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China’s AI Breakthrough Raises New Cybersecurity Fears · The Financial Exchange Show

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Speaker 1: making a donation Today. Face is the Financial Exchange with
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Speaker 1: Mike Armstrong and Mark Vandetti.
1:11
Speaker 2: Good morning, Welcome back to the Financial Exchange. Mike, Mark
1:15
Speaker 2: and Tucker with you on a Monday, ahead of the
1:17
Speaker 2: July fourth holiday.
1:19
Speaker 3: We have the US and.
1:20
Speaker 2: Iran agreeing to resume negotiations again this Monday morning, after
1:26
Speaker 2: a weekend of hostilities flaring up again. We've got bank
1:29
Speaker 2: earnings kicking off in a couple of weeks on July fourteenth.
1:34
Speaker 2: Until then, earning season pretty much wrapped up, and we'll
1:37
Speaker 2: be kicking things off again in a few weeks here.
1:40
Speaker 2: Heavy jobs week This week in terms of economic data,
1:42
Speaker 2: we'll be getting the job openings, labor turnover surveyed, the
1:46
Speaker 2: jolt support, and then Thursday we'll be getting both the
1:49
Speaker 2: weekly jobless claims as well as the official employment report.
1:52
Speaker 2: And that official employment report is the one I want
1:54
Speaker 2: to focus on because we have seen a pretty robust
1:58
Speaker 2: turnaround so far. Are in terms of the labor market
2:02
Speaker 2: for twenty twenty six. In twenty twenty five, the US
2:06
Speaker 2: economy averaged fewer than fifty thousand jobs created every month.
2:12
Speaker 3: So overall, a pretty slow pace of hiring. And sorry, good,
2:17
Speaker 3: I'm sorry, what number did you use? Less than fifty thousands?
2:19
Speaker 2: Oh? It was like nine was it nine thousand on average? Okay, yeah,
2:22
Speaker 2: I didn't have it.
2:23
Speaker 4: Sorry, Sorry, I'm not correcting you. It's just a dramatic
2:26
Speaker 4: dramatically it slid from twenty There was a downward trend.
2:29
Speaker 3: Yeah, of course, we had but robust hiring.
2:32
Speaker 4: When the tariff stuff started freaking businesses out.
2:37
Speaker 3: Yeah, I think there was that.
2:38
Speaker 2: I think there is also the uncertainty about what AI
2:41
Speaker 2: does and what you should do in terms of hiring
2:43
Speaker 2: in the face of that.
2:44
Speaker 3: I think there's a combination of factors.
2:45
Speaker 1: Ye.
2:46
Speaker 4: And I'm not just being critical, well being critical of
2:48
Speaker 4: tariffs because I hate them, of course, but you saw
2:51
Speaker 4: it in March and business is said, we're freaked out.
2:54
Speaker 4: We don't know what we're gonna be able to, you know,
2:56
Speaker 4: we don't know what our margins is going to be.
2:57
Speaker 4: And hiring just now would have slowed anyway, if consistent
3:00
Speaker 4: with the treader any I'm sorry, Mike, I'm being like.
3:03
Speaker 2: In either case, it's picked back up now and for
3:06
Speaker 2: twenty twenty six, we're seeing a pace of hiring that
3:09
Speaker 2: you know, everyone believes is pretty well ahead of the
3:13
Speaker 2: break even rate.
3:13
Speaker 3: The break rate.
3:15
Speaker 2: Yeah, fourteen January through May and the June report, when
3:20
Speaker 2: we get it, is expected to show one hundred and
3:21
Speaker 2: eighteen thousand jobs created.
3:23
Speaker 4: Again, in any other era, we'd be saying, oh my god,
3:26
Speaker 4: the economy is in big trouble.
3:27
Speaker 2: But when you're already four point three percent unemployment, when
3:30
Speaker 2: you do not have a giant labor supply that's continuing
3:33
Speaker 2: to grow, this is actually assumed to maybe even bring
3:36
Speaker 2: the unemployment rate down a little bit with it.
3:38
Speaker 4: I mean, you know what situation you're in. Then you're
3:40
Speaker 4: in Japan. I mean they've got low unemployment, steady but
3:44
Speaker 4: tepid GDP growth. I mean you want a growing, ideally
3:48
Speaker 4: labor force, right, that also adds to potential uh GDP.
3:52
Speaker 3: So we will see what we get on Thursday of
3:54
Speaker 3: this week.
3:54
Speaker 2: Obviously concentrating not only on that job creation number, but
3:58
Speaker 2: the unemployment rate is what really matters, probably most to
4:01
Speaker 2: the Federal Reserve, combined with wage information that we will get, so,
4:04
Speaker 2: you know, big information coming out on Thursday of this week.
4:08
Speaker 2: I want to turn now to Anthropic and you know
4:12
Speaker 2: what happened over the weekend, specifically over in China. So Anthropic,
4:17
Speaker 2: the creator of Claude, as well as some of the
4:21
Speaker 2: latest models that are really on the cutting edge. They're
4:23
Speaker 2: also considering going public this year. A few weeks ago,
4:27
Speaker 2: around June twelfth, they released their kind of dumbed down version.
4:34
Speaker 3: Of Mythos to the general public. They call it Fable.
4:36
Speaker 2: They had a bunch of guardrails in there, because the
4:39
Speaker 2: concern from Anthropic and from government regulators is this AI
4:43
Speaker 2: tool is so powerful that it could be used to
4:46
Speaker 2: exploit vulnerabilities, vulnerabilities in cybersecurity networks. So think about hackers'
4:52
Speaker 2: abilities to hack into banks and other big institutions.
4:56
Speaker 3: And so the.
