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Could AI reshape the economic geography of the United States? · The Financial Exchange Show

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Speaker 2: Good morning, Welcome back to the Financial Exchange Annually. Hope
1:14
Speaker 2: all of you had a nice little time off with family.
1:16
Speaker 2: I personally am still recovering from massive quantities of food
1:21
Speaker 2: that was consumed, and just too much sugar is the
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Speaker 2: consistent thing that I have around this holiday. But broadcasting today,
1:30
Speaker 2: I am at least from beautiful, foggy and rainy Chicago,
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Speaker 2: where we spent our holidays with my wife's family, and
1:39
Speaker 2: I get a little two hour break from that this morning.
1:42
Speaker 2: I'm sure they're all listening in the other room, so
1:44
Speaker 2: I should probably be quiet now. But markets today falling
1:48
Speaker 2: for the first time in five sessions. The Dow initially
1:51
Speaker 2: was down about one hundred points. Has made up a
1:53
Speaker 2: lot of those losses as we head into the eleven
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Speaker 2: o'clock hour here, Dow currently off only thirty five points,
2:00
Speaker 2: about a tenth of a percent, SMP about the same
2:02
Speaker 2: a tenth of a percent, and ASDA a little bit
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Speaker 2: worse for the day, but not substantially. The yield on
2:07
Speaker 2: the ten year treasury now up above well above four
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Speaker 2: and a half percent, now sitting at four point six
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Speaker 2: one five percent, and that is going to be I
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Speaker 2: think probably the story that dominates twenty twenty five is
2:21
Speaker 2: how longer term rates are reacting to both what jro
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Speaker 2: Powell saying as well as actions from the incoming Trump
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Speaker 2: administration what it might mean for both employment and inflation.
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Speaker 2: But that ten year treasury now sitting at four point
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Speaker 2: six one five percent, as I mentioned, in terms of
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Speaker 2: what that means now for mortgage rates, because that's probably
2:43
Speaker 2: the one that matters a little bit more to the
2:45
Speaker 2: average American, those have now bumped all the way up
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Speaker 2: to seven point one percent, which is not quite the
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Speaker 2: highest that it's been during this cycle. We did get
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Speaker 2: up to more like seven and a half percent back
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Speaker 2: in November of last year, but bumping right back up
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Speaker 2: there to those highs, which can spell only bad news
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Speaker 2: for the housing market come twenty twenty five. If you're
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Speaker 2: a buyer out there, obviously you're facing those higher mortgage
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Speaker 2: rates and you know, maybe discouraged to go out there
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Speaker 2: and buy. If you're a seller out there, your replacement rates,
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Speaker 2: you know, if you're locked into that three percent mortgage,
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Speaker 2: it remains a far cry away from where we are today,
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Speaker 2: and that, as it has for the last few years,
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Speaker 2: seems likely a meet to me at least to continue
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Speaker 2: to lock up this housing market for a prolonged period
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Speaker 2: of time. Taking a look at the active listing count
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Speaker 2: for the overall housing market, and I recognize, you know,
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Speaker 2: this time of year is not exactly a busy housing season,
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Speaker 2: but nonetheless, according to the most recent data across the
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Speaker 2: United States, there were nine hundred and fifty three thousand
3:50
Speaker 2: homes for sale. I believe that includes both single and
3:54
Speaker 2: multi family units. That number, just for some framework, back
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Speaker 2: in November twenty nineteen, was sitting at one point one
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Speaker 2: four million homes for sale, and if we go all
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Speaker 2: the way back to November of twenty sixteen, you know,
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Speaker 2: the context around when Donald Trump lost took last took office,
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Speaker 2: we are sitting at one point three four million homes
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Speaker 2: for sale, and so we have been climbing. We're getting
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Speaker 2: to a more comfortable level of inventory, and I'm hopeful
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Speaker 2: that the spring housing market shapes up to something. But yeah,
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Speaker 2: with rates around seven point one percent, I just don't
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Speaker 2: see much relief coming anytime soon. At the same time,
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Speaker 2: the yield on things like savings accounts and CD rates
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Speaker 2: have been coming down as the Federal Reserve has cut
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Speaker 2: rates four times in twenty twenty four. They do seem
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Speaker 2: likely to pause at least somewhat in twenty twenty five
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Speaker 2: on those rate cuts as they sort out what the
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Speaker 2: what the data looks like for twenty twenty five. Mark
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Speaker 2: any other items catching your attention this morning.
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Speaker 3: Now, the rise in rates is interesting, Mike. I think
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Speaker 3: the question on everybody's lips, or at least ours, is
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Speaker 3: when do they hit like a scale velocity? At what
5:01
Speaker 3: point do deficit concerns, the inflationary impact of tariffs all
5:06
Speaker 3: LSEQUL tariffs raise prices, they are inflationary, depending on the
5:10
Speaker 3: Fed's response, that inflation might become dug in. But at
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Speaker 3: what point do rates just start barreling upward out of control.
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Speaker 3: We were talking about this in the last hour in
5:21
Speaker 3: the context of when are people actually going to take
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Speaker 3: action with respect to the deficit. It's huge no matter
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Speaker 3: how you measure it. They'll take action when they feel
5:31
Speaker 3: the pinch. Is this the start of a long and
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Speaker 3: painful upward march in the rate The government pays to
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Speaker 3: borrow for the long term, which has knock on effects,
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Speaker 3: as you point out, Mike, for what we pay for
5:43
Speaker 3: mortgages and some other things is this the point when
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Speaker 3: again that number hits escape velocity. It's not gonna obviously
5:51
Speaker 3: go up indefinitely, but to the point where people start
5:55
Speaker 3: to feel real economic pain as a result.
