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Is Warren Buffett sending a message that nobody is listening to? · The Financial Exchange Show

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Speaker 1: is the Financial Exchange with Chuck Zada and Mark Vandetti.
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Speaker 2: Chuck, Mark and Tucker with you finishing up the last
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Speaker 2: full week of trading before the Thanksgiving holiday. Normally Thanksgiving
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Speaker 2: would be yesterday, but given how the UH month falls,
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Speaker 2: we have the latest Thanksgiving possible with it falling on
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Speaker 2: the twenty eighth this month, and so it's all kinds
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Speaker 2: of confusing. I mean, I'm seeing like pictures from a
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Speaker 2: year ago and it's like, oh, like it was thanks
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Speaker 2: Wait a minute, What's what's going on here? In any case,
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Speaker 2: I will, by the way, say I do think that
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Speaker 2: Thanksgiving is a better holiday setup than many of our
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Speaker 2: other holidays in that you know it's always going to
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Speaker 2: be the fourth Thursday of the month. Why do we
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Speaker 2: not do this with other holidays as well?
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Speaker 1: You did?
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Speaker 2: They kind of float around the calendar Halloween? Why not
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Speaker 2: just make it the fourth Friday in October so everyone
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Speaker 2: has the ability to go out and do what they
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Speaker 2: want without it being a school night or a weekday
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Speaker 2: or whatever it is.
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Speaker 3: No, I like a particular day because I know what
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Speaker 3: day it is. Now I have to go searching for
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Speaker 3: it on the calendar. Okay, seven seconds.
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Speaker 2: Have fun with you know, Tuesday, fourth of July. Yep,
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Speaker 2: be fair, you know, like, yeah, that's that's great. You know,
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Speaker 2: think of it this way. We have President's Day, which
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Speaker 2: celebrates the birthdays of you know, all the president. We
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Speaker 2: don't do it on their actual birthday. We have President's Day.
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Speaker 4: It wasn't that originally Washington's birthday, though I believe.
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Speaker 2: Washington was not born on the second Tuesday in February.
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Speaker 2: When it's observed, is it like the holiday itself is
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Speaker 2: a Monday, always, same with Martin Luther King Day. Like
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Speaker 2: we do these things on fixed days because it makes
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Speaker 2: it easier for us. Series all right, now again the
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Speaker 2: fourth July, I kind of understand because it's the fourth
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Speaker 2: of July, fourth of July and the eighth.
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Speaker 4: But but but freaking Halloween, like what we could just
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Speaker 4: call Independence Day.
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Speaker 2: Jimmy Halloween was not born on October thirty first, you know,
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Speaker 2: Veterans Day we observe on it's always the first Monday
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Speaker 2: after the eleventh. We like, that's when we observe it,
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Speaker 2: even if it happens before banks are closed that Monday.
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Speaker 2: So like we do this stuff and so I'm I
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Speaker 2: just think that we could get more into consistency. Consistent
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Speaker 2: inconsistency is what I'm looking for. That's what I want
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Speaker 2: is just to have it be on the same weekday
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Speaker 2: every year, so that we're not trying to scramble around
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Speaker 2: and be like, well, new Year's falls on it. No,
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Speaker 2: I guess New Year's is another one of those you
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Speaker 2: can't really change.
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Speaker 3: No, you can't chuck No.
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Speaker 4: Honestly, I've never heard anybody complain about this before. It's
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Speaker 4: I'm not saying it's not a legitimate grievance. Clearly, you've
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Speaker 4: got to be in your your bonnet.
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Speaker 2: But here's the thing, it's in my life I've often
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Speaker 2: searched for true originality, and it appears that I finally
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Speaker 2: found it in wanting more holidays to be like Thanksgiving.
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Speaker 2: As far as.
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Speaker 4: Where would you even go? Who would you petition to
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Speaker 4: get that done?
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Speaker 2: I mean it's a federal thing, right, Where should we
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Speaker 2: write to agency handles holidays?
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Speaker 4: It's probably just tweeted Elon Musk, He'll probably agree to
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Speaker 4: do it.
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Speaker 2: What agency do you think actually schedules federal holidays? Agency?
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Speaker 2: It's probably Congress? Yes, So we got to start writing
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Speaker 2: Congress on this. Actually, I'm sure they'll be able to
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Speaker 2: get it done. They're pretty quick on things. You know,
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Speaker 2: there will be no problem. Let's talk a little bit
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Speaker 2: about the market with expectations of the inc I Trump administration.
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Speaker 2: Piece of New York Times the high Risk, high reward
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Speaker 2: Trump Market, and look, I'll read right from here because
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Speaker 2: I think there's some really good things in here. Aspects
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Speaker 2: of the Trump platform are bomb for the markets. He
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Speaker 2: promises lower corporate taxes and less regulation. Those assurances are
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Speaker 2: widely being interpreted as a recipe for fat company profits
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Speaker 2: and a prosperous stock market. The President elect is also
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Speaker 2: expected to try to extend tax cuts that he signed
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Speaker 2: into along twenty seventeen and expire at the end of
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Speaker 2: twenty twenty five. So that's, you know, kind of Hey,
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Speaker 2: these are things that you know historically have helped markets,
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Speaker 2: but not all of his program is a positive for growth.
5:36
Speaker 2: Mister Trump is a self described tariff mancung for sharply
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Speaker 2: increasing tariffs on China and lesser but substantial levies on
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Speaker 2: other trading nations. Furthermore, he has promised a drastic reduction
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Speaker 2: immigration and a tsunami of deportations, so I think that
5:50
Speaker 2: when we look at this the proposed policies, some of
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Speaker 2: them would potentially, in certain situations, be either very good
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Speaker 2: or very bad for the economy. And so trying to
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Speaker 2: make sense out of what the Trump two point zero
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Speaker 2: economy looks like is kind of challenging because it's going
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Speaker 2: to depend on the timing, size, magnitude, and actual implementation
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Speaker 2: of all these things and what actually comes to fruition
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Speaker 2: and what is simply a campaign promise that doesn't get fulfilled,
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Speaker 2: because every politician has those.
