Latest / The Financial Exchange Show / Tesla earnings could offer hope for the stock market

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Tesla earnings could offer hope for the stock market · The Financial Exchange Show

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Speaker 1: heroes by visiting DAV five dot Boston and making a
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Speaker 1: donation today. Face is the Financial Exchange with Paul Lane
1:06
Speaker 1: and Mark Vandetti.
1:11
Speaker 2: Kicking off the second hour of the Financial Exchange, Paul Lane,
1:15
Speaker 2: Mark Vendetti, and Ben Kitchen here with you. All US
1:18
Speaker 2: markets up over two percent, making back some of the
1:21
Speaker 2: losses from yesterday's sell off. We start the second hour
1:25
Speaker 2: of our program by previewing some earnings that we have
1:29
Speaker 2: coming after the bell today. Tesla is going to be
1:32
Speaker 2: reporting its earnings. They had earlier in this month reported
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Speaker 2: that they saw a thirteen percent decline in deliveries. Obviously,
1:41
Speaker 2: they've been in the headlines quite a bit because of
1:43
Speaker 2: Elon Musk's involvement in the Trunk administration. The stock is
1:47
Speaker 2: off about fifty percent from where it was before Trump
1:52
Speaker 2: took office. It had had a significant run up from
1:56
Speaker 2: November to January, but since then has has really created
2:00
Speaker 2: quite a bit, and sales are slowing across many different markets,
2:04
Speaker 2: whether you look at the European market. There's also tremendous
2:07
Speaker 2: challenges that they face in China to gain market share,
2:11
Speaker 2: or rather to maintain market share. They're really losing there,
2:14
Speaker 2: So it'll be interesting to see what we get out
2:17
Speaker 2: of Tesla at the close of market today. It's anticipated
2:20
Speaker 2: that their revenue grew less than one percent for this
2:23
Speaker 2: most recent quarter here.
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Speaker 3: So yeah, strange reversal of well, not strange. We know
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Speaker 3: exactly what it's attributable to. Some of it may be fair,
2:30
Speaker 3: some of it may be unfair. But if you look
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Speaker 3: at analysts who follow the company, their comments have turned
2:36
Speaker 3: from the fine tuning things he needs to do to
2:39
Speaker 3: how to save it. And you would not have thought
2:43
Speaker 3: that fortunes could have turned that quickly. But those are
2:45
Speaker 3: the risks you take when you become vocal.
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Speaker 2: Yes, and he being involved in the headlines. Yeah, like
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Speaker 2: I you know it just it seems as if a
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Speaker 2: lot of the buyers have been alienated just because of
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Speaker 2: some of the local views. And it goes back to
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Speaker 2: that Michael Jordan line that we always reference to the
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Speaker 2: show that you know both sides by by shoes er
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Speaker 2: in this case, by electric vehicles. So be interesting. Like
3:10
Speaker 2: I said, actually, but I think the.
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Speaker 4: Yeah, that's true, talk about this.
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Speaker 3: Eli is a very smart guy, I think, right, Oh, definitely, Okay,
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Speaker 3: so he knows this, so uh, I guess he thought
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Speaker 3: it was worth it.
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Speaker 2: The full year results, like I mentioned, uh, probably won't
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Speaker 2: be that tremendous. As I mentioned, the thirteen percent year
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Speaker 2: over year dropping vehicles in Q one has been concerning,
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Speaker 2: and this is coming off a year previously where they
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Speaker 2: had seen slowing sales growth. So that had really been
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Speaker 2: the story with Tesla that as much as you'd want
3:44
Speaker 2: to beat them up from a valuation perspective, which I
3:46
Speaker 2: think all of us traditional valuation people out there had
3:50
Speaker 2: in terms of what it was trading at, from a
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Speaker 2: prist earnings perspective, at least they could previously promise that
3:55
Speaker 2: there's sort of this hockey hockey shape hockey stick shape
3:59
Speaker 2: revenue growth, but that has really plateaued a bit here.
4:03
Speaker 2: And then the other reason that you'd be a Tesla
4:06
Speaker 2: buyers just the optimism around Elon Musk and the company's
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Speaker 2: propensity for innovation, and none of those bets have really
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Speaker 2: proven just yeah, you know, in terms of the cyber tax,
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Speaker 2: the robotaxity, Yeah, that's probably the insue story.
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Speaker 3: Certainly, the uncertainty around electric vehicle, I was electrical ownership
4:29
Speaker 3: is not quite the way a way I want to
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Speaker 3: put it, but I'll go with that. You know, four
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Speaker 3: years ago, they were shoving these things aggressively down everybody's
4:35
Speaker 3: start out almost felt like I'd have to buy one
4:37
Speaker 3: at some point now, I feel like if I had
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Speaker 3: bought one, I might not be able to charge it
4:42
Speaker 3: because the FEDS have backed off the larger theme. They're
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Speaker 3: backing off supporting charging infrastructure. This type of whip sawing
4:52
Speaker 3: policy is not helpful.
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Speaker 4: And if I'm.
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Speaker 3: Feeling it a little idio bit as a consumer, I
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Speaker 3: can only imagine what businesses who have to make investment
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Speaker 3: and in the short term inventory decisions based on say,
5:03
Speaker 3: tariff policy might be.
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Speaker 4: It's really the.
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Speaker 3: Uncertainty with respect to prospects for electric vehicles and the
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Speaker 3: degree to which the government will support them has got
5:14
Speaker 3: to be really anxiety provoking for some people to climate
5:17
Speaker 3: has changed so radically in such a short period and
5:20
Speaker 3: it could flip back in three years or eight years
5:24
Speaker 3: or one.