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Speaker 2: To be clear, I don't know where you would look
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Speaker 2: for evidence, but I don't know that we see any
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Speaker 2: evidence today that, for instance, there is not enough appetite
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Speaker 2: to absorb the amount of treasury issuance that's going out
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Speaker 2: of the federal government, that we have auctions that aren't
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Speaker 2: going off well, things along those lines. Those to me,
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Speaker 2: would be early indications that oh wow, maybe this global
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Speaker 2: appetite for US treasuries isn't what we thought it was,
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Speaker 2: And or public statements from large governments that hey, they're
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Speaker 2: going to hold off on buying more US government because
6:25
Speaker 2: out of concerns about its credit worthiness. To me, I
6:28
Speaker 2: don't think that we've seen any evidence of that. But
6:30
Speaker 2: could it be getting filtered in through some of the
6:33
Speaker 2: plumbing that I guess that's always possible. I just don't
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Speaker 2: know that it's I don't know that anyone knows that
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Speaker 2: it's going to be a twenty twenty five or even
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Speaker 2: before twenty twenty thirty.
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Speaker 1: Issue.
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Speaker 3: Yeah, I know, think it doesn't have to be an
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Speaker 3: abrupt right cataclysm or a dramatic event. It could just
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Speaker 3: be the like the boiling frog analogy, which is terrible
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Speaker 3: but might capture what's going on here. You don't realize
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Speaker 3: you're being boiled until it's too late. And is this
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Speaker 3: upward march in rates? They're up a percentage point now
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Speaker 3: I'm talking about the ten year treasury and that gets
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Speaker 3: mirrored in mortgage. You at longer term mortgages to a
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Speaker 3: degree are up a full percentage point since the middle
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Speaker 3: of September. That's a big, quick rise.
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Speaker 2: I want to shift a little bit to the other
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Speaker 2: big theme that has been really consistent throughout twenty twenty four,
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Speaker 2: which is the excitement over artificial intelligence and how it
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Speaker 2: might shape the future. And this is an interesting piece
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Speaker 2: from I think it's The New York Times today about
7:31
Speaker 2: how artificial intelligence could reshape the economic geography of America.
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Speaker 2: And here the argument that it's laying out the types
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Speaker 2: of jobs that are very likely to be affected by
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Speaker 2: artificial intelligence, at least according to this a this New
7:46
Speaker 2: York Times piece would be you know, finance type jobs,
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Speaker 2: tech jobs where people are doing coding. We've seen results
7:56
Speaker 2: in those areas where, for instance, you know, coders in
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Speaker 2: jobs in San Francisco and other parts of the country,
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Speaker 2: which are high paying jobs, are far more efficient, and
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Speaker 2: you know, companies have been hesitant to expand hiring in
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Speaker 2: those areas because of how much more efficient some of
8:13
Speaker 2: their workers have been. There are also some of the
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Speaker 2: highest cost areas to live in the country, and so
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Speaker 2: their argument here at least is that the Midwest, mid
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Speaker 2: Atlantic South would benefit or at least not fall quite
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Speaker 2: as hard from the emerging artificial intelligence technology. And I
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Speaker 2: have to say that I'm not sure I buy it.
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Speaker 2: For one one even sliver of a second here, I
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Speaker 2: just don't think there's much historically that would point to,
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Speaker 2: you know, areas of the country being haulowed out due
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Speaker 2: to technological innovation. I think you can say that about offshoring.
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Speaker 2: You know, there are large parts of the country today,
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Speaker 2: part of the Midwest and the rust Belt, that you
9:01
Speaker 2: have fallen by the wayside, in part due to our
9:05
Speaker 2: ability to import all sorts of stuff from outside the
9:07
Speaker 2: United States. But I'm just not sure that I buy that.
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Speaker 2: For instance, New York City, San Francisco, and Boston are
9:13
Speaker 2: going to get hallowed out due to the innovation of
9:15
Speaker 2: artificial intelligence.
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Speaker 3: Well, it doesn't mean there's going to be mass layoffs.
9:19
Speaker 3: It just means you won't need as many people to
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Speaker 3: do mundane tasks. Now still need somebody with experience. You
9:25
Speaker 3: gave the example of coding. You can ask one of
9:29
Speaker 3: these things to give you a framework, but you still
9:33
Speaker 3: have to tweak the code. Just like if you're, say
9:35
Speaker 3: an admin developing a PowerPoint presentation. Your boss gives you
9:39
Speaker 3: a bunch of contents, has put this in a PowerPoint A.
9:42
Speaker 3: I could give you the shell, but you're gonna need
9:44
Speaker 3: to put the finishing touches on yourself. That's something you
9:47
Speaker 3: may have needed a small staff in the past to
9:50
Speaker 3: do for you. You might have more time to devote
9:52
Speaker 3: to I'm just using an example that we're all familiar
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Speaker 3: with because everybody's had to put something in PowerPoint and
9:57
Speaker 3: knows how enormously frustrating it is to size things the
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Speaker 3: right way and make.
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Speaker 2: Them want just try and this, Joe, Nope, Now it's right.
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Speaker 3: Well, you want to put your fist through the monitor
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Speaker 3: every time you use it, at least I do. So
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Speaker 3: that will, in the long run, I think, improve everybody's productivity.
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Speaker 3: We'll just need fewer people, Mike, I don't think it's
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Speaker 3: a matter of mass layoffs and the hollowing out of
10:19
Speaker 3: big cities or anything that dramatic.
