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Why companies are not prioritizing hiring in 2026 · The Financial Exchange Show

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Speaker 1: donation today. This is the Financial Exchange with Chuck Zada,
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Speaker 1: and Mark Fandetti, Chuck.
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Speaker 2: Mark and Tucker with you here on Monday's pretty quiet week,
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Speaker 2: quite honestly, and so if you're recovering from a little
1:25
Speaker 2: bit of overeating on Christmas, as I've been known to do,
1:31
Speaker 2: then we're in the same boat and we can just
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Speaker 2: kind of take it easy. We do have some economic
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Speaker 2: data that comes out this week. Casehal our Home Price
1:38
Speaker 2: Index will be out tomorrow along with the FHFA Home
1:42
Speaker 2: Price Index. We're going to be getting fed Minutes tomorrow
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Speaker 2: as well, and then Wednesday we are going to be
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Speaker 2: getting some jobless claims.
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Speaker 3: But overall, just.
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Speaker 2: A pretty quiet week and a nice way for us
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Speaker 2: to digest our food Digest twenty twenty five and get
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Speaker 2: ready for which twenty twenty six. Trading starts this Friday.
2:03
Speaker 2: It's gonna be one of these weird things where you
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Speaker 2: have one day of trading in the new year, and
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Speaker 2: then hey, take another two day break because of the weekend,
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Speaker 2: and really get into it on Monday the fifth. But
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Speaker 2: in any case, there is still some stuff that is
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Speaker 2: moving around and some things that I think are worth
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Speaker 2: talking about at this time of the year.
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Speaker 3: Things that are not worth talking about.
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Speaker 2: Twenty twenty six s and P five hundred price targets useless,
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Speaker 2: don't care, not gonna do it, So we're gonna skip
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Speaker 2: over that. But what I do want to discuss is
2:32
Speaker 2: we are going to have a new FED chair in
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Speaker 2: the first half of next year. The actual timeline for
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Speaker 2: this is Powell's term is up in May, and so
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Speaker 2: in theory he's going to finish out his term. I
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Speaker 2: think he will, just because I think he've used it
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Speaker 2: as something that's important.
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Speaker 3: But we're very likely to get.
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Speaker 2: An announcement on who that next FED chair is going
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Speaker 2: to be sometime in January. And at this point, I
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Speaker 2: think we've got the two keV are in the running.
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Speaker 2: We've got Kevin Hassett and Kevin Warsh. Waller is in
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Speaker 2: the running. Chris Waller, who is the Where's he the
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Speaker 2: FED governor?
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Speaker 4: Or?
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Speaker 3: Is he just on the is he just he's a governor?
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Speaker 3: He's a governor. I can't remember which which one he's.
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Speaker 5: I don't associate them with the geographic that may be
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Speaker 5: the case. I just think of governor's is floating as
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Speaker 5: opposed to presidents of FED banks who.
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Speaker 3: Oh, okay, I meant he was a president. He's not
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Speaker 3: a president.
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Speaker 2: So those are the three names that have been bandied about.
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Speaker 2: I still think there's an outside chance, we little chance,
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Speaker 2: maybe I don't know, ten twelve percent chance that Scott Besson,
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Speaker 2: current Treasury Secretary, ends up in the role. But this
3:44
Speaker 2: is kind of where we are right now. Is there
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Speaker 2: is going to be a new FED chair about five
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Speaker 2: months from now, and there's a piece in the Wall
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Speaker 2: Street Journal how investors are preparing for a new FED?
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Speaker 2: How are they preparing?
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Speaker 5: Mark Well, I don't. I think you have to think
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Speaker 5: about this in terms of what the Fed's job. If
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Speaker 5: I may just, I don't want to go on a
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Speaker 5: diatribe here about the FED being compromised. Maybe we should
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Speaker 5: get into that because it's unavoidable and it directly impacts
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Speaker 5: financial markets. But first, remember what the FED does. It's
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Speaker 5: the economy's thermostat the FED can It's useful to think
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Speaker 5: about the FED is controlling demand before inflation, so the
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Speaker 5: FED can control the growth rate of the economy. I'm
4:24
Speaker 5: oversimplifying a little bit, and a monetary economist would slap
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Speaker 5: me on the wrist for this, but just think about
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Speaker 5: it that way, and demand overall consists of an inflation
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Speaker 5: component and a real or an after inflation component. But
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Speaker 5: so the Fed, because it can print money, it can
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Speaker 5: effectively control. Again I'm oversimplifying the rate of inflation. Things
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Speaker 5: can get out of hand as a result. If the
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Speaker 5: FED is too lax with respect to one component of
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Speaker 5: its dual mandate, which is to keep inflation low and stable,
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Speaker 5: which the FED defines is two percent. That's still the
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Speaker 5: Fed's job. It's important, I think, to keep that in
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Speaker 5: n The reason I opened with saying, well, the FED
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Speaker 5: is compromised is because the administration doesn't care about the
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Speaker 5: two percent goal. They've made that clear. The administration wants
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Speaker 5: the FED to just print a lot of money. When
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Speaker 5: they say they want interest rates low. That's synonymous with
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Speaker 5: printing a lot of money. To the extent that that
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Speaker 5: influences inflation expectations which are elevated, you've got a problem.
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Speaker 5: And to the extent that that feeds into demand and
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Speaker 5: pushes demand above the economy's productive capacity, you've got a problem.
5:32
Speaker 5: Let me ask inflation problem.
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Speaker 2: Let me ask you a question, because this is one
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Speaker 2: that I'm sure listeners are thinking right now. Previous presidents
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Speaker 2: have made similar not the same type, but have have
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Speaker 2: similarly tried to jawbone the FED into moving rates lower,
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Speaker 2: not in.
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Speaker 5: The modern era, not since snot since Clinton.
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Speaker 2: Well, I was going to go back even further. I
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Speaker 2: mean Clinton and Johnson are the two examples that I
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Speaker 2: was going to give that.
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Speaker 5: Are Clinton and Clinton was a good example, Johnson a
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Speaker 5: bad example.