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Speaker 4: The number one, of course, threat to economic stability is
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Speaker 4: his strong feeling, a parent strong feeling, and it's been
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Speaker 4: reinforced by various I don't know, spokespeople, Toty's whatever you
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Speaker 4: want to call Musk and others that the president should
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Speaker 4: have a role in setting interest rates. It doesn't seem
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Speaker 4: like the market is appreciating how destabilizing that could be.
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Speaker 4: The second a politician gets his or her hands on
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Speaker 4: interest rates, inflation expectations probably go up because you don't
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Speaker 4: see President Trump or anybody else as likely to say, no, no,
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Speaker 4: we got to raise rates next month. Inflation's a little
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Speaker 4: bit too hot. I want to slow the economy down
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Speaker 4: and possibly push it into recession, which was the whole
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Speaker 4: rationale for central bank independence, which is this sort of
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Speaker 4: technical name for a FED. Think of it like the
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Speaker 4: Supreme Court. It would be weird, although constitutionally they're obviously
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Speaker 4: very different. If the FED is a creature of Congress,
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Speaker 4: and the executive branch couldn't theory control the FED if
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Speaker 4: Congress gave it the power to, unlike with the Supreme Court.
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Speaker 4: So this analogy doesn't work, doesn't go that far, but
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Speaker 4: it would be weird for the President to have a
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Speaker 4: say in Supreme Court decisions, at least under our current structure.
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Speaker 4: It'd be equally weird after several decades of hard won
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Speaker 4: FED independence and a lot of evidence. Every monetary economist,
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Speaker 4: and this is a specialty that is populated by people
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Speaker 4: who look at nothing but what constitutes good rules and
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Speaker 4: practices for conducting monetary policy. What the FED does. It
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Speaker 4: controls the money supply and indirectly interest rates. Everybody agrees
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Speaker 4: almost to a person, that FED independence, at central bank independence,
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Speaker 4: not just our FED, is a good thing and associated
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Speaker 4: with better outcomes. Lower inflation or stable inflation. Those two
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Speaker 4: things are related and in the long run, higher economic
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Speaker 4: growth so that would be to call it disruptive if
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Speaker 4: we change that relationship is a huge understatement that to
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Speaker 4: me is the number one risk. Tariffs can be reversed,
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Speaker 4: tax rates can be changed, regulations come and go. If
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Speaker 4: we lose fed independence, Chuck, what president is likely to
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Speaker 4: give that? Back to the ved.
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Speaker 2: Question, just because a lot of times you'll hear, whether
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Speaker 2: it's politicians or individuals, say, look, it's not fair that
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Speaker 2: you know an unelected group is making this policy. This
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Speaker 2: should be something that you know people are having a
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Speaker 2: say in when it comes to elections. Your thoughts and
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Speaker 2: or critiques of that view.
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Speaker 4: I would say elected officials and we indirectly, as a consequence,
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Speaker 4: do have a say. Appointments are made by the President
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Speaker 4: and approved to the Federal Reserve Board anyway in Congress,
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Speaker 4: and approved by the Senate, right the Senate by Congress
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Speaker 4: our represent Now, if the Senate was still appointed by governors,
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Speaker 4: that changed over one hundred years ago, as you know
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Speaker 4: very well, that would be a different story. But they
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Speaker 4: are indirectly accountable. They serve terms, those terms are limited,
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Speaker 4: they're reappointed. We do have a say, and this is
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Speaker 4: true of the head of the FBI. Lots of federal agencies. Sure,
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Speaker 4: you could argue that many of these federal agencies agencies,
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Speaker 4: excuse me, should be eliminated or curtailed. Different argument, So that,
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Speaker 4: to me is the big threat to the to the
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Speaker 4: stock market, which is not pricing this thread in, it seems,
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Speaker 4: and the economy too. Those other policies could have profound
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Speaker 4: and deep and widespread implications, but they can always be
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Speaker 4: reversed fed independence, Chuck. Once it's lost, I'm afraid it
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Speaker 4: could take a generation or more to be re established
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Speaker 4: because it took decades to get to this point.
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Speaker 2: Let's take a quick break here. When we come back,
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Speaker 2: talk a little bit about Berkshire Hathaway sitting on three
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Speaker 2: hundred and twenty five billion dollars and what good old
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Speaker 2: Warren has planning on doing with it.
