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Oil Markets Are Running Out of Time · The Financial Exchange Show

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Speaker 1: Zada and Mark Fandetti.
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Speaker 2: It's Chuck, Mark and Tucker with you here today. And
1:17
Speaker 2: Stock's not doing much of anything in the aggregate as
1:19
Speaker 2: we wait for a FED meeting this afternoon. And we
1:24
Speaker 2: got four big tech earnings after the bell as well, Microsoft, Amazon, Google,
1:29
Speaker 2: and Facebook. I refuse now to call them alphabet and Meta,
1:33
Speaker 2: especially because like Meta's got to change their name again.
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Speaker 2: They're not doing the metaverse anymore, big surprise. No one
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Speaker 2: wanted to, you know, spend their entire day in a headset.
1:43
Speaker 2: Good job, good effort. But yeah, so those are all
1:46
Speaker 2: after the bell, almost ten trillion dollars in market cap
1:49
Speaker 2: reporting earnings and uh big ones too as far as hey,
1:53
Speaker 2: what it means for the AI boom. Let's see what
1:54
Speaker 2: happens with some of those capex numbers. We've got The
1:57
Speaker 2: ten yere treasury continue its can sell off up four
2:01
Speaker 2: point two basis points to four point three nine six percent. Uh.
2:05
Speaker 2: Mortgage wise, mortgage rates have moved back up to six
2:08
Speaker 2: point three eight percent. They had come down a little
2:13
Speaker 2: bit recently. Uh, but now we're starting to tick back
2:16
Speaker 2: up from six two nine again, back up to six
2:18
Speaker 2: three eight after today, probably getting back into the six
2:21
Speaker 2: four range right as we are again kind of in
2:24
Speaker 2: that peak spring housing season time period. The dollar index
2:28
Speaker 2: up zero point one five percent to ninety eight point
2:30
Speaker 2: six two, and we've got gold off fifty seven to
2:34
Speaker 2: ninety and ounce to forty five point fifty. Crude oil
2:38
Speaker 2: West Texas Intermediate backup five point twenty four a barrel
2:41
Speaker 2: to one oh five and seventeen cents, the triple A
2:46
Speaker 2: national averagur gas prices rising again as well, up five
2:50
Speaker 2: point three cents over night to four twenty two and
2:53
Speaker 2: nine tenths. This is now the highest number that we've
2:56
Speaker 2: seen this cycle. Uh So we'll see where things can
3:00
Speaker 2: continue to go. But assuming crude oil holds today, you're
3:03
Speaker 2: probably getting that national average getting close to four twenty
3:06
Speaker 2: nine or four point thirty based on you know what
3:09
Speaker 2: we typically see from these kinds of moves. I do
3:14
Speaker 2: want to stay focused on energy here. I've got two
3:17
Speaker 2: pieces and we'll talk about them eventually, but the pieces are.
3:23
Speaker 2: There's one from the Wall Street Journal, the global energy
3:25
Speaker 2: order is breaking down, basically talking about how you're going
3:29
Speaker 2: to see countries no longer focusing purely on economic efficiency
3:33
Speaker 2: when it comes to energy, but more geopolitics conflict, you know,
3:38
Speaker 2: basically resilience trying to build you know that into their
3:41
Speaker 2: supply chains. And then we got a piece here, jet
3:43
Speaker 2: fuel bidding war breaks out as airlines confront global stress
3:46
Speaker 2: test over shortages and cancelations. So here's the deal. I
3:49
Speaker 2: want to talk about what's going on in the US
3:51
Speaker 2: because most of you listening or watching right now live
3:56
Speaker 2: in the US. I know, we do get the occasional
3:59
Speaker 2: listener of you were from overseas, and we thank you
4:02
Speaker 2: for you know, paying attention to us, but most of
4:04
Speaker 2: us here are paying attention to us from the United States.
4:08
Speaker 2: So here's the deal. The United States occupies a unique
4:11
Speaker 2: position both geographically and resource wise when it comes to oil.
4:17
Speaker 2: Number one, we produce a lot of it. We are
4:21
Speaker 2: the largest oil producer in the world at this point.
4:24
Speaker 2: We are the largest natural gas producer in the world
4:26
Speaker 2: at this point. And so ultimately, like those are things
4:30
Speaker 2: that give us a fair amount of stability during a
4:34
Speaker 2: time like this that other parts of the world do
4:36
Speaker 2: not have. If you have any friends that happen to
4:39
Speaker 2: be in Asia where they are celebrating the arrival of
4:43
Speaker 2: you know, every tanker that comes into port, you know this.
4:46
Speaker 2: If you have friends in Europe who are trying to
4:49
Speaker 2: fill up you know, their little vestment motor bike with
4:52
Speaker 2: some petrol on the way to you know, the beach
4:54
Speaker 2: for the summer. Talk to them about you know availability,
4:58
Speaker 2: and hey, it's just not there right now. It's not
5:00
Speaker 2: that every station is out, but you've got you know,
5:03
Speaker 2: limited availability in a number of cases. And ultimately the
5:08
Speaker 2: US because of the vast resources that we have and
5:11
Speaker 2: also the fact that geographically we're isolated, it's just not
5:15
Speaker 2: the case where we have you know, outright shortages right now.
5:19
Speaker 2: But I want to talk to you about just kind
5:21
Speaker 2: of where this is going over the course of the
5:23
Speaker 2: summer if the Strait of Hormuz remains closed, because I
5:26
Speaker 2: know that no one wants to think about this and
5:29
Speaker 2: no one wants to talk about this, like everyone wants
5:30
Speaker 2: to just be like, okay, like it's fine, like we
5:33
Speaker 2: can move on. The fact is, yes, if Hormuz reopens,
5:36
Speaker 2: we can move on. There'll still be some problems for
5:38
Speaker 2: the next you know, two to six months, but you
5:41
Speaker 2: can look through them. If Hormuz does not reopen soon.