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Speaker 2: Yeah, you've seen the major auto manufacturers that first of all,
5:27
Speaker 2: they're dealing with enough as it is with everything that's
5:30
Speaker 2: going on from a tear front now. But also they
5:32
Speaker 2: had pulled back on a lot of their ev initiatives
5:35
Speaker 2: to begin with to begin with, and so there's just
5:37
Speaker 2: really not a lot of momentum there. Not to mention,
5:41
Speaker 2: if you're battling on the global market field like Tesla is,
5:45
Speaker 2: you've got a lot of Chinese vehicles that are taking
5:47
Speaker 2: a lot of market share away at some of these
5:49
Speaker 2: subsidized prices. So it's a challenging business environment out there,
5:54
Speaker 2: that is for sure. Piece here from CNBC is the
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Speaker 2: dollar falters the World Center Bank trends a tightrope to
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Speaker 2: devalue their currency or not. As I mentioned earlier in
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Speaker 2: the program, we've seen the dollar index down more than
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Speaker 2: nine percent so far this year. Other currencies out there
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Speaker 2: have appreciated against it, such as the Japanese gen and
6:19
Speaker 2: the Swiss franc. So now there's this piece here as
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Speaker 2: to know what we do about that drop in the
6:26
Speaker 2: dollar index and is that an area of concern.
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Speaker 3: So the dollar is falling, presumably, and there may be
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Speaker 3: other reasons, but the main story is that people are
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Speaker 3: fleeing US assets. They're fleeing treasuries, they're fleeing stocks to
6:42
Speaker 3: I'm talking about international investors now, and there's hard evidence
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Speaker 3: for this. They have maybe less confidence that, say, the
6:48
Speaker 3: Fed won't inflate our debts away if it comes under
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Speaker 3: political control, or they just don't like the policy uncertainty
6:53
Speaker 3: here generally, or they're doing it out of spite, they're
6:56
Speaker 3: being a little bit vindictive. Oh you're going to teriff us.
6:58
Speaker 4: We're not going to buy your assets. And it's worth reminding.
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Speaker 3: Ourselves that all those dollars we send abroad when we
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Speaker 3: buy Chinese goods, lows or Japanese electronics, those dollars get
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Speaker 3: recycled back into US investments. The recycling part into investments
7:13
Speaker 3: is called the capital account. You hear about the current
7:15
Speaker 3: account or the trade deficit a lot you don't hear
7:18
Speaker 3: about the flip side of that, which is what foreigners
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Speaker 3: do with those dollars.
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Speaker 4: They invest them.
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Speaker 3: The reason is we don't save enough here to support
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Speaker 3: our own investment needs. We're a very attractive investment location
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Speaker 3: the US is, but we don't save enough. So the
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Speaker 3: point I guess I want to make getting a little
7:35
Speaker 3: bit sidetracked, but I think it's worthwhile reminding ourselves myself included,
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Speaker 3: is that the trade deficit as a result of us
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Speaker 3: not saving enough. It's not a result of anybody playing
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Speaker 3: of stacking the deck against us.
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Speaker 4: Necessarily.
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Speaker 3: There might be a little bit of that China might
7:51
Speaker 3: you know, some currency manipulation might be going on, but
7:54
Speaker 3: that's not the primary reason behind the trade deficit. This
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Speaker 3: article points out that as the dollar is weakened lately
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Speaker 3: because people are fleeing US assets right, other countries are
8:02
Speaker 3: now finding themselves in less favorable in a less favorable
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Speaker 3: competitive position. If you're a Japanese exporter, your export's just
8:12
Speaker 3: got more expensive because the yen is appreciating. So now
8:14
Speaker 3: the Japanese Central Bank has to think about Bank of
8:17
Speaker 3: Japan has to think about the yen, its value, and
8:22
Speaker 3: how it makes monetary how its monetary policy affects the
8:25
Speaker 3: value of the yen. It gets quite involved, is my
8:30
Speaker 3: wandering commentary here suggests.
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Speaker 2: Similarly, a similar story that ties into this discussion is JD.
8:39
Speaker 2: Vance is on a tour where he was speaking recently
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Speaker 2: in India calling for US India ties to sort of
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Speaker 2: tighten and create a win win partnership where they would
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Speaker 2: leverage one another more than they have previously. Certainly from
8:56
Speaker 2: a business perspective, Apple has been in the headlines that's
8:59
Speaker 2: trying to divert of its manufacturing of the Apple iPhone
9:02
Speaker 2: to India, and there's been a lot of pieces that
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Speaker 2: have been written about this idea that India can be
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Speaker 2: the next manufacturing frontier. They still have a tremendous amount
9:12
Speaker 2: of ground to make up when it comes to competing
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Speaker 2: with China on the manufacturing front. But JD Vance was
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Speaker 2: out there encouraging them not only to work with the
9:21
Speaker 2: US and create closer ties, but also encouraging them to
9:26
Speaker 2: purchase more American goods, in particular energy and military equipment,
9:32
Speaker 2: as well as the potential of purchasing American F thirty
9:36
Speaker 2: five warplanes to strengthen the Indian Air Force.
9:39
Speaker 3: Fine, great, you want to be the it's a good
9:41
Speaker 3: role for the vice president. You're sort of the unofficial
9:45
Speaker 3: head of the US Chamber of Commerce or something that's
9:48
Speaker 3: always been an appropriate role for politicians. Don't fool yourself though,
9:51
Speaker 3: into thinking this will and I don't think we need
9:54
Speaker 3: to fix the trade deficit. By the way, it's not
9:56
Speaker 3: a bad thing that we ship fewer goods abroad than
9:58
Speaker 3: we buy from abroad. That makes us all better off.
