again. The only thing that I saw headline
28:17
Speaker 2: on that I I can understand politically, but I have
28:21
Speaker 2: a tough time really justifying. So we talked earlier this
28:27
Speaker 2: year about how there are some four hundred plus thousand
28:30
Speaker 2: retirees who are over the age of sixty five with
28:34
Speaker 2: student loans in collections, and the story previously was that
28:38
Speaker 2: they were going to have their Social Security incomes garnished.
28:40
Speaker 2: You can have your wages garnished when you have these
28:42
Speaker 2: types of debts, any type of debt, you can face
28:44
Speaker 2: that type of thing. The Trump administration has decided we
28:47
Speaker 2: are not going to garnish so Security to pay back
28:50
Speaker 2: student loan debts for that group of people that are
28:53
Speaker 2: over the age of some specific age. They are not
28:55
Speaker 2: going after Social Security benefits, which again I can understand politically,
29:01
Speaker 2: but I have a really tough time justifying overall to say, yeah,
29:04
Speaker 2: we are going after the you know, the twenty eight
29:06
Speaker 2: year old and his wages that's behind on a student loan,
29:09
Speaker 2: but we're not going to go after the sixty five
29:10
Speaker 2: year old who's been behind by you know, a few
29:14
Speaker 2: years at this point.
29:16
Speaker 3: Yeah, economically, I don't know that. Well, I don't know
29:18
Speaker 3: that any of it makes a lot of sense, to
29:19
Speaker 3: be honest. But why you'd want to treat one group
29:22
Speaker 3: differently from others? Well, let's use as you said, it's
29:25
Speaker 3: a political question. Old people consume more, they consume most
29:30
Speaker 3: of what they receive.
29:31
Speaker 2: You could argue that not trying to be heartless here,
29:34
Speaker 2: I'll organize that people that are in default on their
29:36
Speaker 2: student loans and their only income is social Security are
29:38
Speaker 2: probably in a pretty rough spot. So I'm not trying
29:41
Speaker 2: to be heartless here. I'm just saying it doesn't It
29:44
Speaker 2: doesn't on the surface make a ton of difference to
29:46
Speaker 2: me whether Look, it was.
29:46
Speaker 3: A mistake for Barans, was probably a mistake started during
29:49
Speaker 3: Trump won and then prolonged with various extensions under Biden. Yeah,
29:54
Speaker 3: this corrects a long standing I'll call it a policy error,
29:58
Speaker 3: even though it wasn't so well thought out. Is to
30:00
Speaker 3: be called a policy I don't think. And they're just
30:03
Speaker 3: by now implementing differential treatment using political criteria, they're just
30:09
Speaker 3: they're kind of compounding it. Let's just rip the bandaid
30:12
Speaker 3: off and get back to normal on this stuff.
30:14
Speaker 2: Let's take a quick break when we come back, stack
30:16
Speaker 2: Roulette here on the Financial Exchange.
30:18
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31:00
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31:32
Speaker 2: What do you have for us for a stackrou leat there?
31:34
Speaker 3: Mark looks like there's a decent chance. That's so called
31:37
Speaker 3: Trump accounts, which are savings accounts that will grow tax free,
31:42
Speaker 3: but not they don't get preferential tax treatment upon distribution.
31:48
Speaker 3: The selling point of these Trump accounts they're for kids
31:53
Speaker 3: under age eight.
31:53
Speaker 2: I mean, the selling point is you get a grand
31:55
Speaker 2: for free, you do well? Is it for free?
31:56
Speaker 1: Though?
31:57
Speaker 3: I guess that's the point I want to focus on.
31:58
Speaker 3: There are many questionable fee you're associated with this, and
32:01
Speaker 3: we'll dig into those maybe in future episodes. Overall, they
32:05
Speaker 3: seem like a very bad idea. There are already things
32:07
Speaker 3: that take care of education savings and long term savings,
32:10
Speaker 3: so they compete with existing vehicles. They're restricted to equities
32:14
Speaker 3: even as the child gets close to the age upon
32:17
Speaker 3: which they may be taking them out. That's one point
32:18
Speaker 3: I wanted to make, because you pointed out in the
32:21
Speaker 3: last segment why it's a bad idea to have short
32:23
Speaker 3: term money.
32:25
Speaker 2: They are restricted, entirely restricted to equities.