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Speaker 2: So I guess my question on this is we've seen
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Speaker 2: this previously from other presidents. Is there a difference here
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Speaker 2: in terms of how you view that the FED could
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Speaker 2: be influenced because again, previous presidents like yeah, again, Johnson
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Speaker 2: did Nixon certainly?
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Speaker 5: And what happened after that? We had the Great Inflation?
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Speaker 3: Correct?
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Speaker 2: I guess do you draw a straight line from point
6:30
Speaker 2: eight se b or were their exogenous factors that contributed,
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Speaker 2: especially with.
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Speaker 5: Nick Yeah, well, okay, Johnson needed to finance great society
6:42
Speaker 5: in the Vietnam War, so we had easy fiscal, easy
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Speaker 5: monetary policy. Inflation started to pick up in sixty six
6:47
Speaker 5: sixty seven. Then we were off to the races. We
6:49
Speaker 5: had two oil shocks in the seventies just exacerbating things,
6:52
Speaker 5: but the trend was up. Nixon, similarly worried about his
6:56
Speaker 5: reelection appoints his buddy Arthur Burns, who was who was
7:00
Speaker 5: the pre eminent business cycle economists is.
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Speaker 3: Very well regarded. Before his time.
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Speaker 5: He was brilliant, brilliant, right, He spent a lot of
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Speaker 5: time doing forecasting, effectively invented the concept along with a
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Speaker 5: couple of other guys. I say guys generically they happen
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Speaker 5: to be man of business cycles and forecasting them. Johnson
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Speaker 5: and Nixon broke the FED. It was it was already.
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Speaker 5: It was already, you know, tenuous because it was still new,
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Speaker 5: this idea of independent monetary policy. Trump's gonna break the
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Speaker 5: FED again. He arguably already has if you look at
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Speaker 5: inflation expectations, and we're gonna have to relearn the lesson
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Speaker 5: of the importance of independence and FED credibility all over again.
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Speaker 2: Let me ask you another question, then, because there's an
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Speaker 2: assumption I think embedded in this. Let me ask you,
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Speaker 2: is there an assumption embedded in this that whoever is
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Speaker 2: the FED chair is actually going to follow through on
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Speaker 2: what President Trump is explicitly like again week or two,
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Speaker 2: like explicitly saying I want someone who's going to lower rates.
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Speaker 5: I don't if you look at how the and this
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Speaker 5: is this goes a little bit beyond finance. But he's
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Speaker 5: getting his way. In other areas, you could say you
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Speaker 5: think that's great, or you think it's not great. I'm
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Speaker 5: not gonna comment on that, sure, but if he wants it,
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Speaker 5: he's getting it. He's being a very aggressive, empowered, energetic
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Speaker 5: chief executive. I guess, yeah, I have to take a
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Speaker 5: bit of a leap and say I find it hard
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Speaker 5: to believe whoever he puts at the FED is not
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Speaker 5: effectively a puppet, and a puppet sounds derogatory, but I
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Speaker 5: think Trump, if he asked him, he'd say, yeah, I
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Speaker 5: want a puppet at the FED.
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Speaker 2: This leads me to my final question that I think
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Speaker 2: we'll get to where I'm really going with this, and
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Speaker 2: then I will conclude my opening arguments. Scott Bessen, Yeah,
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Speaker 2: the year before he became Treasury Secretary, was very publicly
8:44
Speaker 2: criticizing Janet Yellen, who was Treasury Secretary at the time,
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Speaker 2: saying I don't like how she's managing the mix between
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Speaker 2: short term bills and long term bonds, like you know,
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Speaker 2: wrote multiple white papers on this, and you know it
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Speaker 2: was on different news networks, you know, talking about this
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Speaker 2: and so on and so forth. Comes into the position
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Speaker 2: of Treasury Secretary this year and has kept doing exactly
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Speaker 2: what Janet Yellen was doing because he looked at the
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Speaker 2: situation and was like, Yeah, of course I'm going to
9:12
Speaker 2: keep doing this because I want to keep my job.
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Speaker 2: I guess my question is regardless of who comes in,
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Speaker 2: whether it's one of the Kevins, whether it's Best, whether
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Speaker 2: it's Wall or whoever it might be, whether it's you know,
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Speaker 2: someone who we haven't mentioned yet, which I don't think
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Speaker 2: is the case, because it seems fairly, you know, far
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Speaker 2: along in the process.
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Speaker 3: Now.
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Speaker 2: I believe that to a certain extent, you get into
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Speaker 2: that chair, whatever the chair is, anywhere, and once you
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Speaker 2: realize how much power you have there at the helm
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Speaker 2: of the US financial system, despite your previous thoughts to
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Speaker 2: the contrary, maybe you generally tend to be like, yeah,
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Speaker 2: I guess I really can't, you know, push that button
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Speaker 2: the way that I want to. What happened with Besson,
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Speaker 2: I guess is what I'm getting at is, bessont you
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Speaker 2: know the whole year last year was I can't believe
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Speaker 2: Yellen's doing things this way. I can't believe she's doing
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Speaker 2: it this way. And then he's basically done the exact
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Speaker 2: same thing, and so part of me looks at this
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Speaker 2: and says, I know that, you know, there's this thought
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Speaker 2: that hey, whoever goes in there is going to you know,
10:23
Speaker 2: harm the fed's independence and their credibility. But I guess
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Speaker 2: part of me looks at it and goes, I'm not
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Speaker 2: so sure. Based on what we've seen from Besson during
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Speaker 2: this administration.
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Speaker 5: As well, maybe he pulls like a Thomas Beckett. If
10:36
Speaker 5: you've ever seen the movie he was made archbishop and
10:38
Speaker 5: then he started bucking the king and a Great Peril
10:41
Speaker 5: Tool movie. Yeah, so maybe he does. And then of
10:43
Speaker 5: course Trump pulls a Henry the Second on him. I
10:46
Speaker 5: don't see the president, and if you haven't seen the
10:48
Speaker 5: movie you may not, or you know, read about this episode,
10:51
Speaker 5: you may not get that. But the point is, my
10:54
Speaker 5: guess is that the president has been fierce about imposing
10:57
Speaker 5: loyalty in his will. You think he'll brook uh a
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Speaker 5: FED chairman bucking him. I don't. He'll find a way
11:05
Speaker 5: to fire.
