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Inflation Still Has the Federal Reserve in a Bind · The Financial Exchange Show

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Speaker 2: Good morning, Welcome back to the Financial Exchange. We've got
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Speaker 2: markets that have been generally negative since the start of trading.
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Speaker 2: We've got the now actually positive for the day, now
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Speaker 2: up forty six points, but the NASDAC leading the way
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Speaker 2: down off one point seven percent, led by semiconductor stocks.
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Speaker 2: But we've got major tech companies across the board in decline.
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Speaker 2: Micron among others sinking today as well as yesterday. SMP
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Speaker 2: five hundred now off eighty five points or one point
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Speaker 2: one percent. Overnight, we saw some severe volatility across the board,
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Speaker 2: especially in Korean stocks, which are absolutely dominated by big
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Speaker 2: AI chip related companies Samsung, sk Heinez, et cetera. South
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Speaker 2: Korea's cost by index, which was down overnight, closed down
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Speaker 2: more than twelve percent. But before you get concerned, make
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Speaker 2: sure you understand the index itself is up ninety five
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Speaker 2: percent so far this year, so a ten percent loss
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Speaker 2: on that is not going to likely break anyone's back.
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Speaker 2: We've seen let's see, is Microns still down ten percent
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Speaker 2: this morning?
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Speaker 3: That we don't check.
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Speaker 1: Ten percent.
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Speaker 3: Your computers faster than mine.
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Speaker 2: So major tech companies, chip related stocks especially sinking, and
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Speaker 2: we will see again you should never attribute any one
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Speaker 2: story to all this, and I frankly don't see any
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Speaker 2: new breaking stories as to what would be causing the
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Speaker 2: new renewed concern with AI.
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Speaker 3: But one path that we've laid out as to why
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Speaker 3: we remain.
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Speaker 2: Skeptical of this market and the promises that are being
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Speaker 2: made by everyone throughout the AI supply chain is that
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Speaker 2: I think we are starting to approach the point and
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Speaker 2: we've seen this echoed from CEOs of major companies where
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Speaker 2: artificial intelligence in some cases is costing more than human intelligence,
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Speaker 2: or at least it's costing a lot more than companies
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Speaker 2: we're anticipating. We had a story that we covered a
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Speaker 2: few weeks ago now where Uber blew through their annual
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Speaker 2: budget for artificial intelligence over the course of four months,
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Speaker 2: and it was largely because they were telling all of
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Speaker 2: their coders and developers and staff to use AI, learn
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Speaker 2: how to use AI, and use it for as much
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Speaker 2: as possible.
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Speaker 3: And turns out that costs a lot of money to do.
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Speaker 2: More and more we're hearing from companies that are being
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Speaker 2: cost conscious when it comes to their artificial intelligence spend.
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Speaker 3: Go ahead, Mark, Yeah, a.
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Speaker 4: Lot of the spending is just indiscriminate. Yeah, I mean,
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Speaker 4: you wouldn't just pile pens on your employees' desks. Now,
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Speaker 4: it's absurd because we only have two hands.
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Speaker 3: But you get it.
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Speaker 4: It's panic buying because everybody else is doing it. And
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Speaker 4: if there's one thing we know about corporate America is
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Speaker 4: that it tends to heard you're doing what other CEOs
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Speaker 4: or other C suite people are doing because you feel
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Speaker 4: like you have to in the market's pressuring you to
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Speaker 4: do it, because it's rewarding companies that say they're doing it.
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Speaker 4: Nobody's thinking too much about its impact on future cash
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Speaker 4: flows at this point. Forgive me, but it doesn't seem
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Speaker 4: like they are.
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Speaker 2: Yeah, I mean, frankly, the last fifteen years of the
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Speaker 2: US dock market has been led by a bunch of
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Speaker 2: giant tech companies that had a big moat and a
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Speaker 2: very low capitally intensive what's the opposite of capital intensive
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Speaker 2: capital capital light businesses? What I was thinking, capital light
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Speaker 2: businesses like Google, like Microsoft, like Facebook, who were you know,
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Speaker 2: printing profit margins that we had almost never seen on
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Speaker 2: that scale before. And part of the reason they were
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Speaker 2: able to do so is because they could buy up
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Speaker 2: all the talents when it comes to designing these applications
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Speaker 2: and pretty much crowd anybody else out or buy out the.
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Speaker 3: Competition when needed.
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Speaker 2: All of a sudden, brand new technology comes along and
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Speaker 2: it starts to call into question whether or not they.
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Speaker 3: Can maintain that moat.
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Speaker 2: Right if any schmuck off the street can design a
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Speaker 2: new app that does something that one of these companies
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Speaker 2: thought they had a monopoly on, then all of a
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Speaker 2: sudden it calls into question what you can do there.
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Speaker 2: And so their response to that was build artificial intelligence
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Speaker 2: as quickly as we can internally, regardless of the cost.
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Speaker 2: We need to do it, We need to do it
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Speaker 2: now and take all of the profit that we had
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Speaker 2: been generating from these other products in order to do
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Speaker 2: it to maintain our moat. Some of them will probably
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Speaker 2: be successful in that, but what it's resulting in is
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Speaker 2: really expensive new technology for those who are using it,
5:42
Speaker 2: and already we're seeing some of that pushback. Microsoft has
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Speaker 2: talked about how they are rolling out models available to
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Speaker 2: them from perhaps even some Chinese AI model providers. Open
5:53
Speaker 2: Ai has talked about cutting costs ahead of their IPO
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Speaker 2: in order to compete more with Anthropic and so my
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Speaker 2: path for how this all could come reverberating through the
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Speaker 2: market is if the end users of artificial intelligence, which
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Speaker 2: you know, you could call Uber Technologies one of those
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Speaker 2: you could call, well, you could call Mark Fandetti. Right,
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Speaker 2: if Mark starts paying for AI and it starts getting
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Speaker 2: outrageously expensive, then his employer is going to tell him
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Speaker 2: stop using that or prove to me that it's actually
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Speaker 2: worth it. If that happens, then the additional seats that
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Speaker 2: we were planning on adding to the Anthropic platform, for instance,
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Speaker 2: suddenly the growth targets there might not be doable.
