Latest / The Financial Exchange Show / Market Rally, AI Job Fears, and the Truth About “Safe Haven” Assets

Transcript

Market Rally, AI Job Fears, and the Truth About “Safe Haven” Assets · The Financial Exchange Show

0:00
Speaker 1: The Financial Exchange is produced by Money Matters Radio and
0:02
Speaker 1: is hosted by employees of the Armstrong Advisory Group, a
0:05
Speaker 1: registered investment advisor. All opinions expressed are solely those of
0:08
Speaker 1: the hosts. Do not reflect the opinions of Armstrong Advisory
0:11
Speaker 1: or anyone else. Investments can lose money. This program does
0:14
Speaker 1: not offer any specific financial or investment advice. Please consult
0:17
Speaker 1: your own financial, tax, and estate planning advisors before making
0:20
Speaker 1: any investment decisions. Armstrong Advisory and the advertisers heard on
0:23
Speaker 1: this program do not endorse each other or their services.
0:26
Speaker 1: Armstrong and Money Matters Radio do not compensate each other
0:28
Speaker 1: for referrals and are not affiliated. This is the Financial
0:34
Speaker 1: Exchange with Mike Armstrong and Mark Vandetti. Your exclusive look
0:39
Speaker 1: at business and financial news affecting your day, your city,
0:43
Speaker 1: your world. Stay informed and up to date about economic
0:47
Speaker 1: and market trends, plus breaking business news every day. The
0:51
Speaker 1: Financial Exchange is a proud partner of the Disabled American
0:54
Speaker 1: Veterans Department of Massachusetts. Help us support our great American
0:58
Speaker 1: heroes by visiting dav five K dot Boston and making
1:02
Speaker 1: a donation today. Face is the Financial Exchange with Mike
1:06
Speaker 1: Armstrong and Mark Vandeeddi.
1:11
Speaker 2: Good morning, Welcome back to the Financial Exchange. It's Mike,
1:14
Speaker 2: Mark and Tucker with you on a Tuesday where markets
1:17
Speaker 2: are in rally mode. We've got the Dow, SMP, and
1:19
Speaker 2: NASDAK all over up by over one percent in early trading.
1:23
Speaker 2: After last week the Dow and NASDAK closed in correction territory.
1:27
Speaker 2: Just a naming convention reminder here, ten percent down is
1:33
Speaker 2: considered a correction, twenty percent down considered a bear market.
1:37
Speaker 2: SMP has not yet gotten into that correction territory, but
1:41
Speaker 2: got pretty close over the course of the last week.
1:44
Speaker 2: We received data on the labor market this morning at
1:47
Speaker 2: ten am from the Job Openings in Labor Turnover Survey.
1:51
Speaker 2: This measures the state of things in February, so it
1:54
Speaker 2: does not give you any read on the economy since
1:56
Speaker 2: the breakout of the war in Iran. But nonetheless you
1:59
Speaker 2: had about Sorry, you didn't have much change from January
2:03
Speaker 2: in terms of the state of job openings. There were
2:05
Speaker 2: six point nine million jobs opened in the month of February.
2:09
Speaker 2: The hires decreased to four point eight million in total.
2:12
Speaker 2: Separations didn't change much either. The big story here with
2:16
Speaker 2: this release of data. Is that other than during peak
2:21
Speaker 2: COVID times, when obviously hiring dropped off pretty substantially, we
2:25
Speaker 2: are around a pace of hiring and quits, you know,
2:28
Speaker 2: where people are voluntarily separating from their employer because they're
2:31
Speaker 2: confident about the labor market.
2:33
Speaker 3: We're at levels that we last saw.
2:35
Speaker 2: During the early twenty tens, post Great Financial Crisis. And
2:38
Speaker 2: so when people talk to you about how the labor
2:41
Speaker 2: market seems tough right now, it's not terribly tough. If
2:43
Speaker 2: you have that job already, you're you know, not at
2:46
Speaker 2: an incredibly high unemployment rate. You are at a very
2:51
Speaker 2: low churn point in the labor market. Meaning the opportunities
2:55
Speaker 2: to quit that job, find a new one at a
2:57
Speaker 2: higher salary, or enter the labor market as a recon
3:00
Speaker 2: in college grad or high school grad is more difficult
3:03
Speaker 2: today than it was for you know, I would argue
3:06
Speaker 2: much of the last decade. But nonetheless, that's where we
3:09
Speaker 2: stand here, and that's what I would take away from
3:11
Speaker 2: the Jolts report. This Friday, we will be getting a
3:16
Speaker 2: full jobs report for the month of March, and it's
3:19
Speaker 2: happening also on a shortened trading week. Equity markets will
3:23
Speaker 2: be closed for the Good Friday holiday on Friday of
3:26
Speaker 2: this week. Anything else catching your eye mark in terms
3:30
Speaker 2: of markets, your just economic data that we have coming
3:35
Speaker 2: out this week or today.
3:38
Speaker 4: In terms of the job market, Mike, I think everything's
3:40
Speaker 4: sort of pointing in the same direction, right. The big
3:44
Speaker 4: surveys jolts, which you just summarized, and the household and
3:50
Speaker 4: establishment surveys give us the unemployment rate and payrolls, they
3:54
Speaker 4: all sort of point to the same thing, a loosening
3:56
Speaker 4: of labor market conditions over the past few years. That's
4:01
Speaker 4: good news for the fight against inflation, and we're gonna
4:05
Speaker 4: need that because it's about to get more challenging.
4:08
Speaker 3: And bad news if you want a job.
4:11
Speaker 4: Yeah, yeah, unemployment is still low. No, you're you're yeah,
4:15
Speaker 4: you're right. I don't mean to minimize that, but from
4:18
Speaker 4: a sort of macro perspective, the de Fed's got a
4:22
Speaker 4: mind both the state of the economy, of economic growth
4:26
Speaker 4: and unemployment, as well as inflation, both make people unhappy.
4:31
Speaker 2: According to a new Quinnipiac poll, more than half of
4:35
Speaker 2: Americans say that AI is likely to harm them. Two
4:39
Speaker 2: thirds of Americans I don't know what they mean by
4:42
Speaker 2: I don't think they mean physically harm them.