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Speaker 3: He has with Powell, and he appointed Powell only.
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Speaker 5: He was we know he was on the brink of
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Speaker 5: firing him a couple of times, and but Bessant and
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Speaker 5: others walked him, who's going to be there to walk
11:15
Speaker 5: him back this time. If Bessant decides FED integrity and
11:20
Speaker 5: independence is too important to the stability of our financial system,
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Speaker 5: I'm sorry, mister President. I can't lower interest rates to
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Speaker 5: zero with inflation at about three and economic growth uh
11:31
Speaker 5: seemingly above trend. I don't think the president is going
11:34
Speaker 5: to talk This again, gets way beyond economic analysis. That
11:38
Speaker 5: You've got to look at the way that the president
11:39
Speaker 5: has maade in other areas. He does not brook opposition,
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Speaker 5: He's fierce about imposing loyalty, about demanding loyalty. Will he
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Speaker 5: suddenly respect the Fed's independence because it's his guy? Powell
11:51
Speaker 5: was his guy?
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Speaker 3: But that's what like.
11:53
Speaker 2: I guess what I'm saying is Poul was this guy.
11:56
Speaker 2: He said, I don't like him anymore, but he still
11:59
Speaker 2: hasn't moved on from him.
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Speaker 5: I don't think he's going to make the same mistake twice. Interesting,
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Speaker 5: what in his view is a bit well, look at
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Speaker 5: how the president's behaved in other areas. He feels very empowered.
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Speaker 5: Why would he stop at the at the FED.
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Speaker 3: Let's take a quick break.
12:14
Speaker 2: When we return, let's talk a little bit about labor
12:17
Speaker 2: market expectations.
12:18
Speaker 3: In twenty twenty six, Miss.
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13:39
Speaker 2: Wall Street Journal, it's the French language Wall Street Journal
13:45
Speaker 2: that uh I can't read because I don't speak French.
13:49
Speaker 2: I always struggle with crossword puzzles because of that, you know.
13:51
Speaker 2: I get crossword puzzle as like at least two or
13:53
Speaker 2: three French things in it, and I'm looking at and
13:55
Speaker 2: I'm like, don't know, have to skip the clue, maybe
13:57
Speaker 2: hopefully get it on the cross I've.
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Speaker 3: No chance in those.
14:01
Speaker 2: But whatever companies they're outlining their hiring plans for twenty
14:05
Speaker 2: twenty six, they don't look very good. And this is
14:10
Speaker 2: meshing with the real time data that we are continuing
14:15
Speaker 2: to get on the state of the labor market, which,
14:17
Speaker 2: in my opinion, which might not be worth the paper
14:21
Speaker 2: it's printed on, but usually it's worth at least the
14:23
Speaker 2: paper it's printed on, because paper's pretty cheap these days.
14:28
Speaker 2: US labor market continuing to slow. The latest data that
14:31
Speaker 2: I have here and this.
14:32
Speaker 3: Is from a week ago.
14:34
Speaker 2: But and again you have to take this with a
14:38
Speaker 2: grain of salt, just because year end numbers always get
14:40
Speaker 2: a little wonky because of holiday schedules and floating holidays
14:44
Speaker 2: and things like that. But when you look at the
14:49
Speaker 2: current state of fight attacks withholding relative to last year,
14:54
Speaker 2: this is the trend that we have been on now
14:58
Speaker 2: over the last six month months. July of this year
15:02
Speaker 2: saw a seven point four percent year over year increase
15:06
Speaker 2: in FIGHTA withholding.
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Speaker 3: And why this matters?
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Speaker 2: Okay, Like why I think this matters as opposed to
15:11
Speaker 2: like some of these other measures ultimately, fighter withholding measures.
15:15
Speaker 2: One thing, how much income tax are employers and employees
15:20
Speaker 2: withholding on a regular basis based on the actual wages
15:25
Speaker 2: they are paying, specifically wages under about one hundred and
15:29
Speaker 2: sixty thousand, because that's where the FIKA cap is. And
15:32
Speaker 2: like it's basically how much money is the apt like
15:36
Speaker 2: the normal person in the United States making? How much
15:40
Speaker 2: growth are we seeing in that spending power of three
15:44
Speaker 2: hundred and ten million people as opposed to you know,
15:46
Speaker 2: the twenty million that make north of that or whatever
15:48
Speaker 2: that number is. So in July of this year, FIGHTA
15:52
Speaker 2: withholding growth was at seven point four percent.
15:55
Speaker 3: Which is pretty robust. Like it's pretty good.
15:57
Speaker 2: Like you generally, if you see anything historically like the
16:02
Speaker 2: last ten years, if you're running like five to seven
16:04
Speaker 2: percent growth, you're fine, there like that, that's where you
16:07
Speaker 2: want to be. So seven four you're like, okay, this
16:09
Speaker 2: is pretty good. August slows to seven to two. Negligible change. Honestly,
16:14
Speaker 2: if if you just had like that little wiggle you
16:16
Speaker 2: shrug it off. October down to four point three percent,
16:21
Speaker 2: I'm sorry, September down to four point three percent. October
16:24
Speaker 2: and November you have to aggregate them because of when
16:27
Speaker 2: Halloween fell an end of month this year, but whatever,
16:29
Speaker 2: you can do that down to three point eight percent.
