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Gas Prices Surge — And Detroit May Pay the Price · The Financial Exchange Show

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Speaker 2: Good morning, Welcome back to the Financial Exchange. It's Mike,
1:13
Speaker 2: Paul and Tucker with you on a Tuesday where markets
1:16
Speaker 2: are in rebound mode. We've got the NASDAC leading the
1:19
Speaker 2: way up two thirds of a percent, s and P
1:21
Speaker 2: five hundred and four tenths of percent, and now Jones
1:23
Speaker 2: Industrial average two hundred and fifteen points a little bit
1:27
Speaker 2: more than four tenths of a percent as well. On
1:30
Speaker 2: the bond side, bond investors still, I think, remain confused
1:34
Speaker 2: about how to digest the news out of Iran. We've
1:36
Speaker 2: got the ten year treasury sitting at four point eleven percent,
1:41
Speaker 2: down slightly today, and oil prices moving down substantially today
1:45
Speaker 2: after yesterday's comments from President Trump on a p perhaps
1:50
Speaker 2: de escalation or wrap up of intensity in terms of
1:55
Speaker 2: the strikes on Iran and the war there. Oil prices
1:59
Speaker 2: today moving down ten bucks a barrel, eleven and a
2:02
Speaker 2: half percent in early trading. In terms of gas prices
2:06
Speaker 2: today we are sitting at a national average of three
2:09
Speaker 2: dollars and fifty four cents a gallon. And then I
2:13
Speaker 2: always do like to take a look at this. The
2:15
Speaker 2: closer we get to the real heat above the spring
2:19
Speaker 2: housing season. The average rate on the thirty year fixed
2:23
Speaker 2: rate mortgage now sitting at six point one four percent.
2:28
Speaker 2: The week prior to the events in Iran, we were
2:31
Speaker 2: sitting at or below six percent, and obviously that has
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Speaker 2: been disrupted by these events and we were back up
2:37
Speaker 2: to where we were in early February. All of that
2:39
Speaker 2: ties in to the inflation reading we'll be getting tomorrow, Paul.
2:44
Speaker 2: So tomorrow morning we will get a read on inflation
2:48
Speaker 2: from the Bureau of Labor Statistics. We are generally expecting
2:52
Speaker 2: more confirmation of what we saw. But what has been
2:55
Speaker 2: interesting is there's two main reads of inflation that economists
2:59
Speaker 2: look at, and the one that we get tomorrow is
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Speaker 2: actually not the one that the Fed Reserve prefers to
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Speaker 2: look at. But this is the CPI comes out first
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Speaker 2: every month. It's going to be measuring inflation for the
3:10
Speaker 2: month of February and average economists anticipating a headline increase
3:16
Speaker 2: of three tenths of a percent month over month year
3:19
Speaker 2: over year two point four percent, pretty similar numbers when
3:23
Speaker 2: you strip out food and energy. A few things make
3:25
Speaker 2: this one important one. It is the kind of final
3:28
Speaker 2: reading we get on inflation prior to the events in Iran.
3:32
Speaker 2: As you know, this was all measured in mid February,
3:35
Speaker 2: and the strikes on Irun didn't occur until late last
3:39
Speaker 2: day of February I believe it was, So this does
3:42
Speaker 2: kind of serve as a benchmark or a stake in
3:46
Speaker 2: the ground in terms of where things were prior to
3:50
Speaker 2: the increase in energy prices. The other interesting piece though
3:53
Speaker 2: about inflation is the PCE index, which is the one
3:57
Speaker 2: that the Fed prefers to take a look at. It
3:59
Speaker 2: tends to measure or all prices that consumers pay, whether
4:03
Speaker 2: or not they pay for them directly. So think about
4:05
Speaker 2: your healthcare costs. They may be up substantially, but your
4:08
Speaker 2: employer is primarily paying for them. PCE takes that into
4:11
Speaker 2: better account than CPI does. It's also better at factoring
4:14
Speaker 2: in changes in behavior. So, for example, stake prices go
4:20
Speaker 2: through the roof, Paul decides to buy chicken instead, PCE
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Speaker 2: is going to capture that change in behavior better than
4:26
Speaker 2: CPI is. Nonetheless, pc has been running hotter than CPI.
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Speaker 2: That usually doesn't happen. It's pretty rare. In fact, Generally speaking,
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Speaker 2: CPI runs a quarter to half a percent higher than PCE,
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Speaker 2: and overall, we're seeing price increases over the last twelve
4:43
Speaker 2: months of between two and a half to three percent,
4:45
Speaker 2: depending on which one you are looking at. So this
4:49
Speaker 2: is pretty important here because while the Federal Reserve tends
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Speaker 2: to discount price shocks such as oil, they don't usually
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Speaker 2: discount them to the point where they say, at the
4:59
Speaker 2: same time we have an oil price shock, we're going
5:01
Speaker 2: to reduce interest rates. And so I think that you're
5:04
Speaker 2: going to see some acknowledgment by the current Federal Reserve that, hey,
5:08
Speaker 2: you know, we're not factoring in these oil prices when
5:12
Speaker 2: talking about interest rates setting policy. But if we get
5:14
Speaker 2: a few months out, oil prices now in the eighties
5:18
Speaker 2: compared to the sixties even where we were prior, makes
5:22
Speaker 2: it very difficult for them to do their job and
5:24
Speaker 2: to cut interest rates if that's the path that they
5:26
Speaker 2: want to go.
