Latest / The Financial Exchange Show / Higher Rates Still Can’t Slow AI

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Higher Rates Still Can’t Slow AI · The Financial Exchange Show

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• 1:04
  Speaker 1: is the Financial Exchange with Mike Armstrong and Mark Vandetti.
• 1:14
  Speaker 2: We are off to the races here for the month
• 1:17
  Speaker 2: of October with S & P and NASDAQ notching up.
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  Speaker 3: I believe new all time.
• 1:22
  Speaker 2: I know NASDAQ all time high hit yesterday. I believe
• 1:24
  Speaker 2: we're hitting one on the S & P 500 today.
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  Speaker 2: The Dow doesn't matter. So let's not talk about it.
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  Speaker 2: But oil prices are down. Bond yields are down. And
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  Speaker 2: if I hadn't just listened to a podcast about AI
• 1:38
  Speaker 2: agents and what they're capable of, I would say.
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  Speaker 3: That the world is a little rattled.
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  Speaker 4: Frazzled.
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  Speaker 2: I also was kept awake last night by some sort
• 1:49
  Speaker 2: of screeching, I believe, bird that then, of course, woke
• 1:52
  Speaker 2: up my dog for hours last night.
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  Speaker 3: I'm sorry, screeching bird in the middle of the night?
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  Speaker 3: Middle of the night, some bird.
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  Speaker 4: Fox, probably.
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  Speaker 5: Fox, definitely a fox.
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  Speaker 3: Yeah, not a bird. Fox makes more sense, yeah. Yeah. Well,
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  Speaker 3: I was thinking it was a bird getting killed by
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  Speaker 3: something like a fox. That could be. But fox makes
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  Speaker 3: more sense. It was just screeching at the top of
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  Speaker 3: its lungs.
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  Speaker 4: Did it almost sound like a cough? Like, I'm not
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  Speaker 4: going to try to do it.
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  Speaker 3: It was a high-pitched, ah!
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  Speaker 4: Oh, then a rabbit getting killed by a fox or
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  Speaker 4: a raccoon.
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  Speaker 3: Rabbits make noise? Rabbits squeal.
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  Speaker 4: Oh, yeah, they make a horrible, high-pitched squeal.
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  Speaker 2: Well, in either case, my dog was not happy about
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  Speaker 2: it and let me know for a good hour and
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  Speaker 2: a half last night. I actually have a sound machine
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  Speaker 2: installed right next to his crate for moments just like
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  Speaker 2: this so that I can blare out any of the
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  Speaker 2: wildlife noises coming from outside my house because if he
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  Speaker 2: hears any of them, he will bark for a good
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  Speaker 2: 30 minutes.
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  Speaker 3: How did we get on this subject?
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  Speaker 2: Oh, cause I sound rattled, but in fact, I'm just exhausted.
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  Speaker 3: That was actually, I brought us here. Apologies.
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  Speaker 4: That was actually me and Paul on last week's financial exchange.
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  Speaker 4: Somebody was playing.
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  Speaker 1: Yeah.
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  Speaker 2: Well, in any case, we've got equity markets up, uh,
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  Speaker 2: bonds up, yields down, oil prices down. And, uh, and
• 3:03
  Speaker 2: a fair bit to talk about on a week without
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  Speaker 2: a ton of big economic data. But, um, We are
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  Speaker 2: seeing a little bit of a drop, as I mentioned,
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  Speaker 2: in yields coinciding with Treasury Secretary Besant once again. I
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  Speaker 2: don't know if he's trying to take credit for it
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  Speaker 2: or talk them down a little bit further. But yesterday,
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  Speaker 2: Chuck and I were talking a little bit about Besant's
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  Speaker 2: credibility issues.
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  Speaker 3: He called for, you know.
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  Speaker 2: Deficits to be reduced to 3% of GDP under Trump.
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  Speaker 2: He called for a rapid end to the war, gas
• 3:36
  Speaker 2: prices to come down quickly, tried to talk down interest
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  Speaker 2: rates and failed. And I don't remember which publication, but
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  Speaker 2: they were, you know, making the point that this guy
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  Speaker 2: might not have a lot of credibility.
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  Speaker 3: Bloomberg. Thank you.
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  Speaker 2: It led me to the question, though, like we talk
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  Speaker 2: a ton about Federal Reserve credibility, the importance of the Fed,
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  Speaker 2: you know, sounding tough and being believed by the general public.
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  Speaker 2: I do wonder about treasury credibility. Where does that matter?
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  Speaker 2: Why does it matter? And how can it be helpful
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  Speaker 2: if people actually believed Scott Besant when he said that
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  Speaker 2: he was going to bring down interest rates?
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  Speaker 4: The theory on the Fed comes from a guy named
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  Speaker 4: Tom Sargent, who won the Nobel Prize in Economics. He's
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  Speaker 4: now advising Warsh, by the way. Warsh brought Sargent and
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  Speaker 4: Mankiw from Harvard over to advise on their next project.
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  Speaker 4: policy doctrine. So anyway, the idea is Sargent looked at
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  Speaker 4: four big disinflations in Europe. Why are you smirking? I'm
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  Speaker 4: not going to make a lecture out of this.
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  Speaker 3: Still thinking about this rabbit. It's not you.
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  Speaker 1: Go on.
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  Speaker 4: Oh, you're thinking of a rabbit getting mauled while you
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  Speaker 4: sleep within feet of your bed.
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  Speaker 3: Try to sleep, yes.
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  Speaker 4: Getting disemboweled by a fox in the middle of the night.
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  Speaker 4: He actually took it back to its den. I wouldn't
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  Speaker 4: worry about it.
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  Speaker 3: You may find a head in.
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  Speaker 4: The yard the next day. We've all been there. You
• 5:01
  Speaker 4: get a little trowel and you just right into the
• 5:04
  Speaker 4: wooded area. I just toss it right into the wood. Okay,
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  Speaker 4: so Sargent said, Sargent looked at big disinflations in Austria, Poland,
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  Speaker 4: and a couple of other European or Eastern European economies,
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  Speaker 4: and he concluded that they happened so fast and relatively painlessly.
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  Speaker 3: There was pain.
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  Speaker 4: But it wasn't as bad as you would think in
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  Speaker 4: terms of unemployment and GDP, unemployment going up, GDP coming down.
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  Speaker 4: That credibility was important. Regime change was important.
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  Speaker 3: At the Fed. At the central bank of those.
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  Speaker 4: At their central banks, yeah. It's what you said earlier, Mike.
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  Speaker 4: People believed that policy was going to be different. People
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  Speaker 4: believed here in the U.S. that Paul Volcker was going
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  Speaker 4: to be different. That arguably helped.
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  Speaker 2: Basically, they believed that the Fed was, the central bank
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  Speaker 2: was willing to tank the economy.