16:32
Speaker 2: You could look at that October and November number and say, yeah,
16:36
Speaker 2: it fell to three eight but maybe that was because
16:38
Speaker 2: of the shutdown, because that did have some delays in
16:41
Speaker 2: you know, certain payments there, and government contractors might not
16:44
Speaker 2: have been getting paid during that time, and so maybe
16:46
Speaker 2: they weren't paying their employees. Whatever you can, you can
16:49
Speaker 2: kind of like hand wave it away. December through December
16:54
Speaker 2: twenty second is running half a percent year over year growth,
16:59
Speaker 2: which hmm, in my opinion is below stall speed. And
17:03
Speaker 2: the reason that I say that is, remember this is
17:07
Speaker 2: the time of year where most employers are giving raises,
17:10
Speaker 2: but in reality, raises happen all throughout the calendar year,
17:13
Speaker 2: and I don't know what kind of raises anyone listening
17:16
Speaker 2: may be receiving. Maybe you're retired and this is not,
17:18
Speaker 2: you know, something that's relevant to you anymore. But in general,
17:21
Speaker 2: what we see these days, I think anywhere from like
17:23
Speaker 2: a one and a half to two and a half
17:24
Speaker 2: percent raise is kind of standard throughout most companies. I think,
17:30
Speaker 2: if we want to call it two percent, let's call
17:32
Speaker 2: it two percent plus. You have people that are switching jobs,
17:35
Speaker 2: and when you switch jobs, you're typically not switching to
17:38
Speaker 2: a lower paying job. You're typically trying to move to
17:40
Speaker 2: a higher paying one. And so I generally think the
17:42
Speaker 2: baseline if you have like no job growth, which by
17:45
Speaker 2: the way, is kind of what we've seen the last
17:47
Speaker 2: few months, is yeah, you should still be eking out
17:49
Speaker 2: like three to four percent in payroll tax withholding, because
17:55
Speaker 2: that's kind of the natural order of Yeah, most people
17:59
Speaker 2: are getting you know, one and a half to two
18:00
Speaker 2: and a half percent raises, and if you're taking a
18:02
Speaker 2: new job, you might get like a four to five
18:04
Speaker 2: percent bump, and so you end up, in my opinion,
18:07
Speaker 2: with like three to four percent fighta withholding growth being
18:10
Speaker 2: a baseline for no job growth, that's how I get
18:13
Speaker 2: there at least if we are, in reality seeing anything
18:19
Speaker 2: near only half a percent fight attacks withholding growth yere
18:23
Speaker 2: over year, it suggests to me that the pace of
18:25
Speaker 2: job growth has turned negative, or that the only way
18:30
Speaker 2: people are able to maintain jobs is by getting laid
18:33
Speaker 2: off and then taking a lower paying job in order
18:36
Speaker 2: to mitigate the damage, which also is not great for
18:39
Speaker 2: spending power. Now, again, December is a little wonky, and
18:42
Speaker 2: it's one month, so I'm gonna take that half percent
18:45
Speaker 2: with a grain of salt and see what we get
18:47
Speaker 2: in January and February. But the trend in the second
18:50
Speaker 2: half of the year for actual fight of withholding this
18:53
Speaker 2: is not I'm not talking about you know, hey indeed
18:56
Speaker 2: says there are this many job openings or hey, you
18:59
Speaker 2: know here what employers think about hiring and how they
19:03
Speaker 2: feel man, because like, I don't really care what employers
19:06
Speaker 2: feel about hiring. What I care about is how much
19:09
Speaker 2: payroll tax is being withheld, because that tells me how
19:11
Speaker 2: much payroll is actually being paid out and how much
19:14
Speaker 2: the economy can grow on consumer spending. And so if
19:18
Speaker 2: we see a further deceleration from here in the next
19:21
Speaker 2: couple months, buckle up, because we got problems. Then if
19:25
Speaker 2: we see this reverse and hey, this might just be
19:28
Speaker 2: like wonky because of you know, Christmas falling on a
19:30
Speaker 2: Thursday and the pay period lined up this way, and
19:33
Speaker 2: I can buy that and just say, Okay, this doesn't
19:35
Speaker 2: matter at all, like it's it's fine. But there's a
19:38
Speaker 2: six month trend in place of payroll slowing, and that's
19:42
Speaker 2: something that is of payroll tax withholding slowing, and that's
19:45
Speaker 2: something that's a little bit concerning to me when I
19:48
Speaker 2: see where we've slowed to now and where that can
19:51
Speaker 2: potentially go in the next couple months.
19:53
Speaker 3: So we'll see where it goes. But this is this
19:56
Speaker 3: is the actual stuff I'm looking at right now. Quick break.
20:00
Speaker 3: When we return, it's Wall Street Watch.
20:10
Speaker 1: Liked us on Facebook and follow us on Twitter. Act
20:13
Speaker 1: TFE show breaking business news is always first right here
20:17
Speaker 1: on the Financial Exchange Radio Network. Time now for Wall
20:22
Speaker 1: Street Watch a complete look at what's moving market so
20:25
Speaker 1: far today right here on the Financial Exchange Radio Network.
20:29
Speaker 4: Well, the final trading week of twenty twenty five is
20:32
Speaker 4: starting off in negative territory as trader is away to
20:35
Speaker 4: small batch of economic data points do out this shortened
20:39
Speaker 4: holiday week, including FED meeting minutes and jobless claims pending
20:42
Speaker 4: home sales were released earlier this morning. Right now, the
20:47
Speaker 4: Dow is down by four tenths of a percent or
20:49
Speaker 4: two hundred and three points lower. SMP five hundred is
20:52
Speaker 4: down three tenths of a percent or twenty one points.