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11:06
Speaker 2: So Warren Buffett is a person and widely acknowledged, as
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Speaker 2: you know, one of the greatest investors in history and
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Speaker 2: in particular of you know, the twentieth century and early
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Speaker 2: twenty first and Buffett's company, Berkshire Hathaway, typically holds an
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Speaker 2: awful lot of cash if you look from you know,
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Speaker 2: basically twenty fifteen through twenty twenty two, they were holding
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Speaker 2: between one hundred and one hundred and fifty billion dollars
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Speaker 2: in cash at any particular point in time. Something interesting
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Speaker 2: has happened in the last couple of quarters, though at
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Speaker 2: the end of twenty twenty three nothing was too out
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Speaker 2: of line. Berkshire Hathaway was still holding about one hundred
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Speaker 2: and sixty seven billion in cash, so up a little bit,
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Speaker 2: but nothing, you know, dramatic. But in the last three
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Speaker 2: quarters that cash pile has more than doubled to three
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Speaker 2: hundred and twenty five billion dollars now, so there's been
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Speaker 2: a very rapid build up in cash for Buffet. And
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Speaker 2: this raises, not begs, the question, Hey, does Warren Buffett
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Speaker 2: know something about where the economy's gonna go? And the
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Speaker 2: answer is, well, he knows something about the economy. Whether
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Speaker 2: it's where it's gonna go is unclear. But you get
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Speaker 2: this piece titled you Know Buffet's three hundred and twenty
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Speaker 2: five billion dollar cash hoard is an early warning signal,
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Speaker 2: and it's pretty much saying that Buffet, you know, knows
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Speaker 2: when markets are expensive and he stays clear of him then,
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Speaker 2: and I'm gonna make the case that the size of
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Speaker 2: the cash pile has absolutely nothing to do with what
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Speaker 2: Buffet is thinking. And here's why. In two thousand and one,
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Speaker 2: after the dot com bubble burst, Berkshire Hathaway's cash pile
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Speaker 2: was about forty billion dollars. It stayed around forty billion
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Speaker 2: dollars until oh, g let's see, got up to around
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Speaker 2: forty seven billion in September of seven, right before the
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Speaker 2: financial crisis hit, So it didn't budge at all. It
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Speaker 2: expanded by like seventeen percent over a seven year period,
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Speaker 2: you know, compound annual growth rate of two and a
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Speaker 2: half percent. It then went down all through eight from
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Speaker 2: and part of that is just because look, when you
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Speaker 2: have you know, global financial crisis and everything, even insurers
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Speaker 2: are affected by that and so you know they have
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Speaker 2: some losses and things like that. But there wasn't any
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Speaker 2: great build up then, and likewise, even before the dot
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Speaker 2: com bubble, it wasn't something where Buffett saw this, you know,
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Speaker 2: giant build up there as well. In December of ninety eight,
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Speaker 2: Buffett's Berkshire Hathaway was holding about fifteen billion in cash.
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Speaker 2: By March of two thousand, they were only holding four billions.
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Speaker 2: So there really aren't facts and evidence that the size
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Speaker 2: of Buffett's cash pile is indicative of what he thinks
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Speaker 2: about how the market's going to do or how expensive
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Speaker 2: it is at any point in time, because we haven't
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Speaker 2: seen this kind of build up from them prely in
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Speaker 2: advance of any problems.
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Speaker 4: Buffett's an active manager, and any active manager has to
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Speaker 4: make a decision. Do I invest in something like the
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Speaker 4: S and P five hundred, which would make them an
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Speaker 4: index fund and you wouldn't pay high active management fees
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Speaker 4: for that. Do I depart from the S and P
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Speaker 4: five hundred overweighting some sectors and stocks underweighting others? And
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Speaker 4: if so, how much? To your point when you started
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Speaker 4: this segment, Buffett has on average been a pretty successful
14:26
Speaker 4: active manager. We all have exposure to active managers. If
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Speaker 4: you have before one day and you look at the
14:30
Speaker 4: roster of funds available to you, some of them are
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Speaker 4: probably active.
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Speaker 2: I mean, look, ultimately, if you own the S and
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Speaker 2: P five hundred. We talk about it as a passive index,
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Speaker 2: but there still are criteria that they have active. It's
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Speaker 2: a more active instrument than people think.
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Speaker 4: Yeah, it's not strictly market capitalization i e. Total share value.
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Speaker 2: Of their profit requirements.
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Speaker 4: Yeah, they have a few, and there's evidence that that's
14:54
Speaker 4: actually added a little bit of value. At least the
14:56
Speaker 4: last time I read about that subject, which was now
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Speaker 4: a long time ago. So the point I want to
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Speaker 4: make about Buffett is his job as an active manager,
15:03
Speaker 4: and this is tree of any active manager that follows
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Speaker 4: a fundamental bottom up strategy. That's an important qualifier. I
15:08
Speaker 4: don't worry too much about it. But not every active
15:10
Speaker 4: manager approaches markets the same way. They want to buy
15:13
Speaker 4: something that's worth a dollar for fifty cents on the
15:16
Speaker 4: dollar or seventy five cents on the dollar, and they
15:18
Speaker 4: use various measures forgetting it, how discounted something might be.
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Speaker 4: He's not finding as many attractive opportunities today, many discounted
15:27
Speaker 4: businesses as he was a year or two years, or
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Speaker 4: is a percentage of assets, say five years ago. He'd
15:33
Speaker 4: probably tell you I have no opinion on the near
15:35
Speaker 4: term direction of the economy. All I know is that
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Speaker 4: good companies are expensive right now. Their prospects are fully
15:43
Speaker 4: priced in, so to speak, He's not finding the bargains
15:46
Speaker 4: that he likes that's at face value. How you interpret this,
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Speaker 4: Does that bode well for future stock market growth? I'd
15:53
Speaker 4: argue that it probably doesn't if his forecasting ability is strong,
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Speaker 4: and I'm not saying that it is. But if you
16:00
Speaker 4: got him in a if you got him in a
16:03
Speaker 4: moment of unvarnished truth, he'd probably tell you that he
16:06
Speaker 4: thinks stocks are way too expensive and that's why he's
16:09
Speaker 4: not touching some But you know, if you're an investor,
16:11
Speaker 4: at the same time, you got ask, do I want
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Speaker 4: my active manager holding ten percent? I don't know what
16:16
Speaker 4: percentage of his assets that is? Ten percent sounds a
16:19
Speaker 4: little high. Is probably higher that it's it's probably higher
16:23
Speaker 4: than that, a little low, probably higher than that.
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Speaker 2: If I'm reading this right, it's actually closer to twenty
16:30
Speaker 2: five percent. A little low.
16:31
Speaker 1: This is what I meant saying.
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Speaker 4: Yeah, So you can't read that as saying anything other
16:38
Speaker 4: than he's pessimistic about near term return prospects. Sure, because
16:43
Speaker 4: he's not finding bargains, and that's what any act all
16:45
Speaker 4: active managers have who take a bottom up fundamental value
16:49
Speaker 4: oriented approach, are overweight cash right now for the very
16:53
Speaker 4: same reason, though not to that degree. Why would you
16:55
Speaker 4: pay him active manager to hold twenty five cents out
16:58
Speaker 4: of every dollar you invest with them in cash?