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Speaker 2: And to the extension, I guess my point would be, look,
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Speaker 2: if COVID didn't ruin American cities, I just don't believe
10:28
Speaker 2: that a technological innovation akin to the Internet is likely
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Speaker 2: to do it. I just don't see how that. Again,
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Speaker 2: who knows. Nobody knows exactly how artificial intelligence is going
10:39
Speaker 2: to work out, but I don't see why the impact.
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Speaker 3: Just assume it improves productivity, Mike. We don't have to
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Speaker 3: get into the weeds of how it's going to affect
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Speaker 3: every subcategory of employment. Just assume it means slightly faster
10:53
Speaker 3: economic growth in the long term, though some heavyweights disagree
10:57
Speaker 3: strongly that that's likely to be the case. But puppose
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Speaker 3: it does increase productivity and economic growth by just a
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Speaker 3: little bit. In that sense, it's going to be akin
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Speaker 3: to the Internet, which did both of those things, though
11:08
Speaker 3: not permanently. Sadly, maybe it's effects are longer lasting. Nobody knows.
11:13
Speaker 3: Take these long term forecasts, especially the dire ones, with
11:16
Speaker 3: a huge grain of salt.
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Speaker 2: There is one piece that does seem regardless of how
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Speaker 2: effective it is in the short term or long term,
11:24
Speaker 2: regardless of how many jobs it eliminates, one thing that
11:27
Speaker 2: seems fairly certain according to experts at this point is
11:30
Speaker 2: going to be the demand for electricity. And that is
11:34
Speaker 2: one piece that I find confounding it and interesting. I'm
11:38
Speaker 2: optimistic on it, but very pessimistic in the short term.
11:41
Speaker 2: Utility stocks in twenty twenty four rowse about twenty about
11:45
Speaker 2: twenty percent, some of them a heck of a lot more,
11:48
Speaker 2: some of the unregulated utility energy generation companies through the
11:53
Speaker 2: roof this year on massive new demand from these AI
11:57
Speaker 2: companies like Microsoft, like Meta, who have deep pockets to
12:00
Speaker 2: pay for it in the short term. You know, just
12:03
Speaker 2: fundamental basic economics here. What I see happening is immense
12:08
Speaker 2: new demand for electricity from a market that is not
12:13
Speaker 2: terribly elastic on the supply side. And Mark, you'll have
12:18
Speaker 2: to bring me back to economics one oh one. But
12:20
Speaker 2: when you have a massive increase in demand without much
12:23
Speaker 2: increase in supply, usually I think prices go.
12:26
Speaker 3: Up if they're allowed to. Otherwise you get shortage es.
12:30
Speaker 2: Yeah, that could be the other fascinating one, right generally speaking,
12:34
Speaker 2: all of our utility rates are heavily regulated by the
12:36
Speaker 2: States YEA, and so if they say no, we're not
12:39
Speaker 2: going to allow you to charge more to our customers
12:42
Speaker 2: than what happens. Do we have rolling brownouts and blackouts
12:47
Speaker 2: like they have in other parts of the country because
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Speaker 2: of the massive new AI demand. Longer term, I think
12:52
Speaker 2: that you have new nuclear power plants, and there's already
12:55
Speaker 2: talk about a bunch of nat gas power plants going
12:57
Speaker 2: online specifically for some of these projects. So I'm optimistic
13:01
Speaker 2: long term, but in the short term, I think we
13:03
Speaker 2: have some really painful stuff to work out in terms
13:05
Speaker 2: of electricity generation and transmission. Let's take a quick break.
13:10
Speaker 2: When we come back, we're gonna have trivia for you,
13:12
Speaker 2: and then a couple more AI stories that I want
13:14
Speaker 2: to cover regarding Microsoft. That's next here on the Financial
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Speaker 4: All right, it's time for some trivia here on the show.
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14:31
Speaker 2: Mark and Ben, I think I have a candidate here
14:34
Speaker 2: for least specific or useful article of the year. And
14:38
Speaker 2: I know we're closing in on the end of the
14:40
Speaker 2: year here, so we have a lot of them to
14:43
Speaker 2: cover here. But this piece, which is authored by Jenny Johnson,
14:48
Speaker 2: who if you've never heard of her, she's the president
14:49
Speaker 2: and CEO of Franklin Templeton. She wrote in Baron's about
14:53
Speaker 2: artificial intelligence. And I'm not sure how many words she
14:57
Speaker 2: used here. It's a it's a you know, fifteen paragraph
15:01
Speaker 2: piece here on artificial intelligence, and I can summarize it
15:05
Speaker 2: up in I think ten words. People are optimistic about AI,
15:11
Speaker 2: but they might soon be pessimistic, which might be a
15:14
Speaker 2: good investment opportunity, but maybe not. I don't know if
15:18
Speaker 2: either of you read this thing, but that's the entirety
15:20
Speaker 2: of the piece, as far as I could tell it
15:22
Speaker 2: is there's a lot of optimism about artificial intelligence, but
15:28
Speaker 2: usually there's some pessimism that comes in, and that could
15:31
Speaker 2: be a great investment opportunity, So keep your eyes open.
15:35
Speaker 2: I guess I have no idea what anyone is supposed
15:38
Speaker 2: to do with this piece of information. She doesn't talk
15:40
Speaker 2: about any of the most exciting things happening in artificial intelligence,
15:44
Speaker 2: where they see the big winners or losers over the
15:47
Speaker 2: next few decades. Yeah, I've got nothing from this piece
15:52
Speaker 2: that is I think even remotely useful, even to somebody
15:57
Speaker 2: that doesn't pay a lot of attention to artificial intelligence
15:59
Speaker 2: or business. This news as the two of us do,
16:02
Speaker 2: it just seems I'm sorry, I am certain that the
16:06
Speaker 2: President and CEO of a company as big as Franklin
16:08
Speaker 2: Templeton is very well informed and smart. But this is
16:12
Speaker 2: a fundamentally useless piece of information.
