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Price Shocks: How One Surge Can Rattle the Entire Economy · The Financial Exchange Show

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Speaker 2: Welcome back to the Financial Exchange. It's Mike, Mark and
1:25
Speaker 2: Tucker with you on a Tuesday. As investors continue to
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Speaker 2: digest the events out of the Middle East and iron specifically, obviously,
1:34
Speaker 2: we have markets selling off pretty strongly, althoughre recovering a
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Speaker 2: bit of their losses at the eleven o'clock hour now
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Speaker 2: compared to yesterday, where the markets were all over the
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Speaker 2: place during pre market trading but relatively calm during the
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Speaker 2: Monday session after the Saturday morning attacks on Iran from
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Speaker 2: the US and Israel. We've got the Dow Jones Industrial
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Speaker 2: Average now down nine hundred and ninety points about two percent,
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Speaker 2: the SMP down one hundred and twenty five points one
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Speaker 2: point eight two percent, the NASDAC now off four hundred
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Speaker 2: and thirty five points one point nine percent, the yield
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Speaker 2: and the ten year Treasury moving up a little bit
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Speaker 2: as investors sell off their US government bonds, a tad
2:13
Speaker 2: up to four point zero seven seven percent. That is
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Speaker 2: seeping its way into mortgage rates, where yesterday the thirty
2:21
Speaker 2: year fixed rate mortgage topped six point one percent after
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Speaker 2: spending last week down below or at six point six
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Speaker 2: point zero percent. So you have mortgage rates moving up
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Speaker 2: a bit, oil prices surging as well. For the second
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Speaker 2: day in a row, Brent crude now topping eighty three
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Speaker 2: dollars per barrel. West Texas crude up seven and a
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Speaker 2: half percent to seventy six dollars and sixty three cents net.
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Speaker 2: Gas prices have also been dramatically affected here.
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Speaker 3: And then the other interesting one.
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Speaker 2: US dollar been holding up fairly well throughout all of this,
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Speaker 2: and while people not necessarily buying government bonds at the moment,
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Speaker 2: certainly flocking to US dollar during this period of time
3:08
Speaker 2: of volatility.
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Speaker 3: So all of those naysayers that.
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Speaker 2: You know the dollar dominance and you know dollar was
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Speaker 2: going to be dead over the course of the years,
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Speaker 2: well we're seeing again in times of turmoil. The dollar
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Speaker 2: index over the last couple of days at least did
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Speaker 2: alright and held up fairly well. Anything else in markets
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Speaker 2: catching your eye.
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Speaker 4: This, I guess what's unusual, and you've already said it
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Speaker 4: is that US treasuries are not serving their typical safe
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Speaker 4: haven asset role. Probably and you've hinted at this, because
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Speaker 4: inflation expectations will go up when the price of gas
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Speaker 4: goes up, and all else equal, rising yields correspond to
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Speaker 4: falling bond prices.
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Speaker 2: Yeah, And I hate to attribute any feeling or sentiment
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Speaker 2: to markets overall, but I think one of them that
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Speaker 2: I feel fairly comfortable saying is that there was an
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Speaker 2: expectation built in that inflation would continue to moderate this
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Speaker 2: year and the FED would be capable of bringing down
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Speaker 2: interest rates this year. And this directly challenges that assumption. Now,
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Speaker 2: it wasn't held by everyone. I know. You have, in
4:12
Speaker 2: particular brought it up that, Hey, I don't know that
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Speaker 2: that's all that likely, but I think even you acknowledge
4:17
Speaker 2: that the Fed was going.
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Speaker 3: To happen by it.
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Speaker 4: When we got that bad GDP, i'll call it bad.
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Speaker 4: GDP slowed down. Economic growth slowed down a lot in
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Speaker 4: the fourth quarter of last year. It was negative in
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Speaker 4: the first quarter. It went like gangbusters for two quarters,
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Speaker 4: then it slowed down. Last year was a really volatile
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Speaker 4: year economically, and a slower growth year than the year before.
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Speaker 4: We had no related to that, we had no job creation.
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Speaker 4: But I wasn't sure because GDP growth was so hot
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Speaker 4: in the second and third quarter, way above what most
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Speaker 4: researchers think is the economy speed limit. I'm obviously just
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Speaker 4: using shorthand there for the productive capacity or the growth
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Speaker 4: of supply if you prefer the more like technical concepts.
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Speaker 4: But anyway, I was concerned that maybe the economy was
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Speaker 4: growing way above trend despite the sluggish payroll numbers, excuse me,
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Speaker 4: and that maybe the FED ought to be thinking about
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Speaker 4: not just standing pat but hiking to keep inflation under control,
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Speaker 4: because inflation is what happens when demand outpaces the growth
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Speaker 4: in demand outpaces the growth in supply. Then we saw
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Speaker 4: the fourth quart of GDP number, and I was relieved,
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Speaker 4: I guess, in the sense that well, maybe we're not
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Speaker 4: pushing the economy too hot. Then something like this comes
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Speaker 4: along and that changes the calculation completely.
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Speaker 3: Mike, Yeah, it does.
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Speaker 2: So. Ultimately, what really matters out of this conflict other
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Speaker 2: than the what matters for markets and the economy out
5:39
Speaker 2: of this conflict, because there's a lot of things that
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Speaker 2: matter for geopolitical stability, loss of life, and all the
5:44
Speaker 2: other important factors that are frankly far more important than
5:46
Speaker 2: what's going on with the US stocks. But for stocks,
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Speaker 2: three real things matter about this conflict. The duration is important,
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Speaker 2: The scope is important. Right, do other countries get tied
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Speaker 2: into this, and the severity is important, and none of
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Speaker 2: those do we really have any idea about right now,
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Speaker 2: And so you will hear plenty people, plenty of people
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Speaker 2: out there putting out conjecture and guessing at what might
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Speaker 2: happen next with stock prices or the AI trade or
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Speaker 2: oil prices. And I think if anybody is not dealing
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Speaker 2: with it with a heavy dose of skepticism, then they're
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Speaker 2: lying to you. I think it's my answer. I have
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Speaker 2: no idea what sectors are going to perform well, performed poorly.
