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Jobs Report Gives the Fed No Reason to Cut Rates · The Financial Exchange Show

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  Speaker 1: is The Financial Exchange with Chuck Zotta and Mike Armstrong.
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  Speaker 2: It's Chuck, it's Mike, it's Tucker with you here on DAV.
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  Speaker 2: A Jobs Friday. It's Labor Day Friday, actually. And that
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  Speaker 2: means many of you might be in the car going
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  Speaker 2: to nice places, fun places, beachy places, barbecue-y places, all
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  Speaker 2: of the above. And we appreciate you joining us on
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  Speaker 2: your way to wherever it is that you might be going.
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  Speaker 2: The Jobs Report did come out at 8.30 a.m. Eastern
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  Speaker 2: Time this morning.
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  Speaker 3: What we saw.
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  Speaker 2: A bumper number to the upside on jobs created, 162,000
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  Speaker 2: in August, plus positive revisions for June and July, to
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  Speaker 2: the tune of an additional 55,000 jobs added. This is why, again,
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  Speaker 2: I think generally my view remains, hey, the labor market
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  Speaker 2: is fine. I know that the last couple months before
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  Speaker 2: this were looking a little bit dodgier, but the labor
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  Speaker 2: market is fine. It's not really accelerating enough. I know
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  Speaker 2: that this is a good month here, but other than that,
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  Speaker 2: you kind of look at the three-month average, and it's
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  Speaker 2: just kind of chopping around for the last basically year
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  Speaker 2: or so. It hasn't really gone anywhere. It's not really
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  Speaker 2: getting better. It's not getting worse. The unemployment rate right
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  Speaker 2: now is 4.1%. A year ago, it was 4.3%, so
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  Speaker 2: the unemployment rate has come down year over year and
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  Speaker 2: has been in the same place for the last couple
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  Speaker 2: months now. And so I think my overall view on
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  Speaker 2: the labor market is... It's not a problem for the economy.
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  Speaker 2: It's not great. It's just fine. And sometimes it can
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  Speaker 2: be that without having to be the best labor market
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  Speaker 2: ever or, you know, the worst one and we're heading
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  Speaker 2: for impending doom.
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  Speaker 4: I would give it a substantially better grade than I
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  Speaker 4: would give it last year, I think, is where I land.
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  Speaker 4: I think there's a lot of nerves around hiring last year,
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  Speaker 4: especially after two-hour announcements in April.
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  Speaker 3: I agree.
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  Speaker 4: But you're right, for the last six months or so,
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  Speaker 4: it's improved compared to last year, and that's what we've
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  Speaker 4: really been focused on.
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  Speaker 2: The whole year's been basically the same. It's been, since January,
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  Speaker 2: the labor market bottomed, and it's basically just been, okay.
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  Speaker 3: We're hanging out here.
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  Speaker 4: Yeah, and that's good, because hanging out at 4.1% unemployment,
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  Speaker 4: there aren't a ton of moments in American history where
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  Speaker 4: you see unemployment below 4.5%. It's a pretty solid labor market.
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  Speaker 2: It's not solid, Mike. 4.1 is exceptional.
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  Speaker 3: Yeah.
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  Speaker 2: You look at the times that we've been below 4.1.
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  Speaker 2: You've got periods in the early 1950s, the post-war effort.
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  Speaker 2: You've got a couple periods in the mid-1950s, late 1960s,
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  Speaker 2: late 1990s, and that's basically it.
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  Speaker 5: Yep.
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  Speaker 4: So this report, the labor market itself, I would agree.
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  Speaker 4: I would describe it as exceptional. This report itself defied
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  Speaker 4: expectations pretty dramatically. And in and of itself, as a
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  Speaker 4: single month report, I think is also exceptional.
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  Speaker 3: It's maintaining a low unemployment rate. I would say exceptional.
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  Speaker 4: Yeah. triple the uh you had triple the expectations for
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  Speaker 4: job creation well if.
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  Speaker 2: Expectations were a thousand you came in at three thousand
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  Speaker 2: you wouldn't say you like you tripled it and it's
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  Speaker 2: it's it's it's fine like i don't know we don't
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  Speaker 2: have to overreact in either direction like we didn't panic
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  Speaker 2: when we saw last month's even though it was negative
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  Speaker 2: like this one's it's fine like it's it's good it's
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  Speaker 2: it's a good report but i'm not gonna jump to
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  Speaker 2: the labor market's now amazing yeah uh So good report.
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  Speaker 2: This was one of two data points over this week
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  Speaker 2: and next week that we were considering, Chuck, and kind
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  Speaker 2: of laid out as the two important figures that we
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  Speaker 2: will receive ahead of the September 16th Fed meeting. And so,
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  Speaker 2: you know, in that context of what does the Fed
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  Speaker 2: do next, how would you categorize this report in terms
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  Speaker 2: of inflationary, deflationary, recession indicator, growth indicator? How should the
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  Speaker 2: Fed be, or how will the Fed be interpreting a
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  Speaker 2: report like this? They could, in theory, say, hey, the
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  Speaker 2: labor market's stronger, and if inflation comes in hot, we've
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  Speaker 2: got a case to hike. Generally, you don't want to
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  Speaker 2: be making Fed policy based on one or two data points.
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  Speaker 2: That's not good policy. That generally doesn't tell you that
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  Speaker 2: you have a conclusive theory about why things are happening.
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  Speaker 2: It's much more just like you're reacting to whatever comes out.
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  Speaker 3: And the point I'll.
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  Speaker 2: Make is, okay, so this is a good jobs report,
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  Speaker 2: and let's say that inflation's hot next week.
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  Speaker 3: The Fed goes and they hike.
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  Speaker 2: So let's say that now we get to October, and
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  Speaker 2: we get the September data, and we see 20,000 jobs
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  Speaker 2: lost again, and inflation cools.
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  Speaker 3: Well, should the Fed cut then? No, I would say
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  Speaker 3: they should.
