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Fuel Shortages Are Spreading and the Timeline Is Getting Worse · The Financial Exchange Show

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Speaker 1: a donation today. This is the Financial Exchange with Chuck
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Speaker 1: Zada and Mark Fandetti, Chuck Mark.
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Speaker 2: Tucker with you here and kicking things off. We've got
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Speaker 2: stocks kind of mixed, kind of all over the place,
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Speaker 2: and everything is changing minute to minute, which is basically
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Speaker 2: part for the course over the last I don't know,
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Speaker 2: seven eight weeks or so, or you know, my entire
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Speaker 2: life whatever. S and P five hundreds down thirty eight
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Speaker 2: points right now. When we came in this morning and
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Speaker 2: stocks opened, we were down like five or six. So
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Speaker 2: it's worsened a little bit on reports that talks might
1:45
Speaker 2: not be happening until Wednesday now, even though the ceasefires
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Speaker 2: believed to expire tomorrow night. I don't know. I just
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Speaker 2: I don't know at this point. Don't ask me. But
1:57
Speaker 2: they're gonna talk when they're gonna talk. They're not gonna
1:59
Speaker 2: talk when they're not gonna talk. I don't know. The
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Speaker 2: Dow Jones Industrial average is off one hundred and twenty
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Speaker 2: nine points, about a quarter percent, and the Nasdaq Composite
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Speaker 2: is off two hundred and thirty two points about one
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Speaker 2: percent right now. Interesting thing, just when we're talking about
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Speaker 2: kind of what's selling off and what isn't in tech, Uh,
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Speaker 2: you've got today the stuff in tech that's doing okay
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Speaker 2: is Apple Software and Cisco Semis are getting hit a
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Speaker 2: little bit, but not across the board. Your memory guys
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Speaker 2: are are getting hit more, and Intel's down four percent.
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Speaker 2: But again it's just kind of messy, like what you're
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Speaker 2: seeing even in the tech space right now. When we
2:42
Speaker 2: take a look at the bond market today, ten year
2:45
Speaker 2: Treasury is up two point six basis points to four
2:48
Speaker 2: point two seven percent. Gold is down fifty nine to
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Speaker 2: seventy ounce to forty eight nineteen. And we've got crude
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Speaker 2: oil West Text Intermediate and Brent Crew both up about
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Speaker 2: five dollars a barrel, triple A Nash no avatur gas
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Speaker 2: prices though, is down six tenths of a cent to
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Speaker 2: four of four and two tents. So we're off, you know,
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Speaker 2: from that four to fourteen four to fifteen range, down
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Speaker 2: about ten cents from there again, where gas price is
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Speaker 2: going to be like a week from now. People keep
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Speaker 2: asking me. My answer is, well, tell me what the
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Speaker 2: status of hormones is going to be a week from now,
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Speaker 2: and then I can, you know, give you an adequate assessment.
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Speaker 2: We are getting close to the breaking point with some
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Speaker 2: of this stuff, though, like I quite honestly, I know
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Speaker 2: that we don't really see it here in the US.
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Speaker 2: I have a buddy over in Europe. I have a few, actually,
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Speaker 2: but only one that I've talked to about this, and
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Speaker 2: he continues to tell me that he's seeing more and more,
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Speaker 2: you know, gas stations that are missing one or more
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Speaker 2: products on a daily basis. I have a couple other
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Speaker 2: buddies who live over in Asia, and they've basically described,
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Speaker 2: like the scene is basically what we were doing for
3:57
Speaker 2: toilet paperback in twenty twenty. Is whatever over there is
4:00
Speaker 2: doing for anything energy or hydrocarbon related. It's just like,
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Speaker 2: that's the situation in Asia right now. Japan, just as
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Speaker 2: an example, has stopped publishing oil inventories in the last
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Speaker 2: two weeks. We don't know how much oil Japan has
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Speaker 2: left because they've just stopped publishing. There are two reasons
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Speaker 2: that you do that. One is to prevent you know,
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Speaker 2: panic of your population. The other is because well, that's
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Speaker 2: really the only reason why you would do that again.
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Speaker 2: Australia had like a big celebration by the Prime Minister
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Speaker 2: last week when they announced they managed to procure a
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Speaker 2: single day of diesel fuel for the country so like
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Speaker 2: things are getting pretty gnarly in Asia. And again, the
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Speaker 2: market can look through this if it says, hey, this
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Speaker 2: is gonna be a hit to Q two GDP growth
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Speaker 2: and then things are gonna start getting better and so
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Speaker 2: things will ease and improve. Okay, the market can look
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Speaker 2: through that. If it starts getting to the point where hey,
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Speaker 2: it's not just Q two, but now now it's starting
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Speaker 2: to potentially impact Q three, this becomes problematic. And this
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Speaker 2: is why I laid down back at the beginning of this.
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Speaker 2: And I know, I got, you know, a lot of
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Speaker 2: crap from Mike and Tucker on this because I was like, yeah,
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Speaker 2: if there's if nothing's resolved by Cinco Demayo, and they're like,
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Speaker 2: Sinco Demaya, Like what are you talking about? Like that's
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Speaker 2: not even like I don't know, like who's celebrating Cinco
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Speaker 2: de Mayo. Like on a I'm like, guys, like this
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Speaker 2: this is it. It's not tax Day, it's not Memorial Day.
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Speaker 2: Like find me something else at the beginning of May.
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Speaker 2: And fine, but ultimately, here's the problem. If you don't
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Speaker 2: have a resolution by Cinco Demayo. Again, I know, but
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Speaker 2: just just hear me out. Here's the problem. It takes
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Speaker 2: time to get things spooled back up for production in
5:44
Speaker 2: all of the countries that have shuttered it in the
5:48
Speaker 2: Persian Golf. On top of that, it takes a while
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Speaker 2: to get all the boats that have not been going
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Speaker 2: to the Persian Golf back there in order to actually
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Speaker 2: pick up the cargoes. Because if you own a tanker
6:01
Speaker 2: right now, you don't just sit outside saying when you're
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Speaker 2: gonna let us in, guys. No, you say, look, I've
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Speaker 2: got an asset that I've got to.