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Speaker 3: Right If Uber says.
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Speaker 2: Hey, we were planning on adding one hundred more AI
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Speaker 2: seats in twenty twenty seven, but the costs are so
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Speaker 2: crazy that we can only add twenty, then that impacts
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Speaker 2: the sales targets for the model builders. If their sales
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Speaker 2: targets get hit, then they might say we're going to
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Speaker 2: lower pricing in order to deal with that in order
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Speaker 2: to maintain margins. They would have to go down to
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Speaker 2: the next level the data center builders and providers and
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Speaker 2: the providers of compute power who are helping to power
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Speaker 2: those models and say, hey, you guys need to get
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Speaker 2: your prices in line because we can't charge what we
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Speaker 2: thought we could. If that happens, then the data center
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Speaker 2: providers need to go to power generators and chip providers
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Speaker 2: and say, hey, in Vidia, we can't pay you this
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Speaker 2: much money for your semiconductor. We need you to do
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Speaker 2: it for cheaper so that we can run this data
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Speaker 2: center for longer and at less cost and build it
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Speaker 2: out for a more reasonable price, at which point in
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Speaker 2: Video then needs to go to TSMC, who manufactures all
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Speaker 2: their chips, and say you need to do it for cheaper.
7:38
Speaker 2: Who goes to I don't know where do they buy
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Speaker 2: raw materials from in order to manufacture semiconductors. That's somebody
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Speaker 2: else's job. Apparently a few weeks ago it is Toto Toilets,
7:48
Speaker 2: who you know was really good at making porcelain that
7:50
Speaker 2: went into this. But if you want you know the
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Speaker 2: path in my mind where all of this begins to contract,
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Speaker 2: that's where it happens. And the question is, in my mind,
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Speaker 2: are we seeing any signals from the industry that they
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Speaker 2: are in fact price conscious.
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Speaker 3: I gave you one. I don't know that it's actually
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Speaker 3: permeating the industry yet.
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Speaker 4: No, it seems pretty indiscriminate. And frantic yeah, which is
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Speaker 4: always a recipe for overinvestment, oversupply followed by collapse.
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Speaker 2: Right, So, if you believe that this new industry is
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Speaker 2: so massive that it will continue to expand at an
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Speaker 2: exorbitant rate and replace all of us, and which is
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Speaker 2: just kind of a weird premise to begin with, but
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Speaker 2: it's going to be so unbelievably profitable that the price
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Speaker 2: you are paying to put data centers in the ground
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Speaker 2: is an irrelevant cost point, then that's how you justify where.
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Speaker 3: We are headed right now with markets.
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Speaker 2: If you believe that it's going to behave more like
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Speaker 2: every other technological innovation that we've seen, which is that
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Speaker 2: it gets a bunch of people really excited capital markets
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Speaker 2: invest a whole bunch of money, oversupply the market with
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Speaker 2: that new technology, and then years later you find out
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Speaker 2: who was actually building efficiently and cutting edge and with
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Speaker 2: cost discipline versus who was just building anything they could
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Speaker 2: at whatever price. That's been the trend line of most
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Speaker 2: other technologies we've seen, not just the Internet, others before
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Speaker 2: that that you've pointed out. And that's where I tend
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Speaker 2: to land that I think we're going to go, But
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Speaker 2: only time will tell, and I don't see much of
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Speaker 2: a signal that we're reaching that point already.
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Speaker 4: Yeah, if it doesn't change the trend and growth, Like
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Speaker 4: the Internet didn't change the trend and growth, it may
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Speaker 4: have helped. I don't think it hurt. But as an example,
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Speaker 4: that technology we talked about this in the last hour,
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Speaker 4: that technology was revolutionary. It changed the way we work
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Speaker 4: and live and play and everything else. It didn't change
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Speaker 4: the trend line and growth. Though interestingly, you can't find
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Speaker 4: there's a brief uptick and growth in the late nineties
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Speaker 4: when productivity popped, but that's subsided. You can't pick the
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Speaker 4: Internet out of say a so called time series, a
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Speaker 4: plot of gross domestic product or whatever your favorite measure
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Speaker 4: is of economic well being. You just can't see it.
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Speaker 4: That's actually true in fairness of other technology revolutions too.
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Speaker 4: AI might be different. In fact, most people who know
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Speaker 4: better think it will be different. Hard to say in
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Speaker 4: advance to who the winners will be, and if there
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Speaker 4: are winners, what the timing and magnitude of the rewards
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Speaker 4: will be.
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Speaker 3: Hard to say.
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Speaker 2: Let's take a quick break. When we come back. We're
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12:13
Speaker 2: We will receive a reading on inflation on Thursday of
12:17
Speaker 2: this week, and taking a look at the forecasts that
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Speaker 2: are out there, we're expected to see a whopping year
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Speaker 2: over year inflation rate of four point one percent from
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Speaker 2: the PCE Price Index. When you strip out the food
12:28
Speaker 2: and energy pieces of it, which have been driven by
12:30
Speaker 2: the Iran war, you're still expected to get a reading
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Speaker 2: of three point four percent. Now, Kevin Worsh might want
12:36
Speaker 2: to do away with the firm two percent price target
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Speaker 2: and focus on stability generally.
