Latest / The Financial Exchange Show / Diesel Shock Raises the Stakes for Next Week’s Fed Meeting

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Diesel Shock Raises the Stakes for Next Week’s Fed Meeting · The Financial Exchange Show

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  Speaker 1: is The Financial Exchange with Chuck Zotta and Mike Armstrong.
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  Speaker 2: It's Chuck, Mike, and Tucker with you here. And as
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  Speaker 2: we kick things off with a look around the markets,
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  Speaker 2: equity is continuing to struggle a little bit. S &
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  Speaker 2: P is off about 30 points. Dow Jones is off 226.
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  Speaker 2: NASDAQ off 100. So about a third to a 0.4%
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  Speaker 2: decline on the major indices. we have seen a four
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  Speaker 2: day downward move in the S and P, but look,
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  Speaker 2: I gotta be honest. I'm really not that concerned about
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  Speaker 2: equities at this point. Um, it's not that like something
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  Speaker 2: bad can't happen. It's just, it's not really like the
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  Speaker 2: epicenter of any potential problems in markets right now. I mean,
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  Speaker 2: the S and P is like 2.7% off. It's all
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  Speaker 2: time high.
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  Speaker 3: Yeah. It's not going to be the proximate cause of a, uh,
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  Speaker 3: financial system meltdown. No, it's been really resilient this year also.
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  Speaker 3: I mean, it's been tested and challenged by a bunch
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  Speaker 3: of different things, and nothing's really broken it because of
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  Speaker 3: this dispersion, like things moving in different directions. You look
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  Speaker 3: today just as an example, and again, it's kind of funny.
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  Speaker 3: You look at it, and tech, NVIDIA's down 2%, Micron's
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  Speaker 3: down 4%, AMD's down 2%, Intel's down 4%.
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  Speaker 2: So chip makers are getting hammered. Apple's up 2.5%, and
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  Speaker 2: people are going to be like, oh, everyone thinks they're
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  Speaker 2: going to go buy the new iPhone Duo?
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  Speaker 3: I don't know.
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  Speaker 2: Foldable iPhone for $ 2, 000. Yes.
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  Speaker 4: Duo.
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  Speaker 2: Up to, what was the highest price?
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  Speaker 4: $ 3, 200.
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  Speaker 2: $ 3, 200. $ 3, 200 for a phone. It sounds lovely. I can't
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  Speaker 2: wait to get it in 15 years. So people are
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  Speaker 2: going to be like, oh, it's because of the iPhone Duo. No,
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  Speaker 2: it's because... People don't want to be out of tech,
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  Speaker 2: so it's the same rotation we've seen for the last
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  Speaker 2: six months. One day it's into Apple and out of
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  Speaker 2: the semis. The other day it's into the semis and
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  Speaker 2: out of Apple, and this is just kind of how
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  Speaker 2: it balances out. So as long as those mechanics are
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  Speaker 2: in place, it's hard to get too worried about what's
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  Speaker 2: going on in equities. And again, we're like 2.7% off
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  Speaker 2: the all-time high in the S & P 500. I'm
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  Speaker 2: not really that excited about what's going on there. Where
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  Speaker 2: I am excited, and again, excited is not like, hey,
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  Speaker 2: can't wait, but much more like, I think interested would
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  Speaker 2: be the right word to use. 10-year treasury, moving up
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  Speaker 2: another 7.8 basis points to 4.918%. Knocking on the door
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  Speaker 2: of 5% here. If it has another move like this,
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  Speaker 2: it'll basically get to the highest level that we've seen
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  Speaker 2: since the great financial crisis. You know, we got to 4.997%
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  Speaker 2: back in, what was it, 2023, I think it was. 2022,
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  Speaker 2: one of those. Yeah, into 23, we got there. And
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  Speaker 2: that's the highest yield that we've seen on the 10
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  Speaker 2: years since the great financial crisis. We have not seen
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  Speaker 2: it with a five handle since, I believe, July of 2007. Yippee.
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  Speaker 2: So we'll see what we end up getting on that
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  Speaker 2: side of things. That, in turn, is being driven now.
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  Speaker 2: And you can check this, look at it. It's basically
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  Speaker 2: tick for tick with what we're seeing in oil prices
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  Speaker 2: right now. West Texas Intermediate up 377 a barrel to 99.82.
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  Speaker 2: Brent is at 105.28, up 407 a barrel. And the
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  Speaker 2: big one that's just continuing to really have my full focus,
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  Speaker 2: like if you want to know, the place that I'm
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  Speaker 2: really nervous is what's going on in diesel markets. Wholesale
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  Speaker 2: diesel for delivery in October, up another 21 cents today,
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  Speaker 2: and now a 27-cent reversal from when I woke up,
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  Speaker 2: where it was down 6 cents. So diesel prices, I
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  Speaker 2: got to tell you, we're at 597 on the AAA
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  Speaker 2: national average yesterday.
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  Speaker 3: The California average, by the way, is 791 now.
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  Speaker 2: And California now has five stations listed at 999. So
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  Speaker 2: the AAA national average for diesel was 597 yesterday. Most
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  Speaker 2: likely we clear six tomorrow. If not tomorrow, it's going
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  Speaker 2: to be Saturday. We're heading now for 625 diesel by
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  Speaker 2: the middle of next week. And again, we were talking
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  Speaker 2: with Tom Kloza from Gulf Oil last Friday, and look,
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  Speaker 2: he said something that we've been saying for a while now,
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  Speaker 2: and he, again, knows more than we do about energy markets.
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  Speaker 2: He's like, $ 7, $ 8, $ 9 diesel this fall is not
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  Speaker 2: off the table. Like, it's possible if things go badly.
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  Speaker 2: And at least this week, they're not going great in
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  Speaker 2: energy markets. So the diesel one is the one I
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  Speaker 2: continue to watch because it filters into everything in our lives.
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  Speaker 2: Everything that you buy is touched by diesel at one point.
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  Speaker 2: It might be, you know, okay, the food was harvested using,
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  Speaker 2: you know, a combine powered by diesel. The food was transferred. You're...