16:15
Speaker 3: I'm glad I skipped it, I said, I don't think Mike.
16:17
Speaker 2: Yeah, there you have it. So let's get to one
16:20
Speaker 2: that I think actually is interesting here about Microsoft. So
16:25
Speaker 2: Microsoft was a major investor in.
16:29
Speaker 5: Uh chat GPT, open Ai excuse me uh, and they
16:36
Speaker 5: have been using that investment in research that they've done
16:40
Speaker 5: on their own artificial intelligence assistance, which.
16:44
Speaker 2: I haven't personally used. I know some folks who have
16:47
Speaker 2: who have not been terribly impressed by it. So far,
16:51
Speaker 2: generally speaking, the feedback I've had is, you know, open
16:55
Speaker 2: AI's chat GPT just does a lot of this same
16:57
Speaker 2: stuff a lot better. But nonetheless are starting to roll
17:00
Speaker 2: these products out, and specifically they are rolling them out
17:04
Speaker 2: in some markets without much of the way of choice.
17:07
Speaker 2: You don't seemingly have many options when it comes to this.
17:10
Speaker 2: For example, they added their Copilot service to consumer subscription
17:14
Speaker 2: services for software including word Excel, PowerPoint in Australia as
17:20
Speaker 2: well as several other Southeast Asian countries, and now in
17:23
Speaker 2: those countries, if you want that bundled service of Word, Excel,
17:28
Speaker 2: PowerPoint called Microsoft three sixty five. You don't have any choice.
17:32
Speaker 2: The AI is put into those products as an automated future,
17:36
Speaker 2: which is nothing new, but I think is being looked
17:38
Speaker 2: at a little bit differently when it comes to AI
17:40
Speaker 2: for some reason. You know, like when they roll out
17:43
Speaker 2: new software updates to Excel. You know, Mark, You're you're
17:47
Speaker 2: a big heavy user of Excel, Like everyone just complains
17:50
Speaker 2: about it for a few weeks where they have to
17:52
Speaker 2: figure out where all their buttons went, and then you
17:55
Speaker 2: just kind of deal with it and move forward. But
17:58
Speaker 2: this seems to be getting a little bit more attention,
18:01
Speaker 2: I think, both because people aren't terribly happy with how
18:04
Speaker 2: co pilots doing so far and the fact that they're
18:06
Speaker 2: just toss iting into these packages and raising prices because
18:10
Speaker 2: of it.
18:11
Speaker 3: Yeah, again, it may increase. I tend to think about
18:14
Speaker 3: this in terms of long term economic growth because I
18:17
Speaker 3: can't really speculate. I've not heard many people speculate in
18:21
Speaker 3: interesting ways about it's near term impact. It's anybody's guess.
18:26
Speaker 3: It will probably might make people more productive in the
18:29
Speaker 3: long term, which should be good for economic growth. It
18:33
Speaker 3: will result in some dislocations there will be fewer jobs
18:37
Speaker 3: for say, support people admins. Keep coming to mind for
18:39
Speaker 3: me because that's how that's how much of the stuff,
18:43
Speaker 3: that much of the content that we build in financial
18:46
Speaker 3: services gets put together.
18:49
Speaker 2: So that'll be I mean, I do more, I'll volunteer that.
18:52
Speaker 2: I think the first job that I had working for
18:54
Speaker 2: a major financial services company, mainly living in Excel spreadsheets,
18:58
Speaker 2: not really doing anything inventive, of innovative or uniquely decision making.
19:04
Speaker 2: It was an entry level job, right I was learning
19:05
Speaker 2: how to do all this stuff. Most of those things
19:08
Speaker 2: that I was doing, if not eliminated by the use
19:11
Speaker 2: of artificial intelligence, certainly could have been done a lot
19:15
Speaker 2: easier with AI by a more senior level person. So
19:19
Speaker 2: that is the piece that's interesting to me. How many
19:21
Speaker 2: of those early finance jobs are just deleted because of AI.
19:26
Speaker 2: Let's take a quick break. We'll have the trivia winner next,
19:28
Speaker 2: and then I also want to dive into millennials hitting
19:31
Speaker 2: their middle ages. Let's talk about that next.
19:41
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Speaker 2: All right.
20:02
Speaker 4: Our trivia question today was which character did Kit Harrington
20:07
Speaker 4: portray in Game of Thrones? The correct answer John Snow.
20:13
Speaker 4: Our winner today is Tom and East Longmoto. He has
20:16
Speaker 4: won a Financial Exchange Show T shirt. We play trivia
20:18
Speaker 4: every day here on the Financial Exchange. See complete contest
20:21
Speaker 4: rules at Financial Exchange Show dot com.
20:25
Speaker 2: You're just feeling generous to day after Christmas or something?
20:27
Speaker 4: Ben, Yeah, why not? I mean I barely even watching
20:30
Speaker 4: you say generous? I say, Snow, I didn't really want
20:33
Speaker 4: to work that hard and find a trivia question.
20:38
Speaker 2: Also suffering from the food coma hangover from from Christmas?
20:42
Speaker 2: God it peace? From where are we here? Barons today?