4:43
Speaker 4: But yeah, sorry, that's what it sounded. I know you
4:46
Speaker 4: didn't mean that, that's what it sounded like.
4:47
Speaker 3: It does sound a bit like that.
4:49
Speaker 2: More than two or about two thirds of those same
4:51
Speaker 2: Americans oppose the building of any AI data centers in
4:55
Speaker 2: their community. That is obviously due to the impact on electricity,
4:59
Speaker 2: water use, noise were the main reasons cited, and I
5:04
Speaker 2: do hear this continue to be echoed.
5:06
Speaker 3: I don't know if it matters for the industry.
5:08
Speaker 2: That like, ultimately doesn't matter for the stock price of
5:10
Speaker 2: Nvidio or Microsoft, or the eventual stock price of a
5:14
Speaker 2: company like open Ai, assuming they get an IPO off
5:17
Speaker 2: the ground. I'm unsure, but the data centerpiece is real,
5:23
Speaker 2: and I do just wonder if these companies are dramatically
5:27
Speaker 2: underestimating how difficult it is going to be to get
5:31
Speaker 2: all this compute built and maybe underestimating the cost of that.
5:36
Speaker 2: If local residents are consistently voting these things down and saying, no,
5:40
Speaker 2: we're not going to zone you for you know, the
5:44
Speaker 2: draw and electricity. It's not to say that they wouldn't
5:47
Speaker 2: get built, but imagine a scenario where these same companies
5:50
Speaker 2: instead of you know, right, now they're getting a bunch
5:52
Speaker 2: of tax incentives from some of those local towns to
5:55
Speaker 2: build in here, and they're saying, yeah, well, you know,
5:57
Speaker 2: we'll waive your property taxes for five years, will provide
6:01
Speaker 2: these other tax incentives to build in our state because
6:03
Speaker 2: we know that you're going to ultimately pay a bunch
6:06
Speaker 2: of taxes and hire some people.
6:08
Speaker 3: What if that reverses, right, Like, what if.
6:10
Speaker 2: The math changes so that if you want to build
6:12
Speaker 2: a data center in rural Wisconsin, you, in fact, as
6:17
Speaker 2: you know, Facebook or whoever is actually building the thing,
6:20
Speaker 2: need to offer some local incentives to that local town
6:24
Speaker 2: in the same way that I would imagine, you know,
6:26
Speaker 2: building a nuclear power plant would require in somebody's backyard.
6:30
Speaker 3: I'm not sure it would.
6:32
Speaker 2: There's just a number of things that have been getting
6:35
Speaker 2: my attention about how companies might be underestimating the difficulty
6:39
Speaker 2: of building all of this infrastructure that they claim to
6:41
Speaker 2: want to build, and major tech companies are putting huge
6:45
Speaker 2: dollars behind.
6:47
Speaker 4: Yeah, there's that angle. How disruptive will it be? Nobody
6:50
Speaker 4: wants these things in their backyard. I took the thrust
6:54
Speaker 4: of this survey to be focused on the labor market. Yeah,
6:57
Speaker 4: The question is essentially, do you think it's going to
6:59
Speaker 4: cost you or someone you care about their their their job.
7:03
Speaker 4: And in fact, if a job is sort of structured
7:08
Speaker 4: and consists of repetitive tasks, things that you could write
7:12
Speaker 4: down on paper, and if someone just followed those ingredients,
7:16
Speaker 4: like followed your recipe, well recipe is a little different
7:19
Speaker 4: becuse there's a little bit of an art to it.
7:21
Speaker 4: But you know what I mean. If you could, if
7:22
Speaker 4: you could write down what you do, and anybody could
7:24
Speaker 4: read your instructions and do your job, then yeah, your
7:26
Speaker 4: job might be in danger if your company's got the
7:29
Speaker 4: money to invest in ai. I. There was a study
7:33
Speaker 4: done by researchers at either M I T Or Harvard,
7:35
Speaker 4: you know, one of those one of those places that
7:37
Speaker 4: does such studies, and they found that it was exactly
7:40
Speaker 4: those types of jobs, no big surprise that were that
7:43
Speaker 4: have been adversely impacted because you know, AI not generative,
7:47
Speaker 4: not the stuff that you use today to make funny
7:50
Speaker 4: pictures of your friends and stuff, but intelligent software software
7:58
Speaker 4: that adapts and learns effectively. It's been around for a while,
8:01
Speaker 4: so we have a sense for the types of jobs
8:03
Speaker 4: it complements, like paral legals. It's not going to replace them,
8:06
Speaker 4: but it'll do some of their work and allow them
8:09
Speaker 4: to focus on some of the more interesting parts of
8:11
Speaker 4: their job. And there are other jobs that are just
8:15
Speaker 4: as we talked about, repetitive and might be doomed. That's
8:19
Speaker 4: if your company's got the capital to make the investment.
8:21
Speaker 2: Yeah, the pace is pretty important. The capital required and
8:24
Speaker 2: the pace is pretty important, right. I mean, already these
8:27
Speaker 2: tools are pretty good at designing software and they couldn't
8:31
Speaker 2: do it at all a year ago. And so if
8:34
Speaker 2: it continues to increase of this pace, then I'm with you.
8:37
Speaker 2: I do fear what it would do to the labor
8:38
Speaker 2: market because there's just not enough time for companies to
8:44
Speaker 2: adapt and employees to adapt to the new reality of
8:47
Speaker 2: needing to change their skill set. If it slows down,
8:50
Speaker 2: and you know, it is just kind of slowly integrated
8:53
Speaker 2: into the workforce, and I'm kind of with you that, yes,
8:55
Speaker 2: some tasks will go away, but new jobs will be created.
8:59
Speaker 2: Bloomberg to about how humans can decide whether AI kills
9:03
Speaker 2: or creates jobs, and I keep going back to one
9:09
Speaker 2: kind of thought in my mind, which is, yeah, we
9:12
Speaker 2: could you know, set standards for how AI is used,
9:15
Speaker 2: we could regulate it in a way that wouldn't allowed
9:17
Speaker 2: to do certain things.
9:18
Speaker 3: I don't think that's likely to happen.