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  Speaker 4: I guess it depends what your predisposed thinking about the
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  Speaker 4: economy overall is, right? If you were already predisposed, like
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  Speaker 4: Kevin Warsh stated, that inflation is running too hot and
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  Speaker 4: they remain serious about bringing it down. If you operate
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  Speaker 4: under those words, that's the context of the Fed, and
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  Speaker 4: they're thinking about the economy, then this.
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  Speaker 3: jobs report I don't.
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  Speaker 4: Believe can give you any information to divert you from
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  Speaker 4: that viewpoint. If your viewpoint is already, hey, rates are
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  Speaker 4: restrictive right now and we don't think we need to
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  Speaker 4: do much, then this jobs report I don't think contradicts
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  Speaker 4: that viewpoint either. But if you were looking for an
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  Speaker 4: excuse to not hike rates at the next meeting, this
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  Speaker 4: didn't give it to you.
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  Speaker 2: No, if you had another report where you came out
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  Speaker 2: with like 30,000 jobs lost, now you've got back-to-back months
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  Speaker 2: of negative job growth, and maybe the unemployment rate went
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  Speaker 2: from 4.1 to 4.2 or 4.1 to 4.3.
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  Speaker 3: That'd be a very good reason to not hike rates. Correct.
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  Speaker 2: Then you could say, okay, we've got a multi-month development
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  Speaker 2: that's going on here that's weakening. Do we want to
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  Speaker 2: pay attention to this? The other piece that I'll throw
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  Speaker 2: out there as a counter is on all of this,
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  Speaker 2: It's pretty clear, based on the data, that there's some
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  Speaker 2: residual seasonality that's left over in the inflation data, that's
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  Speaker 2: left over in the GDP data, and that may be
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  Speaker 2: left over in the jobs data. Each of the last
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  Speaker 2: four years now, we've seen jobs numbers weakening heading into
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  Speaker 2: the fall, and then they've bottomed out at some point.
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  Speaker 2: Each of the last four years, we've seen the GDP
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  Speaker 2: rate peak in Q3 and then decline Q4, 1, and
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  Speaker 2: 2 subsequent to that.
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  Speaker 1: Yeah.
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  Speaker 3: Same with inflation. So you kind of wonder here, and
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  Speaker 3: you look at this.
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  Speaker 2: Again, this is why I think you shouldn't be making
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  Speaker 2: these moves based on individual data points. The labor market,
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  Speaker 2: all year it's been telling you, hey, it's not getting worse. Okay,
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  Speaker 2: that's fine. So if it's not getting worse, we certainly
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  Speaker 2: don't need to cut interest rates. I think we can
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  Speaker 2: agree on that broadly when we look at the labor market.
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  Speaker 2: The question is, okay, the inflation picture, are rates restrictive
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  Speaker 2: enough to rein inflation into where you want it to be?
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  Speaker 2: And based on the core inflation numbers being at 2.5
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  Speaker 2: on CPI, 3.3 on PCE, and 4.2 on PPI, you'd
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  Speaker 2: look at that and you'd say, no, we're probably not
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  Speaker 2: there yet. And so this is why I think all
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  Speaker 2: of the hype about, like, oh, what's the Fed going
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  Speaker 2: to do this meeting? Like, it's misplaced. If the Fed
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  Speaker 2: were serious about getting inflation back to 2%, hike interest
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  Speaker 2: rates 1% call today and see what happens over the
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  Speaker 2: next six months. That's what you do. You don't debate about, like...
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  Speaker 2: You and I both know, Mike, a quarter percent either
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  Speaker 2: way doesn't change anything. No, it's the message that you send.
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  Speaker 2: But it's okay. What are you actually going to do?
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  Speaker 2: A quarter percent doesn't change the U.S.
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  Speaker 3: Economy. Right. You know, the reason the U.S.
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  Speaker 2: Economy slowed in 2022... was because the Fed ended up
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  Speaker 2: hiking 5% by the time it was all said and done.
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  Speaker 2: Not like, well, we're going to do a quarter here.
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  Speaker 2: A quarter's not going to matter. Now, could it be
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  Speaker 2: symbolic in that, you know, Warsh acknowledges, okay, I might
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  Speaker 2: need to hike rates? Sure, I buy that in terms
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  Speaker 2: of maybe restoring some credibility. But then what happens if
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  Speaker 2: inflation stays high and you've got to hike again?
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  Speaker 3: Are you going to do that? Because that's not priced
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  Speaker 3: in right now.
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  Speaker 4: So.
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  Speaker 2: I think my take on the labor market remains the
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  Speaker 2: same as it's been pretty much since February of this year,
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  Speaker 2: which is, Hey, the bleeding that we were concerned about
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  Speaker 2: last year stopped. It's not really getting too much better.
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  Speaker 2: It's not really getting, it's not getting worse. And so
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  Speaker 2: given that, I don't think you have any ammunition to
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  Speaker 2: be cutting interest rates and If inflation remains elevated, which
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  Speaker 2: right now it does.
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  Speaker 4: The other contextual point I will make about the labor market,
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  Speaker 4: because it is a big change from anything we've seen
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  Speaker 4: in the last couple decades, I believe. Part of the
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  Speaker 4: reason the labor market is remaining tight in this environment
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  Speaker 4: is because of changes to immigration policy.
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  Speaker 3: Yeah.
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  Speaker 4: Like that is very evident from the data that we
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  Speaker 4: see here. The labor force is about two and a
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  Speaker 4: half million people smaller than than it was, what did
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  Speaker 4: I say, since like November of last year. So that
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  Speaker 4: is a big change, not one that we have really
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  Speaker 4: ever seen with the labor market. And so trying to
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  Speaker 4: guess what happens next there, I think, is you got
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  Speaker 4: to be humble with some of the stuff when you
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  Speaker 4: see such a dramatic change like that, because it is
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  Speaker 4: not something that we've seen before.
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  Speaker 2: Let's take a quick break here. When we return, we'll
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  Speaker 2: talk a little bit about what we're seeing in market
• 11:09
  Speaker 2: response to this and more next.
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• 12:09
  Speaker 2: Mike, shortly after we received the jobs report, we had
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  Speaker 2: a Truth Social post from President Trump.
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  Speaker 3: I'm going to read it here.
