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Are Markets Underestimating the Tariff Fallout? · The Financial Exchange Show

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Speaker 1: a donation Today. Face is the Financial Exchange with Mike
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Speaker 1: Armstrong and Mark Vandetti.
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Speaker 2: Good morning, Welcome back to the Financial Exchange. I've got
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Speaker 2: the winners here, Tucker for us for snowfall, good wind
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Speaker 2: totals if lucky one interested. For those of you who
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Speaker 2: are not listening, throughout coastal New England, coast in northeast
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Speaker 2: is getting absolutely hammered with snow. It looks like Rhode
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Speaker 2: Island is going to be taking the winner for most
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Speaker 2: snowfall totals. But according to the National Weather Service, we've
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Speaker 2: got a few areas with over two feet so far.
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Speaker 3: Let's see.
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Speaker 2: Taking a look at the Massachusetts total so far, Swansea
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Speaker 2: is the winner as of nine thirty eight am twenty
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Speaker 2: four inches total and still coming so more to see
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Speaker 2: their congratulations. But to our listeners down in Rhode Island,
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Speaker 2: you've got them beat Providence coming in at twenty four
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Speaker 2: point six inches, Cranston at twenty three and a half
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Speaker 2: and Narragansett as of ten am with twenty six inches
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Speaker 2: of snow. Sorry West Richmond as well twenty six inches.
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Speaker 2: So unfortunately for our listeners on the cape in well
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Speaker 2: Fleet and Chatham and Hatch Beach, you clocked winds at
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Speaker 2: over seventy miles an hour earlier this morning, So if
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Speaker 2: you still have power, congratulations. I can't imagine it'll be
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Speaker 2: for much longer, but thank you for tuning in. Ooh,
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Speaker 2: sorry I missed this one. Nantucket eighty three miles an hour.
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Speaker 3: Wow, crap, can't be good. No.
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Speaker 2: I have a neighbor who works in the construction industry,
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Speaker 2: does a lot of work down on Nantucket and the islands,
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Speaker 2: and well, actually yes, he sent his brother in law
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Speaker 2: along with a whole bunch of other workers on the
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Speaker 2: last Fairies out yesterday afternoon with a whole bunch of
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Speaker 2: their supplies so that they could keep going to work
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Speaker 2: in this mess today. And Tokara, because I think the
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Speaker 2: Fairies are canceled through Tuesday or Wednesday, if I am
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Speaker 2: not mistaken, to the islands. So good luck to everybody,
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Speaker 2: especially down those without power right now and those with
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Speaker 2: two feet of plus of snow. Good luck to everybody.
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Speaker 2: Take it easy, don't try and dig yourself out right away.
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Speaker 2: It's that wet, heavy stuff that gives folks heart attacks,
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Speaker 2: so be careful. The big news of the day continues
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Speaker 2: to be the Supreme Court's ruling on the President's usage
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Speaker 2: of AIPA tariffs that were implemented back in April of
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Speaker 2: twenty twenty five. Estimates for revenue collected on those between
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Speaker 2: one hundred and thirty and one hundred and seventy five
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Speaker 2: billion dollars, all of which presumed will need to be
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Speaker 2: returned to businesses and individuals who paid those tariffs by
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Speaker 2: what process. Nobody knows because the Supreme Court was intentionally
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Speaker 2: absent on what to do about that, so likely headed
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Speaker 2: to lower courts. But in general, I think the conclusion
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Speaker 2: today after a weekend of thinking through all this is
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Speaker 2: while investors were initially optimistic about what this might mean,
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Speaker 2: they've been thrown back into uncertainty today. As the President
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Speaker 2: started off with ten percent universal tariffs now up to
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Speaker 2: fifteen percent on a different tariff justification that is temporary
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Speaker 2: in nature, can only be in place for one hundred
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Speaker 2: and fifty days, and then a whole bunch of foreign
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Speaker 2: trading partners calling into question trade deals that had not
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Speaker 2: quite yet been inked, such as those between the European
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Speaker 2: Union in the United States, Canada, Mexico, etc. So I
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Speaker 2: think the conclusion is we will have a lot more
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Speaker 2: to cover and discuss when it comes to trade tariffs,
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Speaker 2: and the uncertainty that it poses to the US and
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Speaker 2: world economy in twenty twenty six. Unfortunately, the other thing
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Speaker 2: that I think seems more likely now is that law
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Speaker 2: May is going to be pushed into a corner of
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Speaker 2: voting on this stuff, which they have been obviously reluctant
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Speaker 2: to do, as it kind of goes against some of
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Speaker 2: their core principles, as conservative Republicans in some cases, or
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Speaker 2: in Democrats cases, their core principle of disagreeing with everything
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Speaker 2: the President says.
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Speaker 3: Anything else to add on tariffs mark no other.
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Speaker 4: Than that kind of wildly, No matter what you think
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Speaker 4: about tariffs, you want them implemented in a resolute way
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Speaker 4: and in a way that allows businesses to plan. You
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Speaker 4: may think, misguidedly that they can bring manufacturing jobs back,
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Speaker 4: or that they will somehow restore America to the glory
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Speaker 4: days of the fifties and sixties, even though that is
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Speaker 4: also a myth. But no matter where you come down
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Speaker 4: on tariff's mic and as I've already indicated, there are
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Speaker 4: lots of good reasons to think that there are better
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Speaker 4: ways of raising living standards. The uncertainty is the killer here.