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Speaker 3: And again the flip side to that is that we
10:03
Speaker 3: export investments and services. That aside, we had about a
10:09
Speaker 3: fifty billion dollar so called trade deficit. We bought fifty
10:12
Speaker 3: billion dollars more in Indian goods last year than we exported.
10:17
Speaker 3: If you brought that to zero, because again, the trade
10:19
Speaker 3: deficit is it root a savings deficit you have to
10:23
Speaker 3: keep it's it's non intuitive. First time I learned it,
10:26
Speaker 3: I didn't believe it. Second time I learned it, I
10:28
Speaker 3: was a little more open to it, and it took
10:30
Speaker 3: me like, probably years for it to sink in. So
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Speaker 3: I understand this is it's a weird concept. But the
10:36
Speaker 3: trade deficit is just going to go someplace else because
10:38
Speaker 3: we're not fixing the root of the problem, which is
10:41
Speaker 3: low savings. And that savings problem includes federal government disssavings
10:46
Speaker 3: or the federal budget deficit. All these things are tied together.
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Speaker 2: Should we be fixing the savings.
10:52
Speaker 3: I wouldn't mind seeing incentives for I think our savings
10:55
Speaker 3: rate is probably too low as evit look, given the
10:57
Speaker 3: level of services. There are a couple I'm sorry, I'm
11:00
Speaker 3: answering your question now three different ways, and I've stopped
11:02
Speaker 3: each time and started to answer it differently. We got
11:05
Speaker 3: a big we got a big federal budget debt and deficit.
11:08
Speaker 3: Federal debt, federal budget deficit problem. So I'm gonna focus
11:10
Speaker 3: on that part because reducing that is the equivalent of So, yeah,
11:14
Speaker 3: it's not really what you asked, but I'm gonna say absolutely,
11:16
Speaker 3: particularly when the economy is expanding, if you fixed the
11:19
Speaker 3: budget deficit, it would alleviate to a degree the trade deficit.
11:23
Speaker 3: Though if we continued to grow faster than the rest
11:25
Speaker 3: of the world, we might still find our trade deficit
11:28
Speaker 3: to be all to say large, without defining that. Like
11:31
Speaker 3: in the late nineties, we grew really fast, we ended
11:34
Speaker 3: up with a budget federal budget surplus. We still had
11:36
Speaker 3: a pretty good sized trade deficit, though that was a
11:38
Speaker 3: function of growing fast and not saving enough. So I think, yes, Paul,
11:43
Speaker 3: if you we should fix the savings problem. If you
11:46
Speaker 3: focus on the federal government's dissaving problem, it's it's it's
11:51
Speaker 3: shameful addiction to debt, even to deficits, even in good
11:54
Speaker 3: economic times, when you should be running surpluses.
11:58
Speaker 2: We're gonna take a quick break here on the Financial Exchange.
12:01
Speaker 2: When we come back, we'll have a little bit of
12:03
Speaker 2: trivia and much much more. That's right after this break
12:06
Speaker 2: here on the Financial Exchange. Stick with us.
12:09
Speaker 1: Tara Fever is in high gear. We've got the latest
12:12
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12:31
Speaker 5: All right time. Now for some trivia here on the
12:34
Speaker 5: Financial Exchange Today's Jack Nicholson's eighty eighth birthdayson is widely
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Speaker 5: regarded as one of the greatest actors of the twentieth century,
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Speaker 5: often playing rebels fighting against the social structure. That might
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12:49
Speaker 5: here how many Academy Awards has Jack Nicholson won? How
12:54
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Speaker 5: person who texts us at seven three six two, one
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13:12
Speaker 2: Gold has hit thirty five hundred dollars announced as we
13:16
Speaker 2: look at trading today, it's slightly blow that threshold, but
13:19
Speaker 2: it did top over thirty five hundred dollars announced in
13:23
Speaker 2: what's been a record setting run for gold over the
13:26
Speaker 2: course of the last several months or so. And we'll
13:30
Speaker 2: we'll take some time mark maybe just to talk about
13:34
Speaker 2: how investors sometimes will use gold within their portfolio. I
13:40
Speaker 2: think the biggest thing to take into stock from an
13:45
Speaker 2: investment standpoint is that gold is a non correlated asset.
13:49
Speaker 2: So as much as we talk about the markets on
13:51
Speaker 2: a daily basis, it shows no true correlation to if
13:56
Speaker 2: the markets are up, it does well, the markets are down,
13:58
Speaker 2: it does well. There is no real statistical correlation that
14:04
Speaker 2: can be drawn between those.
14:06
Speaker 4: Yeah, I think that's fair.
14:07
Speaker 3: If you look at the monthly change and the price
14:09
Speaker 3: of gold and the monthly change in the value of
14:12
Speaker 3: some measure of US stocks, like the S and P
14:14
Speaker 3: five hundred index of the Russle one thousand index, you
14:17
Speaker 3: will find that they tend not to move together at
14:20
Speaker 3: the same time. And that's what you want. If you're
14:22
Speaker 3: seeking to diversify your portfolio, you want things that are
14:26
Speaker 3: technically only modestly correlated. And correlated it's just a fancy
14:30
Speaker 3: way of expressing a relationship between any two things. In investments,
14:37
Speaker 3: it's used a lot for obvious reasons. This is unlike
14:40
Speaker 3: more traditional investments, like say small company stocks. If you
14:43
Speaker 3: have a four to one K plan, you might have
14:44
Speaker 3: seen an investment menu with large company stocks, small company stocks,
14:49
Speaker 3: maybe mid sized company stocks, international stocks and international can
14:52
Speaker 3: be broken down into developed and emerging, et cetera, et cetera.
