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Oil Inventories Are Falling Faster Than Expected · The Financial Exchange Show

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Speaker 1: a donation today. This is the Financial Exchange with Chuck
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Speaker 1: Zada and Mike Armstrong.
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Speaker 2: Chuck, Mike and talker with you here and kicking things
1:14
Speaker 2: off and looking at how markets are moving after number
1:18
Speaker 2: of big earnings reports after the bell yesterday, Microsoft, Amazon, Meta,
1:24
Speaker 2: alphabets all reported earning, so nine to ten trillion dollars
1:28
Speaker 2: in market cap reporting earnings only about eight and a
1:31
Speaker 2: half to nine and a half trillion market cap coming
1:33
Speaker 2: out just because a few of them not performing particularly well.
1:37
Speaker 2: And so on the back of that, the S and
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Speaker 2: P five hundreds up about three tenths of a percent.
1:42
Speaker 2: The Dow is up one and a quarter percent, but
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Speaker 2: then has that composite basically flat today, no real movement there.
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Speaker 2: Tenyure Treasury coming in two point four basis points after
1:52
Speaker 2: a big move up yesterday. Dollar index is down zero
1:57
Speaker 2: point eighty six percent, this after what appears to be
2:00
Speaker 2: an intervention from the Bank of Japan as it relates
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Speaker 2: to the yen dollar exchange rate, which had continued weakening
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Speaker 2: past their line in the sand at one sixty yen
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Speaker 2: per dollar. We've got gold up on that as well,
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Speaker 2: with gold up seventy one to eighty ounce to forty
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Speaker 2: six thirty three and thirty cents and crude oil West
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Speaker 2: Text Intermediate down one dollar and five cents a barrel
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Speaker 2: after big run up yesterday, sitting now at one oh
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Speaker 2: five eighty three, triple a national average for gas prices,
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Speaker 2: though moving up another seven point one cents overnight to
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Speaker 2: four dollars and thirty cents per gallon. That now the
2:39
Speaker 2: highest number of the national average has hit in this cycle.
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Speaker 2: Here we are still below the five oh one and
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Speaker 2: six tenths record from the twenty twenty two episode that
2:51
Speaker 2: was hit on June fourteenth of that year, and diesel
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Speaker 2: still hanging out about thirty two cents below the five
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Speaker 2: eighty one and six tenths record that was set at
3:02
Speaker 2: around the same time. Mike, anything that I missed there?
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Speaker 2: Oh yeah, we had a FED meeting. J Powell is
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Speaker 2: going to no longer be running the FED as of
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Speaker 2: the next FED meeting, so this was his last FED meeting.
3:16
Speaker 2: They didn't really do anything, no major fireworks, and stocks
3:19
Speaker 2: closed basically flat yesterday.
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Speaker 3: They did then we got a bunch of earnings reports
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Speaker 3: on the tech side of things. With that, we'll be
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Speaker 3: talking to Mike Santoli from CNBC during the next segment
3:30
Speaker 3: about but a whole mixed bag of earnings from the
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Speaker 3: major tech players in Apple reporting this.
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Speaker 4: Evening, and then finally along the lines of.
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Speaker 3: That FED talk, average thirty year fixed rate mortgage yesterday
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Speaker 3: coming in at six and a half percent. So we've
3:43
Speaker 3: been anywhere between six and nearly seven percent since the
3:47
Speaker 3: breakout of war six and two thirds of percentage, I
3:50
Speaker 3: guess where we capped out at in late March here,
3:54
Speaker 3: but on their way up again yesterday following commentary from
3:58
Speaker 3: Jay and the Committee on Interest Rates.
4:02
Speaker 2: Yesterday we got a weekly report from the Energy Information Administration.
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Speaker 2: It's not a major report normally because normally you don't
4:09
Speaker 2: have the straight offom moves closed and so it's just
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Speaker 2: kind of okay, pay attention and you know, blah blah
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Speaker 2: blah whatever. Unless you're an energy trader, you honestly don't
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Speaker 2: really pay close attention to this report. Sure, it's just
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Speaker 2: how it is in this part of the cycle. Though,
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Speaker 2: it's starting to matter, and we touched on this a
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Speaker 2: little yesterday. But here's the deal. US commercial crude stocks
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Speaker 2: right now, and when I say stocks, I mean basically inventories,
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Speaker 2: but stocks is the word they use in the biz.
