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Warsh Faces His First Real Inflation Test · The Financial Exchange Show

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Speaker 2: Good morning, Welcome back to the Financial Exchange. It's a
1:14
Speaker 2: busy Monday here on the Financial Exchange. Busy week here
1:18
Speaker 2: on the Financial Exchange, with lots of economic data and
1:21
Speaker 2: market news out Early in trading, we've got oil down,
1:26
Speaker 2: stocks flat ish. They briefly dipped negative for the day
1:31
Speaker 2: after opening the morning up nearly one percent, with the
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Speaker 2: S and P five hundred now up one fifth of
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Speaker 2: a percent, the NASDAC up about a twenty three percent,
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Speaker 2: so basically not moving them. The Dow up three hundred points,
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Speaker 2: or six tenths of eight percent in early trading. But
1:44
Speaker 2: this week big week for a few things. One earnings.
1:48
Speaker 2: Busy earnings week with some of the largest companies in
1:50
Speaker 2: the world that will be reporting. So Wednesday we really
1:54
Speaker 2: kick things into high gear with Microsoft going after the bell,
1:57
Speaker 2: along with Meta Thursday after the bell, Apple and Amazon
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Speaker 2: reporting earnings. So what investors are going to be looking
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Speaker 2: for in three out of the four of those pretty
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Speaker 2: much everybody other than Apple, is how big are your
2:11
Speaker 2: spending plans now? And what is the return on investment
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Speaker 2: going to be? Last week we had Google's parent company,
2:19
Speaker 2: Alphabet reporting earnings and they disclosed that they'd be pouring
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Speaker 2: two hundred plus billion dollars into their capital expenditures for
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Speaker 2: semiconductors and the likes investors didn't love it. They sent
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Speaker 2: the stock down, you know what, was five six percent
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Speaker 2: in trading that first day after earning.
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Speaker 3: So not a good news.
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Speaker 2: Story for Alphabet when they reported their earnings. I suspect
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Speaker 2: we're going to get more of the same from many
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Speaker 2: of these folks saying, look, we're going to continue to
2:49
Speaker 2: pour money in here. But that's what investors will be
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Speaker 2: asking on top of that. In the earnings you know
2:55
Speaker 2: calendar for this week, we have Visa, Coca Cola reporting earnings,
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Speaker 2: Seagate Technology, Lamb Research, Proctor, Gamble, master Card, a whole
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Speaker 2: bunch of other companies outside of the traditional semiconductors and
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Speaker 2: tech stocks reporting, but all eyes to be on those
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Speaker 2: big tech companies as they outweigh just about everybody else.
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Speaker 2: Then later on this week, we will be hearing from
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Speaker 2: the Federal Reserve under new chair Kevin Warsh, his second
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Speaker 2: meeting at the helm of the Fed and taking on
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Speaker 2: what some have criticized as a bias towards lower interest
3:32
Speaker 2: rates at behest of the President and so when we
3:35
Speaker 2: take a look out at the likely outcomes for JP.
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Speaker 3: Sorry not for Jack anymore, Kevin, thank you.
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Speaker 2: At the meeting this week, there is currently a sixty
3:44
Speaker 2: two percent chance that he leaves interest rates alone and
3:48
Speaker 2: about a thirty eight percent chance that he ends up hiking.
3:50
Speaker 2: We'll talk a little bit more about warsh in the
3:52
Speaker 2: FED in a bit here. Looking elsewhere at markets, the
3:56
Speaker 2: rate on a thirty year fixed rate mortgage. In the
4:00
Speaker 2: of what's been a pretty disappointing year for home sales
4:03
Speaker 2: and home listings, the inventory has barely budged this year,
4:06
Speaker 2: probably on concerns about these higher rates. The thirty year
4:09
Speaker 2: fixed rate mortgage pushing seven percent again. We're at six
4:12
Speaker 2: point eight one percent as of Friday according to Mortgage
4:16
Speaker 2: News Daily, and we don't have interestrates moving around much
4:19
Speaker 2: this morning. Finally, elsewhere in markets, according to Triple A,
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Speaker 2: the national average for a gallon of gasoline sitting at
4:26
Speaker 2: four dollars and eleven cents, down a little bit this
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Speaker 2: week after a weekend of.
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Speaker 3: Calm.
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Speaker 2: Yeah, it's a weekend of calm for how you can
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Speaker 2: describe it in Iran. So more to come on all
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Speaker 2: of that. But the FEDS new Chairman Kevin Warsh is
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Speaker 2: going to face a pretty big test here. Like I said,
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Speaker 2: there is about a sixty seven percent chance that he
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Speaker 2: does nothing at this upcoming meeting and leaves sorry sixty
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Speaker 2: two percent chance that he leaves interest rates right where
4:56
Speaker 2: they are. That's according to the Chicago Mercantile Exchange. What's
5:00
Speaker 2: unique about this, generally speaking, when you are a couple
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Speaker 2: days out from a Federal Reserve meeting as we are
5:07
Speaker 2: right now, there's a high degree of certainty about what
5:11
Speaker 2: the FED is going to do.
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Speaker 3: Generally speaking, over.
5:14
Speaker 2: The last several years, through the last two FED chair persons,
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Speaker 2: they have forecasted pretty clearly what they intend on doing
5:21
Speaker 2: at the next meeting, and you pretty much know, yeah,
5:24
Speaker 2: they're going to keep rates where they are they're going
5:26
Speaker 2: to hike. You're certainly not going to get a cut
5:28
Speaker 2: at this next meeting. But markets are really uncertain as
5:33
Speaker 2: to what to make of this new FED chair and
5:36
Speaker 2: where he brings interest rates.