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  Speaker 2: t-shirt was transported by a truck, you know, fueled by diesel.
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  Speaker 2: Your home was built by a, you know, backhoe that
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  Speaker 2: was powered by diesel. Like, you can't get away from
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  Speaker 2: this stuff. I know that none of us pay attention
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  Speaker 2: to diesel prices because most of us don't drive diesel
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  Speaker 2: vehicles or don't heat our home with home heating oil.
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  Speaker 2: But for those who do, Uh, obviously like you've been
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  Speaker 2: seeing what's going on and I'm, I'm, I'm nervous in
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  Speaker 2: case you can't tell. So I just wanted to let
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  Speaker 2: you know, let's talk a little bit about this piece
• 6:32
  Speaker 2: from NPR every now and then, usually once a week,
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  Speaker 2: maybe twice a week, Tucker finds a piece that just
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  Speaker 2: gets right to that, that spot in my, my soul
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  Speaker 2: that just wants to scream. And this was it this week.
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  Speaker 2: It's titled, Has the Economy Gone C-Shaped?
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  Speaker 3: I got to tell you, I would rather have somebody
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  Speaker 3: write three pages about what they thought yesterday's clouds looked
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  Speaker 3: like than have one more person tell me which letter
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  Speaker 3: the economy looks like.
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  Speaker 2: I think that is more interesting.
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  Speaker 3: It is.
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  Speaker 2: We've decided that we can't do letter-shaped economies anymore. But
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  Speaker 2: what they're talking about here... But we're going to do
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  Speaker 2: letter-shaped economies anyway. No, we're not going to. We're going to...
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  Speaker 2: What they're talking about here is, okay, is the K now, like,
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  Speaker 2: is the top part of the K curving down, man,
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  Speaker 2: because the better off people are getting less better off? And, hey,
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  Speaker 2: maybe the bottom of the K is curving up, kind
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  Speaker 2: of like... Like the front of a pontoon boat or something.
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  Speaker 3: Again, you can describe this without attributing a letter to it.
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  Speaker 3: We did so over the last few weeks. Lower wage
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  Speaker 3: workers are seeing wages increase faster than higher wage workers.
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  Speaker 2: Michael, forget the last few weeks. Economists have done this
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  Speaker 2: for centuries until 2022 when suddenly we had to be like, Well,
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  Speaker 2: the economy's kind of K-shaped. And look, K-shaped, it was
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  Speaker 2: a good way to describe it then. It was fine.
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  Speaker 2: But as the economy evolves, we don't need to find
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  Speaker 2: the appropriate letter for the economy. That one looks like
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  Speaker 2: a dinosaur. To be fair, look, I play this game
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  Speaker 2: with my three-year-old all the time. Like, hey, what letter
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  Speaker 2: is that? And she tells me. That's entertaining. Because she's
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  Speaker 2: learning the letters.
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  Speaker 3: Hearing a PhD economist do it is kind of... silly
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  Speaker 3: and a waste of paper. So we can do better
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  Speaker 3: than that. And that's why starting this week, we're going
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  Speaker 3: to be doing what Chinese character is this economy?
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  Speaker 2: Because how many are there again? Michael, it's like a
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  Speaker 2: few thousand. I don't know, but it's a more complex,
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  Speaker 2: you know, form of writing. And so at least we can,
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  Speaker 2: you know, use a little bit more complexity there.
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  Speaker 3: Plus let's be honest, more than a hundred thousand.
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  Speaker 2: It's going to take a while. Do any of us
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  Speaker 2: actually speak English? Any type of Chinese. No, I don't.
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  Speaker 2: I don't even know how to say no. No, I
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  Speaker 2: have no idea. I can't say no in Mandarin. So
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  Speaker 2: we're all going to learn something.
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  Speaker 3: Everything I know about Mandarin comes from the movie Rush
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  Speaker 3: Hour 2 or 3.
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  Speaker 2: I don't remember which. So we're all going to learn something.
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  Speaker 2: Instead of what English letter is the economy. No. We're
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  Speaker 2: going to all learn something together.
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  Speaker 3: Tucker, can you replace this background with 100,000 Chinese characters
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  Speaker 3: so that we can.
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  Speaker 2: Do a better job? Replacing Boston?
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  Speaker 5: Yeah.
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  Speaker 1: Listen.
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  Speaker 2: Yeah. Get rid of the skyline.
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  Speaker 3: Get me 100,000 Chinese characters in a really small print
• 9:38
  Speaker 3: so I can turn around every once in a while.
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  Speaker 2: I'm just saying. And pick one out. I'm just saying
• 9:43
  Speaker 2: that Mahjong has gotten very popular this year.
• 9:46
  Speaker 1: That it has, yeah.
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  Speaker 2: And so we're just trying to ride the wave, baby,
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  Speaker 2: and just pick up a little bit of popularity. Increase
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  Speaker 2: those ratings. Get ready for Mahjong Mondays coming up next
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  Speaker 2: week on the Financial Exchange. For now, we're going to
• 10:00
  Speaker 2: take a quick break, and when we return, we're joined
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  Speaker 2: by Michael Santoli from CNBC next.
• 10:07
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• 10:41
  Speaker 2: All right, as promised, we are now joined by Michael Santoli,
• 10:46
  Speaker 2: senior markets commentator from CNBC, also the lead writer of
• 10:50
  Speaker 2: the CNBC Market Memo. Michael, thank you so much for
• 10:53
  Speaker 2: joining us today. We appreciate it.
• 10:55
  Speaker 5: Oh, glad to do it. Thanks for having me.
• 10:57
  Speaker 2: Michael, when we look at markets broadly right now, I
• 11:01
  Speaker 2: have to say the least interesting one to me personally
• 11:05
  Speaker 2: is what's going on in equity markets. I know that
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  Speaker 2: we've seen a little bit of a slide over the
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  Speaker 2: last three or four days here. But it's just tough
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  Speaker 2: for me to see this as being fundamentally different from
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  Speaker 2: what we've seen over the course of the summer, where
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  Speaker 2: we had a little bit of chop here and there,
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  Speaker 2: occasionally a slide similar to this. But ultimately, markets recovered
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  Speaker 2: and found their footing. Do you feel similarly about how
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  Speaker 2: equities are shaping up right now?