9:20
Speaker 2: And if I just put myself in the shoes of
9:22
Speaker 2: the CEO, right, what's easier to dream up? Hey, look
9:26
Speaker 2: at all these costs I can eliminate by killing off,
9:30
Speaker 2: you know, work currently done by humans and replacing it
9:33
Speaker 2: with technology, or dreaming up some new business innovation that
9:40
Speaker 2: I can increase my revenue somehow by integrating AI into
9:45
Speaker 2: the systems that we use. I'll tell you it's a
9:47
Speaker 2: lot easier to measure out and say, hey, these are
9:50
Speaker 2: the fifteen people that I can replace their jobs with
9:53
Speaker 2: AI than it is to say this is the new
9:56
Speaker 2: business model that I can dream up using the collaboration
9:59
Speaker 2: of AI in those existing humans.
10:01
Speaker 3: I don't know.
10:02
Speaker 2: Maybe maybe I'm missing on the boat, maybe I'm just
10:04
Speaker 2: not creative enough, But if I'm a CEO, that's how
10:07
Speaker 2: I'm looking at it.
10:08
Speaker 3: It's Yeah.
10:09
Speaker 4: The the idea that AI is going to wipe out
10:11
Speaker 4: broad swaths of the labor force is just very incomplete.
10:14
Speaker 4: Without demand, there will be no investment.
10:17
Speaker 3: So explain that mark. That's a really critical piece here.
10:21
Speaker 4: Let me let me just put it very simply, if
10:23
Speaker 4: none of us have a job, we're not going to
10:24
Speaker 4: be buying anything that AI cranks.
10:26
Speaker 3: Out like playing Yeah yeah.
10:30
Speaker 4: So you do need gainfully employed people to want to
10:34
Speaker 4: satisfy needs by purchasing stuff. And if if AI.
10:40
Speaker 2: If all of the wealth goes to Elon Musk and
10:43
Speaker 2: Jeff Bezos, they are not going to spend you are
10:46
Speaker 2: they're going.
10:46
Speaker 4: To be creating for products? What exactly will AI be doing?
10:49
Speaker 4: All these chatbots will just be talking to each other
10:52
Speaker 4: or something. So that that that that argument has a
10:55
Speaker 4: sort of Hollywood superficial sensational appeal, but it it it's
11:00
Speaker 4: one of those partial economy argument's going to look at
11:03
Speaker 4: the whole economy. Don't just look at supply, You're gonna
11:06
Speaker 4: look at demand. Where's that what is investment? Investment is
11:09
Speaker 4: just future demand. Savings is just future consumption. And that
11:15
Speaker 4: presumes that begs a question like where's the consumption going
11:19
Speaker 4: to come from if nobody's good a job.
11:20
Speaker 3: So I'm not in the alarmist side.
11:23
Speaker 4: I know you're you're not either, Mike. I don't think
11:25
Speaker 4: you're not in the alarmist camp.
11:26
Speaker 3: Be there.
11:26
Speaker 4: I don't think because it makes no sense to be
11:28
Speaker 4: in relative to historical experience. Yeah, if you look at
11:32
Speaker 4: how technologies have changed.
11:34
Speaker 2: Employment, it's not to minimize the effect that it might have. Right, Like,
11:37
Speaker 2: we used to have a lot of people that worked
11:39
Speaker 2: in auto manufacturing across the United States. They are probably
11:42
Speaker 2: far fewer than their work today than in nineteen eighty.
11:45
Speaker 2: I can see changes like that happening. But the idea
11:47
Speaker 2: that permanently higher unemployments shape you know, sweeps the nation,
11:51
Speaker 2: is very unrealistic.
11:53
Speaker 4: But Mike, you know in eighteen So I read this
11:56
Speaker 4: the other day, so it's sort of on the tip
11:57
Speaker 4: of my tongue. Eighteen seventy. The population worked in agriculture
12:02
Speaker 4: nineteen fifty and now it's like now it's less than
12:04
Speaker 4: two percent, and we and we produce more more agriculture goods.
12:10
Speaker 4: In like nineteen fifty, thirty five or so percent of
12:13
Speaker 4: the population worked in manufacturing. Now it's under ten percent,
12:16
Speaker 4: but we make more because we've become more productive. The
12:19
Speaker 4: rest of us have moved into financial services and healthcare
12:22
Speaker 4: and technology, so there's precedent for it. I guess the
12:27
Speaker 4: big question is will AI be more impactful more quickly?
12:33
Speaker 4: And that's obviously a serious question.
12:34
Speaker 2: Let's take a quick break. When we come back, we're
12:36
Speaker 2: playing a little bit of trivia here next on the
12:39
Speaker 2: Financial Exchange.
12:40
Speaker 1: Stay connected between shows. Follow the Financial Exchange on Instagram
12:44
Speaker 1: for daily clips on business news from New England and
12:47
Speaker 1: around the country. This is the Financial Exchange. Okay, in
12:51
Speaker 1: real time financial insight. As news breaks, The Financial Exchange
12:55
Speaker 1: is live on x Watch the show and follow us
12:58
Speaker 1: for the most up to date business This news you
13:00
Speaker 1: need to know is the Financial Exchange.
13:06
Speaker 5: Remember, you can watch the show live every day on
13:09
Speaker 5: our YouTube page. We'll breaking business news and all of
13:12
Speaker 5: our content is also archives. If you want to go
13:15
Speaker 5: back and see an interview or discussion about a specific topic,
13:19
Speaker 5: it's all there with the click of a button. Just
13:21
Speaker 5: serves The Financial Exchange on YouTube, and be sure to
13:25
Speaker 5: hit that subscribe button. Time for trivia here on the
13:28
Speaker 5: Financial Exchange.
13:30
Speaker 1: On this day.
13:31
Speaker 5: Back in eighteen eighty nine, the Eiffel Tower officially opened
13:36
Speaker 5: at an award ceremony in Paris. Upon its completion, the
13:40
Speaker 5: Eiffel Tower became the tallest structure in the world, a
13:44
Speaker 5: title it held for forty one years. So our trivia
13:49
Speaker 5: question today, what was the tallest structure in the world
13:52
Speaker 5: before the Eiffel Tower. Once again, what was the tallest
13:56
Speaker 5: structure in the world before the Iifel Tower. Be the
14:01
Speaker 5: sixth person today to text us at six one seven
14:04
Speaker 5: three six two thirteen eighty five with correct answer along
14:08
Speaker 5: with keyword trivia and win a Financial Exchange Show T shirt.