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Speaker 4: Chuck, and that's fine.
5:40
Speaker 3: I agree. I think it's a good thing. We don't
5:42
Speaker 3: but it is different from the last few years.
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Speaker 4: It is.
5:45
Speaker 5: I'm not saying it's good or bad. It could prove
5:48
Speaker 5: to be either I've said for the last you know,
5:51
Speaker 5: a couple of months, Hey, if worst proves to be
5:54
Speaker 5: good at his job, it's going to be just fine.
5:57
Speaker 5: If he proves to be bad at his job, well
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Speaker 5: you probably you know, it won't matter what he's saying.
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Speaker 4: If he's bad at his job, it's.
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Speaker 5: Can you set proper monetary policy to get the result
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Speaker 5: that you want?
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Speaker 4: That's what's going to matter.
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Speaker 5: So I think that in looking at you know what
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Speaker 5: we have here, what we said during the you know
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Speaker 5: transition over to Warsh, we said, look, one of the
6:24
Speaker 5: outcomes of this is that, at least in the short term,
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Speaker 5: you might see rates you know, need to move up
6:29
Speaker 5: simply because hey, if you're not exactly sure what the
6:32
Speaker 5: fed chair is going to do, yeah, you probably want
6:35
Speaker 5: a little bit more cushion in, a little bit more
6:38
Speaker 5: risk premium associated with that, just so that you can say, yeah,
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Speaker 5: if things move against me, I'm covered, and so like
6:45
Speaker 5: that that makes sense conceptually there. Eventually you're gonna get
6:50
Speaker 5: a better sense of exactly what Warsh likes to do
6:53
Speaker 5: on the you know what, in terms of timing and
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Speaker 5: magnitude of moves and what things he considers to be
6:58
Speaker 5: important but now we're still in the early days. And
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Speaker 5: this is why I caution anyone against saying that Worsh
7:04
Speaker 5: was either doing, you know, a great job because interest
7:07
Speaker 5: rates went down one week, or a terrible job because
7:09
Speaker 5: they went up one week.
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Speaker 4: Like, let's give the guy a chance to breathe a
7:12
Speaker 4: little bit. Now.
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Speaker 5: I do think this is potentially an important meeting, because
7:18
Speaker 5: clearly Worsh, if he decides to raise interest rates, not him.
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Speaker 5: But if he's able to convince the committee to raise
7:27
Speaker 5: rates here, I think it does send an important signal.
7:30
Speaker 5: But if he doesn't, I don't think it necessarily says Oh,
7:33
Speaker 5: he's definitely the opposite. I think he can send an
7:35
Speaker 5: important signal but doesn't necessarily need to.
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Speaker 2: So it would seem to me chuck that, based on
7:41
Speaker 2: commentary from other voting members of the FED, that if
7:45
Speaker 2: Worsh wanted to move the committee towards higher rates, he
7:48
Speaker 2: would be successful in doing so. The bigger question to
7:51
Speaker 2: me is whether he can be successful in keeping rates
7:54
Speaker 2: where they are, which I also think he would be
7:56
Speaker 2: successful in doing so for the time being, and to me,
7:59
Speaker 2: that's where I think he likely lands. Hey, we got
8:02
Speaker 2: a better than previous inflation report most recently, and oil
8:08
Speaker 2: prices at least as of this week are dropping. So
8:11
Speaker 2: therefore I'm justifying no rate hike. I think that's pretty justifiable.
8:17
Speaker 2: I don't think he would have any challenging bringing a
8:19
Speaker 2: bunch of members along with a rate hike, though.
8:22
Speaker 5: The single best move he could do in my opinion,
8:27
Speaker 5: He's not going to I'm hiking fifty BIPs. If Warsh
8:33
Speaker 5: actually lays down a marker that he's not going to
8:36
Speaker 5: tolerate inflation, yeah, it will go so much further than
8:41
Speaker 5: anything else he could say or do. Yep, he's not
8:45
Speaker 5: going to do that.
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Speaker 3: Yeah.
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Speaker 2: It seems to contradict his stated positions on a few things,
8:49
Speaker 2: such as the productivity increase you might get from AI.
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Speaker 2: Like to me, if you want to hike fifty basis points,
8:56
Speaker 2: you would be doing it because you are concer earned
9:00
Speaker 2: about what we are seeing regarding inflation, part of which
9:03
Speaker 2: is due to the AI spend. And I think that
9:06
Speaker 2: worsh at least from his public comments a year ago,
9:08
Speaker 2: seems to very much disagree with that, with that path
9:12
Speaker 2: for inflation. But I tend to agree a hike no
9:17
Speaker 2: matter the magnitude. Would I think do him a lot
9:21
Speaker 2: of credit and credibility at this point in time, I'm
9:24
Speaker 2: not well. I guess we don't know. We'll find out
9:27
Speaker 2: tomorrow or sorry, we'll find out Wednesday when he speaks to.
9:29
Speaker 4: Take a quick break.
9:30
Speaker 5: When we return, we're talking about grocery prices.
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11:01
Speaker 3: Mike.
11:01
Speaker 2: What is the rockets and feathers effect? New one for me,
11:04
Speaker 2: But it is the effect that I think ever fun
11:07
Speaker 2: has felt with inflation, which is that prices rocket higher
11:11
Speaker 2: and then fall like a feather, Which is pretty the
11:15
Speaker 2: reasonable comparison to make, and one that's easily understood, So
11:20
Speaker 2: I think most people can understand that. Is it grounded
11:24
Speaker 2: in fact?
11:24
Speaker 3: Chuck it.
11:25
Speaker 2: It seems to be. I don't see grocery prices coming
11:27
Speaker 2: down very frequently.