5:27
Speaker 3: Yeah, from all indications, it seems as if there's now
5:30
Speaker 3: looking at the CME futures that there's basically no chance
5:35
Speaker 3: that they cut interest rates at the next meeting that
5:37
Speaker 3: which will be next week, a ninety nine percent probability
5:40
Speaker 3: that rates will stay the same. The Fed Fund rate
5:43
Speaker 3: between three and a half and three point seventy five percent.
5:46
Speaker 3: Even if you look out at future months for April's meeting,
5:50
Speaker 3: which is at the end of the month April twenty ninth,
5:53
Speaker 3: again an eighty seven percent probability looking at the futures
5:56
Speaker 3: trading that rates would stay the same. Heading into this year,
6:00
Speaker 3: the investors had anticipated two rate cuts. I believe that
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Speaker 3: the Federal Reserve where they're posturing, was somewhere between that
6:09
Speaker 3: same level of one to two. Obviously, we'll have a
6:11
Speaker 3: new FED chair taken over in the spring May or
6:15
Speaker 3: June that worst steps in.
6:17
Speaker 2: I believe it's May May. So interesting, that's confirmed.
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Speaker 3: Right, interesting backdrop, but it seems as if this would
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Speaker 3: even further lead to a more weight and see approach
6:28
Speaker 3: with all the inflationary pressure that could potentially arise from
6:32
Speaker 3: energy prices. But we won't see any of that impact
6:35
Speaker 3: on tomorrow's report, as Mike was mentioning, as those attacks
6:39
Speaker 3: didn't occur until the last day of February, and this
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Speaker 3: will be February's inflation report that comes out tomorrow morning.
6:44
Speaker 2: Saudi Ramco's chief executive is warning of catastrophic consequences if
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Speaker 2: the Iran war drags on. The oil producer says that
6:53
Speaker 2: they are getting close to being able to export about
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Speaker 2: seventy percent of their normal crude oil shipments by not
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Speaker 2: having to navigate the Straight of Hormuz at the moment,
7:03
Speaker 2: But again the point there being that they are trying
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Speaker 2: to get to seventy percent of what they would normally do.
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Speaker 2: In total, about twenty percent of global oil supplies have
7:13
Speaker 2: been hit with a raq kuwait uae, all cutting production
7:16
Speaker 2: to varying degrees, the idea there being a if we
7:20
Speaker 2: get it out of the ground, we might not have
7:22
Speaker 2: anywhere to send it. B If our facilities get struck
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Speaker 2: while they are operating, it's far more damaging to the environment,
7:29
Speaker 2: to the area, to the facilities themselves while they're operating
7:33
Speaker 2: if they compared to if they are offline. And so
7:36
Speaker 2: we have seen these facilities go offline, the oil starting
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Speaker 2: to build up, and no real place for it to go.
7:43
Speaker 2: And why everyone keeps warning of how dramatic this could
7:48
Speaker 2: end up being should the Straight of horm moves not
7:50
Speaker 2: become navigable. Navigable is that the I think that might
7:55
Speaker 2: be right. I think within the next few weeks. Here again,
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Speaker 2: the threat here, which the sati Ramco chief isn't threatening
8:05
Speaker 2: what he is pointing out, and you know, the threat
8:08
Speaker 2: to the global economy here is not just a price
8:11
Speaker 2: shock for many buyers of oil. We are talking about
8:15
Speaker 2: the possibility of shortages of oil and refined products within
8:21
Speaker 2: my guest two to three months in some nations across
8:24
Speaker 2: the globe should something like this continue. Now, it would
8:27
Speaker 2: be pretty unprecedented to see it continue in this fashion,
8:30
Speaker 2: But that is the threat that we are talking about.
8:33
Speaker 2: It's not just oh, yeah, gasoline prices go up by
8:36
Speaker 2: forty percent in Japan. It is oh, we need to
8:40
Speaker 2: ration gasoline in Japan because we do not have enough
8:43
Speaker 2: to go around that. That is the real hypothetical problem here, Naviga. Oh,
8:49
Speaker 2: I nailed it then, yeah, yeah, thank you. That's pretty rare.
8:53
Speaker 2: You should give me like some drug to pronounce for
8:55
Speaker 2: the second half of the show, just to make sure
8:56
Speaker 2: we even it out with my correct pronunciation here, because
9:00
Speaker 2: that can't be a good indication for where things go.
9:02
Speaker 2: Let's take a quick break. When we come back, we
9:05
Speaker 2: will be talking about the auto industry and the latest
9:08
Speaker 2: blow with higher gasoline prices striking them. But first we'll
9:12
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11:00
Speaker 2: Next up is another one of those stories that really
11:02
Speaker 2: I have to emphasize does not matter unless gas prices
11:06
Speaker 2: and oil prices remain elevated for the majority of twenty
11:10
Speaker 2: twenty six. But I cannot imagine a scenario that would
11:13
Speaker 2: be worse for US automakers after the whiplash and change
11:19
Speaker 2: in policies from administration to administration, and now an increase
11:23
Speaker 2: in gas prices could really hamper their sales for twenty
11:27
Speaker 2: twenty six. I just think through partly because of policy
11:32
Speaker 2: from the Buying administration now the Trump administration, partly because
11:35
Speaker 2: their own missteps. The massive investments made by these automakers
11:39
Speaker 2: into electric vehicles over the course of the early twenty twenties,
11:43
Speaker 2: the pivot now away from evs into larger trucks and
11:48
Speaker 2: SUVs and gas guzzlers of different sorts, the move to
11:54
Speaker 2: strike the emission standards and miles per gallon standard that
12:00
Speaker 2: these auto companies have been required to face over the
12:03
Speaker 2: last few years. If we were to get hit with
12:06
Speaker 2: four dollars say gasoline prices in twenty twenty six and
12:09
Speaker 2: that remain there, there are plenty of automakers that would
12:13
Speaker 2: be all right, But the American ones that no longer
12:15
Speaker 2: manufacture sedans and have taken big steps to wind down
12:20
Speaker 2: their ev businesses would just be up that creek that
12:24
Speaker 2: we all know about without a paddle.