32:28
Speaker 3: According to this article, which comes from the Wall Street Journal,
32:32
Speaker 3: the Free One thousand dollars is not free at all,
32:34
Speaker 3: for reasons we talked about in the last hour. A
32:37
Speaker 3: current tax cut that's paid for with deficits. It's just
32:40
Speaker 3: a future tax bill, and it'll be paid for. I
32:43
Speaker 3: was going to say, ironically, I don't know if it's ironic.
32:45
Speaker 3: These kids aren't asking for it. Somewhat ironic, and that
32:48
Speaker 3: they make you think you're getting a tax cut today
32:50
Speaker 3: or a break today. But what's the government going to do.
32:52
Speaker 3: It's going to issue debt to give every kid. They're
32:55
Speaker 3: about three or so million born in the United States.
32:57
Speaker 3: Every year every kid one thousand dollars. So it's not
33:00
Speaker 3: a huge expense, a few maybe several billion dollars. But
33:03
Speaker 3: they've got to borrow at four to four and a
33:05
Speaker 3: half percent.
33:06
Speaker 2: Yeah, to do that. The thing that surprised me about
33:09
Speaker 2: these accounts is not the fact that it's going to
33:10
Speaker 2: run up the deficit. Just about everything and the tax
33:12
Speaker 2: bill is going to run up the deficit. The piece
33:14
Speaker 2: that surprised me about it.
33:15
Speaker 3: Think about it like, yeah, because we're talking specifically here
33:17
Speaker 3: about an investment trade off. That's why I bring that up.
33:19
Speaker 2: Ye, that's fairy. The piece that surprised me about this
33:23
Speaker 2: one in particular, is tax wise, they are substantially worse
33:27
Speaker 2: than a five twenty nine.
33:28
Speaker 3: Then just about anything else you could use for this.
33:30
Speaker 2: I mean about as other than the three thousand dollars
33:33
Speaker 2: that you get, which again not free. I recognize there
33:35
Speaker 2: is no such thing as yeah, that's really what I
33:37
Speaker 2: want to do. It's being printed by the government. We're
33:41
Speaker 2: going to be putting it into you know, only people
33:43
Speaker 2: who have kids accounts. But yeah, from every other perspective,
33:49
Speaker 2: if it weren't for the free thousand dollars, this account
33:51
Speaker 2: doesn't have a lot of tax advantages, like you're going
33:53
Speaker 2: to pay the taxes on the distributions that come out
33:56
Speaker 2: of it. You cannot use it tax free for college,
33:59
Speaker 2: for example. You cannot use a tax free for contributions
34:03
Speaker 2: to wroth irays or any of those nice features that
34:06
Speaker 2: college savings plans have, which by the way, have become
34:08
Speaker 2: looser over the last few years. You can now use
34:11
Speaker 2: that for primary school education, private high school. You can
34:14
Speaker 2: use it if the kid never goes to college, to
34:17
Speaker 2: put it into a roth Ira in their name. These
34:20
Speaker 2: special accounts, again, they don't seem very special to me.
34:24
Speaker 3: There are others that more or less try to do
34:26
Speaker 3: the same thing. And there's another irony here, which is
34:29
Speaker 3: they are trying to increase it, and it's related to
34:32
Speaker 3: the paying interest on the debt that'll be used to
34:35
Speaker 3: fund these but it won't increase the overall savings rate.
34:39
Speaker 3: If that is the objective, make savings overall more attractive
34:41
Speaker 3: relative to consumption, maybe by taxing consumption. That's not on
34:46
Speaker 3: the table here. This just strikes me as another ad hoc,
34:49
Speaker 3: kind of erratic, incoherent when considered in relative to the
34:58
Speaker 3: whole of this tax bill element that it's unclear what
35:02
Speaker 3: exactly they're trying to accomplish and whether this is the
35:04
Speaker 3: best way to do it.
35:05
Speaker 2: And to be clear, were I eligible in the future,
35:08
Speaker 2: I would one hundred percent take plate part it right.
35:10
Speaker 2: It's it is.
35:11
Speaker 3: Well, get the free grand money. Get the free grand
35:13
Speaker 3: for those who are eligible for even I'm falling into
35:15
Speaker 3: the trap it's not really free, but you know.
