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Money Monday with Brian James · Brian Thomas

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Speaker 1: The talk station.
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Speaker 2: It's eighth five fifty five KRCD talk station on a Monday.
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Speaker 2: That means it's time for Money Monday with Brian James,
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Speaker 2: Allworth Financial. Brian James as certified financial planner and always
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Speaker 2: recommend you get one of those working for you on
0:16
Speaker 2: your side of the table. You have a fiduciary obligation
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Speaker 2: for you and I know that's what Brian does. And
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Speaker 2: Brian comes every Monday to bring us some great information
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Speaker 2: about well the world of money and maybe how it
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Speaker 2: impacts your daily life now and preparing for retirement. Brian James,
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Speaker 2: welcome back, my friend. Always good having you on this segment.
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Speaker 1: Thank you. Brian Thomas, always good to be here.
0:33
Speaker 2: Hey, shock oil, be vegetables. Everything's going up through the
0:35
Speaker 2: roof because of the situation where the golfs closing. This
0:38
Speaker 2: is not new information, but the problem seems to be
0:40
Speaker 2: getting worse, and as we seem to be moments away
0:43
Speaker 2: from maybe a boots on the ground operation. I know
0:45
Speaker 2: there's a lot of people that have been suggesting that
0:47
Speaker 2: given this stalemate we're in with the Iranians, I guess
0:50
Speaker 2: this is only going to get worse. Where are we
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Speaker 2: on this because it looks like everything has been impacted
0:55
Speaker 2: with the exception of eggs.
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Speaker 3: I note, well, we'll see look at the bright side
1:00
Speaker 3: talking about the cost of eggs at the grocery store
1:01
Speaker 3: cash register.
1:02
Speaker 1: Right, So there you go, good talk and I'll see
1:04
Speaker 1: you next week. Right. Well, either it was an interesting ad.
1:07
Speaker 1: It was.
1:07
Speaker 2: It made the social media rounds. I don't want to
1:09
Speaker 2: give credit where credit isn't toe I think was the
1:11
Speaker 2: riverside I GA was sewing. It was two dozen eggs
1:14
Speaker 2: for ninety nine cents or something like that.
1:16
Speaker 1: Wow, do they have a gas station out there?
1:18
Speaker 2: Spots specially Yeah, gases fuel gases nine dollars a gallon there,
1:24
Speaker 2: But you know, you get eggs anyway, obviously. And look
1:29
Speaker 2: what your Articlium points out. Electric costs aret in all
1:32
Speaker 2: time high, and energy costs are the reason we're experiencing
1:35
Speaker 2: this massive inflation.
1:36
Speaker 3: So for sure, yeah, and and and that's not a
1:40
Speaker 3: shock at all. Right, gases above four bucks nationally in
1:44
Speaker 3: Yahoo and the Chicago Tribune are tying that to jump
1:46
Speaker 3: to the April CPI and energy shot pressers. The Bureau
1:50
Speaker 3: Labor Statistics says the CPI was up six tens of
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Speaker 3: a percent in April. Remember these sound like tiny numbers,
1:55
Speaker 3: but they're really not. That's a one month increase, right,
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Speaker 3: six tens of a percent in April, and three point
2:00
Speaker 3: eight percent year of a year. So we're sneaking up
2:02
Speaker 3: against again against that nasty four percent number. We were
2:05
Speaker 3: stuck but happy around three percent. Remember the goal is two,
2:09
Speaker 3: and we got close. We were in the high tos
2:12
Speaker 3: low threes for a good long time. But now as
2:13
Speaker 3: soon as we invaded Iran, prices have gone back up.
2:16
Speaker 3: Gasoline is up almost thirty percent from a year ago.
2:19
Speaker 3: The national gas pump average is four dollars and fifty
2:22
Speaker 3: one cents as of May eighteenth, California is over six fifteen.
2:26
Speaker 3: We know that that's a little different world out there,
2:28
Speaker 3: but the over six bucks a gallon in the area.
2:30
Speaker 2: Set more than seven for diesel Bryant exactly.
2:33
Speaker 3: I was just just going to bring that up, and
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Speaker 3: remember what we're when we're talking about the price of
2:37
Speaker 3: transporting goods across the country, We're not talking about unletted.