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Speaker 2: How much of this also just has to do with
17:04
Speaker 2: and not so much of this, but just you think
17:06
Speaker 2: about the evolution of Berkshire and how it's gotten to
17:08
Speaker 2: the size that it's at today. You get to a
17:12
Speaker 2: certain size and it becomes harder to deploy that cash
17:16
Speaker 2: as well. When when you've got you know, a trillion
17:18
Speaker 2: dollars in assets that you are managing, Hey, you can't
17:23
Speaker 2: the stuff that worked for you when you were managing
17:25
Speaker 2: twenty billion dollars, it doesn't work the same way when
17:29
Speaker 2: you're managing this much, simply because you're not gonna look
17:33
Speaker 2: at this and say, hey, I found this great business
17:36
Speaker 2: that's gonna be you know, it's gonna cost us, you know,
17:39
Speaker 2: one hundred million dollars and this is a great business. Well, okay,
17:43
Speaker 2: it's not gonna have any impact on your actual bottom
17:46
Speaker 2: line because it's such a small fraction of your you know,
17:49
Speaker 2: your your your book. On the other hand, you start saying, well, gee,
17:52
Speaker 2: you know, do I need to take just you know,
17:54
Speaker 2: these stakes in companies that we don't operate the apples
17:57
Speaker 2: and banks of Americas of the world, And okay, what
18:02
Speaker 2: edge do I have that I'm any any better than
18:04
Speaker 2: people at picking publicly traded companies and how they'll do
18:07
Speaker 2: as opposed operating them. And you kind of look at
18:10
Speaker 2: and you say, I don't know that I do, and
18:12
Speaker 2: maybe that's part of the reason why they're trimming some
18:15
Speaker 2: of their publicly traded stakes and things like that. So
18:17
Speaker 2: it's hard to untangle what's going on. But there are
18:20
Speaker 2: a few different possibilities there.
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Speaker 4: Yeah, I think the one clear conclusion is that there
18:28
Speaker 4: are fewer bargains. I know, I'm repeating myself a little bit.
18:30
Speaker 4: There are fewer bargains today. If you look at cash
18:32
Speaker 4: is a percentage of his total assets under management. He's
18:35
Speaker 4: finding fewer bargains yet, and he found five years ago.
18:39
Speaker 4: That's really all you can say given the data that
18:41
Speaker 4: we have at our fingertips.
18:42
Speaker 2: And it doesn't mean that he's going to find them
18:44
Speaker 2: next week or next year. It says nothing about how
18:49
Speaker 2: long it may take for the market to present him
18:51
Speaker 2: with attractive options.
18:53
Speaker 4: Oh yeah, he'll keep his power.
18:54
Speaker 2: We were you and I were talking about this this morning.
18:56
Speaker 2: The irrational, exuberant speech from Alan Greenspan was I'm pretty
19:00
Speaker 2: sure we settled on nineteen ninety six for it, maybe
19:04
Speaker 2: early ninety seven at the latest.
19:05
Speaker 1: No, it was late.
19:06
Speaker 4: It was December ninety six. You're right, early December nineteen
19:08
Speaker 4: ninety six.
19:09
Speaker 2: The party didn't stop until four years later. And even
19:15
Speaker 2: then it still didn't fully stop for another two years.
19:18
Speaker 2: You know, the people have to like, oh, the tech
19:20
Speaker 2: bubble popped, and it was just this one time thing.
19:22
Speaker 2: It was three years before you finally got that thing
19:25
Speaker 2: to bottom. Let's take a quick break here. When we
19:27
Speaker 2: come back, we got Wall Street Watch and we're talking
19:29
Speaker 2: Treasury secretary contenders after this.
19:42
Speaker 1: Like us on Facebook and follow us on Twitter. Act
19:45
Speaker 1: TFE show Breaking business news is all ways first right
19:49
Speaker 1: here on the Financial Exchange Radio Network. Time now for
19:54
Speaker 1: Wall Street Watch. A complete look at what's moving market
19:57
Speaker 1: so far today right here on the final Inchel Exchange
20:00
Speaker 1: Radio Network.
20:03
Speaker 3: Markets are on pace for a winning week and are
20:06
Speaker 3: currently in mixed territory. Right now, the Dow is up
20:10
Speaker 3: by one hundred and ninety four points, just under a
20:13
Speaker 3: half a percent, SMP five hundred is edging three points higher,
20:18
Speaker 3: and the Nasdaq is off by about a third of
20:20
Speaker 3: a percent or fifty six points. Rusted two thousand up
20:23
Speaker 3: by over one percent this morning. Ten year treasureealed is
20:26
Speaker 3: flat at four point four to two percent, and crude
20:30
Speaker 3: oil is up nearly three quarters of a percent, trading
20:34
Speaker 3: just above seventy.
20:35
Speaker 1: Dollars a barrel.
