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Markets Surge on Iran Pause — But Will the Ships Move? · The Financial Exchange Show

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Speaker 2: Chuck, Mike and Tucker with you as we kick things off.
1:16
Speaker 2: And I gotta tell you, it's been an eventful forty
1:19
Speaker 2: eight hours here. On Saturday night, President Trump had put
1:23
Speaker 2: out a post indicating that the United States was going
1:26
Speaker 2: to attack power plants throughout Iran by Monday night, if
1:32
Speaker 2: Iran had not opened the Strait of hor Moves This
1:35
Speaker 2: morning at seven am, the President indicated that there had
1:40
Speaker 2: been satisfactory progress in some negotiations to potentially end the conflict,
1:46
Speaker 2: and so those plans to bomb the power plants were
1:51
Speaker 2: off for a five day period to allow negotiations to continue.
1:56
Speaker 2: Did not make a mention of, you know, halting any
1:58
Speaker 2: other actions that are currently going on, and I've seen
2:02
Speaker 2: a confirmed video of additional strikes taking place in the
2:05
Speaker 2: region this morning. About twenty minutes later, the Iranian Foreign
2:10
Speaker 2: Ministry says, hey, we're not talking with anyone. They said
2:15
Speaker 2: more words as well, but basically no, like, we haven't
2:18
Speaker 2: talked to anyone. And so as it sits right now,
2:22
Speaker 2: we're basically in a situation where it's unclear exactly what
2:26
Speaker 2: is going on. There's probably some level of communication happening
2:29
Speaker 2: behind the scenes. But things that you do have to
2:31
Speaker 2: remember the Iranian political leadership, a lot of it's dead,
2:36
Speaker 2: first of all, so it's unclear who's actually in charge,
2:39
Speaker 2: if anyone is fully in charge in Iran.
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Speaker 3: Which is partly by design.
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Speaker 2: Well, no, normally you have someone who's in charge, but
2:48
Speaker 2: right now it's unclear that there is.
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Speaker 3: Anyone that's in charge.
2:52
Speaker 2: It's not clear that anyone who's alive actually has the
2:54
Speaker 2: ability to negotiate on behalf of the Iranian state.
2:58
Speaker 3: Yea.
2:59
Speaker 4: What is by design line is the ability for the
3:01
Speaker 4: Iranian military to continue operating without that person seemingly yes.
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Speaker 2: It's also unclear if the President's been reported that the
3:09
Speaker 2: president is us negotiating with the leader of the Iranian Parliament.
3:13
Speaker 2: It's unclear that the Iranian Republican Guard is going to
3:16
Speaker 2: listen to the Iranian Parliament. There's not necessarily like a
3:21
Speaker 2: straight line in terms of how things work, as Mike mentioned,
3:24
Speaker 2: so basically no one really knows anything. But markets are
3:27
Speaker 2: rallying on this news, which is again good news for
3:30
Speaker 2: markets in the short term here, but ultimately this is
3:34
Speaker 2: going to be about one thing and one thing only
3:37
Speaker 2: when it comes to the economy and markets. When do
3:41
Speaker 2: ships start moving through Hormus in large numbers?
3:45
Speaker 3: Yep.
3:47
Speaker 2: To date you have anywhere from like one to three
3:50
Speaker 2: ships a day that now we're passing by under cover
3:54
Speaker 2: of basically like Iranian protection, very close to the Iranian shores.
3:59
Speaker 2: But remember prior to this, you had you know, fifty
4:02
Speaker 2: sixty boats a day going in either direction, and that's
4:04
Speaker 2: just not what you have right now.
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Speaker 4: Iranian protection is a strange way to describe it. I
4:08
Speaker 4: guess it's Iranian identification. Yeah, is how all the identification
4:12
Speaker 4: and lack of you know, tossing missiles and and drones
4:16
Speaker 4: at you.
4:17
Speaker 2: Yeah, basically like they're not shooting at the ones that
4:20
Speaker 2: they've agreed to let pass. But it's a small number.
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Speaker 4: Yeah, it's hard for me to The corollary would be,
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Speaker 4: you know, me pointing a gun at you and not
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Speaker 4: firing and saying I'm protecting you.
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Speaker 2: So yeah, I mean, yeah, it's it's kind of mobby,
4:35
Speaker 2: you know, like it's you know, like it's it's what
4:38
Speaker 2: it is. So ultimately, this is where we find ourselves today.
4:42
Speaker 2: But we do have a rally that is taking place
4:44
Speaker 2: across equity markets. As a result, the S and P
4:47
Speaker 2: now up two and a quarter percent one hundred and
4:49
Speaker 2: forty three points, the Dow up two point three percent
4:52
Speaker 2: as well, about a thousand points, and then as that
4:54
Speaker 2: composite up two and a half percent, about five hundred
4:57
Speaker 2: and thirty points. So you've got a broad based rally
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Speaker 2: taking place across risk assets. Likewise, ten your Treasury is
5:04
Speaker 2: coming in as well, down seven point eight basis points
5:06
Speaker 2: to four point three one four dollar Index is down
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Speaker 2: zero point six percent to ninety eight eighty five. Gold
5:14
Speaker 2: getting bopped on the head, but not as badly as
5:16
Speaker 2: it was earlier in the day where it was down
5:18
Speaker 2: about five percent, now down about two and a half
5:20
Speaker 2: percent to forty four to fifty nine an ounce, and
5:23
Speaker 2: crude oil West Texas Intermediate off about nine dollars a
5:27
Speaker 2: barrel to eighty nine oh four right now. So markets
5:31
Speaker 2: to this point saying okay, like we're buying that there
5:34
Speaker 2: is a de escalation happening, and there may be.
5:37
Speaker 4: And they're bringing us back to just you know, for
5:39
Speaker 4: context here, SMP five hundred is back to prices that
5:41
Speaker 4: we saw on Wednesday of last.