4:57
Speaker 2: Mythos model came out before that. We were covering at
5:00
Speaker 2: this spring that hey, this looked pretty serious. They released
5:02
Speaker 2: it to a small subset of institutions. Then they released
5:07
Speaker 2: this one. Immediately upon release, or pretty close upon release,
5:10
Speaker 2: the Trump administration stepped in basically shut down access. They
5:15
Speaker 2: didn't quite do so, but they basically they put in
5:17
Speaker 2: a rule saying Anthropic, we do not want you to
5:20
Speaker 2: release this to any foreign nationals. Anthropic then turn and said,
5:23
Speaker 2: we have no ability to do so, so we're pulling
5:25
Speaker 2: it entirely. At the time, Tucker, we talked about this
5:30
Speaker 2: on that day, and well, bring it up let's let's
5:35
Speaker 2: pull the clip of what we had to say about
5:38
Speaker 2: this shutdown.
5:41
Speaker 3: You can.
5:44
Speaker 2: You can bet that there are a bunch of research
5:47
Speaker 2: labs right now attempting to build tools using AI that
5:51
Speaker 2: are models that are trained to do similar things that
5:54
Speaker 2: Mythos can do. And so part of my concern has been, yeah,
5:56
Speaker 2: you better rush to patch this stuff because somebody else,
5:58
Speaker 2: even if they don't get Mythos, soon, somebody else is
6:01
Speaker 2: going to develop something that's ninety percent is good at
6:03
Speaker 2: detecting these issues and attacking them. Whether it's a Russian
6:07
Speaker 2: research lab, a Chinese research lab, you know, somebody that's
6:11
Speaker 2: less friendly to the United States is probably going to
6:13
Speaker 2: get their hands on something pretty compelling rather soon. And
6:17
Speaker 2: so it's this dangerous game of hey, do we release
6:20
Speaker 2: this do we not release it?
6:22
Speaker 3: So that was two weeks ago, June sixteenth.
6:25
Speaker 2: All right, Well, this morning Chinese AI systems were released
6:28
Speaker 2: that can now match US models and cybersecurity bug finding scenarios.
6:33
Speaker 2: Zipu's GLM five point two has ranked as one of
6:35
Speaker 2: the ten most used AI models according to data from
6:39
Speaker 2: open Router, and according to experts out there who have
6:42
Speaker 2: tested it, it can basically do everything that anthropics mythos
6:46
Speaker 2: can do.
6:46
Speaker 3: So.
6:47
Speaker 2: I did not think when I said that that I
6:49
Speaker 2: would be proven correct in the matter of two weeks.
6:51
Speaker 2: But this is what has been happening with all of
6:55
Speaker 2: these AI models is they are leapfrogging each other. And
6:58
Speaker 2: while China does AI a lot differently than the developers
7:03
Speaker 2: do here in the United States, some of it works
7:06
Speaker 2: rather to their advantage. So in the US, we very
7:09
Speaker 2: much are creating these closed door models that you need
7:14
Speaker 2: to subscribe to and the code is kind of kept secret.
7:18
Speaker 3: China is very much the opposite.
7:20
Speaker 2: There are these open source models that kind of build
7:22
Speaker 2: on each other, and there's a number of reasons that
7:25
Speaker 2: people theorize they do it that way in China. One
7:28
Speaker 2: would just be I think they accurately figured that if
7:32
Speaker 2: they're really private about how their models are operate, then
7:36
Speaker 2: nobody's going to want to use them because nobody trusts
7:38
Speaker 2: Chinese cybersecurity. Two would just be, Hey, we don't have
7:42
Speaker 2: all that much in the way of resources compared to
7:44
Speaker 2: the United States to develop this stuff, and so we
7:46
Speaker 2: need to be able to build on each other and
7:49
Speaker 2: move forward. But in a matter of two weeks, allegedly
7:52
Speaker 2: what you have here is a model out of China
7:55
Speaker 2: that is open source and available for use now that
7:58
Speaker 2: can seeming we do a lot of what anthropics Mythos
8:02
Speaker 2: could do, and the well, the question will be do
8:08
Speaker 2: they put any guardrails around it, because it doesn't seem
8:11
Speaker 2: like it. It's open source, it's already been downloaded all
8:13
Speaker 2: over the place. And how successful were those big institutions
8:18
Speaker 2: that had early access to Mythos at repairing their bugs
8:22
Speaker 2: and putting up guardrails against all of this.
8:26
Speaker 3: So partially I think this is really.
8:28
Speaker 2: Big news that the Chinese have come up with a
8:31
Speaker 2: model that will do pretty much what we deemed to
8:34
Speaker 2: be a massive security threat here in the United States
8:38
Speaker 2: and released it to the general public.
8:41
Speaker 3: Already. But part of it is just.
8:44
Speaker 2: Me honestly wanted to tutor on Horns for being exactly
8:47
Speaker 2: accurate two and a half weeks ago about what was
8:49
Speaker 2: going to happen. This is kind of what happens when
8:52
Speaker 2: you were at the cutting edge of some sort of
8:54
Speaker 2: new technology, and it wasn't just a coincidence that the
8:56
Speaker 2: Chinese invented something like this. I'm sure that they ripped
8:59
Speaker 2: off Ethos and Fable in some significant way to build this,
9:03
Speaker 2: but that is kind of how these breakthroughs happen. They
9:06
Speaker 2: tend to cluster together and leap frog each other. And
9:10
Speaker 2: now a big question as to whether or not US
9:14
Speaker 2: and global cybersecurity vulnerabilities are going to be exploited by
9:17
Speaker 2: this newest model.
9:19
Speaker 4: Yeah, if you can imagine it, I think you have
9:20
Speaker 4: to accept that it's inevitable. You know, if like this was,
9:25
Speaker 4: this was foreseeable, I think was your Yeah, your point.
9:27
Speaker 4: I'm not diminishing your insight of a couple of weeks ago,
9:31
Speaker 4: but this was this was, this was predictable.
9:33
Speaker 3: Of course, That's that's why we talked about it.
9:35
Speaker 2: And that was the downside to the US government banning
9:38
Speaker 2: this thing is you have to assume that some competitor
9:43
Speaker 2: is about to roll it out as quickly as possible.