20:55
Speaker 4: NASDAC down nearly half a percent or one hundred and
20:58
Speaker 4: nine points lower. RUSS two thousands off just over half
21:01
Speaker 4: or percent, Tenyure Treasure reeled flat at four point one
21:05
Speaker 4: two eight percent, and crude oil up about two and
21:08
Speaker 4: a half percent. Hire today trading just above fifty eight
21:12
Speaker 4: dollars a barrel. Shares in digital Bridge are jumping nearly
21:16
Speaker 4: ten percent following news that Japan's soft Bank agreed to
21:19
Speaker 4: buy data center investment firm digital Bridge for four billion dollars,
21:24
Speaker 4: is part of its artificial intelligence push. Meanwhile, in Video,
21:28
Speaker 4: shares are down almost two percent on the heels of
21:30
Speaker 4: news from last week that the chip and AI giant
21:33
Speaker 4: agreed to buy assets from Grock for twenty billion dollars
21:36
Speaker 4: in cash. Grock is a nine year old chip startup
21:40
Speaker 4: that designs high performance AI chips. The deal marks in
21:43
Speaker 4: Video's largest purchase ever. Elsewhere, the Wall Street Journal is
21:47
Speaker 4: reporting that Lulu Lemon founder Chip Wilson is launching a
21:51
Speaker 4: proxy fight at the Athletic apparel retailer in an effort
21:56
Speaker 4: to remake the company's board as the company searches for
21:59
Speaker 4: a new CEO. Lulu stock is up over two percent,
22:04
Speaker 4: and Disney's Avatar Fire and Ash retain the number one
22:07
Speaker 4: spot in the domestic box office for second straight weekend.
22:10
Speaker 4: Avatar and Disney's Utopia two where the two top performing
22:15
Speaker 4: movies by worldwide ticket sales. Disney shares are edging higher.
22:19
Speaker 4: I'm Tucker Silva and that is Wall Street Watch and
22:21
Speaker 4: remember the Financial Exchange streams every day live on YouTube.
22:25
Speaker 4: Subscribe to our page and follow market activity all morning long,
22:30
Speaker 4: only here in the Financial Exchange Radio network. Just search
22:32
Speaker 4: the Financial Exchange on YouTube and hit that subscribe button.
22:37
Speaker 3: He's in the Wall Street Journal.
22:39
Speaker 2: In a wild year for markets, investors who did nothing
22:42
Speaker 2: did just fine. Mark is this kind of more often
22:48
Speaker 2: than not. This is how it is.
22:50
Speaker 3: And the fact is about seventy percent.
22:52
Speaker 2: Of the time markets go up in the calendar year,
22:54
Speaker 2: thirty percent of the time they don't. And I think
22:58
Speaker 2: even in years like this where we have you know,
23:00
Speaker 2: big intra year volatility the phrase that I tend to
23:04
Speaker 2: like to use.
23:04
Speaker 3: I have two of them.
23:05
Speaker 2: The first is, look, the price of admission to markets
23:08
Speaker 2: equity markets is the volatility that you see. And the
23:11
Speaker 2: second one is, look, you can let the market do
23:13
Speaker 2: the worrying for you. You know, if markets are nervous
23:16
Speaker 2: about something, they will sell off. If that nervousness can
23:19
Speaker 2: be resolved, they will go back up. And that's pretty simple.
23:24
Speaker 2: I know investors only want to see their portfolio go up,
23:27
Speaker 2: and they think that they can do that, but the
23:29
Speaker 2: fact is you can't. It's not possible in equity markets,
23:35
Speaker 2: and quite honestly, it's kind of an entitled view to
23:38
Speaker 2: be like, oh, like, equity markets carried my portfolio up
23:43
Speaker 2: by twenty percent this year, so that's my money. But no,
23:47
Speaker 2: when markets go down, oh, I can't lose that at
23:51
Speaker 2: Like how much hubris do you need to have to
23:54
Speaker 2: be like? I can participate in the gains, but not
23:57
Speaker 2: the losses of equity markets.
23:59
Speaker 5: I mean to understand and retrospect everything seems explainable and obvious,
24:03
Speaker 5: just like history and retrospect seems obvious.
24:05
Speaker 3: Sure, so there's.
24:06
Speaker 5: That tendency to read history stock market history in this
24:11
Speaker 5: case backwards and think something was inevitable and think that
24:14
Speaker 5: you could detect the pattern in the future. But for
24:19
Speaker 5: complexity reasons, those patterns don't hold up. So market timing,
24:22
Speaker 5: like you said, is really hard. But you made a
24:24
Speaker 5: powerful point when you started talking about this, which is
24:27
Speaker 5: most of the time on a calendar your basis, stocks
24:30
Speaker 5: go up. It's true monthly too, but the frequency is
24:32
Speaker 5: a little bit more modest. It's like sixty some odd
24:34
Speaker 5: percent of the time monthly and daily. By the way,
24:37
Speaker 5: it's a fifty, it's about fifty one forty nine. It's
24:39
Speaker 5: about fifty one to forty. And this makes sense when
24:41
Speaker 5: you think about what stocks are there your ticket to
24:44
Speaker 5: participating in economic growth. It's how it's how we hitch
24:49
Speaker 5: our wagon to the train of economic growth in terms
24:52
Speaker 5: of investments.
24:54
Speaker 2: So you can also say it's how labor hitches their
24:56
Speaker 2: wagon to capital. How you can play on the same
24:58
Speaker 2: team if you believe the house always wins and the
25:00
Speaker 2: capital always wins. Aren't stocks the way that you can
25:03
Speaker 2: hit your wagon to capital.
25:04
Speaker 5: They're one way, assuming it's publicly traded companies to benefit
25:06
Speaker 5: from economic growth, which is an assumption underlying what I'm
25:09
Speaker 5: saying here that seems to be the way things continue
25:13
Speaker 5: to work.
25:14
Speaker 1: But.
25:16
Speaker 5: It's not. I wouldn't be too you know, dogmatic and
25:22
Speaker 5: obnoxious about you know, by proclaiming that that's the way
25:27
Speaker 5: things are going to continue to work. But all we
25:28
Speaker 5: have is history. That frequency argument you made comes from history.
25:32
Speaker 5: This is why the safest bet if you're a long
25:34
Speaker 5: term investor, not if you can't afford to lose. I
25:37
Speaker 5: was going to say twenty thirty, forty percent of your capital.
25:39
Speaker 5: Those numbers sound scary, but those are sort of typical
25:42
Speaker 5: stock market draw downs well.
25:44
Speaker 2: And it's also why people typically say, look, if you
25:46
Speaker 2: have money for an emergency funded for buying a house
25:49
Speaker 2: next year, for whatever it might be, that's a short
25:51
Speaker 2: term need.
25:52
Speaker 3: That money belongs nowhere near the.