20:36
Speaker 3: We have more retailer earnings for you this morning, as
20:39
Speaker 3: GAP raised its sales outlook for the year for the
20:42
Speaker 3: third time in twenty twenty four. The apparel retailer said
20:46
Speaker 3: it now expects full year sales to grow between one
20:49
Speaker 3: and a half and two percent. Gap stock is up
20:52
Speaker 3: by six percent on that news. Meanwhile, shares in TurboTax
20:57
Speaker 3: pairent company into it down by four percent after its
21:00
Speaker 3: earnings guidance for the current quarter missed analysts expectations. Elsewhere
21:06
Speaker 3: read it down by seven percent after China's ten Cent
21:09
Speaker 3: reported it had cut its stake in the social media
21:12
Speaker 3: company by about twenty eight percent. Data analytics company Elastic
21:17
Speaker 3: posted better than expected earnings and a revenue for its
21:20
Speaker 3: quarterly results, sending that stock up by sixteen percent. Goldman
21:25
Speaker 3: Sachs initiated coverage of Flutter Entertainment stock with a buy
21:28
Speaker 3: rating and a price target that reflects almost twenty percent
21:32
Speaker 3: upside from Thursday's close, where a bank cited stronger US
21:36
Speaker 3: margins and share buybacks as catalysts for growth ahead. That
21:40
Speaker 3: stock Flutter up by one percent and after its sixteen
21:44
Speaker 3: percent plummet. Yesterday's shares in bitcoin buying software company Micro
21:48
Speaker 3: strategy are narrowly rebounding by four percent so far today.
21:54
Speaker 3: I'm Tucker Silvan.
21:55
Speaker 2: That's Wall Street Watch Markets. Talk a little bit about
21:58
Speaker 2: the still in position of Treasury Secretary for the incoming
22:03
Speaker 2: Trump administration. Been a number of different rumors over the
22:06
Speaker 2: last couple of weeks. The latest is that Kevin Warsh
22:11
Speaker 2: is now one of the leaders in the clubhouse for
22:14
Speaker 2: that role. What can you tell us about Kevin.
22:19
Speaker 1: Well?
22:20
Speaker 4: You know, academically his background is impressive Stanford undergrad JD
22:25
Speaker 4: from Harvard. What I can't find out? And I'm scrammed,
22:28
Speaker 4: ner Yeah, loser right under retiever.
22:31
Speaker 2: No, I didn't say loser, I said nerd.
22:32
Speaker 4: Well, that's my insecurity.
22:35
Speaker 2: It's you, it's me.
22:36
Speaker 4: I don't know that he's got an economics degree, which
22:40
Speaker 4: you don't need. Definitely no need for Treasury's probably better
22:42
Speaker 4: suited for Treasury than he is for FED share. Look,
22:44
Speaker 4: I think the bottom line is, and I'll just repeat
22:47
Speaker 4: what we can all read in the newspaper. I have
22:48
Speaker 4: no inside track on this guy. He's viewed as a
22:51
Speaker 4: sensible kind of establishment right of center, which I can
22:56
Speaker 4: relate to and respect and admire and agree with for
22:58
Speaker 4: what it is worth, So I'm a little bit biased.
23:00
Speaker 4: He'd be a good, steady hand at Treasury who's not
23:04
Speaker 4: likely to do anything stupid, like say, I think the
23:06
Speaker 4: dollar is too expensive. We've had Treasury secretary stumble into
23:11
Speaker 4: ill advised statements about the value of the dollar. Best statement,
23:15
Speaker 4: as Bob Rubin taught us decades ago, Clinton's Treasury secretary
23:19
Speaker 4: is just to say a strong dollars in the United
23:21
Speaker 4: States interest, full stop. He never elaborated, so he'll avoid
23:24
Speaker 4: big mistakes like that. Markets seemed to like him, Chuck Right.
23:26
Speaker 2: The Wall Street Journal exclusive is that in a meeting
23:29
Speaker 2: with President elect Trump, he floated the idea that, hey,
23:35
Speaker 2: why don't you go run Treasury four year and a
23:37
Speaker 2: half and then I'll nominate you as the FED chair
23:39
Speaker 2: when Powell's term is up in May of twenty twenty six.
23:43
Speaker 2: What would be the logic behind that, I guess because
23:46
Speaker 2: it's not like you need experience at Treasury in order
23:49
Speaker 2: to run the FED. That's typically not something that's not
23:52
Speaker 2: something that we've seen, you know, from previous FED chairs.
23:56
Speaker 4: No, they're too entirely different, somewhat different skill set.
24:00
Speaker 2: Figuring out, hey, how do you finance operations of the
24:03
Speaker 2: United States and how do you pay the bills. The
24:05
Speaker 2: other is, let's make sure that the financial system plumbing
24:09
Speaker 2: doesn't break, and let's try to manage the speed of
24:13
Speaker 2: the economy.
24:14
Speaker 4: I mean, I shouldn't say entirely different. They both have
24:16
Speaker 4: financial market oversight responsibility, and as we learned during the
24:19
Speaker 4: financial crisis, Treasury and the FED working hand in glove
24:22
Speaker 4: as they did then is very helpful. Sure, it's kind
24:26
Speaker 4: of it would be weird for them to have that
24:28
Speaker 4: kind of arrangement. It's not public. The Wall Street Journal
24:31
Speaker 4: got some tip. It wouldn't be the first time somebody
24:34
Speaker 4: has been somebody's been promised a high level position and
24:38
Speaker 4: then later became FED chairman. Ben Bernanke was head of
24:41
Speaker 4: the CEA under Bush, then became FED chairman. Larry Summers
24:45
Speaker 4: would have become FED chairman probably had the two thousand
24:48
Speaker 4: election gone differently. And there are probably other examples that
24:51
Speaker 4: just aren't on the tip of my tongue, I think. Again,
24:53
Speaker 4: the key point about him is that he's viewed as
24:56
Speaker 4: a good, safe pair of hands. You can dis agree
25:00
Speaker 4: with his politics. I probably wouldn't. Other people would. Those
25:03
Speaker 4: are honest disagreements, but nobody views him as a wild
25:06
Speaker 4: eyed radical who's likely to say dumb things that upset markets.
25:11
Speaker 2: And he spent what was it in two thousand and six,
25:13
Speaker 2: he was a Fed governor. So again he's got experience operating,
25:16
Speaker 2: you know, at or near this level to begin with.
25:19
Speaker 2: So again, we'll see where this goes. I would expect
25:24
Speaker 2: we're going to have a a name for Treasury Secretary
25:28
Speaker 2: within the next couple weeks. It's if we don't buy
25:31
Speaker 2: the first week in December, I would be surprised.