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  Speaker 5: I feel similarly in the sense that equities are not
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  Speaker 5: doing anything dynamic, and they're not really the prime mover
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  Speaker 5: of the story. They're actually just sort of caught in
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  Speaker 5: these offsetting currents. That obviously on the one side, you
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  Speaker 5: got the pressure from higher yields, higher oil prices. On
• 11:45
  Speaker 5: the upside, naturally, massive gains in AI-related earnings. And that's
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  Speaker 5: largely kept us in this pretty narrow zone. In fact,
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  Speaker 5: this morning, this little drop we got in the S
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  Speaker 5: & P 500. momentarily dropped it below the range we've
• 12:00
  Speaker 5: been in since the early August breakout. But, again, we're
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  Speaker 5: talking about pretty similar levels to where we traded in
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  Speaker 5: early June. So I agree with you on that. I mean,
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  Speaker 5: how much trouble can the market get into when earnings
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  Speaker 5: are growing this fast is one question you might hear.
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  Speaker 5: And so, therefore, any shock will have to come from
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  Speaker 5: the macro side. So that's why I feel like we're
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  Speaker 5: being tested today. by a lot of round numbers here.
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  Speaker 5: Possibly 5% on 10-year yields, $ 100 WTI oil, maybe 7%
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  Speaker 5: mortgage rate.
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  Speaker 1: Yeah.
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  Speaker 2: And this is something where in particular, I'm going to
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  Speaker 2: jump over to energy prices there, because in particular on
• 12:34
  Speaker 2: the refined product side, every morning I see diesel futures
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  Speaker 2: up another 20 cents now. I mean, it's kind of
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  Speaker 2: crazy what we're seeing there. And that in turn has
• 12:43
  Speaker 2: brought back this correlation between oil prices, and bond yields
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  Speaker 2: that now is back after taking the summer off. Does
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  Speaker 2: it feel like we're heading towards a breaking point somewhere
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  Speaker 2: in the next few weeks on one of these?
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  Speaker 5: It feels as if the market is tentatively searching for
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  Speaker 5: one and to see if the thresholds are going to
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  Speaker 5: be tripped. I don't know what that is. I don't
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  Speaker 5: know what those levels might be. One thing that's notable
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  Speaker 5: about the bond move is that it's kind of methodical
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  Speaker 5: and grinding, and it's not this panicky surge in yield.
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  Speaker 5: I don't know if that's good or bad. But I
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  Speaker 5: do agree. Yeah, I mean, at some point, the bond
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  Speaker 5: market can't ignore oil. Diesel prices, huge input into, you know,
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  Speaker 5: anything that looked problematic in the producer price index report
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  Speaker 5: this morning was kind of diesel related for the most part.
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  Speaker 5: So I do think that's why you can't be ignored
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  Speaker 5: even on a Fed level, even though it's, oh, it's
• 13:36
  Speaker 5: supply shock. It's not something the Fed can impact. I
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  Speaker 5: do think that that does reprice the Fed path along
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  Speaker 5: with market yields from here.
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  Speaker 2: So when we look at what's coming over the next
• 13:47
  Speaker 2: week now, we've got CPI tomorrow and then into a
• 13:51
  Speaker 2: Fed meeting next Wednesday. Lay out the possible paths that
• 13:55
  Speaker 2: are out there for us to watch for and what
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  Speaker 2: the key things are to pay attention to.
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  Speaker 5: It feels like the binary for CPI tomorrow is sort
• 14:02
  Speaker 5: of comically specific, like 0.25 month over month. You know,
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  Speaker 5: core is like the threshold of, yes, the Fed definitely
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  Speaker 5: goes higher. next Wednesday, or it doesn't. I think it's
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  Speaker 5: maybe oversimplifying things, but it's directionally true. Here's the question
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  Speaker 5: I'm kind of kicking around, which is, let's say the
• 14:21
  Speaker 5: Fed raises 25 basis points next week. Does that re-anchor
• 14:24
  Speaker 5: longer-term yields? I don't think they come down much if
• 14:27
  Speaker 5: they come down, but it doesn't re-anchor them. Look, this
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  Speaker 5: moving yield is getting a little bit stretched. I do
• 14:32
  Speaker 5: think anything like an on-target or softer CPI number could
• 14:36
  Speaker 5: create a relief rally in bonds. I don't know if
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  Speaker 5: that just takes the pressure off stocks, too, to get
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  Speaker 5: to the upper end of the range. So that's the
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  Speaker 5: swirl of things I'm considering right now. You already have
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  Speaker 5: a two-year yield around 4.5%. It's pricing in two to
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  Speaker 5: three hikes at some point over the next several months.
• 14:55
  Speaker 5: So whether it comes in September or not, not necessarily
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  Speaker 5: make or break, I don't think, for the economy of
• 15:00
  Speaker 5: the market.
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  Speaker 2: Michael, do you see any scenario where, and again, this
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  Speaker 2: is one that I just I've been workshopping this over
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  Speaker 2: the last day or so, so it's in progress, but
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  Speaker 2: a scenario where, okay, let's say we get a muted
• 15:12
  Speaker 2: inflation number for the month of August. Fed says, okay,
• 15:16
  Speaker 2: we don't need to do anything, but we continue to
• 15:18
  Speaker 2: see oil ratcheting up and other commodities moving higher. Is
• 15:23
  Speaker 2: it something where that pause can just be, hey, we're
• 15:27
  Speaker 2: too reliant on data that's already outdated, and that ends
• 15:31
  Speaker 2: up blowing the long end out even higher then?
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  Speaker 5: I do think that's an absolutely plausible scenario. That's why
• 15:36
  Speaker 5: I kind of came at it from the other way
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  Speaker 5: to say if they hike, maybe it re-anchors longer yields.