14:12
Speaker 5: Once again, the six correct response to text us to
14:14
Speaker 5: the number six one seven three six two thirteen eighty
14:18
Speaker 5: five with correct answer along with keyword trivia, We'll win
14:22
Speaker 5: that T shirt. See complete contest rules at Financial Exchange
14:26
Speaker 5: Show dot com.
14:27
Speaker 3: Mark.
14:27
Speaker 2: According to data from the IRS through I think this
14:31
Speaker 2: is through yeah March twentieth, the average individual tax refund
14:35
Speaker 2: was up eleven percent a year over year to three thousand,
14:38
Speaker 2: five hundred seventy one dollars. Means we all withhold too
14:41
Speaker 2: much from our taxes. This year was an exception because
14:44
Speaker 2: they changed a bunch of the laws midway through the year,
14:46
Speaker 2: so it wasn't terribly clear what to withhold. But that
14:49
Speaker 2: is a pretty big bump year over year. What does
14:53
Speaker 2: that come to dollar wise? I think like four hundred
14:56
Speaker 2: bucks increase compared to prior your tax refunds on average,
15:00
Speaker 2: which would normally.
15:01
Speaker 3: You know, we actually.
15:02
Speaker 2: Talked about this back in January February. It was, hey,
15:06
Speaker 2: you know, there are some slowdowns being indicated in the economy,
15:09
Speaker 2: but what sort of impact does a massive tax refund
15:13
Speaker 2: have on the spending of the American public. Unfortunately, for restaurants, spars,
15:21
Speaker 2: and you know where people would generally blow this money,
15:24
Speaker 2: A lot of this is getting eaten up by either
15:27
Speaker 2: actually higher gas prices or perceptions of higher future prices.
15:31
Speaker 2: I think both of those have an impact here. I
15:35
Speaker 2: was looking at data. The average household in twenty twenty
15:38
Speaker 2: five spent about one hundred and seventy seven bucks a
15:41
Speaker 2: month on gas, just on gasoline for their vehicle. So
15:46
Speaker 2: if we assume for a moment that gas prices were
15:49
Speaker 2: to average four bucks a gallon for twenty twenty six,
15:51
Speaker 2: which I'm not saying is what would happen, but you know,
15:54
Speaker 2: hypothetically possible means that your year over year increase in
15:58
Speaker 2: gasoline spending would be about six hundred per year for
16:01
Speaker 2: every household, more than eating up any of the gains
16:04
Speaker 2: you get from that additional tax refund, and I think
16:08
Speaker 2: most importantly eating into kind of the psyche of affordability
16:14
Speaker 2: for the average American is the real problem there?
16:17
Speaker 4: Yeah, you know, Mike, you you said all pretty much
16:20
Speaker 4: there is to say. I think on this, I don't
16:21
Speaker 4: really have anything to have any No, I mean that,
16:24
Speaker 4: and I was trying to compliment. It was a very
16:26
Speaker 4: complete and compact explanation. Yeah, it's it's it's like you
16:30
Speaker 4: said earlier, it's a the gas price hike is can
16:33
Speaker 4: be thought of as a tax increase. So what the
16:36
Speaker 4: government took, the government gave you with one hand, it
16:39
Speaker 4: it taketh away with the other.
16:41
Speaker 2: Then let's switch over to something that I know you're
16:43
Speaker 2: passionate about, which is four to oh one k's and
16:45
Speaker 2: allowing all sorts of new investments into them. So private
16:48
Speaker 2: credit and crypto just got easier to potentially put into
16:52
Speaker 2: four oh one k's in the future. I'm not sure
16:54
Speaker 2: it will ultimately happen, because I do think that these
16:58
Speaker 2: record keepers and do as on these four to one
17:01
Speaker 2: k's take that job very seriously. So I'm unclear just
17:05
Speaker 2: how much these are going to permeate. But what exactly
17:08
Speaker 2: happened here at the Department of Labor and what are
17:10
Speaker 2: we anticipating might happen next to.
17:13
Speaker 4: Well, when they when they when when the DL gives
17:16
Speaker 4: their blessing to something like this, they're effectively saying you
17:20
Speaker 4: can't be sued just because you put it in there.
17:22
Speaker 4: There are lots of plans that have big plans advised
17:26
Speaker 4: by sophisticated consultants with deep capabilities, that offer privately traded
17:31
Speaker 4: companies or private debt in the form of a bigger
17:36
Speaker 4: portfolio of something like a balanced fund or a target
17:40
Speaker 4: date fund that you might know from your lineup. So
17:42
Speaker 4: these vehicles are typically not stand alone. They're part of
17:46
Speaker 4: a diversified, balanced portfolio, and that limits the amount of
17:51
Speaker 4: damage that say that, say a collapse of a narrow
17:56
Speaker 4: market segment could do to a broader portfolio. With the
18:00
Speaker 4: basic principle, there is, of course, just diversification. So a
18:04
Speaker 4: lot of plans offer private market stuff today because they
18:07
Speaker 4: feel comfortable doing it, and they feel comfortable that if
18:10
Speaker 4: you're always worried as a plan sponsor that somebody's going
18:13
Speaker 4: to sue you for breach of fiduciary duty, you did
18:16
Speaker 4: something that a reasonably prudent expert would not have done.
18:21
Speaker 4: That's basically the standard. And the question is does just
18:26
Speaker 4: offering private market investments make you a negligent fiduciary. The
18:31
Speaker 4: answer now is going to be no, But you still
18:34
Speaker 4: have to do your due diligence. You can't just willy
18:36
Speaker 4: nilly put private market investments in your four oh one
18:40
Speaker 4: k a lineup because somebody you knew, somebody you met
18:43
Speaker 4: in an HR conference who works for another companies doing it.