11:28
Speaker 4: Well, here's here's the thing.
11:30
Speaker 5: And I gotta be honest, like we talk about this
11:33
Speaker 5: a lot, but but here's the thing. Prices don't come
11:36
Speaker 5: down right ever. And what I mean by that is
11:39
Speaker 5: not that like one or two prices don't they do
11:41
Speaker 5: because usually the things that cause like the egg cerfluff
11:45
Speaker 5: a couple of years ago, when egg prices went sky high, Okay,
11:48
Speaker 5: the bird flu ends, and hey, you know, farmers can
11:52
Speaker 5: get more money. You know, raising chickens to you know,
11:55
Speaker 5: sell eggs, and so the flock grows and what once
11:58
Speaker 5: was a shortage turns into a glock. That's the very
12:00
Speaker 5: nature of commodity markets. Sure likewise with beef right now,
12:04
Speaker 5: beef prices has been going crazy for the last several years. Well,
12:07
Speaker 5: eventually some enterprising young rancher is gonna be like, hey,
12:11
Speaker 5: we can get more money selling all this beef. Let's
12:13
Speaker 5: raise more cows. And sure enough, what you're gonna end
12:17
Speaker 5: up with then is the shortage you have now turns
12:19
Speaker 5: into a glut five years now, because it takes a
12:21
Speaker 5: while to you know, transition the size of you know,
12:24
Speaker 5: a herd, and that's how it goes. But what I
12:28
Speaker 5: do mean is, hey, the price level overall doesn't.
12:33
Speaker 4: Usually go down.
12:34
Speaker 5: And the reason why is that from an economic perspective,
12:39
Speaker 5: we've realized it's really bad if prices tend to go
12:43
Speaker 5: down over time. And I know, I know all of
12:46
Speaker 5: you people listening are like, Chuck, you're a moron, Like
12:48
Speaker 5: how could anyone let you speak? I get it. But
12:52
Speaker 5: here's the thing. When prices go down, I want you to,
12:57
Speaker 5: you know, put yourself in the head of someone where
12:59
Speaker 5: prices are allways going down. If you're trying to buy
13:03
Speaker 5: a house and you know it's going to be cheaper
13:06
Speaker 5: to buy a house next year later, you won't buy
13:09
Speaker 5: the house this year. You'll say I can get it
13:10
Speaker 5: even cheaper later. And if the price of milk is
13:14
Speaker 5: going to be cheaper tomorrow, you'll say, I'll buy it later.
13:16
Speaker 5: And if the price of tires is going to be
13:18
Speaker 5: cheaper next month, you'll say, I buy it later.
13:20
Speaker 2: And so what you This is what has happened in
13:22
Speaker 2: every terrible recession in the United States Great Depression, eight recession,
13:27
Speaker 2: for get those.
13:27
Speaker 5: Go through the late eight to go through the second
13:29
Speaker 5: half of the eighteen hundreds, where I think we had
13:31
Speaker 5: it was like either like fifteen or seventeen recessions in
13:35
Speaker 5: the last fifteen fifty years of the eighteen hundreds. And
13:38
Speaker 5: the reason why was because you had these deflationary spirals
13:41
Speaker 5: that would take place where okay, prices start going down,
13:45
Speaker 5: people stop spending money. They expect prices to go down,
13:48
Speaker 5: so they keep spending less money, and you just ping
13:50
Speaker 5: pong back and forth in and out of recession.
13:52
Speaker 2: So practically speaking, we have a government and federal reserve
13:59
Speaker 2: that does not want to see deflation, so they intentionally
14:02
Speaker 2: try to avoid it. The other piece, too, is a
14:05
Speaker 2: massive part of any inflationary environment that we see is
14:09
Speaker 2: either caused by or corresponds with rising wages. Correct, and
14:12
Speaker 2: it might be relatively easy to bring egg prices down
14:16
Speaker 2: depending on the conditions, or one, you know, computer hardware down.
14:21
Speaker 2: You're not going to have a lot of luck telling
14:24
Speaker 2: your employee, Hey, Bob, I know you got to raise
14:27
Speaker 2: last year, but this year egg prices went down, so
14:31
Speaker 2: I'm actually cutting your salary by three person.
14:34
Speaker 5: So, Mike, I want you to play a couple roles here.
14:37
Speaker 5: For the first, I want you to be an oak tree.
14:41
Speaker 3: Got it?
14:42
Speaker 4: Okay, you'd a short for an oak tree?
14:45
Speaker 5: It okay, bad example, three month old oak tree, Mike, Mike,
14:49
Speaker 5: I want you to be an asparagus. Yeah, okay, you're
14:53
Speaker 5: an asparagus. Hey, hey, Mike, asparagus. How you doing today?
14:57
Speaker 5: Oh good, I'm glad to hear that gonna chop you
15:00
Speaker 5: down and someone's gonna give me one cent for you.
15:04
Speaker 5: I know that your your cousin has had two cents
15:06
Speaker 5: for last week. No no, but but you're only gonna
15:10
Speaker 5: get one cent today. The asparagus idiots thank you. I
15:14
Speaker 5: know the asparagus can't do anything about it. It can't
15:18
Speaker 5: say anything. It just gets chopped down and whatever. Now, Mike,
15:22
Speaker 5: I want you to play the asparagus farmer. Okay, no,
15:26
Speaker 5: you have to You're the asparagus farmer. Now, hey, Mike.
15:37
Speaker 3: We're not gonna be able to complete this.
15:38
Speaker 4: No, Mike, Mike, you're the asparagus Tucker. I need to stop.