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Speaker 3: Go make money on.
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Speaker 2: I'm gonna take it to the Black Sea. I'm gonna
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Speaker 2: take it to the United States. I'm gonna take it
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Speaker 2: somewhere else that I can pick up a load of
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Speaker 2: oil and go with it, because I'm not just gonna
6:17
Speaker 2: sit here waiting for hormones to reopen. So you gotta
6:21
Speaker 2: get all these boats back. And the problem then is, look,
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Speaker 2: you're at Sinco Demayo. These boats, if they're coming from
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Speaker 2: Europe or from the United States, it's forty days to
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Speaker 2: get back. Okay, Now you're not at Cinco de Mayo.
6:32
Speaker 2: Now you're at Father's Day. Then you gotta fill the
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Speaker 2: boat up and get it to where it needs to go.
6:36
Speaker 2: Now you're not at Father's Day. Now you're what what
6:39
Speaker 2: comes like two weeks after fourth of July. We need
6:41
Speaker 2: more holidays that I can like work with here. It
6:44
Speaker 2: is like it's a gap after the fourth right, is
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Speaker 2: Grandparents' Day in like late July or something like.
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Speaker 4: That, past Steel Days in there, isn't it?
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Speaker 2: Yeah, they'll be storming the basteel again if they don't
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Speaker 2: have oil in Europe at that point. So this is
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Speaker 2: where I'm going with this is if you don't have
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Speaker 2: things open in horr moves by Cinco de Mayo, this
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Speaker 2: is no longer just a Q two problem. This now
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Speaker 2: becomes a Q three problem where you can't get the
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Speaker 2: stuff that you need. There. Can the market look through
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Speaker 2: two quarters? Maybe, but it becomes tougher and like, you know,
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Speaker 2: Heaven forbid that we're sitting here. What's three months after
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Speaker 2: Cinco de Mayo Sinco to August? Like, what's in early
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Speaker 2: August holiday? Do we have any of those VJ Day
7:33
Speaker 2: And Rhode Island that's not a national days, that's just
7:38
Speaker 2: the smallest geographic state in the country.
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Speaker 4: We can't know a question, try to offer an answer.
7:44
Speaker 2: I know our West Coast listeners are like, that's not
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Speaker 2: even a real state. Rhode Island listeners are like, yeah,
7:51
Speaker 2: we're like in charge of this thing in.
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Speaker 4: A real state.
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Speaker 3: International Beard, how many pair before they were?
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Speaker 2: Well, I know, but how many people from California you
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Speaker 2: think have been to Rhode Island that you can't just
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Speaker 2: drive through it? You know?
8:03
Speaker 4: That's what's Connecticut.
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Speaker 2: We could just make fun of every state while we're
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Speaker 2: at it. So in any case, here here's the deal.
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Speaker 2: What'd you say was early August?
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Speaker 3: August seventh, we have International Beer Day?
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Speaker 2: Okay? If if things are not resolved by International Beer Day,
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Speaker 2: you got none.
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Speaker 4: Of that Trump victory in the Pacific. I never mind.
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Speaker 2: The third only celebrated in Rhode Island.
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Speaker 4: If you wanted to goelet this is international This is
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Speaker 4: beer Day if.
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Speaker 3: You wanted to go earlier. The third Sunday in July
8:32
Speaker 3: is National ice Cream Day.
8:33
Speaker 2: Do we have like any actual holidays or just like
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Speaker 2: not even Hallmark will make cards for these holidays?
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Speaker 1: Yeah?
8:39
Speaker 3: Ok, these are all the ridiculous.
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Speaker 2: So this is the deal is look sinco demil I've
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Speaker 2: said since the beginning is where the problems start to
8:46
Speaker 2: really happen. So these negotiations this week, they've either got
8:50
Speaker 2: to bear some fruit or you start to get like
8:53
Speaker 2: we get to Cinco DeMaio pretty quickly from here. It's
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Speaker 2: twenty you know, fifteen days away at this point. Uh
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Speaker 2: So that's kind of what we've got going on in markets.
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Speaker 4: If that's your term, then there's the long term effective
9:05
Speaker 4: higher risk premia because this could happen again.
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Speaker 2: Yes there is, but I don't think markets are gonna
9:11
Speaker 2: pick that. I don't think markets are gonna pick that up.
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Speaker 4: But this year term, no, No, I just mean slightly
9:17
Speaker 4: more volatile stocks maybe. And if you're in the business
9:19
Speaker 4: of managing money, the thing we do in our day job,
9:22
Speaker 4: that is something. It doesn't change the way you invest
9:25
Speaker 4: today necessarily, but it may change your long term explanations.
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Speaker 4: The world is more uncertain, if you like, than it
9:30
Speaker 4: was six weeks ago.
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Speaker 2: I think you only get to that point if you
9:34
Speaker 2: have a couple of years of problems on supply chains.
9:36
Speaker 2: Fair enough, so, just just because again we already went
9:39
Speaker 2: through a supply chain thing and markets are like, does
9:43
Speaker 2: anyone look at markets like over the last couple of
9:45
Speaker 2: years and say they were responding in any way to
9:47
Speaker 2: supply chain issues? We had from like twenty one to
9:49
Speaker 2: twenty two.
9:51
Speaker 1: Not really.
9:52
Speaker 2: They kind of said, that's a one off. Put it
9:54
Speaker 2: in the past.
9:56
Speaker 4: Yeah, you know this.