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Speaker 4: The whimsical way that they've been implemented, and ultimately the
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Speaker 4: faulty way that they've been implemented, it was a risky
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Speaker 4: stratetuch that the Supreme Court has said was unconstitutional. Now
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Speaker 4: I guess we're back to square one. But we have
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Speaker 4: another four hundred and what is it, thirty five? How
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Speaker 4: many reps are there something like that players in the
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Speaker 4: mix who have to weigh in on this now in
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Speaker 4: an election year.
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Speaker 2: You know, further confusion being thrown in here. The European
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Speaker 2: Parliaments Trade Committee held an emergency meeting on Monday to
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Speaker 2: discuss the latest trade moves and effectively said that all
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Speaker 2: discussions and negotiations were on hold regarding trade policy with
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Speaker 2: the United States for the time being. So they've postponed
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Speaker 2: a vote on the US trade deal that was agreed
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Speaker 2: to in theory and all of this stuff thrown into question. Furthermore,
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Speaker 2: the President is due to visit China, I believe, in March,
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Speaker 2: and you know, any discussions around trade there big big
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Speaker 2: question mark now on any negotiations that could happen between
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Speaker 2: the United States and China. So all sorts of big
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Speaker 2: questions to be raised here. Beside the uncertain around trade
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Speaker 2: and the blizzard sweeping the northeast right now. We will
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Speaker 2: get a bunch of economic data as well as earnings
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Speaker 2: this week. The case Shiller Home Price Index for December
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Speaker 2: will be coming out on Tuesday. Consumer confidence will also
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Speaker 2: be reported Tuesday at ten am. We have a bunch
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Speaker 2: of FED speakers. Thursday will be getting initial jobless claims,
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Speaker 2: and then we've got the Producer Price Index coming out
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Speaker 2: on Friday. Yeah, Producer price Index out on Friday, construction spending,
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Speaker 2: and then the following week we'll obviously be getting the
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Speaker 2: jobs report for the month of February, unless the BLS
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Speaker 2: tueses to delay it for some government shutdown related reason.
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Speaker 2: We will see in earnings this week. We had Dominion
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Speaker 2: Energy reporting earnings this morning. Tomorrow, we'll hear from Home
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Speaker 2: Depot and some other irrelevant companies Wednesday after the bell,
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Speaker 2: and Video will be reporting. TJX reports before the on Wednesday,
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Speaker 2: Low's reporting as well, Salesforce going after the bell as well.
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Speaker 2: So again a bunch of different companies that tell you
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Speaker 2: a lot about different areas of the markets and the economy.
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Speaker 2: But in Vidia here the biggest one, right, the four
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Speaker 2: plus trillion dollar behemoth in the AI trade that has
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Speaker 2: driven a lot of the growth, but notably not a
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Speaker 2: lot of it recently. In Vidia stock as of right
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Speaker 2: now sitting just shy of one hundred and ninety dollars
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Speaker 2: per share and has been hovering around that level now
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Speaker 2: for some time. It reached let's see, back in October
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Speaker 2: of last year, reached two hundred and seven dollars per
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Speaker 2: share and since then has just been kind of bumping
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Speaker 2: around here between bucks seventy and you know, one hundred
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Speaker 2: and ninety per share, as investors call into question just
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Speaker 2: how much longer can this spending continue? Will Meta, Amazon, Microsoft,
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Speaker 2: Alphabet continue to buy these chips at the same pace
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Speaker 2: they have and precisely what does it mean for in
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Speaker 2: videos overall model. Let's take a quick break when we
9:06
Speaker 2: come back, play a little bit of trivia here next
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Speaker 2: on the Financial Exchange that's right after this.
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Speaker 5: trivia here on the Financial Exchanging. Yesterday for some reason,
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Speaker 5: the US men's hockey team beat Team Canada in overtime
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Speaker 5: that's right. So our trivia question today is who did
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Speaker 2: By the way, I know this happened on Friday, so
11:13
Speaker 2: it's maybe already talked about, but hats off to the
11:16
Speaker 2: women too. The Women's Olympic game also went overtime with
11:22
Speaker 2: an amazing, amazing win for that women's team. So huge
11:26
Speaker 2: overtime wins to both the men's and women's Olympic hockey teams.
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Speaker 2: For those hockey fans out there, Mark you, I believe
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Speaker 2: talked about this a little bit on Wednesday on the program,
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Speaker 2: and I think it's worth talking about again. So the
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Speaker 2: the AI scare trade is healthy for the stock market.
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Speaker 2: First of all, let's talk about the AI scare trade, right.
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Speaker 2: It's taken a bunch of different forms.
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Speaker 3: I think in the.
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Speaker 2: Fourth quarter of last year you could argue that more
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Speaker 2: investors were scrutinizing the spend of major tech companies and hey,
11:57
Speaker 2: how is this going to pay off? More recently, the
12:00
Speaker 2: AI scare trade has been scrutinizing companies that could be
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Speaker 2: affected by what's truly impressive technology on the AI front,
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Speaker 2: Why would you deem that to be healthy for the
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Speaker 2: stock market if it does continue, this big sell offs
12:17
Speaker 2: of certain sectors of the economy, of certain sectors of
12:19
Speaker 2: the market, could in fact be healthy for the market.