2:41
Speaker 3: We're talking about diesel, and that's a very very different
2:44
Speaker 3: environment that is driving prices up for us.
2:46
Speaker 1: All.
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Speaker 2: Well, I guess the big looming question we get any
2:49
Speaker 2: relief from this.
2:50
Speaker 1: I have to look at it.
2:51
Speaker 2: I suppose in the context of the economy, if you
2:53
Speaker 2: just look at the various you know, the Dow and
2:55
Speaker 2: the S and P five hundred, everything seems to be
2:58
Speaker 2: doing pretty well so far. But all this sounds to
3:01
Speaker 2: me like something that I lived through, although it really
3:03
Speaker 2: wasn't economically aware of the nineteen seventies and stagflation. Is
3:06
Speaker 2: that what we're facing, Brian, Well, it can be.
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Speaker 3: You know, at this point, we still have the faith
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Speaker 3: out there that things will settle down right, and within
3:16
Speaker 3: the market is the stock market is the canary and
3:18
Speaker 3: the coal mine when it comes to that, because it's
3:20
Speaker 3: simply not panicking about this.
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Speaker 1: We're wobbling up and down on a.
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Speaker 3: Daily basis, But we still have yet to have major,
3:27
Speaker 3: major concerns among actual real dollars that you know that
3:31
Speaker 3: we're going to go over the cliff at this point.
3:33
Speaker 3: So there's plenty of stuff to be scared about, but
3:35
Speaker 3: at this point it's still we're still in Take a breath,
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Speaker 3: exhale and step back from your four oh one k.
3:40
Speaker 3: Don't do anything major to it. Don't do that anyway,
3:43
Speaker 3: But how many don't make any rash decisions.
3:45
Speaker 2: Yeah, how many ups and downs, I mean significant ones
3:47
Speaker 2: that we've been through. I mean in my lifetime alone.
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Speaker 2: Of course, you had the problem in the nineteen seventies,
3:52
Speaker 2: you had the housing bubble burk, you had the dot
3:54
Speaker 2: com bubble burst. All of this brought down all kinds
3:56
Speaker 2: of problems for our four oh one case. But you
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Speaker 2: know that twenty five percent drop always ended up going
4:01
Speaker 2: to something north of twenty five percent in terms of gain,
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Speaker 2: and over the lifetime of your investments, it always tends
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Speaker 2: to go in that direction.
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Speaker 3: Brian, Oh, every every other day, I mean, there's a
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Speaker 3: wabble over something. We tend to panic about the littlest things.
4:13
Speaker 3: But the important thing is the pendulum swings back in
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Speaker 3: every direction anyway. Eventually, cooler heads prevail and we move on.
4:20
Speaker 3: And that's that's the situation that we're in right now.
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Speaker 3: It's it's not really any different. So what are we
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Speaker 3: looking for in terms of relief, Well, some some relief
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Speaker 3: is possible, but probably not immediately. Obviously, the near term
4:32
Speaker 3: outlook depends on oil prices, whether the Middle East shipping
4:35
Speaker 3: disruptions can calm down. Now when you're you're talking about
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Speaker 3: boots on the ground, that's the opposite of calming down crude,
4:41
Speaker 3: hovering near one hundred dollars of barrels, keeping those pressure
4:43
Speaker 3: on the pumps. Geopolitical issues here is.
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Speaker 1: What all this is. Right.
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Speaker 3: This isn't a you know, it's not a supply issue.
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Speaker 3: It's not a freighter stuck in the Panama Canal, you know,
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Speaker 3: solvable quickly problems. That's not what's happening. What's happening right now,
4:55
Speaker 3: we're resetting kind of the world order. We're also heading
4:58
Speaker 3: in the summer driving season that's going to drive demand refineries.
5:01
Speaker 1: We always talk about this time of year.
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Speaker 3: Refineries are working on working on switching to that summer
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Speaker 3: gasoline blend that they have to change to.
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Speaker 1: You know, all this seasonal stuff.
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Speaker 3: We're gonna have hurricane season, you know, so we get
5:12
Speaker 3: those ships through the straight of horror moves. They might
5:14
Speaker 3: be coming through hurricanes as well, so that can disrupt
5:16
Speaker 3: golf golf coast refining. But none of what I just said,
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Speaker 3: Brian is new. Those are all seasonal, annual things we have.