5:44
Speaker 2: Here's where you end up going. And this is from
5:46
Speaker 2: the latest Energy Information Administration report that came out this
5:51
Speaker 2: morning at ten thirty am Eastern. So the Energy Information
5:55
Speaker 2: Administration puts out the Air Report every week on what's
5:59
Speaker 2: going on with various with crude oil, with various products,
6:04
Speaker 2: changes in them, refinery capacity, all this stuff, different stuff.
6:09
Speaker 2: Here's the deal. Right now, US commercial crude inventories are
6:14
Speaker 2: at about four hundred and sixty million barrels. Okay. To
6:19
Speaker 2: put this in perspective, the system is built to operate
6:23
Speaker 2: basically running somewhere between like three hundred and sixty million
6:28
Speaker 2: barrels of capacity and five hundred and sixty million, So
6:31
Speaker 2: we're right in the middle of that capacity window right now.
6:36
Speaker 2: The reason why I say that it's built to run
6:38
Speaker 2: that way is you need in any system using liquids
6:42
Speaker 2: a minimum amount of pressure in order to actually get
6:45
Speaker 2: the liquids to go where you want. Plus you actually
6:47
Speaker 2: just need you know, some in there. And when you
6:50
Speaker 2: look at just how oil tanks actually work storage tanks,
6:54
Speaker 2: you can't actually suck up all the stuff at the
6:56
Speaker 2: bottom just because it's watery, it's slimy, it's grease, it's
6:59
Speaker 2: got not slimy, but like it's contaminated, like all the
7:02
Speaker 2: sediment and everything goes down there, it's not usable. So
7:06
Speaker 2: here's the deal. You got about four hundred and sixty
7:08
Speaker 2: million barrels in the US commercial crude system right now.
7:13
Speaker 2: The US commercial crude system for the last week just
7:15
Speaker 2: went through a six million a six million barrel draw
7:19
Speaker 2: six point two million. So if we say, okay, the
7:24
Speaker 2: operational limit is down at three hundred and sixty million barrels.
7:27
Speaker 2: Because the other thing that you got to keep in
7:28
Speaker 2: mind that's included in this capacity. Any oil flowing through
7:31
Speaker 2: a pipeline is in this capacity, and that's about one
7:34
Speaker 2: hundred and twenty to one hundred and fifty million barrels
7:36
Speaker 2: as well. So ultimately where you get to is, if
7:42
Speaker 2: we have a one hundred million barrel buffer in the
7:47
Speaker 2: US commercial crude system and you're seeing a six million
7:50
Speaker 2: barrel draw, you've got sixteen weeks until that is operationally
7:55
Speaker 2: not functional anymore. That's that's the window that you have. Now,
8:01
Speaker 2: this number can change week to week, but this is
8:04
Speaker 2: the first week that you're starting to see these draws,
8:06
Speaker 2: and I would expect them to continue going forward because
8:09
Speaker 2: these are now draws that are based on the fact
8:12
Speaker 2: that there is nothing else that's come through. Hormones in
8:14
Speaker 2: any meaningful volume in the last two months. Yes, you
8:17
Speaker 2: get a tanker through here and there, but it's not enough.
8:21
Speaker 2: It's not so we'll see where this goes. But basically,
8:26
Speaker 2: depending on what you see in these draws that are
8:30
Speaker 2: happening here, you probably have somewhere between like thirteen and
8:34
Speaker 2: eighteen weeks before you start to run into problems with
8:38
Speaker 2: the US crude oil system. And those aren't solved then
8:41
Speaker 2: by shortages. They're solved by prices going up and exports
8:45
Speaker 2: being reduced to countries that won't pay as much as
8:48
Speaker 2: the US will pay. But ultimately this is something that
8:52
Speaker 2: is going to push prices higher as long as there
8:55
Speaker 2: is no resolution, because everyone needs these barrels of oil
8:59
Speaker 2: in order to do something. They might need them to
9:02
Speaker 2: make gas, they might need to make diesel, bunker fuel,
9:06
Speaker 2: they might need him to make jet fuel, whatever it
9:09
Speaker 2: might be. They need these barrels. And this is not
9:12
Speaker 2: just a US phenomenon. If you look at Asia, these
9:16
Speaker 2: large draws of Asian commercial inventory started three weeks ago,
9:21
Speaker 2: so like again, everything's kind of moving from east to
9:23
Speaker 2: west here. If you look at Europe, it started a
9:26
Speaker 2: couple weeks ago and now it's starting to hit here,
9:29
Speaker 2: and the US is resilient from an energy perspective and
9:33
Speaker 2: will be able to handle this. But the way it'll
9:35
Speaker 2: handle it is through demand destruction, which happens when prices
9:38
Speaker 2: move up for supply to meet demand. And so this
9:44
Speaker 2: is where we are going if Horror moves does not reopen,
9:48
Speaker 2: is towards higher prices because the system simply cannot handle
9:54
Speaker 2: this level of demand with the level of crude inputs
9:57
Speaker 2: that we have. The math just doesn't work. And a
10:02
Speaker 2: lot of this again, crude oil exports also hit a
10:06
Speaker 2: new high of six million barrels per day. I've seen
10:10
Speaker 2: some reports that that's probably too high of an estimate
10:13
Speaker 2: just because the system's not built to handle that kind
10:15
Speaker 2: of capacity, so it's probably in the high fives. But
10:20
Speaker 2: the place that people obviously go then as well, why
10:22
Speaker 2: don't we just restrict our crude oil exports? And the
10:24
Speaker 2: answer is, okay, if you do that, then so does
10:27
Speaker 2: everybody else. And that means that you can't get the
10:31
Speaker 2: heavy cruds that you need in order to make the
10:34
Speaker 2: diesels and bunker fuels that you need in order to
10:36
Speaker 2: operate your economy. And the US domestic sources of oil
10:40
Speaker 2: are lighter and don't have as much sulfur, and so
10:43
Speaker 2: you can't make those other types of finished product in
10:46
Speaker 2: the same capacities no matter what you run, no matter
10:49
Speaker 2: how you try to run the lighter oil through. So
10:52
Speaker 2: this is where we are. Is every day that hormus
10:57
Speaker 2: remains closed, this problem is going to continue to build.