5:43
Speaker 3: Week, not an elimination of the last three weeks of downturns.
5:46
Speaker 4: It is a you know, slight risk off trade. I
5:51
Speaker 4: guess today risk on Sorry, yeah, risk on trade today
5:55
Speaker 4: as things rebound a bit.
5:58
Speaker 2: So we're gonna have to see how this develops. I
6:00
Speaker 2: think the big thing I am trying not to get
6:03
Speaker 2: too caught up in what either side is necessarily saying.
6:07
Speaker 2: The thing that's going to matter to the global economy.
6:10
Speaker 2: Do the boats start to move through horror moves? And
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Speaker 2: that's what we're gonna be watching for the first signs of,
6:16
Speaker 2: because that's when you'll know that there's actually improvement in
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Speaker 2: the physical shortages that may be developing out in Asia
6:24
Speaker 2: as opposed to the market trying to resolve itself. So
6:29
Speaker 2: hopeful that there's some progress being made. Let's see what
6:31
Speaker 2: the next few days bring. And I think we'll know
6:34
Speaker 2: more by the end of this week as to whether
6:36
Speaker 2: this is something tangible that we're gonna be able to
6:38
Speaker 2: say yep, like this is when things started to get better,
6:41
Speaker 2: or maybe it's a false start and we're not quite
6:44
Speaker 2: there yet. We'll see what we do have right now.
6:48
Speaker 2: Piece in the Wall Street Journal five dollars. Diesel is
6:52
Speaker 2: crushing truckers. It will soon be felt across the economy.
6:54
Speaker 2: So diesel has now moved up to five twenty eight
6:57
Speaker 2: a per gallon this according to the triple A national average.
7:01
Speaker 2: That's up from about three sixty a gallon prior to this.
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Speaker 2: And I gotta say it's not actually crushing truckers based
7:11
Speaker 2: on what I'm seeing, because truckers are raising their rates
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Speaker 2: very aggressively in order to maintain their profit margins.
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Speaker 4: For most freight companies, a forty percent surge in the
7:21
Speaker 4: price of diesel results in total cost increase of around
7:25
Speaker 4: ten percent.
7:26
Speaker 2: And what we've seen, and this is data from Freight
7:31
Speaker 2: Waves who Craig Fuller is their CEO. We've had him,
7:35
Speaker 2: we had him on our show a couple times last
7:37
Speaker 2: year when all of the tariff stuff was going on.
7:40
Speaker 2: But what we've seen in terms of spot rates for
7:46
Speaker 2: trucking effectively is that they run something called the National
7:50
Speaker 2: Truckload Index, and basically it's, hey, what does it cost
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Speaker 2: per mile in order to move stuff from point A
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Speaker 2: to point B? And in the last couple of weeks,
8:01
Speaker 2: it's moved from around two dollars and sixty cents per
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Speaker 2: mile up to three h two a mile. For those
8:06
Speaker 2: that don't just telling you, hey, they're basically absorbing those
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Speaker 2: costs and passing them on to the people that want
8:11
Speaker 2: to ship stuff For.
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Speaker 4: Those that don't follow diesel prices closely, because I'm in
8:15
Speaker 4: that camp. A month ago, diesel prices were sitting at
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Speaker 4: a round three dollars seventy cents. So this is where
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Speaker 4: it's been felt the most, and it's been a big surge.
8:24
Speaker 4: And it's also why everyone that studies inflation worries about
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Speaker 4: that seep through because you know, oil prices, gas prices at.
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Speaker 3: The pump, they are not included in core inflation.
8:37
Speaker 4: Groceries aren't either, but you know, retail sales of shirts
8:40
Speaker 4: and everything else that goes into your household budget does
8:43
Speaker 4: get counted into core, and with enough time, those higher
8:46
Speaker 4: energy prices can pass right through.
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Speaker 2: Now, in the trucking industry, you typically have two different
8:52
Speaker 2: types of rates that are out there. And I'm not
8:54
Speaker 2: gonna get two technical on it, but this is it's
8:56
Speaker 2: interesting stuff. Like who doesn't love learning about how your
8:59
Speaker 2: stuff acts gets from point A to point B.
9:01
Speaker 3: I do.
9:02
Speaker 2: I think it's great. So you have two rates in general.
9:06
Speaker 2: The first is what's known as a contract rate. Again, hey,
9:09
Speaker 2: I need to move x units per month for the
9:12
Speaker 2: next year. What rate are you gonna give me? You
9:14
Speaker 2: sign a long term contract for it, and you're good
9:17
Speaker 2: to go.
9:17
Speaker 3: Sure.
9:18
Speaker 2: The other ones, what's known as a spot rate. Hey,
9:20
Speaker 2: I got an extra thing I gotta ship this week.
9:22
Speaker 2: What can you do for me? Spot rates are the
9:25
Speaker 2: ones that have moved up by that large amount. Right now.
9:28
Speaker 2: Contract rates are lagging because you don't sign a new
9:31
Speaker 2: contract every day. Eventually, if if gas price, I'm sorry,
9:35
Speaker 2: diesel prices remain high, contract rates will move up to
9:38
Speaker 2: match spot rates, but it takes a little bit of
9:40
Speaker 2: time for that to happen. So what this does mean,
9:45
Speaker 2: and again this is why when this is one of
9:47
Speaker 2: the reasons why the FED talks about like these long
9:49
Speaker 2: and variable lags for monetary policy. You don't start seeing
9:53
Speaker 2: this showing up on every single thing that's being shipped
9:57
Speaker 2: right away because some of them already have existing contracts
9:59
Speaker 2: that they have to, you know, honor at the previous rates.