5:23
Speaker 3: The thing that is not, of course, is the geopolitical
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Speaker 3: unrest that we have right now that comes and goes
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Speaker 3: in cycles as well. So definitely not a time to panic,
5:32
Speaker 3: and really again, never a time to panic. So take
5:34
Speaker 3: a breath and be thankful that you have a job
5:37
Speaker 3: and you're able to get out there and continue to
5:39
Speaker 3: make the economy work.
5:40
Speaker 2: No doubt about it. And you know, for those wait
5:42
Speaker 2: a minute, I thought we were a net energy export,
5:44
Speaker 2: didn't We have enough. We're a wash in oil and
5:46
Speaker 2: gasoline and jet field and everything else. But it's the
5:49
Speaker 2: global market that are impacting. This was an interesting Wall
5:51
Speaker 2: Street Journal article about that just today. The world can't
5:54
Speaker 2: get enough US energy, keeping price high for Americans because
5:57
Speaker 2: we compete on a global basis. We've been able to
5:59
Speaker 2: satisfy the global demand in the absence of the Strait
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Speaker 2: of horror moves, and we are shipping fourteen point two
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Speaker 2: million barrels accrued every single day, but we haven't stepped
6:11
Speaker 2: up production. Refineries are going all out and producing, and
6:15
Speaker 2: our domestic stocks apparently are being depleted fast. That's because
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Speaker 2: the globe is demanding a supply from America that is
6:21
Speaker 2: now available, so we're not going to get any relief
6:23
Speaker 2: domestically either.
6:24
Speaker 3: Well, this is what we wanted to remember. Drill, baby, drill.
6:26
Speaker 3: We want to be a competitor we want to be.
6:28
Speaker 3: We are one of the largest energy producers in the world,
6:31
Speaker 3: and unfortunately, but not surprisingly, I think we have taken
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Speaker 3: the path of, hey, this is a resource we have,
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Speaker 3: let's make as much money as we possibly can out
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Speaker 3: of it, rather than saying, you know what, we've got
6:42
Speaker 3: our own supplies at home. We don't need to participate
6:44
Speaker 3: in the world market. We can keep prices lower here
6:47
Speaker 3: in this country. That's the United States will never make
6:49
Speaker 3: a decision like that. As I say frequently, we are
6:51
Speaker 3: the United States of profit margin. If we can make
6:53
Speaker 3: money off of something, we will, And unfortunately, US citizens
6:57
Speaker 3: are going to take a backseat to the ultimately to
6:59
Speaker 3: the profit margins of the oil industry because that is
7:01
Speaker 3: just how we make our decisions here, and it's how
7:03
Speaker 3: we support our political leaders.
7:05
Speaker 1: Well, you're waving the flag with pride here.
7:06
Speaker 2: It's just reality, just your reality right where you're coming from.
7:11
Speaker 1: Man.
7:11
Speaker 2: But hopefully the oil producers are also paying taxes an
7:14
Speaker 2: the American economy. With their extra profits, We're going to
7:16
Speaker 2: get more tax revenue from them, which may satisfy are
7:20
Speaker 2: rapacious demand to spend money.
7:22
Speaker 1: Yeah, that's true.
7:24
Speaker 3: Remember who we and again I'm not saying this is
7:26
Speaker 3: a bad thing, but that's another place.
7:27
Speaker 1: Taxation is another.
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Speaker 3: Place where we do all the favors we possibly can
7:30
Speaker 3: for our publicly trade Yeah, if you want some deductions, right,
7:34
Speaker 3: our publicly traded companies are not taking garbage bags full
7:37
Speaker 3: of old shirts to Goodwill and taking their receipts and
7:40
Speaker 3: deducting them. There are very complicated tax regulations out there
7:44
Speaker 3: that allow them to pay very very little percentage wise.
7:47
Speaker 3: So yes, is it driving more dollars tax wise?
7:50
Speaker 1: Yes?
7:50
Speaker 3: Are they paying the same way you and I are absolutely.
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Speaker 2: Not providing additional fodder for a regular criticism I have
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Speaker 2: in the American tax code. It is designed by those
7:59
Speaker 2: that benefit the most from it, and that's why it's
8:00
Speaker 2: so damn long, and it shouldn't be and no one
8:03
Speaker 2: should get the extra special relief that nobody else bought.