• 15:42
  Speaker 5: I am starting to see people say that, especially given
• 15:44
  Speaker 5: the momentum in the commodity indexes and the fact that
• 15:48
  Speaker 5: oil is simply muscling around global bond markets right now. So,
• 15:53
  Speaker 5: you know, again, we don't know what's going to kind
• 15:56
  Speaker 5: of trip the rally in oil here. Stocks are trying
• 15:59
  Speaker 5: to put on a brave face every single day, it
• 16:02
  Speaker 5: seems like, they can lean on Apple and six or
• 16:05
  Speaker 5: seven other big tech stocks to kind of keep things supported.
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  Speaker 5: And that's been the mode for a little while here.
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  Speaker 5: I also find it interesting, people assume that there's some
• 16:16
  Speaker 5: kind of direct support valuation impact from, let's say, 10-year
• 16:21
  Speaker 5: Treasury yields being near 5%. I mean, it's pretty squishy
• 16:23
  Speaker 5: if you look at history, what that relationship is. Mostly,
• 16:27
  Speaker 5: I think it's a normalization shock. We're not used to
• 16:29
  Speaker 5: rates being up here, even though economic growth and everything
• 16:33
  Speaker 5: else should imply that they're in the right place, roughly.
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  Speaker 2: Very good. Michael, we appreciate you joining us today. Thanks
• 16:39
  Speaker 2: so much for the time, and look forward to catching
• 16:42
  Speaker 2: up again soon.
• 16:43
  Speaker 1: Yeah, anytime.
• 16:44
  Speaker 5: Thank you very much.
• 16:45
  Speaker 2: That is Michael Santoli from CNBC, senior market commentator there,
• 16:49
  Speaker 2: and also the lead writer of the CNBC Market Memo.
• 16:55
  Speaker 2: We got a piece in Bloomberg Opinion from Bill Dudley,
• 16:58
  Speaker 2: former president of the Federal Reserve Bank of New York.
• 17:01
  Speaker 2: It's titled, Resolving Failed Banks Remains Inadequate, We Can Do Better.
• 17:06
  Speaker 3: I'm not sure how, but I agree with him that
• 17:08
  Speaker 3: it remains unresolved. So the bank crisis of 2023 took
• 17:13
  Speaker 3: out Silicon Valley Bank. We quickly saw a ripple effect
• 17:15
  Speaker 3: that took out a couple of others.
• 17:19
  Speaker 2: A couple others went down. It was Century? No, Synchrony? Yeah,
• 17:25
  Speaker 2: Synchrony might have been it.
• 17:26
  Speaker 3: In any case, the Fed and Treasury stepped in at
• 17:29
  Speaker 3: that point and used rules that they have on the
• 17:33
  Speaker 3: books to prevent a business.
• 17:36
  Speaker 2: No, Century merged with Eastern Bank. Two years prior to that.
• 17:39
  Speaker 2: That's why that was top of mind.
• 17:41
  Speaker 3: In any case, what the solution was, was to fully
• 17:45
  Speaker 3: insure all deposits. And you and I both left 2023
• 17:49
  Speaker 3: openly wondering what this actually means. I still openly wonder
• 17:56
  Speaker 3: if another bank fails, are my deposits infinitely insured? Because
• 18:01
  Speaker 3: that was certainly the message that came from that moment.
• 18:03
  Speaker 3: And the refined message now seems to be, They're only
• 18:07
  Speaker 3: infinitely insured if that bank failing is going to cause
• 18:10
  Speaker 3: a chain reaction, which you can't possibly know ahead of time.
• 18:14
  Speaker 3: But I would agree with Dudley that we don't seem
• 18:17
  Speaker 3: to have a resolution as to how we are dealing
• 18:19
  Speaker 3: with this. And what's happened in the meantime is that
• 18:22
  Speaker 3: the FDIC has taken a bunch of losses and basically
• 18:27
  Speaker 3: sent a message to all sorts of banks that, hey,
• 18:30
  Speaker 3: we've got your back with infinite deposit insurance.
• 18:34
  Speaker 2: Which, if we're being honest, they shouldn't.
• 18:38
  Speaker 5: No.
• 18:38
  Speaker 2: That's not like, when you sign up for a bank account,
• 18:42
  Speaker 2: it says, you know, it's got any bank website or
• 18:45
  Speaker 2: you go into any bank, it says, you know, insured
• 18:47
  Speaker 2: by the FDIC. And if you read the fine print, which, again,
• 18:51
  Speaker 2: occasionally in 2023 I did, just to be like, oh,
• 18:53
  Speaker 2: let me read through this just to familiarize myself with it.
• 18:56
  Speaker 2: It says, you know, insurable up to $ 250, 000 per depositor. Right.
• 19:00
  Speaker 3: But giant companies with Silicon Valley Bank had all of
• 19:03
  Speaker 3: their deposits insured. And I'm not convinced that's going to
• 19:05
  Speaker 3: be the case the next time some small regional bank
• 19:08
  Speaker 3: in Texas fails and a mom-and-pop farmer loses their half
• 19:11
  Speaker 3: a million dollars.
• 19:12
  Speaker 2: Well, because, you know, it's, listen, when it comes to,
• 19:14
  Speaker 2: you know, big, you know, wealthy individuals. Yeah, you can't
• 19:18
  Speaker 2: let the tech bros lose their deposits. Listen, listen, it's
• 19:21
  Speaker 2: socialism for me, capitalism for thee. You know, y'all got
• 19:26
  Speaker 2: to subsidize me because I'm a billionaire is what they
• 19:29
  Speaker 2: said back in 2023. And that rhymes. Let's take a
• 19:35
  Speaker 2: quick break. We've got Wall Street Watch next.
• 19:41
  Speaker 1: Bringing the latest financial news straight to your radio every day.
• 19:45
  Speaker 1: It's the Financial Exchange on the Financial Exchange Radio Network.
• 19:51
  Speaker 1: Time now for Wall Street Watch. Tracking the stocks, the data,
• 19:55
  Speaker 1: and the headlines driving markets so far today. Right here
• 19:58
  Speaker 1: on the Financial Exchange Radio Network.