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Speaker 3: But three point four percent, no matter, No, he did not.
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Speaker 2: He actually stuck to the two percent price target when
12:45
Speaker 2: asked specifically about it.
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Speaker 3: But sorry, didn't mean to snap three point four percent.
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Speaker 4: I don't think warsh until this reason not sounds forgive.
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Speaker 2: Me at three point four percent I don't think you
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Speaker 2: can call prices stable by any stretch the imagination.
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Speaker 4: Well, if stable means low volatility, that's not the case,
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Speaker 4: because inflation is like all it's higher, it's also more volatile.
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Speaker 3: Yep.
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Speaker 2: So when we take a look here, the obvious repercussion
13:14
Speaker 2: for you, me and everybody else is that for the
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Speaker 2: last twelve months now, wages are not keeping pace with
13:20
Speaker 2: in the aggregate, or not keeping pace with inflation.
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Speaker 3: They are down year over year.
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Speaker 2: And you know the problem with that, as we saw
13:30
Speaker 2: back in twenty twenty two, is nobody likes it when
13:32
Speaker 2: prices are going up more than their wages. Nobody likes
13:35
Speaker 2: it when prices are going up generally, even if over
13:38
Speaker 2: the last few years your wages can pace. True, but
13:41
Speaker 2: when you have prices going in the wrong direction, it
13:44
Speaker 2: leads towards all sorts of societal problems. Not to mention,
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Speaker 2: you know, I'm not even painting the worst case scenarios
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Speaker 2: when price hikes get embedded into the psyche of how
13:53
Speaker 2: people behave. I don't think we're there yet based on
13:56
Speaker 2: what we're seeing from expectations on inflation. But you have
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Speaker 2: a bunch of dissatisfied people on one hand, I will
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Speaker 2: say that it's unlikely that this can last for long,
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Speaker 2: right inflation?
14:11
Speaker 4: Is you mean unlikely that it'll stay at four percent on?
14:15
Speaker 4: I'm rounding a little bit for very long? Is that
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Speaker 4: what you mean?
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Speaker 2: No, what I mean is that it's unlikely that price
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Speaker 2: increases can maintain a higher level than wages for a
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Speaker 2: prolonged period of time.
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Speaker 4: Oh, they have historically not so much seventy. Look, we're
14:31
Speaker 4: when people make that statement, they're generally using average hourly
14:34
Speaker 4: earnings and the CPI inflation rate, and so in the seventies,
14:38
Speaker 4: real wages did not, real wages declined, Inflation grew faster
14:43
Speaker 4: than the average hourly wage. The reason I would think
14:47
Speaker 4: we're saying is, I'm sorry, but you're saying, it's like
14:49
Speaker 4: it's not sustainable. Something's going to happen politically, There'll be
14:52
Speaker 4: a change of leadership at the FED or something. Yeah,
14:54
Speaker 4: I agree with that, it's not gonna happen.
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Speaker 2: The reason I would think is because frankly, prices are
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Speaker 2: a calm nation of what people can afford to pay,
15:02
Speaker 2: and if their wages aren't keeping pace with that, there's
15:04
Speaker 2: only so much you can stretch a dollar. Ultimately, if
15:06
Speaker 2: your wages aren't, inflation wouldn't seem to be able to
15:11
Speaker 2: go on very long, I guess. On the other hand,
15:14
Speaker 2: so to this point, we've been describing inflation as a
15:17
Speaker 2: result of the oil price shock. Clearly, when we're getting
15:21
Speaker 2: to three point four percent on the core, it's not
15:24
Speaker 2: just an oil price shock that is causing.
15:27
Speaker 3: All the inflation that we are seeing right now.
15:29
Speaker 2: And one area that I could see getting very disjointed
15:33
Speaker 2: from the average consumer and wages would be the massive
15:37
Speaker 2: rush to spend money on artificial intelligence. That does not
15:41
Speaker 2: seem to be crucially dominated based on what consumers are
15:46
Speaker 2: willing to spend money on. That's not why they are
15:49
Speaker 2: building out this infrastructure. And I can't say that, hey,
15:54
Speaker 2: you know, electronics prices for smartphones or what's driving the
15:57
Speaker 2: inflation piece forward. But I think this boom that we
16:00
Speaker 2: are seeing is at least contributing to low unemployment, wage
16:03
Speaker 2: gains in certain areas, and higher economic activity generally, which
16:07
Speaker 2: is contributing to the higher prices.
16:09
Speaker 3: And so while generally I don't think.
16:11
Speaker 2: That it's sustainable to see wages come in at a
16:14
Speaker 2: lower rate than inflation for a prolonged period of time,
16:17
Speaker 2: it can happen for a pretty long period of time
16:20
Speaker 2: without a correction to the overall scenario.
16:24
Speaker 4: Okay, So the Fed's dilemma, and it's a perennial dilemma,
16:27
Speaker 4: is do we We can't do anything about the price.
16:31
Speaker 4: We can't do anything about the shock. It could be
16:32
Speaker 4: an oil price shock, it could be a favorable shock,
16:35
Speaker 4: like a productivity shock. In this case, it's energy, and
16:38
Speaker 4: that's going to work in the other direction. Over the
16:40
Speaker 4: next few months, We're going to see some disinflation. Headline
16:44
Speaker 4: PCE or CPI should come down a lot over the
16:47
Speaker 4: next couple of months. Core may not come down as much.