25:53
Speaker 2: Stock market, right because the volatility that you see, you
25:58
Speaker 2: don't know when it's going to show up, you don't
26:00
Speaker 2: know how stupid it's going to be, and you don't
26:01
Speaker 2: know exactly when it's going to be resolved.
26:03
Speaker 5: But if somebody puts, you know, a metaphorical gun to
26:05
Speaker 5: your head and says, what are Stock's going to do today,
26:07
Speaker 5: you know the coin is loaded in Stock's favor. Just
26:10
Speaker 5: in terms of the frequency argument, the historical argument, what
26:17
Speaker 5: have stocks done daily, monthly, annually, So you'd be bucking
26:22
Speaker 5: history unless you had a strong conviction going the other way,
26:25
Speaker 5: and I we would look at you askance if you
26:27
Speaker 5: said you did, because that would require a crystal ball
26:30
Speaker 5: that of course doesn't exist. You would say stocks are
26:32
Speaker 5: gonna go up.
26:32
Speaker 3: To a palanteer if you will.
26:34
Speaker 5: Yeah, right, those guys. You would say stocks are going
26:37
Speaker 5: to go up today, or stocks are gonna go up
26:38
Speaker 5: this month, with no other information. That should be your guess,
26:42
Speaker 5: just taking if you were a literal like empiricist, which
26:46
Speaker 5: is not the best way to approach the world necessarily.
26:48
Speaker 3: But probably not.
26:49
Speaker 5: But if you were just being very literal and you
26:52
Speaker 5: were a rank empiricist looking at history, you would say
26:54
Speaker 5: stocks are gonna go up today or this month or
26:56
Speaker 5: this year because historically that's what they've always historically, that's
27:00
Speaker 5: the tendency. Excuse me.
27:02
Speaker 2: Now, you can still have runs within that, just like
27:04
Speaker 2: if you go to a roulette table.
27:05
Speaker 3: Absolutely you say, oh, you.
27:08
Speaker 2: Know, you go to the roulette table, Yes, and okay,
27:10
Speaker 2: it's basically a fifty to fifty shot, which by the way,
27:12
Speaker 2: now is getting worse. I don't know if anyone's been
27:14
Speaker 2: to a casino lately, but roulette tables are adding a
27:16
Speaker 2: triple zero now in order to make the house edge
27:19
Speaker 2: even bigger than it already is. So that's fun because
27:23
Speaker 2: they just can't get you know, greedy enough to you know, do.
27:26
Speaker 5: You know what that offhand? With that shifts the odds to.
27:28
Speaker 3: Well, think about it.
27:29
Speaker 2: I mean, if if you think about the number of
27:30
Speaker 2: spots on a table and you're adding one more, that
27:34
Speaker 2: is in favor of the house, because again, unless you're
27:37
Speaker 2: betting that you're in that that is a suckers bet.
27:40
Speaker 2: Every time you're probably losing another one and a half
27:43
Speaker 2: to two percent to the house.
27:44
Speaker 5: So does it go thirty it's thirty five to one
27:46
Speaker 5: right now? Is go thirty six to one?
27:48
Speaker 1: Am?
27:48
Speaker 2: I No payouts are going to be the same because
27:52
Speaker 2: you still have the same number of numbers that are
27:54
Speaker 2: on there.
27:54
Speaker 5: I know, I've never thought about this carefully enough. Okay,
27:56
Speaker 5: I see what you're saying.
27:57
Speaker 2: Yeah, so it's again it adds to you know, the
28:01
Speaker 2: house edge there because the casinos can't make enough money otherwise,
28:04
Speaker 2: I guess. But in any case, you go to a
28:06
Speaker 2: roulette table, and just because it came up black the
28:09
Speaker 2: last two times doesn't mean it's definitively going to be
28:11
Speaker 2: read fifty to fifty still means Hey, like, if you're
28:15
Speaker 2: going through you know, five of these in a row, yeah,
28:18
Speaker 2: you have pretty low odds of getting you know, the
28:21
Speaker 2: same color each time.
28:22
Speaker 3: But it can happen. I mean, I'll tell the story.
28:25
Speaker 2: I was out at the MGM in Springfield about a
28:28
Speaker 2: year and a half ago, and wildest thing I've ever seen.
28:31
Speaker 2: I'm sitting there and I'm at the roulette table with
28:34
Speaker 2: a couple buddies. We've been out on like a golfing
28:37
Speaker 2: trip in the area, and we were staying there for
28:38
Speaker 2: the night, and this guy walks up with you know,
28:41
Speaker 2: I don't know, thirty bucks or something like that and
28:45
Speaker 2: puts it all on thirty three and gets thirty three
28:49
Speaker 2: maybe it like a thousand bucks his first minute at
28:52
Speaker 2: the roulette table, and all of us are sitting there,
28:54
Speaker 2: We're like, oh, this guy's crazy, Like we've all seen
28:56
Speaker 2: this like a casinos are like, oh, I can't.
28:58
Speaker 3: Believe that happened.
29:00
Speaker 2: And then, you know, get everything set up for him
29:03
Speaker 2: and he just keeps it on thirty three and again,
29:06
Speaker 2: like you know, it's you know, unlikely chance. Like now
29:09
Speaker 2: you're talking like a three percent of a three percent chance,
29:11
Speaker 2: so you're talking like a point zho nine percent chance
29:13
Speaker 2: of back to back. The guy landed a thirty. The
29:17
Speaker 2: guy made thirty grand in a span of two minutes.
29:19
Speaker 2: I mean it was actually like ten just because they
29:21
Speaker 2: had to count all the money up, because it's like
29:22
Speaker 2: when you're paying at thirty grand to chips, it's kind
29:24
Speaker 2: of a lot. But the guy made thirty grand in
29:28
Speaker 2: two minutes because it just happened to be lucky. Now,
29:32
Speaker 2: is that repeatable or investible? No, not in any way,
29:35
Speaker 2: shape or form. So like weird things can happen at
29:37
Speaker 2: the rule Lett table, just like weird things can happen
29:39
Speaker 2: in markets. But that's all part of like how the
29:45
Speaker 2: actual odds end up playing out. Like you don't just
29:47
Speaker 2: get markets going red black, red black, red black from
29:51
Speaker 2: day to day. Sometimes you have seven days down on
29:54
Speaker 2: the S and P in a row. Sometimes you have
29:56
Speaker 2: nine days up on the Nasdaq in a row like that.