18:46
Speaker 4: And this I think is going to be a huge
18:48
Speaker 4: hurdle for a lot of companies. And Mike, you already
18:50
Speaker 4: sort of hinted at this. Just because the DL says
18:52
Speaker 4: you can do it doesn't mean it's going to end
18:54
Speaker 4: up in everybody's four oh one k plan. It's then
18:57
Speaker 4: up to employer, the so called plan sponsor, to make
19:01
Speaker 4: that determination.
19:02
Speaker 2: My problem remains that the vast majority of people that
19:05
Speaker 2: I speak with who don't just go with the default
19:07
Speaker 2: option of the four oh one k, they generally select
19:10
Speaker 2: their investments by looking at the historical return. And granted
19:15
Speaker 2: a lot of these might not have that to offer,
19:17
Speaker 2: but given that that's how a lot of people select
19:19
Speaker 2: these things, I do worry about their ability to or
19:24
Speaker 2: willingness to really differentiate between investments and understand.
19:27
Speaker 3: How they all work.
19:28
Speaker 2: We've got to take a quick break full market recap
19:31
Speaker 2: next with Wall Street.
19:31
Speaker 1: Watch, bringing the latest financial news straight to your radio.
19:45
Speaker 1: Every day. It's the Financial Exchange on the Financial Exchange
19:48
Speaker 1: Radio Network. Tell you out full wool Street Watch treking
19:54
Speaker 1: the stocks, fandato, and the headlines driving markets so far
19:57
Speaker 1: today right here on the Financial extra Inge Radio Network.
20:01
Speaker 5: Markets are in rally mode as Wall Street continues to
20:04
Speaker 5: focus on the conflict in Iran, where President Trump reportally
20:07
Speaker 5: told AIDS he's willing to end the US military campaign
20:10
Speaker 5: against Iran, even if the Straight of four Moves remains
20:14
Speaker 5: largely closed. Gasoline also hit four dollars a gallon, the
20:18
Speaker 5: highest mark since twenty twenty two. Right now, the Dow
20:22
Speaker 5: is up about one percent or four hundred and thirty
20:24
Speaker 5: nine points higher, SMP five hundred up to one and
20:27
Speaker 5: a third percent or eighty four points hired, Nasdaq up
20:31
Speaker 5: one point eight percent, Russell two thousand up nearly two
20:34
Speaker 5: percent higher. Ten year Treasure Reel down one basis point
20:37
Speaker 5: at four point three two eight percent. In Oil up
20:41
Speaker 5: one percent. Hire today trading right around one hundred and
20:44
Speaker 5: three dollars a barrel. Big news in the food space
20:48
Speaker 5: this morning, where a Unilever agreed to combine with to
20:51
Speaker 5: combine its food business excuse me, with McCormick creating a
20:55
Speaker 5: new entity worth over sixty five billion dollars including debt.
21:00
Speaker 5: The deal marks a major strategy shift or Unilever, allowing
21:03
Speaker 5: it to focus on beauty, personal care, and home products.
21:06
Speaker 5: Unilever now down over six percent, while McCormick is pulling
21:10
Speaker 5: back over four percent. Meanwhile, Marvel Technology stock rallying nearly
21:15
Speaker 5: eight percent after Nvidia announced it will invest two billion
21:18
Speaker 5: dollars in Marvel as part of a strategic partnership. Shares
21:22
Speaker 5: an Appellas Pharmaceuticals rocketing one hundred and thirty five percent
21:26
Speaker 5: higher after Biogen announced it will acquire the company for
21:29
Speaker 5: five point six billion dollars in cash. Biogen down by
21:33
Speaker 5: five percent and athletic retailer Nike will report earnings after
21:39
Speaker 5: today's closing bell. I'm Tucker Silvan. That is Wall Street Watch.
21:42
Speaker 5: On the previous segment, we asked you the trivia question,
21:45
Speaker 5: what was the tallest structure in the world before the
21:48
Speaker 5: Eiffel Tower. That would be the Washington Monument. Steve from Westbrook,
21:54
Speaker 5: Maine is our winner today, taking home the Financial Exchange
21:56
Speaker 5: Show T shirt. Congrats to Steve and we played tree
22:00
Speaker 5: the every day here on the Financial looks Change See
22:03
Speaker 5: complete contest rules at Financial looks Change show dot com.
22:07
Speaker 2: Brand new guide from the Armstrong Advisory Group for the
22:10
Speaker 2: month of March is out right now and it's the
22:12
Speaker 2: last day of March. I want to tell you about
22:14
Speaker 2: it because it will not be available on the website tomorrow.
22:17
Speaker 3: It's all about divorce.
22:18
Speaker 2: And your financial strategy and financial plan, and while taboo
22:22
Speaker 2: and difficult to talk about, it is important to really
22:26
Speaker 2: think through the financial consequences of a divorce, should a
22:31
Speaker 2: marriage be heading that direction, or if you are post divorce,
22:35
Speaker 2: figuring out how you rebuild your financial life after the fact.
22:39
Speaker 2: It is pretty plainly obvious, but your expenses do not
22:43
Speaker 2: get cut in half if you are single compared to
22:47
Speaker 2: a married couple, they might decrease slightly here and there,
22:50
Speaker 2: but generally speaking they are not going to get cut
22:53
Speaker 2: in half, and so thinking through that budgeting strategy, thinking
22:56
Speaker 2: through the value of different assets is incredibly important. An
23:00
Speaker 2: example that I'll give somebody right, You've got a married
23:03
Speaker 2: couple and one is a high income earner making a
23:09
Speaker 2: quarter million dollars a year. The other is a teacher
23:13
Speaker 2: earning eighty thousand dollars a year. The value of say
23:17
Speaker 2: a four to oh one k a pre tax four
23:19
Speaker 2: oh one k to the person making a quarter million
23:22
Speaker 2: dollars is a lot less than the person making eighty
23:24
Speaker 2: thousand dollars. The reason is because of taxes. And if
23:27
Speaker 2: you are able to understand the minutia of all this,
23:31
Speaker 2: you can again effectively divide assets in a more efficient
23:35
Speaker 2: way that actually benefits you more and lets you hold
23:38
Speaker 2: on to the things that are important to you. So
23:40
Speaker 2: the value we place on different things becomes really important
23:44
Speaker 2: in figuring out the divisions and.
23:47
Speaker 3: The breakup of assets.