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Speaker 2: Commercial crude stocks right now are about four hundred and
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Speaker 2: sixty million barrels, and this week we saw a six
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Speaker 2: million barrel draw from commercial crude stocks at a time
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Speaker 2: of year when normally you have inventory builds going on.
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Speaker 5: And the big reason for this is a major shift in.
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Speaker 2: Terms of exports that are moving for both crude and
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Speaker 2: finished product right now. Refineries still haven't fully ramped up,
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Speaker 2: so expect the crew drata to probably end up, you know,
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Speaker 2: building a little bit further here. But here, here's the
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Speaker 2: deal is when we say there's four hundred and sixty
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Speaker 2: million barrels of crude in commercial stocks right now and
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Speaker 2: you had a six million barrel draw, most people would say, great,
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Speaker 2: like plenty a cushion, not really a big deal. And
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Speaker 2: it's true, normally that wouldn't be a big deal if
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Speaker 2: this were just a one off. Sometimes this stuff happens.
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Speaker 2: The problem is that the rest of the world, Michael,
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Speaker 2: last time I checked, they are a little short on oil.
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Speaker 3: Is that fair, That's what I've heard. Yeah, yeah, the
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Speaker 3: rest of the world doesn't really have enough oil right now.
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Speaker 2: So the expectation that a lot of the oil people
5:44
Speaker 2: that I know, you know, have here is that this
5:47
Speaker 2: was the first week of what is likely going to
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Speaker 2: be a run of significant draws because the US right
5:53
Speaker 2: now is basically the relief valve for the rest of
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Speaker 2: the world, since you just don't have any spare capacity
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Speaker 2: anywhere else, and other onshore inventories are being whittled down
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Speaker 2: and offshore inventories are basically en route to wherever they
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Speaker 2: can get the highest price right now.
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Speaker 5: So here's the deal.
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Speaker 2: That four hundred and sixty million barrels of domestic crude
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Speaker 2: stocks doesn't mean that you can take that down to zero. Basically,
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Speaker 2: the whole world ends way before you get there. In fact,
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Speaker 2: so the estimates that we have, and this is for
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Speaker 2: what's known as the minimum operational inventory, what's the lowest
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Speaker 2: level that you can get to and the system still
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Speaker 2: works because ultimately you need crude in pipelines in order
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Speaker 2: to have you know, adequate pressure for the stuff to
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Speaker 2: keep moving. There is crude at the bottom of every
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Speaker 2: storage tank that's not usable because it's got all kinds
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Speaker 2: of sediment and water and stuff in it that you
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Speaker 2: can't use, and it's below the line from where they
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Speaker 2: draw from any ways. So the estimates back in the
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Speaker 2: late nineties were that and this was from the National
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Speaker 2: Petroleum Council. The operational inventory for commercial crude inventories then
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Speaker 2: was about two hundred and seventy million barrels. Today, the
7:06
Speaker 2: estimate is higher because there are more pipelines and the system
7:09
Speaker 2: has grown quite a bit since then. The estimates are
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Speaker 2: anywhere from like three hundred and fifty to three hundred
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Speaker 2: and seventy million barrels are needed just to keep the
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Speaker 2: system operational. What this means is, depending on the rate
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Speaker 2: of outflow that you have from the United States from
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Speaker 2: these commercial crude stocks, is that you basically get to
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Speaker 2: that minimum level somewhere between early July and late October,
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Speaker 2: depending on the rate of draws. That's kind of what
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Speaker 2: you're looking at. If you want, you know, in narrower range,
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Speaker 2: most likely late July to late August. Sometime in August
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Speaker 2: is probably the most likely time. I assume that means
7:48
Speaker 2: does that mean sorry, that is right, and can't run
7:52
Speaker 2: the economy.
7:54
Speaker 5: That's not it.
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Speaker 2: What it does mean is that in order for supply
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Speaker 2: and demand match at that point, prices have to continue
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Speaker 2: to rise beyond where they have been now. If there
8:06
Speaker 2: is no resolution to the straight Offoe moves issue, and
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Speaker 2: because the United States is a wealthier country and more
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Speaker 2: able to pay for higher oil prices, We're likely to
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Speaker 2: see higher prices rather than outright shortages as we go
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Speaker 2: through the summer, which is why you're at the point now. Look,
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Speaker 2: I laid down the Synco Demio marker at the beginning
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Speaker 2: of this This draw that you saw was the first one.