16:50
Speaker 4: So does that mean the FED can afford to cut
16:53
Speaker 4: or even stand pat Not necessarily. As you point out,
16:57
Speaker 4: the forces driving headline inflation are different than the forces
17:00
Speaker 4: that drive underlying or trend inflation. You could think of
17:04
Speaker 4: the FED as controlling underlying inflation in the long term,
17:07
Speaker 4: though that can be distorted to in the short term.
17:11
Speaker 4: This was why the Fed's in a pickle. It's not
17:13
Speaker 4: easy to separate those forces and get a sense for
17:18
Speaker 4: whether or not what's happening with headline inflation is meaningful
17:23
Speaker 4: for will influence core inflation. We just don't know.
17:27
Speaker 2: Why and how did the FED screw this up in
17:29
Speaker 2: the seventies, right, it was brought about by an oil
17:33
Speaker 2: price shock.
17:34
Speaker 3: They thought they thought.
17:35
Speaker 4: Relation was non monetary. They thought there was. They thought
17:38
Speaker 4: they thought income's policies were far more likely to be effective.
17:41
Speaker 4: They didn't think that monetary policy was likely to be effective.
17:44
Speaker 4: In flight. It's as absurd as that sounds to us,
17:48
Speaker 4: you have to think about it in terms of the
17:51
Speaker 4: framework they used. They didn't use a tailor rule, they
17:54
Speaker 4: didn't use an interest so called interest rate rule. They
17:57
Speaker 4: didn't define potential output the way we do today, so
18:00
Speaker 4: they didn't think about They did think about the economy
18:03
Speaker 4: running too hot, but they defined potential GDP the supply
18:06
Speaker 4: of the economy, if you will aggregate supply, so to speak.
18:09
Speaker 4: They defined that differently than we do today. So we
18:11
Speaker 4: have the advantage of hindsight when we look at what
18:14
Speaker 4: they did. But in a nutshell, they thought inflation was
18:17
Speaker 4: non monetary. There was nothing that FED could do about it.
18:20
Speaker 4: Incomes policies, price controls were the way to go, and
18:22
Speaker 4: indeed we tried those. They also overestimated the productive potential,
18:27
Speaker 4: and I'm using that's an anachronism. I'm using the way
18:29
Speaker 4: we think about it today, not the way they did.
18:32
Speaker 4: They also overestimated the the productive potential, the capacity, the
18:35
Speaker 4: supply of the economy. They thought we should be able
18:39
Speaker 4: to run it hotter. There's underutilized resources there, whereas it
18:42
Speaker 4: turns out wrong. They didn't see the productivity slow down
18:46
Speaker 4: that was happening in the seventies that was bringing potential
18:49
Speaker 4: GDP gross domestic product, the way we measure economic growth.
18:52
Speaker 4: They didn't know that was happening. It's the flip side.
18:55
Speaker 4: It's the reverse of what was happening in the nineties
18:57
Speaker 4: when we didn't know it was going up green space
19:00
Speaker 4: and had an inkling. And he was right.
19:03
Speaker 2: To the point that we talked about earlier. I also
19:06
Speaker 2: saw nothing from Kevin Worst that would indicate he's willing
19:08
Speaker 2: to just absorb an oil price shock and ignore it.
19:12
Speaker 2: Look you, I think his messaging on that subject was
19:15
Speaker 2: sound that, Hey, this is something that's serious. We've seen
19:18
Speaker 2: elevated inflation now for the last six years, and it
19:21
Speaker 2: is something.
19:22
Speaker 3: We're going to deal with regardless of where it's coming from.
19:24
Speaker 3: Was the message that I heard. Quick break.
19:26
Speaker 2: When we come back a full update on this market
19:29
Speaker 2: sell off we're seeing on a Tuesday, with Wall Street
19:31
Speaker 2: Watch coming up next.
19:32
Speaker 1: Day, bringing the latest financial news straight to your radio.
19:42
Speaker 1: Every day. It's the Financial Exchange on the Financial Exchange
19:46
Speaker 1: Radio Network. Tell you out full whoa Street Watch, treking
19:51
Speaker 1: the stocks, fandato and the headlines driving markets so far
19:54
Speaker 1: today right here on the Financial Exchange Radio Network.
20:00
Speaker 5: The tech sell off today with global markets being impacted
20:03
Speaker 5: after South Korea's index sunk nearly ten percent over worries
20:07
Speaker 5: about heavy AI spending. Right now, the Dow is off
20:11
Speaker 5: only thirty one points, SMP five hundred now down one
20:15
Speaker 5: and a quarter percent, NASDAC down about one point nine percent,
20:20
Speaker 5: or four hundred and ninety one points lower. Rust two
20:22
Speaker 5: thousands down just over nine tenths of a percent. Tenure
20:25
Speaker 5: Treasure yield down excuse me, is down two basis points
20:29
Speaker 5: and now at four point four to eight percent. In
20:32
Speaker 5: Oil down about one percent, trading at seventy three dollars
20:35
Speaker 5: a barrel. Several chip names are seeing losses on the day,
20:39
Speaker 5: with Micron now down eleven percent and both Intel and
20:42
Speaker 5: Nvidia are dropping almost four percent. Meanwhile, after notching its
20:46
Speaker 5: third straight day of losses and plummeting sixteen percent yesterday,
20:51
Speaker 5: SpaceX now bouncing back over two percent today. The stock
20:55
Speaker 5: did briefly fall below's day debut price of one hundred
20:59
Speaker 5: and fifty dollars Earlier this morning. Elsewhere, Oracle discloses it
21:03
Speaker 5: had cut twenty one thousand jobs, are about thirteen percent
21:06
Speaker 5: of its workforce over the last fiscal year, as part
21:09
Speaker 5: of an AI focus reorganization. The stock is down by
21:13
Speaker 5: three percent. And Meta announced a new set of smart
21:16
Speaker 5: glasses called Meta Glasses, with new designs and a starting
21:19
Speaker 5: price of two hundred and ninety nine dollars, eighty dollars
21:22
Speaker 5: less than the price tag for the company's entry level
21:26
Speaker 5: second generation Meta RayBan classes.