9:46
Speaker 2: And so that's been the debate around the US strategy
9:49
Speaker 2: around AI generally is, Hey, we seem to have a
9:53
Speaker 2: head start in this race here against China, so let's
9:56
Speaker 2: try and slow them down by you know, export control
10:00
Speaker 2: around the lakes, chips and things like that. And it
10:02
Speaker 2: doesn't seem to be working terribly well.
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Speaker 4: If you're worried about AI for existential reasons like you're
10:07
Speaker 4: one of these philosophical types worried about the end of mankind,
10:10
Speaker 4: then you can only conclude that we're screwed because AI
10:13
Speaker 4: is that horse is out of the barn, and there
10:16
Speaker 4: are plenty of places where that horse can roam free
10:18
Speaker 4: if we choose to corral it in. Well, I'm way
10:21
Speaker 4: out of my depth with this analogy because I don't
10:23
Speaker 4: think I've ever seen a horse, But anyway, they look
10:26
Speaker 4: like beautiful animals on television, so I'm so anyway, I'm
10:30
Speaker 4: not going to continue with the metaphor because I don't
10:32
Speaker 4: know what I'm talking about, but it's going to happen.
10:35
Speaker 4: So whereas if your interest in AI is business, you
10:41
Speaker 4: want to should I buy Stock A or stock B,
10:44
Speaker 4: then you have to make guesses about the regulatory environment
10:47
Speaker 4: and what regime is in charge and what way the
10:49
Speaker 4: political winds are blowing either way, it's challenging.
10:54
Speaker 2: Y I think anybody trying to figure out who is
10:57
Speaker 2: going to be the cutting edge leader that gets market dominance,
11:01
Speaker 2: it's extraordinarily challenging to do right now, given how quickly
11:05
Speaker 2: everything is changing, And I think that's.
11:07
Speaker 3: Worth noting here.
11:08
Speaker 2: But this particular case concerns me given how severely the
11:14
Speaker 2: US government believed it was a cybersecurity risk to have
11:17
Speaker 2: this thing out there, and how rapidly the Chinese were
11:20
Speaker 2: able to mirror it and create something seemingly just as
11:24
Speaker 2: competitive and just as convincing at attacking vulnerabilities and opening
11:29
Speaker 2: them up. So, if you're already concerned about cybersecurity and
11:33
Speaker 2: access to your financial and personal information being out there
11:36
Speaker 2: on the web, this can be nothing but bad news
11:39
Speaker 2: for the future of it. Let's say quick break when
11:41
Speaker 2: we come back, playing a little bit of trivia here
11:43
Speaker 2: next on the Financial Exchange.
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13:51
Speaker 2: According to the Bureau of Labor Statistics, the work from
13:54
Speaker 2: home phenomenon hit a peak back in twenty twenty two
13:59
Speaker 2: after the pandemic, where some one in three employees said
14:04
Speaker 2: that they were doing some or all of their work
14:07
Speaker 2: from home, and since twenty twenty two hasn't really changed much.
14:11
Speaker 2: We are sitting here still at thirty five percent of
14:13
Speaker 2: all employees, forty seven percent of folks with a bachelor's degree,
14:17
Speaker 2: and fifty seven percent of those with an advanced degree
14:20
Speaker 2: say that they do some or all of their work
14:22
Speaker 2: from home on a typical basis, and that number was
14:26
Speaker 2: only twenty four percent prior to the pandemic. So a
14:30
Speaker 2: few things about this that surprised me. One, the fact
14:33
Speaker 2: that you know, some close to sixty percent of people
14:36
Speaker 2: with advanced degrees are doing some of their work from home.
14:39
Speaker 3: Is a pretty high number.
14:40
Speaker 2: Two, I didn't realize that one in four workers were
14:44
Speaker 2: already doing work from home.
14:46
Speaker 3: Prior to the pandemic.
14:47
Speaker 4: Sounds about right.
14:48
Speaker 3: That seemed high to me.
14:49
Speaker 2: When I didn't realize that, I guess going into this,
14:51
Speaker 2: and so an increase up to thirty five percent in
14:54
Speaker 2: that context is not all that surprising to me. But
14:59
Speaker 2: it is telling to me that, hey, you know, in
15:01
Speaker 2: spite of these big headlines we've covered from JP Morgan
15:04
Speaker 2: in Fidelity and all these others, of calling all their
15:07
Speaker 2: employees back into the office hasn't really moved the needle
15:11
Speaker 2: much at all.
15:12
Speaker 4: If you're in experience, it's highly detrimental.
15:14
Speaker 3: Yeah, let's talk about let's talk about that. I was
15:16
Speaker 3: gonna give a couple of.
15:17
Speaker 4: But yeah, I do you generously let me work half
15:21
Speaker 4: my time from home so I'm older, more experienced, I'm
15:26
Speaker 4: a I'm a sole contributor. You can tell I'm not
15:29
Speaker 4: totally comfortable with it, and I'm not sure where the
15:31
Speaker 4: situation reversed. I would be as generous as you are,
15:34
Speaker 4: but you have to I would take into account. I guess,
15:36
Speaker 4: does anyone answer to them? If I had a staff,
15:38
Speaker 4: that would be unacceptable. What do they do during the day?
15:41
Speaker 4: Do they need to be on call like the investment
15:43
Speaker 4: person is in People want to go in the office
15:44
Speaker 4: and chit chat. People here on the move, so there, And.
15:49
Speaker 3: It depends on the structure.
15:51
Speaker 4: It depends on Yeah, and did did I give the
15:52
Speaker 4: guy an office? And is he never in it? Well,
15:54
Speaker 4: that's a waste of my money. So there are a
15:56
Speaker 4: few different considerations I think, but I think categorically for
16:02
Speaker 4: younger people, it's not good for them, it's not good
16:05
Speaker 4: for the people paying them. Yeah, my two cents, And
16:07
Speaker 4: I think research is.