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Speaker 4: In some people's opinion, Well, valuations are very high. Stocks
12:26
Speaker 4: are really expensive relative to earnings, and one way that
12:29
Speaker 4: could get resolved it's always, by the way, been resolved
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Speaker 4: by falling prices, not rising earnings. These dramatic spikes in
12:38
Speaker 4: PE ratios, and there are lots of different ways to
12:41
Speaker 4: define the E and PE, but I'll just kind of
12:43
Speaker 4: leave it at that. So I kind of took heart
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Speaker 4: from this new theme that's emerging that investors are becoming
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Speaker 4: more discriminating. They're not just wildly pushing up prices of
12:54
Speaker 4: stocks that claim to be implementing AI or AI adjacent
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Speaker 4: in some way. They're actually demanding kind of proof of
13:02
Speaker 4: concept and proof of profit, the ability that is to
13:05
Speaker 4: monetize these investments. So so, for example, there are many
13:11
Speaker 4: companies that are down double digits this year, Microsoft among them.
13:16
Speaker 4: I think, at least it is the last time I checked,
13:17
Speaker 4: which was last week. Overall, though stocks are flat as
13:20
Speaker 4: of today, stocks have not moved on the year, and
13:24
Speaker 4: I don't think they've moved in price terms anyway, not
13:27
Speaker 4: counting dividends and repurchases since like last October. So markets
13:31
Speaker 4: have been a kind of a holding pattern. So if
13:34
Speaker 4: earnings continue to go, and earnings have grown at a
13:36
Speaker 4: double digit pace a year over year four Q to
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Speaker 4: four Q, if that continued, and that's a bit of
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Speaker 4: a stretch to say that it will, Mike, that's one
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Speaker 4: way that stocks could get cheaper without tank in the
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Speaker 4: whole market.
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Speaker 2: That is one piece that I find pretty miraculous about
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Speaker 2: this year. Again, we're very early in on the year,
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Speaker 2: but the S and P five hundred is basically flat
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Speaker 2: with today's action.
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Speaker 3: It's down a third of a.
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Speaker 2: The you know, really big tech forward sectors of the
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Speaker 2: market I think of as the technol the information technology sector,
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Speaker 2: of course, which represents about a third of the S
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Speaker 2: and P five hundred, and then the communications services sector,
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Speaker 2: which is another eleven percent. Why communications, Well, it happens
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Speaker 2: to include companies like Meta as well as Alphabet I
14:22
Speaker 2: believe that are included in that communications sector. And so
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Speaker 2: between those two you have nearly half the market. Those
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Speaker 2: two sectors are down one and a half or sorry, no,
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Speaker 2: that's that's today four percent and one percent respectively, And
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Speaker 2: yet the SMP is basically flat for this year, so
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Speaker 2: there's been this big rotation. To your point, though, you know,
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Speaker 2: more often than not, when you have valuations climbed to
14:50
Speaker 2: exorbitant levels, the way it gets corrected is not through
14:53
Speaker 2: the earnings improving and therefore that ratio improving. Usually historically
14:59
Speaker 2: it's been through through a broad market downturn that has
15:02
Speaker 2: brought all stocks, whether whether you know whether they really
15:05
Speaker 2: should be dragged into the story or not getting whacked.
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Speaker 3: And that's just not what we see this yere right.
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Speaker 4: One way to think about it, because we threw out
15:13
Speaker 4: a lot of concepts, is suppose your your measure of
15:16
Speaker 4: whether how fit you are is just your weight divided
15:18
Speaker 4: by your height. That's not obviously asphisticated as BMI. But
15:22
Speaker 4: suppose weight divided by height was an accepted standard for
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Speaker 4: how physically fit you are, whether you're overweight. That's the
15:29
Speaker 4: same thing as P divided by E. If your weight
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Speaker 4: was high relative to your height, you wouldn't hope to
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Speaker 4: grow to reduce that ratio. That's that's not a good strategy. Similarly,
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Speaker 4: maybe for some maybe some people have tried that on
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Speaker 4: average doesn't work similarly for whatever. And now I'm the
15:47
Speaker 4: difference with P TWOE is that E and theory because
15:50
Speaker 4: I'm picture a ratio here with P on top and
15:54
Speaker 4: E on the bottom, so you know it's it's it's
15:56
Speaker 4: it's just a quotient one divided by the other in
15:59
Speaker 4: theory could continue to chug along if the economy continues
16:02
Speaker 4: to expand, and if this rotation is very accurately described,
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Speaker 4: it I think continues. Maybe stocks stay flat and earnings
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Speaker 4: continue to grow. That doesn't sound like an enticing prospect.
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Speaker 4: But from a bubble deflation, assuming you agree that there
16:20
Speaker 4: was a little bit of a bubble in AI related stocks,
16:24
Speaker 4: from a resumption of more reasonable valuation ratio's perspective, that's
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Speaker 4: the best possible outcome. It would be like the miraculous
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Speaker 4: disinflation that we experienced a few years ago. This would
16:37
Speaker 4: be a miraculous pe deflation, one that didn't really ding
16:42
Speaker 4: the average stock price, which is what an index represents,
16:46
Speaker 4: but allowed pees to normalize well.