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  Speaker 2: Great jobs number just announced, breaking all estimates except mine
• 12:19
  Speaker 2: by double and triple, and you haven't seen anything yet.
• 12:22
  Speaker 2: Employers added 162,000 jobs in August. Lower the interest rates
• 12:27
  Speaker 2: because the USA is a much stronger credit than it
• 12:29
  Speaker 2: was just a short time ago. A strong country means
• 12:32
  Speaker 2: a lower interest rate. It's a better credit. Very simple.
• 12:35
  Speaker 2: We should have the lowest rate of any country in
• 12:38
  Speaker 2: the world, like the old days, without the United States
• 12:40
  Speaker 2: agreeing to allow them their big surpluses, and we could
• 12:43
  Speaker 2: stop that immediately. They would no longer be considered financially elite.
• 12:48
  Speaker 2: Lower the rate or I'll stop trading with countries with
• 12:50
  Speaker 2: which we have a deficit, which the U.S. Supreme Court,
• 12:53
  Speaker 2: in its ridiculous and very costly tariff decision, Strongly acknowledge
• 12:56
  Speaker 2: that the president has the absolute right to do. It's
• 12:59
  Speaker 2: better than tariffs. The Fed board, with its great new leader,
• 13:02
  Speaker 2: must get smart, be patriots for a change. High interest
• 13:05
  Speaker 2: rates put the USA at a very unfair disadvantage. So,
• 13:11
  Speaker 2: the question, there are a few questions that come out
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  Speaker 2: of this.
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  Speaker 3: A bunch.
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  Speaker 2: The first, is the premise accurate that if your economy
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  Speaker 2: is stronger, you should have lower interest rates? Generally, the
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  Speaker 2: answer is no, and the reason why that answer is
• 13:26
  Speaker 2: no gets at something that we were talking about over
• 13:29
  Speaker 2: the last couple days, which is when you're talking about
• 13:32
  Speaker 2: buying U.S. government bonds, ultimately, you have a match between
• 13:37
  Speaker 2: supply and demand, and if the economy is stronger... then
• 13:42
  Speaker 2: in order to buy your debt, you will have to
• 13:45
  Speaker 2: have a higher rate of interest that you offer creditors
• 13:49
  Speaker 2: simply because they have other alternatives that they can look
• 13:51
  Speaker 2: to in a stronger economy. It's different from how we
• 13:56
  Speaker 2: approach it as personal borrowers where, hey, if you have
• 14:00
  Speaker 2: better credit, you're able to get a lower interest rate.
• 14:04
  Speaker 2: The reason why lenders will offer you a lower interest rate,
• 14:08
  Speaker 2: let's say that Mike has an 800 credit score and
• 14:11
  Speaker 2: I've got a 600 credit, The reason they'll offer the
• 14:13
  Speaker 2: lower interest rate to Mike is because he's more likely
• 14:15
  Speaker 2: to pay them back and I am less likely. And
• 14:18
  Speaker 2: so they need more interest to compensate. We all understand that.
• 14:22
  Speaker 2: But when we talk about sovereigns, remember, we're not talking
• 14:25
  Speaker 2: about sovereigns defaulting. They don't typically, aside from like Argentina,
• 14:29
  Speaker 2: default in the traditional sense. Sovereigns can print money as
• 14:33
  Speaker 2: much as they need to in order to fund their debt.
• 14:36
  Speaker 2: and so it's not about a faster-growing country being a
• 14:41
  Speaker 2: better credit risk. Again, faster growth doesn't have anything to
• 14:45
  Speaker 2: do with the risk of default necessarily, but rather you're
• 14:49
  Speaker 2: talking about, hey, what are the alternatives out there, and
• 14:52
  Speaker 2: how fast is growth, and what does that do to inflation,
• 14:55
  Speaker 2: and how much do I need to be paid in
• 14:57
  Speaker 2: order to be compensated for a certain level of growth
• 15:00
  Speaker 2: and inflation that's out there?
• 15:02
  Speaker 3: The reason we had low interest rates in the 2010s?
• 15:05
  Speaker 3: Growth sucked.
• 15:06
  Speaker 2: The growth picture sucked. And so people said, look, I'm nervous.
• 15:10
  Speaker 2: You don't need to pay me much in order to
• 15:11
  Speaker 2: get me into a 10 year treasury because I don't
• 15:15
  Speaker 2: think I can earn much elsewhere. So all of the
• 15:18
  Speaker 2: rest of that, all of the first part of this
• 15:21
  Speaker 2: true social post could have been looked at in a
• 15:23
  Speaker 2: few different ways. Like, hey, you know, bring down our
• 15:27
  Speaker 2: interest rate costs by buying U.S.
• 15:29
  Speaker 3: Government bonds.
• 15:30
  Speaker 4: That could be a message to insurance companies, banks, foreign governments,
• 15:34
  Speaker 4: et cetera, et cetera. The end of the tweet, though,
• 15:36
  Speaker 4: makes it clear that this message is for the Federal
• 15:38
  Speaker 4: Reserve and their interest rate target that they use. So
• 15:43
  Speaker 4: very clearly here, now the president has called upon the
• 15:46
  Speaker 4: Fed and its new leader, whom he appointed, Kevin Warsh,
• 15:49
  Speaker 4: to lower interest rates, in his words, because the U.S.
• 15:54
  Speaker 4: economy is stronger than it appeared yesterday. The Federal Reserve
• 16:00
  Speaker 4: is independent. They are fiercely trying to defend that independence
• 16:05
  Speaker 4: that was you know, a big portion of Jay Powell's
• 16:07
  Speaker 4: last few years in the role. The Supreme Court very
• 16:11
  Speaker 4: much reaffirmed its independence. The question that I have is,
• 16:17
  Speaker 4: does this post change any voting members' minds about what
• 16:21
  Speaker 4: they were going to do? If you were on the fence,
• 16:24
  Speaker 4: and I don't mean in the way that the president's
• 16:26
  Speaker 4: looking for, by the way, if you were on the
• 16:28
  Speaker 4: fence about what to do at this next meeting, and,
• 16:32
  Speaker 4: you know, some clearly are, some aren't. Waller just yesterday
• 16:34
  Speaker 4: said he would support a no-rate hike at the next meeting.