12:26
Speaker 3: In my view, yeah, your context where you led the
12:28
Speaker 3: story is probably where we have to just reemphasize that
12:31
Speaker 3: this would have to be a sustained period of time.
12:33
Speaker 3: But this piece does outline that obviously, if you have
12:37
Speaker 3: gas prices that are up higher for longer, that you
12:39
Speaker 3: will see a shift in buying sentiment where they'll be
12:43
Speaker 3: more focused on those sedan vehicles something that's far more fuelficient,
12:46
Speaker 3: and that is runs counter to what all these big
12:49
Speaker 3: auto manufacturers have been doing, which is doubling down on
12:52
Speaker 3: their big SUVs and trucks and things like that. Out there.
12:55
Speaker 3: Back in twenty eleven to twenty fourteen, where oil prices
12:59
Speaker 3: were elevator, large pickups and SUVs were about fourteen percent
13:03
Speaker 3: markets here today they sit about seventeen percent of the
13:07
Speaker 3: US market in the last few years, reflecting this shift
13:10
Speaker 3: in demand where there has been a lot more appetite
13:13
Speaker 3: for those large pickups and SUVs. But again, I don't
13:18
Speaker 3: know if Detroit and the auto manufacturers are going to
13:20
Speaker 3: pivot just yet. They just took fifty billion dollars of
13:23
Speaker 3: write downs on the big bet for evs. So perhaps
13:25
Speaker 3: a more prudent, measured approaches the way to go about
13:29
Speaker 3: these big, secular changes.
13:31
Speaker 2: In what's just a crappy business to operate it. It's awful,
13:34
Speaker 2: it really is. Late twenty ten's. Oh boy, our NAFTA
13:38
Speaker 2: is under threat. Where are we gonna be able to
13:39
Speaker 2: manufacture cars? Okay, USMCA is signed. We should be able
13:44
Speaker 2: to you know, expand manufacturing across Mexico and Canada now
13:47
Speaker 2: with free trade twenty twenties. Oh boy, people seem to
13:50
Speaker 2: really like Tesla's We should start building evs and look
13:53
Speaker 2: at all these tax incentives the Biden administration is going
13:56
Speaker 2: to promise on the backs of it. Oh Trump administration
14:00
Speaker 2: enters the White House, forget about those ZV plans. We
14:02
Speaker 2: need to back away with them because we're going to
14:04
Speaker 2: be targeted. And oh, by the way, all those manufacturing
14:06
Speaker 2: facilities that we built up in Mexico and Canada are
14:09
Speaker 2: now going to be under threat by tariffs. And what
14:11
Speaker 2: does this business model look like? Hey again, some of
14:14
Speaker 2: this is leadership fault at those automakers. A lot of
14:19
Speaker 2: it's not a lot of it is.
14:22
Speaker 3: It is such a good point to make. It's an
14:24
Speaker 3: awful business. It's just if someone was like, I want
14:27
Speaker 3: to be an auto manufacturer, it is just one of
14:30
Speaker 3: it's hyper competitive, it's so capital intensive, the margins are really.
14:35
Speaker 2: Slim, massively regulated, Yeah, huge vested interests.
14:38
Speaker 3: You're up against some manufacturers that overseas that can just
14:43
Speaker 3: crush you in terms of their input costs relative to
14:46
Speaker 3: what you'd have Domestically.
14:47
Speaker 2: You've got China who subsidizes their own auto industry, so
14:51
Speaker 2: you basically can't sell to large portions of the market
14:53
Speaker 2: because they just undercut you every step of the way.
14:56
Speaker 2: And then you know, as a manufacturer themselves, not that
15:00
Speaker 2: this is a good or bad thing, but you've got
15:02
Speaker 2: this network of dealerships across the nation that have big,
15:07
Speaker 2: big ties with state governments to you know as well.
15:12
Speaker 2: If you need to know how difficult this is, go
15:14
Speaker 2: take a look at Volvo's new startup. What's the name
15:18
Speaker 2: of their new hybrid ev startup that wants to sell
15:21
Speaker 2: direct to consumers. Chuck's been talking about Scout Scout. Yeah,
15:25
Speaker 2: so Scout's backed by Volvo. The latest is they want
15:28
Speaker 2: to sell Volkswagen. Yes, then I might be thinking the
15:34
Speaker 2: wrong one. But some new auto company that's backed by
15:37
Speaker 2: I believe it was Volvo wants to sell directly to
15:41
Speaker 2: consumers and obviously are facing a massive backlash from their
15:47
Speaker 2: their existing dealership network. Who says, wait just a minute here.
15:50
Speaker 2: You might be a new car company, but you're backed
15:52
Speaker 2: by one of the oldest ones out there. So yeah,
15:55
Speaker 2: it is just a I don't know, airline business.
15:58
Speaker 3: Auto manufacturing, what's another one that's just bad? But grocery
16:02
Speaker 3: is pretty tough too, Yeah, yeah, but airlines in airlines is.
16:08
Speaker 2: Just a rough business to be in, constantly facing magetary scrutiny.