20:47
Speaker 2: Welcome to middle aged millennials. That doesn't feel great. Here's
20:50
Speaker 2: how to get your retirement savings on track. Kind of
20:54
Speaker 2: snuck up on you. But the youngest millennials are now
20:57
Speaker 2: twenty nine years old, the oldest forty four years old,
21:01
Speaker 2: and approaching middle age, with a majority of them having
21:05
Speaker 2: absolutely nothing saved for retirement. And the pieces I think
21:09
Speaker 2: a reasonable one to try and get your overall financial
21:13
Speaker 2: house in order and I'm trying to kind of look,
21:17
Speaker 2: I'm a millennial myself, putting myself in those shoes of Okay,
21:21
Speaker 2: if I'm in that sixty six percent, by the way,
21:24
Speaker 2: which according to the National Institute for Retirement to have nothing, sorry,
21:29
Speaker 2: the National Institute on Retirement Security. According to them, sixty
21:32
Speaker 2: six percent of working millennials have absolutely nothing saved for retirement.
21:36
Speaker 2: And so I'm trying to put myself in those shoes
21:38
Speaker 2: of being in that position. And where do you even begin, Mark,
21:43
Speaker 2: how would you, I guess, begin to assess that situation,
21:45
Speaker 2: knowing that it's not your job to be a financial planner,
21:48
Speaker 2: but just looking at somebody who's in a position like that,
21:53
Speaker 2: or even younger maybe first approaching saving for retirement, what's
21:58
Speaker 2: I don't know, step one in your view.
22:00
Speaker 3: Yeah, I guess if I were doing say four oh
22:03
Speaker 3: one K basics education for a big company, and it
22:06
Speaker 3: was a company that skewed young as HR people like
22:10
Speaker 3: to say a lot of young people in the workforce,
22:12
Speaker 3: you try to lure them into contributing. First of all,
22:15
Speaker 3: you're defaulted into your four oh one K plan these days.
22:18
Speaker 3: That's been the case actually for a long time, but
22:19
Speaker 3: wasn't for many decades, and we saw the results. As
22:24
Speaker 3: soon as that was instituted. People stuck with their defaulted
22:28
Speaker 3: the default the savings rate into which they were defaulted,
22:31
Speaker 3: and that's typically the rate at which they get the
22:33
Speaker 3: full company match. So I guess, Mike, if I were
22:35
Speaker 3: dealing with a financially challenged, budget challenged, and budget constrained
22:41
Speaker 3: young person, I would strongly encourage them to at least
22:45
Speaker 3: stick with contributing up to the full company match amount
22:48
Speaker 3: and investing in something that was age and risk tolerance appropriate.
22:52
Speaker 3: Also an automatic process with a modern four oh one K.
22:56
Speaker 2: Yeah, I think. Look, I think a lot of folks
22:59
Speaker 2: just attach this stuff to being so insurmountably complicated that
23:04
Speaker 2: they don't know what to do about it. But like
23:06
Speaker 2: the power of compound interest, I don't think I need
23:09
Speaker 2: to explain to any of our listeners, but I do
23:11
Speaker 2: think gets lost on people, and there's just a large
23:14
Speaker 2: segment of people that I think get a lot of
23:16
Speaker 2: choice paralysis when it comes to four to one case.
23:19
Speaker 2: I think is a great example there, like, Okay, what
23:21
Speaker 2: percentage am I supposed to be doing? Do I need traditional,
23:24
Speaker 2: do I need roth? And then oh dear god, there's
23:26
Speaker 2: fifty different investment options here. How am I supposed to
23:29
Speaker 2: pick these other than throwing a dart at the wall.
23:31
Speaker 2: And I can understand that consternation. I think, you know,
23:35
Speaker 2: there's some other unique challenges millennials faced, not specifically unique
23:39
Speaker 2: to their generation only, but you know, came of age
23:41
Speaker 2: with more debt on average than any previous generation, specific
23:45
Speaker 2: specifically student loan debt. I think, for some reason, maybe
23:50
Speaker 2: this is just consistent across all generations struggle with credit
23:53
Speaker 2: card debt. And I think if you're sitting in that
23:57
Speaker 2: employed position and trying to figure out, okay, you know,
24:00
Speaker 2: how do I begin saving for retirement or at least
24:02
Speaker 2: assess that situation. There's a few basic steps in my mind,
24:06
Speaker 2: and others have spoken to this. Ramsey, you know, this
24:08
Speaker 2: big proponent of it too, Like you know, first things first,
24:12
Speaker 2: you attack any high interest debt, and for me, high
24:15
Speaker 2: interest is like anything over five percent. You just say, hey,
24:19
Speaker 2: I'm going to do my best to wipe that out.
24:21
Speaker 2: Maybe if it's a home mortgage under at seven percent,
24:24
Speaker 2: you might treat that differently, But if you've got a
24:26
Speaker 2: credit card or you know, an eleven percent student loan.
24:29
Speaker 2: The difficult part there is there's almost there's very little
24:33
Speaker 2: likelihood that an investment you make in a four to
24:35
Speaker 2: one K is going to do better than a twenty
24:38
Speaker 2: five percent credit card debt, for example, on any sort
24:41
Speaker 2: of consistent basis, and so it doesn't oftentimes make a
24:44
Speaker 2: lot of sense to invest in that case. Beyond that,
24:47
Speaker 2: once those things are taken care of, you do need
24:50
Speaker 2: some form of emergency fund. Yeah, you can borrow against
24:53
Speaker 2: your four to one K, but not if you're unemployed,
24:56
Speaker 2: and that's usually when those emergency funds are most likely
24:58
Speaker 2: to be needed. But then once there, it's all about
25:02
Speaker 2: having that discipline of saying, yeah, I am going to
25:05
Speaker 2: save for retirement, even if I'm late to the game.