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Speaker 2: Again next week you probably end up seeing more. This
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Speaker 2: is why this matters is because now you're starting to
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Speaker 2: draw on US inventories and that probably doesn't stop until
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Speaker 2: you reach that minimum operational inventory level.
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Speaker 3: Any thoughts, Mike, only that the production side isn't moving either.
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Speaker 3: I mean, not a waste to look at production, but
8:48
Speaker 3: the rig count is one of them. Rig count is
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Speaker 3: down year over year and barely moving month over month,
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Speaker 3: and so you know, another way to solve that problem
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Speaker 3: would be to increase US production, but we are seemingly
9:02
Speaker 3: unable to do that.
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Speaker 4: At this stage.
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Speaker 3: We've got to take a quick break when we come back,
9:09
Speaker 3: playing a little bit of trivia. But Michael Santoli from
9:12
Speaker 3: CNBC joins us next right after this.
9:15
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10:05
Speaker 3: Joining us now is CNBC's Michael Santoli and Mike. That
10:10
Speaker 3: was the busiest day yesterday that I can recall. FED
10:13
Speaker 3: meeting GDP released this morning for earnings for earnings calls
10:17
Speaker 3: from companies that represent over eleven trillion dollars worth of
10:21
Speaker 3: market KAPA, I'd imagine you're having a pretty busy day
10:24
Speaker 3: yesterday and today.
10:25
Speaker 4: So thank you for joining us. We appreciate it.
10:27
Speaker 6: Sure thing. Yeah, a lot to keep up with.
10:29
Speaker 3: So let's start off with the FED, if you don't mind, obviously,
10:33
Speaker 3: j Powell's final meeting after being at the Helm for
10:36
Speaker 3: eight years. I know you've spoken about, you know, the
10:40
Speaker 3: best position for all of us could be if the
10:42
Speaker 3: FED could take a bit of a back seat. Based
10:46
Speaker 3: on what we saw yesterday and the confirmation hearing from
10:49
Speaker 3: Warsh and the diverging views of voting members of the FED,
10:53
Speaker 3: I'm not sure we're going to be getting a quiet FED.
10:56
Speaker 3: As we head in here to the you know, middle
10:59
Speaker 3: of the second quarter here in the June meeting under
11:02
Speaker 3: under Kevin worsh What were your takeaways from the meeting.
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Speaker 6: Yeah, I got it'll be quiet, but I also don't
11:07
Speaker 6: think it'll be particularly active in terms of policy, at
11:11
Speaker 6: least initially. It's maybe a slight irony that Kevin Warsh
11:15
Speaker 6: and his confirmation hearing has talked about how he kind
11:17
Speaker 6: of wanted to have a little more of like family
11:19
Speaker 6: disagreement on the committee and half hash out differences and
11:24
Speaker 6: all the rest, and now we have a very split
11:26
Speaker 6: committee heading into his assuming he gets confirmed into his chairmanship.
11:31
Speaker 6: You know, I do think that all the economic data
11:35
Speaker 6: and all the market pricing points in the direction of
11:38
Speaker 6: they really can't do anything if there's an intention to
11:40
Speaker 6: try to lower short term rates. It just the data
11:44
Speaker 6: are not going to accommodate and the committee structure is
11:46
Speaker 6: not going to accommodate that. And that's probably fine for now, honestly,
11:50
Speaker 6: because if growth hangs in there, I think the markets
11:52
Speaker 6: can at least uneasily stay in the sequilibrium. Now longer
11:56
Speaker 6: term interest rates tenure treasury yield bumping up against four
11:59
Speaker 6: points or that's not some kind of tripwire, but it's
12:02
Speaker 6: getting closer to where it starts to pinch, So I
12:04
Speaker 6: do think it's it's a delicate equilibrium. I think it's fascinating,
12:09
Speaker 6: you know. I think Jeanie Piro, the US attorney for DC,
12:13
Speaker 6: was already this morning publicly saying, look, we're definitely going
12:16
Speaker 6: to appeal to subpoena and all the rest, all the
12:18
Speaker 6: judges ruling. So it seems like a bit of a
12:21
Speaker 6: tough spot for Warsh. But I don't think that the
12:25
Speaker 6: market was poised to see much of a shift in policy.
12:29
Speaker 6: Therefore it doesn't have It doesn't force the market to
12:32
Speaker 6: reprice anything in the short term.