9:57
Speaker 2: If it doesn't become something prolonged, they'll say the same thing.
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Speaker 2: That's kind of my argument.
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Speaker 4: Oh no, I definitely agree.
10:04
Speaker 2: They'll they'll put it to bed and say, Okay, that
10:06
Speaker 2: was a one off call today. So, uh, if your
10:09
Speaker 2: state didn't get made fun of during that segment, please
10:12
Speaker 2: textus at six one seven three six two thirteen eighty five.
10:15
Speaker 2: We're happy to assist. Also, next segment, we're gonna be
10:18
Speaker 2: talking about gen X, who we forgot to talk about
10:20
Speaker 2: last week when we were talking about boomers and millennials.
10:23
Speaker 2: So don't worry, your day is coming. Uh. And if
10:25
Speaker 2: you have any other you know, group that you'd like
10:28
Speaker 2: us to make fun of as we discussed the economy,
10:31
Speaker 2: please texas six one seven three six two thirteen eighty five. Uh,
10:34
Speaker 2: and we will happily tell you, uh what's going on
10:38
Speaker 2: with them economically.
10:40
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11:18
Speaker 5: Time for trivia here on the Financial Exchange. Friday afternoon,
11:21
Speaker 5: American Airlines rejected talks of a potential mega merger with
11:26
Speaker 5: United Airlines. A merger between United and American would create
11:30
Speaker 5: the world's largest airline and and a nearly one hundred
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Speaker 5: year rivalry. So our trivia question today, what is the
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Speaker 5: oldest airline in the US?
11:41
Speaker 3: Once again?
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Speaker 5: What is the oldest airline in the US. Be the
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Speaker 5: fourth person today to text us at six one seven
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Speaker 5: three six two thirteen eighty five with the correct answer
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Speaker 5: along with keyword trivia, and you'll win a Financial.
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Speaker 3: Exchange Show T shirt. Once again.
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Speaker 5: The fourth correct response to Texas to the number six
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Speaker 5: one seven three six two thirteen eighty five with correct
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Speaker 5: answer along with keyword trivia, we'll win that T shirt.
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12:12
Speaker 2: Tucker question for you on this, okay, is this are
12:17
Speaker 2: you talking about this in terms of still operating?
12:20
Speaker 3: I would assume.
12:21
Speaker 5: Major carrier is what this is entailing?
12:25
Speaker 2: And are you including companies that were bought and absorbed
12:29
Speaker 2: into a major You're gonna.
12:30
Speaker 5: Have to take that up with the trivia department. I'm
12:33
Speaker 5: just the guy who reads it. I don't know, man, Okay,
12:37
Speaker 5: sounds good to me.
12:39
Speaker 2: Okay, I guess there's uh bad. I guess there's that.
12:43
Speaker 2: Uh Okay. We got this piece from the Wall Street Journal. Sorry,
12:47
Speaker 2: jen X. We looked at the data and you had
12:48
Speaker 2: it rough too. So last week we spent at least
12:51
Speaker 2: a couple of days talking about whether the baby boomers
12:54
Speaker 2: or the millennials had it tougher. I obviously picked the millennials,
13:00
Speaker 2: and we ignored gen X because that's just what what
13:03
Speaker 2: everyone does. Everyone ignores gen X, but not today. Today
13:07
Speaker 2: we focus on them and uh, you know, talk about, hey,
13:10
Speaker 2: did did you have it hard to? Because everyone why
13:15
Speaker 2: is it a badge of honor to say that your
13:16
Speaker 2: generation had it the hardest economically?
13:20
Speaker 1: Like? What?
13:20
Speaker 2: Why is that a thing?
13:23
Speaker 1: Like?
13:23
Speaker 2: What?
13:24
Speaker 3: How are self explanatory?
13:25
Speaker 1: No?
13:25
Speaker 2: Like don't you want to be better.
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Speaker 5: You've been through more than others. I think that's what
13:32
Speaker 5: it boils down to your harder worker than other generations,
13:37
Speaker 5: kind of like how average driver character is better.
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Speaker 3: Like it all, Yeah, goes in that bucket.
13:42
Speaker 2: Okay, so you've you've been through more, you toughed it out,
13:45
Speaker 2: and you made it. Mark. When we talk about this piece,
13:50
Speaker 2: as you are a gen x er number one, how
13:52
Speaker 2: do you feel about us ignoring you last week?
13:55
Speaker 4: I don't think we did. I I he's part of
13:57
Speaker 4: one of those.
14:01
Speaker 2: What's what do you think about it?
14:03
Speaker 4: I mean, I don't like these. It seems almost silly
14:06
Speaker 4: to talk about any prior generation having it easier than
14:09
Speaker 4: the or harder than the present. Every in a growing economy,
14:15
Speaker 4: the last person standing always has it the easiest. Life
14:19
Speaker 4: expectancy is highest, general standards of living are highest in
14:25
Speaker 4: a growing economy. But they're serious bias in that calculation obviously,
14:29
Speaker 4: So in some ways it's not really an interesting question.
14:31
Speaker 4: I think you asked the right one, which is what
14:34
Speaker 4: are we trying to get at here? Is it just
14:35
Speaker 4: bragging rights that you somehow persevered through a more trying
14:41
Speaker 4: economic or sure, I don't know geopolitical environment.
14:44
Speaker 2: You know.
14:44
Speaker 4: If so, it would be hard to compare a generation
14:47
Speaker 4: like mine that was not. Mike Armstrong made this point
14:50
Speaker 4: last week, never subjected to a draft whereas boomers were,
14:53
Speaker 4: and obviously the greatest generation was too. At the same time, though,
14:58
Speaker 4: it's been challenging to build wealth because we've had to
15:02
Speaker 4: buy stocks at very high prices relative to earnings and
15:05
Speaker 4: had to buy homes at relatively high prices relative I
15:09
Speaker 4: say relatively because I mean relative to income. That said,
15:14
Speaker 4: those homes are bigger and equipped with more impressive amenities.