21:29
Speaker 3: I'm Tucker Silvan.
21:30
Speaker 5: That is Wall Street Watch and in the previous segment,
21:33
Speaker 5: we asked you the trivia question which comedy superstar was
21:36
Speaker 5: offered the joker If Jack Nicholson turned down the role,
21:41
Speaker 5: that would be Robin Williams. And Matt from Harwich, Mass
21:44
Speaker 5: is our winner today taking on the Financial Exchange Show
21:46
Speaker 5: T shirt. Congrats to Matt and we played trivia every
21:50
Speaker 5: day here on the Financial Exchange. See complete contest rules
21:54
Speaker 5: at Financial Exchange Show dot com.
21:57
Speaker 2: Uh piece from the Wall Street Journal on the four
22:01
Speaker 2: percent rule and how there's a better retirement spending plan
22:05
Speaker 2: than the four percent rule, and I agree, I'm just
22:08
Speaker 2: not sure that this is.
22:09
Speaker 3: A useful, useful piece for the general public.
22:12
Speaker 2: But if you're not familiar, the four percent rule was created,
22:15
Speaker 2: i think during the nineteen eighties, and the creator, a
22:18
Speaker 2: financial financial planner at the time, basically drew out a
22:22
Speaker 2: scenario where, look, if you had a fifty to fifty
22:25
Speaker 2: portfolio of stocks and bonds, which in the nineteen eighties
22:28
Speaker 2: we're paying a heck of a lot more on the
22:30
Speaker 2: bonds than they are now, and owned that for the
22:32
Speaker 2: rest of your life, retiring at age sixty five, you'd
22:36
Speaker 2: be able to sustainably withdraw four percent of your portfolio's
22:40
Speaker 2: value per year. And when he back tested it, there
22:43
Speaker 2: were no scenarios where you ran out of money, even
22:45
Speaker 2: in the worst of the worst financial markets. Know, this allocation,
22:50
Speaker 2: combined with this withdrawal strategy put you in a pretty
22:52
Speaker 2: safe place. Since that has been pointed out, a few things. One,
22:55
Speaker 2: bond rates are a heck of lot lower than anybody
22:58
Speaker 2: thought that they would have gotten to. Stock returns have
23:02
Speaker 2: been far higher than where people thought they would get
23:05
Speaker 2: to over the last thirty years, and people are living
23:08
Speaker 2: longer than they were back in the nineteen eighties when
23:10
Speaker 2: this was all looked at. So a few things that
23:13
Speaker 2: are brought up in this. Hey, you know, maybe the
23:15
Speaker 2: four percent rule is too inflexible. Your life expectancy should
23:19
Speaker 2: be taken into account. It doesn't account for things like
23:24
Speaker 2: the one offs in life that happen every few years.
23:27
Speaker 2: You got a kid that gets married, you give them
23:29
Speaker 2: a gift, you have a nursing home event. All of
23:31
Speaker 2: these things don't really get accounted for with the four
23:34
Speaker 2: percent rule.
23:35
Speaker 3: If you're going to use it.
23:37
Speaker 2: Here's where I think the four percent rule is actually
23:40
Speaker 2: a useful starting point. If you are doing things on
23:43
Speaker 2: your own and you're trying to get a general sense
23:47
Speaker 2: of at retirement, am I close to having the right
23:52
Speaker 2: amount of money or enough money to sustainably deal with retirement.
23:56
Speaker 2: Here's how you can think of it. Take a look
23:58
Speaker 2: at my total portfolio value, assuming that your portfolio is
24:01
Speaker 2: diversified and age appropriate for where you are in life.
24:05
Speaker 2: Take four percent of that portfolio value. Add it to
24:09
Speaker 2: your social security or other pension type income that you
24:12
Speaker 2: will have coming in at retirement, and if generally speaking,
24:16
Speaker 2: that income number is going to be more than enough
24:19
Speaker 2: to cover your expenses, you may be at a pretty good.
24:23
Speaker 3: Point for your retirement.
24:25
Speaker 2: If it is well under, you might still be okay,
24:28
Speaker 2: But there's a lot of work that needs to get
24:30
Speaker 2: done about the details to understand why you're well under
24:32
Speaker 2: and how it's going to impact things.
24:35
Speaker 3: Then you need to do the additional work.
24:38
Speaker 2: Then you need to layer on the different things, like
24:40
Speaker 2: what happens if one of us passes away because we're
24:42
Speaker 2: a married couple and I lose that pension income. How's
24:45
Speaker 2: it going to impact me? What if one of us
24:47
Speaker 2: has a big, expensive nursing home stay. How do my
24:50
Speaker 2: Social Security benefits actually work? When should I take them? Like,
24:53
Speaker 2: there's so much more that goes into it. But if
24:55
Speaker 2: all you're attempting to do is assess whether or not
24:58
Speaker 2: you're in the right ballpark for retirement, I do actually
25:01
Speaker 2: think that the four percent rule can add some value
25:03
Speaker 2: at this stage when serving as a guide post for
25:06
Speaker 2: how am I doing generally speaking, when I'm coming along.
25:10
Speaker 2: If you are in that camp and you're trying to
25:14
Speaker 2: assess your readiness for retirement, I have two things for
25:17
Speaker 2: you that I'd like to point out.
25:19
Speaker 3: One.