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Speaker 2: I don't know if this will benefit energy companies in
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Speaker 2: the long term and hurt airlines. I don't know that
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Speaker 2: anybody has a real solid these on this, because nobody
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Speaker 2: knows how long it's going to last, how severe it's
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Speaker 2: going to be, and how many other nations are going
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Speaker 2: to be pulled into a crisis and potentially have different conflicts.
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Speaker 4: And so if you had to speculate, you'd say, well,
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Speaker 4: we know the president. The president doesn't have much tolerance
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Speaker 4: for market pain, and he's watching the stock market and
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Speaker 4: interest rates, and he'll respond to that he had a
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Speaker 4: case in the past, Yeah, he has in the past
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Speaker 4: changed his position he'll declare victory. So it's very good optics.
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Speaker 4: He declares victory, says mission accomplished. Now we're moving on.
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Speaker 4: Even though effectively he's had to backtrack, he's able to
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Speaker 4: frame it in such a way that that he feels
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Speaker 4: anyway that it doesn't look like it looks like he's
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Speaker 4: saving face. So if you had to bet, I think
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Speaker 4: you'd say this is over sooner rather than later. Will
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Speaker 4: declare victory, just like we did when we bombed them
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Speaker 4: three months ago and said we eradicated their nuclear program.
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Speaker 4: And we'll say we eradicated whatever the regime now, it's
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Speaker 4: up to them and the president will pull out or
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Speaker 4: cease hostilities in response to continued market pain, if indeed
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Speaker 4: the market continues to react the way it is reacting today. Though,
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Speaker 4: as you point it out, that's an open question. So
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Speaker 4: if you had to guess, Mike, that would be my
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Speaker 4: for what it's worth. Not that anybody should take my
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Speaker 4: geopolitical speculations I should attach too much weight to them,
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Speaker 4: but I think that's a reasonable guess.
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Speaker 2: In any case, I think it's fair to say that
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Speaker 2: price shocks are bad for economies. Generally speaking, we are
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Speaker 2: getting a price shock right now, with the price of
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Speaker 2: oil moving as dramatically as it has over the last
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Speaker 2: two days, it probably only matters if that price shock
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Speaker 2: has staying power, and we'll see.
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Speaker 4: In a week it's it's hard to conclude that it
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Speaker 4: would even affect inflation. If it persists for more than
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Speaker 4: a couple of weeks, well it's going to make its
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Speaker 4: way into headline CPI obviously energies about ten percent. I'm
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Speaker 4: rounding up a little bit of headline.
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Speaker 2: CPI And if it lasts a year or well, then
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Speaker 2: it's yeah, then that's a different Then you know, Mark's
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Speaker 2: gotta cut back on his Disney Plus subscription and stop
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Speaker 2: watching so many Star Wars shows so that he can
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Speaker 2: afford to commute to work every day. I'm joking. Obviously,
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Speaker 2: I didn't know what to come up with on this, But.
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Speaker 3: If you're not far off, if.
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Speaker 2: You have to spend your money on gasoline because it's
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Speaker 2: more expensive over the course of a long duration, then
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Speaker 2: ultimately you can borrow the money, save less or cut
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Speaker 2: your spending elsewhere in order to make all those ends meet.
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Speaker 2: And that's what people worry about when it comes to
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Speaker 2: price shocks.
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Speaker 4: Yeah, well, this is where the term staglation. Stagflation, excuse me,
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Speaker 4: came from in the seventies. Demand slowed as oil prices rose,
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Speaker 4: and due to other factors too. We were in an
9:19
Speaker 4: out of recession, in and out of recession. It's not
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Speaker 4: the best way to characterize that decade, but demand slowed strangely,
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Speaker 4: inflation did not slow, and that was contrary. This is
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Speaker 4: stagflation was a puzzle. The word was invented out of
9:31
Speaker 4: that experience. That word came out of that experience because
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Speaker 4: it was unusual. Everybody expected slowing economic growth to pull
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Speaker 4: inflation down and it didn't in during the big spikes
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Speaker 4: the seventy three to seventy five and then in the
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Speaker 4: late seventies. So the question is will we see that again.
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Speaker 4: Underlying inflation is not as high as it was done,
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Speaker 4: but it's a little bit elevated.
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Speaker 2: Uh Mark Blackstone Blackstone's flagship private credit fund was hit
11:33
Speaker 2: with a wave of redemptions. UH hit with one point
11:36
Speaker 2: seven billion dollars of net outflows in the first quarter
11:39
Speaker 2: as investors attempting to pull their funds from this mostly
11:45
Speaker 2: ill liquid asset class. And I don't think anybody that
11:49
Speaker 2: doesn't operate in the space really understands what this means.
11:51
Speaker 2: So talk to us about what does Blackstone do and
11:54
Speaker 2: what does it mean when they're hit with one point
11:56
Speaker 2: seven billion dollars worth of outflows.