11:00
Speaker 2: And this is the first week it's showing up in
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Speaker 2: the US. It started showing up in Asia at the
11:06
Speaker 2: beginning of April. Uh, it is you know, spilling over
11:10
Speaker 2: to Europe in the last couple weeks, and now it
11:12
Speaker 2: is here. And so the way that this balance is
11:15
Speaker 2: is through prices going up such that supply and demand
11:19
Speaker 2: match in a way that they don't right now. So
11:22
Speaker 2: we'll see where this goes.
11:24
Speaker 3: Uh.
11:24
Speaker 2: But again, like that's kind of the math in terms
11:27
Speaker 2: of what we're looking at. If you've got questions about
11:29
Speaker 2: this text us six one seven, three, six two thirteen
11:34
Speaker 2: eighty five, happy to answer them. And if we can't
11:37
Speaker 2: answer them, we'll tell you that too. Because we don't
11:40
Speaker 2: know everything. We try to know a lot. But I
11:43
Speaker 2: gotta tell you, it's a big world out there. It's
11:45
Speaker 2: just it's hard. Uh. But again six one seven, three
11:49
Speaker 2: six two, thirteen eighty five. If you've got questions, let's
11:52
Speaker 2: take a quick break. When we return, we'll preview this
11:55
Speaker 2: afternoon's FED meeting, and we've got trivia.
11:58
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Speaker 4: All right, time for trivia here on the Financial Exchange.
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Speaker 4: And today, Jerry Seinfeld turned seventy two years old. Jerry
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13:31
Speaker 2: Got a piece in the UH New York Times what
13:37
Speaker 2: to watch with the Federal Reserves April meeting? Mark, What
13:39
Speaker 2: do you think we should watch?
13:42
Speaker 3: I don't know that we're gonna get much out of it.
13:44
Speaker 3: They're gonna say, well, we're waiting and see, and I
13:46
Speaker 3: think it's a mistake. By the way, we can talk
13:48
Speaker 3: about not just my opinion, but why why a monetary
13:53
Speaker 3: economist would argue that the Fed could be doing something today,
13:56
Speaker 3: uh to combat rising energy prices. But the FED will
14:00
Speaker 3: probably I think then, And you guys can tell me
14:01
Speaker 3: as well as I could guess about this just from
14:04
Speaker 3: sort of conventional wisdom. They're going to say, well, you know,
14:06
Speaker 3: we don't know how big the shock's going to be,
14:07
Speaker 3: how long it's gonna last. So we're waiting and seeing. Right,
14:11
Speaker 3: that seems to be the consensus.
14:13
Speaker 2: Yeah, I mean, look, if if you take a look
14:14
Speaker 2: at the data from the CME FED Watch, it's saying
14:17
Speaker 2: that there is a one hundred percent probability to the
14:20
Speaker 2: Fed okay, keeps rates where they are?
14:22
Speaker 3: Okay, So is that the right thing to do? We're
14:24
Speaker 3: gonna talk to like a pre eminent monetary economist in
14:26
Speaker 3: a couple of weeks. Tucker's lined it up. Can I
14:28
Speaker 3: tease it? Like two weeks in advance, We're gonna talk
14:30
Speaker 3: to Lawrence Ball. I've asked, and I'm just barreling into it.
14:32
Speaker 2: I like how you kept going even before Tucker said yeah, yeah,
14:35
Speaker 2: and even don't tease it.
14:36
Speaker 3: Don't don't tease, don't tease Lawrence Ball on May twelfth.
14:39
Speaker 3: So we're going to talk to a pre eminent monetary
14:41
Speaker 3: economist and maybe we'll ask him about this. Should the
14:44
Speaker 3: Fed do nothing? Is that the right thing to do? Well?
14:46
Speaker 3: What's happening? Inflation expectations are going up. Inflation itself is
14:50
Speaker 3: going up. That's an inevitable byproduct of rising energy prices.
14:54
Speaker 3: Core has been moderate so far, but you wouldn't expect
14:56
Speaker 3: cor to jump right away. It will eventually, sure, particularly
14:59
Speaker 3: if this is drawn out. Should the FED be doing
15:01
Speaker 3: nothing today, Well, if it does nothing, real interest rates
15:03
Speaker 3: which is the nominal rate you see quoted, and then
15:06
Speaker 3: taking inflation minus inflation, real rates are going down and
15:09
Speaker 3: it's real rates that matter for demand. So doing nothing
15:12
Speaker 3: is actually stimulative in this case. There's that point, and
15:15
Speaker 3: then there's the point of well, headline shocks, and we
15:18
Speaker 3: don't just say shocks meaning wow, that's shocking, and big
15:21
Speaker 3: shocks have a specific meaning. They mean the deviation of
15:24
Speaker 3: headline inflation. All items from core, those have their way
15:29
Speaker 3: of have a way of making their way into core
15:32
Speaker 3: over time, but it doesn't take long because of their
15:34
Speaker 3: effect on people's and firms behavior setting of wages and prices.