25:19
Speaker 2: You can request our new guide from the Armstrong Advisory
25:22
Speaker 2: Group for the month of June. It's crucial to anyone
25:26
Speaker 2: heading towards retirement that's got a retirement plan. It's all
25:28
Speaker 2: about understanding required minimum distributions. Whether you have your own
25:33
Speaker 2: retirement account or recently inherited one. This guide will fill
25:36
Speaker 2: you in on all the rules and regulations when it
25:38
Speaker 2: comes to required distributions. Two in two days, we're actually
25:43
Speaker 2: hosting a retirement readiness seminar down in Quincy, all about
25:47
Speaker 2: the two specific subjects of Social Security and medicare two
25:51
Speaker 2: most common questions we get as financial advisors is how
25:54
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25:57
Speaker 2: personal retirement. You can get your copy of the guide
26:00
Speaker 2: or register for this event all at Armstrong Advisory dot
26:04
Speaker 2: com or you can call us at eight hundred three nine.
26:07
Speaker 3: Three four zero zero one.
26:08
Speaker 2: But if you are closing in retirement, I think the
26:11
Speaker 2: point that I would make is there's work to do
26:14
Speaker 2: to make sure you feel confident as you head towards
26:18
Speaker 2: that stage of pulling back from work and no longer
26:20
Speaker 2: drawing in an income.
26:21
Speaker 3: Again.
26:22
Speaker 2: Armstrong Advisory dot com where you can check out our
26:26
Speaker 2: pending events on Thursday of this week as well as
26:28
Speaker 2: throughout the the rest of the summer and fall, or
26:31
Speaker 2: request our brand new free guide on understand and required
26:33
Speaker 2: minimum distributions.
26:35
Speaker 1: The proceeding was paid for by Armstrong Advisory Group, a
26:38
Speaker 1: registered investment advisor. Nothing in the ad or in any
26:40
Speaker 1: Armstrong guide a specific financial, legal, or tax advice. Consult
26:43
Speaker 1: your own financial tax into state planning advisors before making
26:46
Speaker 1: any investment decisions. Armstrong make contact you to offer investment
26:49
Speaker 1: advisory services.
26:50
Speaker 2: We are now below four bucks a gallon on the
26:53
Speaker 2: national average for a gallon of gasoline. We're sitting at
26:57
Speaker 2: three dollars and rounding here ninety three sense on the
27:00
Speaker 2: national average according to Triple A. That's from four to
27:05
Speaker 2: fifty range for sixty range that we were in.
27:07
Speaker 3: Just a month ago.
27:08
Speaker 2: To Mark's point earlier, it'll start getting reflected in inflation
27:12
Speaker 2: numbers in all likelihood when we get those in July
27:15
Speaker 2: for the month of June.
27:17
Speaker 3: A bit of.
27:18
Speaker 2: Disinflation coming here, but at peace. From the New York Times,
27:22
Speaker 2: America's thirst for gasoline may not recover after Iran war
27:26
Speaker 2: and bull not happening. I do not believe for one
27:31
Speaker 2: second that because of the price increases from the Iran War,
27:35
Speaker 2: we're all gonna start suddenly driving priuses, which is what
27:38
Speaker 2: you'd need to happen if America's thirst for gasoline was
27:42
Speaker 2: going to not return.
27:43
Speaker 4: This is the third Gulf war in the past three decades,
27:45
Speaker 4: Am I right?
27:46
Speaker 3: Yes?
27:46
Speaker 4: Yeah, okay, I mean technically not a war as whatever,
27:49
Speaker 4: it's a conflict. It's the third disruption in energy supplies,
27:53
Speaker 4: the third spike and energy prices just the past three decades. Yeah,
27:56
Speaker 4: not going back to the seven And.
27:58
Speaker 3: What's been the trend on Americans? Car perch.
28:00
Speaker 4: They retrench a little bit, they change their habits a
28:04
Speaker 4: little bit in the short term, and then we fall
28:06
Speaker 4: back into the same old.
28:07
Speaker 3: I want to giant. It's massive, and I want to.
28:14
Speaker 4: I'm not judging it. A lot of guys need a
28:15
Speaker 4: lot of men and women need them for work and stuff,
28:18
Speaker 4: but plenty of people don't and occasionally feel good. I'm
28:23
Speaker 4: not gonna I'm not a psychiatrist. I don't know why
28:26
Speaker 4: somebody buys a because they like it. They've got a
28:30
Speaker 4: big family. But you have a big family too, though,
28:32
Speaker 4: and you don't feel compelled to.
28:34
Speaker 3: Do you have.
28:34
Speaker 1: You have a minivan.
28:35
Speaker 2: You got a minivan, yeah, which is think that minivans
28:37
Speaker 2: are cool. So you know, I've talked about that quite
28:40
Speaker 2: at length. I got a TV that folds out of
28:42
Speaker 2: the back. Pretty nice car personally, But.
28:45
Speaker 4: We're we're greeting people who buy a big car if
28:47
Speaker 4: you can afford it, great, But you don't buy a
28:49
Speaker 4: suburban and then complain about the price of Guess.
28:52
Speaker 2: Yeah, I just don't see any indication that a what
28:55
Speaker 2: is looking like a temporary price hike on gasoline is going.
28:59
Speaker 3: To leave to Americans because they never had long term references.
29:02
Speaker 2: Yeah, it never had, don't buy it. Maybe there's something
29:07
Speaker 2: taking hold here with the technological advancement of hybrid engines
29:12
Speaker 2: that Toyota is having a lot of success with.
29:14
Speaker 3: But again, I just I don't know.
29:17
Speaker 2: I'm not seeing that really permeating the overall car buying experience,
29:22
Speaker 2: that it's going to permanently decrease demand for gasoline.