16:13
Speaker 2: It is Volkswagen.
16:14
Speaker 4: Yeah, it's in yesterday's stack.
16:17
Speaker 2: Well, I you know when I'm wrong, I'm wrong. Tucker
16:20
Speaker 2: it's Volkswagen. Sorry about that. They both start with VS.
16:23
Speaker 4: Yeah, you're close and always the second letter.
16:25
Speaker 2: Yeah, yeah, that was like and L is the third leader.
16:31
Speaker 2: Do you want to just do this for the next
16:32
Speaker 2: of the shot? How do you spell volkswag? Finally, is
16:35
Speaker 2: a break a h TSA security lines dragging on for
16:41
Speaker 2: hours as airports say to brace four more so in
16:45
Speaker 2: terms of TSA agents here, we've all gone through this
16:49
Speaker 2: little rundown once or twice before, but they have been
16:53
Speaker 2: The TSA has been shut down since February fourteenth. That's
16:57
Speaker 2: when federal funding lapsed. The agent. These approximately fifty thousand
17:01
Speaker 2: officers received a partial paycheck on February twenty eighth. They
17:04
Speaker 2: are now set to miss their first full paycheck this week.
17:09
Speaker 2: Starting in you'll pay for a TSA officer. This is
17:12
Speaker 2: just continues to be crazy to me, but starts at
17:14
Speaker 2: forty thousand dollars. I'm sure it varies significantly by region.
17:18
Speaker 2: I don't think you can hire somebody at LaGuardia for
17:20
Speaker 2: forty grand a year, would be my guest. But for
17:24
Speaker 2: somebody that has a you know, fairly important security job
17:28
Speaker 2: at forty grand a year, yeah, you're not gonna go
17:32
Speaker 2: to paychecks without having a tough time making ends meet.
17:35
Speaker 2: And so we've been through this dog and pony show.
17:38
Speaker 2: Before they start calling out sick, they need to take
17:40
Speaker 2: on jobs driving ubers or doing something else to pay
17:44
Speaker 2: their bills. And a event, I mean, we're right in
17:48
Speaker 2: spring break season. I'll be flying in April. I think
17:51
Speaker 2: you flew a couple of weeks ago. Travel is going
17:54
Speaker 2: to be picking up as we head towards that spring
17:57
Speaker 2: and then eventual sumilar travel season.
17:58
Speaker 3: And this comes off the back of a forty three
18:00
Speaker 3: day government shutdown to start the year that they were
18:03
Speaker 3: impacted by, too, Tucker, just a.
18:04
Speaker 4: Quick search for Logan Airport, I'm seeing anywhere it's it's
18:09
Speaker 4: closer to sixty thousand annually for a salary for.
18:12
Speaker 2: Sixty Exand yeah, I would think so regionally you have
18:16
Speaker 2: to you know, pay in some of these areas. But
18:18
Speaker 2: for you know, if you're a TSA agent in New Orleans.
18:21
Speaker 2: I heard somebody being interviewed. Yeah, they had been in
18:24
Speaker 2: New Orleans for Mariti Gras and they were there for business,
18:26
Speaker 2: uh you know, this week and they're like, I've been
18:30
Speaker 2: sitting in this TSA line for over an hour and yeah,
18:32
Speaker 2: I'm sure in areas of the country like that you're
18:35
Speaker 2: facing a far lower wage than you would for working
18:37
Speaker 2: at Boston Logan Airport, LaGuardia, JFK, et cetera. So we
18:42
Speaker 2: will see how long this stretches on. Generally speaking, these
18:45
Speaker 2: things do not take very long because no second to
18:49
Speaker 2: Congress members. You know, family has to sit in a
18:51
Speaker 2: TSA line that's an hour and a half long and
18:54
Speaker 2: misses their flight, they tend to be incentivized pretty quickly
18:58
Speaker 2: to shift on pa.
19:00
Speaker 3: Area of by Parson support. I think everyone can get
19:02
Speaker 3: on the backs of having a nice experience going through
19:05
Speaker 3: an airport.
19:05
Speaker 2: Yeah, that tends to be an area that most of
19:07
Speaker 2: us agree on. So we will see how long this
19:09
Speaker 2: one stretches out. But that important piece here, as TSA
19:12
Speaker 2: agents will be missing their first full pay check this
19:15
Speaker 2: week and expected callouts to increase. Markets remain in positive
19:20
Speaker 2: territory and have accelerated since early trading today. Will be
19:23
Speaker 2: taking a quick break and then a full market recap
19:26
Speaker 2: is next. On the Financial Exchange.
19:34
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20:01
Speaker 4: Markets trading modestly higher following yesterday's volatile ride, with the
20:04
Speaker 4: price of oil and the war in Iran still at
20:06
Speaker 4: the forefront four Wall Street. Right now, the Dow is
20:09
Speaker 4: up half a percent or two hundred and thirty nine points.