8:06
Speaker 1: It gets me.
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Speaker 3: The more boring it is, the fewer people will read it,
8:10
Speaker 3: and the fewer opinions will appear at the ballot.
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Speaker 2: Buy and the fewer favors can be handed out via
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Speaker 2: the tax code. Oh boy, you're hitting right in my
8:16
Speaker 2: wheelhouse there, Brian James. And one more thing I want
8:18
Speaker 2: to talk about before we move away from this topic
8:20
Speaker 2: and talk about this new AI obsession Wall Street as fertilizer. Now,
8:24
Speaker 2: we do apparently manufacture a lot of fertilizer in this country,
8:29
Speaker 2: so it's not like this straight up hormones is the
8:30
Speaker 2: only place we get it. Sadly, we don't make enough
8:33
Speaker 2: for our own use, which is why we have to
8:34
Speaker 2: bring it in. That's the ripple effect that I'm worried
8:37
Speaker 2: about with the fertilizer shut down. A lot of countries
8:39
Speaker 2: don't make their own and they need that production from
8:41
Speaker 2: the Middle East, and if they're not getting the crops
8:43
Speaker 2: fertilized right now at crop planting time, that could be
8:46
Speaker 2: a very very bad ripple effect down the road.
8:49
Speaker 3: That's another one of those seasonal things that we'll see
8:50
Speaker 3: when we when we need to have these crops pulled
8:54
Speaker 3: out of the ground and harvested and shipped across Did
8:56
Speaker 3: we get them grown? Probably going to get the right
8:58
Speaker 3: yields that we're used to in all those kinds of things.
9:01
Speaker 3: And so yes US is a major producer of the
9:05
Speaker 3: three big categories of fertilizer, nitrogen, phosphate, and potash. All
9:10
Speaker 3: that comes out of Louisiana, Oklahoma. Iowa, Texas and in Florida.
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Speaker 1: Florida is a big one too. You're right.
9:16
Speaker 3: In the companies like Mosaic Nutrient. These are all big,
9:20
Speaker 3: huge industrial companies that live in the background. And remember
9:24
Speaker 3: what we talked about occasionally natural gas plays a role
9:26
Speaker 3: here too. Natural gas is an important element in the
9:29
Speaker 3: production of fertilizer. Yeah, and so when you as an
9:32
Speaker 3: example of what can happen there, when you look at
9:34
Speaker 3: Europe twenty twenty two, Europe's fertilizer production collapsed when natural
9:38
Speaker 3: gas prices exploded right after the Russia invaded Ukraine. So
9:42
Speaker 3: there's all these things are connected, and one little thing
9:44
Speaker 3: happening somewhere far off in the universe may trickle down
9:48
Speaker 3: to have an effect.
9:48
Speaker 1: You know.
9:49
Speaker 3: Again locally here at home, we're not really exempt from anything,
9:52
Speaker 3: no not.
9:53
Speaker 2: And somewhere in the in some remote corner of India,
9:56
Speaker 2: there's a butterfly flapping its wings right now exactly.
10:00
Speaker 1: And I have to rebounce my four O K because
10:01
Speaker 1: of it.
10:02
Speaker 2: That's right. Yeah, I don't recommend you doing that. Neither
10:04
Speaker 2: is Brian pull You're talking out of your cheek. We'll
10:06
Speaker 2: come back and talk about Wall Street's news KRCD talk station,
10:08
Speaker 2: Happy Monday, Money Monday.
10:10
Speaker 1: Brian James on the phone, pivoting over.
10:13
Speaker 2: Brian James, I would admit cryptocurrency and all of its
10:16
Speaker 2: forms like the peace of God. It passes all Brian Thomas,
10:18
Speaker 2: understanding I've been had to explain to me and everything
10:22
Speaker 2: I just looked at. It's a bunch of ones and
10:23
Speaker 2: zero's floating around in the world and it's not regulated.