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Speaker 2: In either case, it has been pretty fascinating to watch
16:53
Speaker 2: this year again as that composite struggling this year, the
16:59
Speaker 2: S and P he basically flat for the year. Dow
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Speaker 2: Jones industrial average now up one percent for the year,
17:04
Speaker 2: So again a bit of a reversal from what we've
17:07
Speaker 2: seen for the last few years, and we will see
17:09
Speaker 2: how it continues to play out. The other area that
17:12
Speaker 2: is thinking about artificial intelligence and speaking about it publicly
17:16
Speaker 2: at least is the Federal Reserve. And Bill Dudley, former
17:20
Speaker 2: FED official, has a piece that I think lines up
17:23
Speaker 2: with your own views mark on productivity artificial intelligence and
17:27
Speaker 2: what it means for the FED. But what does he
17:29
Speaker 2: outline in terms of his own thinking about what AI?
17:34
Speaker 2: And I think he acknowledges that it truly impressive technology
17:37
Speaker 2: that probably will change the world, But what does it
17:39
Speaker 2: mean for the FED and interest rates?
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Speaker 4: Yeah, Dudley's view is just the conventional economist view, which
17:45
Speaker 4: you get right out of textbooks. So I'm not inventing
17:48
Speaker 4: anything or even thinking too hard about it when I
17:52
Speaker 4: say what Dudley said and what anybody who's familiar with
17:57
Speaker 4: growth would say, which is okay. So I suppose AI
18:02
Speaker 4: is spectacularly successful. It is revolutionary, it increases productivity, it
18:06
Speaker 4: changes the way we work and live. Should interest rates
18:09
Speaker 4: on average be higher or lower? The answer that's not
18:11
Speaker 4: really clear all LSEQL. They should be higher because AI
18:14
Speaker 4: is going to soak up a lot of investment. It
18:17
Speaker 4: may also induce people to spend more in anticipation of
18:20
Speaker 4: higher future earnings. That would also argue for on average
18:24
Speaker 4: higher interest rates. And when I mean when I say
18:25
Speaker 4: interest rates, I mean the rate the Fed sets, the
18:28
Speaker 4: very short term rate that the Fed the Federal Reserve
18:30
Speaker 4: that can control. So proponents of reducing rates because of
18:35
Speaker 4: the AI story are making an economically incoherent argument.
18:41
Speaker 2: Mike Yeah Dude points out, like, okay, yeah, If AI
18:44
Speaker 2: just gets rolled out and it manages to augment existing
18:46
Speaker 2: workers and machines and make us all more productive, great,
18:50
Speaker 2: But historically that's not really been how new technology works.
18:53
Speaker 2: It more likely renders a whole bunch of people's skills obsolete.
18:57
Speaker 2: It could force companies to pay more for the remaining
19:00
Speaker 2: workers who actually have the skills, and historically, at least
19:04
Speaker 2: it's led to companies spending a whole bunch of money
19:08
Speaker 2: on that technological innovation in order to stay relevant and effective,
19:11
Speaker 2: which again historically has required higher real interest rates due
19:16
Speaker 2: to that additional spending on the part of consumers, businesses
19:20
Speaker 2: and everybody else, which you know hypothetically drives inflation a
19:24
Speaker 2: little bit higher.
19:25
Speaker 3: We've got to take a quick break.
19:26
Speaker 2: We're going to have a full market recap with you
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Speaker 2: just after this market and selloff mode as we close
19:31
Speaker 2: in on the noon hour.
19:41
Speaker 1: Bringing the latest financial news straight to your radio. Every day,
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Speaker 1: It's the Financial Exchange on the Financial Exchange Radio Network.
19:51
Speaker 1: Time now for Wall Street. Watch a complete look at
19:55
Speaker 1: what's moving market so far today right here on the
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Speaker 1: Financial Exchange Radio Network.
20:01
Speaker 5: The markets are in sell off mode to begin the week,
20:04
Speaker 5: as Wall Street continues to navigate tariff confusion amid the
20:07
Speaker 5: Supreme Court overturning Trump's tariffs on Friday Saturday, President Trump
20:12
Speaker 5: said he would increase to a fifteen percent global tariff.
20:16
Speaker 5: Traders also writing for significant earnings from AI and chip
20:20
Speaker 5: giant Nvidia, as well as retailer Home Depot and Lows
20:25
Speaker 5: and others. Right now, the Dow is down one point
20:28
Speaker 5: four percent or six hundred and ninety points, lower S
20:31
Speaker 5: and P five hundred down nearly one percent or sixty
20:35
Speaker 5: six points, Nasdaq selling off one point one percent or
20:38
Speaker 5: two hundred and fifty three points. Russell two thousand down
20:41
Speaker 5: over two percent now Tenure Treasure Reel down five basis
20:45
Speaker 5: points at four point zero three five percent, and crew
20:48
Speaker 5: to Oil up eight tenths of a percent, trading just
20:51
Speaker 5: above sixty seven dollars a barrel. Eli Lilly and unce
20:54
Speaker 5: a new form of its blockbuster obesity drug, zep Bound
20:58
Speaker 5: that offers a month's worth of doses in a single pen. Separately,
21:01
Speaker 5: Novo Nordisk said its obesity treatment failed to beat the
21:06
Speaker 5: weight loss delivered by Eli Lily zepp Bound in a
21:09
Speaker 5: head to head trial. Shares and Novo nordis plunging over
21:13
Speaker 5: fifteen percent, while Eli Lilly stock is up about four percent.