16:08
Speaker 3: I'm becoming more and more with you on that. And
16:11
Speaker 3: you know, it's tough when you're in your.
16:14
Speaker 2: Forties, fifties, or sixties to kind of put yourself back
16:18
Speaker 2: into that twenty two year old mentality. But I'm just
16:21
Speaker 2: I'm remembering what it was like as a twenty one
16:24
Speaker 2: or twenty two year old working for a major organization,
16:28
Speaker 2: not really knowing what you're doing. Let's be honest, He's
16:31
Speaker 2: a twenty two year old in a new company. You
16:33
Speaker 2: have no idea what your job is and interact you
16:36
Speaker 2: don't know how to interact with people that are in
16:38
Speaker 2: many cases twice your age, and being asked to do
16:42
Speaker 2: all of that via a slack channel. I'm trying to
16:46
Speaker 2: think of. They brought up a really interesting point here,
16:49
Speaker 2: which is, like imagine, I think every twenty two year
16:53
Speaker 2: old in their job has had this conversation where they
16:55
Speaker 2: go to a co worker and say, I don't understand
16:58
Speaker 2: what it is that I'm doing. I don't understand why
17:00
Speaker 2: I'm doing it, how to do it, or what my
17:02
Speaker 2: boss just asked me.
17:03
Speaker 3: Can you help me?
17:04
Speaker 2: And in a good organization, that person will give you
17:06
Speaker 2: some help. Imagine now writing that into a Slack channel
17:11
Speaker 2: and having to type it out. That is a very
17:15
Speaker 2: different experience. Right in the back of my mind, what
17:18
Speaker 2: I'm thinking, if I have to type that out is crap,
17:21
Speaker 2: I'm gonna get fired. I just put in writing that
17:24
Speaker 2: I have no idea what my job is and how
17:25
Speaker 2: to do it. That is a very different experience from
17:28
Speaker 2: going to somebody's desk and saying, hey, you've done this
17:30
Speaker 2: for years.
17:30
Speaker 3: I'm a little bit confused about this project.
17:32
Speaker 2: Can you explain to me what's going on how I
17:34
Speaker 2: go about doing it? And so I think more and
17:37
Speaker 2: more organizations are realizing that, and ultimately organizations are built
17:41
Speaker 2: up with people of all different experience types, and they're
17:44
Speaker 2: realizing that, Hey, for these twenty two year olds that
17:46
Speaker 2: we're trying to turn into our leadership ten years from now,
17:52
Speaker 2: they are not getting what they need out of remote work.
17:55
Speaker 3: In most cases now.
17:56
Speaker 4: For a leadership role, you're a psychologist as much as
17:59
Speaker 4: a business person. You're managing personalities, under pressure. The only
18:04
Speaker 4: way to acquire that skill or to hone it. If
18:06
Speaker 4: you have it, and some people are born with it,
18:09
Speaker 4: others acquire it. I think they learn it is to practice.
18:14
Speaker 4: So you'd never put someone on a management track. You've
18:16
Speaker 4: never allowed them to work remotely. That would be folly.
18:21
Speaker 2: But other positions, I think a lot of them are
18:23
Speaker 2: you know, whether they think is right or wrong.
18:25
Speaker 3: I think I think that is happening pretty frequently. Well, yeah,
18:28
Speaker 3: I'm just saying it shouldn't.
18:30
Speaker 4: Maybe, Okay, if you're managing a bunch of coders and
18:32
Speaker 4: your job is primarily reviewing the quality of code, then
18:35
Speaker 4: maybe it doesn't matter.
18:36
Speaker 2: The other problem with these organizations that I have seen now,
18:40
Speaker 2: and you know, my wife works for an organization that
18:43
Speaker 2: was pretty heavily remote through most of the pandemic and
18:45
Speaker 2: then slowly brought back in person. The point that she's
18:48
Speaker 2: made to me is the company made organizational structural changes
18:52
Speaker 2: during the pandemic.
18:53
Speaker 3: You know, they said, hey, we.
18:54
Speaker 2: Can go hire that person in California, that one in
18:57
Speaker 2: North Carolina, and that one up in Boston, and they're
19:00
Speaker 2: all going to be part of the same team. And
19:02
Speaker 2: now you're bringing them all back to the office, but
19:03
Speaker 2: they all work in different locations, and so you're not
19:06
Speaker 2: actually getting that critical cohesion that you otherwise would from
19:12
Speaker 2: a co late located team. So it's going to be
19:15
Speaker 2: about more than just bringing those people back to the office,
19:17
Speaker 2: which many organizations have started to, but it's much more
19:21
Speaker 2: complicated than that when you look at the new structure,
19:23
Speaker 2: especially a big companies, than just come back to the office,
19:27
Speaker 2: We're going to take a quick break when we come back.
19:29
Speaker 2: Full Market Recap is next with Wall.
19:31
Speaker 4: Street Watch right.
19:38
Speaker 1: Bringing the latest financial news straight to your radio. Every day.
19:43
Speaker 1: It's the Financial Exchange on the Financial Exchange Radio Network,
19:48
Speaker 1: t out full whoa Street Watch treking the stocks, the data,
19:52
Speaker 1: and the headlines driving markets so far today right here
19:55
Speaker 1: on the Financial Exchange Radio Network.