10:26
Speaker 2: It leads up until maybe the Clarity Act, which came
10:29
Speaker 2: out of committee the other day along party lines. I
10:31
Speaker 2: know you're gonna explain that what this Clarity Act is
10:34
Speaker 2: all about. I mean, I get concerned when I see
10:37
Speaker 2: that the bill was championed by the crypto companies. For
10:40
Speaker 2: some reason, they are in favor of this. They want
10:42
Speaker 2: some measure of regulation, but not too much. And apparently
10:46
Speaker 2: that's where the party divide comes along. First off, Brian,
10:48
Speaker 2: how did this become a Republican Democrat division?
10:50
Speaker 3: Well, honestly, I believe it's because the crypto industry has
10:53
Speaker 3: an awful lot of money behind it, and there are
10:55
Speaker 3: a bunch of politicians who would like to make that
10:58
Speaker 3: group happy so that that money can flow their way.
11:00
Speaker 3: And so, yeah, this was God forbid a somewhat bipartisan
11:04
Speaker 3: vote here. The reason So this is about regulation, right,
11:07
Speaker 3: So Republicans normally are not so excited about regulation, but
11:12
Speaker 3: in this particular case, it will mean. The point of
11:15
Speaker 3: this here is legitimizing cryptocurrency and allowing if there's rules,
11:20
Speaker 3: if there's regulation, then all of a sudden, we're allowing
11:24
Speaker 3: the bigger dollars to flow it.
11:26
Speaker 2: Well, wait a minute, doesn't that that legitimizing part just
11:29
Speaker 2: sort of overlook the reality that it seems to be
11:31
Speaker 2: pretty legitimate in the hearts and minds of so many
11:33
Speaker 2: people who are using it and buying it. There's billions
11:35
Speaker 2: and billions of dollars out there invested in it. Yeah,
11:37
Speaker 2: but the key word of what you just said is people.
11:39
Speaker 2: What we're talking about is institutions. So without the regulation
11:43
Speaker 2: then the big financial institutions can only do so much
11:46
Speaker 2: with it. And not to mention really what they're after here,
11:48
Speaker 2: one of the big things is the twelve trillion dollars
11:51
Speaker 2: that we all collectively have in our four to one case.
11:53
Speaker 2: We've been talking about that frequently over the last couple
11:55
Speaker 2: of years as these acts have kind of snuck through.
11:57
Speaker 3: There's a lot of different moving parts to this. Of
11:59
Speaker 3: course go figure. But the whole point of this, again
12:02
Speaker 3: would be to legitimize this stuff as kind of as
12:05
Speaker 3: a security, if you would, But they don't want to
12:08
Speaker 3: go that far because that would put it under the
12:09
Speaker 3: SEC regulation. SEC is generally stricter and more expensive to
12:14
Speaker 3: deal with, and so they're looking to have it governed
12:17
Speaker 3: by the Commodity Futures Trading Commission CFTC instead of the SEC.
12:22
Speaker 3: And so what it's doing is it's attempting to This
12:24
Speaker 3: bill attempts to define when a crypto network is decentralized
12:28
Speaker 3: enough to avoid securities classification. If you're going to trade
12:31
Speaker 3: it through aut official exchange, it's going to become a security.
12:33
Speaker 3: So they're looking to kind of redefine what that is
12:35
Speaker 3: to keep it out from under the SEC. And this
12:37
Speaker 3: is a piece of paper with a bunch of leaders
12:39
Speaker 3: who signed it, who said this is probably a good idea.
12:42
Speaker 3: So now the bill moves onto the full Senate, where
12:44
Speaker 3: it's going to need sixty votes to survive the filibuster.
12:47
Speaker 1: So let's see what happens.
12:48
Speaker 2: Well, I see that the banking industry is concerned about this,
12:51
Speaker 2: under the argument that it's going to allow crypto groups
12:54
Speaker 2: to offer interest like payments to stable coin holders and
12:58
Speaker 2: lead to decreased bank deposits. I guess part of me
13:01
Speaker 2: wants to read that as well. This is I guess
13:04
Speaker 2: progress of a sort. Sorry, the banks have some new
13:07
Speaker 2: competition in the form of crypto, But if that's where
13:10
Speaker 2: people want to gravitate to, isn't that like an improvement?
13:12
Speaker 2: It doesn't that force banks to maybe change their ways
13:14
Speaker 2: for the better of all of us.