14:55
Speaker 3: The reason you have so many choices on your four
14:57
Speaker 3: to one K menu, and if you have a pension fund,
14:59
Speaker 3: these choices are there too, you just don't make them
15:01
Speaker 3: a board. Does these allow you to spread your capital out,
15:06
Speaker 3: not have all your eggs in one basket? Right, Gold,
15:09
Speaker 3: it would seem, and this is true, but only less
15:11
Speaker 3: so of other metals precious and industrial has the sort
15:16
Speaker 3: of unique property that is very modestly correlated with traditional
15:20
Speaker 3: asset classes like stocks and even bonds, although much more
15:23
Speaker 3: correlated with bonds than it is with with stocks. It
15:26
Speaker 3: seems well, I may have that, I may have said
15:29
Speaker 3: that incorrectly. I don't think it's correlated with either one.
15:30
Speaker 3: I was looking internally at just equities because that's our
15:33
Speaker 3: area of interest. But anyway, so gold is interesting in
15:37
Speaker 3: that it's pretty investible.
15:39
Speaker 4: Ben you're asking, how.
15:41
Speaker 5: Aside physical gold, how do you invest in gold?
15:45
Speaker 2: There are exchangtrated fund options out there in the investment
15:49
Speaker 2: world which allow investors the ability to participate in the
15:56
Speaker 2: price appreciation of gold and have some exposure to it.
16:00
Speaker 2: I should say with that, so it's not.
16:02
Speaker 3: Hard to add it to a portfolio in this day
16:04
Speaker 3: and age. It's been very investible in a very liquid way.
16:07
Speaker 3: You can buy it and sell it throughout the day
16:09
Speaker 3: for a long time, So it's easy to add it
16:11
Speaker 3: to a portfolio if your objective is to make your
16:14
Speaker 3: portfolio more robust to different possible market and economic climates,
16:21
Speaker 3: if you will.
16:23
Speaker 2: Yeah, it serves more than thirty percent to start the year,
16:26
Speaker 2: so certainly it's been off file.
16:27
Speaker 3: Yeah, a good start here, And this to me is
16:30
Speaker 3: again part of the dollar story. If you think of
16:32
Speaker 3: gold as a currency because of its historical treatment, as
16:38
Speaker 3: its acceptance, it's treatment, it's characteristic, whatever you want to
16:41
Speaker 3: call it as a currency, you can think of the
16:43
Speaker 3: dollar depreciating against gold. When the price of gold goes up,
16:47
Speaker 3: it takes more dollars to buy it, just like when
16:50
Speaker 3: the euro dollar exchange rate goes up or down, depending
16:53
Speaker 3: on what's in your numerator and what's in your denominator.
16:56
Speaker 3: Let's just make it easy and say when the exchange
16:57
Speaker 3: rate goes up, it's because the dollar strengthening, the dollars weakening.
17:00
Speaker 3: The exchange rate goes down, it takes more dollars to
17:02
Speaker 3: buy a euro in this example, similar thing seems to
17:05
Speaker 3: be happening with gold.
17:06
Speaker 4: Is this happening with currencies?
17:07
Speaker 3: It takes more dollars to buy euro or yen or gold.
17:13
Speaker 2: Warren Buffett timed his Apple stock sale to perfection. What's next?
17:18
Speaker 2: That's a headline from a Wall Street Journal piece. Here
17:21
Speaker 2: eleven days from now, Warren Buffett will host the Woodstock
17:24
Speaker 2: quote unquote Woodstock for Capitalist event. A lot of the
17:28
Speaker 2: questions that he will likely receive will stem from the
17:32
Speaker 2: significant pile of cash that Berkshire Hathaway is sitting on,
17:35
Speaker 2: which is now up to about three hundred and eighteen billion. Notably,
17:40
Speaker 2: they had sold a very large chunk of their Apple
17:44
Speaker 2: shares that they had initially started investing in Apple back
17:48
Speaker 2: in twenty sixteen. Apple obviously has lost about twenty five
17:52
Speaker 2: percent of its value since it's December peak, and a
17:57
Speaker 2: lot of the questions will be just what does you
18:00
Speaker 2: know Warren Buffett? For see, from an economic perspective, is
18:03
Speaker 2: this cash hoarde of his a strategic move to help
18:07
Speaker 2: bail out you know, blue chip companies like he's done
18:10
Speaker 2: in the past. I doubt we'll get a lot of
18:12
Speaker 2: information as to what his plans or the firm's plans are.
18:16
Speaker 2: But it is always interesting to hear his feedback. It's
18:19
Speaker 2: amazing that he continues to host this event in the
18:23
Speaker 2: upwards of his nineties. I don't know if he's ninety
18:26
Speaker 2: five ninety two, he's you know, significantly up there. But
18:30
Speaker 2: is always interesting to hear his feed doact just because
18:33
Speaker 2: of his the career and the historical perspective that he brings.
18:36
Speaker 3: It doesn't mean he's soured on Apple. It just means
18:38
Speaker 3: he thinks he can deploy his capital to a higher
18:41
Speaker 3: and better use, maybe by sitting on it in the interim.
18:45
Speaker 3: He's an active manager. He's an unusually long standing and
18:50
Speaker 3: a successful one in some ways. And he's activist too,
18:54
Speaker 3: Unlike many of the managers on say the menu in
18:56
Speaker 3: your four one K plan to go back to that
18:58
Speaker 3: for a second. He rolls up his sleeves and gets
19:00
Speaker 3: involved in the management of the companies in most in
19:02
Speaker 3: some cases that he owns. So it doesn't mean Apple's
19:05
Speaker 3: prospects have deteriorate. It it's all relative with somebody like
19:09
Speaker 3: with somebody like Buffett.