23:49
Speaker 2: If you have questions about this guide and you want
23:52
Speaker 2: to learn more, it's free. It's our March Guide on
23:55
Speaker 2: Divorce and your Financial Plan. We all know a family
23:58
Speaker 2: member that's either going through one has recently done so
24:01
Speaker 2: and get a free copy of the guide to better
24:05
Speaker 2: prepare yourself. The numbers eight hundred three nine three for
24:08
Speaker 2: zero zero one. Again it's our March Guide, only available
24:12
Speaker 2: today Armstrong Advisory dot Com or eight hundred three nine
24:15
Speaker 2: three for zero zero one.
24:17
Speaker 1: The proceeding was paid for by Armstrong Advisory Group, a
24:20
Speaker 1: registered investment advisor. Nothing in the ad or in any
24:22
Speaker 1: Armstrong guide a specific financial, legal or tax advice. Consult
24:25
Speaker 1: your own financial tax into state planning advisors before making
24:28
Speaker 1: any investment decisions. Armstrong may contact you to offer investment
24:31
Speaker 1: advisory services.
24:32
Speaker 2: Mark, We've got this piece on US government bonds in
24:36
Speaker 2: particular from Bloomberg and to summarize things about the bond
24:41
Speaker 2: market for a moment, because I feel as though the
24:43
Speaker 2: average investor understands equity markets fairly well, and I think
24:47
Speaker 2: there's a big lack of understanding about the bond market,
24:50
Speaker 2: in part because it is far larger in terms of
24:53
Speaker 2: issue and say in the number of different things that
24:55
Speaker 2: are out there. But generally speaking, you know, US government
24:58
Speaker 2: bonds seen as a safe haven when are getting really
25:00
Speaker 2: ugly in terms of economic times. Historically, investors have piled
25:05
Speaker 2: into them and waited out whatever sort of event it was.
25:08
Speaker 2: This was especially prominent, for example, during the Great Financial Crisis,
25:11
Speaker 2: but other moments in time too. The problem is when
25:15
Speaker 2: an economy is faced with kind of dueling concerns inflation
25:21
Speaker 2: and growth, that investors don't really seem certain about what
25:24
Speaker 2: to do. And you're seeing a little bit of that
25:26
Speaker 2: over the course of the last few weeks. What are
25:29
Speaker 2: we seeing and is it clear that one party is
25:32
Speaker 2: right or wrong about bonds right now.
25:36
Speaker 4: In terms of in terms of what has caused yields
25:39
Speaker 4: to rise, Like, is the what is the fear that's
25:42
Speaker 4: driving the sell off in bond prices?
25:44
Speaker 3: Yeah, I think that's the key question. I think so
25:46
Speaker 3: well you can.
25:47
Speaker 4: Yeah, I'm asking that kind of rhetorically. I don't, I don't,
25:50
Speaker 4: I don't know myself. The fact is nobody knows right.
25:53
Speaker 4: Like any other market, single explanations are usually incomplete. Well,
25:58
Speaker 4: look what we do know, Mike, is that interest rates,
26:00
Speaker 4: bond yields the payment you get twice a year if
26:04
Speaker 4: you own a bond a longer term government bond, or
26:08
Speaker 4: monthly if you own a bond mutual fund. Those yields
26:13
Speaker 4: have been going up because prices have been going down.
26:15
Speaker 4: And that's how the mechanics of bonds works. Wire price
26:19
Speaker 4: is going down. Well, it could be that people are
26:21
Speaker 4: worried about the inflationary impact of the spike in oil prices.
26:26
Speaker 4: If inflation goes up, the value of the interest payments
26:30
Speaker 4: you get in terms of what they will buy will
26:33
Speaker 4: go down. Said differently, a dollar will go less far
26:38
Speaker 4: if inflation goes up by more than expected, and so
26:40
Speaker 4: bond prices have to compensate for that by going down.
26:43
Speaker 4: That's just mechanics. It sounds complicated, but it's once you
26:47
Speaker 4: sort of think it through, it makes a lot of sense.
26:49
Speaker 4: So one explanation for the rise in yields is worries
26:53
Speaker 4: about inflation. However, we know that real or after inflation
26:58
Speaker 4: yields rise is responsible for most of the increase in
27:05
Speaker 4: bond yields over the past few weeks. How do you
27:07
Speaker 4: explain that. Well, there's a story in the Financial Times
27:10
Speaker 4: today about foreign entities, banks and governments selling US treasuries
27:18
Speaker 4: for various reasons of late, so that could be pushing.
27:23
Speaker 3: Up a rate.
27:23
Speaker 4: So it could also be worries about increased deficit spending. Mike,
27:27
Speaker 4: that's a little bit of a stretch, and that's the
27:28
Speaker 4: one people always pull off the shelf when they can't
27:31
Speaker 4: think of anything, myself included. So we don't really know.
27:34
Speaker 2: So during times of market downturns like we've been seeing. Right,
27:37
Speaker 2: we just talked about how Dow and NASDAK were in
27:39
Speaker 2: correction territory last week.
27:40
Speaker 3: They might be out of it now.
27:41
Speaker 2: But what have been the safe havens this time around,
27:44
Speaker 2: because it seems to me bonds haven't been, gold hasn't been.
27:50
Speaker 3: I suppose energy stocks probably have.
27:52
Speaker 2: But what have been the safe havens from this market
27:55
Speaker 2: event this time around?
27:57
Speaker 4: Yeah, we were talking about that earlier today internally, right,
28:00
Speaker 4: we were looking at major asset classes. We looked at gold.
28:03
Speaker 4: We looked at the US dollar, which has gone up
28:06
Speaker 4: relative to foreign currencies. People don't think of the dollars
28:09
Speaker 4: in their pocket as assets, but they are. They trade
28:13
Speaker 4: on exchanges. In fact, currency markets dwarf all other markets
28:17
Speaker 4: in terms of daily volume of trading. So foreigners have
28:22
Speaker 4: flocked to the US dollar, just not in the form
28:25
Speaker 4: of US treasuries. Other than that, Mic, like you suggested,
28:29
Speaker 4: the traditional safe havens. Maybe gold has safe haven characteristics.
