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Are the good vibes back on Wall Street? · The Financial Exchange Show

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Speaker 2: Lane Good more than happy Tuesday. Welcome to the Financial Exchange.
1:12
Speaker 2: It's earnings week and FED week here on Wall Street.
1:16
Speaker 2: We've got big earnings reports, especially coming tomorrow, but today
1:20
Speaker 2: we do have Visa reporting after the bell, United Health Group, Novartis,
1:24
Speaker 2: next Era all reported before the bell. Today we've got
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Speaker 2: layoff announcements from a couple of big companies actually, but
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Speaker 2: Amazon making the biggest splash. And then the FED has
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Speaker 2: entered their closed door meetings today. They will be doing
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Speaker 2: their press conference and what Chuck and I deemed to
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Speaker 2: be probably one of the most boring q and as
1:46
Speaker 2: out there for the FED tomorrow, because they're going to
1:49
Speaker 2: be asked questions like how do you know this without
1:52
Speaker 2: government data, and they're going to respond, no, we don't
1:55
Speaker 2: really know without government data, but here's what we think.
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Speaker 2: So they are very like the FED to cut rates
2:01
Speaker 2: at the next coming meeting. We'll have a little bit
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Speaker 2: of Fed talk as well. But the starting piece from
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Speaker 2: the Wall Street Journal this morning, the good vibes back
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Speaker 2: on Wall Street. To be fair, the good vibes only
2:13
Speaker 2: really took a halt for like a week and a
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Speaker 2: half here when it comes to Wall Street. But here's
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Speaker 2: what they are referring to. I think specifically was the
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Speaker 2: vibe change on October tenth. And on October tenth, that
2:28
Speaker 2: was a Friday. That was the day the President Trump
2:31
Speaker 2: hit truth social up with a post about China and
2:35
Speaker 2: their rare earth material restrictions, said that he was going
2:40
Speaker 2: to cancel the meeting with President she in. Where are
2:43
Speaker 2: they meeting? I don't even remember career believe Okay, he's
2:47
Speaker 2: canceling the meeting. He was going to impose one hundred
2:49
Speaker 2: percent tariffs. Market sold off three percent that day. We
2:53
Speaker 2: were also in the midst of digesting some really new
2:57
Speaker 2: information when it came to the private credit industry and
3:00
Speaker 2: Buddy talking about how the Tricolor failure followed by the
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Speaker 2: first brand's failure was going to send a reverberation into
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Speaker 2: markets and lo and behold. At the time, I want
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Speaker 2: to patter on back here for a home because on
3:12
Speaker 2: at the time when it came to the tariff stuff,
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Speaker 2: at least we really looked at that and said, what
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Speaker 2: has changed here? Right? Nothing has changed here. These two
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Speaker 2: countries are posturing ahead of a meeting, and all they
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Speaker 2: are doing is announcing these things so that they can
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Speaker 2: then wipe them away at this big meeting that's coming up,
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Speaker 2: and so therefore there's nothing really happening here and you
3:34
Speaker 2: shouldn't get overly concerned about it. It's not to say
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Speaker 2: that they can't boil over, but I'm very much on
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Speaker 2: the on the mindset now that until you actually see
3:44
Speaker 2: China completely cut off rare earth materials into the US,
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Speaker 2: and until you see US retaliate with one hundred percent
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Speaker 2: actual tariffs being collected, we got to stop sweating it.
3:54
Speaker 3: We've built up some calls since April where it was
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Speaker 3: it was raw new, but now we're more seasons into
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Speaker 3: how this game goes.
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Speaker 2: So you saw that sell off initially, things have rebounded.
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Speaker 2: I guess my point though, would be markets have clearly
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Speaker 2: turned more optimistic. The good vibes are back, if you will.
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Speaker 2: We're into earning season that has the ability to boost
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Speaker 2: the vibes even further potentially this week. But important to
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Speaker 2: consider here that neither of those things that set this
4:23
Speaker 2: off have been resolved in any way. We don't suddenly
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Speaker 2: have a new realization about private credit that all is
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Speaker 2: fine and the you know, the bad weather has passed
4:32
Speaker 2: on private credit. No, that is still a lingering issue
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Speaker 2: out there, and the relationship between the US and China
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Speaker 2: has not resolved and probably will not you know, during
4:42
Speaker 2: the Trump administration. Would be my guess, My best guess
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Speaker 2: as to how things resolve with US and China is
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Speaker 2: this uncomfortable coexistence where we both realize that we can
4:54
Speaker 2: dramatically harm each other's economies and just don't really move
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Speaker 2: the status quot on any of that. And that's fine,
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Speaker 2: I would agree.
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Speaker 3: The tension is not going anywhere, but there is potentially
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Speaker 3: a catalyst from them making a deal, and the meeting's
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Speaker 3: coming up soon. I think it's in the next couple
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Speaker 3: of days here they if they're mad to make further
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Speaker 3: progress on a deal. I don't think that fixes everything,
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Speaker 3: but it certainly would add to the quote unquote good vibes.
5:19
Speaker 2: Best case scenario, you get a deal on TikTok and
5:21
Speaker 2: a commitment to buy a bunch of soybeans that they
5:23
Speaker 2: don't follow through on, probably right, like what are we
5:27
Speaker 2: even talking about here? So yeah, I mean that is
5:29
Speaker 2: the rare, rare deal like commitment Rea, you know, hey,
5:33
Speaker 2: we're not going to do the worst case thing, which
5:36
Speaker 2: also then completely throws into question the domestic industry for
5:40
Speaker 2: rare earth, but we'll deal with that when we get there.