29:25
Speaker 4: My hope is that it changes American car makers thinking
29:28
Speaker 4: GM and Ford, specifically about Sedan's they've abandoned that market
29:31
Speaker 4: almost entirely, and just in the interest of diversification. Had
29:35
Speaker 4: this conflict, Yeah, been more drawn out than it was, and.
29:39
Speaker 3: It could still be.
29:40
Speaker 4: We get conflicting news reports like every hour on where
29:43
Speaker 4: these so called peace talks stand, they'll wish they had
29:46
Speaker 4: a sedan or two in their lineup.
29:48
Speaker 3: Probably I would think so.
29:50
Speaker 2: But once again, we are, you know, three months into
29:53
Speaker 2: this conflict, and I see nothing indicating significant changes to American.
29:56
Speaker 3: Car buying habits. So I'm with you.
29:59
Speaker 2: I think it was a I'm worried that it was
30:01
Speaker 2: a mistake on the part of the American auto manufacturers
30:03
Speaker 2: to abandon the sedan in favor of evs and pickup
30:07
Speaker 2: trucks only. But there's not a lot that we are
30:11
Speaker 2: doing to contradict that.
30:12
Speaker 4: And Mike, we do everything we can to keep gas
30:16
Speaker 4: purchases artificially high during these disruption periods. We release oil
30:20
Speaker 4: from the strategic reserve. Yeah, we do everything we can
30:24
Speaker 4: to make sure people don't change their habits. And I'm
30:27
Speaker 4: not going to judge.
30:27
Speaker 3: That good politics. It's good. It's good.
30:30
Speaker 4: It's certainly good short term politics. And it swings with
30:33
Speaker 4: the regime in power too. Last regime was pushing us
30:35
Speaker 4: to buy alternative energy powered stuff. This regime seems to
30:40
Speaker 4: think that we don't need to go in that direction. So,
30:44
Speaker 4: like your head spins, what should I even bother listening
30:48
Speaker 4: to whoever's in power?
30:50
Speaker 2: Let's take a quick break when we come back a bit.
30:52
Speaker 2: If stacker Lett is next on the Financial Exchange.
30:55
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30:59
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31:04
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31:18
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31:27
Speaker 1: This is the Financial Exchange Radio Network.
31:41
Speaker 2: Time for a bit of stacker Let here Mark, what
31:44
Speaker 2: do you have to kick things off?
31:45
Speaker 4: Finally, giving meaningful financial support to nuclear power, Mike Wall
31:49
Speaker 4: Street Journal reports in an exclusive US bets billions of
31:53
Speaker 4: dollars in low cost loans can revive nuclear power. The
31:56
Speaker 4: Trump Administration's DOE Department of Energy is going to be
31:59
Speaker 4: off for about seventeen and a half billion, and low
32:01
Speaker 4: interest loans to utilities to finance the building of Westinghouse
32:05
Speaker 4: nuclear reactors, aiming to speed up construction of about ten
32:09
Speaker 4: reactors over the next say decades. So it'll take about
32:14
Speaker 4: a decade or so for these two come online. But
32:17
Speaker 4: good news in the sense that it's real money and
32:20
Speaker 4: a streamline regulatory process to get moving again with this
32:24
Speaker 4: form of cheap once they're up and running. And many
32:27
Speaker 4: people will laugh at that adjectivity when you used to
32:29
Speaker 4: describe nuclear energy, but in many ways all costs considering
32:32
Speaker 4: including environmental, a cheap and of course independent way to
32:36
Speaker 4: generate energy about time.
32:38
Speaker 2: Yeah, I'm very much in favor of this structure too,
32:41
Speaker 2: the idea of low cost loans being put out there
32:44
Speaker 2: by the government in order to support public works projects,
32:47
Speaker 2: as opposed to the path that we've been taking recently
32:50
Speaker 2: with companies, which is acquiring their stock.
32:53
Speaker 3: Oh god, no, yeah, yeah, there's a word for that.
32:56
Speaker 3: I like to draw a contrast here, right.
32:58
Speaker 2: The United States seems to have a strategic initiation they
33:00
Speaker 2: want to put in place, which is to develop nuclear
33:04
Speaker 2: to develop electricity generation capacity, and one of the key
33:09
Speaker 2: ways that they can do so is through nuclear power,
33:12
Speaker 2: among other sources, and so their path is, hey, we're
33:14
Speaker 2: going to provide low cost loans in order to go
33:17
Speaker 2: build that stuff out because it's really expensive. The other
33:20
Speaker 2: path would be to say that we think the US
33:22
Speaker 2: government thinks that this company specifically is going to be
33:25
Speaker 2: the best at building.
33:26
Speaker 4: Well, I haven't heard. Well, we're partnering with Westinghouse because
33:28
Speaker 4: they're the only ones that make these AP one thousand reactors.
33:32
Speaker 4: They're proven, right.
33:35
Speaker 2: But the point that I'm trying to make here is
33:37
Speaker 2: I draw a big distinction between this version of things,
33:40
Speaker 2: which is, hey, we are offering financing capacity and you know,
33:44
Speaker 2: a buyer of this energy to incentivize the construction of
33:47
Speaker 2: this stuff, rather than we're buying we are taking ownership
33:51
Speaker 2: in XYZ company. The US government taking ownership into separate
33:56
Speaker 2: companies in different industries I think is a mistake. I
33:58
Speaker 2: think it's stifles competition and it leaves big questions as
34:02
Speaker 2: to what the long term plan is with America's ownership
34:05
Speaker 2: of these companies. Now, you know, ten years from now,
34:09
Speaker 2: when somebody else is in charge of you know, being
34:11
Speaker 2: a steward of those shares. So I like this approach,
34:14
Speaker 2: and I just like drawing contrast to what we've been
34:16
Speaker 2: doing over the course.