19:58
Speaker 5: Markets are rallying to begin the shortened holiday trading week
20:02
Speaker 5: after the US and around agreed to halt days of
20:05
Speaker 5: fighting over the straight of four moves. Investors also looking
20:08
Speaker 5: ahead to the June jobs report on Thursday morning. Right now,
20:12
Speaker 5: the Dow is up just over four tenths of a percent,
20:15
Speaker 5: SMP five hundred up about three quarters of a percent,
20:18
Speaker 5: Nasdaq up one point three percent, Russell two thousand down
20:22
Speaker 5: about one percent tenor Treasureel this flight at four point
20:27
Speaker 5: three seven percent. In oil up nearly two percent higher,
20:31
Speaker 5: trading at seventy dollars a barrel. Some major media news
20:35
Speaker 5: this morning after Comcast said it plans to separate its
20:38
Speaker 5: media in Connectivity business into two publicly traded companies, spinning
20:43
Speaker 5: off NBC Universal and Sky. Comcast shares are up over
20:48
Speaker 5: six percent on that news. Meanwhile, Rocket Lab agreed to
20:51
Speaker 5: buy Iridium and a cash and stock deal that would
20:54
Speaker 5: give a control over a satellite fleet and access to
20:57
Speaker 5: wireless resources it could use to compete with SpaceX. Rocket
21:02
Speaker 5: Lap stock is up by eight percent, while i Ridium
21:04
Speaker 5: shares are surging by twenty two percent. Elsewhere, Charter Communications
21:09
Speaker 5: is seeing its stock jump eleven percent after Bloomberg reported
21:12
Speaker 5: on Friday that the company and SpaceX held exclusive talks
21:17
Speaker 5: on a consumer phone product. In Verizon said it projected
21:21
Speaker 5: second quarter losses of between seven hundred and eight hundred
21:25
Speaker 5: million dollars. Verizon shairs are sinking about seven percent. I'm
21:31
Speaker 5: Tucker Silvan. That is Wall Street Watch. In the previous segment,
21:34
Speaker 5: we asked you the trivia question, how many years was
21:36
Speaker 5: Bernie madeoff sentence too. That would be one hundred and
21:40
Speaker 5: fifty years. Tim from Stone of Masses our winner today
21:43
Speaker 5: taking home the Financial Exchange Show t shirt. Congrats to Tim,
21:47
Speaker 5: and we play trivia every day here on the Financial
21:49
Speaker 5: Exchange See complete contest rules at Financial Exchange Show dot com.
21:55
Speaker 2: While Street Journal has a piece on the high stakes
21:57
Speaker 2: effort to repair the American retirements system, they point to
22:01
Speaker 2: a few things that are in disrepair. The most important
22:04
Speaker 2: that I can point out would be our retiree health
22:08
Speaker 2: insurance system and our Social Security system, not because the
22:11
Speaker 2: programs themselves don't work today, but because they are both
22:15
Speaker 2: running out of money in the.
22:17
Speaker 3: Very foreseeable future.
22:18
Speaker 2: And they try and highlight a few areas where lawmakers
22:22
Speaker 2: are paying attention and doing something about it.
22:24
Speaker 3: And it's not to poo pooh on.
22:29
Speaker 2: The efforts of people who are actually paying attention to
22:32
Speaker 2: the American retirement system. I agree that there have been
22:35
Speaker 2: reforms put into place over the last few years that
22:37
Speaker 2: have attempted to shore some things up. I think the
22:41
Speaker 2: idea of universal access to retirement plans and automatic enrollment
22:46
Speaker 2: automatic increases are all areas that basically lawmakers have not
22:51
Speaker 2: pushed companies to do, but have provided some lawsuit protection
22:57
Speaker 2: from being able to do it right, like, hey, you
23:00
Speaker 2: just set somebody up with a retirement plan and put
23:02
Speaker 2: them into a specific.
23:04
Speaker 3: Type of fund, We're going to make it.
23:05
Speaker 2: So it's pretty difficult to be sued for doing what
23:08
Speaker 2: you think is in the person's best interest. So I
23:11
Speaker 2: think those have been good pieces around the edges, But
23:14
Speaker 2: I have to say that I don't really see policymakers
23:17
Speaker 2: paying attention to the two trains coming down the track
23:22
Speaker 2: at US, which are the insolvency of Medicare and Social Security,
23:25
Speaker 2: And nothing that you can do around the edges on
23:29
Speaker 2: retiree self enrollment and retirement plans could possibly do anything
23:33
Speaker 2: to dent the problems that would be front and center
23:36
Speaker 2: if those two programs actually have to face cuts.
23:39
Speaker 4: Since the people of this country in the thirties and
23:41
Speaker 4: again in the sixties decided its government's business to make
23:45
Speaker 4: everybody prepared for retirement and enjoy a certain standard of living,
23:51
Speaker 4: not necessarily a comfortable one, some bare minimum in retirement,
23:55
Speaker 4: I guess we have to deal with this problem. But
23:57
Speaker 4: the wild eyed libertarian in me says, why is this
23:59
Speaker 4: every bodies problem? If government would forget can I can
24:03
Speaker 4: I be can I rant?
24:03
Speaker 3: Can I get because we've getten we get texts about this.
24:07
Speaker 4: Everybody's going to hate this rant, the big government, Republicans
24:10
Speaker 4: of today and Democrats, they're all gonna hate it. So
24:12
Speaker 4: this is this is I think balanced. Why is it
24:15
Speaker 4: my responsibility to make sure anybody else is prepared for retirement?
24:18
Speaker 4: If government would cut damn spending, it would reduce the deficit,
24:22
Speaker 4: presumably lower interest rates. It would also allow me to
24:24
Speaker 4: keep more of what I earn and say more for retirement.
24:27
Speaker 4: I'm not going to finish that sentence with problem solved,
24:30
Speaker 4: but I'm very tempted to that government has directed politicians
24:34
Speaker 4: have direct control over those two things. They're not particularly
24:37
Speaker 4: good at those two things. Why in the world they
24:39
Speaker 4: would think they're well equipped to solve a retirement crisis.
24:42
Speaker 4: This is not a constructive comment, by the way, because
24:44
Speaker 4: we're knee deep in the New Deal and in the
24:47
Speaker 4: Great Societies, these programs that progressive politicians have shackled us
24:52
Speaker 4: with to make us all our brother's keeper over the decades.
24:55
Speaker 4: Uh so, I guess we're we're in it knee deep
24:58
Speaker 4: and it's too late. But imagine if government just focused
25:00
Speaker 4: on simple things like spending discipline and reducing the debt
25:04
Speaker 4: and therefore, uh, presumably interest rates. Imagine that.