20:12
Speaker 4: S and P five hundred up a third of a
20:15
Speaker 4: percent or twenty three points. NASDAC also up over half
20:18
Speaker 4: a percent or one hundred and twenty points. Russell two thousand,
20:21
Speaker 4: up nine tens of one percent, Tenure Treasureeled is down
20:25
Speaker 4: one basis point at four point one one seven percent,
20:28
Speaker 4: and Oil down nearly twelve percent, now trading at eighty
20:32
Speaker 4: three dollars and fifty four cents a barrel. Several travel
20:36
Speaker 4: stocks continue to take a hit as a result of
20:38
Speaker 4: the recent surge in oil energy costs. United American Delta
20:42
Speaker 4: are all down by one percent, while Carnival stock is
20:45
Speaker 4: also down by one percent. Meanwhile, Hewlet Packard Enterprise shares
20:49
Speaker 4: are up near now nearly one percent, after the tech
20:52
Speaker 4: company posted mixed results, beating earnings expectations but merely narrowly
20:57
Speaker 4: missing on revenue. It did, however, raise its earnings outlook
21:01
Speaker 4: as AI and data center developers drove strong demand. Elsewhere,
21:06
Speaker 4: a department store chain Coles saw it's quarterly sales drop
21:10
Speaker 4: more than expected despite the company's turnaround effort. However, Colestock
21:14
Speaker 4: is jumping by seven percent. Bail Resorts is flat after
21:18
Speaker 4: the ski resort operator cut its annual guidance, blaming the
21:21
Speaker 4: tough weather conditions in the Rockies, including record low snowfall.
21:26
Speaker 4: And after today's close, all eyes will turn to Oracle
21:30
Speaker 4: when they will post their quarterly earnings. I'm Tucker Silva
21:36
Speaker 4: and that is Wall Street Watch, and our trivia question
21:39
Speaker 4: in the previous segment was how many years did it
21:41
Speaker 4: take for the Nasdaq to pass its peak in March
21:44
Speaker 4: of two thousand. That would be fifteen years. Mark from Salem,
21:49
Speaker 4: New Hampshire is our winner today, taking home a Financial
21:51
Speaker 4: Exchange Show t shirt. Congrats to Mark, and we play
21:55
Speaker 4: trivia every day here in the Financial Exchange. See complete
21:58
Speaker 4: contest rules at five on a schelix Change Show dot com.
22:02
Speaker 2: All Right, I need listeners to tell me if I
22:04
Speaker 2: am going insane because this piece from market Watch up
22:09
Speaker 2: next is actually interesting, but the title is so frustrating
22:14
Speaker 2: to me. So here's the title from MarketWatch. Here's exactly
22:17
Speaker 2: how many retirees had to unretire in the last six months?
22:21
Speaker 2: And I ran and I was like, well, that's interesting.
22:23
Speaker 2: How are they going to tell me exactly how many
22:25
Speaker 2: people unretired in the last six months. They go on
22:28
Speaker 2: to say, we don't know, insane. Uh, seven percent of
22:34
Speaker 2: retirees have unretired in the past six months, according to
22:37
Speaker 2: a survey released by AARP ands February. That is not exact.
22:41
Speaker 2: It is by definition of survey, meaning is it a guess,
22:45
Speaker 2: an estimate of how many people have unretired over the
22:48
Speaker 2: course of the last six months. Don't tell me you're
22:50
Speaker 2: gonna inform me exactly how many retirees had to unretire.
22:53
Speaker 2: That is what we refer to as a census, where
22:55
Speaker 2: you go and ask every single retiree whether or not
22:58
Speaker 2: they retired or not. What you did is you cited
23:01
Speaker 2: a survey from our ARP which is fine. It is
23:03
Speaker 2: a very good guess of how many people had to unretire.
23:06
Speaker 2: It is informative. But who is writing these things and
23:09
Speaker 2: why does language and words not seem to matter to anyone.
23:13
Speaker 2: I know that I screw up words all the time,
23:15
Speaker 2: but not when I write things down and try and
23:17
Speaker 2: publish them, which I don't do in the first place.
23:20
Speaker 2: So maybe I shouldn't criticize. But I'm sorry. I know
23:23
Speaker 2: I had to focus on that there's actually some good
23:25
Speaker 2: information in here. But don't tell me you know exactly
23:28
Speaker 2: how many people had to unretire when you cite a
23:30
Speaker 2: survey that was done by ARP that probably surveyed no
23:33
Speaker 2: more than five thousand people.
23:35
Speaker 3: Mike, there are no rules in the clickbait game.
23:37
Speaker 2: There are no rules in the clickbait game, Paul. Paul,
23:41
Speaker 2: our day job outside of hosting this radio show is
23:45
Speaker 2: about advising people, primarily on retirement. And unless I'm badly mistaken,
23:51
Speaker 2: I am sure that you have seen people retire and
23:54
Speaker 2: then choose or forced to go back to work in
23:57
Speaker 2: some way, shape or form. What do you see as
24:00
Speaker 2: the most common reasons people do it in terms of
24:03
Speaker 2: going back to work, Are most of them that you're
24:05
Speaker 2: working with forced to do so? I think we've all
24:07
Speaker 2: seen people in their sixties, seventies, and eighties working at
24:11
Speaker 2: places that we visit, and I wonder how you prepare
24:16
Speaker 2: for well, one how you prepare for retirement in a
24:20
Speaker 2: way that makes you never be forced to make that decision.
24:23
Speaker 2: And then when you do see people going back to work,
24:26
Speaker 2: what are some of the reasons they choose to do so.
24:28
Speaker 3: The most common reason that we see Mike is out
24:30
Speaker 3: of preference, which is a good thing. You want that
24:33
Speaker 3: to be the primary reason because that means that they're
24:36
Speaker 3: just doing it, whether it's for socialization, a greater feeling
24:40
Speaker 3: of purpose, just to fill up the amount of hours
24:42
Speaker 3: in the week. There are some people who want that
24:45
Speaker 3: beach retirement to just kick back in the sand and
24:48
Speaker 3: not have to do anything on the work related front.