• 16:38
  Speaker 4: So he's already out there saying something like that. But
• 16:40
  Speaker 4: if you're on the fence about what do we do
• 16:43
  Speaker 4: next and you're concerned about the Fed's future independence, I've
• 16:48
  Speaker 4: got to think that a lot of those Fed voting
• 16:51
  Speaker 4: members are going to say, we have to hike rates
• 16:53
  Speaker 4: here to preserve the appearance of independence from the White House.
• 16:58
  Speaker 2: So a few things to break down on this. First,
• 17:02
  Speaker 2: I actually think Waller was misinterpreted yesterday. Do you?
• 17:05
  Speaker 3: I didn't read his actual quote. I read the interpretation.
• 17:07
  Speaker 2: I do, because he pretty much said, yes, as of
• 17:10
  Speaker 2: right now, I think there's a case for not doing anything.
• 17:13
  Speaker 2: And then he was like, but depending on how things
• 17:15
  Speaker 2: evolved before the meeting, I could be swayed the other way.
• 17:18
  Speaker 3: So yeah, that is a misinterpretation.
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  Speaker 2: I think a lot of people saw what he said
• 17:23
  Speaker 2: and kind of cut off the back end, and I
• 17:25
  Speaker 2: don't think it was as open and shut as it
• 17:26
  Speaker 2: was portrayed in a few places. The other piece on
• 17:33
  Speaker 2: this is Remember that the Fed has three options at
• 17:37
  Speaker 2: any particular meeting.
• 17:39
  Speaker 3: Cut, hike, or do nothing. Yep.
• 17:42
  Speaker 2: Doing nothing still, if you want to preserve Fed independence,
• 17:45
  Speaker 2: you could still say you're doing that by doing nothing.
• 17:48
  Speaker 2: The other piece on this is, here's what I can
• 17:52
  Speaker 2: tell you, there is not going to be a cut
• 17:54
  Speaker 2: at the next meeting.
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  Speaker 3: Obviously, no.
• 17:56
  Speaker 2: So no matter what we get at the next meeting...
• 18:01
  Speaker 2: I don't think it's going to be what the president
• 18:03
  Speaker 2: is asking for. And so, as such, I don't think
• 18:07
  Speaker 2: that this adds any additional pressure there.
• 18:10
  Speaker 3: And furthermore, what I will say is.
• 18:15
  Speaker 2: If you are a voting member of the Federal Reserve
• 18:17
  Speaker 2: and something the president says is influencing your decision either way, either, well,
• 18:22
  Speaker 2: I've got to stand up to him by doing this
• 18:25
  Speaker 2: or I've got to get in line by doing that,
• 18:28
  Speaker 2: then you shouldn't be at the Federal Reserve. Hmm. Like,
• 18:31
  Speaker 2: your job is to call balls and strikes based on
• 18:34
  Speaker 2: what the economy's doing. And that's how you actually prove
• 18:38
  Speaker 2: that you're independent, is not by, like, symbolically, well, he
• 18:42
  Speaker 2: wants a cut, so I'm going to hike. Well, no,
• 18:44
  Speaker 2: that's just as stupid as being like, well, he wants
• 18:47
  Speaker 2: a cut, so I'm going to cut. If you think
• 18:51
  Speaker 2: the economy warrants a hike, you vote for a hike.
• 18:54
  Speaker 2: If you think it warrants nothing, you vote for nothing.
• 18:57
  Speaker 2: If you think it warrants a cut, you vote for
• 18:59
  Speaker 2: a cut. But if you're being swayed either to defy
• 19:03
  Speaker 2: the president or to get in line, then maybe being
• 19:07
  Speaker 2: on the Federal Reserve Open Market Committee isn't for you.
• 19:10
  Speaker 4: So we have 12 voting members that will be lining
• 19:12
  Speaker 4: up on the 15th and 16th of September to make
• 19:16
  Speaker 4: this decision. Three of them at the last meeting, I believe,
• 19:20
  Speaker 4: voted for a hike. The others remaining on the side
• 19:24
  Speaker 4: of nothing. So we will see what happens in a
• 19:26
  Speaker 4: few weeks here.
• 19:27
  Speaker 3: Quick break. Wall Street Watch coming up next.
• 19:39
  Speaker 1: Like us on Facebook and follow us on Twitter at
• 19:41
  Speaker 1: TFE Show. Breaking business news is always first, right here
• 19:46
  Speaker 1: on the Financial Exchange Radio Network. Time now for Wall
• 19:51
  Speaker 1: Street Watch. Tracking the stocks, the data, and the headlines
• 19:54
  Speaker 1: driving markets so far today, right here on the Financial
• 19:57
  Speaker 1: Exchange Radio Network.
• 19:59
  Speaker 5: The August jobs report is here, where 162,000 jobs were
• 20:03
  Speaker 5: added last month, well above estimates of 55,000. while the
• 20:08
  Speaker 5: unemployment rate held steady at 4.1%. Right now, markets are
• 20:12
  Speaker 5: in negative territory. The Dow is off 0.5% or 272
• 20:17
  Speaker 5: points off. S & P 500 down about a third
• 20:21
  Speaker 5: of a percent or 22 points lower. NASDAQ down two-tenths
• 20:24
  Speaker 5: of 1% or 54 points lower. Rust 2000 mostly flat.
• 20:28
  Speaker 5: 10-year Treasury yield flat as well at 4.764%. And oil
• 20:30
  Speaker 5: dropping 5%. nearly 2%, trading at $ 89 a barrel. Lululemon
• 20:39
  Speaker 5: tanking 17% after the activewear retailer cut its outlook for
• 20:44
  Speaker 5: the second time this year after another quarter of declining sales. Meanwhile,
• 20:49
  Speaker 5: rare earth stocks including USA Rare Earth, Critical Metals, MP Materials,
• 20:54
  Speaker 5: and Energy Fuels are seeing modest gains after Reuters reported
• 20:57
  Speaker 5: that some Chinese firms halted U.S. shipments due to geopolitical concerns. Elsewhere,
• 21:04
  Speaker 5: Volkswagen stock jumped 7% overseas after the automakers board approved
• 21:08
  Speaker 5: a plan to double job losses to 100,000 and have
• 21:12
  Speaker 5: its model portfolio as it contends with tariffs and Chinese competition.