15:21
Speaker 4: Stock returns have been a little lower over the last
15:22
Speaker 4: twenty five years as opposed to the twenty five years
15:24
Speaker 4: before that. Nine point five percent is the average return
15:28
Speaker 4: in the last twenty five In the twenty five years
15:30
Speaker 4: preceding that, when boomers were building we're starting to build wealth.
15:34
Speaker 4: In earnest it was fifteen percent. So you could you
15:36
Speaker 4: could compound more quick your dollars compounded more quickly in
15:39
Speaker 4: the decades leading up to the turn of the millennium
15:41
Speaker 4: than since. And as I said earlier, and this is related,
15:45
Speaker 4: stocks are have been over the past couple decades a
15:48
Speaker 4: lot more expensive relative to earnings. And if you think
15:51
Speaker 4: of stocks as the price of funding retirement. It's been
15:53
Speaker 4: harder to do for more recent generations than past generations.
15:58
Speaker 4: But those past generations would say, wait a minute, pal,
16:01
Speaker 4: I know people that died in their forties and fifties
16:03
Speaker 4: because there were treatments available for previously, for diseases that
16:08
Speaker 4: were previously death sentences that weren't available in my time.
16:13
Speaker 4: So I find these questions tricky to answer because everybody's
16:17
Speaker 4: criteria is different. Plus, like, what's the point. Okay, you
16:21
Speaker 4: win the argument, Great, you had a toughest what's for lunch?
16:24
Speaker 2: What do we do now? Yeah? Okay, you win?
16:27
Speaker 1: What like is that?
16:28
Speaker 4: How does that help me?
16:30
Speaker 1: Yeah?
16:30
Speaker 2: I always come back to the place that I get
16:33
Speaker 2: to on all this when you're including everything, because you
16:35
Speaker 2: have to, like you've got to. It can't just be
16:38
Speaker 2: the financial piece, because if it's just the financial piece,
16:41
Speaker 2: there's literally a huge survivorship bias embedded in that. In
16:46
Speaker 2: that Okay, boomers had it great financially, but as you said, like,
16:50
Speaker 2: what does that mean?
16:50
Speaker 1: Though?
16:51
Speaker 2: Here's the thing about boomers. They were still living in
16:54
Speaker 2: a world where when they were born, child mortality was
16:58
Speaker 2: exponentially higher than it is today. The generation before that
17:03
Speaker 2: the silence you still had. I think it was like
17:06
Speaker 2: twenty percent of kids didn't make it to age five.
17:08
Speaker 4: If you had to worry about polio, right, Like this is.
17:11
Speaker 2: Stuff that you don't worry about the same way today. Like, yes,
17:14
Speaker 2: there's still is infant mortality, but it is quite honestly,
17:17
Speaker 2: like two oars of magnitude removed from what it want.
17:20
Speaker 4: In a heart attack, they called it angina. Take some nitrates,
17:23
Speaker 4: rub it off, or you know, rub some dirt on it,
17:25
Speaker 4: walk it off, right, I mean you couldn't go to
17:27
Speaker 4: an urgent care center to get treated. They didn't exaction that, right.
17:31
Speaker 2: But my grandfather when he was born, it was the
17:33
Speaker 2: same year that the band aid was invented, you know,
17:37
Speaker 2: like the band Like imagine that, Like back then you
17:40
Speaker 2: invented the band aid and you can make millions of dollars.
17:42
Speaker 2: Today you got to do like, hey, we figured out
17:45
Speaker 2: like GLP one, so like people can no just here's
17:48
Speaker 2: a band aid, Like you can't take that. And this
17:51
Speaker 2: is why I always come back to if you were
17:54
Speaker 2: to pick any other period from now to have kids,
17:57
Speaker 2: I don't think you're being intellectually honest.
17:59
Speaker 4: It's really a serious exercise Chuck. Serious researchers don't look
18:03
Speaker 4: into this other than trying to explain inequality and structural
18:07
Speaker 4: reasons why it might have blown up, why there might
18:10
Speaker 4: be a growing gaptasm really between the so called rich
18:14
Speaker 4: and the so called poor. However, you wanted to find
18:16
Speaker 4: that other than that, and that could lead to something constructive.
18:19
Speaker 4: G should we be adopting policies that mitigate inequality and
18:23
Speaker 4: reduce the possibility of I don't know, populist led turmoil
18:28
Speaker 4: that disrupts the economy and shock markets and stuff. Other
18:31
Speaker 4: than that, I don't really see how these little mental
18:34
Speaker 4: experiments are or whatever you want to call them, are constructive.
18:36
Speaker 2: But no, I'm a big believer in the world has
18:41
Speaker 2: never been in the aggregate as good as and and
18:46
Speaker 2: today is the worst it will ever be for the
18:48
Speaker 2: rest of your life.
18:50
Speaker 4: Hope, God willing, I mean a Roman may have.
18:53
Speaker 2: Said aggregate like, the problems that we're going to be
18:57
Speaker 2: dealing with in the future are going to be smaller
19:00
Speaker 2: than the.
19:00
Speaker 4: One, probably assuming the trend continues to go up. Assuming
19:03
Speaker 4: we don't, and if it's not.
19:04
Speaker 2: The case, then okay, we had a good run. What
19:07
Speaker 2: I'm most proud of for this segment. Is that in
19:09
Speaker 2: a story that was supposed to be all about gen X,
19:12
Speaker 2: we barely talked about them.
19:14
Speaker 4: Ooh, sitting right here, guys once again, so sitting right.