10:02
Speaker 2: As you go through the spring, those start to roll off,
10:06
Speaker 2: depending on how long term they are, and so the
10:08
Speaker 2: contract rates move up to meet the spot rates if
10:11
Speaker 2: you still have diesel prices where they are. So this
10:15
Speaker 2: is not something that you're gonna see instantly, but watch
10:18
Speaker 2: this because it seeps into everything from Hey, like, if
10:22
Speaker 2: you know abnbev is shipping beer across the country, Okay,
10:26
Speaker 2: that means that, you know, the price of beer goes up,
10:28
Speaker 2: but not right away because it takes time for this
10:30
Speaker 2: to seep in. Likewise, if Walmart is shipping plywood across
10:35
Speaker 2: the country, takes time to seep in because the ones
10:37
Speaker 2: that are under contract are already you know, set, so
10:41
Speaker 2: it won't show up right away. But watch what happens
10:43
Speaker 2: as we get into April and May, because that's when
10:45
Speaker 2: this potentially starts to move a little bit more. It's
10:48
Speaker 2: not instant, but it's as you start to get two
10:50
Speaker 2: three months out, if you still have gas prices in
10:53
Speaker 2: this area, that's where things start to h to matter.
10:57
Speaker 2: So we'll watch how things go there. But uh, kind
11:00
Speaker 2: of interesting. Let's take a quick break when we come back,
11:04
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Speaker 2: Mike, there's a piece in Bloomberg here. It's titled what
12:41
Speaker 2: we still don't know about private credit is troubling. It
12:47
Speaker 2: may be, it may not. If we don't know about it,
12:49
Speaker 2: how could we know that it's troubling.
12:51
Speaker 4: The troubling part is a further hypothetical. So the troubling part,
12:56
Speaker 4: according to the author, is whether private credit stress stays
12:58
Speaker 4: contained or spreads.
13:00
Speaker 2: Well, we don't even know how much stress there is. Like, yeah, look,
13:04
Speaker 2: I'm not one to like, you know, have a bunch
13:07
Speaker 2: of sympathy for the private credit people, because I've been
13:10
Speaker 2: someone who for the last eight months has said, hey,
13:12
Speaker 2: like something kind of stinks here and we need to
13:14
Speaker 2: pay attention to it. But I also can't be like, hey,
13:18
Speaker 2: there's all this stuff that we don't know, and so
13:20
Speaker 2: it's troubling. Well, if we don't know it, it can't
13:23
Speaker 2: be troubling. I mean, it could be, but we don't
13:26
Speaker 2: know if it's troubling, Yeah, troubling.
13:29
Speaker 4: This seems a little bit. Here's okay, here's a relevant
13:33
Speaker 4: question that I want to ask you. All of the
13:35
Speaker 4: focus is.
13:36
Speaker 2: On the banks.
13:38
Speaker 4: This whole article is written from the perspective of what
13:40
Speaker 4: happens if it's too embedded in the banks and they
13:42
Speaker 4: come up with estimates that you know, for US banks
13:45
Speaker 4: there's just under one hundred billion dollars of exposure. The
13:48
Speaker 4: exposure that's an estimate from the Federal Reserve. Moody's estimates,
13:52
Speaker 4: it's closer to three hundred billion.
13:54
Speaker 2: None of that's anything. And quite honestly, I know that's
13:59
Speaker 2: crazy to say three dred billion doesn't matter, But that's
14:01
Speaker 2: how big these banks are.
14:02
Speaker 4: Right, Why is our lens too focused on the banks
14:08
Speaker 4: from the Great Financial Crisis episode? Because banks are not
14:11
Speaker 4: the only financial institutions that matter? Nope, Right, Like, you
14:16
Speaker 4: cannot have a functional financial system if you cannot get insurance.
14:21
Speaker 4: You cannot have a functional financial system if a good
14:24
Speaker 4: portion of pensions go belly up. Like, there are other
14:28
Speaker 4: institutions that are important to the functioning of our systems,
14:31
Speaker 4: And I'm that's one of my worries is that I
14:34
Speaker 4: don't actually think that we are I hate to say
14:38
Speaker 4: this at any moment, but I don't actually think that
14:41
Speaker 4: the worries for banks is going to come from private
14:44
Speaker 4: credit during the next bank blow up. But there are
14:48
Speaker 4: a bunch of other fin institutions that do derive a
14:52
Speaker 4: lot of their income from this, from the space that
14:56
Speaker 4: if they blew up. I don't think we could look
14:57
Speaker 4: at it and say, oh, well that doesn't matter.
15:00
Speaker 3: Yeah.
15:00
Speaker 2: The places that give me the hebgb's right now the
15:11
Speaker 2: insurance companies, specifically the big life insurance not not even
15:14
Speaker 2: the big ones, but just like anyone in the life
15:18
Speaker 2: insurance space, you don't know what they own and you
15:21
Speaker 2: don't know how much of it has gone bad. Yeah,
15:24
Speaker 2: and we're not going to know that for until I
15:30
Speaker 2: think that here's the question that I think you have
15:32
Speaker 2: to ask, when can you sound the all clear on
15:36
Speaker 2: private credit? Like, let's talk about what that looks like,
15:39
Speaker 2: because we can say okay, like we might be scared
15:41
Speaker 2: about it. What are the things that we would look
15:43
Speaker 2: like look at to be able to say, hey, this
15:48
Speaker 2: is all clear now and not something to worry about.
15:51
Speaker 4: The early indications would probably come from the stock prices,
15:55
Speaker 4: probably right, like the stock market usually gives some degree
16:00
Speaker 4: all clear, and these companies across.
16:03
Speaker 3: The border, I think you just need time.