11:58
Speaker 4: Well, the bonds that you owned, Ruth, say your four
12:01
Speaker 4: to one K plan in a Bloomberg aggregate index. You
12:05
Speaker 4: might even have them, might even have that name attached
12:07
Speaker 4: to them. It's more likely just called the XYZ bond fund,
12:10
Speaker 4: particularly if you work for a big employer. Those are
12:12
Speaker 4: all publicly traded bonds. There are dealers who keep inventories
12:16
Speaker 4: of those bonds. So if the manager of the fund,
12:18
Speaker 4: in response to you wanting to sell, needed to raise capital,
12:21
Speaker 4: it's very easy to do.
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Speaker 1: So.
12:23
Speaker 4: It's easy to sell a US Treasury bond, easy to
12:25
Speaker 4: sell Apple bonds or something like that. Private credit and
12:30
Speaker 4: equity for that matter, is the name suggests these are
12:33
Speaker 4: not publicly traded. I'm going to call them deals because
12:35
Speaker 4: they're not securities. Their shares in companies, yes, but they're
12:40
Speaker 4: not publicly disclosed regulated regulated is the better word disclosure.
12:44
Speaker 4: It doesn't have much to do with it. That's just
12:46
Speaker 4: sort of a side thing. So when you want to
12:49
Speaker 4: sell a privately owned security, and by the way, you
12:51
Speaker 4: probably don't own these directly or even indirectly. If you
12:55
Speaker 4: have a pension plan, part of your benefits are funded
12:57
Speaker 4: with private market investments. But for the most part, we
13:00
Speaker 4: don't have private investments available to us as individuals, or
13:04
Speaker 4: at least in until several years ago. One of the
13:07
Speaker 4: benefits of the higher returns promised by these One of
13:10
Speaker 4: the benefits is the higher returns promise by these investments.
13:12
Speaker 4: One of the drawbacks is their liquid fancy way of
13:16
Speaker 4: saying you can't get your money on a moment's notice
13:19
Speaker 4: like you can in a typical mutual funder by selling
13:21
Speaker 4: a Stocker ETF And when as soon as they tell
13:25
Speaker 4: you we're gonna we're gonna put additional restrictions as per
13:29
Speaker 4: the agreement on this fund on withdrawals to protect shareholders.
13:32
Speaker 4: What happens when you tell people they can't run for
13:34
Speaker 4: the exits.
13:35
Speaker 1: They run round for the exits.
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Speaker 3: Yeah, that is the natural result of all this.
13:39
Speaker 2: I think it's fair, at least in my mind, to
13:42
Speaker 2: assume that there is not a whole bunch of interest
13:44
Speaker 2: right now on the part of new money to say, hey,
13:48
Speaker 2: what can you do for me by jumping into private credit.
13:51
Speaker 2: I am certain there are investors who are curious and saying, hey,
13:54
Speaker 2: you know, maybe it's a buying opportunity. Maybe I can
13:57
Speaker 2: if I fund the right company, you know, scoop up
14:00
Speaker 2: some potential good deals here.
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Speaker 3: But that's not choice.
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Speaker 4: They've made commitments to these funds years ago, and their
14:06
Speaker 4: capital gets called, and you can't get out of that
14:09
Speaker 4: obligation for individuals, though they can hold.
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Speaker 3: Off on in any case.
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Speaker 2: Obviously, the funds themselves have been pushing hard to try
14:17
Speaker 2: and get into places like four oh one K plans
14:19
Speaker 2: and other new areas of potential investment, which I have
14:23
Speaker 2: expressed concerns about it and still feel that way. But
14:26
Speaker 2: I'm wondering who else it affects if the new demand
14:32
Speaker 2: for lending out this type of money is seeing some
14:36
Speaker 2: form of dry up. And again that's maybe not a
14:39
Speaker 2: foregone conclusion, but it seems pretty obvious to me. The
14:42
Speaker 2: pension funds aren't looking to allocate new dollars to this
14:45
Speaker 2: at this point.
14:45
Speaker 4: Sometimely smaller funds that were late to the game yep,
14:49
Speaker 4: might be able to commit capital to it. Others who
14:52
Speaker 4: made commitments previously will have their capital call. That's how
14:54
Speaker 4: those things work. You don't know where your money's going
14:57
Speaker 4: ahead of time. You make a commitment to a manager
14:59
Speaker 4: that you truve has skill and trust in all those
15:02
Speaker 4: great things, and then over time they tell you, well,
15:05
Speaker 4: we need five million for this deal and etc. So
15:09
Speaker 4: you don't have much control over the timing.
15:11
Speaker 2: Like many other areas of the market, this is one
15:13
Speaker 2: of those that expanded fairly dramatically during COVID and throughout
15:17
Speaker 2: the twenty tens.
15:18
Speaker 3: And Yeah, my conclusion is just generally, when.
15:22
Speaker 2: Money is pretty free and loose, as it was during
15:25
Speaker 2: COVID and has been throughout, the existence of a lot
15:29
Speaker 2: of this private credit surge is that sometimes bad loans
15:34
Speaker 2: are made, Sometimes loans are made to companies that can't
15:37
Speaker 2: really afford to pay it back, and oftentimes loans are
15:40
Speaker 2: made or taken on by companies who are not prepared
15:45
Speaker 2: for the financial reality of interest rates going up, which,
15:49
Speaker 2: to be clear, most of these loans are made on
15:51
Speaker 2: a variable rate basis or will eventually be refinanced out,
15:55
Speaker 2: and so in addition to the pension funds, I think
15:58
Speaker 2: there's been this renewed concern too about Okay, who did
16:01
Speaker 2: they loan the money too? And software companies seems to
16:04
Speaker 2: be a big answer here, all of whom have been
16:06
Speaker 2: under pressure for other reasons. So the question that I
16:09
Speaker 2: keep wondering about is who does this matter to? And
16:12
Speaker 2: I think my general answer is, yeah, there's some insurers
16:15
Speaker 2: pension funds who might be under pressure if this is
16:18
Speaker 2: as ugly as some have insinuated.