25:08
Speaker 2: Yeah, I mean social security does solve a problem that
25:14
Speaker 2: markets can solve for themselves.
25:16
Speaker 4: Well, I don't know, but look, I understand risk sharing.
25:17
Speaker 4: They would say, well, but like the pool is, so
25:19
Speaker 4: there's there's there's an economic argument for it. So I'm
25:21
Speaker 4: arguing from the heart here. Sure, not necessarily the head,
25:24
Speaker 4: but risk sharing and spreading out risks over a big
25:27
Speaker 4: pool is there's a strong economic argument for.
25:32
Speaker 3: It, except when you don't appropriately fund said pool.
25:34
Speaker 4: And yeah, even that they screwed up. It's it's almost
25:37
Speaker 4: like a free lunch because the risks all offset each other.
25:40
Speaker 4: It's like what you do in your portfolio. You pick
25:42
Speaker 4: uncorrelated things to build an investment, a durable investment portfolio.
25:47
Speaker 4: In theory, you do the same thing with an insurance pool.
25:49
Speaker 2: And you know, medicare as an example. Like you, I
25:53
Speaker 2: like that we're arguing the merits of these different programs.
25:56
Speaker 2: But I can see the point here because no insurance
25:59
Speaker 2: company is going to up to say, yeah, I would
26:01
Speaker 2: love to provide health insurance to people over the age
26:04
Speaker 2: of sixty five. There's going to be a market problem there, right,
26:07
Speaker 2: No no insurer is going to raise their hands and say.
26:10
Speaker 4: Or somebody with a pre existing can happy to.
26:12
Speaker 2: Do so, which you know a lot of sixty five
26:14
Speaker 2: year olds are going to have. So I recognize the
26:17
Speaker 2: purpose of these programs, but we have willfully underfunded them.
26:20
Speaker 2: And anybody reporting that lawmakers are starting to pay attention.
26:24
Speaker 3: To it, I gotta say, I don't see any evidence.
26:27
Speaker 2: I see very zero, very little evidence that anyone is
26:30
Speaker 2: genuinely paying attention to these things. And I think, well,
26:34
Speaker 2: I know what's going to happen.
26:35
Speaker 3: We're going to.
26:36
Speaker 2: Kick the can all the way down the road to
26:38
Speaker 2: twenty thirty two when benefits are about to be cut,
26:41
Speaker 2: and we'll yeah, solution then.
26:44
Speaker 4: But that's why I've sort of had it. They're not
26:46
Speaker 4: serious about it. They don't deserve, they don't deserve to
26:49
Speaker 4: be entrusted with responsibility of managing my retirement. So screw it.
26:53
Speaker 4: Let me keep more of what shut it down. I'll
26:55
Speaker 4: worry about it because you guys stink at man. You
26:58
Speaker 4: don't even take it seriously. They're debating trivia, and there's
27:02
Speaker 4: this train wreck, perfectly predictable train wreck that we're headed toward.
27:07
Speaker 4: So the heck with it. If they don't want to
27:09
Speaker 4: be in the business of managing these programs responsibly, Let's
27:12
Speaker 4: devolve authority back to people where it belongs and from
27:16
Speaker 4: which it originated.
27:17
Speaker 3: Where does the rubber hit the road?
27:18
Speaker 4: Now?
27:18
Speaker 2: I've put my personal opinion out there several times, which is,
27:22
Speaker 2: I don't believe that folks that are within ten years
27:25
Speaker 2: of Social Security benefits being received are going to see
27:28
Speaker 2: any degree of cut to their predicted benefits.
27:30
Speaker 3: I just don't believe it.
27:32
Speaker 2: We don't have much of a history of raising taxes
27:35
Speaker 2: and cutting benefits.
27:37
Speaker 3: Generally speaking, we have a pretty good isha.
27:39
Speaker 4: We've also had a very cooperative economic climate. Forgive me
27:42
Speaker 4: for a button in Yeah, I mean, what if interest
27:44
Speaker 4: rates spike, inflation stage are four percent. We've never been
27:47
Speaker 4: in the situation we're in today with respect to no
27:49
Speaker 4: fiscal room, huge deficits in debt inflation on the precipice
27:53
Speaker 4: of breaking out again. So a monetary fed balance sheet
27:57
Speaker 4: is whale size.
27:59
Speaker 3: My point would be on the margins.
28:00
Speaker 2: I feel comfortable with that prediction, but I'm not sure
28:03
Speaker 2: I'd be willing to bet my retirement on it. What
28:05
Speaker 2: and so know before you go about betting your retirement
28:10
Speaker 2: on the viability of Social Security and Medicare, you might
28:14
Speaker 2: consider testing out what happens if they do have to
28:17
Speaker 2: cut those benefits, or they do have to raise your taxes,
28:20
Speaker 2: or if the other scenario that just got talked about
28:22
Speaker 2: inflation starts ripping higher than was otherwise experienced over the
28:26
Speaker 2: last three decades. Because I can assure you, as somebody
28:29
Speaker 2: who makes it their living of looking at people's retirement
28:32
Speaker 2: plans that they've put into place, very few of them
28:34
Speaker 2: actually stress test these potential scenarios of markets not doing
28:40
Speaker 2: as well as they have for the last thirty years,
28:41
Speaker 2: or inflation being a lot worse, or soci Security getting
28:44
Speaker 2: cut or Medicare being removed. And so if you are
28:47
Speaker 2: heading into that ten years towards retirement and thinking about
28:51
Speaker 2: how to structure your financial future, let Armstrong Advisory Group
28:55
Speaker 2: help you put some degree of formula around this and
29:01
Speaker 2: test out your scenario. You can call us at eight
29:04
Speaker 2: hundred three nine three four zero zero one. You can
29:07
Speaker 2: go to Armstrong Advisory dot com and learn a bit more.