12:33
Speaker 3: Yeah, And the point about the the spoena and the
12:36
Speaker 3: investigation being that Jerome Powell is announced that he will
12:38
Speaker 3: be staying on in his in his not his governor,
12:44
Speaker 3: not his chairman role, but a government for the first
12:47
Speaker 3: time and I think seventy five years. So yeah, plenty
12:50
Speaker 3: of plenty of fireworks at the FED, it seems for
12:52
Speaker 3: the time being. But I agree with you on policy
12:54
Speaker 3: unlikely to go anywhere.
12:56
Speaker 4: Then.
12:56
Speaker 3: The GDP report, which reflected big business investment, likely a
13:01
Speaker 3: lot of that coming from the AI push and a
13:05
Speaker 3: real mixed bag of earnings. So, you know, going through
13:08
Speaker 3: the earnings, if you don't mind, here we had some
13:11
Speaker 3: big winners, some big losers in terms of stock market reaction.
13:16
Speaker 3: Are you able to drive any themes on what made
13:19
Speaker 3: the winners winners and what made the losers losers? Because
13:22
Speaker 3: there are a lot of different stories here. And granted
13:25
Speaker 3: Meta's business doesn't look a whole lot like Alphabets, but
13:28
Speaker 3: they all have the common thread of massive CAPEX guidance.
13:32
Speaker 6: Yeah, and I think that what divides the the you know,
13:35
Speaker 6: kind of perceived winners versus losers, is how short or
13:39
Speaker 6: along the path to actually getting paid back from the
13:42
Speaker 6: investment is. And you know, Alphabet Google, it's kind of
13:45
Speaker 6: happening on the fly where they genuinely see demand a
13:49
Speaker 6: genuinously user users actually taking up what they're offering. In
13:54
Speaker 6: terms of consumer AI, they had a lot to say about,
13:57
Speaker 6: you know, business enterprise AI being a push and they
14:01
Speaker 6: own a big chump of chunk of anthropic and basically,
14:03
Speaker 6: right now, all the market wants is some kind of
14:05
Speaker 6: way to play anthropic. Meta. You know, as you mentioned,
14:09
Speaker 6: it doesn't really sell cloud services, It doesn't really have
14:13
Speaker 6: third party customers, who are going to you know, uptake
14:16
Speaker 6: on the investment. Mostly what the numbers did is confirm
14:21
Speaker 6: the market's preconceived ideas of who's relatively better and worse position,
14:26
Speaker 6: because Amazon and Alphabet came into those reports their stocks
14:30
Speaker 6: at all time highs and outperforming and everybody loving them.
14:33
Speaker 6: And on the other end, Microsoft seeming like a little
14:35
Speaker 6: bit of a bind with its core enter software business,
14:39
Speaker 6: even though it owns twenty seven percent of open Ai,
14:41
Speaker 6: which is no longer the preferred player versus Anthropic and
14:46
Speaker 6: then Meta, sort of feeling as if it's kind of
14:48
Speaker 6: spending in this wild, urgent way, and maybe that says
14:52
Speaker 6: something about what Zuckerberg believes to be the long term
14:55
Speaker 6: durability of the core business. Perhaps I think all that
14:59
Speaker 6: stuff is in, it's netting out to kind of, you know,
15:03
Speaker 6: more or less a slight positive I guess impact on
15:07
Speaker 6: the S and P five hundred, but it's more of
15:08
Speaker 6: a push in anything.
15:10
Speaker 3: In spite of the big uptick and CAPEX for the year,
15:13
Speaker 3: I think we're now over seven hundred billion dollars assume
15:16
Speaker 3: from just these four in video stocks falling about four
15:20
Speaker 3: percent today, a little bit less now, but any read
15:22
Speaker 3: on what investors are interpreting here and what this all
15:26
Speaker 3: means for in video, because on the surface you hear
15:28
Speaker 3: the you know, the most profitable and richest companies in
15:31
Speaker 3: the world upping their capex again in video is a
15:35
Speaker 3: big beneficiary of any AI spend, but not today, it seems.
15:40
Speaker 6: It's fascinating. I think the short answer is the market
15:44
Speaker 6: got to in video first and valued it assuming that
15:48
Speaker 6: there would be this open ended demand. So it pushes
15:51
Speaker 6: in video to a five trillion dollar market cap. The
15:54
Speaker 6: massive shortage and you know, pricing power was seen to
15:57
Speaker 6: be in its products the gpused and it still is.