15:47
Speaker 3: I don't know, go on, sorry, you bow it.
15:57
Speaker 4: Tucker with the sound effects.
16:00
Speaker 5: All right, Mike, you're the asparagus farmer right now. Hey, Mike,
16:04
Speaker 5: I know that we paid you twelve dollars an hour
16:06
Speaker 5: last year. This year we're only getting half as much
16:10
Speaker 5: for the asparagus. I need you to take ten dollars
16:12
Speaker 5: an hour.
16:13
Speaker 3: I'm no, no, I'm just gonna knock row the asparagus.
16:16
Speaker 5: You're gonna You're gonna go and work some other job
16:19
Speaker 5: that still pays you twelve or thirteen. And this is
16:23
Speaker 5: the big thing is prices tend to move up because
16:26
Speaker 5: wages tend to move up. And really, when when prices
16:30
Speaker 5: as a whole move down, it usually indicates something is
16:33
Speaker 5: really bad for the economy. Everyone wants deflation because they
16:36
Speaker 5: assume their earning power remains the same. The only way
16:41
Speaker 5: deflation actually tends to happen is if earning's power is reduced,
16:47
Speaker 5: and so people are like, yeah, I want prices to
16:49
Speaker 5: go down and I'm still making my wage.
16:51
Speaker 4: Well, how does that happen for everyone?
16:54
Speaker 2: Like, tell me, the only way it happens is if
16:57
Speaker 2: you're on Social Security. But even there, like we're still
17:01
Speaker 2: like something else is being screwed, Like there's a problem
17:04
Speaker 2: somewhere as you are doing okay, Yeah, I mean, like, look,
17:07
Speaker 2: the last time we had deflation July oh nine, prices
17:12
Speaker 2: fell year over year by two percent.
17:15
Speaker 3: Yeah, like you did not You did not see that happen.
17:18
Speaker 2: Otherwise, isomy done until nineteen fifty five?
17:22
Speaker 3: I don't remember. You know precisely the conditions there.
17:25
Speaker 2: But again, not economies that you want to live through
17:29
Speaker 2: July of two thousand and nine.
17:31
Speaker 5: No, it was basically the worst economy that anyone in
17:34
Speaker 5: the last one hundred years have lived through. Right, we'd
17:37
Speaker 5: like to avoid that if at all possible. I want
17:39
Speaker 5: to talk about this piece in Wall Street Journal. Big
17:42
Speaker 5: companies are starting to hire again. Nope, they started in January,
17:45
Speaker 5: defying predictions of AI wipeout. So a few things. Number
17:48
Speaker 5: one is Mike notes, yes, they started in January. Number two,
17:51
Speaker 5: as I say, like almost every day now, the AI
17:54
Speaker 5: models that you are seeing are the worst you're going
17:56
Speaker 5: to see for the rest of your life. So just
17:58
Speaker 5: because companies are hiring to doesn't mean that they will tomorrow.
18:03
Speaker 5: Third point, Uh, this the latest rise of like AI
18:06
Speaker 5: agents and things like that really started to take hold
18:10
Speaker 5: in like highly you know, tech savvy businesses three to
18:16
Speaker 5: six months ago, right, yeah, this year, like the average
18:19
Speaker 5: This is like you know, when the drill was invented,
18:22
Speaker 5: being like, well people are still using screwdrivers. Well, okay,
18:26
Speaker 5: you got to you gotta give it a minute for
18:28
Speaker 5: it to like seep out everywhere.
18:30
Speaker 3: Yeah.
18:30
Speaker 2: I think the bigger story here is that companies who
18:34
Speaker 2: were initially shocked by the President's tariff plans and didn't
18:38
Speaker 2: know what to do have now moved past those concerns
18:42
Speaker 2: because the Supreme Court threw a whole bunch of them out,
18:45
Speaker 2: and the President has replaced what was a whiplash effect
18:48
Speaker 2: of tariffs with a pretty consistent ten to twelve and
18:51
Speaker 2: a half percent rate across the board. That seems a
18:55
Speaker 2: lot calmer than it was this time.
18:57
Speaker 3: Last year.
18:58
Speaker 2: So I think that's really the whole story here, and
19:01
Speaker 2: I don't think we're seeing much at all in the
19:03
Speaker 2: way of AI hiring, firing, or anything else. So that's
19:07
Speaker 2: my take so far.
19:08
Speaker 5: But let's you know, this is kind of like the
19:12
Speaker 5: people who back in, you know, the summer of twenty
19:14
Speaker 5: twenty are like, well, New York City's dead forever.
19:17
Speaker 2: Yeah, well, no, certain jobs might be dead forever. I'm
19:21
Speaker 2: just not sure which ones.
19:22
Speaker 4: Let's see how this all evolves.
19:23
Speaker 5: Here is my point quick break, and we're gonna be
19:27
Speaker 5: talking about big cities and kids after this.
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Speaker 6: Markets have raised gains from a strong start to the
19:59
Speaker 6: day ahead of a very busy week including a big
20:02
Speaker 6: test for new FED chairman Kevin worsh and his second
20:04
Speaker 6: meeting in tech earnings for Microsoft, Meta, Apple, and Amazon.
20:08
Speaker 6: Right now, the Dow is up a third of a percent,
20:10
Speaker 6: or one hundred and sixty nine points SMP five hundred,
20:13
Speaker 6: down two tents of one percent or fourteen points lower,
20:17
Speaker 6: Nasdaq down nearly half a percent or one hundred and
20:20
Speaker 6: eleven points lower, RUSS two thousand is up four tenths
20:24
Speaker 6: of one percent, and Your Treasure Reel down three basis
20:26
Speaker 6: points at four point sixty four percent.