29:10
Speaker 2: But again, don't put your financial future at risk by
29:15
Speaker 2: just sticking your head in the sand. When we are
29:17
Speaker 2: literally you know cretoring towards some big, big issues in
29:20
Speaker 2: the near future when it comes to social security and
29:23
Speaker 2: medicare eight hundred three nine three for zero zero one
29:26
Speaker 2: or Armstrong Advisory dot Com.
29:28
Speaker 1: The proceeding was paid for by Armstrong Advisory Group, a
29:30
Speaker 1: registered investment advisor. Nothing in the ad or in any
29:33
Speaker 1: Armstrong guide a specific financial, legal, or tax advice. Consult
29:36
Speaker 1: your own financial tax into state planning advisors before making
29:39
Speaker 1: any investment decisions. Armstrong may contact you to offer investment
29:42
Speaker 1: advisory services.
29:43
Speaker 2: We're going to take quick break. Markets have taken a
29:45
Speaker 2: strong turn upwards. We'll have a full recap and a
29:48
Speaker 2: little bit of stack roulette next on the Financial Exchange.
29:51
Speaker 1: Breaking business and financial news first throughout the day only
29:55
Speaker 1: here on the Financial Exchange Radio Network.
30:04
Speaker 3: You'd have to.
30:04
Speaker 2: Ticket time for a bit of stack eru Lette here
30:11
Speaker 2: and if you missed it during Wall Street Watch, Comcast
30:14
Speaker 2: is talking about splitting off into a couple of different
30:16
Speaker 2: companies their Media NBC universal entity.
30:20
Speaker 3: I guess Sky is.
30:21
Speaker 2: In there too, but no one in America knows what
30:23
Speaker 2: Sky is, so we'll ignore that for a minute. And
30:26
Speaker 2: then the the traditional Comcast business of selling cable bundles
30:30
Speaker 2: and Internet to I.
30:32
Speaker 3: Don't know if I have them in my home. Actually
30:34
Speaker 3: I think I might have a rise.
30:35
Speaker 2: Nonetheless, they're talking about separating the two entities, which I
30:39
Speaker 2: don't know how long have even been the same entity.
30:42
Speaker 2: But this is the This is the uh, the bread
30:45
Speaker 2: and butter of nbas who go in and advise companies
30:48
Speaker 2: to split up and combine each other over and over
30:51
Speaker 2: again for big fees that they get to collect. Interestingly, though,
30:57
Speaker 2: it does create a standalone media company, and I think that,
31:00
Speaker 2: more than anything else, is probably the big push behind this,
31:03
Speaker 2: because whether you like the prices or not, there's been
31:07
Speaker 2: a lot of transaction volume for traditional media companies over
31:11
Speaker 2: the course of the last few years, right with between
31:13
Speaker 2: the Paramount stuff, the HBO Max stuff, everything here that
31:16
Speaker 2: we've been covering, you know, even go back further right
31:19
Speaker 2: first twentieth century Fox sold off to Disney a few
31:22
Speaker 2: years back, and so I'm guessing that they are rightly
31:25
Speaker 2: identifying that, hey, a core entertainment only business could be
31:33
Speaker 2: worth a whole lot more than attaching this boring almost
31:37
Speaker 2: utility like internet and cable business to it. But we
31:42
Speaker 2: will say, I'm guessing the goal is consolidation and the
31:44
Speaker 2: stocks moving up today on the idea because it's up
31:47
Speaker 2: about six and three quarters of percent. It was up,
31:50
Speaker 2: by the way, about twenty percent when I looked at
31:52
Speaker 2: this in early pre market trading, which doesn't signify anything,
31:56
Speaker 2: but investors clamoring here that hey, maybe there could be
31:59
Speaker 2: something positive to come through a breakup of these two entities.
32:04
Speaker 4: Yeah. I imagine it's just easier to plug into the
32:06
Speaker 4: acquirer's portfolio right just buying content, and they probably make
32:10
Speaker 4: it in the same studio or right next door to
32:12
Speaker 4: wherever you're doing your stuff.
32:14
Speaker 3: I would think so.
32:15
Speaker 2: And so when I think about all the bidding wars,
32:18
Speaker 2: what was the bidding wars between Netflix and Paramount?
32:22
Speaker 3: Yes, for Warner Brothers, Is that right?
32:24
Speaker 1: Correct?
32:25
Speaker 3: Yeah?
32:25
Speaker 2: So, I mean NBC Universal is at much bigger entity,
32:29
Speaker 2: but certainly you know, could be part of a portfolio
32:34
Speaker 2: for somebody else, or maybe they want to go acquire
32:35
Speaker 2: So we will see where that goes. But big changes
32:38
Speaker 2: coming to Comcast, NBC Universal and then entire entity here
32:42
Speaker 2: over the course the next year or so.
32:44
Speaker 3: What do you have for us? Mark?
32:45
Speaker 4: Supreme Court made a couple of rulings today with economic implications.
32:49
Speaker 4: I think foremost among them was ruling that the president
32:52
Speaker 4: could not remove a FED governor on some flimsy pretext
32:56
Speaker 4: as he tried to do. The most important thing I
33:00
Speaker 4: think coming out of this ruling is that the Court
33:03
Speaker 4: held that the court are pined. I don't know held
33:07
Speaker 4: is the right word, although it isn't. The ruling that
33:09
Speaker 4: the FED is different than say, the Federal The Federal Reserve,
33:13
Speaker 4: the entity that controls the supply of money and therefore
33:16
Speaker 4: interest rates and therefore long term inflation, is different from
33:20
Speaker 4: other entities. The standard a president has to meet before
33:25
Speaker 4: removing a FED governor is higher than elsewhere. Specifically, the
33:30
Speaker 4: Court said, the Federal Reserve operates at a deliberate remove
33:34
Speaker 4: from the ordinary political process. It's different. The Court acknowledges this.
33:39
Speaker 4: They talk about the inclusion of a budget. For example,
33:43
Speaker 4: they say the Fed's budget is independent of congressional control.
33:47
Speaker 4: They raise their own money, they pay their own bills.