21:18
Speaker 5: Another drop maker making headlines is Mark after the company
21:21
Speaker 5: announced it's splitting its pharmaceuticals units to bolster product launches
21:25
Speaker 5: before a crucial patent loss, where one will house its
21:29
Speaker 5: cancer drugs, including blockbuster key Trude merkstock is up by
21:33
Speaker 5: one percent. Meanwhile, Domino's Pizza posted solid fourth quarter results
21:37
Speaker 5: where its same store sales climb three point seven percent
21:40
Speaker 5: and blogged is six point four percent increase in revenue.
21:45
Speaker 5: The pizza chain also raised its quarterly dividend by fifteen percent.
21:49
Speaker 5: Dominos is now up by over two percent, and several
21:53
Speaker 5: airline stocks are seeing losses on the day, included United
21:56
Speaker 5: American and Delta, all trading about four percent lower amid
22:00
Speaker 5: the widespread snowstorm impacting the Northeast, resulting in thousands of
22:06
Speaker 5: flight cancelations. Some Tucker Silva and that is Wall Street
22:10
Speaker 5: Watch And in the previous segment, we asked you the
22:12
Speaker 5: trivia question who did the US men's hockey team beat
22:15
Speaker 5: in the gold medal game of the nineteen eighty Winter Olympics.
22:21
Speaker 5: It would be Finland two days after they beat the
22:25
Speaker 5: Soviet Union, so again it was Finland. Mike from West Harwich,
22:29
Speaker 5: Mass is our winner today, taking home a Financial Exchange
22:32
Speaker 5: Show t shirt. Congrats to Mike, and we play trivia
22:35
Speaker 5: every day here on the Financial Exchange See complete contest
22:38
Speaker 5: rules at Financial Exchange Show dot com.
22:41
Speaker 3: Mark.
22:41
Speaker 2: In twenty twenty five, there were nine hundred and ninety
22:44
Speaker 2: seven actively manage ETFs launched into markets. The ets are
22:51
Speaker 2: taking a very different path than I think the industry
22:54
Speaker 2: was started on, and this might surprise you, but when
23:00
Speaker 2: speaking to the general public about ETFs as like an
23:04
Speaker 2: investment tool, there's almost no real understanding of the differences
23:11
Speaker 2: between ETFs and mutual funds, why you might consider one
23:15
Speaker 2: versus another, and what this expansion has really led to.
23:19
Speaker 2: Let's start, though, with the launching of these new ETFs,
23:22
Speaker 2: because the industry itself was built on the like I
23:27
Speaker 2: don't know who actually started the first exchange traded fund.
23:30
Speaker 2: It's probably not one of the majors, but it was
23:33
Speaker 2: decades ago, and Vanguard was the one that comes to
23:35
Speaker 2: mind for me, at least in terms of really taking
23:39
Speaker 2: advantage of it. But I don't think they were first
23:40
Speaker 2: to market, but it did drive down costs and effectively
23:44
Speaker 2: the first products that were launched in the space were
23:46
Speaker 2: these passively managed algorithms that built you a basket of
23:52
Speaker 2: stocks for a fraction of what it costs from their
23:54
Speaker 2: actively managed mutual fund counterparts. Do you have anything else
23:58
Speaker 2: to summarize, I guess in that development of that industry, to.
24:02
Speaker 4: My knowledge, it was State Street. They introduced the so
24:04
Speaker 4: called Spider in nineteen ninety three, which is just an
24:07
Speaker 4: S and P five hundred index, so it tracks that
24:10
Speaker 4: index of leading US companies. There were plenty of mutual
24:12
Speaker 4: funds at the time that did it. What made ETFs
24:15
Speaker 4: which are just a rapper, They're like mutual funds, but
24:17
Speaker 4: they're rapped differently so that allows them to trade throughout
24:21
Speaker 4: the day, and there are some tax advantages relative to
24:24
Speaker 4: mutual funds of the ETF vehicle. But to my knowledge,
24:27
Speaker 4: it was State Street Bank and Trust. It was their
24:29
Speaker 4: subsidiary s SGA State Street Global Advisors that pioneered this
24:34
Speaker 4: idea in nineteen ninety three, and since then, of course,
24:36
Speaker 4: there's been this proliferation from diversified low cost index vehicles
24:42
Speaker 4: to these really niche solely speculative in terms of how
24:47
Speaker 4: they're meant to be used vehicles that the Wall Street
24:50
Speaker 4: Journal catalogs in today's article, right.
24:52
Speaker 2: And that was the name of the game for quite
24:54
Speaker 2: a few decades. Mark was just, Hey, which giant fund
24:57
Speaker 2: provider can undercut the other one by offer an SMP
25:01
Speaker 2: tracked index fund for a lower cost. We've basically gotten
25:03
Speaker 2: as close to zero as you can get, or in
25:05
Speaker 2: the case of Fidelity, I don't think they do this
25:07
Speaker 2: on the ETF side, but I believe they actually have
25:10
Speaker 2: mutual funds that literally have zero cost attached to them
25:13
Speaker 2: that track major indices. To your point, in twenty twenty five,
25:17
Speaker 2: in the last couple of years that the industry has
25:19
Speaker 2: been designed by more of these much more speculative type things. So,
25:23
Speaker 2: for instance, you have ETFs that now track cryptocurrencies. You
25:26
Speaker 2: have ETFs that now track single commodities or individual companies,
25:30
Speaker 2: and that add leverage to them, so they attempt to
25:33
Speaker 2: double or triple the daily return of these commodities or
25:38
Speaker 2: individual companies. We have all sorts of new ETFs that
25:42
Speaker 2: are designed to buffer the volatility of the markets or
25:47
Speaker 2: take volatility out of certain markets. And to me, the
25:52
Speaker 2: launch of these new products over the last couple of
25:54
Speaker 2: years one there's only one real reason you do it,
25:57
Speaker 2: which is to make money. And I think the companies
25:59
Speaker 2: see a clear path where Hey, the term ETF. When
26:03
Speaker 2: I ask the average person, hey, do you understand the
26:05
Speaker 2: difference between ETF and a mutual fund?