13:16
Speaker 3: Just throwing out that is absolutely the whole purpose of
13:19
Speaker 3: the decentralization concept of cryptocurrency, removing the major financial institutions
13:25
Speaker 3: and removing the financial supply chain that we've built over
13:28
Speaker 3: centuries upon centuries and kind of putting it in the
13:31
Speaker 3: hands of the people. Which all that is great, that's
13:34
Speaker 3: a great slogan to put out there and wave on
13:36
Speaker 3: a flag. But at the same time, anything that provides
13:39
Speaker 3: a path to kind of stay hidden and to stay
13:41
Speaker 3: a little more disconnected but still move a lot of
13:44
Speaker 3: money around, what's that going to attract, Brian, That's going
13:46
Speaker 3: to attract a little bit of malfeasance here and there.
13:48
Speaker 3: So that's why the whole reason behind there is for
13:51
Speaker 3: some kind of oversight. If it's that without over going overboard,
13:55
Speaker 3: the answer is not no oversight.
13:57
Speaker 1: So that's what they're trying to address well.
13:58
Speaker 2: And I understand law enforcements arguing about this because illicit
14:01
Speaker 2: financial transactions can be hidden using crypto, and I get
14:04
Speaker 2: all that, but I'm also a privacy advocate Brian James,
14:07
Speaker 2: and the whole idea of crypto scares me because they
14:09
Speaker 2: can easily track literally every penny you spend, where you
14:12
Speaker 2: spend it, and all of that. And I'm sorry to
14:15
Speaker 2: the extent some criminals are going to use it. I
14:16
Speaker 2: would rather keep my privacy and let them take advantage
14:20
Speaker 2: of the system like so many criminals are going to
14:21
Speaker 2: do anyway, then remove all elements of privacy.
14:25
Speaker 3: Yeah, so it's an interesting conundrum there, right. So maybe
14:28
Speaker 3: the names aren't attached, but you can definitely follow the
14:31
Speaker 3: path that old phrase follow the money, and one can
14:33
Speaker 3: literally pull this stuff up on.
14:34
Speaker 1: The Internet and you can see where.
14:36
Speaker 3: The piles of the giant piles of crypto are. You
14:38
Speaker 3: just can't figure out who owns them. Now, there is
14:40
Speaker 3: a fascinating book out there called Number Go Up that
14:43
Speaker 3: digs deep into how there are some groups out there
14:46
Speaker 3: who have figured out ways to figure out which people
14:49
Speaker 3: are behind this. So not only is it maybe not
14:52
Speaker 3: as private as we might think, there's breadcrumbs out there.
14:55
Speaker 3: Anybody who is performing these a list of transactions leaves
14:58
Speaker 3: a trail.
14:59
Speaker 1: That's the whole point of the blockchain.
15:00
Speaker 3: It does leave a trail, and it may or may
15:02
Speaker 3: not hide the names attached to it. I don't think
15:04
Speaker 3: that's a bad thing.
15:05
Speaker 2: Well, there you have it. That's the reality of crypto
15:07
Speaker 2: right now. More with Brian James, gonna find about Prediction
15:09
Speaker 2: Markets who's also made a prediction See the.
15:12
Speaker 1: Talk station eight thirty almost e.
15:15
Speaker 2: Thirty one to fifty about kersite talk station one more
15:17
Speaker 2: with Money Monday's Brian James. Thanks to Allworth Financial for
15:20
Speaker 2: loaning them out to us every week and pivoting over
15:23
Speaker 2: Prediction Market's Brian James. Prediction markets is pretty much you
15:26
Speaker 2: can bet on anything, like the Reds are gonna win
15:29
Speaker 2: or not, the the the catcher is going to scratch
15:32
Speaker 2: himself in the fourth inning or not, and of course
15:35
Speaker 2: the direction of you know things that of all the economy.
15:37
Speaker 2: I mean, isn't that really kind of like a large
15:39
Speaker 2: betting thing?
15:41
Speaker 1: That's really all it is. You can get.
15:43
Speaker 3: You can bet on just about anything that you can take.
15:45
Speaker 3: Get somebody to take the other side of right, if
15:47
Speaker 3: there's nobody else watching that game, for the catcher to
15:49
Speaker 3: scratch himself.
15:50
Speaker 1: Then you might not get that bet taken.