25:33
Speaker 4: No rush though, I don't, but yes, you're right, I
25:36
Speaker 4: would too. I would too. He's going at a break
25:38
Speaker 4: neck pace with his appointments.
25:39
Speaker 2: Well, here's the thing, Like, normally you see most appointments
25:42
Speaker 2: and someone asked me about this the other the other day.
25:45
Speaker 2: They're like, does it seem like these appointments are coming quickly?
25:47
Speaker 2: And I'm like, maybe by a week or two. But generally,
25:49
Speaker 2: in most cases, you look at when the names for
25:53
Speaker 2: cabinet positions are, you know, when the nominations are made,
25:58
Speaker 2: and it's typically by that first week in December. So like, yeah,
26:01
Speaker 2: they're moving maybe a little quickly, but it's not anything significant.
26:05
Speaker 2: You typically see most nominations made in the first month
26:10
Speaker 2: after the election.
26:11
Speaker 4: I mean, the bigger question we talked about this, or
26:13
Speaker 4: I did, I ranted about it in the last segment,
26:15
Speaker 4: is will this appointee, whoever it ends up being, to
26:18
Speaker 4: the Treasury, assuming it's a stepping stone to FED, and
26:21
Speaker 4: whether or not it's Worsh it may go that way.
26:24
Speaker 4: That may be the progression. Will they push back when
26:27
Speaker 4: he attempts to impose his will on the FED, as
26:30
Speaker 4: he's attempting to do with other branches of government and
26:33
Speaker 4: institutions right now? Will his FED chairman stand up to him,
26:36
Speaker 4: because the time will come when he will want lower
26:39
Speaker 4: interest rates or steady interest rates, and the right thing
26:41
Speaker 4: to do for the economy is something different. What kind
26:44
Speaker 4: of backbone will this person, whether it's Worsh or somebody
26:47
Speaker 4: else show.
26:49
Speaker 2: Let's talk a little bit about this piece from the
26:52
Speaker 2: New York Times. It's automakers to Trump, please require us
26:55
Speaker 2: to sell electric vehicles. What's going on here?
26:59
Speaker 4: Well, they've been gearing up for nothing else for the
27:01
Speaker 4: past ten The government's been telling them for roughly ten years.
27:04
Speaker 4: Or I'll go back even further and say since two
27:07
Speaker 4: thousand and nine that they've got to raise they've got
27:11
Speaker 4: to increase fuel efficiency and what is roughly the same thing,
27:15
Speaker 4: decrease emissions.
27:16
Speaker 2: They've been spending billions of dollars to do so.
27:18
Speaker 4: They've retooled their entire I'll just say their entire operation
27:22
Speaker 4: for lack of a more precise way to put it,
27:24
Speaker 4: because I'm largely ignorant about this area. So they've invested
27:27
Speaker 4: so much in this that to do a U turn
27:29
Speaker 4: would require a big I guess revamping on once again,
27:34
Speaker 4: which would dang profits.
27:35
Speaker 2: And I don't think the take from here is not
27:39
Speaker 2: that car companies want to be forced to produce only evs,
27:43
Speaker 2: but rather, hey, we've spent a bunch of money retooling
27:46
Speaker 2: these plants in order to produce more evs and more
27:49
Speaker 2: efficient vehicles. And if all you do is take away
27:54
Speaker 2: what's there now, you're leaving us with a bunch of
27:57
Speaker 2: spending that's not necessarily going to pay off. It's kind
28:00
Speaker 2: of like, why do we spend all.
28:01
Speaker 4: These big investments in battery production and research and that
28:05
Speaker 4: all goes down the drain. You could say, look, that's fair.
28:08
Speaker 4: That's called regulatory risk.
28:10
Speaker 2: The company that I continue to think really just kind
28:13
Speaker 2: of nailed this despite everyone criticizing them for a couple
28:17
Speaker 2: of years in the early twenty twenties. Is Toyota who
28:21
Speaker 2: did not get sucked in by the idea of, Hey,
28:23
Speaker 2: we just need to make EV's like every other company
28:25
Speaker 2: in twenty twenty one and twenty two was like, Wow,
28:28
Speaker 2: we're gonna have twenty different EV models by you know,
28:31
Speaker 2: twenty thirty. We're gonna have thirty different EV models by
28:34
Speaker 2: twenty thirty five. And Toyota looked at it and was like, Yeah,
28:37
Speaker 2: we're gonna keep doing hybrids. And what you are seeing
28:40
Speaker 2: is an expansion of their hybrid lineup. Just as an example,
28:43
Speaker 2: the Toyota Camry. Now it's only available in a hybrid.
28:45
Speaker 2: They don't offer a a gas only version, and it
28:49
Speaker 2: still is the best selling sedan in the country because
28:53
Speaker 2: people are like, Wow, I can get fifty miles a
28:55
Speaker 2: gallon in a Toyota Cameray. Sure, I'm gonna like that.
28:58
Speaker 2: That sounds wonderful. And there's rumors now that the next
29:02
Speaker 2: RAV four, which is going to be the twenty six
29:04
Speaker 2: model version, is going to be hybrid only as well,
29:07
Speaker 2: and it's getting at the idea that, look, people want
29:10
Speaker 2: better gas mileage. They're not necessarily ready to go to
29:12
Speaker 2: EV's and mass And I think Toyota completely saw through
29:18
Speaker 2: the short term infatuation with hey, we need to only
29:22
Speaker 2: make evs that so many other automakers kind of move
29:25
Speaker 2: towards when when Tesla was rallying back in twenty twenty,
29:28
Speaker 2: they were like, oh, we got to do this. No,
29:30
Speaker 2: Toyota saw through that and said, hey, this is a
29:32
Speaker 2: temporary thing. This is not real and permanent. And man,
29:36
Speaker 2: they look like geniuses because that when everyone was criticizing
29:39
Speaker 2: him back in twenty twenty one and twenty two for
29:42
Speaker 2: not having larger EV plans.