16:21
Speaker 3: There are some.
16:21
Speaker 2: Borrowers in the software space that could be affected if
16:24
Speaker 2: it's pretty ugly. But overall, the concern that I have
16:28
Speaker 2: more than anything else is if scares from the private
16:32
Speaker 2: credit industry lead to lenders making it more difficult to
16:37
Speaker 2: borrow overall, that's just not great conditions for a growing economy.
16:43
Speaker 2: If it's tougher to find borrowed money, then that kind
16:47
Speaker 2: of affects everything, does it not?
16:50
Speaker 3: Well, there's a.
16:51
Speaker 4: Lot of these managers have a lot of dry powder,
16:54
Speaker 4: so I don't think they're dry powder. Is the industry
16:58
Speaker 4: way of saying. Lot of funds, pension funds and stuff
17:01
Speaker 4: like that have committed big amounts. So they've got hundreds
17:05
Speaker 4: of billions of dollars and so called dry powder ready
17:08
Speaker 4: to commit to deals when they find something that meets
17:11
Speaker 4: their requirements. Look, I mean, I don't know. If it
17:14
Speaker 4: coincides with a slowing economy geopolitical uncertainty like we're dealing
17:19
Speaker 4: with right now, you could get this sort of confluence
17:24
Speaker 4: of malign forces that brings about a really big economic disruption.
17:32
Speaker 4: I just don't know, Mike what to make of it.
17:34
Speaker 2: A lot was made last week about Jack Dorsey and
17:37
Speaker 2: his company Block planning to slash forty percent of his employees,
17:42
Speaker 2: or over four thousand people. Obviously, as the story has
17:45
Speaker 2: been playing out and getting a lot of tension, people
17:48
Speaker 2: have dug in a little bit more and done a
17:50
Speaker 2: little bit more research on what that's all meant. So
17:52
Speaker 2: a few things. One, they did go on a big
17:55
Speaker 2: hiring spree during the pandemic. Their headcounter grew from about
17:59
Speaker 2: four thousand people in late twenty twenty to nearly thirteen
18:03
Speaker 2: thousand by late twenty twenty three. So I think that
18:05
Speaker 2: is some hugely important context that I was personally not
18:08
Speaker 2: aware of last week when this story broke was Okay,
18:11
Speaker 2: so you're cutting four thousand jobs, but your head count
18:15
Speaker 2: grew by nine thousand people over the course of three years. Okay,
18:18
Speaker 2: that's interesting to me. The less interesting but kind of
18:23
Speaker 2: entertaining and kind of sad piece of this is that
18:27
Speaker 2: in September, just September of twenty twenty five, the company
18:30
Speaker 2: gathered eight thousand of their employees from around the globe
18:34
Speaker 2: in California for a sixteenth birthday celebration for the company.
18:39
Speaker 2: They flew everybody out to the Oakland Coliseum. They hired
18:43
Speaker 2: a expensive DJ, they had the Block founder Jack Dorsey
18:49
Speaker 2: interview Jay Z who's a board member, and long story short,
18:53
Speaker 2: the event cost the company some sixty six zero million
18:56
Speaker 2: dollars to throw and then lo and behold. Some five
19:01
Speaker 2: months later, they're laying off some four thousand of those employees,
19:05
Speaker 2: many of which probably attended this event. And again one
19:09
Speaker 2: is not directly related to the other. They're not laying
19:12
Speaker 2: off because they spent too much money on one of
19:14
Speaker 2: these events, but it sure would leave a bad taste
19:16
Speaker 2: in my mouth if I were invited to an event
19:18
Speaker 2: in California where I saw my CEO, you know, decked
19:22
Speaker 2: out and interviewing Jay Z and then get a.
19:24
Speaker 3: Pink slip a few months later.
19:27
Speaker 2: Let's take quick break. Market's improving as we close in
19:30
Speaker 2: on the noon hour. Here, we'll have a full market
19:32
Speaker 2: recap net with Wall Street Watch.
19:42
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Speaker 1: It's the Financial Exchange on the Financial Exchange Radio Network
19:53
Speaker 1: out full whoa Street Watch trekking the stocks, fandato, and
19:56
Speaker 1: the headlines driving markets so far today right here on
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Speaker 1: the Financial Exchange Radio Net.
20:01
Speaker 5: Well, equity markets are selling off, but not as bad
20:04
Speaker 5: as an hour ago, as investors are growing more concerned
20:06
Speaker 5: that the conflict with the US and Iran could last
20:09
Speaker 5: longer than anticipated. Oil prices are jumping higher as a result.
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Speaker 5: Right now, the Dow is down one point eight percent
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Speaker 5: or eight hundred and ninety one points, SMP five hundred
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Speaker 5: down one point six percent or one hundred and fourteen points,
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Speaker 5: Nasdaq selling off one point seven percent or four hundred
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Speaker 5: and three points lower, Rusted two thousand down two point
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Speaker 5: six percent, ten You're treas reeled up one basis point
20:32
Speaker 5: at four point zero six seven percent, and crude oil
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Speaker 5: jumping eight percent higher, trading just above seventy seven dollars
20:39
Speaker 5: at barrel. Target beat earnings expectations but post a lower
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Speaker 5: profit for the holiday quarter, marking its thirteenth straight quarter
20:46
Speaker 5: of declining sales. New CEO Michael Fidelki t's the retailers
20:51
Speaker 5: turnaround will be presented shortly. Target shares a rising by
20:55
Speaker 5: five percent. Sticking with retail where Best Buys Quarterly sales
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Speaker 5: and outlook disappointed, but it's adjusted per share earnings came
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Speaker 5: in strong, sending shares up by four percent. Mew all
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Speaker 5: shares in social media platform Pinterest jumping seven percent after
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Speaker 5: Elliott Investment Management made a one billion dollar investment, where
21:13
Speaker 5: Pinterest plans to use the money to buy back stock
21:16
Speaker 5: as part of a three and a half billion dollar
21:17
Speaker 5: share repurchase program. Elsewhere, database company Mango dB offered a
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Speaker 5: soft quarterly guidance, fueling concerns that AI could upend its business.