5:43
Speaker 2: Other big news coming out this week, We have fifteen
5:47
Speaker 2: trillion with a t dollars worth of market capitalization reporting
5:51
Speaker 2: just across five companies, five of the biggest companies in
5:54
Speaker 2: the world at this stage, Microsoft, Alphabet, and Meta all
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Speaker 2: reporting tomorrow after the bell. That's not to minimize the
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Speaker 2: impact of companies like Boeing and Caterpillar and Verizon who
6:05
Speaker 2: are also reporting, but they're just not in the same
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Speaker 2: ballpark as those big three Thursday after the bell as well,
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Speaker 2: Apple and Amazon. Between those five that I mentioned, Apple, Amazon, Microsoft, Meta, Alphabet,
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Speaker 2: fifteen trillion dollars worth of market capitalization reporting probably.
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Speaker 3: Class to twenty five percent of the S and P
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Speaker 3: five hundred from a waiting per second, maybe twenty.
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Speaker 2: Probably more because the top ten represent forty seven percent
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Speaker 2: I believe it is now. And so you know, the
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Speaker 2: only other big, big, big one that you have probably yeah, yeah,
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Speaker 2: about a fifth. I think that's a good measurement. A
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Speaker 2: quarter to a fifth of the S and P five
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Speaker 2: hundred reporting earnings just over the next two days. So
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Speaker 2: clearly I think there's some optimism about that. Markets wouldn't
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Speaker 2: have floated up by one percent yesterday if they weren't
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Speaker 2: excited about big earnings coming out. What I guess, what
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Speaker 2: are you on the lookout for this week when it
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Speaker 2: comes to earnings?
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Speaker 3: What we I'm gonna just pivot a little bit from
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Speaker 3: that question for just a moment, because I want to
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Speaker 3: mention something else that's been going on this week.
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Speaker 2: That's just just your question with a question. No, no,
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Speaker 2: it's not a question.
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Speaker 3: This is a statement a lot of mergers and acquisitions
7:14
Speaker 3: activity over the course of the last week or so. Really,
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Speaker 3: that is part of this good vibes thesis on Wall
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Speaker 3: Street that you are seeing a tremendous amount of companies
7:24
Speaker 3: agreeing to acquire one another or to merge together. And
7:27
Speaker 3: that is also something that plays into just overall market
7:31
Speaker 3: confidence that you have a regulatory environment that companies feel
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Speaker 3: pretty comfortable with merging here on the earning season. To
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Speaker 3: go back to your initial question here, in terms of
7:41
Speaker 3: what we're looking for, it seems like there is going
7:44
Speaker 3: to be a tremendous amount of scrutiny now on cap
7:46
Speaker 3: ax capital expenditures. What are these big hyperscaler companies spending
7:51
Speaker 3: on their data center build. I think that's something that's
7:54
Speaker 3: going to be in focus, and what will probably segue
7:56
Speaker 3: us to the next story too is the labor market
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Speaker 3: and sort of commentary there on where we're going to
8:02
Speaker 3: sit any type of AI improvements is also something that
8:07
Speaker 3: I think for the next six months to a year,
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Speaker 3: there's gonna be tremendous amount of scrutiny from Wall Street
8:12
Speaker 3: and analysts to see if the products that are being
8:15
Speaker 3: released or utilized by some of these big tech names
8:18
Speaker 3: are making a significant impact from a productivity standpoint, And
8:21
Speaker 3: the easiest way to probably see it is more on
8:23
Speaker 3: like the cloud computing side. That's what they're going to
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Speaker 3: be looking at this week, is growth in those segments.
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Speaker 2: Yeah, I'm very curious about it. Just how much scrutiny
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Speaker 2: investors aren't going to place on these companies.
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Speaker 3: HM.
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Speaker 2: So far, there's been very little, it's fair to say,
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Speaker 2: like just scrutinizing what is actually being There's just.
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Speaker 3: Cheering left and right, really right, not a lot of.
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Speaker 2: So that's what I'm interested in is, you know, assuming
8:45
Speaker 2: these companies come out with another several billion dollars worth
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Speaker 2: of capex and announcements on this that or the other,
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Speaker 2: do analysts start to scrutinize, okay, and then what no,
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Speaker 2: not yet? Not yet?
8:57
Speaker 3: No, I don't think so. I think that as long
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Speaker 3: as to run.
8:59
Speaker 2: With that, let's take break. When we come back, I
9:01
Speaker 2: want to talk a little bit more about these big
9:03
Speaker 2: companies and the swings in their stock prices, and whether
9:06
Speaker 2: or not what feels extraordinary to a lot of investors
9:10
Speaker 2: is in fact extraordinary from these big companies. That and
9:13
Speaker 2: Amazon job cuts coming up next.
9:16
Speaker 1: There's only one show that follows Well Street's continued volatility.
9:20
Speaker 1: Keep it here all morning long on the Financial Exchange
9:23
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9:28
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9:33
Speaker 1: we are covering. This is the Financial Exchange Radio Network, Paul.
9:48
Speaker 2: Our stocks more volatile than they used to be? That's
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Speaker 2: really what we're asking with some of these pieces these days, right?
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Speaker 2: Are stocks swinging more more than they used to? How
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Speaker 2: would you, I guess, first things first, how would you
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Speaker 2: go about even answering that question?
10:06
Speaker 3: Well, the way that the Financial Times poses it here
10:09
Speaker 3: is they are using dollar values of market cap to
10:13
Speaker 3: try and assess or gauge that volatility. So just for
10:16
Speaker 3: listeners out there, market cap is just basically what Wall
10:19
Speaker 3: Street deems a company to be worth, and how they
10:22
Speaker 3: determine that is the number of shares out there that
10:25
Speaker 3: people own times the price that it goes for on
10:27
Speaker 3: the open market every single day. And so as a
10:30
Speaker 3: result of that, on the highest end, you get in
10:32
Speaker 3: Video worth four and a half trillion. And in terms
10:34
Speaker 3: of what we've seen over the last five years, we've
10:37
Speaker 3: had the S and P five hundred grow about a
10:41
Speaker 3: one hundred percent, and as a result of that one
10:44
Speaker 3: hundred billion dollars today compared to the volatility of five
10:49
Speaker 3: years ago, it's easier to have moves one hundred billion
10:52
Speaker 3: dollars in a day when that's what you know, two
10:54
Speaker 3: percent of what in Vidia's market cap of four and
10:57
Speaker 3: a half trillion.