25:08
Speaker 2: I need to get started here and feel that effective
25:11
Speaker 2: compound interest. I think there's also this hesitation mark that
25:14
Speaker 2: I hear from people all the time of like, oh, well,
25:16
Speaker 2: I don't want to buy in that markets at all
25:17
Speaker 2: time highs. But I mean, you tell me, Mark, you
25:20
Speaker 2: study this a heck of a lot more than I do.
25:22
Speaker 2: What happens after markets reach all time highs.
25:24
Speaker 3: Ideally, if you're young, you want prices to pull back.
25:28
Speaker 3: I know we're not all in that camp, right, So
25:30
Speaker 3: if you're averaging in Mike. The whole point of making
25:33
Speaker 3: a regular contribution out of your paycheck is that you
25:36
Speaker 3: remove market timing risk, at least over the short term.
25:41
Speaker 3: As you get older, market timing risk gets more severe.
25:44
Speaker 4: But when you're.
25:45
Speaker 3: Young, number one, we all know that if the economy
25:49
Speaker 3: continues to operate as it has over the last let's
25:51
Speaker 3: just call it century, a period over which large company
25:55
Speaker 3: stocks is proxied by the morning Star large cap indis,
25:58
Speaker 3: but you can use anymilarly constructed one to get to
26:01
Speaker 3: the same conclusion. They've delivered low double digits, like eleven
26:05
Speaker 3: twelve percent a year, somewhere in between eleven and twelve.
26:08
Speaker 3: That's that's including inflation. So that's not entirely representative of
26:12
Speaker 3: what you could buy with that level of return, But
26:14
Speaker 3: you get the point. Suppose markets continue to deliver something
26:17
Speaker 3: in that range some years a lot less, oh, there's
26:21
Speaker 3: a lot more. If with a thirty plus year horizon,
26:24
Speaker 3: you're going to be fine, just average in ride out
26:27
Speaker 3: the downturns. Indeed, you're buying stocks when they're relatively cheap
26:30
Speaker 3: during downturns.
26:31
Speaker 2: So, and my other piece would be even when things
26:34
Speaker 2: are seem expensive or hit all to them highs on average?
26:37
Speaker 2: What a stocks do after they reach all the time high?
26:39
Speaker 3: I'm sorry, yeah, you asked that question.
26:40
Speaker 2: All time high after that too? Right? Like the excuse me,
26:43
Speaker 2: there's no statistical probability that. Oh yeah, once you hit
26:46
Speaker 2: that all time high, get ready because it all comes
26:48
Speaker 2: crashing down. No, that's not on average what happens. I'm
26:51
Speaker 2: not saying it won't next time. But if you're finding
26:54
Speaker 2: yourself in a situation where you were unsure as to
26:58
Speaker 2: whether or not you are caught up on your financial
27:00
Speaker 2: security for retirement, if you are approaching that level or
27:04
Speaker 2: right in the midst of your working career and trying
27:06
Speaker 2: to assess, Hey, where am I and will I be
27:08
Speaker 2: able to reach my goals by the time I'm ready
27:11
Speaker 2: to stop working? Please give the folks at Armstrong Advisory
27:14
Speaker 2: Group a call. We offer free consultations for folks to
27:18
Speaker 2: specifically evaluate where they are in their retirement journey. We'll
27:22
Speaker 2: sit by, sit at the table with you and really
27:25
Speaker 2: evaluate these things with some framework to it to evaluate, Hey,
27:29
Speaker 2: here's where I am today and this is how I'm
27:31
Speaker 2: going to get where I need to be in the future.
27:34
Speaker 2: Give the folks at arm Strong Advisory Group a call.
27:36
Speaker 2: We offer these consultations throughout New England to folks. The
27:39
Speaker 2: numbers eight hundred three nine three for zero zero one.
27:43
Speaker 2: We have people standing by to help talk to you
27:45
Speaker 2: about your financial security and your strategy for the future.
27:49
Speaker 2: That number again is eight hundred three nine three for
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27:54
Speaker 1: The proceeding was paid for by Armstrong Advisory Group, a
27:57
Speaker 1: registered investment advisor. Nothing in the ad or in any
27:59
Speaker 1: arms Strong guide to specific financial, legal or tax advice.
28:02
Speaker 1: Consult your own financial, tax and too state planning advisors
28:05
Speaker 1: before making any investment decisions. Armstrong make contact you to
28:08
Speaker 1: offer investment advisory services.
28:11
Speaker 2: Mark, we have this story about empty nesters and we
28:15
Speaker 2: cover it. You and I covered it last week. There's
28:16
Speaker 2: some twenty million plus empty nester households out there, and
28:21
Speaker 2: just quick pull, like when you think about where your
28:25
Speaker 2: parents live, or ben where your parents live, or frankly,
28:28
Speaker 2: where my parents live. Do any of them live in
28:31
Speaker 2: areas that you would consider to be pretty desirable for
28:35
Speaker 2: young families, like close to big labor markets and you
28:39
Speaker 2: know that type of thing.
28:42
Speaker 4: Well, my parents live in Framingham. Does that count?
28:44
Speaker 2: So yeah, that definitely counts. They live in a desirable
28:47
Speaker 2: area for a I think for a family to like
28:50
Speaker 2: be close to the Boston area. Mark, how about yours?
28:53
Speaker 2: Did they retire to a different area.
28:55
Speaker 3: Or no, My mom lives in a townhouse, so not
29:00
Speaker 3: suitable for families, though some squeeze in there.