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  Speaker 3: It was serious. Or at least risk tanking the economy
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  Speaker 3: to control inflation.
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  Speaker 4: And that made it easier to disinflate. A little bit paradoxical,
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  Speaker 4: but there is this... school of thought that holds that
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  Speaker 4: disinflations don't have to be painful if people believed if
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  Speaker 4: a regime makes statements, I think Sargent put it like this,
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  Speaker 4: sufficiently credible to be believed. And I love that. And
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  Speaker 4: it stuck with me because it makes sense.
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  Speaker 3: So anyway, does the Treasury need it too?
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  Speaker 4: I just want to give you the background on credibility.
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  Speaker 3: Why don't we talk about it?
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  Speaker 4: Yeah, of course, Mike. I mean, if we're going to
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  Speaker 4: be actively, Besant is a tinkerer. He likes to tinker
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  Speaker 4: in foreign exchange markets. From his background as a trader.
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  Speaker 2: He's also arguably more front-facing than any Treasury Secretary that
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  Speaker 2: I can recall.
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  Speaker 4: Maybe since Hank Paulson during the crisis or something. He's
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  Speaker 4: an activist, Treasury. He's more activist than we've seen. And
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  Speaker 4: the idea is you speak softly, carry a big stick.
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  Speaker 4: This is obviously the Teddy Roosevelt expression I'm using here.
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  Speaker 4: It was applied to the military geopolitical context at the time.
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  Speaker 4: Bessette is speaking loudly and carrying a small stick.
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  Speaker 2: He has no ability to print money. He doesn't control
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  Speaker 2: interest rates. He can choose where to issue debt on
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  Speaker 2: which end of the curve.
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  Speaker 3: Which bills to pay how?
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  Speaker 4: They can't do a lot on the margin. Like you said,
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  Speaker 4: unlike the Fed, he can't print money. Unlike Congress, he
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  Speaker 4: can't dictate fiscal. He doesn't even have a formal... Well,
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  Speaker 4: they do have a formal role. I shouldn't put it
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  Speaker 4: that way. But Congress is the fiscal policy driver, and
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  Speaker 4: he's made some silly statements. We're going to get the
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  Speaker 4: deficit down to 3% of GDP. We're at 6% now.
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  Speaker 4: And it came down like a tenth because of tariff revenue,
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  Speaker 4: and that's since been reversed. What was his other three?
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  Speaker 4: He had inflation.
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  Speaker 2: Gas prices, war in Iran. Ten-year treasury yields.
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  Speaker 3: Ten-year treasury yields. GDP growth, maybe.
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  Speaker 4: Treasury secretary has no control over these things. Why he
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  Speaker 4: chooses to make very specific, not just forecasts, but promises
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  Speaker 4: is beyond me. He's done this multiple times. Go ahead.
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  Speaker 3: My question is, does it matter for anything other than
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  Speaker 3: Besson's career?
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  Speaker 4: His he has no credibility right now is.
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  Speaker 3: Right here and that's what i'm asking is to have a.
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  Speaker 4: Political future is is is dead probably after this regime
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  Speaker 4: is out after this administration's out does it matter for
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  Speaker 4: yeah it does i suppose if in a crisis it
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  Speaker 4: will matter mike if he's not believed as credible like
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  Speaker 4: hank paulson had credibility issues during the because he vacillated
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  Speaker 4: in two thousand and eight and so markets weren't sure
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  Speaker 4: whether or not treasuries can be able to come up
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  Speaker 4: with the firepower to follow through on paulson's promises if
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  Speaker 4: he doesn't if he isn't shut up for a while
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  Speaker 4: to speaking frankly presence probably telling in this case the
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  Speaker 4: president stands perception really really well being uh... tb personality
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  Speaker 4: or having a history in television and optics uh... if
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  Speaker 4: markets don't believe that you can handle a crisis It could,
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  Speaker 4: for example, make it harder for him to influence the
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  Speaker 4: value of the dollar indirectly or something like that, Mike.
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  Speaker 4: So it may not seem like it matters right now. But, yeah,
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  Speaker 4: it will at some point.
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  Speaker 2: There's one piece I can relate to, which is he
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  Speaker 2: is either choosing or being forced to speak a heck
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  Speaker 2: of a lot more than any Treasury Secretary that I
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  Speaker 2: can recall.
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  Speaker 4: He seems to like the line. He doesn't have to.
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  Speaker 2: Yeah, I don't think he has to unless his boss
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  Speaker 2: is telling him to, which could be the case. And,
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  Speaker 2: you know, doing a radio program for two hours a day,
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  Speaker 2: five days a week, I'm sure that, well, I know
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  Speaker 2: Tucker has plenty of clips of me saying, rather stupid
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  Speaker 2: things that turned out to not be true years later.
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  Speaker 4: Yeah, but you wouldn't make a forecast, Mike, and say,
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  Speaker 4: I'm going to make this happen, then it doesn't happen,
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  Speaker 4: and you.
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  Speaker 3: Get an egg on your face. I wouldn't, and I'm
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  Speaker 3: also not the Treasury Secretary.
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  Speaker 2: So those two things combined make me feel a little
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  Speaker 2: bit more comfortable with the stupid things that I've said,
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  Speaker 2: like calling a rabbit a bird this morning. And so, yeah,
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  Speaker 2: I do think that that stuff matters. It might not
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  Speaker 2: matter right now, to your point. In a crisis, it could.
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  Speaker 2: And I don't know why he does any of these things.
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  Speaker 4: Yeah, but two things, Mike. It could have been a bird.
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  Speaker 4: We still don't know. We're just guessing. We just said
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  Speaker 4: it was unlikely it would be a bird squealing in
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  Speaker 4: the middle of the night. And secondly, I know rabbits
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  Speaker 4: squeal when attacked. I've heard them in the middle of
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  Speaker 4: the night get attacked. So it's unpleasant, but I've heard it.
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  Speaker 4: So we're guessing. And thirdly, you weren't orchestrating it.
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  Speaker 1: Mm-hmm.
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  Speaker 4: So there are a lot of, I'm not saying it's
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  Speaker 4: not a good first pass.
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  Speaker 3: At an analogy. I'm not saying you're not dumb, but
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  Speaker 3: I can see how you got there, Mike. Let's take
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  Speaker 3: a quick break.
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  Speaker 2: When we come back, I want to talk a little
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  Speaker 2: bit more about, yes, yields are coming down a little
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  Speaker 2: bit today. The trend has been significantly higher upwards. How
• 10:37
  Speaker 2: long does that tend to last? What does it mean
• 10:39
  Speaker 2: for the rest.
• 10:40
  Speaker 3: Of corporate America? That's next here on the Financial Exchange.
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• 11:10
  Speaker 3: Well, folks, I have good news.