• 21:17
  Speaker 5: And movie theater chain AMC is seeing its stock jump
• 21:21
  Speaker 5: nearly 9% after the company's CEO criticized Robinhood stock tokens
• 21:27
  Speaker 5: that follow the price of stocks like AMC. I'm Tucker Sullivan.
• 21:33
  Speaker 5: That is Wall Street Watch.
• 21:36
  Speaker 2: Mike, anything else that we want to clean up on
• 21:38
  Speaker 2: the jobs report?
• 21:40
  Speaker 3: No.
• 21:41
  Speaker 4: Next Friday, we will be getting a CPI report, if
• 21:43
  Speaker 4: I'm not mistaken. Those two, in combination, are really the
• 21:46
  Speaker 4: only two data points ahead of the Fed meeting that
• 21:48
  Speaker 4: might influence that decision.
• 21:51
  Speaker 3: And so we'll have our eyes on that next week.
• 21:54
  Speaker 2: Yeah, it's kind of the one of the rare instances
• 21:59
  Speaker 2: where we end.
• 22:00
  Speaker 3: Up getting.
• 22:02
  Speaker 2: The PPI next week is going to be out before
• 22:06
  Speaker 2: the CPI, which is not usually the case. So those
• 22:09
  Speaker 2: can be just kind of exciting for being a little
• 22:11
  Speaker 2: bit different in terms of how they may play out there.
• 22:15
  Speaker 2: So I think that'll be interesting to see what we get.
• 22:18
  Speaker 2: Some other data next week, by the way. It's, again,
• 22:22
  Speaker 2: nothing huge that's out there aside from those. But we
• 22:25
  Speaker 2: are going to get jobless claims. We do have EIA
• 22:27
  Speaker 2: data on Thursday as well. We get New York Fed,
• 22:32
  Speaker 2: oh no, New York Fed's not next week. That's the
• 22:35
  Speaker 2: week after, I think, for manufacturing. So again, a few
• 22:39
  Speaker 2: other things there. Still nothing for earnings. Remember, earnings season
• 22:42
  Speaker 2: done until October. So we'll see kind of what comes
• 22:45
  Speaker 2: through with some of the data over the next week.
• 22:50
  Speaker 2: Let's talk about U.S. Treasuries a little bit, Mike. Yield
• 22:53
  Speaker 2: on the 10-year yesterday came in from 4.8% to 4.76%.
• 22:56
  Speaker 2: Does that mean that the U.S. now has its debt
• 22:59
  Speaker 2: situation under control?
• 23:00
  Speaker 3: Yeah, we fixed it. I'm glad we did. Let the
• 23:02
  Speaker 3: balloons drop, and yeah. It was interesting, actually.
• 23:07
  Speaker 4: Some volatility in rates this morning. We had the 10-year
• 23:12
  Speaker 4: up over 4.8 very briefly right after the report was released.
• 23:15
  Speaker 4: It's since come back in. But yeah, apparently all of
• 23:19
  Speaker 4: our debt problems are solved now.
• 23:21
  Speaker 3: Chuck, it's the debt!
• 23:23
  Speaker 2: So this is why I think it's dumb to talk about,
• 23:27
  Speaker 2: you know, yields exclusively as being, oh, like investors are
• 23:30
  Speaker 2: rejecting high levels of U.S.
• 23:32
  Speaker 3: Debt. Well, no, they're not rejecting high levels of U.S.
• 23:36
  Speaker 1: Debt.
• 23:36
  Speaker 2: If they were doing that, then tell me why interest
• 23:40
  Speaker 2: rates fell over the course of the entire 2010s. You know,
• 23:43
  Speaker 2: we had debt levels that were rising the entire time,
• 23:46
  Speaker 2: and yet the 10-year Treasury started the 2010s at like 3.6%,
• 23:51
  Speaker 2: and closed the 2010s at like 1.5. So those facts
• 23:57
  Speaker 2: are just not in evidence. Even if you want to
• 24:00
  Speaker 2: look more closely, like this year, just as an example,
• 24:04
  Speaker 2: 10-year Treasury in mid-January was at 4.3. By the end
• 24:08
  Speaker 2: of February, it was at 3.9, 3.97. Mike, did the
• 24:12
  Speaker 2: deficit picture improve over the course of February?
• 24:15
  Speaker 3: Not that I'm aware of.
• 24:16
  Speaker 4: Chuck, the difficult part with this is I think both
• 24:19
  Speaker 4: you and I do agree that eventually deficits could have
• 24:23
  Speaker 4: this effect on interest rates over a long period of time.
• 24:27
  Speaker 4: Are we both in agreement about that point, that eventually
• 24:30
  Speaker 4: the government spending the debt could become a real issue
• 24:34
  Speaker 4: and backdrop to higher rates for a longer period of
• 24:37
  Speaker 4: time and really push any number of problems? It could
• 24:43
  Speaker 4: be high inflation, it could be devaluation of the dollar.
• 24:46
  Speaker 4: But I think on that point, we agree. The problem
• 24:50
  Speaker 4: would be, If you believed that was happening any time
• 24:53
  Speaker 4: over the last 50 years, you were proven wrong pretty quickly.
• 24:57
  Speaker 2: Yes, and if you want to look for the things
• 25:01
  Speaker 2: to watch for in terms of, hey, tell me that
• 25:06
  Speaker 2: this is really about the deficit and not anything else,
• 25:12
  Speaker 2: you need yields going up while the dollar goes down.