35:17
Speaker 2: It is again, you know, compared to me who already
35:21
Speaker 2: had my kids, it is going to be free money
35:23
Speaker 2: for my brother who has one in the future. And
35:25
Speaker 2: so yeah, it is a free grand I'm not saying
35:28
Speaker 2: you shouldn't participate in one of them. But when you
35:31
Speaker 2: look at hey, why would I ever put money into
35:33
Speaker 2: this thing in the future, It is a pretty tough
35:36
Speaker 2: case to be made that you shouldn't compared to other
35:39
Speaker 2: savings vehicles that are out there, such as roth I
35:42
Speaker 2: Raise five twenty nines and.
35:43
Speaker 3: Other tools, it seems really slapdash, Mike. Why in the
35:45
Speaker 3: world would they make it a requirement that you stay
35:47
Speaker 3: in equities until the very end you could be faced with,
35:50
Speaker 3: as you pointed out in the last segment, a big
35:54
Speaker 3: draw down in mark.
35:55
Speaker 2: It's just when you need the money. My big question
35:57
Speaker 2: is why this right, Like, is the goal to increase
36:00
Speaker 2: the birth rate? This ain't going to do it? Is
36:03
Speaker 2: it to make raising children more affordable? Like? I don't,
36:07
Speaker 2: I don't really fully understand. I would debate the idea
36:11
Speaker 2: that we can try and increase the birth rate by
36:13
Speaker 2: throwing money at the issue in the first place, But
36:15
Speaker 2: in either case, a grand ain't enough money to do so,
36:18
Speaker 2: So we're starting off with a false premise. And then
36:21
Speaker 2: when you take a look at just the tool itself
36:23
Speaker 2: compared to other existing tools that are out there, I
36:26
Speaker 2: would sure prefer if the government's going to give me
36:28
Speaker 2: a thousand dollars. I would love for it to go
36:29
Speaker 2: into a five twenty nine rather than one of these things.
36:32
Speaker 2: So that's where I'll leave that one. Google, Meta and
36:36
Speaker 2: Snap still think that we all want to wear virtual
36:40
Speaker 2: reality glasses, and I cannot figure out why they think this, well.
36:44
Speaker 5: A virtual reality?
36:46
Speaker 2: What are we calling them?
36:47
Speaker 1: Like?
36:48
Speaker 2: Augmented reality, enhanced reality?
36:51
Speaker 5: It's another wrinkle to social media.
36:54
Speaker 2: Do you think anybody actually wants this?
36:56
Speaker 5: Apparently?
36:56
Speaker 3: Yeah, not after seeing Zuckerberg model them. He's doing the
37:00
Speaker 3: biggest disservice anybody could.
37:01
Speaker 2: Why do you think that, Tucker I meant because the
37:04
Speaker 2: companies are making them.
37:05
Speaker 5: No, I mean, Meta opened up their own retail stores
37:08
Speaker 5: to showcase the ray Ban version of their glasses, and
37:12
Speaker 5: it seems like it's pretty busy. Really, Yeah, the stores
37:17
Speaker 5: are busy. That's what we talked about it like a
37:19
Speaker 5: few weeks ago.
37:20
Speaker 2: Yeah, with real life people. Yeah, unless they're going to
37:25
Speaker 2: these stores trying on the glasses.
37:27
Speaker 1: Yeah.
37:28
Speaker 5: They weren't metaverse people without legs, you know, they were
37:30
Speaker 5: real people.
37:31
Speaker 1: Yeah.
37:32
Speaker 2: Okay, I mean, I I am very open to the
37:35
Speaker 2: idea that I'll be proven wrong and that my kids
37:37
Speaker 2: will love wearing glasses that augment their reality with all
37:40
Speaker 2: sorts of social media experiences.
37:42
Speaker 5: Don't think this is going to last.
37:43
Speaker 2: I don't think it's going to go anywhere.
37:45
Speaker 3: Some uses, though, like you're fixing their toilet, you want
37:47
Speaker 3: to see a tutorial.
37:49
Speaker 2: Some limited, great industrial and use cases that I would
37:53
Speaker 2: agree with. Yeah, if I am working on a jet
37:55
Speaker 2: engine or fixing the toilet mechanic, it would be nice
37:58
Speaker 2: to have that augmented reality in there. But I don't
38:02
Speaker 2: need one as a financial advisor, and I don't know
38:04
Speaker 2: many people that do need them.
38:05
Speaker 3: Well, because we work in services.
38:07
Speaker 2: Let's take a quick break for the rest of the day.
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Speaker 2: We'll be back at it tomorrow, a Federal Reserve meeting day,
38:12
Speaker 2: and a whole lot more. Have a great rest of
38:14
Speaker 2: your afternoon, folks,