29:58
Speaker 2: That happens too, but ultimately this stuff balances out in
30:02
Speaker 2: the long term day to day and you end up
30:05
Speaker 2: with pretty close to that fifty to fifty split.
30:07
Speaker 5: Now, there are decades like the two thousands when stocks
30:10
Speaker 5: underperform everything including bonds and cash. Thankfully they're rare. But
30:15
Speaker 5: if you remember periods like that, again, thankfully they're rare.
30:19
Speaker 5: So if you're not of a certain age, you weren't
30:20
Speaker 5: even investing, then for others of us who were, that's
30:23
Speaker 5: seared in our memory. That reinforces the caveat that you conveyed,
30:30
Speaker 5: which is, if you don't have a long enough timeframe.
30:34
Speaker 5: I don't know what a long enough time frame is,
30:36
Speaker 5: seven ten years, maybe ten years, Yeah, then don't put
30:39
Speaker 5: whatever that a long enough time frame associated with whatever
30:42
Speaker 5: the goal for that money is. Equities are probably not
30:45
Speaker 5: the right place for it.
30:46
Speaker 2: And this is before we even get into the fact
30:48
Speaker 2: that what we're saying about US markets does not apply
30:51
Speaker 2: to international ones in any way, shape or form. The
30:54
Speaker 2: return distribution chart is entirely different. If you're looking at
30:57
Speaker 2: European equities, it's entirely different if you're looking at like
31:01
Speaker 2: it's this is not consistent across markets because those markets
31:04
Speaker 2: have different rules by which they play. Sometimes the rules
31:07
Speaker 2: are better, sometimes they're worse. But like this is, it's
31:11
Speaker 2: it's not something it's not physics that we are talking
31:14
Speaker 2: about here. It is inherently unpredictable in terms of specific outcomes.
31:20
Speaker 2: But you can map these, you know, outcome distribution charts
31:23
Speaker 2: over different periods and see what you get in different markets.
31:27
Speaker 3: Let's take a quick break.
31:28
Speaker 2: When we return, let's talk a little bit about what's
31:31
Speaker 2: going on in the Boston areas as it relates to
31:36
Speaker 2: jobs and housing.
31:38
Speaker 1: Find daily interviews and full shows of the Financial Exchange
31:41
Speaker 1: on our YouTube page. Subscribe to our page and get
31:44
Speaker 1: caught up on anything and everything you might have missed.
31:47
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31:52
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31:55
Speaker 1: the trends on Wall Street. This is the Financial Exchange
31:59
Speaker 1: Radio Network.
32:09
Speaker 2: Piece in the Boston Globe today. It's titled Forever Renters
32:14
Speaker 2: from any in Greater Boston. American dream of home ownership
32:17
Speaker 2: no longer exists. And two things are true in my opinion,
32:22
Speaker 2: right now, home prices in the Boston area are unaffordable
32:26
Speaker 2: for a large number of people who live in the
32:28
Speaker 2: Boston area. So they may feel this way right now,
32:31
Speaker 2: But I think it is a horrible mistake to extrapolate
32:34
Speaker 2: what's going on right now and say that it is
32:37
Speaker 2: anything permanent into evidence. I would like to enter two
32:41
Speaker 2: different things in support of this. The first, Mark Tucker, actually,
32:45
Speaker 2: can you fire up the way back machines time us?
32:48
Speaker 3: Okay, we don't need to go too far.
32:50
Speaker 2: We're going to head back to late late twenty early
32:54
Speaker 2: twenty twenty one. And I remember this time. Remember this
32:59
Speaker 2: is like peak pandemic. This is when you have the
33:01
Speaker 2: pieces that were being published like, hey, no one's ever
33:04
Speaker 2: gonna live in cities again, man, and the Northeast is dead,
33:08
Speaker 2: and like, ultimately, like what we found is, hey, people
33:11
Speaker 2: like to live in cities because they like to be
33:13
Speaker 2: you know, close to their other humans and stuff.
33:16
Speaker 3: It's not for everyone.
33:17
Speaker 2: I get that, But there's a reason why cities have
33:19
Speaker 2: existed over time and generally gotten bigger, and it's because
33:23
Speaker 2: people like to be around other people in the services
33:25
Speaker 2: provided by them. And so like that wasn't gonna change,
33:29
Speaker 2: and so I think ultimately, like I look at that
33:32
Speaker 2: and like those predictions were really bad. The other one, Tucker,
33:36
Speaker 2: can you take us back a little bit further now,
33:37
Speaker 2: I need to go back to twenty twelve, so eight
33:39
Speaker 2: more years.
33:40
Speaker 3: If you could Ah, it's twenty twelve.
33:44
Speaker 2: Now the world is gripped by fears of gregsit and Italy.
33:48
Speaker 1: Eve.
33:48
Speaker 2: Remember this was when like all the pigs were talking
33:51
Speaker 2: pigs was Portugal, Italy, Ireland, Greece and Spain. They were
33:55
Speaker 2: talking about leaving the Eurozone, or rather being booted out
33:58
Speaker 2: of the Eurozone by the better behaved Germans and French
34:02
Speaker 2: and everywhere.
34:02
Speaker 5: They've done it.
34:03
Speaker 2: Yea, it's not your point, No, it's fine, Like, I
34:06
Speaker 2: appreciate where you're coming from. In any case, where was I, Oh,
34:11
Speaker 2: here's where I was going with this. This was the
34:13
Speaker 2: time when you had a bunch of people saying millennials
34:15
Speaker 2: are never going to amount to anything financially, they'll never
34:19
Speaker 2: own homes.
34:20
Speaker 3: Avocado toast eaters, you losers.