24:50
Speaker 3: There are many clients that we have that enjoy getting
24:54
Speaker 3: up and be inactive and doing something, so that's the
24:56
Speaker 3: most common. Of course, there are alternative scenarios that are
25:00
Speaker 3: are you more negative situations where the person is not
25:04
Speaker 3: financially prepared or has had some sort of catastrophic incident
25:07
Speaker 3: occur that forces them to go back into the libor force.
25:10
Speaker 3: I would say most common with those are people who
25:13
Speaker 3: are strained on the investable asset side of things, or
25:16
Speaker 3: have expensive that are so burdensome that they need to
25:19
Speaker 3: find another sort of income outside of their portfolio income
25:22
Speaker 3: as well as the recurring recurring income they'll get from
25:25
Speaker 3: Social Security or pension. Those are often the most cases,
25:29
Speaker 3: but I would say that luckily, for the most part,
25:32
Speaker 3: I've seen far fewer cases of that because our job
25:35
Speaker 3: is at its core to try and avoid clients bumping
25:38
Speaker 3: into that scenario. And so what comes into that is
25:41
Speaker 3: a lot of planning and a lot of analysis ahead
25:44
Speaker 3: of retirement, not just jumping into retirement with both feet
25:47
Speaker 3: without considering all sorts of different factors, like what are
25:50
Speaker 3: your income needs going to be in retirement? What if
25:52
Speaker 3: there are shocks to your financial plan through inflationary increases
25:56
Speaker 3: like we've kind of seen on a shorter order over
25:58
Speaker 3: the last few weeks or so. So that is all
26:01
Speaker 3: of the work that goes into our relationship with clients
26:04
Speaker 3: is so that they can retire and know that we've
26:07
Speaker 3: done food full due diligence as best we can to
26:11
Speaker 3: really give them the stamp of approval that they can
26:13
Speaker 3: do this.
26:13
Speaker 2: To your point, Paul, of the seven percent who unretired
26:17
Speaker 2: in that six month time period, forty eight percent, just
26:20
Speaker 2: about half were the ones who said they needed money.
26:22
Speaker 2: The other half were those who chose to retire for
26:25
Speaker 2: word or chose to go back to work for some
26:27
Speaker 2: reason or another, which, again to your point, I don't
26:29
Speaker 2: think is necessarily a bad thing. Plenty of people choose
26:31
Speaker 2: to do so without any sort of financial constraint. The
26:36
Speaker 2: fact of the matter is, when you're preparing for retirement,
26:39
Speaker 2: some of the biggest issues that I see when people
26:42
Speaker 2: actually do have money problems in retirement often come down
26:46
Speaker 2: to those same people painting a picture of their retirement
26:51
Speaker 2: and forecasting that they're spending was going to be dramatically
26:53
Speaker 2: different from when they were working. Right. That is, I
26:57
Speaker 2: think something that we somehow delude ourselves into believing sometimes
27:01
Speaker 2: that Hey, when I retire, you know, look how much
27:03
Speaker 2: money I spend on suits and that car that I
27:06
Speaker 2: need to You know, I'm a realtor and I need
27:08
Speaker 2: a new car every three years because I'm driving everywhere
27:10
Speaker 2: I need to make the right impression. And you know,
27:13
Speaker 2: I'm not going to be paying for all these meals
27:16
Speaker 2: out because we're gonna have time to cook. Finally, and
27:18
Speaker 2: what I always go back to people is, look, if
27:20
Speaker 2: you're trying to figure out how much you're going to
27:23
Speaker 2: spend in retirement, the single best barometer you can have
27:27
Speaker 2: for what you're going to spend in retirement is not
27:29
Speaker 2: some rule of thumb, of the eighty percent rule of
27:31
Speaker 2: this day or the other. It's what are you spending now.
27:35
Speaker 2: That's the best starting points you can have. If there
27:37
Speaker 2: are certain things that you know will drop off, like
27:39
Speaker 2: a mortgage or a car payment, that's one thing. But otherwise,
27:42
Speaker 2: if you're tell me that your lifestyle is going to
27:44
Speaker 2: dramatically change because you're retired, my perspective is it doesn't happen.
27:49
Speaker 3: And I make the counter argument that maybe you should
27:51
Speaker 3: go on the other end of things, because now, all
27:53
Speaker 3: of a sudden, you have forty hours of a week
27:55
Speaker 3: or however many hours you're working that are fully unencumbered
27:59
Speaker 3: that you can go out and spend money. You just
28:01
Speaker 3: think about your day to day. Most of us go
28:02
Speaker 3: into some sort of office or work site where you
28:06
Speaker 3: might bring in buy a cup of coffee, but you
28:09
Speaker 3: bring your lunch, and all of a sudden, they're not
28:10
Speaker 3: all expenses. Think about what you do on the weekend.
28:12
Speaker 3: There's far more spending that occurs there.
28:14
Speaker 2: If you are nervous about the unretirement phenomena, if it's
28:18
Speaker 2: concerned that your personal scenario could require it if you're
28:22
Speaker 2: worried that inflation could eat into your retirement, where a
28:25
Speaker 2: big geopolitical event with a market downturn could cause you
28:28
Speaker 2: to need to pivot in retirement. I urge you to
28:31
Speaker 2: work with a professional to assess where your spending is
28:34
Speaker 2: going to be and whether or not your retirement savings
28:38
Speaker 2: can withstand that retirement spending for the rest of your life.
28:41
Speaker 2: Give the folks at Armstrong Advisory Group a call. We
28:44
Speaker 2: work with clients day in, day out to assess this question,
28:47
Speaker 2: among many others. It is complicated. Taxes change, mortgage payments change.