15:40
Speaker 3: So the FED, by doing nothing is effectively accommodating. And
15:44
Speaker 3: that's not my term. That's sort of like a term
15:46
Speaker 3: of art used by people in that field, accommodating the
15:48
Speaker 3: shock which is inflationary.
15:51
Speaker 2: So let me look at the other side of the argument.
15:54
Speaker 2: Then there are other people that will say, okay, if
15:59
Speaker 2: this is a temporary shock, the FED hiking into it
16:05
Speaker 2: is going to prevent capital from being deployed that could
16:07
Speaker 2: eventually resolve said shock. Is that a bad line of arguments?
16:13
Speaker 3: Well, yeah, the way I might put that as well,
16:16
Speaker 3: the FED ax on demand. It it controls in a
16:18
Speaker 3: way indirectly. You talk about nominal GDP a lot, that's
16:21
Speaker 3: a proxy for demand. Why should we be throttling demand
16:26
Speaker 3: in response to a supply shock. It's a legitimate question.
16:29
Speaker 3: I'm not going to argue with the premise. Most people
16:31
Speaker 3: can disagree. Okay, you can keep demand constant by accommodating
16:37
Speaker 3: the shock, because the alternative is by pushing against the shock,
16:42
Speaker 3: you're going to constrain demand the only tool the FED
16:44
Speaker 3: has at its disposal. Sure, and that causes growth to slow,
16:48
Speaker 3: and that exacerbates in the short term the stagflationary component
16:52
Speaker 3: of the shock. This is a sort of overly I
16:56
Speaker 3: don't don't mean to sound overly technical. I'm not qualified
16:58
Speaker 3: to get too technical. The shot of this is the
17:00
Speaker 3: FED can cause a little bit of pain today, but
17:03
Speaker 3: keep inflation. Keep the impact on inflation, curb the impact
17:07
Speaker 3: on inflation, cap the impact on inflation. Though it's they
17:10
Speaker 3: can't quite be that specific. About it at the expense
17:13
Speaker 3: of slower growth. It's a legit question. I don't pretend
17:15
Speaker 3: to have the right answer, but I know for sure
17:17
Speaker 3: not doing anything is effectively allowing some of this inflation
17:21
Speaker 3: to seep into the economy at a time when core
17:23
Speaker 3: inflation was still elevated, because they never got it back
17:27
Speaker 3: to their so called two percent goal, which is not sacrisanct,
17:30
Speaker 3: but it is I think important for anchoring expectations.
17:33
Speaker 2: Another piece of data that we're going to be getting
17:35
Speaker 2: tomorrow is the first reading of Q one GDP. And
17:41
Speaker 2: when we look at the estimates, Atlanta FED has Q
17:45
Speaker 2: one GDP at one point two percent. Consensus estimate is
17:47
Speaker 2: that let's see, where's the consensus estimate? Here we go
17:52
Speaker 2: between one and a half and two three this coming
17:55
Speaker 2: off a week Q four. Is it fair to say that,
17:58
Speaker 2: quite honestly, Q one GDP, given how the world has changed,
18:04
Speaker 2: is basically irrelevant regardless of where it comes in.
18:09
Speaker 3: It's you mean, if you're making a forecast, well, yes.
18:12
Speaker 2: I guess here's where I go. Is Normally the best
18:16
Speaker 2: predictor of where economic growth is going to be in
18:18
Speaker 2: the future is where economic growth has been tends to autocorrelating.
18:23
Speaker 2: Is that the right way?
18:23
Speaker 3: You could say correlated? Yeah, there's some persistence there is.
18:26
Speaker 2: What it's done previously is most likely prediction.
18:30
Speaker 3: You would just say whatever it did last quarter plus
18:32
Speaker 3: a little bit of noise. Yeah.
18:33
Speaker 2: So the reason that I bring this up is, Look,
18:34
Speaker 2: the world is fundamentally different from what it looked like
18:37
Speaker 2: for most of Q one. As such, whether this comes
18:42
Speaker 2: in at zero percent or it comes in at four
18:44
Speaker 2: I'm not sure what really matters, but you think it it.
18:49
Speaker 3: Does, because that'll tell us how much slack or not
18:51
Speaker 3: there is in the economy. That tells us if if
18:53
Speaker 3: you think about the inflation process, there's a demand component
18:56
Speaker 3: to it. Sure, if demand was soft in the first quarter,
18:59
Speaker 3: that actually gives the FED some room to accommodate this
19:01
Speaker 3: oil price shock, Like you don't, demand is not going
19:04
Speaker 3: to be a If GDP comes in at four percent, real,
19:07
Speaker 3: holy crap, the FED should be thinking about tightening regardless
19:12
Speaker 3: of the oil price. Sure shock, so it changes It
19:14
Speaker 3: would change their thinking if it were like really hot.
19:16
Speaker 3: But if it comes in at or a little bit
19:18
Speaker 3: below or a little bit above what I'll call trend,
19:21
Speaker 3: the productive potential of the econda the supply side of things.
19:25
Speaker 3: If it comes in around trend, you're fine. The Fed
19:28
Speaker 3: can focus on the shock.
19:29
Speaker 2: Quick break here when we come back, Trivia Answer and
19:33
Speaker 2: Wall Street.
19:33
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19:44
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19:47
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19:50
Speaker 1: Tell you out full Wall Street Watch tracking the stocks,
19:54
Speaker 1: the data, and the headlines driving markets so far today
19:57
Speaker 1: right here on the Financial Exchange Radio Network. Weld.