• 25:16
  Speaker 2: And you need commodities, specifically like precious metals, going up
• 25:20
  Speaker 2: even as yields are going up as well. And we've
• 25:24
  Speaker 2: had that sporadically here and there. But seeing it for
• 25:27
  Speaker 2: a day or two is not something that makes any
• 25:32
  Speaker 2: kind of extended trend. One of the charts that I
• 25:35
  Speaker 2: have that I saved just so I can come back
• 25:38
  Speaker 2: to it is it's a chart of, okay, show me
• 25:41
  Speaker 2: the 10-year yield, show me the dollar index, and show
• 25:43
  Speaker 2: me gold. And if you look at it year to date,
• 25:47
  Speaker 2: what you have is yields have moved up from, again,
• 25:50
  Speaker 2: call it the 4.2% range to 4.7.
• 25:53
  Speaker 3: Got it.
• 25:54
  Speaker 2: Dollar index over the same time period has gone from
• 25:58
  Speaker 2: 98 and changed to 99. Mike, is 99 lower than 98?
• 26:04
  Speaker 3: Not that I'm aware of.
• 26:05
  Speaker 2: Okay, so the dollar has not sold off over the
• 26:07
  Speaker 2: course of the year.
• 26:09
  Speaker 3: Next one.
• 26:10
  Speaker 2: Gold has gone from... Actually, I'm just tracking like a
• 26:14
  Speaker 2: gold ETF, but basically it's completely up 1% over the
• 26:18
  Speaker 2: course of the year. So what we need is yields up,
• 26:21
  Speaker 2: dollar down, gold up. We've got yields up half a percent.
• 26:26
  Speaker 2: The dollar, though, hasn't sold off this year. It's actually strengthened.
• 26:29
  Speaker 2: And gold is basically flat this year. So, yeah, you
• 26:33
  Speaker 2: could pull out certain instances where you say, hey, end
• 26:36
  Speaker 2: of July, like Kevin Warsh's Fed meeting, the yields went up.
• 26:42
  Speaker 2: the dollar went down and gold found a bid for
• 26:46
  Speaker 2: like three days. Like that, that doesn't make a, a
• 26:51
  Speaker 2: convincing trend to me. Now, if you want to look
• 26:54
  Speaker 2: at like 2027 and you're like, Hey, yields go up
• 26:57
  Speaker 2: another half percent. The dollar sells off 3% and gold
• 27:00
  Speaker 2: goes up 10. Now I'm interested if that happens like
• 27:04
  Speaker 2: over a full year, but a couple of days here
• 27:07
  Speaker 2: and there where you see it, I mentioned it on
• 27:10
  Speaker 2: our show when it happens because I'm like, hey, this
• 27:12
  Speaker 2: is notable if it keeps happening. But the fact is,
• 27:15
  Speaker 2: let's look just at the last two weeks as an example.
• 27:19
  Speaker 2: Tenure's gone from 4.62 up to 4.76. The dollar's completely flat,
• 27:24
  Speaker 2: and gold has sold off about 5%. That's not representing
• 27:29
  Speaker 2: a debt concern in the last two weeks now. So
• 27:34
  Speaker 2: you've got to look at how different assets are moving
• 27:37
  Speaker 2: in relation to these things. And I think if you
• 27:40
  Speaker 2: do that, you're going to find yourself less prone to, uh, Tucker,
• 27:43
  Speaker 2: can I get an angry debt person? Uh, yeah.
• 27:48
  Speaker 5: The debt!
• 27:49
  Speaker 3: You're not going to sound like that. Ugh, Chuck, it's
• 27:52
  Speaker 3: the debt! No one likes that person.
• 27:55
  Speaker 1: Hey.
• 27:55
  Speaker 2: I don't like that person, and that person's me. So,
• 27:59
  Speaker 2: don't be that version of me.
• 28:02
  Speaker 3: Do you guys know that we have $ 40 trillion in debt?
• 28:04
  Speaker 3: Is that me? No, that's me. Okay. It's hard to
• 28:09
  Speaker 3: tell when you're whispering.
• 28:10
  Speaker 4: I know.
• 28:11
  Speaker 3: That's why I do it. It's pushing up the yields, man.
• 28:15
  Speaker 2: Right. Don't be that person. No one likes that person.
• 28:19
  Speaker 2: I kind of wish I had never done that.
• 28:21
  Speaker 3: The debt.
• 28:23
  Speaker 2: We got to live and learn. So that's what's going
• 28:27
  Speaker 2: on in treasury markets right now. Let's take a quick
• 28:30
  Speaker 2: break here. And when we return, let's talk a little
• 28:34
  Speaker 2: bit about diesel and grocery prices next.
• 28:38
  Speaker 1: Remember, you can watch the show live every day on
• 28:41
  Speaker 1: our YouTube page. We've got market updates and breaking business
• 28:44
  Speaker 1: news all morning long, plus a full archive of all
• 28:47
  Speaker 1: our show's content. It's all there with a click of
• 28:50
  Speaker 1: a button at youtube.com slash the Financial Exchange Show. This
• 28:55
  Speaker 1: is your home for the most comprehensive coverage of the
• 28:57
  Speaker 1: economy and the trends on Wall Street. This is the
• 29:01
  Speaker 1: Financial Exchange Radio Network.
• 29:08
  Speaker 2: Mike, as we projected at the beginning of this week,
• 29:12
  Speaker 2: diesel prices in the United States have now hit a
• 29:14
  Speaker 2: new all-time high at 585 a gallon, taking out the 2022.
• 29:18
  Speaker 3: High of 581.
• 29:21
  Speaker 2: Based on where wholesale and futures prices are, we might
• 29:25
  Speaker 2: get a little bit more upward drift in the short
• 29:28
  Speaker 2: term here, maybe towards the 590 range.
• 29:30
  Speaker 3: But I think most of this move is capped out here.
• 29:33
  Speaker 2: Again, not really any suggestion that we're going to see
• 29:36
  Speaker 2: these prices come down on diesel here.
• 29:39
  Speaker 3: And in particular.
• 29:40
  Speaker 2: When we look at diesel inventories domestically, there's some real problems,
• 29:45
  Speaker 2: particularly on the East Coast, that may develop over the
• 29:49
  Speaker 2: next four to six weeks as companies start to ship.