16:04
Speaker 2: In my opinion, time is the only thing I think
16:06
Speaker 2: that can put it to bed. And timeline wise, twenty
16:13
Speaker 2: one months end of next year, if you haven't seen
16:17
Speaker 2: anything happen by then, you kind of look at it
16:20
Speaker 2: and say, look, a lot of these were loans that
16:23
Speaker 2: were taken out, you know, back in twenty twenty through
16:26
Speaker 2: twenty twenty two. A lot of them might have been
16:29
Speaker 2: you know, five to seven years in uh to maturity.
16:34
Speaker 2: If you haven't seen real problems by then.
16:37
Speaker 3: Then they're not gonna be.
16:38
Speaker 2: It's it's not a result, it's not a it's likely
16:41
Speaker 2: not a systemic issue that is big enough to affect that.
16:46
Speaker 2: It doesn't mean you still can't have like individual funds
16:48
Speaker 2: that run into problems and stuff. But in terms of
16:52
Speaker 2: should the average person still care about what's going on
16:55
Speaker 2: in private credit, then my answer would be I think
16:58
Speaker 2: there's an expiration date on it, because we can't just
17:01
Speaker 2: be sitting here in like twenty thirty five being like, hey,
17:04
Speaker 2: those private credit concerns of twenty twenty six, how about them?
17:07
Speaker 2: Like No, like you eventually, you got to get to
17:10
Speaker 2: a point where you're like, Okay, we can put this
17:11
Speaker 2: to bed because it's not a thing anymore.
17:14
Speaker 4: My only caveat there would be if we do, in fact,
17:16
Speaker 4: green light all this stuff into everyday person's four one
17:20
Speaker 4: K plans and that is the formula for it avoiding
17:24
Speaker 4: a blow up, then maybe it needs to stretch out
17:27
Speaker 4: a little bit further. Right, Like, right now, it's facing
17:29
Speaker 4: a bit of a liquidity crisis. Everybody's trying to run
17:32
Speaker 4: for the exits on private credit and yeah, so they're
17:36
Speaker 4: left figuring out, Okay, you know, how do we.
17:38
Speaker 3: Get our liquidity?
17:39
Speaker 4: If they get their liquidity from your pension plan or
17:43
Speaker 4: your four o one K and my four to one k, sure,
17:45
Speaker 4: then there might still be an underlying problem that gets
17:48
Speaker 4: resolved in the short term but not the long term.
17:51
Speaker 2: Yeah, I think that's fair. Uh so we've got that
17:54
Speaker 2: going on. Why healthcare is doing the heavy lifting in
17:56
Speaker 2: this job market. Well, we're getting older. We need more
17:59
Speaker 2: health care, is the answer. So I'll give you some
18:02
Speaker 2: of the data though.
18:03
Speaker 4: So in twenty ten, according to the Census, there were
18:05
Speaker 4: forty point three million Americans over the age of sixty five.
18:08
Speaker 4: That's grown by nearly forty percent. As of twenty twenty,
18:11
Speaker 4: there were fifty nearly fifty six million Americans over the
18:15
Speaker 4: age of sixty five. And based on that trend line,
18:18
Speaker 4: I don't I don't know if you have an estimate
18:19
Speaker 4: for twenty twenty five or twenty twenty six. I couldn't
18:22
Speaker 4: find one Obviously, we do a census once a decade.
18:24
Speaker 4: The healthcare sector and healthcare plus social assistance sectors of
18:28
Speaker 4: the labor market. In twenty ten, there were sixteen point
18:31
Speaker 4: seven million folks working there. As of twenty twenty, twenty
18:34
Speaker 4: point seven million.
18:35
Speaker 2: You saw a.
18:36
Speaker 4: Dip briefly during COVID, and then it's just reaccelerated here
18:40
Speaker 4: and so it seems pretty clear to me. Sixty five
18:43
Speaker 4: plus population has grown thirty eight percent, healthcare and social
18:46
Speaker 4: assistance population grown twenty four percent. You don't need one
18:52
Speaker 4: new healthcare worker for every new person turning sixty five,
18:55
Speaker 4: But so long as we continue to age, there will
18:58
Speaker 4: be more demand for people that work in nursing, skilled nursing,
19:04
Speaker 4: and all sorts of social assistance that's needed to keep
19:08
Speaker 4: us alive and relatively healthy.
19:12
Speaker 2: Yeah, I think that's a fair assessment of it. Let's
19:15
Speaker 2: take a quick break here, and when we return, we've
19:19
Speaker 2: got the trivia answer, We've got Wall Street Watch, and
19:22
Speaker 2: then we'll talk about this piece from Barren seven ways
19:24
Speaker 2: to overcome the risks of retiring into a down stock market.
19:28
Speaker 2: We'll discuss that next.
19:41
Speaker 1: Bringing the latest financial news straight to your radio every day,
19:45
Speaker 1: it's the Financial Exchange on the Financial Exchange Radio Network,
19:51
Speaker 1: tell you out full Wall Street Watch treking the stocks,
19:54
Speaker 1: the data, and the headlines driving markets so far today
19:58
Speaker 1: right here on the Financial Exchange Radio Network.
20:01
Speaker 5: Equity markets are strongly rallying after President Trump said earlier
20:05
Speaker 5: this morning the US military will postpone further strikes on
20:08
Speaker 5: Iranian energy infrastructure for five days, falling productive talks. Right now,
20:14
Speaker 5: the Dow is up two point two percent over one
20:16
Speaker 5: thousand points, high, SMP five hundred up nearly two percent
20:20
Speaker 5: or one hundred and twenty seven points, NASDAC up two
20:23
Speaker 5: point two percent or four hundred and seventy six points,
20:25
Speaker 5: RUSSA two thousand, up three point six percent. Ten Your
20:30
Speaker 5: TRISEREL down six basis points at four point thirty three
20:33
Speaker 5: to two percent, and crude oil down nearly twelve percent,
20:37
Speaker 5: trading right around eighty six dollars a barrel. Several airline
20:41
Speaker 5: stocks are seeing gains in reaction to Trump's announcement this morning.