16:00
Speaker 6: But what's happened since then is that things have looked
16:03
Speaker 6: tighter and more scarce on the rest of the food chain.
16:06
Speaker 6: And so it's really interesting as a text cycle to
16:09
Speaker 6: keep talking about. This is the most excitement at the
16:12
Speaker 6: moment is in the oldest, lowest value add type semiconductors
16:18
Speaker 6: and network gear and all of these stocks that made
16:20
Speaker 6: their bones in the eighties and nineties like Intel and
16:24
Speaker 6: Western Digital and you know and Qualcomm. Suddenly they're the
16:29
Speaker 6: hot things. And I think that just tells you that
16:31
Speaker 6: there is this kind of desperate spend to you know,
16:34
Speaker 6: in this next phase of AI that there just isn't
16:38
Speaker 6: enough of it. I think long term, I don't know
16:40
Speaker 6: how blish that is, because that tells you all the
16:44
Speaker 6: free cast flow from the most profitable companies in the world,
16:47
Speaker 6: such as Microsoft and Meta and Alphabet are going to
16:52
Speaker 6: pay up for relatively commodity type hardware just to get
16:57
Speaker 6: up and running. So for now, the market teams find
17:00
Speaker 6: that Semi's as a lynchpin group of this market given
17:03
Speaker 6: all the static and the rest of you know, the
17:05
Speaker 6: economy in the Middle East and everything else. And for now,
17:09
Speaker 6: you know, the numbers last night kind of moved the
17:11
Speaker 6: chains on that story. But in Vidia, it's kind of
17:14
Speaker 6: like we already did that for you. Even though the
17:16
Speaker 6: stocks near a high, it's not getting an incremental push.
17:19
Speaker 3: Michael Santoli from CNBC join us today talk about the
17:23
Speaker 3: big market action this week, all the earnings releases, FED
17:27
Speaker 3: announcements and everything else. I really appreciate you being here, Michael,
17:31
Speaker 3: and we'll speak again soon.
17:32
Speaker 6: All right, thank you very much.
17:33
Speaker 7: Take care, all right, Tom for trivia here on the
17:36
Speaker 7: Financial Exchange, and on this day in two thousand and nine,
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Speaker 7: Chrysler filed four Chapter eleven bankruptcy today. Chrysler is a
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18:26
Speaker 2: Mike, I want to pull this one forward from just
18:29
Speaker 2: a bit later in the stack. Airbnb hosts prepped their
18:32
Speaker 2: homes for a World Cup windfall.
18:34
Speaker 3: They're still waiting, and it tells me next our neighbor
18:37
Speaker 3: sent me this one this mornin. It tells the story
18:39
Speaker 3: of a woman who spent sixty thousand dollars updating her
18:43
Speaker 3: place in order to charge forty five hundred dollars a
18:47
Speaker 3: week for people to come and stay during the World Cup.
18:51
Speaker 3: So the first thing is, if you do the math
18:53
Speaker 3: there's not enough weeks for that to actually make economic sense.
18:58
Speaker 5: The World Cup's like a four week I don't mean
19:00
Speaker 5: to number two.
19:02
Speaker 2: The whole premise of trying to make a windfall for
19:04
Speaker 2: the World Cup is, Hey, there's gonna be a ton
19:06
Speaker 2: of people coming. They'll pay more for my place as is.
19:09
Speaker 2: I don't need to do any work like That's that's
19:12
Speaker 2: kind of how I would look at it, is, Hey,
19:15
Speaker 2: instead of me trying to get like forty five hundred
19:17
Speaker 2: per week on you know, a six thousand dollars you know,
19:20
Speaker 2: sixty thousand dollars investment, let me put nothing in and
19:23
Speaker 2: see if I can get three thousand a week.
19:27
Speaker 3: Yeah, the math wasn't quite working out there, But overall
19:30
Speaker 3: ticket sales aren't good either. So there's multiple parts of
19:33
Speaker 3: this story. We gotta take a quick break. Wall Straight
19:35
Speaker 3: Watch coming up next.
19:36
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19:57
Speaker 1: Right here on the Financial Exchange.