28:51
Speaker 2: All of these things change as you age, but they
28:54
Speaker 2: need to be accounted for and taken into to turn
28:58
Speaker 2: when you go and actually pull away from work permanently.
29:02
Speaker 2: The number for the Armstrong Advisory Group is eight hundred
29:04
Speaker 2: three nine three for zero zero one. You can book
29:07
Speaker 2: a time for us to call you back at Armstrong
29:09
Speaker 2: Advisory dot com. But that number once again eight hundred
29:13
Speaker 2: three nine three for zero zero one.
29:16
Speaker 1: The proceeding was paid for by Armstrong Advisory Group, a
29:18
Speaker 1: registered investment advisor. Nothing in the ad or in any
29:21
Speaker 1: Armstrong guide a specific financial, legal, or tax advice consult
29:24
Speaker 1: your own financial tax into state planning advisors before making
29:26
Speaker 1: any investment decisions. Armstrong may contact you to offer investment
29:30
Speaker 1: advisory services.
29:31
Speaker 2: Let's take a quick break here on the Financial Exchange
29:33
Speaker 2: markets against surging positive territory nasdak up now seven tenths
29:37
Speaker 2: of a percent. We're going to be playing a bit out,
29:39
Speaker 2: playing a bit of stack roulette here next on the
29:43
Speaker 2: Financial Exchange.
29:44
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31:11
Speaker 2: We talk a lot about how people make a big
31:14
Speaker 2: deal about the difference in generations when in fact all
31:17
Speaker 2: people are pretty similar. But you know, what was being
31:20
Speaker 2: written about millennials a decade ago is now being written
31:22
Speaker 2: about gen z and there are some differences in the trends.
31:26
Speaker 2: I remember I had an internship with a large financial
31:30
Speaker 2: services organization based out of Boston in the late two thousands.
31:36
Speaker 2: I think it was PREGFC, and they had already been
31:39
Speaker 2: noticing a phenomenon prior to the Great Financial Crisis and
31:42
Speaker 2: then certainly making its way through the GFC that millennials
31:47
Speaker 2: in their twenties were really conservative investors. Twenty fourteen UBS
31:52
Speaker 2: study found that millennials held about fifty two percent of
31:54
Speaker 2: their assets in cash, compared to roughly a quarter in
31:58
Speaker 2: previous generations. Only about twelve percent of millennials in their
32:01
Speaker 2: twenties identified as aggressive investors, and I think it was
32:05
Speaker 2: really just the scars of the GFC that led millennials
32:08
Speaker 2: to invest this way. On the other hand, gen Z's
32:11
Speaker 2: got a little different vibe. Gen Z's got a different
32:13
Speaker 2: vibe about all this. I think they do still have
32:16
Speaker 2: scars of a financial phenomena, but that financial phenomenon is affordability.
32:21
Speaker 2: They've dealt with very high inflation. I'm sure the COVID
32:24
Speaker 2: stuff screwed them up pretty good, and they are instead
32:29
Speaker 2: seemingly again, I haven't seen any real studies, you know,
32:32
Speaker 2: looking at the averages, but from what I am seeing,
32:35
Speaker 2: you know, interest in prediction markets, sports betting, et cetera,
32:40
Speaker 2: seem to be on a completely different spectrum of risk
32:43
Speaker 2: tolerance compared to their millennial counterparts, and to some degree,
32:46
Speaker 2: I think that's logical. My concern is, obviously, you know,
32:51
Speaker 2: my concern with the millennials was that the Great Recession
32:54
Speaker 2: delayed a lot of their decisions. Unfortunately, it ended up
32:57
Speaker 2: being just to delay the home ownership rate and saving
33:00
Speaker 2: you know, level for millennials today compared to previous generations
33:05
Speaker 2: has now caught up and you know, you're basically in
33:07
Speaker 2: the same spot, and they became more aggressive investors as
33:10
Speaker 2: markets played out. But for twenty somethings to be starting
33:14
Speaker 2: on the complete opposite end of the spectrum, You do
33:17
Speaker 2: wonder how it plays out because the reports of people
33:20
Speaker 2: in gambling debt, the reports of especially twenty something year
33:24
Speaker 2: old men who are I'm not gonna say falling victim
33:29
Speaker 2: to it, but seemingly getting addicted to things like incredibly
33:33
Speaker 2: speculative investments or not investments at all, that are kind
33:38
Speaker 2: of posing as investments like prediction markets and things that
33:42
Speaker 2: you can do on your Robinhood account is concerning to
33:45
Speaker 2: me in a very different way than what the millennial
33:47
Speaker 2: news was.
33:48
Speaker 3: The amount of access that they have to those relative
33:51
Speaker 3: to two thousand are coming out of two thousand and eight.
33:53
Speaker 3: It's just vastly different.
33:55
Speaker 2: I remember how much, I mean, what did it cost
33:56
Speaker 2: to trade a stock in twenty ten bucks.
34:01
Speaker 3: A trade, so you were also limited on the amount
34:03
Speaker 3: of trades that you would make. I remember my account
34:05
Speaker 3: not being that big that seven or eight dollars matter
34:07
Speaker 3: a lot, Yeah, And working at Meryl Ledge out of college,
34:10
Speaker 3: it was you know, one hundred free trades a month
34:12
Speaker 3: or something that was like something that you could get
34:14
Speaker 3: new customers on. Obviously, e Trade and others just elimited
34:18
Speaker 3: all that, and schwab to elimited all the commission training thing.