19:10
Speaker 2: They haven't made a significant acquisition in a bit, but
19:13
Speaker 2: we'll see if there's any information that comes out at
19:15
Speaker 2: the meeting in a week and a half or so.
19:19
Speaker 2: Here taking a look around at markets, the S and
19:23
Speaker 2: P five hundred still up over two percent in the
19:25
Speaker 2: Dow Jones rallying eight hundred points as we hit two
19:28
Speaker 2: hours into trading. We're going to take a quick break
19:30
Speaker 2: here on the Fantasy Exchange. When we come back, we'll
19:32
Speaker 2: have the answer to our trivia question and much more
19:35
Speaker 2: right after this break.
19:41
Speaker 1: Bringing the latest financial news straight to your radio. Every day,
19:45
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19:51
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20:05
Speaker 5: Today's trivia question was how many Academy Awards has Jack
20:09
Speaker 5: Nicholson one? And your answer is three. Jack won two
20:13
Speaker 5: Best Actor Oscars for One Flew Over the Cuckoo's Nest
20:16
Speaker 5: and As Good as It Gets. He also won a
20:17
Speaker 5: Best Supporting Actor for his role in Terms of Endearment.
20:21
Speaker 5: Today's winner is Lynn from Agawam. She will be taking
20:24
Speaker 5: home a Financial Exchange Show T shirt. We play trivia
20:28
Speaker 5: every day here on the Financial Exchange See complete contest
20:31
Speaker 5: rules at Financial Exchange show dot com.
20:34
Speaker 2: A wider federal workforce may shrink by one point two million.
20:38
Speaker 2: A FED estimate shows the broader US federal workforce, according
20:43
Speaker 2: to the Federal Reserve Bank of Atlanta, could shrink by
20:46
Speaker 2: more than one million. This is reflecting an estimated reduction
20:51
Speaker 2: in those indirectly employed by the government through contracts and grants.
20:56
Speaker 2: Given the size of the federal workforce, this could have
20:59
Speaker 2: an impact on the labor market. It's certainly something that
21:05
Speaker 2: is worth falling. More than two point four million people
21:08
Speaker 2: were directly employed by the federal government at the end
21:11
Speaker 2: of twenty twenty four, before all these cost cutting measures
21:15
Speaker 2: went into effect.
21:16
Speaker 4: Here, I totally forgot about this story.
21:18
Speaker 3: I've become so enraptured by the FED independence talk in
21:22
Speaker 3: tariff talk that I forget about the coming tsunami of
21:27
Speaker 3: the people affected second order, third order by federal layoffs.
21:34
Speaker 3: I don't mean, I don't know what to say. Labor
21:36
Speaker 3: economists kind of throw their hands up in the air.
21:38
Speaker 3: All the guests guesses are large, but they are just guesses,
21:43
Speaker 3: And it'll take months and months for this data to
21:46
Speaker 3: trickle in.
21:47
Speaker 2: When do we get the next jobs report, it's probably
21:49
Speaker 2: got to be next Friday, the second I would imagine here,
21:53
Speaker 2: that's when we'll get some more information on the labor report.
21:58
Speaker 2: Will take a look at that. It does look like
22:00
Speaker 2: I would probably be Friday, March second, May second would
22:03
Speaker 2: be my guess.
22:05
Speaker 3: Yeah, in a normal an a normal economy and one
22:08
Speaker 3: that wasn't struggling to adjust to fluid shall we say,
22:12
Speaker 3: tariff policy, you could probably.
22:15
Speaker 4: Absorb these losses.
22:16
Speaker 3: You know, millions of workers change jobs. It's like three
22:20
Speaker 3: to five million every month. US economy is.
22:23
Speaker 4: It's gigantic.
22:24
Speaker 3: It's easy to lose sight of that. This would normally
22:26
Speaker 3: be a drop in the bucket. But in light of
22:29
Speaker 3: some of the other stresses that the economy is laboring under,
22:33
Speaker 3: obviously not helpful. But maybe the changes, you know, need
22:37
Speaker 3: to be made.
22:39
Speaker 4: Hard to say.
22:41
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23:39
Speaker 2: A millionaire tax would generate about four hundred billion in revenue.
23:43
Speaker 2: That's according to the budget lab at Yale, if you
23:47
Speaker 2: were to tax those who make over a million dollars
23:50
Speaker 2: at a forty percent rate all income rather over a
23:55
Speaker 2: million dollars at a forty percent rate. The Congress will
23:59
Speaker 2: get back together over the course of the next week
24:02
Speaker 2: or so to discuss about what to do regarding Trump's
24:07
Speaker 2: twenty seventeen cuts that are set to expire at the
24:11
Speaker 2: end of this year. This will be of a tremendous
24:14
Speaker 2: focus for many people out there. Obviously, the taxing jobs
24:18
Speaker 2: cut at lowered a lot of the marginal tax rates,
24:21
Speaker 2: but some of the new proposals that they're looking to
24:23
Speaker 2: enact would significantly add to the federal deficits. So there's
24:27
Speaker 2: going to need to be some sort of increase in
24:29
Speaker 2: revenue generated to offset them, whether it's talking about no
24:33
Speaker 2: taxing on overtime pay or not taxing Social Security. All
24:38
Speaker 2: these measures, like I said, would cost a significant amount
24:42
Speaker 2: of lost revenue for the United States, so it has
24:44
Speaker 2: to be made up somewhere. A little surprising that it's
24:47
Speaker 2: being bantered about the taxes over a million dollars from
24:52
Speaker 2: the Republican side of things, It seems like that has
24:54
Speaker 2: been disputed a little bit, but that's at least one
24:57
Speaker 2: of the rumors that is being mentioned here as going
25:00
Speaker 2: after the millionaire.