10:58
Speaker 2: It's like when people tell me that the day move
11:00
Speaker 2: three hundred points in there, freaked out. It's less than
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Speaker 2: one percent, exactly exactly, that's less than one percent.
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Speaker 3: I hate dollar comparisons when you're talking about markets. I
11:09
Speaker 3: think it's much better to do it in terms of percentages.
11:13
Speaker 3: When you're trying to use these base of comparisons. Now
11:16
Speaker 3: this piece does go in and try and make some
11:19
Speaker 3: other points to why there could be more volatility, and
11:21
Speaker 3: those I can kind of get behind a little bit.
11:23
Speaker 3: There seems to be similar to twenty twenty one, a
11:26
Speaker 3: lot more options activity. In fact, I believe we're seeing
11:30
Speaker 3: the volume of single stock options reaching the highest level
11:34
Speaker 3: since that period. There is some frothiness in the market
11:36
Speaker 3: that could lead to more volatility, but it hasn't played
11:40
Speaker 3: out on a broader scale.
11:41
Speaker 2: Yeah, I think beware of two big things, securitization and leverage,
11:46
Speaker 2: and we are seeing growth in both of these things. Right,
11:50
Speaker 2: we talked about how there's now more ETFs than there
11:52
Speaker 2: are individual securities on the market. What does that mean.
11:54
Speaker 2: It means that more companies are finding ways to make
11:56
Speaker 2: money by securitizing things like single stock leverage, dtfs like well,
12:04
Speaker 2: frankly all sorts of different things, crypto and other exchange
12:07
Speaker 2: trade funds. And so I think be wary of securitization
12:10
Speaker 2: of more and more products because that historically has led
12:13
Speaker 2: to big problems. But without high degrees of leverage in there,
12:17
Speaker 2: it's usually not been able to light a match that
12:20
Speaker 2: burns the whole thing to the ground. And so that's
12:23
Speaker 2: the biggest piece in my mind to watch out for,
12:24
Speaker 2: is Hey, when there is a massive amount of leverage
12:27
Speaker 2: in any area of the market, that's a bit of
12:30
Speaker 2: a warning sign that if there's any bad news there,
12:33
Speaker 2: then it can come crumbling down pretty quickly.
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Speaker 3: Yeah, you take the stairs up with the market, but
12:37
Speaker 3: oftentimes it's the elevator down when you have a lot
12:39
Speaker 3: of leverage played in.
12:40
Speaker 2: So Amazon stock is not moving much on the news,
12:44
Speaker 2: but ahead of their earnings call on Thursday, they've announced
12:49
Speaker 2: a fourteen thousand corporate workforce layoff. There are apparently plans
12:53
Speaker 2: to cut up to thirty thousand jobs that would be
12:56
Speaker 2: roughly ten percent of Amazon's white collar. Reminder, this does
13:01
Speaker 2: not include, uh, you know, any of their delivery drivers
13:05
Speaker 2: or warehouse workers. Were specifically talking about the white college stuff.
13:08
Speaker 2: What is your I was trying to think through, Is
13:12
Speaker 2: there any way to read this in terms of the
13:14
Speaker 2: timing of the announcement right ahead of earnings. My mind
13:17
Speaker 2: immediately went there, and so I won't be shocked if,
13:21
Speaker 2: for instance, they're trying to make this earnings call about
13:25
Speaker 2: AI productivity, or maybe it's a bad earnings call and
13:28
Speaker 2: they're trying to where to my thing.
13:30
Speaker 3: That's where my mind ran too. I said, oh, that
13:32
Speaker 3: seems a little pessimistic sign that they're trying to kind
13:34
Speaker 3: of throw this out before.
13:36
Speaker 2: Yeah. But again, reading too much into that can be
13:38
Speaker 2: a bad move too, because sometimes what happens is a
13:42
Speaker 2: local newspaper gets word of the the you know, announcement,
13:45
Speaker 2: and they need to get out in front of it
13:47
Speaker 2: before you know. The last thing you want as a
13:49
Speaker 2: company is your employees reading about a coming layoff from
13:55
Speaker 2: you know, the New York Times rather than from their
13:57
Speaker 2: employer themselves. So there can be a number of different
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Speaker 2: reads to this, and I don't want to jump to
14:02
Speaker 2: any conclusions on that. But what has been unique about
14:06
Speaker 2: this market rally and this moment right here is the
14:12
Speaker 2: discussion to me of expansion. Right there's been a huge
14:16
Speaker 2: push for expansion. There's been massive expansion of R and
14:19
Speaker 2: D dollars and clearly on AI. Usually historically when that's happened,
14:25
Speaker 2: it's been paired with an expansion of employment. Yeah, like,
14:29
Speaker 2: we're we're embarking on this new project. We're going to
14:31
Speaker 2: need ten thousand new workers in order to do it,
14:35
Speaker 2: and look at, you know, how profitable it's going to
14:37
Speaker 2: be five years from now. This moment, because of the
14:40
Speaker 2: nature of the technology that everyone's excited about, has all
14:44
Speaker 2: been about how much can I cut staff, limit future
14:50
Speaker 2: employment and still.