34:21
Speaker 3: But now you have prediction markets. Sports gambling obviously wasn't legal,
34:25
Speaker 3: though it was still around in the twenty tens, you know,
34:28
Speaker 3: perhaps under the table stuff, but now it's just it's everywhere,
34:32
Speaker 3: and it's advertised to many of those people in that generation.
34:35
Speaker 3: And ultimately what's going to come down to, Mike is
34:38
Speaker 3: everyone has to learn their lesson. Unfortunately, for some it
34:40
Speaker 3: will become an addiction. That's the real scary, more serious stuff.
34:43
Speaker 3: But for others you have to learn the lesson the
34:46
Speaker 3: hard way. Oftentimes with investing that it doesn't always trend up.
34:50
Speaker 3: There are times where, hopefully with some of the memestock
34:53
Speaker 3: stuff in twenty one, people did learn some of those lessons,
34:56
Speaker 3: but it just seems like that hasn't fully been Yeah.
34:59
Speaker 2: Interestingly, the millennial lessons seemed to be the one that
35:03
Speaker 2: they learned in the twenty tens anyway, was Yes, stocks
35:06
Speaker 2: don't always just get absolutely hammered by fifty percent. Your
35:09
Speaker 2: parents may always lose their homes every time there's a recession,
35:14
Speaker 2: and it took them a while to believe that markets
35:17
Speaker 2: were somewhere they could invest in and earn money. The
35:20
Speaker 2: skepticism or the attitude of the gen z from again
35:25
Speaker 2: my general observation reading is much more there's no way
35:28
Speaker 2: I'm ever gonna be able to catch up, yolo, Why
35:31
Speaker 2: don't I just put it all on red? And that's
35:34
Speaker 2: an over exaggeration, but a pretty opposite attitude compared to
35:38
Speaker 2: the millennial generation, which was really scared and conservative.
35:41
Speaker 3: Seemingly, burger wars continue to heat up, Mike, and I've
35:45
Speaker 3: gotten great enjoyment out of it. We've talked about this
35:47
Speaker 3: on the program. McDonald's had come out with the big
35:50
Speaker 3: Archburger and had put together a quick video of their
35:53
Speaker 3: CEO taking a absolutely pathetic bite out of it, incredibly measly,
35:57
Speaker 3: and then there was a twinge of sort of regret
36:00
Speaker 3: he took that bite, and that was marketed out to
36:02
Speaker 3: all of McDonald's social media followers, and so then you
36:06
Speaker 3: had burger king jumping in the wars with their CEO
36:08
Speaker 3: taking a bite. A new entrant had entered the mix
36:11
Speaker 3: just recently five Guys, in fact five Guys social media account.
36:16
Speaker 3: Their Twitter account said, seeing all these CEOs have a
36:19
Speaker 3: burger byte competition dot dot dot, I should probably jump
36:22
Speaker 3: in and end it real quick. One five guys burger
36:25
Speaker 3: and the competition is over. So that is from five
36:28
Speaker 3: Guys Twitter account. Immediately, McDonald's claps back and says, relaxed,
36:33
Speaker 3: your CEO might be the only one who can afford
36:35
Speaker 3: a five guys burger.
36:36
Speaker 2: The rest of the world.
36:37
Speaker 3: Isn't spending forty dollars on a burger and a drink
36:40
Speaker 3: when they could eat at McDonald's for a fraction of that.
36:42
Speaker 3: And I'm just loving every single second of it. I
36:45
Speaker 3: love when companies get combative with one another and throw
36:49
Speaker 3: it all down. Burger King jumped in on this one
36:52
Speaker 3: too and said, there's really no point in joining the
36:54
Speaker 3: bite war when nobody can afford the entry fee. We'll
36:58
Speaker 3: leave the forty dollars burgers to you guys. Five guys.
37:01
Speaker 3: The rest of the world still likes being able to
37:02
Speaker 3: buy a meal without having to do I don't know
37:06
Speaker 3: where that that's coming from. I'm sure five guys is
37:09
Speaker 3: definitely more expensive than when he's actual food. It's better burgers.
37:14
Speaker 3: I mean like that, that's just the deal. But I
37:17
Speaker 3: love just the the back and forth, uh and them
37:20
Speaker 3: taking shots at the prices of five guys.
37:22
Speaker 2: My favorite fake version of this so far has been
37:25
Speaker 2: somebody who posted a video pretending to be the Dasani
37:28
Speaker 2: Water CEO and he's like, oh, I really have to
37:31
Speaker 2: drink this stuff on camera? You mean? Dasani famously teased
37:36
Speaker 2: for the worst bottled water out there if you're if
37:38
Speaker 2: you're unfamiliar, but like shaking while he brings it to
37:41
Speaker 2: his mouth and then like passing out immediately upon taking
37:43
Speaker 2: a tentative sip of his own bottled water. So that
37:47
Speaker 2: one was pretty good. But yeah, that the burger wars
37:49
Speaker 2: have been You're right, Paul, A nice break of entertainment
37:53
Speaker 2: from the seriousness of the world lately. Markets in positive
37:58
Speaker 2: territory as we close out the show today, and oil
38:00
Speaker 2: prices dropping as we close out the show, oil prices
38:03
Speaker 2: down a good eleven percent as we close in on
38:06
Speaker 2: the noon hour. We'll be back at it tomorrow. Everybody,
38:09
Speaker 2: have a great rest of your day. Enjoyed the beautiful
38:11
Speaker 2: weather here in the Northeast, and we'll see a Wednesday