20:45
Speaker 5: Delta United airlines in Southwest are all up about five percent.
20:49
Speaker 5: Cruise lines including Carnival and Royal Caribbean also rallying about
20:55
Speaker 5: seven percent. Meanwhile, the Wall Street Journal is reporting that
20:58
Speaker 5: Elliott Investment Management as a multi billion dollar investment in Synopsis,
21:02
Speaker 5: where Elliott plans to engage with the chip designed software
21:05
Speaker 5: maker to push the business to make more money from
21:08
Speaker 5: its software and services. Synopsis is up by five percent
21:12
Speaker 5: and after its thirty plus percent tumble on Friday, shares
21:16
Speaker 5: and super Microcomputer modestly rebounding by seven percent today. Friday's
21:21
Speaker 5: plunge came after the US charged the co founder of
21:25
Speaker 5: the company and two others in connection with an alleged
21:28
Speaker 5: scheme to smuggle Nvidia chips into China. I'm Tucker Silva
21:34
Speaker 5: and that is Wallstreet Watch. On the previous segment, we
21:36
Speaker 5: asked you the trivia question what was the most commonly
21:39
Speaker 5: used name for Ronald Reagan's strategic defense initiative? That would
21:44
Speaker 5: be Star Wars. Joe from Worcester, Mass is our winner today,
21:48
Speaker 5: taking them a Financial eks Change Show t shirt. Congrats
21:51
Speaker 5: to Joe and we play trivia every day here on
21:54
Speaker 5: the Financial Exchange. See complete contest rules at Financial looks,
21:58
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22:00
Speaker 2: The Piece and barrens I'm sorry. Seven ways to overcome
22:04
Speaker 2: the risks of retiring into a down stock market. What
22:09
Speaker 2: this really gets at is what's known as sequence of
22:11
Speaker 2: returns risk, where if you're retire to No. Eight you
22:14
Speaker 2: were screwed. In fact, like you might not have been
22:17
Speaker 2: because the performance in the fifteen years after was so strong.
22:19
Speaker 2: But the big thing is, hey, a down year early
22:24
Speaker 2: in your retirement has a different impact and more meaningful
22:27
Speaker 2: one than one that might happen fifteen or twenties later,
22:30
Speaker 2: fifteen or twenty years later towards the end of your retirement.
22:33
Speaker 2: So what kinds of strategies, what kinds of thoughts are
22:35
Speaker 2: outlined in this piece here?
22:37
Speaker 4: So as a starting point here, like we're gonna get
22:40
Speaker 4: into a bunch of different strategies, but as a starting point,
22:42
Speaker 4: you have to go into it assuming that the market
22:46
Speaker 4: will go into a downturn when you retire, And if
22:49
Speaker 4: you use that as your starting point, then you can
22:51
Speaker 4: kind of build off of things from there. Sure, but
22:54
Speaker 4: a few pieces here that the article points out. You
22:57
Speaker 4: build a cash or short term bond buffer. What do
23:00
Speaker 4: they mean by that is easily accessible more than rainy
23:04
Speaker 4: day savings? So you know, financial advisors the CFP, I think,
23:07
Speaker 4: depending on your situation, recommends between three and twelve months
23:12
Speaker 4: of your average living expenses in cash this is a
23:15
Speaker 4: buffer beyond some of that because guess what, stock market
23:18
Speaker 4: downturns don't always just last three to twelve months. One
23:22
Speaker 4: thing that most retirees have the flexibility on is when
23:24
Speaker 4: to take their Social Security benefits. Maybe you're healthy and
23:27
Speaker 4: you're planning on taking till seventy, but you know what,
23:29
Speaker 4: if you get hit by a surprise market downturn. That
23:32
Speaker 4: can help, you know, stop the bleeding from a portfolio
23:36
Speaker 4: is having another income source coming in roth conversions. I
23:41
Speaker 4: don't think that's really a strategy for rescue, but it
23:43
Speaker 4: can be a strategy to make yourself more tax efficient
23:46
Speaker 4: in the future if you're paired with a market downturn
23:48
Speaker 4: at that moment in time, because you can convert securities
23:53
Speaker 4: at a lower value and you just pay taxes on
23:55
Speaker 4: what they are worth when you do the conversion. And
23:58
Speaker 4: then everyone's favorite continuing to work is another strategy. But
24:01
Speaker 4: here's personally like how I look at this stuff, and unfortunately,
24:06
Speaker 4: like everything else financial planning related, there's not really a good.
24:11
Speaker 2: Rule of thumb on this.
24:13
Speaker 4: I work with folks and say, okay, let's map out
24:16
Speaker 4: your next decade to the best of our ability.
24:20
Speaker 3: You know, if you're heading towards retirement.
24:21
Speaker 4: Let's map out the next decade in terms of what
24:23
Speaker 4: we think you might spend. We'll map out the next
24:27
Speaker 4: decade in terms of income coming in, and then from
24:30
Speaker 4: there you should have some estimate of net net what
24:33
Speaker 4: needs to come from your portfolio. Sure, and so long
24:38
Speaker 4: as you get to a comfortable level to say, okay,
24:40
Speaker 4: I know that somewhere probably between the next three and
24:43
Speaker 4: ten years of my net needs from the portfolio is
24:46
Speaker 4: covered from something more predictable than the up and down
24:51
Speaker 4: swings of the stock market, most people feel pretty comfortable.
24:54
Speaker 4: Your results may vary. It depends on your situation and
24:57
Speaker 4: your tolerance for all these things. But that's how I
25:00
Speaker 4: I get to my starting point with people that I
25:02
Speaker 4: work with. And guess what, it requires some work.