15:51
Speaker 3: But stuff like that is literally out there, you know,
15:54
Speaker 3: the bigger ones of course, will the Fed cut rates,
15:56
Speaker 3: will inflation exceed three percent? Will this candidate or that
15:59
Speaker 3: candidate win? Will oil hit a certain price? That kind
16:01
Speaker 3: of stuff. And these contracts do trade like stocks, and
16:05
Speaker 3: they settle at either zero or one dollar, depending on
16:07
Speaker 3: the outcome. And so platforms that are out there, like
16:11
Speaker 3: calls KLSHI you're going to hear that name an awful lot.
16:14
Speaker 3: They argue that these are financial instruments, not gambling, and
16:18
Speaker 3: that distinction does matter because it puts them under federal
16:20
Speaker 3: commodities regulations sometime.
16:22
Speaker 1: We've talked about that group this.
16:23
Speaker 3: Morning instead of state gambling laws, which is a whole different,
16:27
Speaker 3: very different animal. So why are we talking about this,
16:30
Speaker 3: Brian times, Well, this has exploded. Prediction market trading grew
16:34
Speaker 3: from roughly five billion dollars a month in late twenty
16:37
Speaker 3: four to about twenty four billion dollars by March of
16:40
Speaker 3: twenty twenty six, we're now starting to see this retail
16:42
Speaker 3: speculation bleeding into the mainstream brokerage platforms too. Interactive Brokers,
16:47
Speaker 3: that's a big online brokerage out there. They are integrating
16:50
Speaker 3: prediction markets directly into their trading ecosystem.
16:54
Speaker 2: Well, I guess on some level I have to say
16:57
Speaker 2: this out loud only for you to correct me or say, yeah,
16:59
Speaker 2: you're kind of right. Aren't this various stock markets themselves
17:03
Speaker 2: prediction markets? I mean, you have literally millions and billions
17:06
Speaker 2: and people investing in the meach and every day the
17:08
Speaker 2: direction goes up or down based upon people's perception of
17:11
Speaker 2: the direction of the market any particular like for example,
17:13
Speaker 2: oil you might bet is going to go up and
17:15
Speaker 2: you buy it and expecting the contracts to go up.
17:17
Speaker 2: But I mean, the volume results in some measure of accuracy.
17:22
Speaker 2: The more people participate, the more smart people make decisions
17:26
Speaker 2: that are reflected in the market. So don't you get
17:28
Speaker 2: the best possible view of any given buy based on
17:32
Speaker 2: stock market since it's the most popular.
17:34
Speaker 3: Wisdom of crowds is what you're referring to there, So yeah,
17:37
Speaker 3: a stock market price, any stock price, is nothing more
17:40
Speaker 3: than the general public's official opinion of what that company's
17:43
Speaker 3: going to earn in the future. It doesn't matter what
17:45
Speaker 3: they did last quarter. That's just verifying whatever bet we
17:47
Speaker 3: made last quarter, was that right or not. But if
17:50
Speaker 3: a stock is going up, that's because investors see that
17:53
Speaker 3: there is a good future head. They may be right,
17:54
Speaker 3: they may be wrong, but they're willing to put their
17:56
Speaker 3: dollars on the line. Now that's the big thing here.
17:58
Speaker 3: Of course, there's a lot of activity here. Activity generates
18:01
Speaker 3: profits for somebody. That's why these prediction markets are out there.
18:05
Speaker 3: But why Wall Street likes these If it's one thing
18:07
Speaker 3: to take a survey and get people's opinion. Surveys can
18:11
Speaker 3: be kind of bloney because people will, you know, they
18:12
Speaker 3: might maybe they're you know, maybe their turmy hurts that
18:15
Speaker 3: day or something, they're in a bad mood.
18:16
Speaker 2: When money is involved, exactly, if you're.
18:19
Speaker 3: Going to attach your dollars, your own hard earned dollars
18:21
Speaker 3: to an opinion, that's a pretty good opinion. So Wall
18:24
Speaker 3: Street is actually looking looking at this as as a
18:28
Speaker 3: way to confirm a way to kind of predict a
18:30
Speaker 3: sentiment on certain things. Recession probabilities, geopolitical conflict risks, natural
18:35
Speaker 3: disaster forecasts, election outcomes. That's a big one right there.