28:33
Speaker 4: Maybe it's an inflation edge. Maybe it's a hedge against
28:36
Speaker 4: very bad leadership here and elsewhere, or something like that.
28:43
Speaker 4: You could pick your favorite reason. They simply have not
28:47
Speaker 4: held up in the face of stock market turbulence driven
28:51
Speaker 4: by geopolitical turmoil, which is not what you would expect.
28:56
Speaker 3: Necessarily.
28:57
Speaker 2: Let's take a quick break. Markets remains strong only in
29:00
Speaker 2: positive territory. Will recap them mandplate and do a bit
29:03
Speaker 2: of stack Roulette. Next on the Financial Exchange.
29:06
Speaker 1: Daily financial content in your feed when you want it.
29:09
Speaker 1: Follow the Financial Exchange on Instagram. Face is the Financial Exchange.
29:15
Speaker 1: The Financial Exchange is Life. On Series XM's Business radio
29:18
Speaker 1: channel one thirty two weekdays from eleven to noon, get
29:22
Speaker 1: the latest business and financial news from across the country
29:25
Speaker 1: and around the world, and keep up to date on
29:27
Speaker 1: how it might affect your wallet. That's the Financial Exchange
29:31
Speaker 1: weekdays from eleven to noon on Series XM's Business Radio
29:34
Speaker 1: Channel one thirty two. Face is the Financial Exchange Radio Network, Mark, I.
29:48
Speaker 2: Want to talk about this new use of artificial intelligence
29:52
Speaker 2: from a company called Public. I've heard of Public because
29:55
Speaker 2: they do they do advertise a whole bunch on platforms
29:59
Speaker 2: that I listen, and two I don't know if other
30:02
Speaker 2: people have, but it's an investment company called Public, and
30:05
Speaker 2: it's effectively creating AI agents that allow you to the
30:10
Speaker 2: wallshert journal article is about buying the dip, which in
30:14
Speaker 2: investor terms, is doing something like a buy limit order
30:18
Speaker 2: or a stop loss. They're rolling out this functionality. To me,
30:22
Speaker 2: it seems like more of an advertising blitz than you know,
30:26
Speaker 2: anything that's going to be terribly useful, and I think,
30:30
Speaker 2: well two points that I would make. One, if you
30:34
Speaker 2: need to use an AI agent to learn how to
30:37
Speaker 2: do something like this, I'm not sure.
30:40
Speaker 3: It doesn't indicate to me that.
30:42
Speaker 2: You are going to fully understand how these things work,
30:44
Speaker 2: and I think might set you up for some big
30:46
Speaker 2: mistakes in doing so. I think learning how these things
30:49
Speaker 2: do work is great for somebody that's going to invest
30:52
Speaker 2: their own portfolio, but having an AI agent that's going
30:54
Speaker 2: to do it for you kind of skips over it
30:56
Speaker 2: and doesn't really seem like it would save you a
30:58
Speaker 2: whole bunch of time and might lead you to do
31:01
Speaker 2: things that you don't fully understand, So buyer beware. Second piece,
31:04
Speaker 2: this doesn't really have to do with public specifically, but
31:08
Speaker 2: I keep running into stories over and over about people
31:13
Speaker 2: who are thinking that they are hiring an investment professional
31:18
Speaker 2: and end up getting scammed out of money. And for
31:21
Speaker 2: anybody that works in the industry, they already know this.
31:24
Speaker 2: But for the general public, if you are thinking about
31:27
Speaker 2: finding a new investment platform or hiring an individual to
31:31
Speaker 2: manage your portfolio or invest in crypto for you, there
31:35
Speaker 2: are basically two places that that person is required to
31:38
Speaker 2: register by US law. It's either at FENRA or the SEC,
31:43
Speaker 2: and sometimes both. And they've got really nice public facing
31:46
Speaker 2: websites where I can look up a person or a firm,
31:49
Speaker 2: look up their zip code and find them and look
31:51
Speaker 2: up are they actually licensed to do what they're saying
31:54
Speaker 2: they're doing? Are they licensed to do it in the
31:56
Speaker 2: state that I live in? Do they have a bunch
31:58
Speaker 2: of disclosures about what they've done in the past. The
32:01
Speaker 2: websites are brokercheck dot Finra dot org and advisorinfo dot
32:05
Speaker 2: SEC dot gov. If you just google either of those
32:08
Speaker 2: you will find them. But pretty critical first step to
32:11
Speaker 2: take before you consider hiring somebody instead of just taking
32:14
Speaker 2: their word or looking at their fancy website. Especially in
32:17
Speaker 2: the days of AI, any of those things are really
32:20
Speaker 2: easy to fake. So if you're thinking about doing any
32:23
Speaker 2: of that, just this is I guess a bit of
32:26
Speaker 2: a public public service announcement, like, just use one of
32:30
Speaker 2: these two tools, look the person up, don't go blindly
32:33
Speaker 2: wire money. I know that sounds silly, but I can
32:36
Speaker 2: tell you that it is happening over and over and
32:39
Speaker 2: over again, especially for with seniors who don't understand how
32:42
Speaker 2: to navigate these tools. So again, advisorinfo dot sec dot
32:46
Speaker 2: gov or brokercheck dot finra dot org to just look
32:50
Speaker 2: somebody or a company up and see what it is
32:52
Speaker 2: that they claim to do. Mark, what do you have
32:54
Speaker 2: for a stackrolette?
32:55
Speaker 1: Mike?
32:55
Speaker 4: Related to the point we were just talking about, we
32:57
Speaker 4: were kind of I was grasping its straws at explanations
33:01
Speaker 4: for why treasuries might have lost some of their allures
33:05
Speaker 4: a safe haven asset of late, and what longer term
33:09
Speaker 4: trends could contribute to that erosion over time. Bloomberg has
33:14
Speaker 4: an article today the headline as Barclays predicts growing treasury
33:18
Speaker 4: market will need bailouts, and the upshot of this is
33:22
Speaker 4: that treasuries are mostly held by banks. These dealers always
33:28
Speaker 4: at the ready to buy and sell them. So you
33:30
Speaker 4: have this, you have a b This isn't I shouldn't
33:33
Speaker 4: use this phrase, but I will. You have like a
33:36
Speaker 4: buyer of last resort for treasuries in the form of banks.