19:18
Speaker 2: Here, You're welcome. Let's take a quick break here, and
19:21
Speaker 2: when we return, we've got the trivia answer. We're doing
19:26
Speaker 2: Wall Street Watch and then we're gonna talk about uh,
19:31
Speaker 2: let's do private credit. That sounds fun.
19:41
Speaker 1: Bringing the latest financial news straight to your radio. Every day,
19:46
Speaker 1: it's the Financial Exchange on the Financial Exchange Radio Network.
19:51
Speaker 1: Tell you now, whoa Street Watch, treking, the stocks, potato,
19:55
Speaker 1: and the headlines driving markets so far today right here
19:59
Speaker 1: on the Financial ex Change Radio Network.
20:01
Speaker 5: Markets and negative territory. To begin the week a mid
20:03
Speaker 5: tensions between the US and Iran increasing over the weekend.
20:06
Speaker 5: Last hour, President Trump said it's highly unlikely he would
20:10
Speaker 5: extend the two week ceasefire with Iran if a deal
20:13
Speaker 5: is not reached before it ends, and staid the Straight
20:15
Speaker 5: of Hormuz would remain blocked until an agreement is finalized.
20:20
Speaker 5: Right now, the Dow is down a tenth of a percent,
20:22
Speaker 5: SMP five hundred down, nearly four tenths of a percent,
20:25
Speaker 5: NASDAC down about two thirds of a percent to one
20:29
Speaker 5: hundred and fifty six points, Rust two thousand up about
20:31
Speaker 5: a tenth of a percent, Tenure Treasure reeled up one
20:34
Speaker 5: basis point at four point two five six percent, and
20:38
Speaker 5: Oil up five percent higher, trading at eighty eight dollars
20:42
Speaker 5: a barrel. Shares in Marvel Technology rising over four percent
20:46
Speaker 5: after the information report of the chip maker is in
20:48
Speaker 5: discussions with Google to build new AI chips. Meanwhile, building
20:53
Speaker 5: products distributor QXO agreed to acquire insulation products company top
20:58
Speaker 5: Build for seventeen billion dollars. Top Build stock is surging
21:03
Speaker 5: sixteen percon while a QXO stock is down by seven percent.
21:08
Speaker 5: And sandwich change Jersey Mikes has confidentially filed for an
21:12
Speaker 5: IPO Blackstone bottom majority steak in the sandwich chain in
21:15
Speaker 5: twenty twenty four and a deal that value the company
21:18
Speaker 5: at about eight billion dollars. Jersey Mikes is the second
21:21
Speaker 5: largest sandwich chain in the US, trailing only Subway. I'm
21:27
Speaker 5: Tucker Silva and that is Wallstreet Watch. In the previous segment,
21:30
Speaker 5: we asked you the trivia question what is the oldest
21:33
Speaker 5: airline in the US. It will be Delta Airlines. Clifford
21:37
Speaker 5: from Nashaue in New Hampshire is our winner today, taking
21:40
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21:42
Speaker 5: trivia every day here on the Financial Exchange. See complete
21:46
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21:50
Speaker 2: Mark we got private credit piece here Wall Street Journal.
21:54
Speaker 2: Private credit is on the hunt for credit card debt
21:58
Speaker 2: and what's going on here exactly?
22:01
Speaker 4: Yeah, the upshot, Well, you know, it's a good question.
22:03
Speaker 4: I scanned it once and I'm trying to pull out
22:07
Speaker 4: like the main point, hoping it would be something sort
22:11
Speaker 4: of new, and I can look. Private credit consists of
22:16
Speaker 4: non bank loans to lenders who choose to not go
22:19
Speaker 4: to banks or can't tap public markets, and there's a
22:23
Speaker 4: lot of different type. It's a very broad category. It's
22:25
Speaker 4: like calling gohead.
22:27
Speaker 2: You can have all kinds of crap that's in there,
22:29
Speaker 2: like as an example, the ones last year you had
22:33
Speaker 2: Tricoller who they were an auto dealer that had a
22:37
Speaker 2: bunch of loans that they had taken out for inventory. Okay,
22:41
Speaker 2: that's that's one example. I've seen other private credit that
22:44
Speaker 2: is a museum taking out debt to go and buy artwork,
22:49
Speaker 2: and it can be everything in between. So when you
22:51
Speaker 2: hear private credit, it doesn't mean like a certain type
22:53
Speaker 2: of loan with certain features, with certain maturity, and it
22:57
Speaker 2: can be a bunch of stuff that's like not even
22:59
Speaker 2: close to being similar, kind of like when we talk
23:02
Speaker 2: about stocks, like we don't just be we don't just
23:05
Speaker 2: talk about like every stock that exists, because there's a
23:07
Speaker 2: huge difference between Apple and Tucker. What was the deli
23:12
Speaker 2: a few years back that was like running a the
23:16
Speaker 2: Jersey Deli fraud people.
23:19
Speaker 3: Yeah, it was definitely a New Jersey whatever it was.
23:23
Speaker 2: Like that company in Apple don't have anything in common,
23:27
Speaker 2: just like a lot of different private credit types don't
23:30
Speaker 2: have anything in common either.
23:32
Speaker 4: No, it's true, and they shouldn't by the way you want.
23:35
Speaker 4: So the upshot is you've got private credit managers looking
23:38
Speaker 4: for looking to diversify their portfolios, in this case using
23:43
Speaker 4: credit card debt, and it almost I don't know if
23:46
Speaker 4: I don't think I don't know if the implication, I
23:47
Speaker 4: don't know if the desired effect of this is supposed
23:51
Speaker 4: to be to get people to sort of worry about it,
23:55
Speaker 4: like they're seeking out lower quality assets or something. But again,
23:59
Speaker 4: this is normal.
24:00
Speaker 2: I almost wonder if it comes across better because one
24:03
Speaker 2: of the areas that has held up better in markets.