20:28
Speaker 4: And Oil down over six and a half.
20:31
Speaker 6: Percent, trading at eighty three dollars a barrel. Chinese chip
20:35
Speaker 6: maker CXMT made at stock market debu and Shanghai, surging
20:39
Speaker 6: four hundred and sixty six percent to become the country's
20:44
Speaker 6: most valuable listed company, Sticking with the chip sector, where
20:47
Speaker 6: in video shares are falling over four percent, falling reports
20:50
Speaker 6: that it is in talks to provide a roughly two
20:53
Speaker 6: hundred and fifty billion dollars backstop for Open AI as
20:56
Speaker 6: part of a massive data center project in southern Ohio. Elsewhere,
21:01
Speaker 6: shares and Cracker Barrel down over four percent after the
21:03
Speaker 6: restaurant chain announced chief executive Julia Massino is stepping down
21:07
Speaker 6: after a few years of controversy around its refresh and
21:10
Speaker 6: logo change, and some breaking news in media after NBC
21:14
Speaker 6: Universal and YouTube have reached a multi year deal that
21:17
Speaker 6: will see Peacock Cast into the platform for YouTube premium subscribers,
21:22
Speaker 6: including NBC Sports portfolio of the NFL and NBA Universal
21:27
Speaker 6: films like the Minions franchise as well. The partnership comes
21:31
Speaker 6: weeks after Comcast announced NBC Universal would split from its
21:36
Speaker 6: parent company. I'm Tucker Silva and that is Wall Street.
21:39
Speaker 1: Watch.
21:40
Speaker 4: You ever see a Minions movie?
21:42
Speaker 3: Several all the time? Solid, solid king, King King, Yeah,
21:48
Speaker 3: that's the Minion.
21:50
Speaker 4: How did Tucker have that ready to go Friday?
21:53
Speaker 2: He's been looking for any movies that contain the word Kevin,
21:57
Speaker 2: just to be prepared for this week's FED meeting.
21:59
Speaker 4: Was that Kevin?
22:00
Speaker 3: That was one of the other minions talking about the
22:03
Speaker 3: menuon named Kevin.
22:04
Speaker 4: Oh, I thought it's a kidding, No keen Kin, No Kevin.
22:08
Speaker 5: Okay, I'd never heard it before, so no, yeah, I guess, uh, oh,
22:14
Speaker 5: this is.
22:14
Speaker 4: Gonna be a problem on Wednesday.
22:16
Speaker 3: Is yeah, yeah, yeah, not a lot of js.
22:19
Speaker 1: No, it wasn't a lot of Jerome.
22:21
Speaker 4: Why would it be jasome?
22:23
Speaker 3: Jrome?
22:24
Speaker 6: Yeah?
22:25
Speaker 5: Okay, okay, Uh anyways, uh, peace in CNBC for gen
22:30
Speaker 5: X investors, dot com bubble haunts stock market portfolios, closing
22:33
Speaker 5: in on retirement and what this is getting at is
22:36
Speaker 5: your gen xers right now?
22:38
Speaker 4: Uh? They are entering into their sixties.
22:41
Speaker 2: Yeah, the oldest gen Xers are now sixty one years old.
22:44
Speaker 2: So this conversation about retirement is going to rapidly shift
22:47
Speaker 2: from what has been a conversation about baby boomers for
22:50
Speaker 2: the last two decades to the gen xers.
22:52
Speaker 5: I thought we were just going to spend twenty years
22:54
Speaker 5: not talking about who's retired. We might yeah, that might
22:56
Speaker 5: be the answer to But here's the thing. Gen x
22:59
Speaker 5: really started to accumulate wealth during the latter part of
23:03
Speaker 5: the nineties. That was when they were, you know, in
23:05
Speaker 5: their mid to late thirties for a big chunk of them.
23:07
Speaker 2: Yeah, how many I like, I've met several former tech
23:11
Speaker 2: employees who you know, how many people have you met
23:14
Speaker 2: in this age demo that were like fairly, very briefly
23:17
Speaker 2: stock market millionaires because of stock options and things like
23:20
Speaker 2: that from their employer before you know, crashing because they
23:24
Speaker 2: couldn't sell those options. They were restricted all sorts of
23:26
Speaker 2: different things that prevented them from cashing in. But they
23:29
Speaker 2: definitely lived that in a very real way, and they
23:32
Speaker 2: also watched their parents retire during that same decade.
23:36
Speaker 3: In a lot of cases.
23:37
Speaker 4: Yep.
23:38
Speaker 5: So gen X again by the typical definition, you're talking
23:40
Speaker 5: nineteen sixty five to nineteen eighty, so you were seeing
23:45
Speaker 5: anywhere from like three point seven about three point four
23:49
Speaker 5: to three point eight million berths a year. And again
23:53
Speaker 5: you look at like, okay, you know, nineteen ninety nine,
23:56
Speaker 5: the vast majority of gen xers at the peak of
23:59
Speaker 5: the tech bubble, we're anywhere between like twenty and thirty
24:02
Speaker 5: four years old. So it was their like first experience
24:07
Speaker 5: being able to save money, as you know workers in
24:10
Speaker 5: most cases, and by the time you're in like your
24:12
Speaker 5: mid thirties, your earning power has you know, increased a
24:14
Speaker 5: lot from your early twenties ideally, So I think it's
24:18
Speaker 5: kind of interesting now that you have that first set
24:20
Speaker 5: of gen xers that is approaching retirement. You probably have
24:24
Speaker 5: some that have gone through mandated retirements depending on their
24:27
Speaker 5: profession at this point. But it's that that question of
24:32
Speaker 5: like how much do they trust the stock market based
24:35
Speaker 5: on the amount of wealth that was wiped out right
24:38
Speaker 5: in like prime earning years of their career where they
24:42
Speaker 5: went through just that decade of bad returns.