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  Speaker 2: We determined during the break that we, with a high
• 11:15
  Speaker 2: degree of confidence, that it was a fisher cat.
• 11:18
  Speaker 5: We also have a texter who chimed in saying it
• 11:21
  Speaker 5: was a fisher cat.
• 11:23
  Speaker 3: See, I make good wild cat impressions. Yeah. Oh, yeah.
• 11:29
  Speaker 2: Yeah.
• 11:31
  Speaker 3: That's 100% what it was. I could see how you
• 11:34
  Speaker 3: thought that was a bird, yeah. My dog lost it.
• 11:37
  Speaker 2: We then got into a very elaborate debate as to
• 11:40
  Speaker 2: what would have, I would not allow my dog to
• 11:43
  Speaker 2: go chase a fisher cat around the backyard just so
• 11:45
  Speaker 2: we're all on the same page.
• 11:46
  Speaker 3: But had I.
• 11:48
  Speaker 2: 80-pound lab versus fisher cat, and AI tells us that
• 11:53
  Speaker 2: the lab would come out on top.
• 11:55
  Speaker 3: Disagree.
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  Speaker 4: That's because AI wants to see you hurt when a
• 11:59
  Speaker 4: fisher takes your dog out.
• 12:01
  Speaker 2: But you can text the show at 617-362-1385. AI has
• 12:04
  Speaker 2: no soul. I know that this is top-notch economic stuff
• 12:09
  Speaker 2: that we're reporting on, but this is the stuff that
• 12:11
  Speaker 2: people love.
• 12:11
  Speaker 5: A fisher cat would jump on your dog, a lab.
• 12:14
  Speaker 4: Go for the throat.
• 12:15
  Speaker 5: Go for the throat.
• 12:16
  Speaker 3: Maybe make some damage. Cause mortal damage. Not kill the dog.
• 12:19
  Speaker 5: I don't think you would kill the dog.
• 12:20
  Speaker 4: Could bleed out, though.
• 12:21
  Speaker 5: But then it would run away.
• 12:22
  Speaker 3: Mm-hmm.
• 12:23
  Speaker 5: Because Fisher catches such spazzes.
• 12:24
  Speaker 4: And he'd be at the vet for two days.
• 12:26
  Speaker 3: Yeah.
• 12:26
  Speaker 4: Well, you were on edge.
• 12:27
  Speaker 3: That wasn't the question. That wasn't the question.
• 12:30
  Speaker 1: What was the question? Death?
• 12:32
  Speaker 3: Who would win in a fight?
• 12:34
  Speaker 5: I think the Fisher cat would have won. I don't
• 12:36
  Speaker 5: think the lab, now if it's a German Shepherd or
• 12:39
  Speaker 5: a Doberman, sure, yeah.
• 12:41
  Speaker 3: Again. A lab? My lab is outrageously friendly.
• 12:45
  Speaker 1: Yeah, mine too.
• 12:46
  Speaker 2: It corners our cats every once in a while and
• 12:48
  Speaker 2: just looks at them and wants to play. So there's
• 12:51
  Speaker 2: not an ounce of fight in him. So I tend
• 12:54
  Speaker 2: to err with you on the Fisher cat coming out
• 12:56
  Speaker 2: on top against this friendly, goofy, 80-pound lab.
• 13:00
  Speaker 4: Who's what?
• 13:00
  Speaker 3: One?
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  Speaker 1: Two?
• 13:02
  Speaker 3: One and a half.
• 13:02
  Speaker 4: Yeah, okay.
• 13:03
  Speaker 3: He's like 20 in dog years, though. Okay. Where were we?
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  Speaker 5: Yields or something?
• 13:12
  Speaker 2: Yeah, yeah.
• 13:13
  Speaker 3: So I want to talk about history as a guide
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  Speaker 3: for interest rates.
• 13:18
  Speaker 5: So.
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  Speaker 2: I'm curious as to whether history as a guide for
• 13:23
  Speaker 2: interest rates is useful at all. But here's what it's
• 13:26
  Speaker 2: talking about when we talk about the history as a guide.
• 13:30
  Speaker 2: Business cycles tend to follow pretty short term. What's the
• 13:34
  Speaker 2: average business cycle in the United States? I think it's
• 13:36
  Speaker 2: something like five to eight years.
• 13:39
  Speaker 4: Recessions were about a year. They're shorter now. They used
• 13:43
  Speaker 4: to be a little bit. So the average is call
• 13:45
  Speaker 4: it about a year. They last about a year. In
• 13:50
  Speaker 4: the post-war period, there have been 12.
• 13:51
  Speaker 3: Yep.
• 13:52
  Speaker 4: The average is about a year.
• 13:55
  Speaker 3: Not necessarily. And how long does the expansion period typically last?
• 13:58
  Speaker 4: Several years. And since the 1980s, recessions have gotten shorter,
• 14:04
  Speaker 4: as you all kind of know.
• 14:06
  Speaker 3: Shorter and less frequent, right?
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  Speaker 4: Far less frequent.
• 14:08
  Speaker 3: Yeah.
• 14:09
  Speaker 4: And until the Great Recession, anyway, they were more shallow.
• 14:13
  Speaker 3: 82 was deep, too.
• 14:14
  Speaker 4: It was deepest since the Depression.
• 14:15
  Speaker 2: On the other hand, interest rate cycles have historically in
• 14:19
  Speaker 2: the U.S.
• 14:19
  Speaker 3: Gone on a lot longer.
• 14:21
  Speaker 2: There have only been a few. We hit a peak
• 14:22
  Speaker 2: on interest rates post-World War II in 1981. And from
• 14:25
  Speaker 2: 1981 through 2020 or 2021, rates were on a consistent
• 14:26
  Speaker 2: downward cycle. And so one of the questions that's being
• 14:38
  Speaker 2: asked right now is, will that be the next trend, right?
• 14:41
  Speaker 2: Will we be on another 40-year trend upwards in terms
• 14:44
  Speaker 2: of interest rates after what we've seen.
• 14:46
  Speaker 4: Over the course of the last five? Or no mini-trend.
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  Speaker 4: I mean, there's no reason why interest rates should trend,
• 14:52
  Speaker 4: first of all. Much like currencies. We talked about that
• 14:54
  Speaker 4: internally this morning. The dollar, relative to other currencies, hasn't
• 14:58
  Speaker 4: really gone anywhere since 1973. There's no reason why interest
• 15:03
  Speaker 4: rates should trend in either direction. there is this notion
• 15:07
  Speaker 4: of a natural rate of interest, uh, that depends on
• 15:11
  Speaker 4: structural forces. And over time, it's unclear whether that should
• 15:16
  Speaker 4: go down up or stay the same with respect to
• 15:19
  Speaker 4: the long-term secular, so to speak, decline in rates from
• 15:23
  Speaker 4: the early 1980s, roughly until COVID. There are a few explanations,
• 15:27
  Speaker 4: not going to drone on, but, uh, increased savings on
• 15:32
  Speaker 4: the part of Asian countries coming into the U S, um,
• 15:37
  Speaker 4: The reduction in inflation, obviously, but real rates came down, too,
• 15:39
  Speaker 4: so we'll just focus on real rates. Better monetary policy, potentially.