33:50
Speaker 4: There are private sector representatives involved in FED decision making,
33:54
Speaker 4: the heads of the various the presidents of the various banks,
33:57
Speaker 4: which are picked by private center sector entity. The Court
34:01
Speaker 4: also acknowledges, and they didn't have to go this far,
34:03
Speaker 4: that the appearance of independence is as important as independence
34:07
Speaker 4: in fact, and key to the Federal Reserve's design. This
34:10
Speaker 4: is a huge win for monetary policy credibility and for
34:14
Speaker 4: the Fed's ability to, when necessary, tamp down on inflation.
34:20
Speaker 3: Yeah, it seems to be.
34:23
Speaker 2: And the FED has pretty consistently over the last couple
34:27
Speaker 2: of years supported the independence there and kind of backstopped things.
34:31
Speaker 3: But it's I guess the point that I would make
34:33
Speaker 3: is it has been close.
34:35
Speaker 4: Yeah, this decision was not unanimous.
34:36
Speaker 3: It was not.
34:37
Speaker 2: It was a five to four vote. I was fairly close.
34:40
Speaker 2: And we will see where things go next. Because obviously
34:44
Speaker 2: Lisa Cook still might be removed if courts agree with
34:49
Speaker 2: the White House that yes, she needs to be, So
34:51
Speaker 2: we shall see.
34:52
Speaker 4: Not a lawyer, obviously, never mind a constitutional lawyer, but
34:55
Speaker 4: it would seem to me that Congress needs to tighten
34:57
Speaker 4: up the statute that Congress has the power to control
35:00
Speaker 4: the money supply. Anybody who can read the Constitution can
35:02
Speaker 4: read that coin and coin and printing, coining and printing
35:05
Speaker 4: as Congress's responsibility. They created the FED, they left some
35:10
Speaker 4: ends loose, some things open ended, and a politician who
35:14
Speaker 4: wants to accumulate more power will exploit those ambiguities. Congress
35:19
Speaker 4: needs to we need a new Federal Reserve Act, probably
35:21
Speaker 4: an amendment to it. I should say that makes it
35:24
Speaker 4: very clear that the chief executive who wants to control everything,
35:28
Speaker 4: including the money supply, can't just fire a fed governor
35:31
Speaker 4: on some cooked up pretext.
35:33
Speaker 2: So I have every fact in Congress will step up
35:36
Speaker 2: to the.
35:38
Speaker 3: Get that done.
35:40
Speaker 2: I want to talk about tiny trucks. Have you guys
35:43
Speaker 2: seen k trucks around k Ei?
35:46
Speaker 3: Do you know what I'm talking?
35:46
Speaker 2: Yeah? Yeah, These these tiny new little trucks that I've
35:50
Speaker 2: been seeing driving all over the place. They're starting to
35:52
Speaker 2: get imported now from Japan because they can be classified
35:56
Speaker 2: as an antique vehicle there. You know, they can go
35:59
Speaker 2: get them that are a twenty years old and you
36:01
Speaker 2: can skirt some import rules when it comes to importing
36:05
Speaker 2: cars into the US because of that, and I keep
36:08
Speaker 2: seeing them all over the place. It also times out
36:10
Speaker 2: pretty well with this new proposed I think it's an
36:14
Speaker 2: electric truck.
36:16
Speaker 3: Is it not the Slate truck or.
36:17
Speaker 1: Is it electric?
36:19
Speaker 2: So Slate is coming out with this new all electric
36:22
Speaker 2: twenty five thousand dollars pickup trucks quite small. But when
36:28
Speaker 2: we talk about a twenty five thousand dollars price tag.
36:31
Speaker 2: It's important to recognize how they do that, which is
36:34
Speaker 2: by not putting in a radio, not putting in power.
36:38
Speaker 3: Windows, no cruise control.
36:40
Speaker 2: They've stripped everything out of this vehicle in order to
36:43
Speaker 2: get it to that price tag. And I have just
36:47
Speaker 2: a lot of questions as to whether or not there's
36:49
Speaker 2: a market for that right now in the United States,
36:52
Speaker 2: Like if you cannot sell.
36:56
Speaker 5: For in general, the small pickup.
36:58
Speaker 2: Yeah, I just specific this specific one, I guess, because
37:02
Speaker 2: this is the only real one that I can point
37:04
Speaker 2: to as being pushed right now. When I look at
37:07
Speaker 2: American car buying habits, we seem to be getting pricier
37:10
Speaker 2: and pricier. And so the idea that we're going to
37:13
Speaker 2: go for this very stripped down vehicle with.
37:17
Speaker 3: You know, no bells and whistles attached to it.
37:19
Speaker 2: I know you can add all those, you can customize
37:21
Speaker 2: everything with this thing and jack the price up. But
37:24
Speaker 2: there's a reason that automakers stopped selling affordable sedans in
37:29
Speaker 2: this country, and it is because they couldn't make any
37:31
Speaker 2: money on.
37:31
Speaker 4: Yeah, it depends on how many they need to sell
37:33
Speaker 4: to cover their fixed costs. Then they hope people add
37:35
Speaker 4: stuff on, like I don't know, seat belts later on.
37:38
Speaker 3: They have seat belts.
37:39
Speaker 2: They're the head ones that they came out against they
37:41
Speaker 2: had nineteen forties. Yeah, market's still in positive territory. The
37:45
Speaker 2: NASDAK up three hundred and forty points of one and
37:48
Speaker 2: a third percent, the SMP closing in on eight tenths
37:50
Speaker 2: percent of the now Jones Industrial Average up about half
37:53
Speaker 2: a percent.
37:54
Speaker 3: As we close out the program today.
37:56
Speaker 2: We'll be back tomorrow with a Joltz Report and a
37:58
Speaker 2: whole lot more as we continue our.
38:01
Speaker 3: July fourth week coverage. Have a great rest of your day, everybody.
38:04
Speaker 3: We'll be back then.