34:23
Speaker 2: Like that was what was going on then, And now
34:26
Speaker 2: you have the pieces being published ten years, you know,
34:28
Speaker 2: twelve years later being like, oh, you guys, actually you know,
34:32
Speaker 2: did stop hopping around on jobs once you had kids,
34:35
Speaker 2: And yeah, you figured out how to save some money
34:36
Speaker 2: and buy homes and you're actually buying homes at a
34:39
Speaker 2: greater rate than your parents were. And so gee, all
34:42
Speaker 2: those prognostications were wrong. So what I would say to
34:46
Speaker 2: anyone in their twenties and thirties that feels locked out
34:48
Speaker 2: of the Boston housing market, Yes, it sucks right now
34:52
Speaker 2: for you, but no, it might not be like this forever.
34:55
Speaker 2: And be open to the idea that the affordability picture
34:58
Speaker 2: on housing change dramatically in a three to five year period.
35:02
Speaker 2: And don't give up. If you still have dreams of
35:05
Speaker 2: home ownership, just understand it might take you a little
35:07
Speaker 2: bit longer to get there. But I've seen enough publications
35:11
Speaker 2: of you know, things that are like, oh, this is
35:13
Speaker 2: how it's gonna be for this group, and this is
35:14
Speaker 2: how it's gonna be for that one, And it's most
35:17
Speaker 2: people like really overestimate how permanent any shift is. And
35:21
Speaker 2: I suspect this shift of unaffordability is one that's temporary
35:25
Speaker 2: as well, because by its very nature, it's hard for
35:28
Speaker 2: it to be permanent when more and more people can't
35:30
Speaker 2: afford these properties.
35:31
Speaker 4: When the holidays rolled in and the cold settles over
35:34
Speaker 4: New England, find your escape in the US Virgin Islands.
35:37
Speaker 4: Trade the freezing tempts in Grayskuys for warm sun, turquoise
35:40
Speaker 4: water and that easy island energy. You can feel the
35:44
Speaker 4: second U land. This December through early January, Saint Croix
35:47
Speaker 4: I knights with the Crucian Christmas Festival, a celebration over
35:51
Speaker 4: a century old.
35:52
Speaker 3: If Frederick Stegg.
35:52
Speaker 4: Comes alive with call for parades, live regae and streets
35:56
Speaker 4: filled with the sites and flavors of real Caribbean culture,
35:59
Speaker 4: it's the holiday season with a tropical beats. From there,
36:03
Speaker 4: explore Saint Thomas with its duty free shopping and the
36:06
Speaker 4: legendary views at Megan's Bay. Or slow down on Saint John,
36:10
Speaker 4: where quiet beaches and National Park trails make every day
36:13
Speaker 4: feel like your own private adventure. Getting there could not
36:17
Speaker 4: be easier. There's no passport needed, no money to exchange.
36:22
Speaker 4: Just pack light and step out of the cold into
36:24
Speaker 4: pure sunshine. This holiday season, let yourself fall naturally in
36:29
Speaker 4: rhythm with the heartbeat of the islands. Visit America's Caribbean paradise,
36:33
Speaker 4: the US Virgin Islands. Go to visit USVII dot com
36:37
Speaker 4: and book your trip today. That's visit USBI dot com.
36:42
Speaker 3: Now.
36:42
Speaker 2: The other piece to add on this in terms of hey,
36:45
Speaker 2: how could the worm turn as far as Boston home prices.
36:48
Speaker 2: Boston is a great exporter of two things, and I
36:50
Speaker 2: say export, not to like other countries, but just in general,
36:53
Speaker 2: Boston is a great exporter of two things, seafood and nerds,
36:57
Speaker 2: and specifically the engine that makes the Massachusetts economy run
37:03
Speaker 2: and by virtue of that, the New England economy run,
37:07
Speaker 2: because again, like it all kind of gets powered by Boston.
37:09
Speaker 2: As much as I hate to admit it, like that's
37:11
Speaker 2: it's just how it is. Like without Boston as this
37:14
Speaker 2: you know, center of economic activity, the rest.
37:16
Speaker 3: Wouldn't be quite what it is.
37:20
Speaker 2: The fact is, Boston has historically, over the last one
37:23
Speaker 2: hundred years or so, been more stable than the rest
37:26
Speaker 2: of the US economy because its main drivers have been
37:28
Speaker 2: education and healthcare, and those are areas that typically are
37:32
Speaker 2: less susceptible to booms and bust cycles than places like construction.
37:38
Speaker 2: And what we are seeing now is that the labor
37:42
Speaker 2: market for you know, very highly educated workers, the folks
37:46
Speaker 2: with you know, the PhDs, multiple MBAs and all that stuff,
37:49
Speaker 2: it's weakening in the Boston area for a number of reasons.
37:52
Speaker 2: And so this is another thing that I come back to.
37:54
Speaker 2: If you are someone without the PhD, without you know,
37:59
Speaker 2: a master's and ana and this and that, you've probably
38:03
Speaker 2: you know, been competing against people with way higher salaries
38:06
Speaker 2: than you for the last you know, dozen twenty years
38:10
Speaker 2: for housing stock. If the job market for those very
38:13
Speaker 2: highly educated employees is shifting, then, as an example, the
38:19
Speaker 2: family outlined in one of these pieces that you know,
38:21
Speaker 2: the two of them combined make one hundred and seventy
38:23
Speaker 2: five thousand dollars, start to become people who are going
38:26
Speaker 2: to be in the driver's seat for buying property in
38:29
Speaker 2: the Boston area once the family's making you know, four
38:32
Speaker 2: hundred thousand don't exist in the Boston area in the
38:36
Speaker 2: same concentrations anymore. In any case, let's take a quick break.
38:39
Speaker 2: By the way, four hundred thousand dollars worth of lobster
38:41
Speaker 2: has disappeared from a Taunton warehouse. Don't know where it is,
38:45
Speaker 2: but it's a lot of lobster. Quick Break Hour two
38:48
Speaker 2: coming up in a bit.
39:00
Speaker 1: Four