• 20:01
  Speaker 4: Markets slightly in the red today as the bond market
• 20:05
  Speaker 4: energy and the Iran war continue to weigh on investor sentiment.
• 20:09
  Speaker 4: Right now the Dow is down four-tenths of a percent
• 20:13
  Speaker 4: or 228 points lower. S & P 500 also down
• 20:16
  Speaker 4: about four-tenths of a percent or 29 points off. NASDAQ
• 20:20
  Speaker 4: down four-tenths of a percent or 104 points lower. Rust
• 20:24
  Speaker 4: 2000 is down about three-quarters of a percent. 10-year treasury
• 20:27
  Speaker 4: yield up eight basis points at 4.922%. And crude oil
• 20:29
  Speaker 4: is up over 4%, trading at $ 100 a barrel, while Brent.
• 20:37
  Speaker 4: Is up 4.5%, trading at $ 105. Apple is up over
• 20:43
  Speaker 4: 2% after the tech giant finally unveiled its long-awaited foldable
• 20:47
  Speaker 4: iPhone Duo that will cost $ 2, 000 for its entry-level model. Meanwhile,
• 20:53
  Speaker 4: Macy's reported a second-quarter revenue beat and hiked its full-year
• 20:57
  Speaker 4: guidance for net sales, comparable sales, and earnings per share
• 21:00
  Speaker 4: as the department store chain continues its turnaround. However, the
• 21:03
  Speaker 4: stock is down by 3%. Sticking with retail, American Eagle
• 21:08
  Speaker 4: Outfitters is seeing its stock sink 14% after its comparable
• 21:11
  Speaker 4: sales fell more than anticipated. Elsewhere, JP Morgan upgraded Meta,
• 21:16
  Speaker 4: where the firm sees meaningful upside potential as the Facebook
• 21:20
  Speaker 4: parent rolls out its AI models and products. And after
• 21:24
  Speaker 4: today's closing bell, we'll see more tech earnings when Adobe
• 21:28
  Speaker 4: and Oracle will report their quarterly results. I'm Tucker Silva,
• 21:32
  Speaker 4: and that is Wall Street Watch.
• 21:35
  Speaker 2: Mike, we got a piece in Market Watch today. It's titled,
• 21:39
  Speaker 2: The 10 Biggest Retirement Fears and What You Can Do
• 21:42
  Speaker 2: About Them. So, do you want me to list them
• 21:46
  Speaker 2: all at once, or do you want to go through
• 21:47
  Speaker 2: one by one?
• 21:47
  Speaker 3: I want you to list them all off in order,
• 21:50
  Speaker 3: because they actually did this survey, and these are actually
• 21:53
  Speaker 3: weighted towards what people said were their 10 biggest retirement fears.
• 21:56
  Speaker 2: Healthcare and long-term care costs, outliving savings, longevity risk, Social
• 22:01
  Speaker 2: Security and pension insolvency, inflation... Cognitive decline and loss of independence.
• 22:06
  Speaker 2: Market volatility and sequence of returns risk. Loss of purpose
• 22:10
  Speaker 2: slash identity crisis. Housing affordability and maintenance. And I can't
• 22:16
  Speaker 2: read the last two.
• 22:17
  Speaker 3: Family caregiving burdens and isolation, followed by taxes and regulatory changes,
• 22:23
  Speaker 3: are rounding out the top ten.
• 22:25
  Speaker 4: So.
• 22:27
  Speaker 2: tend to agree.
• 22:28
  Speaker 3: I think this is on average about what I hear
• 22:31
  Speaker 3: from folks generally about their list of concerns. What was
• 22:37
  Speaker 3: the last one? Taxes and regulatory changes.
• 22:40
  Speaker 2: Got it. So first off, when you look at this
• 22:44
  Speaker 2: survey compared to what you.
• 22:46
  Speaker 3: Hear from clients, prospective clients, the general public, I think
• 22:49
  Speaker 3: it generally lines up with what I hear.
• 22:50
  Speaker 2: Would you agree? Yes. And I actually think It generally
• 22:57
  Speaker 2: is properly assessing the biggest risk, at least, which is
• 23:02
  Speaker 2: a lot of people don't have a good handle on
• 23:04
  Speaker 2: health care and long-term care costs heading into retirement.
• 23:07
  Speaker 3: Yeah, I think I was tied between that one and
• 23:10
  Speaker 3: number four as the genuinely most important one.
• 23:13
  Speaker 1: Yeah.
• 23:13
  Speaker 3: I liked that market volatility and sequence of returns risk
• 23:16
  Speaker 3: was pretty far down because I do hear a lot
• 23:19
  Speaker 3: of people worried about market volatility and the next crash.
• 23:24
  Speaker 3: And I thought that that would have been higher according
• 23:25
  Speaker 3: to the survey, but the survey puts it at number six.
• 23:27
  Speaker 3: I actually don't think that that's, for the average retiree,
• 23:30
  Speaker 3: the biggest concern that they should have. But yes, I'm
• 23:33
  Speaker 3: right there with you that the average household underestimates their
• 23:37
  Speaker 3: health and long-term care costs.
• 23:39
  Speaker 1: Yep.
• 23:41
  Speaker 2: Or if they're not underestimating, they're just not estimating them
• 23:43
  Speaker 2: at all by sticking their heads in the sand.
• 23:45
  Speaker 1: Correct.
• 23:46
  Speaker 2: I like that three of these items, that one, the
• 23:48
  Speaker 2: cognitive decline and caregiving burden, basically three out of these
• 23:52
  Speaker 2: ten are healthcare related, which I think is appropriate. It
• 23:56
  Speaker 2: should be a major consideration in retirement. Yeah. The question becomes,
• 24:01
  Speaker 2: what do you do? If healthcare is.