21:27
Speaker 5: Shares are tanking by twenty one percent, and Swiss sneaker
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Speaker 5: maker on Holding seeing it's stock tumble eleven percent after
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Speaker 5: the company's annual sales guidance underwhelmed investors. I'm Tucker Silva
21:40
Speaker 5: and that is Wall Street Watch and the previous segment,
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Speaker 5: we asked you the trivia question, Well, the hell is it?
21:47
Speaker 5: How many Americans have walked on the moon? I'll be
21:50
Speaker 5: twelve twelve? Yeah, John from South Hadley, mass is our
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Speaker 5: winner today taking on a Financial Exchange Show T shirt.
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Speaker 5: Congrats to John, and we played trivia every day here
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Speaker 5: on the Financial looks Change. See complete contest rules at
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Speaker 5: Financial eks.
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Speaker 3: Change Show dot com CNBC.
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Speaker 2: As a piece today, poor coordination can cost couples in
22:09
Speaker 2: average fourteen thousand dollars in retirement. Wealth research finds, and
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Speaker 2: they talk about a few things here, but definitely something
22:15
Speaker 2: that I've encountered firsthand. And the difficulty here is when
22:20
Speaker 2: it comes to couples coordinating their paychecks.
22:23
Speaker 3: And coordinating their finances.
22:25
Speaker 2: And frankly, I've seen a lot of different ways of
22:28
Speaker 2: doing this, even with couples that have been married for decades,
22:32
Speaker 2: in terms of their comfortability with it. Oftentimes frequently I
22:36
Speaker 2: have continue to see even couples in retirement where you know,
22:42
Speaker 2: John's Social Security check goes into John's bank account and
22:46
Speaker 2: Wendy's so Security check goes into Wendy's bank account, and
22:48
Speaker 2: then they pay for some things out of a joint account,
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Speaker 2: even at that stage of marriage, and so everybody has
22:53
Speaker 2: a different approach to this. But what CNBC does correctly
22:57
Speaker 2: point out in all of this is that when you
23:01
Speaker 2: take that approach, when you do not coordinate, especially during
23:06
Speaker 2: your income your income earnings years, you can leave money
23:10
Speaker 2: on the table. So simplest version of this would be, Hey,
23:13
Speaker 2: we want to retire, we want to save for retirement,
23:16
Speaker 2: and we each have four to one ks through work,
23:19
Speaker 2: and Wendy's four oh one K offers a ten percent match.
23:23
Speaker 2: John does I say John in this hypothetical, Okay, John's
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Speaker 2: four oh one K offers a five percent match, But
23:29
Speaker 2: you know what, we can't afford to save ten percent
23:31
Speaker 2: of our income, so we're both saving seven and a
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Speaker 2: half percent. Great, but you're leaving money on the table
23:36
Speaker 2: in that scenario, very obviously right, you have a ten
23:39
Speaker 2: percent potential match, you're not saving all of it into there,
23:42
Speaker 2: and so you're leaving money on the table. The more
23:45
Speaker 2: intelligent thing to do is put ten percent into John's
23:49
Speaker 2: five percent into Wendy's. If you both earn the same amount,
23:53
Speaker 2: maximize both matches and you'll get more total dollars into
23:56
Speaker 2: the four oh one k, which guess what, for most
23:59
Speaker 2: everybody doesn't really matter if the four O one k's
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Speaker 2: in John's name or Wendy's name. If you get divorced
24:05
Speaker 2: or something happens, you're getting half.
24:06
Speaker 3: So wait.
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Speaker 4: A simple way to do that would be identify the
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Speaker 4: one with the with the more generous match, make sure
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Speaker 4: you're getting that, and then you fill the remaining person's
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Speaker 4: four oh one K contribution limit bucket with whatever's left
24:21
Speaker 4: after that, right, Like you want to go to the
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Speaker 4: max match first and make sure you're maxing out, right.
24:26
Speaker 3: Yeah, But then it gets more complicated.
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Speaker 2: What if what if it's the same match but one
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Speaker 2: of the four to one k's sucks?
24:34
Speaker 3: I put that plainly, but like you know, I.
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Speaker 4: You have to stink pretty bad for you to avoid
24:39
Speaker 4: contributing to it, Like agreed, you'd have to, Like you
24:41
Speaker 4: could just all right, I'm gonna just gonna use the
24:43
Speaker 4: index fund in yours because everything else stinks, and then
24:46
Speaker 4: we're gonna use offsetting investments in mind.
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Speaker 3: Yeah and four one ks.
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Speaker 2: This is less common, but i'd see it oftentimes in
24:53
Speaker 2: uh four O three b's or you know, options for
24:57
Speaker 2: teachers where the retirement plans are pretty ugly in some cases.
25:02
Speaker 2: And so let's imagine that there isn't a match differential.
25:06
Speaker 2: But you know, really one of these is much better
25:08
Speaker 2: than the other and has far higher costs than the
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Speaker 2: other one.
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Speaker 3: Do I really feel comfortable.