24:45
Speaker 3: Right.
24:46
Speaker 2: Yeah, we will say I haven't seen a lot written
24:50
Speaker 2: on like how the average Gen X invests. Are they
24:54
Speaker 2: more conservative than their parents? Are they more conservative than
24:58
Speaker 2: previous generations who have come of this age, But nonetheless
25:01
Speaker 2: that they were old enough to be shaped by that
25:04
Speaker 2: decade time period, and so I don't know, I would
25:08
Speaker 2: think that they are actually reasonably well prepared for what
25:11
Speaker 2: the stock market can throw at them. You know, they
25:13
Speaker 2: weren't teenagers when the dot com bubble crashed in most cases.
25:16
Speaker 2: They certainly weren't teenagers when the Great Financial Crisis hit,
25:20
Speaker 2: and so they very much lived that period of time
25:22
Speaker 2: of people losing their homes, losing their shirt in the
25:24
Speaker 2: stock market, and hopefully are you know, going in eyes
25:27
Speaker 2: wide open to this moment in time. But nonetheless, most
25:34
Speaker 2: of this generation is now probably within a decade of
25:37
Speaker 2: retirement and trying to sort through, Hey, how do I
25:41
Speaker 2: navigate this change, especially with concerns about you know, things
25:46
Speaker 2: and programs that my parents' generation really didn't need to
25:48
Speaker 2: worry about. You know, the conversation around the funding of
25:50
Speaker 2: Social Security and Medicare was not all that pressing in
25:53
Speaker 2: two thousand. Sure, these things are real concerns that these
25:58
Speaker 2: this generation has and by the way, the prevalence of
26:01
Speaker 2: the pension for this generation compared to the last two
26:04
Speaker 2: generations is very, very different. If you have questions about
26:10
Speaker 2: how to fund your retirement future and you're facing it
26:12
Speaker 2: down in the next decade, the time to start is now.
26:16
Speaker 2: I know it feels a ways away when you're talking
26:18
Speaker 2: about being fifty five years old and working till sixty.
26:21
Speaker 3: Five or sixty seven.
26:22
Speaker 2: That sneaks up on your relatively quickly, and especially for
26:27
Speaker 2: those with kids that are, you know, on the cusp
26:29
Speaker 2: of graduating college or in there now. Once they're done,
26:33
Speaker 2: you're about to hit into your like peak savings times right.
26:37
Speaker 2: In many cases, your expenses are going down, your earnings
26:40
Speaker 2: are at all time high, and now is the time
26:43
Speaker 2: to correct any of those mistakes that may have existed
26:45
Speaker 2: in previous decades. If you have questions like that you'd
26:49
Speaker 2: like a consultation, you can call the folks at Armstrong
26:51
Speaker 2: Advisory Group. The phone number is eight hundred three nine
26:54
Speaker 2: three for zero zero one again eight hundred three nine
26:58
Speaker 2: three four zero zero one.
27:00
Speaker 1: The proceeding was paid for by Armstrong Advisory Group, a
27:02
Speaker 1: registered investment advisor. Nothing in the ad or in any
27:05
Speaker 1: Armstrong guide a specific financial legal or tax advice. Consult
27:08
Speaker 1: your own financial tax into state planning advisors before making
27:10
Speaker 1: any investment decisions. Armstrong may contact you to offer investment
27:14
Speaker 1: advisory services.
27:15
Speaker 5: Piece in the Wall Street Journal, America's big cities are
27:18
Speaker 5: rapidly losing kids. They're not actually losing them. Let's be
27:23
Speaker 5: clear about it. I don't think the headline is great here.
27:27
Speaker 5: Maybe a better one would be like, hey, America's big
27:29
Speaker 5: cities have fewer kids now than before.
27:33
Speaker 4: But I get why that doesn't hit quite as hard.
27:35
Speaker 3: More of a headline catcher here.
27:37
Speaker 5: So here's what's happening. The number of children under eighteen
27:42
Speaker 5: living in large US cities has fallen six percent over
27:45
Speaker 5: the past decade. This as the actual population in those cities,
27:51
Speaker 5: depending on the ones that you look at, have either
27:53
Speaker 5: been stable in some cases, you know, growing rather quickly.
27:56
Speaker 5: So the question is you know what what gives here?
27:59
Speaker 5: And it's basically two things. Number one, fertility rates continue
28:03
Speaker 5: to slide. Number Two, as people have kids, they are
28:08
Speaker 5: moving out of cities in a more frequent manner than
28:12
Speaker 5: in the past. That's basically it.
28:15
Speaker 2: Yeah, pretty much full stop on this one. I don't know, well,
28:20
Speaker 2: you know ramifications here Obviously, inner city schools are often
28:25
Speaker 2: criticized for being a lot worse than the surrounding areas.
28:29
Speaker 2: And this is not a formula for those getting any better.
28:32
Speaker 2: They're gonna get worse, right Like, if you are seeing
28:35
Speaker 2: a smaller portion of those cities composed of families with
28:38
Speaker 2: young children, then they are going to consistently vote against
28:40
Speaker 2: more funding for public schools and all sorts of different
28:44
Speaker 2: programs that makes raising children easier.
28:46
Speaker 5: And it's most likely as those programs worsen, the ones
28:49
Speaker 5: with means to leave those programs and go somewhere else
28:52
Speaker 5: are going to and so you end up with worstening
28:54
Speaker 5: performance and a worsening tax base. So it's not great
29:00
Speaker 5: from that perspective. I don't know exactly how you fix this,
29:04
Speaker 5: but I mean you.