• 15:44
  Speaker 4: A lot of economic variables moderated over that period.
• 15:47
  Speaker 2: I guess my conclusion would be I don't think there's
• 15:49
  Speaker 2: anything natural about the fact that the last interest rate
• 15:52
  Speaker 2: cycle took about 40 years, and I have no expectation
• 15:54
  Speaker 2: that this one will take 40 years to peak. No, no.
• 15:56
  Speaker 4: They don't get in the mindset of there are long
• 16:00
  Speaker 4: cycles in interest rates. Think trendless. Yeah. There are many trends.
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  Speaker 4: The 1980s to the present is not a mini trend,
• 16:08
  Speaker 4: and that conveys the false impression that these things take decades. Like,
• 16:13
  Speaker 4: for example, it took four decades for rates to trough
• 16:17
  Speaker 4: from the early 80s.
• 16:19
  Speaker 2: It also took a good how many decades? Four decades
• 16:25
  Speaker 2: for them to peak, right? I mean, if we think
• 16:27
  Speaker 2: about where rates came from. I wonder where, you know,
• 16:30
  Speaker 2: where do they bottom post-World War II?
• 16:32
  Speaker 4: The Fed was fixing the 10-year at 2.5, the long-term yield,
• 16:37
  Speaker 4: excuse me, at 2.5, it wasn't the 10-year, and the
• 16:40
  Speaker 4: short-term at. 375. Okay, so yields were capped from roughly
• 16:45
  Speaker 4: 10 years. Then we had the Treasury-Fed Accord, or the
• 16:48
  Speaker 4: Treasury Accord, if you prefer.
• 16:49
  Speaker 3: Yeah.
• 16:50
  Speaker 4: And in 1951, and then, you know, inflation was high
• 16:56
  Speaker 4: in 51, as we all remember.
• 16:59
  Speaker 3: How old are you?
• 17:00
  Speaker 4: And then this is just sort of the history. It's
• 17:02
  Speaker 4: a really interesting, the Fed's got this on their website,
• 17:04
  Speaker 4: the history of yields and recent Fed policy. I'm 54,
• 17:07
  Speaker 4: by the way, so no, I was not around then. Yeah,
• 17:12
  Speaker 4: so rates, and then in the mid-60s, of course, inflationary, fiscal,
• 17:17
  Speaker 4: and inerrant, in retrospect, monetary policy allowed rates to rise
• 17:23
  Speaker 4: steadily from the mid-60s, call it 65. Until 82, as
• 17:28
  Speaker 4: you pointed out. Again, so that conveys the false idea
• 17:31
  Speaker 4: that these are cycles and they play out over decades,
• 17:34
  Speaker 4: but that's just kind of an artifact of history.
• 17:37
  Speaker 2: You have a sample size of two in post-World War
• 17:39
  Speaker 2: II history, so it's not terribly useful.
• 17:40
  Speaker 4: I don't love that expression because it's like, well, it's
• 17:43
  Speaker 4: all we've got. It's a legitimate way to look at
• 17:44
  Speaker 4: the potential behavior of... capital markets, but at the same time, yeah,
• 17:50
  Speaker 4: you'd have to make some pretty hefty assumptions to conclude
• 17:55
  Speaker 4: that the same type of, that there'll be the same
• 17:57
  Speaker 4: type of duration to these movements. I mean, maybe the
• 18:01
  Speaker 4: tenure goes from 5.3 to ate really fast in the
• 18:05
  Speaker 4: next year. It seems implausible, but it doesn't necessarily have
• 18:08
  Speaker 4: to take four decades.
• 18:09
  Speaker 3: It seemed implausible. It would go from nothing to 5.7
• 18:11
  Speaker 3: in the course.
• 18:12
  Speaker 4: Of four years. Yeah, think about that. Right. If you'd
• 18:15
  Speaker 4: asked yourself a few years ago, remember the 10-year was at, what,
• 18:17
  Speaker 4: like 0.5? Yeah. Okay, we all knew that was absurd.
• 18:20
  Speaker 4: The Fed was engineering that, and we were virtually in
• 18:23
  Speaker 4: depression at the time. But it didn't take long for
• 18:26
  Speaker 4: it to rise 500 basis points. That's the 10-year. You
• 18:29
  Speaker 4: never would have guessed that at the time.
• 18:30
  Speaker 2: No, that moved a heck of a lot faster than
• 18:33
  Speaker 2: any trend in the past. In the meantime, these higher
• 18:35
  Speaker 2: rates are starting to have.
• 18:37
  Speaker 3: Real effects, I think.
• 18:39
  Speaker 2: When you take a look at a few businesses that
• 18:41
  Speaker 2: are talking about plans that they're making, the Paramount one
• 18:44
  Speaker 2: comes to mind where their debt sale did not go
• 18:47
  Speaker 2: terribly well. McCormick is talking about needing to use different
• 18:50
  Speaker 2: types of debt to finance an acquisition they're doing. And
• 18:53
  Speaker 2: then several other businesses have cited the higher interest rates
• 18:56
  Speaker 2: as a reason to maybe not move forward with some
• 18:59
  Speaker 2: plans that they were making. And that's by design, by
• 19:03
  Speaker 2: the way.
• 19:03
  Speaker 4: It's going to crush earnings.
• 19:04
  Speaker 3: It has to.
• 19:05
  Speaker 2: Except at the same time, you have this seemingly relentless
• 19:11
  Speaker 2: force of expansion coming from artificial intelligence.
• 19:13
  Speaker 4: Which is driving that.
• 19:14
  Speaker 3: That is driving everything else. Driving yields up. Yeah.
• 19:18
  Speaker 2: Driving interest rates up for the likes of McCormick, but
• 19:20
  Speaker 2: not slowing down the likes of Google.
• 19:22
  Speaker 3: We've got to take a quick break.
• 19:23
  Speaker 2: When we return, full market updates next with Wall Street Watch.
• 19:39
  Speaker 1: Like us on Facebook and follow us on Twitter at
• 19:42
  Speaker 1: TFE Show. Breaking business news is always first right here
• 19:47
  Speaker 1: on the Financial Exchange Radio Network. Time now for Wall
• 19:51
  Speaker 1: Street Watch. Tracking the stocks, the data, and the headlines
• 19:55
  Speaker 1: driving markets so far today right here on the Financial
• 19:58
  Speaker 1: Exchange Radio Network.