20:00
Speaker 4: Wall Street's ready for a very busy afternoon ahead, as
20:04
Speaker 4: investors will be watching the final press conference from Fitcherman
20:07
Speaker 4: Jerome Powell following the Central Bank's decision on interest rates
20:11
Speaker 4: at two o'clock. All lies will then shift to big
20:14
Speaker 4: tech after the bell or alphabet, Amazon, Microsoft, and Meta
20:19
Speaker 4: will post their first quarter earnings. Right now, the Dow
20:22
Speaker 4: is down two thirds of a percent, or three hundred
20:25
Speaker 4: and twenty four points, SMP five hundred down about a
20:28
Speaker 4: tenth of a percent, Nasdaq edging three points higher, RUSS
20:32
Speaker 4: two thousand is down four tenths of a percent, Tenure
20:34
Speaker 4: treas reeled up four basis points at four point four
20:38
Speaker 4: zero two percent, and Oil jumping over five percent, rating
20:42
Speaker 4: at one hundred and five dollars a barrel. Starbucks jumping
20:45
Speaker 4: nearly nine percent after the coffee chain posted a six
20:48
Speaker 4: point two percent rise in same store sales in the
20:51
Speaker 4: first quarter. CEO Brian Nicol said its sales rebound is
20:55
Speaker 4: picking up steam in its turnaround effort. Meanwhile, online broker
20:59
Speaker 4: d Robinhood reported a quarterly profit that fell short of
21:02
Speaker 4: street expectations, sending shares down by thirteen percent. Elsewhere, Seagate
21:07
Speaker 4: Technology shares are rallying fourteen percent after the data storage
21:11
Speaker 4: company beat third quarter estimates on the top and bottom lines,
21:16
Speaker 4: while its revenue outlook also impressed. Other data storage names
21:19
Speaker 4: are seeing gains in reaction, and during its annual product event,
21:23
Speaker 4: Uber announced it will add hotel bookings through its app
21:27
Speaker 4: in a partnership with Expedia, beginning in June. Vacation rentals
21:31
Speaker 4: from Expedia's Verbo brand will be added later this year
21:35
Speaker 4: to that app. Uber down modestly. I'm Tucker Silvan. That
21:40
Speaker 4: is Wall Street Watch, and in the previous segment, we
21:42
Speaker 4: asked you the trivia question which actor won the most
21:45
Speaker 4: Primetime Emmy Awards for his or her performance on Seinfeld LB.
21:50
Speaker 4: Michael Richards, who played Kramer as we all know Kevin
21:53
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21:55
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21:59
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22:03
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22:06
Speaker 2: So during the break, I read the headline of our
22:10
Speaker 2: the piece I'm going to cover right now out loud,
22:13
Speaker 2: just because I don't know. I was trying to make
22:15
Speaker 2: conversation or something. And the headline is working longer isn't
22:19
Speaker 2: a fool proof retirement plan? And Mark Fandattie chimed in,
22:23
Speaker 2: yes it is. And he's right, like, if you work
22:26
Speaker 2: long enough so that you die in your job, then
22:29
Speaker 2: you don't need to worry about retirement. He said this facetiously,
22:34
Speaker 2: but you.
22:34
Speaker 3: Know, somewhat somewhat well. I mean, look, I'm not I'm
22:40
Speaker 3: not giving advice, but yes, it is. It's self evidently.
22:45
Speaker 2: Why won't you just work and die?
22:47
Speaker 3: Yeah, I mean that's the way the pope does it.
22:51
Speaker 3: You ever see an unemployed elderly pope?
22:53
Speaker 2: No? Uh, not true, we had one recent Yeah, but
22:56
Speaker 2: he special we had one recently. In any case, Uh,
23:00
Speaker 2: I want to read from the piece because it gets
23:03
Speaker 2: at the one flaw in the argument of work until
23:07
Speaker 2: you die. Almost half forty six percent of the people
23:10
Speaker 2: who retired and twenty twenty five did earlier than anticipated,
23:14
Speaker 2: according to the Employee Benefit Research Institute, a think tank.
23:18
Speaker 2: The bulk do so for unforeseen reasons, including health conditions, layoffs,
23:23
Speaker 2: or caregiving for a loved one. Expert says, and this
23:26
Speaker 2: is the rub is that everyone talks about, well, I'm
23:30
Speaker 2: going to I'm planning to retire at this particular time,
23:33
Speaker 2: but there's often something that ends up forcing your hand instead,
23:37
Speaker 2: and it can force your hand in either direction. The
23:40
Speaker 2: stuff that can make you retire early is the things
23:43
Speaker 2: that are outlined here. The stuff that can make you
23:46
Speaker 2: retire later is, hey, your investment strategy didn't match up
23:50
Speaker 2: with you know, what you thought it was going to
23:52
Speaker 2: do from a return perspective, and so the money wasn't there.
23:56
Speaker 2: Or your company's pension plan went through a renegotiation, there
24:00
Speaker 2: was a cut to the pension plan, so you don't
24:02
Speaker 2: get as much as you thought you were going to.
24:05
Speaker 2: So ultimately, while the pure utilitarian, hey, what's the best
24:11
Speaker 2: way to avoid, you know, struggling in retirement, Well, just
24:14
Speaker 2: don't retire. Situation, While that might be that the perfect
24:19
Speaker 2: plan ultimately, like it's one where you have to understand
24:23
Speaker 2: that there are often forces that will shift your retirement
24:27
Speaker 2: timeline around and you can't really do anything about it.
24:33
Speaker 2: Like it's it's just kind of how it is. And
24:35
Speaker 2: some of these things, look, you know, layoffs are caregiving
24:38
Speaker 2: for a loved one. You might say, well, look that's
24:40
Speaker 2: not retirement. That could just be a short term thing. Ultimately,
24:45
Speaker 2: as much as you know, we like to pretend it's
24:47
Speaker 2: not a real thing, age discrimination is real, and trying
24:50
Speaker 2: to get rehired in your sixties or seventies is nearly
24:55
Speaker 2: impossible in a lot of different fields for various reasons.