29:44
Speaker 4: I do pity us automakers. I mean, they were counting
29:49
Speaker 4: on a regulatory regime remaining in place and they're getting whipsaw.
29:54
Speaker 4: They'll get whipsawed again. And my guess is we'll have
29:56
Speaker 4: a lot of electoral turnover over the next a lot
29:59
Speaker 4: of turnover the executive level anyway, over the next ten
30:02
Speaker 4: or twenty years, as we've had over the past ten
30:05
Speaker 4: because these problems are not amenable to being solved in
30:08
Speaker 4: four years. Are deeper structural problems economically are They're gonna
30:11
Speaker 4: have to do another one eighty in four years. If
30:13
Speaker 4: a Democrat wins the White House or if they take
30:16
Speaker 4: back Congress and try to reinstitute some of these.
30:19
Speaker 2: I'm not screen I have that much pity for the
30:21
Speaker 2: automakers because a lot of this was of their own chooses.
30:25
Speaker 2: A lot of the decisions they made were before the
30:28
Speaker 2: Inflation Reduction Act was even passed. But in response to
30:32
Speaker 2: a lot of this was before like it was twenty
30:33
Speaker 2: twenty one and all these companies were like, yep, we're
30:36
Speaker 2: gonna be rolling out all evs in the next ten
30:38
Speaker 2: years because they saw what EV's were doing to, you know,
30:42
Speaker 2: the stocks of EV companies, and it turned out that
30:45
Speaker 2: that was just a short term. But like, they made
30:47
Speaker 2: these decisions before the federal tax credits were in place,
30:51
Speaker 2: and that to me is more, Hey, we got greedy
30:56
Speaker 2: because we thought we could be a trillion dollar company.
30:58
Speaker 4: I thought it was average fuel economy motivated too. We're
31:00
Speaker 4: going to sell a lot of big trucks that are
31:03
Speaker 4: terrible on gas and balance that with smaller vehicle They.
31:07
Speaker 2: Still made the wrong decision. Then, Yeah, I always go
31:10
Speaker 2: back to this quote, Mark, You'll appreciate this one. This
31:16
Speaker 2: is the business we have chosen, and ultimately, when you're
31:20
Speaker 2: an automaker. Hey, that's the business you chose, like you
31:23
Speaker 2: have to figure out how to navigate it correctly. They didn't,
31:27
Speaker 2: and they're dealing with it now. Say what do you say?
31:29
Speaker 4: I'll appreciate that because I look like an extra at
31:31
Speaker 4: Connie's wedding from Godfather one. I just know that if
31:36
Speaker 4: you squint, I'm in that shot. What if I don't squint,
31:40
Speaker 4: I'm still in that Still in that shot, I still
31:41
Speaker 4: look like fifteen people in that Yeah, there you go,
31:43
Speaker 4: pick a random person in that scene.
31:44
Speaker 2: Let's take a quick break here. When we come back,
31:47
Speaker 2: let's see let's talk a little bit about energy prices
31:50
Speaker 2: and also want to touch a little bit on social
31:52
Speaker 2: security benefits.
31:53
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32:01
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32:09
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32:13
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32:25
Speaker 2: Mark we got a piece in CMBC here seventy three
32:27
Speaker 2: percent of workers worry social security won't be able to
32:30
Speaker 2: pay retirement benefits. Here's what financial advisors say. I always
32:34
Speaker 2: I would love to hear what financial advisors say on
32:38
Speaker 2: this topic, and basically it says lots of advisors, you know,
32:43
Speaker 2: get questions about this, and the thing that you're hearing
32:47
Speaker 2: from advisors two different things. The first is, hey, you
32:50
Speaker 2: want to bet on longevity, saying, hey, wait as long
32:53
Speaker 2: as possible, because with advances in medicine, people are most
32:56
Speaker 2: likely going to live longer. And that's what you hear
33:00
Speaker 2: from basically all of the advisors in this piece. I
33:04
Speaker 2: do think it's important to note that, look, not everyone
33:07
Speaker 2: has the same kind of family health history that you
33:09
Speaker 2: know would encourage people to think of it in terms
33:12
Speaker 2: of longevity. There are a whole bunch of us out
33:15
Speaker 2: there who, hey, the family health history doesn't look great,
33:19
Speaker 2: and you know, oftentimes that can be a real predictor
33:23
Speaker 2: of your longevity, and in particular, if you already have
33:26
Speaker 2: things that might be developing. Hey, even though it might
33:29
Speaker 2: not be best for a long retirement, in some situations,
33:33
Speaker 2: it can make more sense to, you know, claim solid
33:35
Speaker 2: security earlier because the health piece is a big one
33:38
Speaker 2: that matters.
33:39
Speaker 4: Yeah, I guess you have to get tested for something specific.
33:43
Speaker 4: I have personal experience with this. The result wasn't great
33:47
Speaker 4: and it will probably affect my decision at sixty two
33:51
Speaker 4: because my break heathen is shorter, probability speaking, probabilistically speaking,
33:56
Speaker 4: whatever the right adverbis. Then say some without the predisposition,
34:01
Speaker 4: the genetic predisposition predisposition that I have and that many
34:05
Speaker 4: of you have. This is not uncommon. So I've never
34:09
Speaker 4: really thought about the larger impact to tell you the
34:12
Speaker 4: truth of say, better testing through one of these services
34:17
Speaker 4: or through your doctor, if they find out that your
34:20
Speaker 4: father passed away from something that we're getting better at
34:22
Speaker 4: identifying genetically, and how that might play into your financial
34:26
Speaker 4: planning decisions. I've never thought about how that might impact
34:29
Speaker 4: the Social security Social Security's longevity, which ain't looking good.