25:01
Speaker 3: Yeah, you know, things are pretty desperate when Republicans find
25:04
Speaker 3: the need.
25:05
Speaker 4: I'm both to raise taxes too.
25:07
Speaker 3: My favorite tax rate would start and end with a zero,
25:10
Speaker 3: But our situation is such that people like a certain
25:13
Speaker 3: level of federal government services. I would prefer less, but
25:18
Speaker 3: you know, this is a democracy. So we've got this
25:20
Speaker 3: massive gap and it's growing, and the trend has been
25:23
Speaker 3: negative for about the last twenty five years, the last
25:25
Speaker 3: time we had a surplus, and something has to be done.
25:29
Speaker 3: Drastic spending cuts don't seem feasible. Either political party doesn't
25:35
Speaker 3: seem to have the I don't know four to two,
25:37
Speaker 3: for lack.
25:38
Speaker 4: Of a better word, to pull that off.
25:40
Speaker 3: Democrats probably on an interest in cutting spending. Republicans in
25:43
Speaker 3: theory are interested, but when the squealing starts, they quickly
25:45
Speaker 3: pull back. And this is one way to close a
25:48
Speaker 3: very small fraction of the gap. By the way, this
25:50
Speaker 3: four hundred billion does not compare favorably to the five
25:53
Speaker 3: trillion in additional debt that will have accumulated over the
25:56
Speaker 3: next ten years according to the same source here, and
25:58
Speaker 3: I'll mentioned in this article is prior work that they've
26:01
Speaker 3: done that we will rack up over the next ten
26:04
Speaker 3: years if all the spending increases and tax cuts that
26:08
Speaker 3: Congress seems to like right now.
26:10
Speaker 4: Or are passed.
26:11
Speaker 3: So you could do this, but it's not going to
26:14
Speaker 3: make up more than a fraction of the new debt
26:17
Speaker 3: that will incur if all their favorite priorities make it
26:20
Speaker 3: through into law.
26:21
Speaker 2: Unfortunately, when the Tax and Jobs Cut Act was implemented
26:25
Speaker 2: in twenty seventeen, it was for eight years, and this
26:28
Speaker 2: is where we are on the precipice of the sunset
26:31
Speaker 2: of this act. They by law, it was set to
26:34
Speaker 2: retroactively go back to what the rates were previously. Of course,
26:37
Speaker 2: the discussions that are being held here over the course
26:40
Speaker 2: the next couple weeks are discussing how they would either
26:42
Speaker 2: extend that initiative add some new ones. That's all the
26:46
Speaker 2: focus here, so we'll continue to keep a significant eye
26:50
Speaker 2: on that. That certainly is an area of interest for
26:54
Speaker 2: every you know.
26:55
Speaker 3: And at the same time, the average interest rate on
26:57
Speaker 3: you and what really matters is the average rate on
26:59
Speaker 3: government debt. That's what government has to pay to finance
27:03
Speaker 3: to carry that debt on an ongoing basis. It used
27:06
Speaker 3: to be like three percent. I used to say three
27:08
Speaker 3: percent for years because that's roughly where it stood.
27:11
Speaker 4: It's now like four and a half.
27:12
Speaker 3: And we all know that the federal government paid more,
27:15
Speaker 3: spent more, if you like, on interest last year than
27:16
Speaker 3: it did on defense. And it's closing in on some
27:19
Speaker 3: other big areas too, like a trillion bucks just an
27:21
Speaker 3: interest that's not going down, so that alone is half
27:26
Speaker 3: the budget deficit. All these numbers, they just start to
27:29
Speaker 3: get bewildering because they're all really ugly, and they're all
27:32
Speaker 3: really big in getting bigger. But the interest problem, if
27:37
Speaker 3: you will, is baked into the cake and makes this
27:41
Speaker 3: all the harder to deal with.
27:43
Speaker 2: We're going to take a quick break here on the
27:46
Speaker 2: Finansed Exchange, but when we come back, we'll be doing
27:48
Speaker 2: a little bit of stack roulette. Markets continue to be
27:53
Speaker 2: in positive territory, with the Dow up over seven hundred points,
27:56
Speaker 2: up over two percent, and the S and P five
27:59
Speaker 2: hundred up two percent as well. Quick break here in
28:02
Speaker 2: the Fincial Exchange, but stack roulette right after this.
28:06
Speaker 1: The global trade war is in full swing. How long
28:09
Speaker 1: will it last? Is anyone's gus? Keep it here for
28:12
Speaker 1: the most up to date information plus breaking news every
28:15
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28:19
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28:26
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28:29
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28:36
Speaker 5: The Financial Exchange is proud of our partnership with the
28:39
Speaker 5: Disabled American Veterans Department of Massachusetts. This year's five K
28:43
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29:09
Speaker 2: All right, time for a little bit of stock roulette, Mark,
29:12
Speaker 2: I will let you bet lead off. What do you
29:14
Speaker 2: got first?
29:14
Speaker 3: I'm really bad at this segment, and this is in
29:18
Speaker 3: this I picked the I pick the worst stories too,
29:20
Speaker 3: because I always pick ones that don't summarize their point well.
29:23
Speaker 3: But I'm gonna give this a shot from the Wall
29:25
Speaker 3: Street Journal Real Estate section, why Florida's condo owners are
29:28
Speaker 3: so desperate to sell. I'll just read the key points.