34:17
Speaker 3: Of the last couple of years.
34:18
Speaker 2: Here a Tesla crashed into a Texas home in the
34:24
Speaker 2: Houston area, killing a woman, not the driver of the vehicle,
34:29
Speaker 2: the woman that was sitting in the home that the
34:31
Speaker 2: vehicle was collided into. And more and more I'm coming
34:35
Speaker 2: to the conclusion that we just can't have nice things.
34:38
Speaker 2: I drive a Ford that has their own version of
34:42
Speaker 2: self driving technology in this which is from my experience,
34:45
Speaker 2: not quite as advanced.
34:46
Speaker 3: As the Tesla self driving piece.
34:50
Speaker 2: It's specifically to highways only they only map it out there,
34:54
Speaker 2: and even as such, it makes mistakes all the time.
34:58
Speaker 3: All the time. You have to monitor it. You have
35:01
Speaker 3: to have your eyes on the road.
35:02
Speaker 4: Can you give an example.
35:04
Speaker 2: It will accelerate too much around a corner and then
35:08
Speaker 2: just change into the wrong lane because it's out of control.
35:12
Speaker 2: It happens on one twenty eight for me almost every
35:14
Speaker 2: time I drive around this specific corner. It'll take a
35:17
Speaker 2: corner too hot and it will just start moving into
35:21
Speaker 2: the lane next to it, and you know, you have
35:23
Speaker 2: to take control.
35:24
Speaker 4: There's no memory of that. Experience of you taking control.
35:28
Speaker 2: Correct does not build on itself, has not improved on
35:30
Speaker 2: itself one bit. Fortunately in the forward version, their safety
35:35
Speaker 2: measure is that it actually tracks your eyeballs, and if
35:37
Speaker 2: your eyeballs go look over at the cool new construction
35:40
Speaker 2: on the left, and it basically starts beeping at you
35:43
Speaker 2: and says, you know.
35:43
Speaker 4: Okay, what's the point of self driving if you're not
35:45
Speaker 4: you're petrified the whole time.
35:48
Speaker 3: Course, Yeah, you know.
35:50
Speaker 4: Does it help you find it more or less relax
35:52
Speaker 4: You don't see more relaxed.
35:53
Speaker 2: I find that I am far calmer and more relaxed
35:58
Speaker 2: and heavy traffic because if I'm in bumper to bumper traffic,
36:01
Speaker 2: it's doing an excellent job of keeping me in my
36:03
Speaker 2: land something on the road and not need to constantly
36:07
Speaker 2: press the pedal.
36:08
Speaker 3: I find it pretty useful.
36:10
Speaker 2: I also think that just about every major auto manufacturer
36:13
Speaker 2: out there has a less advanced technology that basically does
36:17
Speaker 2: the same thing. Adaptive cruse control basically does the same
36:20
Speaker 2: thing when you're in heavy traffic like that. But what
36:24
Speaker 2: we're seeing time and time again, it's been a little
36:26
Speaker 2: while since a Tesla driver has done something like this.
36:28
Speaker 3: By the way, the video is horrif.
36:30
Speaker 5: I was just about to say that the video guy
36:33
Speaker 5: was horrifying.
36:34
Speaker 2: Lying, well, that's the thing, is he and I wasn't
36:37
Speaker 2: doing it like he likely had with the cock speed
36:41
Speaker 2: set to his tesla, was probably reading a book or
36:43
Speaker 2: something stupid like that, and plowed into this home at
36:48
Speaker 2: what seemed like fifty miles an hour a play to
36:50
Speaker 2: the video.
36:50
Speaker 5: I think it was faster than that, but still, Yeah,
36:54
Speaker 5: it was a horrifying video. And it looked like it
36:58
Speaker 5: was set in like a cul.
36:59
Speaker 1: De sac almost.
37:00
Speaker 2: Yeah, it was not on a highway. It was very
37:02
Speaker 2: much in a quiet what seemed like from the video,
37:04
Speaker 2: which came from a ring video doorbell, a low traffic,
37:09
Speaker 2: quiet neighborhood. So I you know, investigators are looking into
37:14
Speaker 2: what were the conditions of the crash, and you know,
37:17
Speaker 2: I'm coming to foregone conclusions here, But man, it sure
37:20
Speaker 2: seems like we can't handle nice things like this. Well,
37:23
Speaker 2: it seems like the technology is not there for the
37:26
Speaker 2: use cases that people are deploying it with. We've seen
37:28
Speaker 2: countless cases where I called them careless people rather than
37:35
Speaker 2: stupid people. Careless people are using this technology in ways
37:39
Speaker 2: that they shouldn't. There was the case where a guy
37:40
Speaker 2: was using it from the back seat a few years
37:42
Speaker 2: ago and crashed and died. And this is the worst
37:45
Speaker 2: case scenario because the person crashed the vehicle and rather
37:50
Speaker 2: than accidentally killing themselves, killed an innocent bystander who you know,
37:55
Speaker 2: shouldn't have been subject to the less than ready for
38:00
Speaker 2: prime technology, as well as.
38:02
Speaker 3: The person that was ignoring the rules. That's all the
38:04
Speaker 3: time we have for the show. Today. Markets are down.
38:07
Speaker 2: S and P's off one point two percent and Asdack's
38:09
Speaker 2: down one point eight on chip concerns and big sell
38:13
Speaker 2: offs in that space. We'll have a full recap and
38:15
Speaker 2: more tomorrow on the Financial Exchange. Have a great rest
38:18
Speaker 2: of your day.