24:06
Speaker 2: But you look at what's been going on with like
24:08
Speaker 2: default rates and things like that, and what's happening in
24:12
Speaker 2: the credit card space, and generally things have held up
24:15
Speaker 2: pretty well there. And so I almost look at this
24:18
Speaker 2: and I'm like, Okay, good, They're not just buying more
24:20
Speaker 2: of the same stuff and compounding the problem. Yes, it's true,
24:24
Speaker 2: they may end up making themselves entirely new problems through
24:27
Speaker 2: buying this kind of debt.
24:28
Speaker 1: But.
24:31
Speaker 2: I don't know. I prefer to have, you know, a
24:33
Speaker 2: little bit more diversification of funding source when you're looking
24:38
Speaker 2: at stuff like that.
24:39
Speaker 4: Yeah, I mean, the quantity of consumer loan balance is
24:43
Speaker 4: held by private credit is the article notes is increased
24:46
Speaker 4: by has increased from three from two hundred to three
24:51
Speaker 4: hundred fifty. So but that's over seven years, Yeah, over
24:55
Speaker 4: the last several I don't have perspective. I don't know
24:57
Speaker 4: whether that's more or less than other types of loans
25:00
Speaker 4: that private credit I'll say originates. But what they're supposed
25:04
Speaker 4: to do is diversify their portfolios. They shouldn't just sorry,
25:07
Speaker 4: they shouldn't just be lending to companies. They shouldn't just
25:09
Speaker 4: be buying debt of say, private equity companies and stuff
25:13
Speaker 4: like that. They shouldn't just be buying real estate debt
25:15
Speaker 4: or engaging in or buying aircraft leasing related debt or
25:19
Speaker 4: royalties or whatever else. As you point out, there are
25:22
Speaker 4: lots of different types of There are lots of different
25:24
Speaker 4: types of loans that private market managers can make private
25:27
Speaker 4: credit in this case, and I would expect them to
25:29
Speaker 4: want to diversify their portfolios. So is this like big news?
25:33
Speaker 4: I don't know what was the point, other than that
25:37
Speaker 4: this particular category has grown, just so you know, Mark,
25:41
Speaker 4: I mean and look, an investor who's buying private credit
25:44
Speaker 4: is generally a sophistic who's investing in private credit deals.
25:47
Speaker 4: Excuse me, is generally sophisticated and has a very specific
25:52
Speaker 4: risk and return profile that they're looking for to complement
25:55
Speaker 4: other stuff in their portfolio. This might be of interest
25:59
Speaker 4: to a investor looking for something to fill a very
26:03
Speaker 4: specific niche folks.
26:05
Speaker 2: The Armstrong Advisory Group is hosting a retirement planning seminar.
26:10
Speaker 2: It's at five pm on April thirtieth at the Crown
26:14
Speaker 2: Plaza in Wuburn. Topics of discussion social security medicare and
26:19
Speaker 2: retirement planning. There still is space available, but it is limited.
26:25
Speaker 2: So again, this is April thirtieth at five pm at
26:28
Speaker 2: the Crown Plaza Hotel in Woburn, Massachusetts. To sign up
26:33
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26:36
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26:39
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26:44
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26:47
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26:52
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26:56
Speaker 2: happening April thirtieth at five pm at the Round Plause
27:00
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27:02
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27:08
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27:12
Speaker 1: The proceeding was paid for by Armstrong Advisory Group, a
27:14
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27:17
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27:20
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27:22
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27:28
Speaker 2: All right, we got a kind of interesting, kind of
27:31
Speaker 2: not piece from Barons. I know, I'm really selling it here.
27:36
Speaker 2: The worst you to retire wasn't nineteen twenty nine. The
27:38
Speaker 2: creator of the four percent retirement rule says, it was
27:41
Speaker 2: nineteen sixty eight. And so if you're not familiar with
27:44
Speaker 2: the four percent rule, it's the idea that was promogulated
27:48
Speaker 2: originally by William Bengin, who said, look, if you are
27:53
Speaker 2: retiring and have a thirty year time horizon in retirement,
27:56
Speaker 2: a four percent withdrawal rate is generally safe so that
27:59
Speaker 2: you don't run out of money. And basically what Bengan
28:03
Speaker 2: looks at here is, yeah, nineteen twenty nine you went
28:06
Speaker 2: through a big crash, which obviously impacted what you had there.
28:11
Speaker 2: But the problem with a nineteen sixty eight retirement was
28:15
Speaker 2: he had almost fifteen years of high inflation and low
28:18
Speaker 2: equity returns combined during that time period, and so that
28:23
Speaker 2: made it the most challenging time for the four percent
28:27
Speaker 2: rule to actually work the way intended.
28:30
Speaker 4: Yeah, depending on the assumptions you make, you could come
28:33
Speaker 4: to that conclusion. We do our own little simulations here internally.
28:38
Speaker 4: The way you do it, I'll be really brief here.
28:40
Speaker 4: You assume somebody retires in nineteen twenty eight, the first
28:44
Speaker 4: year for which we've got good data on stocks and
28:47
Speaker 4: everything else. And how did they do over the next
28:49
Speaker 4: thirty years. Did they run out of money if they
28:52
Speaker 4: were taking four or five or six percent or not?
28:54
Speaker 4: And as you would expect when you do an exercise
28:57
Speaker 4: like that, and you can make a pretty good range
29:01
Speaker 4: of assumptions in there and still get to the same conclusion,
29:04
Speaker 4: because the bad periods were so bad that even somebody
29:08
Speaker 4: who was say conservative in their withdrawal rate or their
29:11
Speaker 4: initial inflation assumption was wrong footed by the environment. Yeah,
29:15
Speaker 4: it was very bad to retire in the late nineteen twenties,
29:18
Speaker 4: not a big surprise. Stocks went down by ninety percent.