29:03
Speaker 2: Sure. The piece here that they're talking about is that
29:07
Speaker 2: there seems to be this optimism that hey, once the
29:10
Speaker 2: baby boomers start downsizing, or the undertone to this is
29:14
Speaker 2: frankly dying, then there's going to be this big unload
29:18
Speaker 2: of housing. But they make the point that they might
29:22
Speaker 2: not actually work that way, because the biggest concentration of
29:25
Speaker 2: empty nesters might not be in the places that younger
29:28
Speaker 2: people want to actually live, and there may be some
29:32
Speaker 2: truth to this. The highest concentration of empty nesters, which
29:35
Speaker 2: they define I think as fifty years plus and having
29:39
Speaker 2: two empty bedrooms in their home, so I'm candidate for downsizing,
29:43
Speaker 2: that concentration is most heavy in Pittsburgh, Buffalo, and Cleveland.
29:48
Speaker 2: The highest concentration of young people in the country I
29:51
Speaker 2: think they define as forty years and under, are in
29:54
Speaker 2: San Jose, Austin and Denver. And look, I think this
29:58
Speaker 2: is already largely reflect did in terms of housing prices.
30:02
Speaker 2: But it does sort of raise the question to me
30:04
Speaker 2: as to whether or not a new supply of homes
30:06
Speaker 2: coming on the market in places like Maine, which has
30:11
Speaker 2: the average highest average oldest population in the country, will
30:15
Speaker 2: actually do anything to fix some of our housing problems
30:18
Speaker 2: that exist in this country. I'm not really sure that
30:23
Speaker 2: waiting out baby boomers dying is a sound strategy for
30:26
Speaker 2: dealing with housing and affordability, I think, is my conclusion.
30:30
Speaker 3: Yeah, what's going to fix it is a big decline
30:32
Speaker 3: in asset prices. Probably nobody hopes for that, but it's
30:38
Speaker 3: how home prices are not going to continue to grow
30:40
Speaker 3: in a low single digit clip after inflation indefinitely.
30:44
Speaker 2: Yeah, I would, I would think not. You know, the
30:47
Speaker 2: other solution if you want, well maybe you don't want
30:50
Speaker 2: government involved quite as much, would be deregulation of the
30:54
Speaker 2: housing sector. But that seems to be another one that
30:57
Speaker 2: governments are really unwilling to take because the regulation that
31:02
Speaker 2: we have in the housing sector is not coming from
31:04
Speaker 2: the federal government. The regulation that we have in the
31:06
Speaker 2: housing sector is coming from my town, your town, and
31:10
Speaker 2: everybody else's town, And when asked, local residents aren't really interesting.
31:14
Speaker 3: I don't want more multifamily housing and in my town
31:17
Speaker 3: of rent them, I sympathize. I move, I'm part of
31:22
Speaker 3: the I am part of the problem. I'm pro town choice. Yeah,
31:26
Speaker 3: I guess, and I know it sounds hypocritical to lament
31:30
Speaker 3: the so called housing shortage, but at the same time
31:33
Speaker 3: say I don't want more multi family housing, and.
31:36
Speaker 2: Well, like I don't think you take many people, I
31:41
Speaker 2: think take a hypocritical approach to this and say, oh,
31:43
Speaker 2: we need to bring down the house to.
31:45
Speaker 3: Well, but we we are lamenting it right now in
31:47
Speaker 3: this segment, or we're pointing it out as a problem
31:50
Speaker 3: and trying to identify solutions. I freely admit that I
31:53
Speaker 3: don't want more congestion in my little town. It's the
31:56
Speaker 3: reason I moved there in the first place. I gotta
31:59
Speaker 3: fight congestion, getting to need them every single day. I'd
32:02
Speaker 3: rather not. I'd rather not live with that during my downtime.
32:07
Speaker 3: So I sympathize, and I think.
32:09
Speaker 2: You are in the majority here, Mark, which is why
32:12
Speaker 2: I don't think this is a very easy problem to fix. Here.
32:15
Speaker 2: People love the idea of bringing down housing costs, except
32:18
Speaker 2: when they're confronted with the actual solution. It's again similar
32:21
Speaker 2: to the deficit problem. To me, I want to bring
32:23
Speaker 2: down deficits. Well, then you're going to get a lot
32:25
Speaker 2: less services from the federal government and your tax rates
32:27
Speaker 2: are going to go.
32:28
Speaker 4: Oh.
32:28
Speaker 2: Actually, I don't love that solution. I want to fix
32:30
Speaker 2: the housing problem. Well, they're going to build a bunch
32:32
Speaker 2: more houses near you. Do you like that? No, I
32:35
Speaker 2: don't love that. Oh and by the way, the value
32:37
Speaker 2: of your home is going to go down if this works.
32:39
Speaker 2: Oh yeah, I don't like that at all. There's no
32:42
Speaker 2: solution where we just suddenly bring down the house of
32:44
Speaker 2: cost it that cost of housing, but your house keeps
32:48
Speaker 2: its value.
32:49
Speaker 3: Yeah, you've got to either move such or sorry, Mike,
32:53
Speaker 3: but there's got to be movement on the supply side.
32:55
Speaker 3: You were just talking about some supply side solutions which
33:00
Speaker 3: are meeting with resistance from blockheads like me, and or
33:05
Speaker 3: you can address it on the demand side, and some
33:08
Speaker 3: of those.
33:08
Speaker 2: Who be just agreeing to call you a blockhead there.
33:10
Speaker 2: That was me. Let's take a quick break when we
33:15
Speaker 2: come back, a little bit of stack root. Let to
33:17
Speaker 2: finish up the show.