24:59
Speaker 2: So this is something where, again if you're trying just
25:03
Speaker 2: to figure out, hey, what does retirement look like, and
25:08
Speaker 2: not you know, what's the day I'm going to retire,
25:10
Speaker 2: but what's the range of outcomes for which hey, it
25:13
Speaker 2: could make sense for me to retire. If you don't
25:17
Speaker 2: want to, you know, do the full fandetti and work
25:21
Speaker 2: till you die, then you can call the Armstrong Advisory
25:25
Speaker 2: Group at eight hundred three nine three for zero zero
25:29
Speaker 2: one to schedule a consultation. Again, the idea behind this
25:33
Speaker 2: is not to say this is the day you can retire,
25:36
Speaker 2: but more Hey, here's some different scenarios of how you
25:40
Speaker 2: could potentially depending on exactly what unfolds as you get
25:45
Speaker 2: into your sixties and seventies. Again, scheduling time to speak
25:49
Speaker 2: with someone from the Armstrong Advisory Group by calling eight
25:52
Speaker 2: hundred three nine three for zero zero one, no cost
25:57
Speaker 2: to the consultation. You get some good information. You come
26:00
Speaker 2: out of there with some new ideas that might help
26:02
Speaker 2: you figure out what retirement can look like. Again, that
26:06
Speaker 2: phone number is eight hundred three nine three for zero
26:10
Speaker 2: zero one.
26:11
Speaker 1: The proceeding was paid for by Armstrong Advisory Group, a
26:13
Speaker 1: registered investment advisor. Nothing in the ad or in any
26:16
Speaker 1: Armstrong guide a specific financial, legal, or tax advice. Consult
26:19
Speaker 1: your own financial tax into state planning advisors before making
26:22
Speaker 1: any investment decisions. Armstrong may contact you to offer investment
26:25
Speaker 1: advisory services.
26:27
Speaker 2: Let's see what do I want to talk about here? No? No, no, okay,
26:34
Speaker 2: let's do this one just quickly. Are you financially worse
26:37
Speaker 2: off today? More Americans say yes, Here's why this. According
26:41
Speaker 2: to a new Gallup poll, more than half fifty five
26:44
Speaker 2: percent actually say that their financial situation is deteriorating, and
26:50
Speaker 2: a couple of years ago, only forty seven percent of
26:53
Speaker 2: Americans said that their financial situation was deteriorating. So it's
26:57
Speaker 2: kind of like, okay, like what gives here? And overall
27:02
Speaker 2: inflation from a rate of change perspective is eased from
27:06
Speaker 2: a few years ago. You still have a pretty historically
27:12
Speaker 2: low unemployment rate, quite honestly, you know, in the low
27:17
Speaker 2: to mid fours. And despite that, you have more and
27:20
Speaker 2: more Americans saying, hey, I don't feel good about where
27:24
Speaker 2: things are. And I think, quite honestly, I think there
27:29
Speaker 2: are two things at play here. Number one, the labor market.
27:34
Speaker 2: Even though it is still a low unemployment rate, it's
27:37
Speaker 2: a very stagnant labor market. It takes a while to
27:39
Speaker 2: get hired, you know, it's just not there's not a
27:42
Speaker 2: lot of dynamism and movement within the labor market right now.
27:45
Speaker 2: So I think that's part of it. The other piece
27:47
Speaker 2: is I think that no one looks at inflation as
27:55
Speaker 2: a rate of change. Actually that's the definition.
27:59
Speaker 3: So that's in I know, odd perception, but yeah, but.
28:02
Speaker 2: I believe that people look at the price level.
28:04
Speaker 3: Oh yeah, absolutely true, not the.
28:06
Speaker 2: Rate of change. Sure, absolutely, they feel the rate of
28:09
Speaker 2: change when it gets past a certain threshold, Like I think,
28:11
Speaker 2: you know, if something's moving up at you know, a clip,
28:14
Speaker 2: like they you feel inflation when it moves from like
28:18
Speaker 2: two to five, even if you don't, like say but
28:21
Speaker 2: like no, no one feels the difference between a two
28:24
Speaker 2: and two and a half percent inflation rate. That's like
28:26
Speaker 2: the kind of sinister thing about it is it erodes
28:29
Speaker 2: you know, purchasing power much more rapidly. But you don't
28:31
Speaker 2: really like feel that two to two and a half difference.
28:35
Speaker 2: But I think when it comes to the price level,
28:37
Speaker 2: I think that the thing a lot of Americans are
28:38
Speaker 2: still struggling with is prices went up a lot in
28:41
Speaker 2: the early part of this decade. M and they they
28:43
Speaker 2: didn't come down because they never come down well in
28:46
Speaker 2: the aggregate, the price the price level. The only time
28:48
Speaker 2: it goes down is when things are really bad in
28:51
Speaker 2: the account.
28:51
Speaker 3: I went through this with Michael Armstrong yesterday. The inflation
28:54
Speaker 3: rate so far this decade, if you annualize it is
28:56
Speaker 3: three point six percent. I'm rounding up a couple of
28:58
Speaker 3: hundredths of a percentag point there, three point five.
29:00
Speaker 1: I think it was sure.
29:01
Speaker 3: Last decade it was two point very low twos so
29:04
Speaker 3: the twenty tens different circumstances, but that's a reference point
29:08
Speaker 3: for US A decade before that, notwithstanding the oil and
29:11
Speaker 3: gas price run up of the early two thousands, it
29:14
Speaker 3: was in the low twos nineteen nineties, in the mid twes,
29:17
Speaker 3: so this is a shockingly higher inflation decade and we're
29:22
Speaker 3: all still processing that as compared to the last three.