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Speaker 2: Having all of you know, vast majority of my paycheck
25:19
Speaker 2: going into this forum K and effectively working for maybe
25:23
Speaker 2: my health insurance benefits and not much of a paycheck.
25:25
Speaker 2: Like psychologically, it is really challenging in that case up
25:30
Speaker 2: until very recently. The other thing that was very common
25:32
Speaker 2: would be one of the employer plans has a option,
25:36
Speaker 2: the other doesn't. Oh which one should we be contributing to?
25:40
Speaker 3: Oh?
25:41
Speaker 2: Yours has a wrothmind? Doesn't do we you know, funnel
25:44
Speaker 2: more of our combined income into one versus another. Here's
25:49
Speaker 2: ultimately where I go with this. It's usually not enough
25:54
Speaker 2: of a justification to tell somebody that they have to
25:58
Speaker 2: combine their finances at this stage. Really think as a
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Speaker 2: married couple in terms of how to contribute to retirement.
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Speaker 2: Usually the differential in match and cost to the four
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Speaker 2: O one K is not so severe in those cases
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Speaker 2: that it's worth completely upending how you manage your finances.
26:13
Speaker 2: If you're comfortable with it, because it does oftentimes lead
26:16
Speaker 2: to discomfort, right. I mean, I know somebody in particular
26:20
Speaker 2: who just has a great option with the four oh
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Speaker 2: one K, is working part time and basically doesn't take
26:27
Speaker 2: home a paycheck even though they're working thirty some odd
26:30
Speaker 2: hours a week in order to just maximize that four
26:33
Speaker 2: a one K match, and it kind of sucks, just
26:37
Speaker 2: like sorry, toss around that term loosely, but psychologically, going
26:43
Speaker 2: to work and then not really taking home a paycheck
26:45
Speaker 2: because all of it's going towards retirement is tough to do.
26:49
Speaker 3: But you do have to.
26:51
Speaker 2: Understand that these plans, especially for married couples, are designed
26:55
Speaker 2: in ways where there can be advantages and disadvantages to
26:58
Speaker 2: contributing to certain types of plans, to certain types of contributions.
27:04
Speaker 3: Maybe your employer.
27:05
Speaker 2: Has an option for putting company stock into the four
27:07
Speaker 2: to one K. These things do get complicated, and while
27:12
Speaker 2: it's fairly simple in terms of what you should do
27:14
Speaker 2: as a single individual, when you add a partner in there,
27:17
Speaker 2: when you add kids into the equation, it becomes immensely
27:21
Speaker 2: more complicated in terms of how you position your retirement savings.
27:25
Speaker 2: If you're in that position, you've combined finances, you're trying
27:28
Speaker 2: to figure out, Hey, what's the best way to maximize
27:30
Speaker 2: all of my benefits from my family's future. Give the
27:34
Speaker 2: folks at Armstrong a call. This is the type of
27:37
Speaker 2: stuff that we focus on with our clients every day.
27:40
Speaker 2: You can reach us at eight hundred three nine three
27:42
Speaker 2: for zero zero one. We offer free consultations throughout New England.
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Speaker 2: The number again eight hundred three nine three for zero
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Speaker 2: zero one, or you can check us out and book
27:53
Speaker 2: time for us to call you back at Armstrong Advisory
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Speaker 2: dot com.
27:56
Speaker 1: The proceeding was paid for by Armstrong Advisory Group, a
27:58
Speaker 1: registered investment advisor. Nothing in the ad or in any
28:01
Speaker 1: Armstrong guide a specific financial, legal or tax advice. Consult
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Speaker 1: your own financial tax into state planning advisors before making
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28:10
Speaker 1: advisory services.
28:11
Speaker 2: Well, we had tariffs, then briefly we didn't have tariffs
28:14
Speaker 2: when the Supreme Court ruled them out, And now we
28:16
Speaker 2: have tariffs again, and businesses of all size are trying
28:21
Speaker 2: to figure out what the heck they do about it.
28:24
Speaker 2: So to be clear, if you are Walmart and Target
28:27
Speaker 2: and TJ Max and Costco. You've had your legal team
28:31
Speaker 2: lined up for months, prepared for the Supreme Court to
28:33
Speaker 2: throw all this out and start suing for your refunds.
28:37
Speaker 2: What's a fair bit more interesting is what you're doing.
28:40
Speaker 2: If you are a fifty person company that manufactures clothes
28:45
Speaker 2: or that sells clothing in the United States, and you
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Speaker 2: paid a million dollars in tariffs over the last years,
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Speaker 2: you have to really measure, Okay, how much am I
28:56
Speaker 2: going to spend on attorneys if I get the money back?
29:00
Speaker 2: What timeframe is it going to be returned to me?
29:04
Speaker 2: What if I don't have the cash on hand to
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Speaker 2: hire an attorney that specializes in this because guess what,
29:08
Speaker 2: they're probably pretty expensive right now, given how few of
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Speaker 2: them know what they're doing.
29:12
Speaker 3: Uh, do I need to borrow money to go get that?
29:16
Speaker 2: If I do get the tariff refund, will my customers
29:19
Speaker 2: be expecting money back from them? I was listening to
29:23
Speaker 2: an interview with somebody who hadn't decided yet if they
29:25
Speaker 2: are going to sue the government over these tariff refunds,
29:28
Speaker 2: because they were evaluating all of this, combined with the
29:31
Speaker 2: fact that they actually had to borrow money to pay
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Speaker 2: the tariffs in the first place, and they're sitting there saying, Okay,
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Speaker 2: I have to borrow more money to hire the attorney.