25:05
Speaker 2: It does. It's not something where you just sit down
25:08
Speaker 2: and oh, like magically like you get there, Like you've
25:12
Speaker 2: got to do the legwork on it, to really go
25:15
Speaker 2: through all the details that are necessary. And look, sometimes
25:21
Speaker 2: people are perfectly comfortable and capable of doing that themselves.
25:25
Speaker 2: A lot of times it requires, you know, some forethought
25:27
Speaker 2: into things that you might not have considered in situations
25:30
Speaker 2: that are really challenging to sort through.
25:33
Speaker 4: Yeah, I mean it's easy to just take a look
25:35
Speaker 4: at this and say, Okay, you know, the target date
25:38
Speaker 4: fund says that I should have this much a stock exposure.
25:40
Speaker 3: But the target date fund doesn't know that your daughter's.
25:42
Speaker 4: Going to get married in three years, or that your
25:44
Speaker 4: roof is forty years old, or that.
25:46
Speaker 2: You like new cars every four years instead of every ten.
25:49
Speaker 2: You know.
25:49
Speaker 4: Like, so, if you are facing this down, what you've
25:53
Speaker 4: heard from us is that a one size solution may
25:56
Speaker 4: work for you. It's possible it happens to work for you,
26:00
Speaker 4: but if it does, it's likely because it's a coincidence.
26:03
Speaker 4: If you want to have that piece of mind of
26:06
Speaker 4: knowing that, hey, my portfolio as it's allocated today is
26:09
Speaker 4: actually in a position that can support me if I
26:12
Speaker 4: choose to or am forced to retire, or maybe I
26:15
Speaker 4: have to do so earlier than anticipated. How do I
26:18
Speaker 4: structure my investments to ensure that they can withstand a
26:22
Speaker 4: downturn because guess what, it's been a heck of a
26:24
Speaker 4: long time since we've had a long one. If you
26:27
Speaker 4: have questions like that, if you're looking for that peace
26:30
Speaker 4: of mind, give Armstrong Advisory Group a call so we
26:33
Speaker 4: can work with you on delivering it. The numbers eight
26:36
Speaker 4: hundred three nine three for zero zero one. How to
26:40
Speaker 4: soerce security, medicare even trust planning and tax planning come
26:44
Speaker 4: into all of my retirement plans? Call Armstrong Advisory Group
26:47
Speaker 4: we can help you with it. Eight hundred three nine
26:50
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26:52
Speaker 1: The proceeding was paid for by Armstrong Advisory Group, a
26:55
Speaker 1: registered investment advisor. Nothing in the ad or in any
26:57
Speaker 1: Armstrong guide a specific financial, legal, or tax consult your
27:00
Speaker 1: own financial tacks into state planning advisors before making any
27:03
Speaker 1: investment decisions. Armstrong may contact you to offer investment advisory services.
27:08
Speaker 2: So we got a piece in the Bloomberg today. It's
27:12
Speaker 2: titled why are young people taking so many unwise financial risks?
27:16
Speaker 2: And quite honestly the answer is because they're young people.
27:21
Speaker 2: I know that's going to be unsatisfying to many of you,
27:24
Speaker 2: But Tucker, can you get the time machine fired up?
27:26
Speaker 2: That bye? Okay, we got to go back to twenty ten,
27:29
Speaker 2: So put a little plutonium in that puppy. All right,
27:36
Speaker 2: It's twenty ten and young Chuck decides on a Friday
27:42
Speaker 2: night to take a two hour drive down to Foxwood's
27:45
Speaker 2: Casino with one of his buddies from college, and on
27:50
Speaker 2: the way they stop at the Cheesecake Factory in Providence,
27:52
Speaker 2: grab a little you know something there, and then continue
27:55
Speaker 2: on their way to the blackjack tables at Foxwood's. And
27:59
Speaker 2: when they're two things happen. First, Young Chuck ends up
28:04
Speaker 2: having to after you know, losing some money at the
28:06
Speaker 2: blackjack table. Hey, this is gonna be my night. I
28:09
Speaker 2: gotta figure this out. Young Chuck ends up taking out
28:12
Speaker 2: a cash advance on his credit card because hey, like
28:16
Speaker 2: it's just gonna work out and you do. Newsflash, it
28:19
Speaker 2: did end up working out for me that night.
28:21
Speaker 3: Good.
28:21
Speaker 2: But like things were pretty dodgy, Like I was literally thinking,
28:25
Speaker 2: how am I going to pay rent if this doesn't
28:27
Speaker 2: pan out? Meanwhile, my friend who I'm with, who right
28:30
Speaker 2: now is a very successful doctor. Might I add was
28:34
Speaker 2: taking his grad school loans and using them to bet
28:38
Speaker 2: on the blackjack table at Foxwoods. Also very dumb?
28:41
Speaker 3: Yeah, we were.
28:42
Speaker 2: Very dumb because we were twenty two, twenty three years old,
28:44
Speaker 2: and this is what young people do. They do dumb
28:48
Speaker 2: financial things. Everyone wants to make this into something new
28:52
Speaker 2: in terms of like, hey, why are young people like
28:55
Speaker 2: doing prediction markets, and is it because they think the
28:58
Speaker 2: world's gonna end and this is the only way to
29:00
Speaker 2: get ahead, and like people just want to make this
29:02
Speaker 2: into something big.
29:03
Speaker 3: No, twenty something year olds are dumb.
29:04
Speaker 2: Twenty year olds do dumb things with money all the time.
29:07
Speaker 2: So here I had some of these tools available to me,
29:09
Speaker 2: I would have done other dumb things too.
29:11
Speaker 4: Right, that's the relevant question that I have. One do
29:14
Speaker 4: they recognize in the moment that it is dumb?
29:19
Speaker 3: Oh?
29:19
Speaker 2: I knew what I was doing was dumb?
29:21
Speaker 3: Yeah?