33:19
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34:23
Speaker 2: Market to try with you. I'm gonna kick things off
34:25
Speaker 2: on STACKRU left here with about a bit of Nissan
34:28
Speaker 2: Honda merger news. So if you haven't heard, there's consideration
34:32
Speaker 2: that Nissan may consider merging up with Honda, in which
34:36
Speaker 2: case likely seeing that Honda would be the dominant player there,
34:38
Speaker 2: they would become the third largest auto manufacturer in the
34:41
Speaker 2: world behind Toyota and Volkswagen, and largely see it as hey,
34:46
Speaker 2: if it does happen, Nissan would face a lot of
34:48
Speaker 2: job cuts because quite honestly, they sell in the same
34:51
Speaker 2: markets and there's probably just the main synergies that you
34:55
Speaker 2: would have. There would be Honda basically doing a lot
34:57
Speaker 2: of the back office and manufacturing process for On which
35:00
Speaker 2: has very much struggled to define themselves and differentiate over
35:04
Speaker 2: the last few years. But speaking on the subject was
35:08
Speaker 2: Carlos gon and if you forgot about Carlos, he led
35:11
Speaker 2: Nissan until he was arrested in Japan on a number
35:16
Speaker 2: of charges, but mainly on the subject of financial misconduct.
35:21
Speaker 2: He then bribed someone to Americans to smuggle him out
35:25
Speaker 2: of the Japan in what I believe was concert equipment
35:29
Speaker 2: and thereby avoiding those financial misconduct charges by going to
35:33
Speaker 2: a country that does not extradite to Japan. It would
35:37
Speaker 2: seem to me that once you do that you kind
35:40
Speaker 2: of give up the ability to be taken seriously about
35:42
Speaker 2: your company anymore.
35:44
Speaker 3: Well, are they gonna do smuggle him in a speaker
35:46
Speaker 3: or something. He's a he's not a big man.
35:49
Speaker 2: Oh and maybe you can correct me if you remember
35:52
Speaker 2: this story. But I believe they smuggled him. They they
35:55
Speaker 2: posed as like some sort of concert uh, you know,
36:00
Speaker 2: back end people, and they had a giant box that
36:02
Speaker 2: they smuggled him out of his hotel room and and
36:05
Speaker 2: and got him out of the country. And yeah again,
36:08
Speaker 2: once you get smuggled out of country and concert equipment
36:11
Speaker 2: to avoid financial misconduct charges, I don't think you have any.
36:14
Speaker 3: Right to comment on thereability.
36:16
Speaker 2: Financial future of the company anymore.
36:18
Speaker 3: Now you can't. Yet, you can't claim you jumped into
36:20
Speaker 3: the speaker by accident. I just wanted I'd taken a
36:22
Speaker 3: nap the next thing I knew.
36:25
Speaker 2: What do you have for us, Mark.
36:26
Speaker 3: Poor Jim Carrey? Yeah, recently did you read this story?
36:29
Speaker 3: I think there's a cautionary tale here, like a cautionary
36:32
Speaker 3: financial planning tale. Obviously, a wealthy guy did many movies.
36:36
Speaker 3: The going rate for him to star in the late
36:39
Speaker 3: nineties early two thousands we all know was in the
36:41
Speaker 3: ten to twenty million dollars.
36:42
Speaker 4: He was the first twenty million dollar movie.
36:44
Speaker 3: Yeah right, okay was it? The article actually actually says
36:47
Speaker 3: that had I thoroughly read it, I would have picked
36:50
Speaker 3: up on it. But he recently sold his house or
36:53
Speaker 3: one of his homes in California, paid four million for
36:56
Speaker 3: it a couple decades ago, a few decades ago, sold
36:59
Speaker 3: it for money, so he did fine. But he admits
37:02
Speaker 3: in the article that he sold it because he quote
37:04
Speaker 3: needs the money, and that he continues to take movie jobs.
37:07
Speaker 3: He'd hoped to be retired, but he continues to take
37:10
Speaker 3: gigs doing voices for movies like a Sonic franchise, because
37:14
Speaker 3: he needs the money.
37:15
Speaker 2: Not just voicing it. He is physically in that thing. Yeah,
37:18
Speaker 2: oh really, He's pretty pretty public about that. And yeah
37:21
Speaker 2: some some I like his candor financial mismanagement, good candor.
37:25
Speaker 3: I like it to he You know, what he needs
37:27
Speaker 3: is the he needs He needs armstrong advisory group, like.
37:30
Speaker 2: Well, yeah, but he also needs that Adam Sandler Netflix deal, right, Like, Hey,
37:34
Speaker 2: you're gonna just crank out like thirty movies, a bunch
37:37
Speaker 2: of redoos on stuff that you've already done, and we're
37:39
Speaker 2: going to pay you a bunch of big money because
37:41
Speaker 2: of nostalgia that that was. That seems to be what
37:44
Speaker 2: There's been some good ones in there. Did you see
37:46
Speaker 2: the ads though for Happy Gilmore two coming out next year?
37:49
Speaker 3: No, did not know that.
37:50
Speaker 2: That was all over Netflix yesterday during the football game.
37:52
Speaker 4: Yeah, I've seen the teaser with with Happy and Shooter McGavin.
37:56
Speaker 2: Yes, precisely. Markets have turned positive for the day, Dow,
38:00
Speaker 2: SMP and NAZAC all slightly and positive territory. We'll have
38:03
Speaker 2: a full recap for you when we're back at it
38:05
Speaker 2: tomorrow to close out the week. Folks, Merry Christmas, Happy Honika,
38:09
Speaker 2: Thank you so much for joining us. We will touch
38:11
Speaker 2: base again tomorrow. Have a great day.