29:40
Speaker 2: I borrowed money to pay the tariffs. My customers, if
29:43
Speaker 2: I get a refund, might want some of that back.
29:45
Speaker 2: But in the meantime, I got to pay all this
29:47
Speaker 2: interest that I just paid on the tariffs.
29:48
Speaker 3: That were deemed illegal.
29:50
Speaker 2: It is a really clear answer of what to do
29:53
Speaker 2: if your costco if you are that small business. It's
29:57
Speaker 2: some really funky math right now. And I don't really
30:01
Speaker 2: have any advice for those people that are in that position.
30:03
Speaker 2: It is a tough position to be in, and right
30:06
Speaker 2: now the government has not done.
30:09
Speaker 3: The right thing to do would be.
30:10
Speaker 2: Make a very clear process for those small businesses so
30:13
Speaker 2: they don't have to hire a law firm for half
30:15
Speaker 2: a million dollars or whatever it's going to be in
30:17
Speaker 2: order to process this stuff. Yeah, but to this point
30:19
Speaker 2: there's been nothing on them.
30:20
Speaker 4: All those regulations they've cut, and they deserve credit, the
30:25
Speaker 4: administration does for wanting to reduce the burden on business.
30:28
Speaker 4: Some of those regulations have benefits as well as costs.
30:31
Speaker 4: So I'm being a little sloppy here, but generally speaking,
30:33
Speaker 4: we could probably afford to cut half of the regulations
30:37
Speaker 4: we impose on the private sector. I know that's a
30:39
Speaker 4: little bit cavalier, but I suspect it's not too far off.
30:43
Speaker 4: All that is undone by this reckless tariff policy, this
30:48
Speaker 4: refund turmoil, could have been avoided had these tariffs spent.
30:51
Speaker 2: Now.
30:51
Speaker 4: I don't like them, but if Congress had voted on them,
30:54
Speaker 4: made them law, I couldn't complain about the process. Instead,
30:58
Speaker 4: this haphazard tariff by proclamation on again, off again, whatever
31:04
Speaker 4: you want to call it, process was. It wasn't a process.
31:07
Speaker 4: It was just whimsical. We went this way for a year.
31:10
Speaker 4: People warned that it wasn't sustainable, that it was likely
31:14
Speaker 4: to face successful legal challenges. The administration did it anyway.
31:17
Speaker 4: My point is, in making reference to otherwise good regulatory
31:22
Speaker 4: burden reduction moves, is that this offsets all that. Like, yeah,
31:25
Speaker 4: now that we're all spinning our wheels, they're wasting resources
31:29
Speaker 4: on attorneys who haven't had a client in thirty years
31:32
Speaker 4: because they specialize in tariff law and nobody needed them.
31:35
Speaker 4: Now all of a sudden, they're the bell of the ball. Great,
31:38
Speaker 4: think about the tragic waste of resources that is instead
31:41
Speaker 4: of developing new products, finding new ways to make customers
31:44
Speaker 4: lives better, they sit around thinking about tariffs, tariff refunds,
31:49
Speaker 4: and what the future holds for tariffs. It's a tremendous
31:51
Speaker 4: waste of time, money, and resources. It offsets tax cuts
31:55
Speaker 4: and other regulation cuts.
31:56
Speaker 2: That's the one tase that I think can get got
31:58
Speaker 2: bipartisan support. Is nobody's tear happy that a bunch of
32:01
Speaker 2: lawyers are going to make a whole bunch of money
32:03
Speaker 2: on this. And that's that's one thing that is almost
32:05
Speaker 2: definitely certain is lawyers are getting paid after all of
32:09
Speaker 2: this Supreme Court Act.
32:10
Speaker 4: Yeah, how dide industries always crop up when government missteps.
32:15
Speaker 4: And this is another.
32:16
Speaker 2: Financial services too, by the way, because a bunch of
32:18
Speaker 2: sure finanal service companies are going to businesses, small ones
32:22
Speaker 2: in particular and saying, hey, we think you're owed a
32:24
Speaker 2: million dollars in tariffs, sign over the rights to that
32:27
Speaker 2: revenue for three hundred thousand dollars and we'll do all
32:31
Speaker 2: of it for you.
32:32
Speaker 4: Even if you love tariffs, this is just it was
32:35
Speaker 4: just such such a such a misguided way to implement them,
32:38
Speaker 4: totally on avoidable quick break.
32:40
Speaker 3: When we return bit of stack Roulette is next on
32:43
Speaker 3: the Financial Exchange.
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33:45
Speaker 2: We're approaching the noon hour here in the US, but
33:48
Speaker 2: European markets are starting to close over there. Generally speaking,
33:51
Speaker 2: markets in Europe down about three percent on the day
33:55
Speaker 2: as the tension in the Middle East continues to intensify.
33:59
Speaker 2: In the the US, though, we've made up a lot
34:01
Speaker 2: of ground. The S and P five hundred at one
34:03
Speaker 2: point today was off about two point three percent, now
34:06
Speaker 2: down only one point four percent. Now, which when we
34:10
Speaker 2: opened I think was off about eleven hundred points, is
34:12
Speaker 2: now off seven hundred and sixteen points, are about a
34:14
Speaker 2: point and a half sorry, one and a half percent,
34:17
Speaker 2: and the NASDAC down three hundred and seventeen points are
34:20
Speaker 2: one point four percent. So obviously quite voultile out there,
34:23
Speaker 2: inequities both domestically and abroad, and we will just have
34:28
Speaker 2: to continue to monitor here as investors digest.
34:30
Speaker 4: Yeah, if you want to play that, what are markets
34:32
Speaker 4: telling us game? It seems like the stock market is
34:35
Speaker 4: saying we don't know how long this is gonna last
34:36
Speaker 4: or how severe the economic impact will be.