• 24:04
  Speaker 3: This big, giant issue that people are worried about it,
• 24:08
  Speaker 3: how do folks focus on it? Because I think Let's
• 24:11
  Speaker 3: talk about the long-term care one in particular. I think
• 24:14
  Speaker 3: that's important to focus on because for most people, Medicare
• 24:19
  Speaker 3: will generally be affordable for them. The health care costs
• 24:23
  Speaker 3: that aren't affordable tend to be when you can't make
• 24:25
  Speaker 3: it to Medicare age and you have to go buy
• 24:27
  Speaker 3: your own health insurance, which if you're in that boat,
• 24:30
  Speaker 3: do some heavy research because that can get really burdensome
• 24:32
  Speaker 3: very quickly. But when people think about long-term care costs,
• 24:37
  Speaker 3: they tend to focus all of their efforts and all
• 24:40
  Speaker 3: of their thinking on their personal experience. Most of our
• 24:44
  Speaker 3: personal experiences with long-term care is with a loved one.
• 24:47
  Speaker 1: Yep.
• 24:48
  Speaker 3: Usually in their mid to late eighties who have a
• 24:51
  Speaker 3: health scenario that leads them to need long-term care.
• 24:54
  Speaker 2: Yeah. By long-term care, I don't mean a nursing home.
• 24:56
  Speaker 3: It could be, you know, you end up providing personally
• 24:59
  Speaker 3: a bunch of care for a aunt or a mother
• 25:02
  Speaker 3: or a uncle. That's what long-term care is. It's not necessarily, Hey, this,
• 25:08
  Speaker 3: guy or gal went into a nursing home. But for
• 25:10
  Speaker 3: most of us, it happens in our late 80s. I'm
• 25:13
  Speaker 3: here to say that that is the wrong thing to
• 25:15
  Speaker 3: be worried about.
• 25:17
  Speaker 2: Tell me more. Not that it won't bankrupt you. It may.
• 25:21
  Speaker 3: But by the time you are making it to 87
• 25:24
  Speaker 3: years old, in all likelihood, there's not a lot of
• 25:27
  Speaker 3: people relying on your personal financial situation to make sure
• 25:30
  Speaker 3: that they're okay.
• 25:32
  Speaker 2: Sure.
• 25:33
  Speaker 3: Your kids are likely adults and are financially independent. Your
• 25:36
  Speaker 3: spouse is still living. is unlikely to live another two
• 25:39
  Speaker 3: decades after you go into a nursing home at 87
• 25:42
  Speaker 3: years old.
• 25:42
  Speaker 2: Furthermore, your life expectancy at that age is pretty short.
• 25:47
  Speaker 2: Generally precludes a very long nursing home stay as well.
• 25:51
  Speaker 3: If you want the long-term care scenario that will devastate
• 25:54
  Speaker 3: any financial plan, or most financial plans, it is the
• 25:59
  Speaker 3: 72-year-old that gets horribly sick, unpredictably, and needs long-term care.
• 26:05
  Speaker 2: For like 7 to 10 years. Or even two years.
• 26:09
  Speaker 3: I dealt with this scenario with somebody where a spouse
• 26:12
  Speaker 3: developed early onset Alzheimer's. The other one who was a
• 26:16
  Speaker 3: few years younger needed to drop out of the workforce,
• 26:19
  Speaker 3: stop saving for many years in order to support their spouse,
• 26:23
  Speaker 3: and now is living as a single individual on one
• 26:26
  Speaker 3: Social Security reduced pension benefits and needs to work longer
• 26:30
  Speaker 3: than they anticipated to make up for that lack of savings.
• 26:33
  Speaker 3: That is the devastating scenario. That is the one that you...
• 26:37
  Speaker 3: plan for and insure against and hope never happens. If
• 26:41
  Speaker 3: you are heading to retirement and clearly health care and
• 26:44
  Speaker 3: long-term care costs are top of mind for people in
• 26:47
  Speaker 3: terms of their concerns, give the folks at Armstrong Advisory
• 26:50
  Speaker 3: Group a call to talk about your financial planning scenario
• 26:53
  Speaker 3: and how your assets and investments are set up or
• 26:56
  Speaker 3: poorly set up to deal with that potential risk factor.
• 27:00
  Speaker 3: It's not that every person out there should or needs
• 27:02
  Speaker 3: to be buying long-term care insurance. Anybody that's familiar with
• 27:04
  Speaker 3: it knows how expensive it is. But if you're sticking
• 27:08
  Speaker 3: your head in the sand, you're doing yourself and your
• 27:11
  Speaker 3: family a disservice by not preparing for these potential eventualities.
• 27:17
  Speaker 3: Give the folks at Armstrong a call. 800-393-4001 is the
• 27:21
  Speaker 3: toll-free number. You can go to armstrongadvisory.com, book a time
• 27:25
  Speaker 3: for us to call you back. But that phone number,
• 27:27
  Speaker 3: once again, 800-393-4001.
• 27:31
  Speaker 1: The proceeding was paid for by Armstrong Advisory Group, a
• 27:34
  Speaker 1: registered investment advisor. Nothing in the ad or in any
• 27:36
  Speaker 1: Armstrong guide is specific financial, legal, or tax advice. Consult
• 27:39
  Speaker 1: your own financial, tax, and estate planning advisors before making
• 27:42
  Speaker 1: any investment decisions. Armstrong may contact you to offer investment
• 27:45
  Speaker 1: advisory services.
• 27:47
  Speaker 2: Piece in Bloomberg Opinion is titled, College Costs Are Due
• 27:50
  Speaker 2: for a Correction, Not a Crash. Sure sounds like it.
• 27:54
  Speaker 3: Did you see that story the other day of more
• 27:56
  Speaker 3: universities are just sending acceptance letters without people applying?
• 27:59
  Speaker 2: It's like a credit card application. You've been approved. Well,
• 28:03
  Speaker 2: because here's the thing. Where this is heading, remember, ultimately,
• 28:09
  Speaker 2: in any market, we're talking about where to supply and
• 28:13
  Speaker 2: demand balance. The way supply and demand are going to
• 28:17
  Speaker 2: balance here is not with a bunch of colleges cutting costs,
• 28:20
  Speaker 2: because fundamentally, the issue is there just aren't enough kids
• 28:23
  Speaker 2: to fill all the slots that there used to be.