• 19:59
  Speaker 5: Markets adding to their gain after the S & P
• 20:01
  Speaker 5: 500 and NASDAQ notched fresh record highs. Right now the
• 20:07
  Speaker 5: Dow is up about half a percent or 243 points higher.
• 20:11
  Speaker 5: S & P 500 is up six-tenths of a percent
• 20:13
  Speaker 5: or 45 points up. NASDAQ is up six-tenths of a
• 20:16
  Speaker 5: percent or 164 points. Rust 2000 is off about a
• 20:21
  Speaker 5: quarter percent. 10-year Treasury yield is down two basis points
• 20:24
  Speaker 5: at 5.288%. Crude oil down over one and a half percent,
• 20:26
  Speaker 5: trading at $ 88 a barrel, while Brent is at $ 98.
• 20:33
  Speaker 5: After more than a year in pursuit, Paramount's takeover of
• 20:37
  Speaker 5: Warner Brothers Discovery officially closed today, where the new company
• 20:40
  Speaker 5: will be called Skydance with the ticker SKYD. That stock
• 20:45
  Speaker 5: is down 2% today. Meanwhile, after its recent rally that
• 20:48
  Speaker 5: made CEO Elon Musk a trillionaire once again, good for him.
• 20:52
  Speaker 5: SpaceX shares today are up another 2%. Over the past
• 20:55
  Speaker 5: five trading sessions, shares jumped 16% higher ahead.
• 20:59
  Speaker 1: Of today's open.
• 21:00
  Speaker 5: Meanwhile, Google parent Alphabet agreed to a 20-year deal to
• 21:04
  Speaker 5: buy nuclear power from Constellation Energy. Constellation is rallying 12%.
• 21:11
  Speaker 5: AMD is up over 2% after Citi raised its price target,
• 21:14
  Speaker 5: citing greater CPU demand driven by Meta's Muse AI agent.
• 21:20
  Speaker 5: Uber agreed to acquire catering and workplace meals platform Easy Cater.
• 21:24
  Speaker 5: In a deal valued at $ 2. 3 billion, Uber shares are
• 21:28
  Speaker 5: down modestly. I'm Tucker Sylvan.
• 21:31
  Speaker 1: That is Wall Street Watch.
• 21:33
  Speaker 2: Got a pair of stories today about retirement savings, retirement access, etc.
• 21:38
  Speaker 2: One from Barron's about why so many wealthy retirees are
• 21:41
  Speaker 2: hoarding their nest eggs. Another from Bloomberg about high earners
• 21:45
  Speaker 2: doing the opposite, seemingly, and stopping contributions to 401ks. The
• 21:49
  Speaker 2: stopping contributions piece is interesting to me because they're effectively
• 21:53
  Speaker 2: trying to hedge against the risk of tax rates going up, which...
• 21:58
  Speaker 2: Seems logical to me, but I've heard people making this
• 22:00
  Speaker 2: case for a quarter century and it hasn't happened yet. So,
• 22:04
  Speaker 2: I mean, eventually I would think that tax rates need
• 22:06
  Speaker 2: to go up to deal with our giant fiscal problems.
• 22:09
  Speaker 3: And if they do, then yeah, I mean.
• 22:12
  Speaker 4: So the thinking there is, I want to pay taxes
• 22:13
  Speaker 4: today because I believe rates are going up in the future.
• 22:16
  Speaker 4: And even though my income will be lower, I believe
• 22:18
  Speaker 4: on the margin, my tax liability will be higher. It's
• 22:21
  Speaker 4: a little bit convoluted, sorry. But that's effectively the thinking.
• 22:24
  Speaker 4: You pay less by... biting the bullet.
• 22:27
  Speaker 3: Yeah.
• 22:28
  Speaker 2: And they outlined the case of one individual who is
• 22:30
  Speaker 2: doing this, dropping her retirement contribution from 20 to five.
• 22:33
  Speaker 2: I guess my counterpoint would be, I believe today, 90
• 22:36
  Speaker 2: to 95 percent of 401k plans allow you to contribute
• 22:39
  Speaker 2: your money.
• 22:40
  Speaker 3: To Roth 401ks.
• 22:41
  Speaker 2: So if you really believe this firmly, that would be
• 22:45
  Speaker 2: another alternative to that is, hey, you know, I'm going
• 22:48
  Speaker 2: to pay the taxes ahead of time still and put
• 22:50
  Speaker 2: the money into a Roth 401k. And avoid the future
• 22:53
  Speaker 2: taxation there unless they completely upend the rules on me.
• 22:56
  Speaker 4: You can ask your employer plan, your HR person, if
• 23:00
  Speaker 4: a Roth option is not available within your 401k. And
• 23:04
  Speaker 4: you can typically see it on the contribution dropdown. Like,
• 23:06
  Speaker 4: how do you want to put money in pre-tax? It
• 23:08
  Speaker 4: used to be pre-tax, post-tax. Those were your only options. Now,
• 23:11
  Speaker 4: Roth is typically an option. But if not, ask your
• 23:13
  Speaker 4: HR person. why it isn't, and would they consider making
• 23:16
  Speaker 4: it available if the administrator, if the record keeper, a Vanguard,
• 23:22
  Speaker 4: a Fidelity, a Paychex, the Standard, somebody like that, if
• 23:25
  Speaker 4: they make that option available, and all do these days.
• 23:28
  Speaker 2: And yeah, they pretty much are required to now, because
• 23:31
  Speaker 2: if you earn too much income, your contributions, part of
• 23:35
  Speaker 2: your contributions are required to go into Roth. And so
• 23:38
  Speaker 2: If they don't offer it, they probably need to start
• 23:41
  Speaker 2: doing so very soon.
• 23:42
  Speaker 4: And you can still put money into a K plan.
• 23:44
  Speaker 4: Correct me if I'm wrong. Post-tax. That's not a Roth,
• 23:48
  Speaker 4: but it's subject to the overall, the 402, whatever it is,
• 23:52
  Speaker 4: code section limit. But you could still put money in post-tax,
• 23:55
  Speaker 4: which is exactly what it sounds like. You pay your
• 23:57
  Speaker 4: federal income tax. Maybe not FICA. I forget. And I'm
• 24:00
  Speaker 4: not a tax advisor, so don't take me too seriously.
• 24:03
  Speaker 4: But you can still put money in post-tax is my point, right, Mike?
• 24:05
  Speaker 3: Depending on the plan.
• 24:06
  Speaker 4: It always depends on the plan, right?
• 24:08
  Speaker 3: Yeah, they're allowed to customize all of this.
• 24:10
  Speaker 2: The other piece, though, I also find interesting because I
• 24:12
  Speaker 2: do experience this with clients myself about retirees who are
• 24:19
  Speaker 2: spending a lot less than they probably could. In fact,
• 24:21
  Speaker 2: they found that four in 10 people don't touch anything
• 24:24
  Speaker 2: from their retirement accounts until they get to the RMD age,
• 24:27
  Speaker 2: which for, you know, most of those people might be 73.