29:21
Speaker 2: Still did it?
29:22
Speaker 3: Two?
29:24
Speaker 4: Is it worse now because the tools available? That's the
29:27
Speaker 4: relevant question to me? Is so twenty you know, I'll
29:31
Speaker 4: just you know, say especially Maybe it's just my view
29:35
Speaker 4: on things because I am a man, But eighteen to
29:38
Speaker 4: twenty five year old men pretty especially dumb and bad
29:41
Speaker 4: decision makers as a group, not all of them. If
29:46
Speaker 4: they're being provided with more opportunities to make dumb decisions,
29:49
Speaker 4: you know, are we seeing something unique now or is
29:52
Speaker 4: this no more you know? Is this no more prevalent
29:55
Speaker 4: than you know what you experienced.
29:57
Speaker 2: Dumbness is like air. It expands to fill the available container,
30:01
Speaker 2: and if you give it a bigger container, it will
30:04
Speaker 2: fill that fill it. If if I had access to
30:07
Speaker 2: prediction markets when I was twenty two or twenty three,
30:10
Speaker 2: oh boy, yeah I would. And this is the dangerous
30:13
Speaker 2: part in my opinion. When I went down to Foxwood's
30:15
Speaker 2: on a Friday night, ultimately I reached a point where
30:18
Speaker 2: it's like, hey, you can't do any more damage, get
30:22
Speaker 2: out of here and go home, because like there just
30:24
Speaker 2: was no way to do it. If it's on your phone,
30:27
Speaker 2: just sitting on your couch twenty four hours a day, Yeah,
30:32
Speaker 2: I could see myself getting into some real trouble at
30:35
Speaker 2: that point. I mean again, it's it's luck at the
30:37
Speaker 2: draw that like I didn't and was able to figure
30:40
Speaker 2: it out. But ultimately, I don't think that young people
30:45
Speaker 2: today are, you know, in the aggregate, making any worse
30:48
Speaker 2: or better financial decisions than they used to. I think
30:51
Speaker 2: they have new tools available, just like they always do.
30:54
Speaker 2: And until we figure out how to manage that such
30:58
Speaker 2: that they can't wreck themselves the way they currently are,
31:01
Speaker 2: I do think it's gonna be a problem because you
31:03
Speaker 2: talk to like if you have again on the gambling
31:07
Speaker 2: sites and prediction market sites, it's mostly young men, like
31:11
Speaker 2: go talk to anyone in your family who's between the
31:13
Speaker 2: ages of eighteen and twenty seven, and they'll tell you
31:18
Speaker 2: a lot of my friends have problems with gambling, debt
31:20
Speaker 2: or similar things.
31:22
Speaker 4: One third of Gen z or say they gamble in
31:25
Speaker 4: crypto or sports betting.
31:28
Speaker 2: It's a lot. I'm not surprised. Yeah, And you know
31:31
Speaker 2: people make it out to be like, well, that generation
31:33
Speaker 2: thinks the world's get end, so they might as well
31:35
Speaker 2: do it.
31:35
Speaker 3: No, it's just on their phone.
31:36
Speaker 2: No, it's just there. They're just playing a game. Like
31:40
Speaker 2: you don't have to make it into a bigger thing.
31:43
Speaker 2: It's just young people do dumb financial things. Story at eleven.
31:47
Speaker 2: Let's take a quick break. When we return, let's do
31:52
Speaker 2: some stack roulette.
31:53
Speaker 1: After this, follow the Financial Exchange Show on Instagram and
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Speaker 1: see what's driving the conversation about Wall Street and economic trends.
32:01
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32:05
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32:13
Speaker 1: You're listening to the Financial Exchange Radio Network.
32:28
Speaker 2: All right, Mike, it's time for stack.
32:31
Speaker 3: What do you got for me?
32:32
Speaker 4: If you're sick of high gas prices? EV deals are
32:35
Speaker 4: everywhere right now. This is actually the case. When I
32:39
Speaker 4: was shopping for my layer's car, which is electric, we
32:42
Speaker 4: ended up with the Ford Mustang Machi. The incentives on
32:46
Speaker 4: all of these things, whether they're from Ford, Chevy or
32:49
Speaker 4: Hyundai worse significant. Tesla's I'm sure are also the same case,
32:54
Speaker 4: as they have been struggling as well, but the overestimation
32:59
Speaker 4: of demand coming into twenty twenty five and twenty twenty
33:03
Speaker 4: six was pretty substantial. Many of these companies have now
33:06
Speaker 4: backed off their EV plans, but they're sitting here with
33:09
Speaker 4: a glut of evs and a bunch of Americans buying
33:13
Speaker 4: evs on the news of higher gas prices for two weeks.
33:17
Speaker 4: Would be just the funniest American car buying trend that
33:21
Speaker 4: I can think of.
33:23
Speaker 3: Like I distinctly remember during the mid.
33:28
Speaker 4: Two thousands and the gas crunch, the gas price increase
33:32
Speaker 4: that led up to the Great Financial Crisis used priuses
33:36
Speaker 4: going for a MSRP for a brief period of time there,
33:40
Speaker 4: and you can kind of imagine that happening here too.
33:43
Speaker 4: I'll remind people that electricity prices aren't cheap either right now,
33:47
Speaker 4: and you do actually need.
33:48
Speaker 2: To charge your electric vehicles.
33:50
Speaker 4: So just because you don't have to fill with gas
33:51
Speaker 4: does mean you have to fill it with some other
33:54
Speaker 4: means of making it go. But I'll admit I was
33:59
Speaker 4: surprised just how dramatic the discounts were on especially prior
34:03
Speaker 4: year electric vehicle models when I was out there shopping
34:06
Speaker 4: and I'm quite happy with mine.