29:26
Speaker 3: So that covers just about anybody in the workforce today
29:29
Speaker 3: and most people who are alive.
29:31
Speaker 2: And I think it's that idea of relative, like, the
29:35
Speaker 2: relative nature of this is what makes it feel that way.
29:39
Speaker 2: Even though the labor market, even though the unemployment rate's low,
29:44
Speaker 2: well it's still higher than it was a few years ago,
29:46
Speaker 2: and it's still harder to get hired today than a
29:48
Speaker 2: few years ago. And so we compare things to recent history.
29:52
Speaker 2: If you got gas prices at four twenty two right now,
29:56
Speaker 2: let's say they go up to six dollars a gallon.
29:57
Speaker 2: I'm not saying they will, but just bear with me
29:59
Speaker 2: for a second. And they go up to six, you're like, oh,
30:02
Speaker 2: six is terrible. They come back down to four, You're like, yeah, four,
30:06
Speaker 2: it is not so bad because it's relative to what
30:10
Speaker 2: you experienced before, and so this is something that I
30:14
Speaker 2: think plays in as just the labor market is worse
30:17
Speaker 2: than a few years ago, and inflation, while better than
30:20
Speaker 2: a few years ago, prices are still higher because that's
30:22
Speaker 2: the direction they always move, and I think people just
30:26
Speaker 2: kind of feel like crap because of that. And the
30:28
Speaker 2: other thing I've said is just look, since the start
30:31
Speaker 2: of this decade, Americans have just gotten slammed with something
30:34
Speaker 2: new every year. Twenty twenty, pandemic, Everything's shut down. Am
30:39
Speaker 2: I gonna have a job? Will my business survive? Twenty
30:42
Speaker 2: twenty one? Hey we got all this free money, Let's
30:45
Speaker 2: go buy some stuff. Oh wait, it won't be delivered
30:47
Speaker 2: for eight months because of supply chain issues. Twenty twenty two,
30:50
Speaker 2: Hey supply Oh no, wait, there's a war in Ukraine
30:54
Speaker 2: and prices are going through the roof. Twenty twenty three
30:57
Speaker 2: The banks are imploding. What are we gonna do? Twenty four?
31:01
Speaker 2: Hey the labor market feels like it's slowing down. Twenty five, Hey,
31:05
Speaker 2: the labor market is slowing down. Twenty six You got
31:10
Speaker 2: gas prices moving up, and uncertainty about you know, other
31:12
Speaker 2: prices as well. So it's just been like one thing
31:16
Speaker 2: after another that's we haven't just had one year where
31:20
Speaker 2: we can just be like, yeah, we're cool. Yeah.
31:23
Speaker 3: The eighties, nineties up till the Great Recession, the GFC
31:27
Speaker 3: whatever you global financial courses, whatever you want to call it.
31:28
Speaker 3: In two thousand and two thousand and nine, we're an
31:30
Speaker 3: unusually a quiescent period. Economists call it even.
31:34
Speaker 2: The two thousands. The two thousands had.
31:36
Speaker 3: Like up until the GFC.
31:37
Speaker 2: Yeah, but even there it was like, Okay, here's the problem. Yeah,
31:40
Speaker 2: and yeah there was some other like smaller stuff, but
31:42
Speaker 2: it was like, Okay, we spent five years digging out
31:44
Speaker 2: from that. But then quite honestly, the economy from like
31:46
Speaker 2: fifteen through nineteen.
31:48
Speaker 3: Yeah, it was pretty dark. Volatil a, GDP volatility, volatility
31:51
Speaker 3: about the macro variables went back down. There's a name
31:53
Speaker 3: for it. Economists, researchers called it the great moderation. Question
31:57
Speaker 3: is was it a great you know, aberration? And are
31:59
Speaker 3: we now just the new normal?
32:01
Speaker 2: Let's take a quick break, and when we come back,
32:03
Speaker 2: we got stack Roulette.
32:04
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33:08
Speaker 2: Mark, what do you got for stack roulettes?
33:10
Speaker 3: Starring The Wall Street Journal. The US wants to ban
33:12
Speaker 3: China's high tech cars, but they're already here in El Paso.
33:16
Speaker 3: I don't really know how to summarize this, so I'll
33:18
Speaker 3: just read a couple of quick, very quick blurbs that
33:21
Speaker 3: we've applied very high tariffs and regulatory barriers to block
33:25
Speaker 3: Chinese car inports. You can't buy them here, Yes, they're
33:27
Speaker 3: a fraction electric or conventional. They're a fraction, and that's
33:31
Speaker 3: I'm not just like using that as an expression. They're
33:33
Speaker 3: literally like half of what comes in some cases a quarter, yeah, right,
33:36
Speaker 3: Like literally a fraction of what America comparable American cars costs.
33:40
Speaker 3: These things get rave reviews everywhere, including from US journalists
33:43
Speaker 3: who either aren't allowed to or haven't published their reviews
33:46
Speaker 3: of them yet. And so despite the fact that Americans
33:50
Speaker 3: are clamoring for affordable, reasonable quality cars so you know,
33:55
Speaker 3: we can get to work, it doesn't look like there's
33:57
Speaker 3: any prospect. And maybe they're good national security arguments that
34:00
Speaker 3: I'm just not aware of, Chuck. But I see quotes
34:02
Speaker 3: in this article from protectionist politicians from the Midwest who
34:05
Speaker 3: want to quote hermetically seal the US market, And I
34:08
Speaker 3: think that's fine if you want the whole country to
34:10
Speaker 3: go the way of I'm going to. I don't want
34:13
Speaker 3: to pick on a Midwestern state and upset every listener
34:16
Speaker 3: who happens to be listening or watching US.