29:05
Speaker 2: Have to completely rejigger the funding mechanism for schools, which
29:09
Speaker 2: seems unlikely.
29:11
Speaker 5: Good luck with that. Yeah, just take a quick break.
29:13
Speaker 5: When we come back, we're gonna.
29:15
Speaker 4: Do a little bit of stack roulette.
29:17
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29:21
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29:23
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29:45
Speaker 6: Remember you can watch the show live every day on
29:48
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29:51
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30:05
Speaker 4: Mike, what do you got for stockt roulette?
30:07
Speaker 2: I have this piece on the SEC and their requirement
30:11
Speaker 2: for quarterly earnings reports. So right now, every traded US
30:17
Speaker 2: company is required to disclose to the general public their
30:22
Speaker 2: earnings as of the most recent quarter, according to some
30:25
Speaker 2: generally accepted accounting principles, and the SEC wants to do
30:29
Speaker 2: away with that requirement. And I believe they're talking about
30:34
Speaker 2: going to a biannual requirement here, and some are up
30:37
Speaker 2: in arms. I don't really understand who, because while you
30:42
Speaker 2: and I Chuck are excited this week about earnings, the
30:46
Speaker 2: list of companies that we're excited about diving into is.
30:49
Speaker 3: Like four long.
30:51
Speaker 2: I think the vast majority of Americans do not give
30:53
Speaker 2: a darn about earnings reports. They don't tune into the
30:57
Speaker 2: calls themselves. They you know, I know that there were
31:00
Speaker 2: like Nvidia earnings parties and things like that. I think
31:03
Speaker 2: those that really do care are financial media and stock
31:07
Speaker 2: market analysts, who will have less to do perhaps.
31:10
Speaker 3: If there are not earnings reports here.
31:12
Speaker 2: But I'll remind folks that merely because a company doesn't
31:17
Speaker 2: have to report earnings on a quarterly basis doesn't mean
31:20
Speaker 2: they won't all right, like, if you give out less information,
31:24
Speaker 2: that can be bad for your stock, and so I
31:25
Speaker 2: think most companies are going to continue to do this
31:27
Speaker 2: on a quarterly basis. It also doesn't suddenly allow you
31:31
Speaker 2: to lie about your company, right, like, just because you're
31:35
Speaker 2: not required to put together a pretty expensive earnings report.
31:39
Speaker 3: By the way, like costs a lot of money to
31:41
Speaker 3: do this.
31:41
Speaker 2: You got to go hire an accountant, an outside auditor,
31:44
Speaker 2: all these different things and put it all together.
31:46
Speaker 5: It's not you don't just plug it into TurboTax if
31:48
Speaker 5: you're Delta or whoever.
31:50
Speaker 3: And so I.
31:52
Speaker 2: Really do not see this as harmful to markets in
31:55
Speaker 2: any meaningful way. If companies still want to tell the
31:57
Speaker 2: general public something about their business that's changed in the
32:00
Speaker 2: most recent quarter, nothing precludes them from doing so. Go
32:03
Speaker 2: see IBM last week or two weeks ago when they
32:05
Speaker 2: told everybody that their earnings were gonna suck. And if
32:09
Speaker 2: companies or investors don't want to own stocks that don't
32:12
Speaker 2: report their earnings on a quarterly basis, then those companies
32:15
Speaker 2: will probably go about doing the earnings reports on a
32:18
Speaker 2: quarterly basis anyway. So I do not see this as
32:21
Speaker 2: harmful in any way to markets. I don't think investors
32:23
Speaker 2: should be worried about it, and I think the only
32:25
Speaker 2: ones who actually care about this change are those with
32:28
Speaker 2: a vested interest in their job basically requiring those quarterly
32:33
Speaker 2: earnings reports.
32:34
Speaker 4: So couple things.
32:35
Speaker 5: Number One, when we talk about requirements, just as an example,
32:39
Speaker 5: companies aren't required to give earnings guidance for future quarters,
32:43
Speaker 5: right they choose to because they think it benefits them
32:47
Speaker 5: as a company to be able to give investors a
32:49
Speaker 5: sense of, hey, here's what we think we're going to
32:51
Speaker 5: do next quarter.
32:52
Speaker 4: But they're not required to do that. They still do.
32:56
Speaker 5: When we talk about the history of earnings reporting in
33:00
Speaker 5: the US, I want to put a few dates out there.
33:02
Speaker 5: Number one, nineteen thirty four, the SEC was established, and
33:08
Speaker 5: with that annual audited reporting requirements were put in place.
33:13
Speaker 5: So again nineteen thirty four, pretty big date for you know,
33:16
Speaker 5: the Securities in Exchange Act or the Securities Exchange Act,
33:20
Speaker 5: and included in there was, hey, you have to report
33:23
Speaker 5: earnings annually. You have to file an annual report.
33:27
Speaker 4: You're ten k. So that's nineteen thirty four.
33:29
Speaker 5: And obviously in response to you know, the Great Depression
33:32
Speaker 5: and all the problems that went along with accounting issues.
33:35
Speaker 5: Then in nineteen forty six, after World War Two, the
33:38
Speaker 5: New York Stock Exchange, not the SEC, but the Exchange said, hey,
33:43
Speaker 5: we want listed companies to report quarterly. In fifty five,
33:49
Speaker 5: the New York Stock Exchange started requiring listed companies to
33:54
Speaker 5: publish at least semi annual reports, and in sixty two
33:57
Speaker 5: moved to full quarterly reporting. Nineteen seventy was when the
34:01
Speaker 5: SEC made quarterly reporting mandatory for all companies. So it's
34:06
Speaker 5: only in the last fifty six years that that's been
34:08
Speaker 5: the case. The question on this is, hey, from a
34:15
Speaker 5: from a pros and cons perspective, the biggest cons to
34:20
Speaker 5: quarterly reporting Number one the cost of companies, which, quite honestly,
34:25
Speaker 5: if you get big enough leig it's it's a non factor.