14:52
Speaker 3: Still make more revenue. That is, to me, the macroeconomic
14:56
Speaker 3: point to make on this story about Amazon is that
15:00
Speaker 3: there has been a tremendous shift call it over I
15:03
Speaker 3: guess the last three or four years really since the
15:07
Speaker 3: Chatchy pt moment and the further enthusiasm regarding AI has
15:11
Speaker 3: just picked up momentum since then. That usually to strut
15:16
Speaker 3: your stuff as to how strong you are as a company,
15:19
Speaker 3: it was a tremendous flex to show that you're hiring
15:22
Speaker 3: thousands of more workers, because what does that mean, growing sales,
15:26
Speaker 3: growing optimism in your company? And now particularly in these
15:30
Speaker 3: Silicon Valley companies, but also in retailers too. You know,
15:33
Speaker 3: you hear this commentary from financial banks and others. It
15:38
Speaker 3: is more sexy to sort of say, you know what,
15:40
Speaker 3: we're going to keep our head count the way it is.
15:43
Speaker 3: We may trim for efficiencies because we believe that this
15:46
Speaker 3: technology is with AI is going to automate a lot
15:50
Speaker 3: of work, and we're going to be able to make
15:52
Speaker 3: more money with the same headcount, so you're almost kinnterintuitively,
15:56
Speaker 3: sort of punished in a sense by Wall Street for
15:59
Speaker 3: this idea, idea of this old methodology of hiring new workers,
16:02
Speaker 3: which to me is fascinating that shift.
16:05
Speaker 2: The question to me is, you know, are our companies
16:10
Speaker 2: actually cutting headcount because they are being more productive and
16:15
Speaker 2: specifically they're being more productive because of artificial intelligence or
16:19
Speaker 2: I think there's clearly a productivity shift going on right now.
16:22
Speaker 2: We can measure that. We're also hearing rumors of have
16:26
Speaker 2: you heard of the nine to nine six schedule? No,
16:30
Speaker 2: nine to nine pm, nine am to nine pm, six
16:33
Speaker 2: days a week. It's it's the work schedule of the
16:36
Speaker 2: Chinese chin. Yeah, I've heard that, the nine nine to
16:38
Speaker 2: six schedule. You know, there's big pressure among all companies,
16:43
Speaker 2: but especially any of those in the US that are
16:45
Speaker 2: tied to AI to push their workers to be more
16:48
Speaker 2: productive and hopefully be able to credit artificial intelligence. My
16:54
Speaker 2: question is, are we seeing a productivity boom across the
16:58
Speaker 2: workforce right now because people are more nervous about their job,
17:01
Speaker 2: They're putting in extra hours and just trying harder than
17:04
Speaker 2: they were over the last few years, in which case
17:07
Speaker 2: the productivity increase that we're seeing is not sustainable, right
17:12
Speaker 2: you can't go from working eight hours to nine hours
17:16
Speaker 2: to fifteen hours over the course the next five years.
17:20
Speaker 2: There's a limitation to how much productivity you will actually
17:23
Speaker 2: pick up in your job. You'll be capped at. Or
17:26
Speaker 2: are we genuinely starting to see some increases in productivity
17:30
Speaker 2: due to a new emerging technology that will drive a
17:34
Speaker 2: decade of further productivity and allow us to deal with
17:38
Speaker 2: the fact that we have a much slower growth in
17:40
Speaker 2: our population and will allow countries like China to deal
17:43
Speaker 2: with the fact that they are literally seeing more deaths
17:45
Speaker 2: than they are births in their country right now. These
17:48
Speaker 2: are again unanswerable questions, and I don't know, I don't
17:53
Speaker 2: feel like many people are really asking them or holding
17:56
Speaker 2: their feet to the fire on these questions. Either it's
17:58
Speaker 2: just oh, yeah, we cut these heads and we were
18:01
Speaker 2: able to still grow revenue. Okay, show show me the reality.
18:06
Speaker 3: I've been looking for a piece and maybe it is
18:09
Speaker 3: out there and it just hasn't come across my desk
18:11
Speaker 3: that provides concrete evidence, maybe just to an individual business
18:16
Speaker 3: out there that is getting tremendous productivity enhancements from this
18:19
Speaker 3: new technology.
18:20
Speaker 2: Amazon opposite exists. Amazon. MIT did a study where they
18:23
Speaker 2: basically showed that ninety some odd percent of companies that
18:26
Speaker 2: are implementing AI are seeing no increases in productory.
18:28
Speaker 3: Really, Amazon is a good example of a company that
18:31
Speaker 3: has benefited. I mean, if you look at some of
18:33
Speaker 3: these statistics in terms of the number of packages that
18:36
Speaker 3: they ship per employee, it's was one hundred and seventy
18:41
Speaker 3: five back about ten years ago. Now per employee that
18:44
Speaker 3: they have within their warehouses it's three eight hundred and
18:47
Speaker 3: seventy just over a ten year span. You know, the
18:50
Speaker 3: amount of robots that they have, like, they are probably
18:53
Speaker 3: the epin me of the use of robotics and technology
18:56
Speaker 3: to their benefit on the retail side of things, just
18:58
Speaker 3: to how efficient that they've become. But that doesn't speak
19:03
Speaker 3: to the broader economy in terms of it.
19:05
Speaker 2: Doesn't speak to what people care about right now, which
19:07
Speaker 2: is not how robotics are fixing things, but how artificial
19:10
Speaker 2: intelligence is making you more productive. Right That MIT study,
19:14
Speaker 2: by the way, found that ninety five percent of enterprise
19:17
Speaker 2: level genera AI products failed to deliver measurable revenue acceleration.
19:23
Speaker 2: Still early days, but that's where MIT found us. Quick
19:25
Speaker 2: Break Full market recap is next with Wall Street Watch.