29:21
Speaker 4: They didn't recover until Ike was president. So we all
29:25
Speaker 4: kind of knew that. The assumption, the conclusion that the
29:28
Speaker 4: late sixties were a bad time to retire, that holds
29:31
Speaker 4: up if you assume people don't change their behavior. Sure,
29:35
Speaker 4: presumably they did and would have although they didn't have
29:38
Speaker 4: the number of instruments, you know, vehicles that they didn't
29:41
Speaker 4: even have mutual funds, or at least they weren't. They
29:44
Speaker 4: weren't widespread. Excuse me, they were mutual funds, but they weren't.
29:47
Speaker 4: You had to like send your check by mail and
29:49
Speaker 4: stuff like that. So suppose we're on the cusp of
29:53
Speaker 4: a really bad period high inflation. That's possible with these
29:58
Speaker 4: oil price shocks and affect chair who seems to want
30:01
Speaker 4: to cut rates no matter what coming into coming into office.
30:04
Speaker 2: But even like in the context of a retirement, and
30:07
Speaker 2: this is the thing that I come back to, whatever's
30:10
Speaker 2: going on. Here's the thing. If you look at it historically,
30:14
Speaker 2: whatever's going on at the start of your retirement in
30:16
Speaker 2: the world in markets, it's not usually what's going on
30:19
Speaker 2: at the.
30:19
Speaker 4: End, No, far from it.
30:20
Speaker 2: Never. So this is why, like, even if you're concerned
30:23
Speaker 2: about X, Y or z today and oh, how's it
30:25
Speaker 2: going to affect my retirement, Honestly, it's not going to
30:29
Speaker 2: affect most of your retirement. Like it's like the problems
30:34
Speaker 2: you are seeing. Think about it this way. If you
30:36
Speaker 2: retired in nineteen ninety, Okay, so the problems that you
30:40
Speaker 2: faced at the start of the nineteen nineties were oil
30:42
Speaker 2: price shock, midd war in the Middle East, YadA, YadA.
30:46
Speaker 2: You then went through like the this whole tech boom.
30:49
Speaker 2: Then you add this housing bubble that came up. Then
30:51
Speaker 2: you add you know, a slow rick like It's not
30:53
Speaker 2: to say there weren't problems. But if you were nervous
30:57
Speaker 2: to retire because of hey, like Saddam husaying, is you
31:01
Speaker 2: know invading Kuwait, that wasn't really the problem for your retirement.
31:08
Speaker 2: That's that's the point I'm trying to make.
31:10
Speaker 4: Yeah, you'd have to your strategy would have to be static.
31:13
Speaker 4: You'd have to be sort of very negligent to not
31:16
Speaker 4: go ahead.
31:16
Speaker 2: You forget about like your strategy. Like my whole point is,
31:21
Speaker 2: whatever you're worried about at the beginning of your retirement,
31:24
Speaker 2: you really shouldn't be well.
31:26
Speaker 4: But it could sink it though, if if you're over
31:28
Speaker 4: invested in equities and you retire into a catastrophe.
31:30
Speaker 2: I mean, like, of course, like that could. But yeah, again,
31:34
Speaker 2: odds are that when you look at it, Remember here's
31:37
Speaker 2: the I guess here's where I end up getting to it.
31:41
Speaker 2: In most of these cases, when things get bad enough,
31:44
Speaker 2: policy makers change course. Like we've been through enough disasters
31:49
Speaker 2: in the last thirty years to know that that's the case.
31:54
Speaker 2: And I'm not saying this is not a like stocks
31:56
Speaker 2: will always go up, but it's okay, Like whatever you're
32:01
Speaker 2: going through in markets is not going to be the
32:03
Speaker 2: thing that you're going through your retirement.
32:05
Speaker 4: But sequence of a financial advisor, I think would say
32:08
Speaker 4: sequence of returns, as the industry sometimes calls it, matters
32:12
Speaker 4: a lot. If you retire into some upheaval and you
32:16
Speaker 4: don't change your strategy, you could be invested too heavily
32:19
Speaker 4: in risk assets and equities, for which is why.
32:21
Speaker 2: Having a properly diversified portfolio heading into retirement is what
32:25
Speaker 2: you need. So I don't.
32:26
Speaker 4: Think if you do the exercises that we do here
32:29
Speaker 4: and look at what happened if you retire excuse me,
32:31
Speaker 4: in nineteen twenty eight then in ninety what happened to
32:32
Speaker 4: the people that retired in twenty nine, then in thirty
32:34
Speaker 4: then and did nothing? So they had like the worst
32:37
Speaker 4: financial advisor in the world. They told them, stay the course,
32:39
Speaker 4: everything's fine. All those people were forgive me screwed, But
32:44
Speaker 4: that's not going to happen if you work with a
32:46
Speaker 4: competent professional, and that competent professionals verdict may be this
32:51
Speaker 4: theme will not prevail throughout your retirement. You've got thirty
32:53
Speaker 4: years here. If the recent turmoil has taught you that
32:56
Speaker 4: you can't stomach the risk because you're no longer dollar
32:59
Speaker 4: cost averaging.
33:00
Speaker 2: In right, you can still end up being screwed by
33:02
Speaker 2: your own decisions that you make during like, you can
33:04
Speaker 2: still end up with problems. My point is just whatever
33:07
Speaker 2: you're worried about the beginning of your retirement, it's not
33:11
Speaker 2: going to be the thing that you need to care about.
33:14
Speaker 4: Stuff to be worried about over the course of your
33:16
Speaker 4: retire right exactly.
33:17
Speaker 2: There's always something new to worry about, right, That's my point.
33:21
Speaker 2: Let's take a quick break. When we return stock Roulette.
33:25
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33:28
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33:32
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33:36
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33:42
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33:45
Speaker 1: Face is the Financial Exchange.