• 24:30
  Speaker 2: For most people listening now, it's 75. If you were
• 24:33
  Speaker 2: born 60, 1960 or after your age is 75, which
• 24:36
  Speaker 2: is pretty wild, right? I mean, this is the bucket
• 24:38
  Speaker 2: of money that you have saved all your life for.
• 24:41
  Speaker 2: And a lot of those folks, four in 10 of
• 24:42
  Speaker 2: them are finding, Hey, my social security pension and other
• 24:44
  Speaker 2: savings are getting me by just fine. That too can
• 24:48
  Speaker 2: be a mistake because if you're not touching that bucket,
• 24:50
  Speaker 2: you are.
• 24:51
  Speaker 4: Perhaps a mistake.
• 24:52
  Speaker 2: Um, It's not necessarily a mistake, but if you're not
• 24:55
  Speaker 2: touching it at all, I'm not just talking about it
• 24:58
  Speaker 2: for expenses, but if you're not touching it at all,
• 25:00
  Speaker 2: even for tax maneuvers, then some people will find themselves
• 25:04
  Speaker 2: in a higher income tax bracket when they are of
• 25:07
  Speaker 2: RMD age than when they were working.
• 25:10
  Speaker 4: Oh, because they have to take a bigger distribution. It
• 25:12
  Speaker 4: pushes them into a.
• 25:13
  Speaker 3: Yes. Okay.
• 25:14
  Speaker 4: So for tax optimization purposes.
• 25:17
  Speaker 3: It can make sense to do something different.
• 25:18
  Speaker 4: You've got to look at the whole picture.
• 25:19
  Speaker 3: Yeah. Here's the reality, though.
• 25:22
  Speaker 2: The reason that people are finding this is that most
• 25:25
  Speaker 2: people don't suddenly want to dramatically change their lifestyle because
• 25:29
  Speaker 2: they found themselves with more wealth than they previously expected.
• 25:32
  Speaker 3: They just don't.
• 25:34
  Speaker 2: I talk to people all the time who are in
• 25:35
  Speaker 2: this situation who just said, spending more money isn't going
• 25:38
  Speaker 2: to make me happier, so what's the point?
• 25:40
  Speaker 4: God bless them.
• 25:41
  Speaker 3: Yeah, that's a great thing. It's a fantastic thing.
• 25:44
  Speaker 4: Only the financial press, financed, of course, by companies that
• 25:47
  Speaker 4: just want you to consume until you drop, could conclude
• 25:51
  Speaker 4: that this is a, quote, problem. It's called peace of mind.
• 25:54
  Speaker 4: And they say this in the article. I like having
• 25:57
  Speaker 4: a nest egg because it's my security. If Medicare pulls
• 26:00
  Speaker 4: out the rug from underneath me, I can pay for
• 26:03
  Speaker 4: some of my own health care, for example.
• 26:05
  Speaker 3: Here's the point that I will make.
• 26:06
  Speaker 2: Either of these scenarios, choosing not to save into your
• 26:09
  Speaker 2: 401k because you're worried about future tax rates or not
• 26:11
  Speaker 2: spending to your capacity, are all good problems to have.
• 26:16
  Speaker 2: But with the work of a financial planner, they can
• 26:20
  Speaker 2: take these scenarios and just make it so that you
• 26:25
  Speaker 2: and your family pay less in taxes at some point
• 26:29
  Speaker 2: down the road in your life. After reading both of these,
• 26:32
  Speaker 2: I found inefficiencies in the way that they are doing things.
• 26:36
  Speaker 2: You might say, hey, I could use this bucket of
• 26:39
  Speaker 2: money to support the charitable things that I want to
• 26:42
  Speaker 2: do in my life, or I'm saving, but I don't
• 26:44
  Speaker 2: want to save my 401k.
• 26:45
  Speaker 3: Well, why?
• 26:46
  Speaker 2: What's the reason behind that? Oh, well, maybe we can
• 26:49
  Speaker 2: reroute the contributions to this other bucket. That is, to me,
• 26:54
  Speaker 2: the real core value that a qualified financial advisor can
• 26:59
  Speaker 2: provide beyond hey, this is the investment to make, this
• 27:02
  Speaker 2: is the best bucket to put this in. It's how
• 27:04
  Speaker 2: do we think about the multi-generational impact on taxes by
• 27:08
  Speaker 2: what you're doing today versus.
• 27:09
  Speaker 3: This other alternative that you have here.
• 27:11
  Speaker 2: If you have questions along those lines, if you want
• 27:14
  Speaker 2: to kick the tires and understand it a little bit better,
• 27:16
  Speaker 2: please give the folks at Armstrong Advisory Group a ring.
• 27:19
  Speaker 2: We talk about all of these types of issues daily
• 27:22
  Speaker 2: with our clients.
• 27:23
  Speaker 3: The number is 800-393-4001.
• 27:27
  Speaker 2: You can book a time for us to call you
• 27:28
  Speaker 2: back at armstrongadvisory.com, but that phone number once.
• 27:31
  Speaker 3: Again, 800-393-4001.
• 27:35
  Speaker 1: The proceeding was paid for by Armstrong Advisory Group, a
• 27:37
  Speaker 1: registered investment advisor. Nothing in the ad or in any
• 27:40
  Speaker 1: Armstrong guide is specific financial, legal, or tax advice. Consult
• 27:43
  Speaker 1: your own financial, tax, and estate planning advisors before making
• 27:46
  Speaker 1: any investment decisions. Armstrong may contact you to offer investment
• 27:49
  Speaker 1: advisory services.
• 27:50
  Speaker 3: Let's take a quick break.
• 27:51
  Speaker 2: When we come back, I want to talk a little
• 27:54
  Speaker 2: bit more about these rates and the lack of impact
• 27:56
  Speaker 2: they seem to be having on the artificial intelligence boom.
• 27:59
  Speaker 2: The New York Times phrases this as a problem for
• 28:02
  Speaker 2: the Federal Reserve. We'll discuss whether or not it truly
• 28:05
  Speaker 2: is next after this.
• 28:07
  Speaker 1: Business and financial news affecting the markets and your wallet.
• 28:11
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• 28:14
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• 28:18
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• 28:21
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• 28:27
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• 28:49
  Speaker 3: Mark, the 10-year interest rate on U.S.
• 28:55
  Speaker 2: Government debt, treasury debt, is sitting at 5.277% today.
• 29:00
  Speaker 3: We're down slightly.
• 29:01
  Speaker 2: Yields are falling with oil prices this morning, which has
• 29:04
  Speaker 2: been a pretty consistent trend this year.
• 29:07
  Speaker 3: Energy prices up, yields up.