19:40
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Speaker 1: TFE show. Breaking business news is always first right here
19:47
Speaker 1: on the Financial Exchange Radio Network. Time now for Wall
19:52
Speaker 1: Street Watch a complete look at what's moving markets so
19:55
Speaker 1: far today right here on the Financial Exchange Radio Network.
19:59
Speaker 4: Markets modestly extending gains from yesterday's rally is the FED
20:03
Speaker 4: kicks off its two day meeting today, followed by rate
20:06
Speaker 4: decision on Wednesday. Traders are also writing for a batch
20:10
Speaker 4: of big tech earnings and a potential China trade deal
20:14
Speaker 4: later this week. Right now, the Dow is up by
20:16
Speaker 4: just over half a percenter two hundred and fifty six points.
20:19
Speaker 4: Hired SMP five hundred is up a tenth of a
20:22
Speaker 4: percenter six points, NASDAC UPUB up about a quarter percent
20:26
Speaker 4: or fifty five points, Russell two thousand down by four
20:30
Speaker 4: tenths of one percent, Tenure Treasureel flat at the moment
20:33
Speaker 4: now at three point nine to nine to one percent,
20:36
Speaker 4: and crude oil is down one in a quarter percent.
20:39
Speaker 4: Trading it's sixty dollars and fifty four cents at barrel.
20:42
Speaker 4: Amazon announced that it will lay off about fourteen thousand
20:45
Speaker 4: corporate jobs, marking the largest round of corporate job cuts
20:49
Speaker 4: in the company's history. Reports indicated Amazon's layoffs are expected
20:53
Speaker 4: to affect as many as thirty thousand corporate jobs. Amazon
20:57
Speaker 4: shares are down slightly. Meanwhile, UPS shares a jumping seven
21:01
Speaker 4: percent after the delivery giant posted better than expected third
21:04
Speaker 4: quarter revenue and raised its fourth quarter guidance. The company
21:08
Speaker 4: also said it has reduced its management workforce by about
21:11
Speaker 4: fourteen thousand positions so far this year, and its operational
21:15
Speaker 4: workforce by thirty four thousand positions elsewhere. Microsoft and open
21:19
Speaker 4: Ai finalized a new agreement where Microsoft will get a
21:23
Speaker 4: twenty seven percent ownership stake in open Ai, worth about
21:27
Speaker 4: one hundred and thirty five billion dollars. Microsoft shares are
21:31
Speaker 4: up over two percent and has surpassed four trillion dollars
21:34
Speaker 4: in market cap today. Apple also crossed that mark today.
21:39
Speaker 4: PayPal is up by twelve percent after the digital payments
21:42
Speaker 4: company beat third quarter earnings and announced a new e
21:45
Speaker 4: commerce partnership with open Ai. Wayfair surging about twenty percent
21:50
Speaker 4: after the online furniture retailer posted stronger than expected third
21:54
Speaker 4: quarter earnings, and after today's closing bell, we'll see third
21:58
Speaker 4: quarter results from Visa. I'm Tucker Silvan. That is Wall
22:02
Speaker 4: Street Watch.
22:03
Speaker 2: Hey, those guys have just what you need? Shut up?
22:07
Speaker 1: Did I say that aloud?
22:10
Speaker 2: I find it to be a catch? What is the
22:12
Speaker 2: actual slogan? Just what I need? Okay? Yeah, pretty solid,
22:18
Speaker 2: just what I needed. No, no different song that. Yeah,
22:22
Speaker 2: they should maybe do that matter. I'm ware it is.
22:25
Speaker 2: I'm just singing that song. Yeah, got it wayfair and uh,
22:30
Speaker 2: I just wanted to sing that.
22:31
Speaker 3: I mean, if you can tell if you can tell
22:33
Speaker 3: a joke during break and then retrail it on you
22:35
Speaker 3: that I can do that fair enough.
22:38
Speaker 2: The Fed's six point six trillion dollar test. Here's my thesis.
22:45
Speaker 2: Nobody has anything to write about regarding the FED because
22:49
Speaker 2: they're going to cut by a quarter percent tomorrow and
22:53
Speaker 2: there's no government data for them to digest. So instead
22:56
Speaker 2: they're talking about their balance sheet. Because you got to
23:01
Speaker 2: write something about the FED. It's the day before a meeting,
23:03
Speaker 2: So what do we talk about their six point six
23:05
Speaker 2: trillion dollar balance sheet and the fact that it's about
23:07
Speaker 2: to be paused in terms of the runoff. So in
23:11
Speaker 2: order to explain this, so you have to kind of explain,
23:13
Speaker 2: I guess how they came upon six point six trillion
23:16
Speaker 2: dollars worth of securities over the course of the last
23:19
Speaker 2: few decades. So typically when we talk about the FED,
23:23
Speaker 2: we're talking about the FED fund's target interest rate, which
23:27
Speaker 2: they set and they don't set they through open market actions.
23:32
Speaker 2: They attempt to put it within a range of interest rates,
23:35
Speaker 2: and that drives everything from your auto loan to your
23:39
Speaker 2: credit card interest rate, to your heelock and really drives
23:43
Speaker 2: those interest rates on the short end of the curve.
23:46
Speaker 2: In times of crisis or frankly, even in times that
23:50
Speaker 2: I wouldn't really considered crisis, they have implemented different market actions,
23:58
Speaker 2: such as during eight during that crisis and during twenty twenty,
24:02
Speaker 2: and I was I was talking to Mark Fandatty today
24:04
Speaker 2: to make sure I'm describing this properly, but failure. Yes,
24:08
Speaker 2: here is kind of how I would describe these market actions.