34:07
Speaker 2: Why can't they just make the car out of the
34:09
Speaker 2: solar panel? Man, great question, make the whole thing out
34:13
Speaker 2: of the black box exactly exactly. Let's see, Mike, do
34:17
Speaker 2: we want to talk about the trillion dollar race to
34:20
Speaker 2: automate our entire lives? Or even rich travelers are complaining
34:23
Speaker 2: about spiking prices.
34:24
Speaker 3: Let's talk about the race to automate? Okay.
34:27
Speaker 2: So you've got all of these different AI programs out there,
34:31
Speaker 2: and in particular in the last couple months, the idea
34:35
Speaker 2: of AI agents has become front and center in terms
34:38
Speaker 2: of you know, what's cutting edge and where things are going.
34:41
Speaker 2: And an AI agent is not just a chatbot that
34:44
Speaker 2: you talk to and say, Hey, tell me how big
34:47
Speaker 2: the Grand Canyon is, or sure, what do you think
34:50
Speaker 2: I should do on my vacation this week? An AI
34:53
Speaker 2: agent is something that in theory you could instruct to
34:55
Speaker 2: actually do things across a variety of different platforms. As
34:59
Speaker 2: an example, you could say to your AI agent, book
35:02
Speaker 2: me the cheapest flight from Chicago to Nashville anytime this
35:08
Speaker 2: summer for four days.
35:09
Speaker 4: And by the way, this AI agent can also be
35:11
Speaker 4: trained to function in specific areas and likely changes based
35:15
Speaker 4: on its interactions with you, which is also the same
35:17
Speaker 4: of a lot of these AI models themselves. Yes, but
35:20
Speaker 4: the AI agent yeah, oftentimes designed and you know, specifically
35:25
Speaker 4: trained with you in mind or your company in mind.
35:28
Speaker 2: You could use them for let's say that you had
35:29
Speaker 2: like a smart scale as an example, Hey, I weigh
35:32
Speaker 2: myself every day. Built you know, you could have an
35:34
Speaker 2: AI agent that says, based on your weight, here's what
35:36
Speaker 2: I'm you know, gonna tell you to eat today or
35:38
Speaker 2: something like that. So there's all different, you know, permutations
35:41
Speaker 2: of what you can do with it. Ultimately, here's the
35:44
Speaker 2: deal with AI agents. You can either and this is
35:48
Speaker 2: going to be like the resolution of this is is
35:50
Speaker 2: kind of the the tough part. You can have an
35:53
Speaker 2: AI agent that has access to all kinds of different
35:56
Speaker 2: systems you can have talking about with it, like a business,
35:59
Speaker 2: within anything, even your personal life. You can have an
36:01
Speaker 2: AI agent that has access to all kinds of different
36:04
Speaker 2: systems and programs and can go all kinds of different places.
36:07
Speaker 2: You can have an AI agent that has access to
36:09
Speaker 2: all kinds of either personal data or sensitive data within
36:13
Speaker 2: your company. And you can have an AI agent that
36:18
Speaker 2: is completely safe from anything really going like very wrong.
36:24
Speaker 2: You cannot have all three of those things at once
36:27
Speaker 2: because the second you give an AI agent access let's
36:30
Speaker 2: look at a personal one, the second you give it
36:32
Speaker 2: access to personal data such as you know, a credit
36:35
Speaker 2: card or social security number, or data birth or anything else.
36:39
Speaker 2: When you give it access to that and tell it
36:41
Speaker 2: to go and go, you know, use other systems, all
36:44
Speaker 2: of a sudden, you've got the risk of your personal
36:46
Speaker 2: data ending up places where it shouldn't or being you know,
36:50
Speaker 2: spilled to someone it shouldn't be spilled to. Like Likewise,
36:54
Speaker 2: for a company, let's say that you have a database
36:57
Speaker 2: of customer data names, solid security numbers, medical records, whatever
37:02
Speaker 2: it might be. You can have that data safe, or
37:06
Speaker 2: you can have an AI agent that has access to
37:08
Speaker 2: it and the ability to take it somewhere else. But
37:12
Speaker 2: that's a huge risk because the AI agent might end
37:14
Speaker 2: up doing something that you don't instruct.
37:16
Speaker 4: It to You might be wondering why would you want
37:18
Speaker 4: to do this, But to be really clear, like these
37:20
Speaker 4: AI agents can I'm trying to think of like use
37:24
Speaker 4: cases for giant companies. So let's say you are JP
37:27
Speaker 4: Morgan Chase and you are trying to make your customer
37:30
Speaker 4: interactions that much smoother and that much more personalized. An
37:34
Speaker 4: AI agent can go in and search the customer and say,
37:36
Speaker 4: this is what we know about them, this was the
37:38
Speaker 4: last interaction they had with us, this is how much
37:40
Speaker 4: money they took out of their ATM. And the next
37:42
Speaker 4: time they call, you can make it so that person
37:45
Speaker 4: answering the phone knows that person pretty intimately and gives
37:49
Speaker 4: them that comfortable feeling and.
37:51
Speaker 2: Forget that Mike the boring stuff. Hey, you're trying to
37:54
Speaker 2: process medical billing claims. Great, here's the medical billing ID,
37:58
Speaker 2: here's the social Security number, here's the doctors they seen.
38:00
Speaker 2: Go settle all of this up that way. You don't
38:03
Speaker 2: have to have a person who does that. But then
38:05
Speaker 2: all of that data is now property of like the
38:08
Speaker 2: agent has access to it and doesn't clearly do what
38:12
Speaker 2: it wants to do. I don't really care if it's fired either.
38:14
Speaker 1: No.
38:15
Speaker 2: Taking a look at markets still positive but off their highs,
38:18
Speaker 2: we'll see I think, finish things, finish up and we
38:20
Speaker 2: will see you tomorrow on the Financial Exchange