• 29:53
  Speaker 2: their holiday products into their stores, as well as the
• 29:57
  Speaker 2: harvest kicks off. But this is something that could potentially
• 30:01
  Speaker 2: filter through to all parts of the economy, because in
• 30:05
  Speaker 2: order to move big, heavy stuff, or even large quantities
• 30:09
  Speaker 2: of light stuff, you've got to use diesel in order
• 30:13
  Speaker 2: to do so. And diesel prices now at an all-time high.
• 30:17
  Speaker 2: And up about 10% in the last month.
• 30:20
  Speaker 3: Yeah. No way to paint this as good news. I
• 30:23
  Speaker 3: am excited.
• 30:24
  Speaker 4: In the next hour of the show, we will be
• 30:27
  Speaker 4: joined by Tom Clauser, who's the chief energy advisor for
• 30:30
  Speaker 4: Gulf Oil. He's also the co-founder of Opus, which is
• 30:32
  Speaker 4: a key data provider, Dow Jones & Company, on all
• 30:35
  Speaker 4: sorts of items in the energy markets. And I think
• 30:40
  Speaker 4: he'll have some unique insights. some unique insight into just
• 30:44
  Speaker 4: what we are seeing on crack spreads, diesel prices, availability.
• 30:47
  Speaker 3: In the Northeast.
• 30:49
  Speaker 4: I believe he's based in New Jersey, so another state
• 30:51
  Speaker 4: that does have some pretty heavy home heating oil usage.
• 30:56
  Speaker 4: So excited about that interview again. Tom Claus is joining
• 30:59
  Speaker 4: us around 11.20 this morning to talk about the state
• 31:03
  Speaker 4: of energy markets. I do want to talk about the
• 31:06
  Speaker 4: new guide from the Armstrong Advisory Group out for September.
• 31:10
  Speaker 4: We're kicking off the month here with the five hidden
• 31:13
  Speaker 4: costs of saving too much for retirement. And I know
• 31:17
  Speaker 4: that sounds almost foolish when I say it out loud.
• 31:20
  Speaker 4: You're saving too much for retirement. What a good problem
• 31:22
  Speaker 4: to have. But it can represent a problem. The most
• 31:25
  Speaker 4: obvious one that people, I think, have started to become
• 31:28
  Speaker 4: really aware of is the impact of required minimum distributions.
• 31:32
  Speaker 3: If you wait all the way until.
• 31:34
  Speaker 4: 73 or 75 years old, depending on when you were born,
• 31:38
  Speaker 4: you can end up with this required income that is
• 31:42
  Speaker 4: more than you would otherwise need to spend in retirement
• 31:46
  Speaker 4: and can affect all sorts of things from your tax
• 31:48
  Speaker 4: rate to your Medicare brackets and how much you pay
• 31:53
  Speaker 4: for health insurance in retirement. And so that piece of
• 31:56
  Speaker 4: it is really fundamental and important. But I think probably
• 31:59
  Speaker 4: most importantly over all of this stuff is If you've
• 32:03
  Speaker 4: saved too much for retirement, it likely means that you
• 32:05
  Speaker 4: spent more time working than you had to. And maybe
• 32:08
  Speaker 4: that's what you want, right? Maybe you love your job,
• 32:10
  Speaker 4: you love every second of it, and it's what brings
• 32:12
  Speaker 4: you passion. If that's the case, good for you. We
• 32:14
  Speaker 4: all wish you were in that position, or we all
• 32:17
  Speaker 4: wish we were in that position. But if you're not
• 32:21
  Speaker 4: in that position, and you don't know if you've saved
• 32:23
  Speaker 4: enough for retirement, then it can lead to extra years
• 32:26
  Speaker 4: of work, less time with your family, and availability to
• 32:30
  Speaker 4: do all those critical things that you've always wanted when
• 32:33
  Speaker 4: you've had more time. Get our free copy of our
• 32:36
  Speaker 4: new guide for September, Five Hidden Costs of Saving Too
• 32:40
  Speaker 4: Much for Retirement, by calling us at 800-393-4001. You can
• 32:46
  Speaker 4: request it online at armstrongadvisory.com, but that phone number again, 800-393-4001.
• 32:53
  Speaker 1: The proceeding was paid for by Armstrong Advisory Group, a
• 32:56
  Speaker 1: registered investment advisor. Nothing in the ad or in any
• 32:58
  Speaker 1: Armstrong guide is specific financial, legal, or tax advice. Consult
• 33:01
  Speaker 1: your own financial, tax, and estate planning advisors before making
• 33:04
  Speaker 1: any investment decisions. Armstrong may contact you to offer investment
• 33:07
  Speaker 1: advisory services.
• 33:09
  Speaker 3: Mike, I want to talk about sandwiches. Yes, me too.
• 33:13
  Speaker 2: More than half of Americans in their 40s are sandwiched
• 33:16
  Speaker 2: between an aging parent and their old children. So this
• 33:18
  Speaker 2: gets at the sandwich generation idea of, People having their
• 33:22
  Speaker 2: own kids to take care of, plus parents to take
• 33:25
  Speaker 2: care of.
• 33:25
  Speaker 3: I gotta tell you, Chuck, I'm pretty disappointed in you.
• 33:28
  Speaker 2: I know.
• 33:28
  Speaker 3: Not the type of sandwich I was looking for. I know.
• 33:31
  Speaker 2: So, what I'm really interested in is, are there any members,
• 33:35
  Speaker 2: do we have, like, what's the percentage of people in, like,
• 33:37
  Speaker 2: the club sandwich generation?
• 33:40
  Speaker 3: Uh, so that would be... The.
• 33:42
  Speaker 2: People in their 40s that have living great-grandparents and have
• 33:46
  Speaker 2: living great-grandkids.
• 33:48
  Speaker 3: Basically, like, every generation having kids right around age 20.
• 33:50
  Speaker 1: Mm-hmm.
• 33:52
  Speaker 3: There's got to be at least I'm guessing it's at
• 33:54
  Speaker 3: least a few percent. Yeah. Yeah.
• 33:57
  Speaker 2: So in any case, this actually hasn't really changed much
• 34:00
  Speaker 2: since the last time Pew looked at this.