34:33
Speaker 4: Trust fund depletes you, guys. You and Mike Armstrong talk
34:35
Speaker 4: about this a lot. What ten years, the trust fund?
34:37
Speaker 4: Eight years?
34:39
Speaker 2: Okay, yeah, twenty thirty three, and we're through twenty four now, so.
34:42
Speaker 4: Exactly when almost exactly when I'm eligible. So what they've
34:45
Speaker 4: said about the midpoint of gen X is actually true,
34:48
Speaker 4: which means what they either cut benefits or they have
34:51
Speaker 4: to get money from elsewhere to make good on promised
34:55
Speaker 4: benefits at that point. Is that accurate?
34:57
Speaker 2: Mike and I have our theory as to what they're
34:58
Speaker 2: actually going to do.
35:00
Speaker 4: What's your are are likely?
35:02
Speaker 2: Our going theory is that they are simply going to
35:05
Speaker 2: change the rules so that Social Security can just pay
35:07
Speaker 2: out however much it needs to deficit be damned. Yeah,
35:12
Speaker 2: so that's that's our thought.
35:14
Speaker 4: Do nothing, barmore borrow can't I mean, we're talking about
35:19
Speaker 4: enormous new additions to borrow.
35:21
Speaker 2: There's no one alive right now who's ever had to
35:24
Speaker 2: deal with that as a US citizen.
35:28
Speaker 4: Yeah, well, we've never had a debt is big outside
35:31
Speaker 4: of wartime, but.
35:33
Speaker 2: But basically, like, there's no one alive right now that
35:36
Speaker 2: has had to deal with the situation where the US
35:39
Speaker 2: couldn't borrow more money. Yeah, you know, it's You talk
35:44
Speaker 2: to any argentineator, any Greek, and they'll tell you, Yeah,
35:48
Speaker 2: this is real stuff that we have to deal with. Like,
35:50
Speaker 2: our government cannot just borrow in perpetuity. It causes problems.
35:55
Speaker 2: When it does, the interest rates go up, inflation goes up,
35:57
Speaker 2: and it causes problems. There's no one a lot in
36:00
Speaker 2: the United States that's had that experience.
36:02
Speaker 4: That's true. Yeah, we have to face that constraint.
36:04
Speaker 2: And so my point is like, Congress isn't going to
36:07
Speaker 2: think that's possible, that that's a problem.
36:09
Speaker 4: But what if the average interest rate on US debt,
36:12
Speaker 4: which is today about three percent, is five or seven
36:14
Speaker 4: and instead of thirteen percent of the federal budget, interest
36:17
Speaker 4: payments are thirty That reality will be playing.
36:21
Speaker 2: Will be for everybody mostly understood, though by Congress It's
36:25
Speaker 2: not going to be absorbed quickly, is the point I'm making.
36:28
Speaker 4: Yeah, No, I don't disagree. They'll kick the can. I
36:29
Speaker 4: guess as much as it is feasible.
36:31
Speaker 2: Yeah, it's so.
36:32
Speaker 4: What does that mean for quik? Back to the point
36:34
Speaker 4: of the article. What would you tell a client if
36:35
Speaker 4: they were fretting, handwringing about availability of social Security? Do
36:39
Speaker 4: you say, just go with what the current law says
36:41
Speaker 4: or plan for the worst?
36:42
Speaker 2: Well, I think that you have to be able to
36:44
Speaker 2: kind of hedge different ways and say, look, you have
36:46
Speaker 2: to stress test to your financial plan against what happens
36:49
Speaker 2: if there are changes, if you're trying to figure this
36:51
Speaker 2: out for yourself. This is what the Armstrong Advisory Group
36:55
Speaker 2: helps clients out with. Every single day. Call eight hundred three,
36:59
Speaker 2: nine three or zero zero one to schedule time to
37:02
Speaker 2: speak with an advisor again eight hundred three nine three
37:05
Speaker 2: four zero zero one.
37:07
Speaker 1: The proceeding was paid for by Armstrong Advisory Group, a
37:10
Speaker 1: registered investment advisor. Nothing in the ad or in any
37:12
Speaker 1: Armstrong guide a specific financial, legal, or tax advice. Consult
37:16
Speaker 1: your own financial, tax, and estate planning advisors before making
37:18
Speaker 1: any investment decisions. Armstrong make contact you to offer investment
37:21
Speaker 1: advisory services.
37:23
Speaker 2: Mark, We don't have a ton of time here, so
37:26
Speaker 2: I just want to let's actually cover this story just
37:29
Speaker 2: because I think it's kind of interesting. Actually, DirecTV there's
37:32
Speaker 2: scrapping their merger with Dish Network, and I think the
37:37
Speaker 2: big thing is that it's unclear what the path is
37:40
Speaker 2: for either of these companies to surviving. It's unclear either
37:45
Speaker 2: of these companies really survive in the future. In my opinion,
37:49
Speaker 2: I'm not sure what is there for them.
37:51
Speaker 1: Would that leave?
37:51
Speaker 4: If these companies don't, who would that leave in the
37:53
Speaker 4: satellite cable space.
37:55
Speaker 2: Basically no One part of me wonders if Elon Musk's
38:00
Speaker 2: Starlink might step in and find some way to build
38:04
Speaker 2: out a platform on that side of the things.
38:06
Speaker 4: That's gonna be great for people.
38:08
Speaker 2: You know, in the wilderness. Hey, look, i'll tell you,
38:11
Speaker 2: having used the service a couple of times present. Yeah,
38:15
Speaker 2: I've got a couple friends that have it at their
38:17
Speaker 2: places and might oh yeah, it's cool. Let's take a
38:20
Speaker 2: quick break here. When we come back, more financial exchange