• 29:08
  Speaker 4: Except yesterday for some reason, but yeah.
• 29:11
  Speaker 2: The question that's raised by the New York Times is
• 29:15
  Speaker 2: one that we've kind of debated, I guess, back and forth,
• 29:19
  Speaker 2: which is, will these higher rates actually restrict the important
• 29:25
  Speaker 2: sectors of the economy that are causing.
• 29:27
  Speaker 3: The inflation in the first place? And the answer seems
• 29:30
  Speaker 3: to be, at least right now, no.
• 29:32
  Speaker 2: That higher interest rates are not restrictive for giant tech
• 29:37
  Speaker 2: companies that are building AI data centers.
• 29:39
  Speaker 4: I don't know that they're cause, if that's what the
• 29:41
  Speaker 4: Times said. Sorry, I couldn't view this article because the
• 29:43
  Speaker 4: Times has locked me out for all my rude comments.
• 29:47
  Speaker 3: Yeah, it's not a paywall. Yeah. It's personal.
• 29:49
  Speaker 4: They were just, yeah. Like, okay, we like Reagan too,
• 29:52
  Speaker 4: but you're out.
• 29:54
  Speaker 2: No.
• 29:55
  Speaker 4: So it's not clear to me that AI is driving
• 29:58
  Speaker 4: chip prices. It's contributing maybe on the margin to inflation.
• 30:02
  Speaker 4: But your point is, is it sort of like a
• 30:05
  Speaker 4: Fed tightening? Is it doing the Fed's job for it?
• 30:08
  Speaker 4: Can I generalize the question, put it that way? To
• 30:11
  Speaker 4: an extent, is it doing the Fed's job for it?
• 30:12
  Speaker 4: The answer that you've already given us the answer, I think,
• 30:15
  Speaker 4: is no. Because, number one, some of them are financing internally.
• 30:20
  Speaker 4: They're increasingly relying on other aspects of capital markets to
• 30:23
  Speaker 4: finance hyperscalers and right on down the value chain, semis
• 30:28
  Speaker 4: and utilities. They're increasingly relying on broader capital markets and
• 30:33
  Speaker 4: even banks to finance the boom. And they seem to
• 30:35
  Speaker 4: be price insensitive. Is that what you were going to say?
• 30:37
  Speaker 2: They seem to be, yeah. They don't really care if
• 30:40
  Speaker 2: interest rates are higher or energy prices are higher. They're
• 30:42
  Speaker 2: just going to keep on building because they see an
• 30:44
  Speaker 2: almost infinite profit for.
• 30:45
  Speaker 4: What could come. I think most researchers would agree with that, yeah.
• 30:48
  Speaker 2: I guess the question is, how much of a problem
• 30:49
  Speaker 2: does that really represent for the Fed? Because I don't
• 30:52
  Speaker 2: know how much inflation this is causing, but I suspect
• 30:55
  Speaker 2: it's not a ton. And realistically, I still have almost
• 31:01
  Speaker 2: no doubt that if the Fed gets really serious about
• 31:05
  Speaker 2: inflation and is willing to sacrifice employment to control it, then, yeah,
• 31:11
  Speaker 2: I mean, we're seeing it with other companies, right? The
• 31:13
  Speaker 2: borrowing costs are so high, the likes of McCormick and
• 31:15
  Speaker 2: other major employers forget about you know microsoft and all
• 31:19
  Speaker 2: these companies might be building a lot of data centers
• 31:22
  Speaker 2: they're not employing marginally tons more people to do all
• 31:27
  Speaker 2: of this they're just spending a lot of money and
• 31:29
  Speaker 2: buying products that are now going for a higher price
• 31:31
  Speaker 2: point if you raise interest rates high enough to slow
• 31:35
  Speaker 2: down the rest of the economy i still think that's
• 31:38
  Speaker 2: going to get the job done of controlling inflation it's
• 31:41
  Speaker 2: just at what sacrifice.
• 31:42
  Speaker 4: Yeah I don't think the feds worry about excess demand
• 31:45
  Speaker 4: right now, and that's the knob they can control. The
• 31:50
  Speaker 4: labor market does not appear to be overly tight. Unemployment's low,
• 31:54
  Speaker 4: but by other measures, there's some slack.
• 31:57
  Speaker 3: Yeah, jolts and payrolls and everything.
• 31:59
  Speaker 4: Namely, yeah, but sure, jolts too. So when you keep
• 32:04
  Speaker 4: in mind that what the fed can do via its
• 32:07
  Speaker 4: control of the money supply, less directly interest rates, and
• 32:10
  Speaker 4: even less directly demand... The Fed can moderate total demand, aggregate,
• 32:15
  Speaker 4: so-called aggregate demand. The Fed can't do much about supply-driven inflation.
• 32:20
  Speaker 4: Supply shocks like oil prices, and there can be others
• 32:23
  Speaker 4: like AI demand. There are supply and demand elements to that.
• 32:27
  Speaker 4: This is where it gets complicated. I don't pretend to
• 32:29
  Speaker 4: have all the answers here, even some. I'll just describe
• 32:32
  Speaker 4: the way the Fed's thinking about this. Does it make
• 32:34
  Speaker 4: sense to kill the economy right now to get inflation
• 32:36
  Speaker 4: down by a half a percentage point? given that demand
• 32:39
  Speaker 4: may not even be the culprit. The thing over which
• 32:41
  Speaker 4: we have the most control may not even be the culprit.
• 32:44
  Speaker 4: I don't believe they think that we have an excess
• 32:46
  Speaker 4: demand problem right now. We'll see what the GDP growth
• 32:49
  Speaker 4: rate comes in for 3Q.
• 32:52
  Speaker 2: But you've, Mark, said consistently that you think rates should
• 32:55
  Speaker 2: be higher, which would slap demand.
• 32:58
  Speaker 3: The point is, do you believe?
• 32:59
  Speaker 4: If only for psychological reasons. Look, if I, you know,
• 33:03
  Speaker 4: if we had, if I had my druthers and could
• 33:05
  Speaker 4: do wave a wand, rates went up by a half
• 33:07
  Speaker 4: or a full percentage point, it would take several quarters
• 33:10
  Speaker 4: for that to work its way through the economy to
• 33:12
  Speaker 4: have its effect on demand anyway. So it's not going
• 33:14
  Speaker 4: to do anything about inflation in the near term. The
• 33:17
  Speaker 4: 25 basis point hike will almost certainly not make a dent,
• 33:21
  Speaker 4: no matter how ambitious your assumptions about how quickly or
• 33:25
  Speaker 4: or how impactful monetary policy is, it's not going to
• 33:28
  Speaker 4: make a difference. Their job right now is to convince
• 33:30
  Speaker 4: us that they will act, if and when the time comes,
• 33:35
  Speaker 4: more severely to crush. I know, if this sounds like
• 33:38
  Speaker 4: a stretch and it sounds a little convoluted, it's because
• 33:41
  Speaker 4: it is. This is not a science. They need to
• 33:43
  Speaker 4: convince us that they will act when the time comes,
• 33:45
  Speaker 4: and that's what their recent, by their recent moves and
• 33:50
  Speaker 4: by their recent statements, they intend to demonstrate that. Sorry,
• 33:54
  Speaker 4: I don't have an unambiguous answer.