34:04
Speaker 2: All right, Mark, what do you got for me? For
34:05
Speaker 2: stack Roulettes?
34:06
Speaker 4: Tucker pulled this piece for us, Chuck, I don't know
34:08
Speaker 4: if to caught your eye from the Financial Times.
34:10
Speaker 2: No it didn't, Ai.
34:12
Speaker 4: Hey, you're just being polite, Yeah, of course you saw. Hey,
34:15
Speaker 4: I boom poised to be massively massively deflationary. That's their
34:19
Speaker 4: adverb or adjective. It's an adverbt right, yeah, anyway, says
34:24
Speaker 4: Northern Trust. So what they what do they mean this?
34:28
Speaker 4: This falls in the same category as some of the
34:29
Speaker 4: other AI hype that we were talking about that worsh
34:32
Speaker 4: the incoming FED share. Presumably is is a champion of
34:36
Speaker 4: the idea that AI is not only going to increase
34:39
Speaker 4: productivity and related to that, not just cut the rate
34:43
Speaker 4: of inflation, but cut turn inflation. Well, they say they
34:47
Speaker 4: say disinflationary, elsewhere it says deflationary. Let's assume they mean disinflationary,
34:52
Speaker 4: which means a lower rate. I mean, maybe chuck, But
34:56
Speaker 4: there are also scenarios in which AI could be inflationary,
35:01
Speaker 4: leading to a demand for capital and increase in economic activity.
35:04
Speaker 4: Maybe productivity doesn't follow. And look, what the point I
35:08
Speaker 4: wanted to make here is that in the long run,
35:11
Speaker 4: inflation is a result of too much demand, which is
35:16
Speaker 4: in turn as a result of the FED printing too
35:18
Speaker 4: much money. There are no structural forces that make inflation
35:22
Speaker 4: high or lower in the long run. It's solely the
35:24
Speaker 4: fed's responsibility to hit their target two percent, three percent,
35:27
Speaker 4: whatever it happens to be So take pieces like this,
35:31
Speaker 4: which you're going to see a lot of and which
35:33
Speaker 4: often have an ax to grind taken with a grain
35:35
Speaker 4: of salt.
35:37
Speaker 2: Is there anything worth taking from that piece the idea?
35:42
Speaker 4: Keep in mind that if AI does boost productivity, that
35:47
Speaker 4: that could allow rates to remain. If your concern is
35:52
Speaker 4: monetary policy, are there favorable consequences for monetary policy? Sure,
35:57
Speaker 4: we might be able to keep rates a little bit lower,
35:59
Speaker 4: run the economy at what would have been previously thought
36:02
Speaker 4: a hot level, because it's not hot, much like Yeah,
36:05
Speaker 4: the nineteen nine what am I saying? I should just say, Leah, Chuck,
36:08
Speaker 4: the late nineteen nineties a similar sort of favorable confluence
36:12
Speaker 4: of factors. But we don't know whether that's going to happen,
36:15
Speaker 4: and we don't know what the level of productivity is
36:17
Speaker 4: before AI boosts it. Maybe it was going to drop
36:21
Speaker 4: to zero and AI keeps it at one or one
36:24
Speaker 4: and a half. We just don't know at this point, Chuck.
36:26
Speaker 2: I want to talk a little bit about a store
36:29
Speaker 2: we covered.
36:30
Speaker 1: I don't know.
36:30
Speaker 2: I think this was maybe a year or two ago. Yeah,
36:35
Speaker 2: two years back in January twenty four. We're gonna just
36:37
Speaker 2: put a bow on this one the three southern California
36:41
Speaker 2: residents who had staged fake bear attacks on their cars
36:46
Speaker 2: to try to collect insurance payouts. Remember this was the
36:50
Speaker 2: guy who dressed up in the bear suit and then
36:54
Speaker 2: wrecked these cars. But there was surveillance video, and so
36:58
Speaker 2: all the bear experts were like, hey, that bears not
37:01
Speaker 2: moving like a bear. It's moving like a person in
37:03
Speaker 2: a bear suit.
37:04
Speaker 3: Didn't the bear like open the door with a door?
37:06
Speaker 2: Yes it was. It was well, look, bears are smart,
37:10
Speaker 2: like bears aren't dumb, and they can like open doors
37:13
Speaker 2: and stuff.
37:14
Speaker 3: Like in a human like fashion, but not that.
37:16
Speaker 2: Way because they just don't move like humans like. And
37:21
Speaker 2: then he used the my favorite part is still you know,
37:26
Speaker 2: like the pulled pork cause yeah, the guy used those
37:29
Speaker 2: to like rip the leather on the seats and stuff.
37:32
Speaker 2: And so it became very apparent quickly that hey, this
37:36
Speaker 2: was not actually a string of bear attacks but a
37:38
Speaker 2: dude in a bear suit, and so they are not
37:42
Speaker 2: actually gonna have that one hundred and forty one thousand
37:44
Speaker 2: dollars in insurance payouts. Instead, two of the defendants were
37:48
Speaker 2: sentenced to one hundred and eighty days in jail in
37:50
Speaker 2: order to pay more than fifty thousand each in restitution.
37:54
Speaker 2: The third is also sentence to one hundred and eighty
37:57
Speaker 2: days in jail and restitution has not yet been determined.
38:01
Speaker 2: So this is why you don't commit insurance fraud because
38:06
Speaker 2: you will spend six months in jail and have to
38:08
Speaker 2: pay the money back. You're better off not spending the
38:13
Speaker 2: time in jail and not perpetuating the insurance fraud.
38:16
Speaker 3: Just a thought.
38:18
Speaker 2: We'll take a quick break for the rest of the day.
38:20
Speaker 2: Back tomorrow on the Financial Exchange