24:11
Speaker 2: Is it is the Fed's attempt to supply liquidity into
24:15
Speaker 2: the market and specifically to do something about longer term
24:18
Speaker 2: interest rates. It's not direct yield curve controlled. They're not
24:22
Speaker 2: targeting to say, hey, we want the thirty year treasury
24:25
Speaker 2: to be trading at four percent or two percent, But
24:28
Speaker 2: they are by going out there during COVID and buying
24:32
Speaker 2: what was it like forty five billion dollars a month
24:35
Speaker 2: in treasuries and mortgage backed securities. There's only one reason
24:39
Speaker 2: you do that, which is to supply the market with
24:41
Speaker 2: liquidity dollars and to make sure that rates on that
24:44
Speaker 2: stuff that you know could otherwise go crazy are staying
24:48
Speaker 2: within some sort of range that you are targeting.
24:50
Speaker 3: And that you could credit for your third three percent
24:52
Speaker 3: mortgages that you picked up right back in what not
24:55
Speaker 3: have been the reprise. Like that is kind of a
24:58
Speaker 3: direct almost direct core and.
25:00
Speaker 2: So I feel like that confuses myself included people because
25:04
Speaker 2: we do talk about the FED as, oh, they don't
25:06
Speaker 2: really control long term rates. Well, they can, they just
25:09
Speaker 2: usually don't do it unless it's a crisis.
25:12
Speaker 3: They try, they can try to influence them, you know,
25:14
Speaker 3: as best they can with monetary policy. Sometimes that could
25:18
Speaker 3: fall flat, but they've been successful in being stimulative by
25:24
Speaker 3: these approaches.
25:25
Speaker 2: And this was really kind of revolutionized by Bernanki, who
25:28
Speaker 2: kind of wrote about it a lot in the nineties
25:30
Speaker 2: and got the chance to implement it during the Great
25:32
Speaker 2: Financial Crisis and really put this to the test and
25:35
Speaker 2: then was just kind of accelerated to a previously unforeseen
25:39
Speaker 2: level during the COVID crisis. But here we stand now
25:44
Speaker 2: with a federal reserve, a central bank with six plus
25:46
Speaker 2: trillion dollars sitting there in terms of security. Is what
25:49
Speaker 2: they had been doing since twenty twenty two has been
25:53
Speaker 2: not exactly selling them into the open market. But again,
25:55
Speaker 2: they're bonds, so at some point those bonds mature, the
25:59
Speaker 2: Fed gets there dollars, and they've just not been going
26:02
Speaker 2: back out and buying new ones. That's what they mean
26:05
Speaker 2: by balance sheet runoff is just saying, Yep, the bond
26:07
Speaker 2: at matured, We're going to allow it to mature. We're
26:09
Speaker 2: not going to go take that cash and buy another one.
26:12
Speaker 2: We are therefore, you know, sapping the market of liquidity
26:15
Speaker 2: a little bit.
26:16
Speaker 3: Uh.
26:16
Speaker 2: It looks like they are going to end that portfolio
26:19
Speaker 2: runoff very soon, is where people are conjecturing, and in
26:24
Speaker 2: the context of where we are right now in markets,
26:27
Speaker 2: very slow job growth, concerns about private credit, concerns about
26:31
Speaker 2: some of the owners that private credit. I think that
26:34
Speaker 2: is a reasonable policy choice, but it is just kind
26:38
Speaker 2: of wild to be sitting here and saying Yeah, with
26:40
Speaker 2: low unemployment, low inflation, a stock market that's hitting all
26:44
Speaker 2: time highs, the Fed's probably going to be saying sometimes
26:47
Speaker 2: soon that not only are we lowering interest rates, but
26:49
Speaker 2: we are going to continue to supply the market with
26:51
Speaker 2: liquidity by not allowing these balance these bonds to just
26:54
Speaker 2: run off our balance sheet.
26:55
Speaker 3: It seems really counterintuitive that we'd be wrapping up this
26:58
Speaker 3: cycle so quickly. To be fair, you know, inflation has
27:03
Speaker 3: come down to a more reasonable target of three percent
27:06
Speaker 3: or so, and then on the liquidity front, like you mentioned,
27:09
Speaker 3: it's been in a little bit better place. But it's
27:13
Speaker 3: always a very difficult balancing act. And I don't pretend
27:16
Speaker 3: to know the intricacies of it. That FED fight FED
27:19
Speaker 3: Fund overnight rate is heavily influenced by the amount of
27:24
Speaker 3: reserves that the FED has on its balance sheet separate
27:27
Speaker 3: from the securities portfolio. So it's a really careful balancing
27:30
Speaker 3: act that they have to strike here in terms of
27:32
Speaker 3: when they end this runoff. But you intro the segment
27:36
Speaker 3: the best where this is deep cut sort of like
27:38
Speaker 3: that indie band or like that movie at like a Cambridge,
27:43
Speaker 3: you know, small theater sort of chatter here when you
27:46
Speaker 3: talk about the FED balance sheet. It's not the big
27:48
Speaker 3: boys stuff, which the interest rate movements.
27:51
Speaker 2: Yeah, I mean, frankly, I just feel like the FED
27:53
Speaker 2: is stuck in this position now where they have a
27:55
Speaker 2: giant balance sheet and nobody fully understands, even at the
28:00
Speaker 2: Federal Reserve, what would happen if they continue to try
28:03
Speaker 2: and run it off. And so the safe thing to
28:05
Speaker 2: do is just to say, yeah, we're pausing, We're going
28:07
Speaker 2: to keep doing what we're doing. And yes, we own
28:09
Speaker 2: this gargantuan amount of securities and a huge balance sheet
28:13
Speaker 2: that we've never seen before. But as such, running it
28:17
Speaker 2: off when we have some concerns about the state of
28:20
Speaker 2: markets is too dangerous, So we'll let the next person
28:24
Speaker 2: worry about it. That's I kind of think where the
28:27
Speaker 2: FED sits right now. Let's take a quick break. When
28:29
Speaker 2: we come back, Americans facing a retirement confidence paradox, we
28:35
Speaker 2: will talk about what's the plur of paradox paradoxes? Yeah,
28:40
Speaker 2: we'll talk about paradoxes next on The Financial Exchange.