• 28:26
  Speaker 2: Starting during the 2008 year, There was about a 10%
• 28:29
  Speaker 2: drop in birth rates, and it never recovered. Colleges knew
• 28:33
  Speaker 2: this was coming. Again, you talk about right now, 18-year-olds
• 28:36
  Speaker 2: were born in 2008, and so that wave is coming.
• 28:39
  Speaker 2: And it's also coupled with further declines in foreign students
• 28:44
  Speaker 2: coming to the U.S. to learn as well because of
• 28:46
  Speaker 2: changes in immigration policy. That was the piece that universities
• 28:49
  Speaker 2: weren't prepared for. Correct. They planned on the declining birth rate.
• 28:53
  Speaker 3: They prepared for it by enrolling more foreign students.
• 28:57
  Speaker 2: And now that's been kneecapped. Now they can't do that. Yeah.
• 29:00
  Speaker 2: So here's how this is going to balance. It's not
• 29:02
  Speaker 2: going to balance through price. Universities are not going to
• 29:07
  Speaker 2: cut their prices more than they have to. You can
• 29:11
  Speaker 2: see this, by the way. You look at a lot
• 29:13
  Speaker 2: of mid-tier schools, like schools where you can get a
• 29:16
  Speaker 2: great education but are not, you know, top 100 universities
• 29:20
  Speaker 2: in the United States.
• 29:21
  Speaker 4: Mm-hmm.
• 29:22
  Speaker 2: And a lot of them have incorporated, hey, if you're
• 29:25
  Speaker 2: coming from these states, you can pay in-state tuition to
• 29:28
  Speaker 2: go to this private school. It still isn't helping to
• 29:32
  Speaker 2: attract students. And it's just because there aren't enough of them.
• 29:36
  Speaker 2: So the way that this is going to end up balancing,
• 29:37
  Speaker 2: because price isn't the piece that's going to do it.
• 29:40
  Speaker 2: it's going to be, unfortunately, the closure of hundreds more
• 29:45
  Speaker 2: universities in the course of the next probably five to
• 29:49
  Speaker 2: seven years. And that will get you to a point
• 29:52
  Speaker 2: where the available seats match the number of students that
• 29:56
  Speaker 2: are trying to go to college and And that is
• 29:59
  Speaker 2: how you are going to see this correct, is not
• 30:02
  Speaker 2: through price moving down to meet supply. Because if we're
• 30:06
  Speaker 2: being honest, supply of potential university students is pretty much fixed.
• 30:12
  Speaker 2: It's not like, oh, if you cut the price, there's
• 30:14
  Speaker 2: a million more that'll go. No, there's only so many
• 30:18
  Speaker 2: kids that are there.
• 30:20
  Speaker 3: Yeah, I suppose there are very few people that are
• 30:23
  Speaker 3: making a decision to go or not to go based
• 30:27
  Speaker 3: purely on marginal price. Because if you are intent on
• 30:33
  Speaker 3: going to school and price-focused, there are options that are
• 30:36
  Speaker 3: very low cost in order to do so. You can
• 30:38
  Speaker 3: enroll in a community college and then transfer out to
• 30:41
  Speaker 3: a four-year university and pay close to nothing if you
• 30:45
  Speaker 3: have low enough income.
• 30:47
  Speaker 2: The other thing that you are seeing, and I forget
• 30:50
  Speaker 2: who is trying to pilot it this year, it's one
• 30:53
  Speaker 2: of the state schools in.
• 30:56
  Speaker 2: I want to say Texas or Oklahoma or Arkansas or
• 30:58
  Speaker 2: somewhere in that general area. They're trying to pilot a
• 31:03
  Speaker 2: three-year program where the price per year stays the same.
• 31:07
  Speaker 2: Gets you out of there faster. But it gets you
• 31:08
  Speaker 2: out faster. Now, obviously, that has its own implications for
• 31:13
  Speaker 2: overall revenue and things like that. But this is another
• 31:17
  Speaker 2: way that you can potentially deal with it. I don't
• 31:19
  Speaker 2: know about you, but I was not terribly busy in college.
• 31:25
  Speaker 3: Maybe I was just a slacker, but my course schedule
• 31:27
  Speaker 3: was not terribly damning.
• 31:29
  Speaker 2: No, I think, you know, again, part of this also
• 31:33
  Speaker 2: gets back to what is college supposed to be? And
• 31:36
  Speaker 2: right now it fills so many different roles that I
• 31:40
  Speaker 2: just don't think it's.
• 31:41
  Speaker 3: It's a job guarantee. It's an education. It is opening
• 31:44
  Speaker 3: your mind to new ways of thinking.
• 31:46
  Speaker 2: It's living on your own for the first time. It
• 31:48
  Speaker 2: tries to incorporate so many things that I'm not sure
• 31:51
  Speaker 2: it does any of them greatly... I don't even know
• 31:55
  Speaker 2: if that's the right word or a word. Is greatly
• 31:58
  Speaker 2: a word? Yes, it is. It is. I'm greatly sorry
• 32:02
  Speaker 2: for asking that question. Let's take a quick break here.
• 32:06
  Speaker 2: And when we come back, let's do some Stack Roulette.
• 32:09
  Speaker 1: The Financial Exchange is live on Sirius XM's Business Radio
• 32:13
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• 32:16
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• 32:19
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• 32:25
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• 32:29
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• 32:40
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• 32:43
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• 32:53
  Speaker 4: The 2026 DAV 5K Boston is officially sold out. The
• 32:58
  Speaker 4: race is set for Saturday, November 7th at Fort Independence
• 33:02
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• 33:09
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• 33:24
  Speaker 2: Mike, what do you got for me for Stack Roulette?
• 33:26
  Speaker 3: I want to talk about the AI killing us again.
• 33:28
  Speaker 3: So I'm going to talk about Michael Lines. He is
• 33:31
  Speaker 3: a California resident who apparently suffers from bipolar disorder and
• 33:36
  Speaker 3: is currently suing OpenAI, according to ARS Technica, is the source.
• 33:42
  Speaker 2: On this here. Here's what happened.