33:40
Speaker 4: But the problem is that the treasury market has grown
33:44
Speaker 4: at about ten percent a year since two thousand and nine.
33:47
Speaker 4: Whereas bank capital the dry powder, if you will, that
33:50
Speaker 4: they have available to hold these treasuries and serve as
33:55
Speaker 4: that facilitator has grown by about four percent a year.
33:58
Speaker 2: And to be clear, that ten percent a year is
34:01
Speaker 2: just because our government is spending money that it doesn't happen.
34:04
Speaker 4: Oh, it's just it's recklessness for them. I mean, there
34:06
Speaker 4: are a couple of recessions in there.
34:08
Speaker 2: You're talking about the technicalities that we have to talk about, like, no,
34:10
Speaker 2: you're right, deficit the reason here, yeah, yeah, yeah, yeah yeah.
34:13
Speaker 4: So government when it spends money, it can text and spend,
34:16
Speaker 4: or it can borrow and spend, which is just future taxes.
34:19
Speaker 4: So the point they make in this article, and this
34:21
Speaker 4: ties into what we were talking about earlier, is that
34:24
Speaker 4: banks may not be able to fill that role. So
34:26
Speaker 4: the government itself is going to have to step in
34:29
Speaker 4: and buy if and effectively act as buyer of last resort.
34:33
Speaker 4: Maybe that means the FED, Maybe that means some new
34:38
Speaker 4: arrangement that impacts liquidity in the treasury market. That's that's
34:41
Speaker 4: another reason why the character, the safe haven character that
34:45
Speaker 4: we take for granted for treasuries could is not is
34:50
Speaker 4: not somebody's birthright. You have to sort of earn that,
34:53
Speaker 4: to your point, with good responsible fiscal policy, and we
34:57
Speaker 4: have not done that.
34:58
Speaker 2: You're right, I know that this next piece is a
35:02
Speaker 2: bit like telling people to be financially responsible when they
35:05
Speaker 2: go to Disney World, But according to CNBC and Edmonds,
35:11
Speaker 2: nearly one in three car buyers are underwater on trade ins,
35:15
Speaker 2: meaning they go to trade in their car they owe
35:17
Speaker 2: more than the vehicle is worth. In my mind, there
35:21
Speaker 2: are only really two scenarios where this is justifiable from
35:26
Speaker 2: a personal finance perspective. One is the car just gets totaled,
35:30
Speaker 2: completely out of your control, and what other choice do
35:32
Speaker 2: I have. I'm underwater on the thing because you know,
35:35
Speaker 2: I didn't put any money down, I drove it off
35:37
Speaker 2: the lot it got totaled, or I drove it for
35:39
Speaker 2: a year, it got total and it's worthless. The second
35:41
Speaker 2: would be your life changes in such a dramatic way
35:45
Speaker 2: that the vehicle you currently own doesn't really fit that lifestyle.
35:48
Speaker 2: So I bought a Honda Civic and I had quadruplets.
35:52
Speaker 2: That's obviously not going to work.
35:54
Speaker 5: Why would you need in your car?
35:57
Speaker 2: I am guessing. I'm guessing that when one in three
36:01
Speaker 2: Americans are doing this, meaning one in three car buyers
36:04
Speaker 2: are underwater on their vehicles, that they don't fall into
36:09
Speaker 2: one of those two categories, or at least the majority
36:11
Speaker 2: of them don't fall into one of those two categories,
36:14
Speaker 2: So can we I think this is one area where
36:17
Speaker 2: I'm willing to just blindly say that I think this
36:20
Speaker 2: is bad personal finance. If you are in that one
36:24
Speaker 2: of three people that is forced to trade in a
36:27
Speaker 2: vehicle that's underwater and roll that loan into a new
36:30
Speaker 2: underwater vehicle, why we allow you know why we allow this?
36:36
Speaker 2: Like we don't allow you to do this in the
36:38
Speaker 2: mortgage market, for example, we do allow it in the
36:41
Speaker 2: car market. I'm guessing for some obvious reasons, and to
36:45
Speaker 2: be fair, it's a lot smaller dollar amount than we
36:48
Speaker 2: do in the mortgage market. But yeah, this is just
36:51
Speaker 2: generally bad financial decision making. I know cars are expensive,
36:57
Speaker 2: I know that circumstances dictate what you have to do,
37:00
Speaker 2: But the average negative equity, by the way, reached seventy
37:03
Speaker 2: two hundred bucks in the fourth quarter of twenty twenty five.
37:06
Speaker 2: The only reason I'm not, you know, alarmist about this
37:09
Speaker 2: one exces.
37:10
Speaker 3: There's two reasons.
37:11
Speaker 2: One, the market for auto loans is not so large
37:15
Speaker 2: that it's likely to cause a financial crisis in and
37:17
Speaker 2: of itself. The part that surprised me a lot. Was
37:21
Speaker 2: All we've done here is return back to what we
37:23
Speaker 2: were dealing with pre COVID. In twenty nineteen, the average
37:26
Speaker 2: share of trade ins with negative equity was actually higher
37:29
Speaker 2: than it is now. He was thirty three point six
37:31
Speaker 2: percent according to JD Power back in twenty nineteen. Now
37:35
Speaker 2: we're at about thirty point five percent. So it's not
37:38
Speaker 2: that our decision making around car purchases is newly bad.
37:44
Speaker 2: It's always been bad, and we had some reprieve over
37:47
Speaker 2: the last five years.
37:49
Speaker 3: When there was a lot of stimulus to be thrown
37:51
Speaker 3: out there.
37:52
Speaker 2: We've got to go. That's all the time we have
37:54
Speaker 2: on the financial exchange. The Dow, SMP, and Nasdaq all
37:57
Speaker 2: strongly in rally territory. Dow Jones Industrial Average up four
38:02
Speaker 2: hundred and forty nine points about one percent, SMP up
38:05
Speaker 2: eighty four one and a third in the Nasdaq up
38:07
Speaker 2: three hundred and seventy four points or one point eight percent.
38:10
Speaker 3: We will be back at it tomorrow.
38:12
Speaker 2: Folks, have a great rest of your day.