• 33:56
  Speaker 3: For you there. No, I'm not looking for one.
• 34:00
  Speaker 2: And I do think it does present a somewhat unique
• 34:04
  Speaker 2: problem for the Fed insofar as their policy is not
• 34:08
  Speaker 2: affecting one of the highest and fastest growth engines of
• 34:11
  Speaker 2: the U.S.
• 34:12
  Speaker 3: Economy right now.
• 34:14
  Speaker 4: Well, their tools are blunt.
• 34:16
  Speaker 3: But yeah, I guess that's my point. That's kind of
• 34:17
  Speaker 3: always the case.
• 34:18
  Speaker 4: If this were a financial institution, they could use their...
• 34:22
  Speaker 4: macro prudential regulatory tools to stifle excesses they can't do
• 34:28
  Speaker 4: that with the tax sector they can't do that if
• 34:31
  Speaker 4: excess demand is coming from some non financial segment of
• 34:36
  Speaker 4: the economy they just don't have the tools To do it,
• 34:39
  Speaker 4: it's like... They can't raise taxes on Microsoft. They can't
• 34:43
  Speaker 4: put in new regulations on AI data centers. And so instead,
• 34:46
  Speaker 4: they can do one thing, which is make the cost
• 34:48
  Speaker 4: of capital for those institutions more expensive. It's like chemo
• 34:50
  Speaker 4: or radiation. I hate to use this analogy because it's
• 34:52
  Speaker 4: such a serious issue for a lot of people. But
• 34:55
  Speaker 4: in the old days, it was really blunt. These days,
• 34:58
  Speaker 4: it's far... It's more targeted therapies, yeah.
• 35:01
  Speaker 3: Yeah.
• 35:01
  Speaker 4: So the Fed does not have a targeted therapy policy tool.
• 35:05
  Speaker 1: Right.
• 35:06
  Speaker 3: Yeah. That's a good comparison.
• 35:08
  Speaker 2: Sad comparison, but good comparison. Oil prices down a little
• 35:12
  Speaker 2: bit today. They've been down for the last few weeks, really.
• 35:17
  Speaker 2: What it's not moving a whole lot is the stuff
• 35:19
  Speaker 2: that matters. And there's a logical reason behind this. For
• 35:22
  Speaker 2: a frame of reference here, West Texas Crudes currently right
• 35:26
  Speaker 2: now sitting at $ 87.
• 35:27
  Speaker 3: 90 per barrel.
• 35:27
  Speaker 2: That is down from a recent high of about $ 105
• 35:29
  Speaker 2: per barrel. And Really, it has to do with a
• 35:36
  Speaker 2: lot of the reporting that we've been seeing over the
• 35:37
  Speaker 2: last few weeks, which is more oil moving both through
• 35:40
  Speaker 2: the Red Sea as well as through the Strait of Hormuz.
• 35:43
  Speaker 2: I do have some questions about how that is going
• 35:45
  Speaker 2: to progress. But one thing that's not really moving is
• 35:49
  Speaker 2: refined product. The reason why is because a lot of
• 35:53
  Speaker 2: the refineries across the Middle East have been taken offline
• 35:57
  Speaker 2: due to the war in Iran. In addition, a number
• 36:00
  Speaker 2: of Russian refineries have been taken offline due to strikes
• 36:02
  Speaker 2: by the Ukrainians. And so, plain and simple, you've got
• 36:06
  Speaker 2: more oil flowing at a cheaper price, which will eventually
• 36:11
  Speaker 2: lead to good news there. But on diesel specifically, we
• 36:15
  Speaker 2: are still about 20 cents away from our all-time high ever,
• 36:20
  Speaker 2: which was reached back on September 22nd. And most of
• 36:23
  Speaker 2: that seems to be coming from, mostly from additional refining
• 36:28
  Speaker 2: capacity here in the United States coming back online. rather
• 36:32
  Speaker 2: than anything else. This is, by the way, data from AAA.
• 36:35
  Speaker 2: If you just search AAA gas prices, you can follow
• 36:38
  Speaker 2: along here. But the national average for a gallon of
• 36:40
  Speaker 2: diesel is sitting at $ 6.
• 36:42
  Speaker 3: 32.
• 36:43
  Speaker 2: The all-time high was back on September 22nd at $ 6.
• 36:47
  Speaker 3: 53.
• 36:48
  Speaker 2: We've talked at length about all of the second-order effects
• 36:53
  Speaker 2: of diesel prices being this high.
• 36:55
  Speaker 3: I guess the question... is there somebody that can come
• 36:59
  Speaker 3: to the rescue on all of this? I don't really know.
• 37:03
  Speaker 2: My guess would be that if any large group could
• 37:08
  Speaker 2: come to the rescue on bringing diesel prices down, it
• 37:11
  Speaker 2: would be China just as they have with keeping oil
• 37:14
  Speaker 2: prices low. They have a bunch of teapot refineries that,
• 37:17
  Speaker 2: you know, uh, can operate at pretty high levels. Um,
• 37:22
  Speaker 2: But I don't know if they, frankly, the Chinese have
• 37:25
  Speaker 2: spent the last six months buying a lot less oil
• 37:28
  Speaker 2: than they used to.
• 37:29
  Speaker 3: So I don't know if they literally have the product. Well, yeah,
• 37:31
  Speaker 3: there is.
• 37:32
  Speaker 4: But it's Henry Kissinger, probably, like a diplomatic expert who
• 37:36
  Speaker 4: could resolve the wars in Iran and the stalemate in
• 37:38
  Speaker 4: the Middle East. These are geopolitical, right? At root, these
• 37:41
  Speaker 4: are geopolitical problems. They're not economic or regulatory problems.
• 37:45
  Speaker 2: But I think the point that I would make is
• 37:47
  Speaker 2: even with that perfect politician that navigates the end of
• 37:52
  Speaker 2: this crisis and convinces the Chinese to refine more product,
• 37:56
  Speaker 2: you have long-term damage that was done to all sorts
• 37:58
  Speaker 2: of infrastructure across Europe, Russia, and the Middle East that
• 38:04
  Speaker 2: is going to take a while to come back online.
• 38:06
  Speaker 3: We've got to take a quick break.
• 38:07
  Speaker 2: Markets remain strongly in positive territory. A lot more to
• 38:10
  Speaker 2: cover in the second hour. We will be right back.