34:28
Speaker 4: It's sure, yes, like it's going to be.
34:29
Speaker 5: Millions of dollars, but when you're selling billions of dollars
34:32
Speaker 5: of stuff.
34:32
Speaker 2: Flag it's But there were immaterial there was a not
34:36
Speaker 2: small company.
34:37
Speaker 3: Who was it?
34:38
Speaker 2: Do you remember, like in the last two years there
34:41
Speaker 2: was a relatively big company who had to come out
34:43
Speaker 2: with disclosure saying, we cannot find the accountants to do
34:47
Speaker 2: our audited financial reports and so we have to delay
34:50
Speaker 2: our innings.
34:50
Speaker 4: Call well, super micro had all the accountants fire them.
34:53
Speaker 2: Is that the one you're thinking, I'm thinking, I'll look
34:55
Speaker 2: this up while you're continue to talk here. But it's
34:58
Speaker 2: not a small endeavor, especially for like a mid size company.
35:02
Speaker 4: No, so compliance cost is a big one. Uh.
35:04
Speaker 5: The other one it does kind of encourage more short
35:08
Speaker 5: term thinking about you know, stocks and that.
35:11
Speaker 4: Hey like it.
35:12
Speaker 5: It pressures managers to manage for the next ninety days.
35:15
Speaker 5: You could make that case. The benefits of it You
35:18
Speaker 5: get more timely information auto parts by the way, Okay,
35:22
Speaker 5: so you're getting more timely information. Uh, you don't have
35:25
Speaker 5: as much time in between, so you have smaller surprises
35:28
Speaker 5: if something material changes, Like you don't have three months
35:31
Speaker 5: of surprising data you have six months if you're going
35:34
Speaker 5: to semi annual.
35:35
Speaker 3: Uh.
35:36
Speaker 5: And again it I think that even though quarterly reporting
35:41
Speaker 5: does lead to potentially more short term focus, it does
35:44
Speaker 5: also force management teams then to say, hey, we can't
35:48
Speaker 5: let a problem fester and become an issue because we've
35:52
Speaker 5: got a we've got another report that's coming up. We
35:54
Speaker 5: gotta we gotta deal with this, you know, faster.
35:57
Speaker 2: So yeah, I mean, the important question in my mind
35:59
Speaker 2: would be does this encourage some degree of insider trading
36:05
Speaker 2: because there's more information that's not made public?
36:12
Speaker 3: You know, I just I just don't see that as
36:13
Speaker 3: a real risk.
36:14
Speaker 4: And if someone breaks those laws, then you enforce them.
36:17
Speaker 4: You know, I'm not worried about that.
36:21
Speaker 2: Uh.
36:22
Speaker 5: Piece here from Bloomberg opinion, why are so Why are
36:24
Speaker 5: Americans so financially illiterate?
36:27
Speaker 4: Uh?
36:30
Speaker 2: I love when journalists asked the question why are you
36:33
Speaker 2: all so stupid? Angry?
36:39
Speaker 3: Like that that is.
36:40
Speaker 4: Commonly why y'all dumb?
36:43
Speaker 6: Is like, okay, slurry picture of somebody with the dunce
36:47
Speaker 6: cap on.
36:48
Speaker 4: So this once.
36:49
Speaker 5: Again gets at that ten question survey that the TI
36:52
Speaker 5: Institute is has done and pretty much says like Okay,
36:58
Speaker 5: you know, answer these basic financial questions and gen Z
37:01
Speaker 5: scored the lowest. Only about half of people could only
37:04
Speaker 5: answer two of the eight questions about personal finance not great.
37:09
Speaker 4: Which isn't great.
37:12
Speaker 5: And I think that this person they go through, they're like, Okay,
37:16
Speaker 5: maybe like the advice that's out there isn't very good.
37:18
Speaker 5: Maybe people will turned to AI and they're not getting
37:20
Speaker 5: good advice from there.
37:22
Speaker 4: You know, what do we end up doing about this?
37:25
Speaker 5: And I think the the big thing is until you
37:30
Speaker 5: actually run into big problems related to specific you know
37:35
Speaker 5: things that become commonplace financial problems, well no one thinks
37:40
Speaker 5: it's gonna happen to them, and so like people just
37:41
Speaker 5: brush it off, like no one thought they were going
37:43
Speaker 5: to go bust during the before the mortgage crisis. And
37:46
Speaker 5: then we learned, oh, like don't take out a home
37:48
Speaker 5: equity line to buy a boat, Like that's that's not
37:50
Speaker 5: a good thing to do.
37:51
Speaker 2: Yeah, but like there are real world consequences here, right,
37:54
Speaker 2: Like I do blame part of this on why so
37:57
Speaker 2: many of our generation have eighty thousand dollar student loans.
38:01
Speaker 3: Nobody explained to them what the hell that means?
38:03
Speaker 5: Right, you just you hear it when you're seventeen and
38:05
Speaker 5: you don't understand what it means to have to pay
38:07
Speaker 5: that back. So I don't know what the answer is,
38:10
Speaker 5: but education, Oh yeah, that's probably it.
38:14
Speaker 4: Quick break for the whole rest of the day. We'll
38:16
Speaker 4: see you tomorrow