• 34:03
  Speaker 3: So back in when was it? Twenty twenty one.
• 34:07
  Speaker 2: Twenty three percent of households overall were in the sandwich generation. Today,
• 34:11
  Speaker 2: it's twenty five percent. So it's ticked up a little
• 34:14
  Speaker 2: bit in the last five years. The big thing that
• 34:18
  Speaker 2: you are seeing is there's some drift towards older generations
• 34:23
  Speaker 2: or older people being more likely to fall into this
• 34:26
  Speaker 2: group by virtue of longer lifespan. So 45 percent of
• 34:30
  Speaker 2: households with a member age 50 to 59 now are
• 34:33
  Speaker 2: in a sandwich situation as opposed to 36 percent five
• 34:37
  Speaker 2: years ago. Yeah.
• 34:37
  Speaker 4: Yeah. What I think has changed, I mean, you know,
• 34:41
  Speaker 4: compared to five years ago and 15 years ago, is
• 34:45
  Speaker 4: the cost of caring for a loved one if their
• 34:47
  Speaker 4: health is deteriorating. That figure has just continued to skyrocket
• 34:52
  Speaker 4: year after year. And for folks that aren't aware, across
• 34:56
  Speaker 4: the country, if you're talking about the most serious level
• 35:00
  Speaker 4: of long-term care, nursing homes, in the cheapest states in
• 35:03
  Speaker 4: the country, think Louisiana, Mississippi, I think you're down in
• 35:07
  Speaker 4: the $ 10, 000 a month range. And here in the Northeast...
• 35:10
  Speaker 4: The average, I think, is $ 14, 000 a month, meaning there
• 35:14
  Speaker 4: are certainly places in the greater Boston area that push $ 20, 000
• 35:16
  Speaker 4: a month for that type of care.
• 35:18
  Speaker 2: Yeah, if you're like down the Cape, as an example,
• 35:21
  Speaker 2: where there's not much capacity and an older population, it
• 35:24
  Speaker 2: can be close to like $ 25, 000 in some cases.
• 35:26
  Speaker 3: Yeah. So I do wonder... I don't think there's a
• 35:29
  Speaker 3: lesson from these statistics, but....
• 35:34
  Speaker 4: What percentage of people would you guess that you talk to, Chuck,
• 35:36
  Speaker 4: that either already have or are seriously considering purchasing long-term
• 35:41
  Speaker 4: care insurance?
• 35:42
  Speaker 3: 3%. Yeah. Maybe 5%. Yeah.
• 35:46
  Speaker 2: It's not many because it's cost prohibitive in a lot
• 35:50
  Speaker 2: of cases. And people look at it and say, well,
• 35:54
  Speaker 2: I'm never going to go into a nursing home.
• 35:56
  Speaker 4: Right.
• 35:57
  Speaker 2: And look, I understand that thought, but yet somehow they
• 36:00
  Speaker 2: still end up being pretty full.
• 36:02
  Speaker 4: Even if it's not the nursing home, what people experience, right? Like, okay,
• 36:07
  Speaker 4: I didn't go into the nursing home because my daughter
• 36:09
  Speaker 4: or my son, but most of the time my daughter,
• 36:14
  Speaker 4: cared for me and helped me out quite a bit.
• 36:17
  Speaker 4: And what sacrifices does that parent need to make in
• 36:20
  Speaker 4: order to do so, right? I've seen people drop out
• 36:22
  Speaker 4: of the labor market in order to care for an
• 36:25
  Speaker 4: aging loved one. And that's wonderful if you can do so,
• 36:27
  Speaker 4: but then what sort of position does that person in?
• 36:29
  Speaker 2: Yeah.
• 36:31
  Speaker 4: People aren't really aware of this, but a lot of
• 36:33
  Speaker 4: the long-term care policies these days that are out there,
• 36:36
  Speaker 4: they actually don't just go towards a facility. A lot
• 36:40
  Speaker 4: of them, it's called indemnity, will actually just pay you.
• 36:45
  Speaker 3: If you.
• 36:48
  Speaker 4: Qualify for the care, meaning you develop dementia or you
• 36:50
  Speaker 4: can't perform, I think it's two out of six activities
• 36:53
  Speaker 4: of daily living, then these insurance policies, it's not like
• 36:56
  Speaker 4: you have to be institutionalized. They will just pay you
• 36:59
  Speaker 4: and you can use it to help pay your daughter
• 37:02
  Speaker 4: who's helping you out to take a break from work to,
• 37:04
  Speaker 4: you know, set things up. And so it is a
• 37:08
  Speaker 4: underappreciated area of the insurance market that more people probably
• 37:13
  Speaker 4: should be considering. But to your point, most people also
• 37:16
  Speaker 4: can't afford.
• 37:17
  Speaker 3: A lot of people can't.
• 37:18
  Speaker 2: But there is a window in terms of like income
• 37:21
  Speaker 2: and net worth where it can make some sense.
• 37:25
  Speaker 3: Yeah.
• 37:25
  Speaker 2: It's like, hey, I've got a net worth that would
• 37:27
  Speaker 2: be decimated in like a three year nursing homestay. And
• 37:31
  Speaker 2: I've got enough income to be able to pay for it. Right.
• 37:34
  Speaker 3: Right. Yeah.
• 37:35
  Speaker 4: If you're worth $ 50 million, this isn't likely a big
• 37:38
  Speaker 4: concern of yours. If you're worth $ 200, 000, you can't afford it.
• 37:43
  Speaker 4: And if you're in a different range there, boy, it
• 37:48
  Speaker 4: can make some sense for the insurance. It can really
• 37:52
  Speaker 4: decimate you if you don't have it.
• 37:54
  Speaker 2: The folks with net worths between like $ 500, 000 and $ 2
• 37:57
  Speaker 2: million seems to be the sweet spot in a lot
• 38:00
  Speaker 2: of cases for potentially using it.
• 38:02
  Speaker 3: Let's take a quick break here.
• 38:03
  Speaker 2: We've got Hour 2 of the show coming up in
• 38:06
  Speaker 2: just a little bit.