34:39
Speaker 3: That that makes sense, sure.
34:40
Speaker 4: Bond markets, well, we know that US treasury notes and
34:44
Speaker 4: bonds and bills sold off over the past couple of days,
34:47
Speaker 4: so yields have gone up, interest rates have gone up. Yeah,
34:50
Speaker 4: that makes sense too. I think oil price Horizon oil prices.
34:54
Speaker 4: Even if it's not sustained, we'll have a short term
34:56
Speaker 4: impact on inflation that sort of ties the Fed's hands.
34:59
Speaker 3: Yeah, I think that's conclusion right.
35:00
Speaker 2: It doesn't mean we're gonna get much higher inflation over
35:03
Speaker 2: the next decade, but an event like this makes it
35:06
Speaker 2: more difficult for the FED to control inflation and bring
35:10
Speaker 2: down interest Yeah.
35:11
Speaker 4: I haven't seen any evidence yet that longer term that
35:13
Speaker 4: the real part of longer term interest rates, because you
35:15
Speaker 4: could break them up into expected inflation and the real
35:18
Speaker 4: component are going up because this means more government spending,
35:21
Speaker 4: say on defense, bigger deficits, upward pressure on rates that
35:24
Speaker 4: may come down the road, probably too early because you
35:28
Speaker 4: can't tease well. Short term rate movements are probably real
35:33
Speaker 4: rate movements generally speaking, but the Verizon oil complicates that
35:37
Speaker 4: the picture. And then finally medals gold rallied yesterday, pulling
35:40
Speaker 4: back today. Though my little story yesterday was well to
35:44
Speaker 4: safe haven asset. People flocked toward it, but that doesn't
35:48
Speaker 4: jive with what's happening today. People are not flocking toward
35:51
Speaker 4: anything but the US dollar, which is up. What are
35:54
Speaker 4: they buying with those dollars? It appears nothing in terms
35:57
Speaker 4: of US assets. They're just parking them in bank accounts.
35:59
Speaker 4: But the US dollar still the world's reserve currency and
36:02
Speaker 4: still the trusted unit of exchange. You know, if you
36:06
Speaker 4: need something liquid, you're gonna pay. If you want a
36:08
Speaker 4: liquid currency that just about anybody will accept, you're gonna
36:11
Speaker 4: use US dollars. Clearly a dollar is a beneficiary.
36:15
Speaker 2: By the way, just flashing across the TV right now,
36:17
Speaker 2: diesel prices have jumped by a record thirty four percent
36:21
Speaker 2: in two days here, So we were talking about gas
36:23
Speaker 2: prices and other prices, diesel prices moving massively over the
36:27
Speaker 2: course of the last two days.
36:28
Speaker 3: That is apparently a record for a two days.
36:30
Speaker 4: Yeah, and that's one very vivid example of how this
36:33
Speaker 4: type of thing can make its way into the prices.
36:35
Speaker 3: Of other stuff. Kidding right right, talking about that early,
36:38
Speaker 3: right into your eighteen wheeler.
36:39
Speaker 2: Anything else catching your eyes in terms of markets or
36:41
Speaker 2: stories this morning market.
36:42
Speaker 4: I'm not very good at this part of the program,
36:44
Speaker 4: as you know, Mike, to begin with. But today everything
36:46
Speaker 4: is war related, so it's it's hard to see, you know,
36:51
Speaker 4: other than Apple raising its prices ten percent on MacBooks
36:55
Speaker 4: and stuff like that, that could now they blame chip shortages,
37:01
Speaker 4: which is plausible.
37:02
Speaker 3: Specifically RAM, I think, is that's what.
37:04
Speaker 4: Yeah, active memory chips. Yeah, they're they're blaming that. And
37:07
Speaker 4: then to the extent that I mean, this is a
37:09
Speaker 4: universal problem, not helpful for inflation, but I don't want
37:13
Speaker 4: to start crying wolf about relative price changes either.
37:17
Speaker 3: Yeah.
37:17
Speaker 2: I think the narrative on anything tech related right now,
37:22
Speaker 2: in terms of frankly, a lot of different parts of
37:25
Speaker 2: the economy has been for the last couple of years
37:27
Speaker 2: that the artificial intelligence industry is eating up a lot
37:30
Speaker 2: of resources deniable right whether it's literally black hole, whether
37:34
Speaker 2: it's literal labor to construct data centers, or electricity or
37:39
Speaker 2: now the big story being memory RAM going into all
37:44
Speaker 2: sorts of devices. All of it is being bid up
37:47
Speaker 2: because of the boom and artificial intelligence, and we're starting
37:51
Speaker 2: to see some of the impacts of that, and one
37:53
Speaker 2: of those is through apple products that need to be
37:55
Speaker 2: priced higher because of the cost of some of these.
37:57
Speaker 4: This has to affect the rest of the industry.
37:59
Speaker 3: I mean it can't.
38:00
Speaker 4: I mean, if they're lying, we'll find out because others
38:03
Speaker 4: won't respond similarly.
38:04
Speaker 1: Right.
38:05
Speaker 2: Dow Jones Industrial Average SMPN NASDAC all strongly in the
38:09
Speaker 2: negative here, over one percent down as we close out
38:12
Speaker 2: the show. Russell two thousand, down two and a half percent.
38:16
Speaker 2: Oil prices as we close out up five point three
38:19
Speaker 2: six percent, but even that has moderated off of its
38:21
Speaker 2: earlier highs. We'll be back at it tomorrow with a
38:24
Speaker 2: full recap and more here on the Financial Exchange