26:07
Speaker 3: The general answer is no.
26:08
Speaker 2: But when I think of ETF, I think of a
26:11
Speaker 2: cheaper alternative to mutual funds. And in the case of the
26:13
Speaker 2: ones that were launched over the last few years, it's
26:15
Speaker 2: not been the case. Right. The whole point of these
26:17
Speaker 2: ones has been, Hey, these are pretty expensive strategies, they're
26:21
Speaker 2: oftentimes actively managed, and seek to do very different things
26:25
Speaker 2: than what the industry was built on.
26:27
Speaker 4: Yeah, you can think of it like oh sorry, no please.
26:30
Speaker 4: They think of it like cereal. When it started out,
26:33
Speaker 4: you could gab special k cornflakes and rice cre They
26:36
Speaker 4: were all basically the same thing, and they satisfied most
26:39
Speaker 4: of your needs, which a diversified index fund does. Most
26:42
Speaker 4: people just need broad market exposure as cheaply as possible.
26:46
Speaker 4: That's a great retirement strategy. Dollar cost average into that
26:50
Speaker 4: sucker for a few decades and you'll harvest market returns.
26:54
Speaker 4: ETFs were introduced to meet the need for taxif implementation
27:01
Speaker 4: of that type of dollar cost averaging.
27:04
Speaker 3: But to your.
27:05
Speaker 4: Point, investment managers are in the business of offering products
27:10
Speaker 4: that they think people will buy, and is speculative appetites
27:14
Speaker 4: got more sort of sophisticated. They started offering more things
27:17
Speaker 4: in this very convenient and now familiar rapper.
27:21
Speaker 2: In any case, I think what's clear to me is
27:24
Speaker 2: that while these things that have been launched over the
27:28
Speaker 2: last few years, you know, have their they have their place,
27:32
Speaker 2: and some of them are more applicable, I think to
27:34
Speaker 2: most people than others. Others just look like pure speculative tools.
27:39
Speaker 2: To me that are probably a waste of money for
27:41
Speaker 2: the average investor, but it is confusing. The other thing
27:45
Speaker 2: I'll say is, you know, the title of the Wall
27:47
Speaker 2: Street Journal article is the exotic makeover of the once
27:50
Speaker 2: boring ETF market. And I would just ask myself, like,
27:53
Speaker 2: as a sixty five year old retiree, am I looking
27:55
Speaker 2: for an exotic makeover?
27:57
Speaker 3: I don't think most of us.
27:58
Speaker 4: Again, like with my serial analogy, most of what you
28:01
Speaker 4: see in the hundreds of choices in the supermarket shelf
28:04
Speaker 4: is not relevant to you. It's niche.
28:07
Speaker 2: And I think deciphering between all of that is more
28:11
Speaker 2: challenging than ever, And especially with some of these products
28:14
Speaker 2: they are specifically marketed towards and geared towards retirees, it
28:18
Speaker 2: does become challenging to differentiate if you are invested in
28:23
Speaker 2: some of these newer products today, if you are looking
28:27
Speaker 2: at some of these strategies and saying, hey, might that
28:30
Speaker 2: benefit my portfolio my goals for investing. You know, I've
28:35
Speaker 2: got this cash on the sideline and I've been hesitant
28:37
Speaker 2: to move into markets, but this suddenly appeals to me.
28:41
Speaker 2: One I would ask you to slow down, make sure
28:43
Speaker 2: you understand what you're investing in. If you need some
28:46
Speaker 2: assistance in figuring out what that all means and how
28:49
Speaker 2: it might affect your retirement. Give the folks at Armstrong
28:52
Speaker 2: Advisory Group a call the numbers eight hundred three nine
28:56
Speaker 2: three four zero zero one. We offer free consultations where
28:59
Speaker 2: we can dive through and educate you on how these
29:02
Speaker 2: different products can be used to successfully supplement what you
29:07
Speaker 2: already have. The number again is eight hundred three nine
29:11
Speaker 2: three four zero zero one. You can also book a
29:14
Speaker 2: time for us to call you back at Armstrong Advisory
29:16
Speaker 2: dot com.
29:17
Speaker 1: The proceeding was paid for by Armstrong Advisory Group, a
29:20
Speaker 1: registered investment advisor. Nothing in the ad or in any
29:22
Speaker 1: Armstrong guide a specific financial, legal or tax advice. Consult
29:25
Speaker 1: your own financial tax into state planning advisors before making
29:28
Speaker 1: any investment decisions. Armstrong may contact you to offer investment
29:31
Speaker 1: advisory services.
29:32
Speaker 2: In the Encouraging News category. According to a new report
29:37
Speaker 2: released by Gusto just on Saturday, they're now twenty one
29:41
Speaker 2: point two million employees at firms with between two and
29:45
Speaker 2: ninety nine workers who have access to a four oh
29:48
Speaker 2: one K or four oh one K style account. That's
29:50
Speaker 2: up from fifteen point six million back in twenty nineteen.