29:32
Speaker 3: It's an interesting story. If you have a journal subscription,
29:35
Speaker 3: check it out. Facing rise and costs due to insurance
29:38
Speaker 3: hikes and special assessments. Okay, we're all kind of living
29:41
Speaker 3: with that, even us here in the Northeast. I know
29:42
Speaker 3: homeowners association rates are going up, and that's those insurance
29:46
Speaker 3: hikes are baked into the HOA fee, as I understand it,
29:50
Speaker 3: although you also.
29:51
Speaker 4: Pay for separate coverage for stuff within the dwelling, right
29:55
Speaker 4: is that right?
29:56
Speaker 3: You have to buy a policy or that sounds right
29:59
Speaker 3: okay for your I mean, if you want your personal
30:00
Speaker 3: stuff covered, you got to buy a policy for that.
30:02
Speaker 3: And I don't know if the HOA makes you buy
30:05
Speaker 3: something for the interior of the dwelling for like water
30:07
Speaker 3: damage and stuff, But anyway, so it's a double whammie there.
30:10
Speaker 3: The insurance on the outsides of these structures is going up,
30:14
Speaker 3: and on the stuff inside, condo prices have dipped. Unfortunately,
30:19
Speaker 3: they don't tell me year over year over the past
30:22
Speaker 3: five years what the decline has been. They just note
30:24
Speaker 3: that condo prices have been steadily leaking declining for the
30:29
Speaker 3: past several years. But the bottom line they don't say,
30:33
Speaker 3: I just didn't realize that the problem was Apparently quite dire.
30:38
Speaker 3: Lenders are wary. So this is like a systematic systemic
30:42
Speaker 3: I should say, thing is going on whereby condos are blacklisted.
30:46
Speaker 3: Lenders just won't make loans on those particular individual units
30:53
Speaker 3: or buildings. And then the article goes on to detail
30:57
Speaker 3: the sort of nightmare stories from a number of retire
31:00
Speaker 3: couples who now find themselves having to move because they
31:04
Speaker 3: simply can't afford HOA plus insurance costs and because the
31:07
Speaker 3: market is so weak. Building thirty years are older, Okay,
31:12
Speaker 3: here's one aggregate number and I'll wrap with this. Buildings
31:15
Speaker 3: thirty years are older had depreciated twenty two percent in
31:18
Speaker 3: the past twenty four months, according to one local real
31:22
Speaker 3: estate firm. I had no idea the problem was that directs.
31:25
Speaker 4: But didn't know was.
31:25
Speaker 2: That it's fascinating. I just came back from a trip
31:29
Speaker 2: with the family. We were down in Charleston, South Carolina,
31:32
Speaker 2: and we had previously done trips to Florida and c
31:37
Speaker 2: s to Key was one area we had done a
31:39
Speaker 2: couple of years back, and that area obviously dramatically impacted
31:43
Speaker 2: by some of the hurricanes, and my father I was
31:45
Speaker 2: mentioning that just to your point, mark the real estate there,
31:49
Speaker 2: there was a tremendous amount of surge in demand in
31:52
Speaker 2: around COVID for people to move down there just because
31:56
Speaker 2: of the climate, the things that the reasons that people
31:58
Speaker 2: are always.
31:59
Speaker 4: Gravitate power or export, no doubt.
32:01
Speaker 2: But the brutal realization that isn't new necessarily the hurricanes
32:07
Speaker 2: and the impact to the insurance industry down there has
32:10
Speaker 2: just been dramatic, and in terms of the amount of
32:13
Speaker 2: properties that are being listed at significantly lower values or
32:17
Speaker 2: price cuts, where people are in a very difficult situation
32:21
Speaker 2: where if you don't have the means to just self insured,
32:24
Speaker 2: those costs can be too exorbitant to cover any type
32:28
Speaker 2: of home owners insurance that you'd want to have on
32:30
Speaker 2: the property. You risk even in the self insurance market,
32:34
Speaker 2: you risk losing the asset entirely by not having any
32:37
Speaker 2: sort of coverage. If you just say I'm going to
32:39
Speaker 2: go pay off and not have any debt assess to it,
32:42
Speaker 2: no mortgage, and just go without it, it's just a really,
32:46
Speaker 2: really difficult spot.
32:47
Speaker 4: You do that if you're in a condo or a condo.
32:50
Speaker 2: I'm talking single families, standalone homes.
32:53
Speaker 3: The condor, which just makes the condo market a nightmare
32:56
Speaker 3: because you are locked into all these arrangements.
32:58
Speaker 2: And the special assessments like you were alluding to, I've
33:02
Speaker 2: talked with clients who are impacted by them. It is
33:05
Speaker 2: just financially incredibly burned some and traumatic for them to
33:10
Speaker 2: not have the fund set aside for upwards of twenty thousand,
33:13
Speaker 2: forty thousand dollars commitment for all these condo ors to
33:17
Speaker 2: pool together to redo a roof or reduce some of
33:20
Speaker 2: the structuring within the units because they need to meet
33:24
Speaker 2: certain codes to get the insurance coverage. It just it's
33:28
Speaker 2: really really going to be difficult. I feel like, well, how.
33:31
Speaker 4: Do you plan for this?
33:32
Speaker 3: Suppose climate change driven? The Wall Street Journal dosn't mention it,
33:35
Speaker 3: which is astonishing because at the root of all this
33:37
Speaker 3: is whether or not you choose to believe it. The
33:39
Speaker 3: climate is changing, weather it's getting more extreme. You don't
33:42
Speaker 3: believe me, just ask your insurance company, right, they're strictly
33:45
Speaker 3: dollars and cents about this, which is my preferred take
33:49
Speaker 3: on it. And or look at the filings of any
33:51
Speaker 3: major US corporation. They're all preparing to mitigate the effects
33:55
Speaker 3: of climate change. And so with climate change becoming making
33:59
Speaker 3: weather more severe, how do you plan for cost of
34:02
Speaker 3: living down there?