18:38
Speaker 3: You know, if you're somebody who's inclined to use these
18:40
Speaker 3: things and you're gonna put money on it, then you're
18:42
Speaker 3: very likely betting on the candidate that you yourself are
18:44
Speaker 3: going to vote for because that's who you think is
18:46
Speaker 3: going to win. So that there there is some predictive
18:49
Speaker 3: value here. A lot of strategists say they provide cleaner
18:52
Speaker 3: market signals than traditional analyst forecasts or pulling again, because
18:55
Speaker 3: it's people putting their real dollars on the line, which
18:58
Speaker 3: will generally align with what they think.
19:00
Speaker 2: So the regulatory component of this, clearly it's not regulated
19:04
Speaker 2: like securities right now, What impact would that have if
19:06
Speaker 2: they said, yeah, this is like trading securities, and so
19:09
Speaker 2: you're going to be subjected to the rules and regulations
19:11
Speaker 2: regarding those.
19:12
Speaker 3: Well, I think that that's that's the complicated part, because
19:15
Speaker 3: how are you going to regulate the manipulation of this?
19:17
Speaker 1: Right right?
19:18
Speaker 3: If I'm just a famous person and uh, and I
19:21
Speaker 3: can get another famous person to say something on a
19:23
Speaker 3: live mic, well then I can get a bunch of
19:25
Speaker 3: people paid. And I think that is literally happening right
19:28
Speaker 3: now with these prediction markets. How are you going to
19:30
Speaker 3: police things like that? Right, That's why the SEC exists
19:32
Speaker 3: because you have to file your quarterly reports. You have
19:35
Speaker 3: to you know, we have to be able to look
19:36
Speaker 3: at the books and all that kind of stuff, and
19:38
Speaker 3: that makes everything complicated. But I don't I do not
19:41
Speaker 3: know how in the world we're going to be able
19:43
Speaker 3: to regulate this kind of thing, you know, when it
19:46
Speaker 3: comes to making sure it's not being manipulated, and it
19:49
Speaker 3: already is being abused. There have been cases out there here.
19:52
Speaker 3: It's been used to create a headline that is then
19:54
Speaker 3: used to push in the gem.
19:56
Speaker 2: Of course click. Of course, people react to it, Oh
19:59
Speaker 2: my god, I saw that headline. I'm gonna buy or
20:01
Speaker 2: do this in the prediction market, and of course you've
20:03
Speaker 2: been lied to at the outset of course, that formulates
20:05
Speaker 2: people stupid decisions. But then again, the same thing happens
20:08
Speaker 2: in sports betting. If you get some kid to shave
20:10
Speaker 2: a few points off in a ballgame, he's gonna benefit
20:13
Speaker 2: financially because you're gonna write him a check or otherwise
20:15
Speaker 2: not exposed the skeletons in his closet, and you're gonna
20:18
Speaker 2: win your sports bet. That happens all the time.
20:20
Speaker 3: It does, and that was a pretty famous local example
20:23
Speaker 3: of the Black Sox scandal against the Cincinnanti Reds in
20:26
Speaker 3: nineteen nineteen. Right, But we didn't have all the oversight,
20:28
Speaker 3: we didn't have social media and all that stuff then.
20:31
Speaker 3: So yeah, you know, well, somebody is going to find
20:33
Speaker 3: a creative way to abuse this stuff and it's going
20:35
Speaker 3: to be it's gonna have an impact.
20:37
Speaker 2: And that had the impact of creating the cardinal rule
20:40
Speaker 2: of baseball you do not bet on baseball. Another local
20:43
Speaker 2: history how about that, Brian Thomas tying that one back
20:46
Speaker 2: in anyhow, But no, go ahead and violate it because
20:49
Speaker 2: you're the best ever whatever, Brian James. You don't need
20:51
Speaker 2: a comment on that. That was me, Brian James. All
20:53
Speaker 2: or Financial Appreciation show coming up on the show, talking
20:55
Speaker 2: about these important issues every week. We'll do this again
20:57
Speaker 2: next week. Have a wonderful week between now and then.
20:59
Speaker 1: Well, I'll talk to you in one week.
21:01
Speaker 2: Boult lines are open, folks five one, three, seven, four
21:03
Speaker 2: nine fifty five hundred, eight hundred eight two three talk
21:05
Speaker 2: it