29:54
Speaker 2: In contrast, bigger firms with over five hundred workers, ninety
29:58
Speaker 2: percent of them have a retirement plan. The only question
30:00
Speaker 2: there is, who on earth are these ten percent that
30:03
Speaker 2: work for companies with more than five hundred employees and
30:06
Speaker 2: don't have access to a four oh one K or
30:08
Speaker 2: similar type of plan. When it comes to these, by
30:12
Speaker 2: the way, I think most people use them correctly, but
30:16
Speaker 2: it just always sticks with me. I had a family
30:19
Speaker 2: member who's now passed away who was very suspicious of
30:23
Speaker 2: their four oh one K, and it was mainly because
30:25
Speaker 2: they didn't really like or trust the company that they
30:28
Speaker 2: worked for, which, unfortunately, plenty of people find themselves in
30:32
Speaker 2: that position.
30:33
Speaker 3: And I think that I tried to explain.
30:36
Speaker 2: To him why that is probably a mistake and how
30:39
Speaker 2: these things actually work, how they're different from pension plans,
30:42
Speaker 2: for example, where you know the financial success of that
30:45
Speaker 2: company and the trust you need in them is pretty required.
30:50
Speaker 2: But if you are finding yourself in that position, definitely
30:53
Speaker 2: do your research. Because, by and large, with very few exceptions,
30:57
Speaker 2: I see the introductions of these types of retire plans
31:00
Speaker 2: as really beneficial to most employees. And I kept looking
31:05
Speaker 2: for the other shoe to drop on this story, and
31:07
Speaker 2: there really wasn't one. It is to my mind very
31:10
Speaker 2: good news that more and more Americans now have the
31:12
Speaker 2: ability to save into these four oh one K plans.
31:15
Speaker 2: Whether or not they have the capability financially is a
31:17
Speaker 2: different question, but really, in my mind, very few downsides
31:22
Speaker 2: to the furthering of that four oh one K option.
31:25
Speaker 2: We've got to take a quick break when we come back.
31:28
Speaker 2: Stack Roulette is next on The Financial Exchange.
31:31
Speaker 1: Smart Financial Talk. Whenever you want, find The Financial Exchange
31:35
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31:38
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31:40
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31:49
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31:59
Speaker 5: The Change is a proud partner of the Disabled American
32:03
Speaker 5: Veterans Department of Massachusetts. The DAV five K raised over
32:07
Speaker 5: one hundred and fifty thousand dollars last year, but we
32:11
Speaker 5: still need your help. You can support our great American
32:13
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32:34
Speaker 3: It's time for a bit of stack roulette.
32:36
Speaker 2: And it has been a while on the show since
32:37
Speaker 2: we've had the opportunity to rant about one of our
32:41
Speaker 2: just timeless rants that we go to. So I'm actually
32:44
Speaker 2: to turn the mic over to Tucker to share about
32:47
Speaker 2: his experience over the weekend at I believe the Boston Garden,
32:50
Speaker 2: Is that right?
32:50
Speaker 5: Yeah, TD Garden took the kiddos to Disney on Ice
32:54
Speaker 5: A plus. Great show. But we're on the suite level
32:59
Speaker 5: and there was this new provisions market where you get
33:04
Speaker 5: your snacks. They have like a wine dispenser, a whiskey dispenser,
33:08
Speaker 5: a beer like anything, but all self serf, all self serve.
33:13
Speaker 5: I mean, they get a couple workers hovering around making
33:15
Speaker 5: sure you're not being a complete dope checking out, But
33:18
Speaker 5: the checkout process is pretty much there's like four or
33:21
Speaker 5: five different areas or kios, if you will, where you
33:26
Speaker 5: set all your items on this tray looking thing, and
33:30
Speaker 5: there's like a scanner overhead and as you're putting it down,
33:34
Speaker 5: your items down. You see on the screen. It's just like, oh,
33:37
Speaker 5: here's some potato chips, here's a bottle of water, here's
33:40
Speaker 5: a slice of pizza, et cetera, et cetera. And it's
33:43
Speaker 5: dead on accurate. It's very impressive technology. Go to check out.
33:47
Speaker 5: What's the first thing you see? Do you want to tip?
33:49
Speaker 5: Ten percent or twenty five percent?
33:54
Speaker 3: I'm like, who the hell am I tipping? There's not
33:57
Speaker 3: a human insight.
33:58
Speaker 2: No.
33:58
Speaker 5: I mean again, there was a workers just like hanging out,
34:01
Speaker 5: just making sure you're, you know, not stealing stuff and
34:04
Speaker 5: making sure you know how to cash out.
34:07
Speaker 3: But they probably I see, is tip What The only.
34:10
Speaker 2: Thing that comes to mind is they probably are required
34:12
Speaker 2: to open the beer can if you got one that
34:14
Speaker 2: that's always They.
34:16
Speaker 3: Don't even open it.
34:17
Speaker 5: They tell you to open it.
34:18
Speaker 3: Yeah, they say, hey, open your beer opener. Yeah, we
34:22
Speaker 3: all have to resist this.
34:23
Speaker 2: I know that you can get into the habit of
34:25
Speaker 2: just being like, oh, yeah, ten percent. No, if they
34:28
Speaker 2: are not going to actually do anything to help you,
34:30
Speaker 2: then we cannot be in the habit of tipping these machines.