34:18
Speaker 2: From So I think our listeners from like a lot
34:20
Speaker 2: of those states realize what's happened to those states, you know, Okay,
34:23
Speaker 2: in the last.
34:23
Speaker 3: Twenty bad policy. Guys, Ohio and Massachusetts had the same
34:26
Speaker 3: per capita GDP fifty years ago, it wasn't clear which
34:29
Speaker 3: would break out. Now there are structural and global forces
34:33
Speaker 3: that allowed Massachusetts to grow a lot faster. But you
34:35
Speaker 3: want to make the country. Maybe you don't like some
34:37
Speaker 3: of Massachusetts's politics, I certainly don't, but economically, you want
34:41
Speaker 3: to make the country more like Massachusetts less like the Midwest.
34:44
Speaker 3: And anybody who's ever traveled out there, and I'm not
34:46
Speaker 3: going to like pick on Gary, Indiana or other you
34:49
Speaker 3: just sort of basket cait. Well, you know, okay, but
34:51
Speaker 3: everybody knows that's a text I always say that and
34:53
Speaker 3: then I slammed something. Those are sort of textbook lost cities.
34:59
Speaker 3: Letting these say people make policy for the country is
35:01
Speaker 3: a little bit upsetting for those of us who just
35:03
Speaker 3: want a decent car at a decent price.
35:05
Speaker 2: The counter to this is these vehicles are so heavily
35:08
Speaker 2: subsidized by the Chinese government in terms of their production
35:12
Speaker 2: that no one can compete with them playing field, and
35:16
Speaker 2: so I think there are very good reasons for not
35:18
Speaker 2: wanting them in for that reason, because otherwise you are
35:21
Speaker 2: just externalizing your industrial base. And as we've seen in
35:24
Speaker 2: the last you know, five seven years that has ramifications.
35:28
Speaker 2: When you actually need to produce things industrially domestically.
35:31
Speaker 3: Why not pivot to something? Why not take the If
35:33
Speaker 3: the Chinese want to pay for half my car, I'll
35:35
Speaker 3: take it, and we can you know, don't.
35:39
Speaker 5: No.
35:40
Speaker 2: But I think the other thing is this is before
35:41
Speaker 2: we get to the question of can you trust the
35:44
Speaker 2: Chinese government to still be friendly to you depending on
35:48
Speaker 2: what their wishes and desires are going forward as it
35:51
Speaker 2: relates to places like Taiwan and even just you know what,
35:55
Speaker 2: you know, the conditions they would set for needing to
35:59
Speaker 2: you know, allow these vehicles to be sold in the US.
36:01
Speaker 2: Like what again, it's I really very much have concerns
36:09
Speaker 2: about allowing Chinese owned manufacturing companies to gain significant footholds
36:18
Speaker 2: in US sales and what it does to our manufacturing
36:21
Speaker 2: capacity for things that we need to be able to
36:23
Speaker 2: produce domestically. And I will say that vehicles, not electric,
36:27
Speaker 2: not internal combustion engine, but just vehicles in general. I
36:31
Speaker 2: think from a national security perspective, there is it. There
36:34
Speaker 2: are very good reasons to want to have those produced domestically.
36:38
Speaker 3: Yeah, I've just never understood where you draw the line food, pharmaceuticals,
36:42
Speaker 3: I think as.
36:43
Speaker 2: I think all of those things should have domestic production,
36:46
Speaker 2: even if it's not the most economically.
36:47
Speaker 3: Slippery slope to autarchy and Soviet levels of growth which
36:51
Speaker 3: were like zero. I don't mean they were totally self sufficient,
36:54
Speaker 3: but it was a disaster.
36:55
Speaker 2: Or the other piece is, look, if you want to
36:59
Speaker 2: allow four or those those items to be manufactured overseas well,
37:06
Speaker 2: then you have to have very strict protocols that are
37:10
Speaker 2: followed that China has not proven they can follow through on.
37:15
Speaker 2: I think that like, those are those are some real problems.
37:18
Speaker 3: If that's what's driving this, Okay, but it sounds like
37:20
Speaker 3: when I read politicians from the Midwest quotes, they're just
37:23
Speaker 3: concerned about their constituents. Are not thinking about larger economics.
37:27
Speaker 2: No, of course, they're concerned about their constituents.
37:30
Speaker 3: And yeah, okay, that's a stupid thing to say.
37:33
Speaker 2: Well, here's the thing. It's it's also it's one thing
37:36
Speaker 2: for us to say like, oh, it's you know, like, yes,
37:38
Speaker 2: you need to be accepting of you know, this other competition.
37:41
Speaker 2: But when that competition puts someone out of a job
37:43
Speaker 2: and they can't find one for two years, like that's
37:45
Speaker 2: a lived experience that's really hard to actually go through
37:49
Speaker 2: because in a lot of in a lot of parts
37:51
Speaker 2: of the country that get haulowed out, there is no
37:52
Speaker 2: other job that you can just go to, you know,
37:55
Speaker 2: there's no new factory that comes in, there's no new
37:58
Speaker 2: retailer that comes in. It's just okay, like this what
38:00
Speaker 2: it is now. So we're not very good at dealing
38:03
Speaker 2: with that when we were like, oh, we'll take all
38:05
Speaker 2: the economic benefits, but we're not going to distribute them
38:09
Speaker 2: to all of the people. They're just going to accrue
38:11
Speaker 2: to the owners of those companies. It's not great. Let's
38:15
Speaker 2: take a quick break for the entire rest of the day,
38:17
Speaker 2: but hey, we're going to be back tomorrow and we'll
38:20
Speaker 2: have some fun. Join us then