34:03
Speaker 2: It's a great question, and I don't think that there
34:06
Speaker 2: is an easy answer. The home ownership side of things,
34:09
Speaker 2: for the second home market, you just feel like you
34:12
Speaker 2: really are rolling the dice a little bit. It seems
34:15
Speaker 2: like renting would just be a lot more appealing to
34:18
Speaker 2: just rent a property if you're the classic Northeast you know,
34:21
Speaker 2: or a Greater Boston area person who's looking for a
34:25
Speaker 2: reason to get away for a little bit. It just
34:27
Speaker 2: seems like at least you don't bear that cost of
34:31
Speaker 2: the insurance coverage or all the potential ramifications that future
34:35
Speaker 2: hurricanes could have. But it is something that it's not
34:40
Speaker 2: going to get any better anytime soon, that's for sure.
34:43
Speaker 2: Similar sort of train of thought here. The magic number
34:45
Speaker 2: to retire has comfortably for people to repire comfortably is
34:51
Speaker 2: now down to one point twenty six million. Previously, in
34:54
Speaker 2: the study that was done last year, that number was
34:58
Speaker 2: one point four six million. According to a new study
35:01
Speaker 2: that was done by Northwestern Mutual where they pulled forty
35:04
Speaker 2: six hundred adults in the month of January, what number,
35:08
Speaker 2: basically do you need to retire comfortably? That was the
35:12
Speaker 2: figure that they had come up with. The average four
35:15
Speaker 2: one K balance in the fourth quarter, according to data
35:19
Speaker 2: provided from Fidelity, was one hundred and thirty one thousand,
35:22
Speaker 2: seven hundred dollars. Now that spans all ages, of course
35:26
Speaker 2: when you're taking a look at the average balance, but
35:28
Speaker 2: still well short of the magic number. And confidence for
35:33
Speaker 2: those people looking to retire has dwindled a little bit,
35:37
Speaker 2: you know. Some of the concerns are outliving their savings.
35:40
Speaker 2: Of course, long term care costs are something that we
35:42
Speaker 2: talk about our client with our clients quite a bit.
35:45
Speaker 2: That has dented people's confidence in being able to retire.
35:51
Speaker 2: So this is something that we deal with on a
35:54
Speaker 2: daily basis. And now, of course you have macroeconomic and certainty.
35:57
Speaker 2: Of course, there's always things like this that pop up,
36:00
Speaker 2: but there's a lot of concern out there for retirees
36:05
Speaker 2: who are approaching that.
36:06
Speaker 3: Do they give any explanation for the reduction and the
36:09
Speaker 3: assets that people think? And I assume that's they don't say,
36:12
Speaker 3: before tax, after tax, is that all your accounts is?
36:15
Speaker 2: That's I believe that's specific to pre tax dollars. Yes,
36:24
Speaker 2: they basically break it out by doing that survey the
36:27
Speaker 2: forty six hundred, but I don't feel as if it
36:30
Speaker 2: really specifically says exactly why we saw that big of
36:35
Speaker 2: a drop here they do talk about just you know,
36:39
Speaker 2: that target savings rate they should have anywhere we typically
36:42
Speaker 2: say rule thumb, ten to fifteen percent of your pay
36:46
Speaker 2: should be going towards retirement. But the reason for this drop,
36:50
Speaker 2: it doesn't seem like it is fully drawn out here,
36:54
Speaker 2: and obviously it there is what area of the country
36:56
Speaker 2: you're trying to retire into, right where that balance comes in.
36:59
Speaker 2: You know, Massachusetts or Hawaii is a whole lot different
37:02
Speaker 2: than Louisiana or North Shore or something.
37:04
Speaker 3: Would say it's easier than ever or easier than it's been. Well, yeah,
37:06
Speaker 3: easier than ever to calculate what is the magic amount
37:11
Speaker 3: for you with a retirem account If you have a
37:13
Speaker 3: four oh one K they have such tools.
37:15
Speaker 4: Everybody's got them now, whether you're four one.
37:18
Speaker 3: Ka's administered by Fidelity, Vanguard or one of the smaller guys,
37:21
Speaker 3: you can find out what your number is.
37:23
Speaker 4: Getting there, of course, is the assumptions.
37:25
Speaker 2: It's just always up for to date, right you know,
37:27
Speaker 2: what inflation rate are you going to assume? What are
37:30
Speaker 2: you going to know?
37:30
Speaker 1: Think?
37:31
Speaker 3: These calculators guide you through that, so more than ever,
37:34
Speaker 3: individuals can figure out what their number is.
37:38
Speaker 4: There you'd be surprised.
37:39
Speaker 2: The input side of things, people have a very difficult
37:42
Speaker 2: time trying to gather together what do I need to
37:44
Speaker 2: live on in retirement?
37:46
Speaker 3: And so it's really the budget and the expense part
37:48
Speaker 3: where you spend most of your time as if financial.
37:50
Speaker 2: That's a big part of it is trying to figure
37:51
Speaker 2: that out. It It can certainly be challenging to put
37:54
Speaker 2: together here, but that's all the time that we have
37:57
Speaker 2: for this episode. Here of the and It's exchange took
38:00
Speaker 2: in a look around at markets, all in positive territory
38:03
Speaker 2: up over two percent across the board, dowd Jones up
38:06
Speaker 2: almost eight hundred points, the S and P five hundred
38:08
Speaker 2: up over one hundred points. We'll have Tesla's earnings at
38:11
Speaker 2: the close of the bell today. We'll be covering that
38:13
Speaker 2: and much more on tomorrow's show at ten am. Thanks
38:16
Speaker 2: so much for joining us.