34:35
Speaker 3: Uh. And just Rew like, who does the tip even
34:38
Speaker 3: go to?
34:38
Speaker 4: In this?
34:38
Speaker 5: I could not tell you that I put it on.
34:41
Speaker 2: I'm fairly certain that Massachusetts law requires the company to
34:46
Speaker 2: pay the tip out to an individual.
34:49
Speaker 3: I don't think.
34:50
Speaker 2: I'm sure that the garden's allowed to hold on to it,
34:52
Speaker 2: but in either case, it's absolutely.
34:54
Speaker 5: I'm sure it's pulled or whatever. Amongst all the TD workers.
34:57
Speaker 2: The other one that always gets me is whenever I
34:59
Speaker 2: go to one of these brews and I order a
35:02
Speaker 2: bunch of takeaway beer, right and literally they just have
35:06
Speaker 2: it in a case like waiting for it to happen.
35:08
Speaker 2: All they did was, you know, get it from the fridge,
35:10
Speaker 2: turn around, put it in the case for me. And
35:13
Speaker 2: the first thing that comes up it's not do you
35:15
Speaker 2: want to tip a dollar five or seven, which I
35:16
Speaker 2: would honestly like might be willing to do. It's do
35:20
Speaker 2: you want to tip fifteen, twenty or twenty five percent?
35:22
Speaker 2: And I just lose my mind at the audacity of
35:27
Speaker 2: these companies to request my tip on a transaction like that.
35:31
Speaker 5: I don't get it.
35:32
Speaker 2: Resist don't allow it to happen. Mark, what do you
35:36
Speaker 2: have for us for Staford?
35:37
Speaker 4: Let Mike, not a lot going on today because of
35:39
Speaker 4: the paralyzing storms, So I thought I'd mentioned with respect
35:43
Speaker 4: to four o one case, I you know who sponsors
35:46
Speaker 4: your plan, the employer associated with it doesn't really have
35:49
Speaker 4: any bearing on the way the plan is run. The
35:53
Speaker 4: employer has to pick a provider. The assets stay separate,
35:57
Speaker 4: the administration usually stays separate from your employer. Your money's
36:01
Speaker 4: kept in a trust, has nothing to do with your employer.
36:04
Speaker 4: They couldn't access it if they wanted to. It's separate
36:07
Speaker 4: from their from their company holdings.
36:12
Speaker 2: Importantly, if that company goes belly up, yeah, they go
36:15
Speaker 2: completely bankrupt, what happens to that four oh one K.
36:18
Speaker 4: It's in a trust. The assets are separate from company assets,
36:21
Speaker 4: so your money will remain invested in whatever you chose.
36:25
Speaker 4: That's different than a pension, where your benefits could be
36:27
Speaker 4: imperiled because benefits continue to accrue in the company's got
36:31
Speaker 4: to fund those. But four oh one K accounts, they're
36:33
Speaker 4: more like iras that are offered to a group. That's
36:37
Speaker 4: not the best analogy, but it is kept in a trust,
36:40
Speaker 4: totally separate from your employer.
36:41
Speaker 2: And by the way, it's oftentimes introduced by the company,
36:44
Speaker 2: in large part because the executives at that company want
36:47
Speaker 2: a tool to be able to save money on taxes,
36:50
Speaker 2: and so I just again I talked about this earlier
36:53
Speaker 2: during the last segment.
36:54
Speaker 3: But when.
36:57
Speaker 2: You have one of those plans, I'm not saying that
36:59
Speaker 2: everybody should save into it. I'm not saying that it's
37:03
Speaker 2: the best thing for you in particular.
37:05
Speaker 3: I'm not saying you.
37:06
Speaker 2: Should do the traditional versus the ROTH. Those are all
37:08
Speaker 2: complicated discussions, but it should be treated differently than say,
37:14
Speaker 2: suspicions about your employer's ability to pay the next paycheck
37:18
Speaker 2: or fund that pension liability or any of those different
37:21
Speaker 2: factors because of the way it's set up, and it
37:23
Speaker 2: is one of those distinct There are many disadvantages to
37:26
Speaker 2: a four oh one K compared to a pension plan,
37:28
Speaker 2: but this is one of the distinct advantages is you're
37:31
Speaker 2: not reliant upon that company's surviving the next thirty years
37:36
Speaker 2: in order to ensure that that money in your plan
37:38
Speaker 2: is actually accessible for you. Markets remain open and pretty
37:43
Speaker 2: strongly in negative territory here as we kick off the
37:47
Speaker 2: last week of February and trading, the Dow Jones Industrial
37:50
Speaker 2: Average now leading the way down seven hundred thirty points
37:54
Speaker 2: about one and a half percent. S and P five hundred,
37:57
Speaker 2: down seventy one points or one percent, Back down two
38:00
Speaker 2: hundred and sixty four points one point one five percent,
38:03
Speaker 2: and the Russell two thousand, those smaller names, down fifty
38:05
Speaker 2: three points or two percent in early trading.
38:09
Speaker 3: We've got a lot more.
38:09
Speaker 2: To cover this week as we continue to digest the
38:13
Speaker 2: Supreme Court's overruling of tariffs.
38:15
Speaker 3: We'll be back at it tomorrow.
38:17
Speaker 2: Stay safe, everybody, and we'll see you then.