28:43
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29:43
Speaker 2: So Paul Prudential did a survey about Americans, and actually
29:48
Speaker 2: not just Americans. They surveyed folks from Brazil, Mexico, Japan,
29:53
Speaker 2: and the United States, specifically looking at forty two hundred
29:56
Speaker 2: adults and their feelings about retirement. One I guess surprising
30:02
Speaker 2: piece to me, which I take as good news, is
30:05
Speaker 2: that eighty nine percent of wealthy US adults said that
30:09
Speaker 2: they are confident they'd be able to cover essential cost
30:12
Speaker 2: in retirement, but only about half of them have actually
30:18
Speaker 2: factored in inflation to their retirement planning. So that's the
30:20
Speaker 2: paradox that they're calling is they're basically saying that Americans
30:24
Speaker 2: are overly confident about their ability to retire and fund
30:27
Speaker 2: their retirements, which I would I guess by I think
30:31
Speaker 2: such a bull market like the one that we have
30:33
Speaker 2: seen frankly over the last seventeen ish years now, right
30:38
Speaker 2: since since twenty ten or so or two thousand and
30:43
Speaker 2: nine or so, we have seen just a straight line
30:45
Speaker 2: bull market that I think has lent a lot of
30:47
Speaker 2: confidence to folks. But it's a fair point that, yeah,
30:52
Speaker 2: when you dig underneath the hood, you start to raise
30:55
Speaker 2: some questions about where people are actually prepared or unprepared
30:59
Speaker 2: for their retirement.
31:00
Speaker 3: The inflation pieces is probably the hardest moving target because
31:04
Speaker 3: it is impossible to project in our financial planning work
31:08
Speaker 3: that we do. It usually is the most sensitive one
31:11
Speaker 3: that can impact a client's plan. Is any changes in inflation,
31:16
Speaker 3: particularly if it's higher than projected, can really put a
31:20
Speaker 3: damper and a huge den into someone's potential financial success.
31:24
Speaker 2: I've said this before here, but I'll actually say that
31:27
Speaker 2: most people that I have met and had these types
31:29
Speaker 2: of conversations with are much more worried about a market crash,
31:34
Speaker 2: but much more exposed to higher inflation. Sure sure, like
31:38
Speaker 2: the way that they're managing their own money. They're terrified
31:40
Speaker 2: of the market falling apart and completely underprepared for the
31:44
Speaker 2: idea that inflation could run three percent instead of two
31:46
Speaker 2: and a half, exactly right, Like such a small little
31:49
Speaker 2: tweak there, I think the I think one of the
31:54
Speaker 2: problems though with our industry. We both work as financial advisors,
31:57
Speaker 2: we work in wealth management. I feel as though we
32:01
Speaker 2: have this kind of stodgy reputation for, oh, they're just
32:05
Speaker 2: going to take my money and do whatever they want
32:07
Speaker 2: with it. And some people have a positive outlook with that, like, oh, look,
32:11
Speaker 2: how great they have done it managing money over the
32:14
Speaker 2: course of a decade. Others might have a negative outlook
32:18
Speaker 2: of it. But I think that's kind of the opinion
32:19
Speaker 2: of what financial advisors do is they're here to take
32:22
Speaker 2: my money and you allocate it properly, and frankly, if
32:27
Speaker 2: I'm looking at my own portfolio over the last fifteen
32:29
Speaker 2: years and even did something very simple like put it
32:33
Speaker 2: all in some sort of balanced type of fun I've
32:36
Speaker 2: probably done pretty darn well, and I think that's that's
32:40
Speaker 2: where some of the nuance comes in. And what we
32:42
Speaker 2: do a bad job of in our industry is actually
32:44
Speaker 2: explaining that. Oh yeah, we have plenty of clients who
32:48
Speaker 2: have you know, some of the best wealth managers out there.
32:51
Speaker 2: They can pick stocks, they can run a portfolio on
32:53
Speaker 2: their own, they don't really know our help, but they
32:55
Speaker 2: have no idea how to build a financial plan right.
32:58
Speaker 2: I've met engineers who are excellent at building spreadsheets and
33:03
Speaker 2: can model out their entire rest of their financial lives
33:05
Speaker 2: with a high degree of accuracy, accounting for things like
33:08
Speaker 2: inflation and market drops, but are some of the worst
33:13
Speaker 2: when it comes to assessing how taxes are going to
33:15
Speaker 2: play out with their plan. I've met tax attorneys who
33:18
Speaker 2: know the tax code in and out and can find
33:20
Speaker 2: every loophole for you, and suck at investing. And so
33:26
Speaker 2: my point with all this would merely be there's a
33:30
Speaker 2: lot of you know, places that try and do a
33:33
Speaker 2: one size fits all approach, and that can be right
33:36
Speaker 2: for some people, but it's absolutely wrong for others, and
33:38
Speaker 2: I think especially you know, I'm seeing differences between generations too.
33:44
Speaker 2: I've found older generations that really just want to outsource
33:46
Speaker 2: it all and just say I'm not interested in this.
33:49
Speaker 2: I found a lot of younger generations who say, no,
33:51
Speaker 2: I am passionate about investing. I just need help here.
33:54
Speaker 2: And that's where again, I think our industry could do
33:57
Speaker 2: a better job of explaining, like, oh, yeah, there are
34:00
Speaker 2: financial advisors out there where if I just need somebody
34:03
Speaker 2: to take a look at what I've already done and
34:06
Speaker 2: give me a grade and tell me how, you know,
34:08
Speaker 2: how am I coming along When it comes to preparing
34:10
Speaker 2: for all this. There are people that will do that.