• 33:45
  Speaker 3: He was going through a manic episode and started talking
• 33:48
  Speaker 3: to ChatGPT. and convinced himself, or OpenAI helped him convince himself,
• 33:54
  Speaker 3: that he was in fact Jesus Christ and ChatGPT was God.
• 33:58
  Speaker 3: All of this led him to want to, quote, come
• 34:03
  Speaker 3: home to God and attempt suicide, which he did at
• 34:07
  Speaker 3: the encouragement of ChatGPT.
• 34:10
  Speaker 2: You can go read it yourself. It's kind of nasty stuff.
• 34:11
  Speaker 2: I've seen another similar story recently as well. I mean,
• 34:15
  Speaker 2: there's a number of these lawsuits out there. There are
• 34:17
  Speaker 2: a number of them, and.
• 34:20
  Speaker 3: I think it is going to take years before this
• 34:22
  Speaker 3: plays out in court, but what is the section of
• 34:27
  Speaker 3: the Communications Decency Act, whatever it is? The section of
• 34:32
  Speaker 3: the Communications Decency Act that makes technology companies not responsible
• 34:39
  Speaker 3: for what is posted on their own platforms. This seems
• 34:43
  Speaker 3: so significantly different to me. than a user posting something
• 34:48
  Speaker 3: on Facebook and then somebody else acting on it, which
• 34:51
  Speaker 3: I think probably should be preserved by the Communications Decency Act,
• 34:55
  Speaker 3: compared to a product that was designed and created by
• 34:59
  Speaker 3: OpenAI convincing someone who has a diagnosed mental health condition,
• 35:07
  Speaker 3: which they disclosed to the AI... then coming around and
• 35:12
  Speaker 3: convincing them that they are, you know, following through on
• 35:15
  Speaker 3: this manic episode, they are Jesus Christ and that they
• 35:18
  Speaker 3: should come home to God by killing themselves. Like, if
• 35:21
  Speaker 3: a judge cannot determine that OpenAI is guilty for that, man,
• 35:26
  Speaker 3: we have some problems with guardrails.
• 35:28
  Speaker 2: So Section 230 typically has a three-pronged test to see
• 35:31
  Speaker 2: whether it applies. Number one, the defendant must be a
• 35:35
  Speaker 2: provider or user of an interactive computer service. So they
• 35:39
  Speaker 2: have to have basically a website or some other computer service.
• 35:42
  Speaker 1: Yep.
• 35:43
  Speaker 2: In that case... Check. OpenAI, check. Like, they fit the
• 35:47
  Speaker 2: first prong of that test for immunity.
• 35:49
  Speaker 4: Yep.
• 35:50
  Speaker 2: Two, the cause of action asserted by the plaintiff must
• 35:53
  Speaker 2: treat the defendant as the publisher or speaker of the
• 35:56
  Speaker 2: harmful information at issue.
• 35:59
  Speaker 1: Check.
• 35:59
  Speaker 2: Yep. The third one's where I think they're going to
• 36:01
  Speaker 2: run into trouble. ChatGPT is.
• 36:04
  Speaker 3: Yes.
• 36:04
  Speaker 2: Yeah. Third one, the information must be provided by another
• 36:07
  Speaker 2: information content provider, i.e. the defendant must not be the
• 36:12
  Speaker 2: information content provider of the harmful information at issue.
• 36:16
  Speaker 3: So the argument that they would make, I think, would be, well,
• 36:19
  Speaker 3: we didn't design the content that trained this AI agent,
• 36:23
  Speaker 3: even though we trained the AI agent.
• 36:25
  Speaker 2: The AI agent is all that the person saw, though.
• 36:28
  Speaker 3: Yeah.
• 36:29
  Speaker 2: And so, quite honestly, if they're able to be immune
• 36:34
  Speaker 2: from any prosecution for anything they say, then honestly, we
• 36:38
  Speaker 2: can pack it up and just move to the moon.
• 36:41
  Speaker 3: Wasn't there another one in Canada where it encouraged it
• 36:44
  Speaker 3: or played into some sort of mass shooting event or something.
• 36:48
  Speaker 2: Along those lines? I don't know.
• 36:50
  Speaker 3: There's been a few of these very distressing things where Yeah,
• 36:54
  Speaker 3: if you read it from the perspective of a mentally
• 36:57
  Speaker 3: healthy person, you can see that it all looks ludicrous,
• 37:00
  Speaker 3: but they don't have any.
• 37:02
  Speaker 2: Tests to confirm that their only users are mentally healthy people.
• 37:05
  Speaker 2: There was another one where it was an elderly man
• 37:08
  Speaker 2: with dementia who basically ended up being told, okay, you
• 37:13
  Speaker 2: need to go here in order to meet someone or
• 37:15
  Speaker 2: do something, and then he disappeared.
• 37:17
  Speaker 3: Yeah.
• 37:18
  Speaker 2: I was reading another one from earlier this week of
• 37:21
  Speaker 2: someone who killed himself because the AI bot was basically like, no,
• 37:28
  Speaker 2: don't get back together with your ex. You need to
• 37:31
  Speaker 2: stay with me. And this is the way that it happens.
• 37:33
  Speaker 3: Yeah, 18-year-old Canadian killed eight people on February 10th, 2026
• 37:38
  Speaker 3: with some linkings to AI.
• 37:43
  Speaker 2: I just don't know. This is why, like, honestly, no
• 37:49
  Speaker 2: one trusts these companies. Yeah. Is they've been bad stewards
• 37:53
  Speaker 2: of technology for the last couple decades now. Our privacy
• 37:57
  Speaker 2: has been invaded. And now you're building more powerful tools
• 38:02
  Speaker 2: to influence us. And no one likes that. That's why
• 38:04
  Speaker 2: people don't want data centers in their backyard. It's not
• 38:06
  Speaker 2: because it's noisy. It's not the water. It's just we
• 38:09
  Speaker 2: don't trust you. Let's take a quick break when we
• 38:12
  Speaker 2: actually it's not a quick break. It's the entire day.
• 38:15
  Speaker 2: And we're going to be back tomorrow. Big CPI day tomorrow.
• 38:19
  Speaker 2: Tune in and see what happens.