34:12
Speaker 2: There are people that you can have on retainer and
34:14
Speaker 2: just pay an hourly fee. There are folks that will
34:17
Speaker 2: just manage your money and do nothing else at all.
34:21
Speaker 2: But we have this again reputation of oh, they want
34:23
Speaker 2: to do everything and take over everything. If you have
34:26
Speaker 2: questions about your own financial future and you fall into
34:32
Speaker 2: one of those categories of oh, I feel like I'm
34:35
Speaker 2: actually fine at these other things and could use a
34:38
Speaker 2: little bit of help hereer guidance on this guidance on
34:40
Speaker 2: that specific issue, I can't promise that Armstrong Advisor Group
34:43
Speaker 2: can answer all of them right. Like you know, we
34:46
Speaker 2: are not experts on everything. Nobody is experts on everything.
34:49
Speaker 2: But if you have questions like that and you want
34:51
Speaker 2: to kick the tires a little bit and understand how
34:54
Speaker 2: we work with our clients, give us a call at
34:56
Speaker 2: eight hundred three nine three four zero zero one. It's
35:00
Speaker 2: a number for the Armstrong Advisory Group. We have employees
35:03
Speaker 2: and offices scattered throughout the New England area, but we
35:05
Speaker 2: meet with people nationwide and be happy to chat with
35:08
Speaker 2: you too. The number again is eight hundred three nine
35:11
Speaker 2: three four zero zero one.
35:13
Speaker 1: The proceeding was paid for by Armstrong Advisory Group, a
35:16
Speaker 1: registered investment advisor. Nothing in the ad or in any
35:18
Speaker 1: Armstrong guide a specific financial, legal, or tax advice. Consult
35:22
Speaker 1: your own financial, tax into state planning advisors before making
35:24
Speaker 1: any investment decisions. Armstrong may contact you to offer investment
35:27
Speaker 1: advisory services.
35:29
Speaker 2: At the open this morning, United Parcel Service UPS was
35:32
Speaker 2: up about ten percent in early trading. It's calmed down
35:35
Speaker 2: a little bit. It's up about seven percent so far
35:38
Speaker 2: in trading. What did we hear from the logistics and
35:42
Speaker 2: delivery Giant Pole.
35:43
Speaker 3: Similar to what Amazon had talked about earlier that we
35:47
Speaker 3: covered in the show. UPS is also cutting thirty four
35:51
Speaker 3: thousand jobs in its operational workforce, and that's a seventy
35:55
Speaker 3: percent increase from its previous target. But also in terms
35:58
Speaker 3: of the reason why it's so high today, is it
36:01
Speaker 3: just crush profit expectations and there's more confidence in the
36:06
Speaker 3: courier's comeback plans. UPS has struggled tremendously post pandemic. They
36:10
Speaker 3: had a lot of momentum, but have struggled since then
36:12
Speaker 3: quite a bit. It's interesting this mirrors sort of a
36:15
Speaker 3: conversation I had recently with a client who is a
36:18
Speaker 3: longtime employee of UPS who recently retired, who mentioned that
36:21
Speaker 3: the cost cutting endeavors that they are embarking aren't are
36:25
Speaker 3: serious and significant. He was mentioning to me that they
36:28
Speaker 3: are really looking to cut headken down and this backs
36:32
Speaker 3: that up.
36:33
Speaker 2: Yeah, you've seen it with the storefronts too. They are
36:35
Speaker 2: closing more of those. Frankly, the only time I ever
36:39
Speaker 2: enter them. Actually, there's two occasions. One is when I
36:41
Speaker 2: need to ship something to my family in the Midwest
36:44
Speaker 2: for usually Christmas, and usually it's my wife doing that,
36:48
Speaker 2: not me. Two. It's when I'm returning for something for Amazon,
36:51
Speaker 2: right right, and that's convenient, but I don't know how
36:55
Speaker 2: much business that really generates for ups, And so they're
36:59
Speaker 2: cutting these stores and finally seeing a bit of a
37:02
Speaker 2: break in what has been, frankly a three year direct
37:05
Speaker 2: trend downwards for this company. It's trading at ninety five
37:09
Speaker 2: dollars and fifty cents a share this morning. It hit
37:11
Speaker 2: a peek back in twenty twenty two of nearly two
37:14
Speaker 2: hundred and twenty five dollars a share. Yeah, I mean,
37:17
Speaker 2: it has been a big, big fall for what has
37:20
Speaker 2: been Yea again a huge logistics company. But they've been
37:26
Speaker 2: I think struggling to find their position ever since Amazon
37:29
Speaker 2: started to compete with them, No.
37:32
Speaker 3: Question about it. That business is very challenging. The low
37:35
Speaker 3: value e commerce stuff that they were doing for Amazon,
37:37
Speaker 3: it's just been tough, and Amazon has taken a lot
37:39
Speaker 3: of it on its own, and ye been a fierce
37:41
Speaker 3: competitor for them. It's it's incredible. The cost savings that
37:45
Speaker 3: they've achieved this year is about two point two billion
37:47
Speaker 3: for the first nine months of the year. Three and
37:50
Speaker 3: a half billion will be the total year over year
37:52
Speaker 3: savings that they have. Stock was down, as you mentioned,
37:55
Speaker 3: twenty nine percent this year through Monday.
37:58
Speaker 2: S and P five hundred barely hanging on to some
38:00
Speaker 2: gains here. We've got it up about a tenth of
38:02
Speaker 2: a percent. We're gonna take a quick break when we
38:04
Speaker 2: come back. We're talking private credit among other things, so
38:08
Speaker 2: stay tuned, folks will be right back