19:59
Speaker 7: Radio Markets and positive territories, investors sift through a flurry
20:03
Speaker 7: of big tech earnings, economic data points, including first quarter
20:06
Speaker 7: GDP and the PCE index. On top of that, FED
20:10
Speaker 7: chairman Jerome poll And us he would stay on as
20:12
Speaker 7: FED governor after his term as chair ends. Right now,
20:16
Speaker 7: the Dow is up one and a third percent, SMP
20:20
Speaker 7: five hundred up nearly half a percent, Nasdaq up nearly
20:23
Speaker 7: two tents of a percent, Russell two thousands up one
20:26
Speaker 7: and a quarter percent. Ten year treasure Real down two
20:29
Speaker 7: basis points at four point three to nine percent, and
20:32
Speaker 7: Oil down two percent, trading at one hundred and.
20:34
Speaker 1: Four dollars a barrel.
20:35
Speaker 7: Meta shares plunging nine percent and reaction to the company's
20:38
Speaker 7: plans to spend even more money on AI. Amazon shares
20:42
Speaker 7: down nearly two percent after the e commerce giants saw
20:45
Speaker 7: its total revenue and profit climb in the first quarter,
20:48
Speaker 7: driven by growing AI services in cloud sales. Microsoft is
20:52
Speaker 7: falling five percent after the company said capital spending will
20:55
Speaker 7: increase sixty one percent this year compared to twenty twenty five.
20:59
Speaker 7: Alphabet jumping seven percent if the Google parent posted a
21:03
Speaker 7: twenty two percent jump in first quarter revenue, and after
21:06
Speaker 7: today's closing bill more tech earnings on the way, where
21:09
Speaker 7: Apple will post its first quarter results. I'm Tucker Silva
21:13
Speaker 7: and that is Wall Street Watch.
21:16
Speaker 3: Joining us now is Todd Lutsky from the law firm
21:18
Speaker 3: of Cushing and Dolan and Todd, thanks for joining us.
21:22
Speaker 9: Always a pleasure.
21:23
Speaker 3: Todd want to talk today about the complexities of leaving
21:27
Speaker 3: assets to beneficiaries, and quite honestly, is one of the
21:32
Speaker 3: more common questions that I get in my day job
21:35
Speaker 3: as a financial advisor.
21:37
Speaker 4: So walk us through it.
21:39
Speaker 3: Right. If the goal, which for many it is, is
21:42
Speaker 3: avoiding probate, what type of tools can I use to
21:48
Speaker 3: add to make sure my assets go to the people
21:51
Speaker 3: I want without having to spend a whole bunch of money.
21:56
Speaker 9: So when I hear that part of it, I always say,
21:59
Speaker 9: some times the cheaper approach is not the better approach.
22:02
Speaker 9: But let me let me say this, because this happens.
22:05
Speaker 9: People will say, Oh, I can just I'm married, I'll
22:09
Speaker 9: just leave everything jointly. It'll go to my spouse when
22:11
Speaker 9: I die and then we'll take it from there. Well,
22:13
Speaker 9: that would avoid probate. It's inexpensive, but it would also
22:17
Speaker 9: not solve any of the estate tax planning problems or
22:20
Speaker 9: how do I leave my assets to my children problems?
22:23
Speaker 9: So that's that's a problem. And there's single people who say, oh,
22:26
Speaker 9: you know what, I'll just throw you know, a couple
22:29
Speaker 9: of joint owners on these accounts. I have this one
22:32
Speaker 9: child who's close by, and I'll put you know, joint
22:35
Speaker 9: names on the account. So just go to that child, Okay.
22:37
Speaker 9: But then if you do that, what about all the
22:40
Speaker 9: other kids that you have that you didn't mean to disinherit,
22:42
Speaker 9: that you accidentally disinherited by putting them on as joint owners.
22:47
Speaker 6: So that can be a problem.
22:48
Speaker 9: Plus you expose the assets to their creditors, for you know,
22:51
Speaker 9: they get divorced while you're alive and there's a joint
22:54
Speaker 9: owner on your account. That's a problem. Too many risks
22:57
Speaker 9: to not take a little time to do planning. If
23:01
Speaker 9: all you're trying to do is avoid probate, you end
23:03
Speaker 9: up really shooting yourself in the foot.
23:06
Speaker 3: Talk to me a little bit about the idea of
23:08
Speaker 3: giving the asset away during your lifetime, because we obviously
23:11
Speaker 3: both see it all the time. You know, they want
23:14
Speaker 3: to keep the family in the home, they'll give it
23:16
Speaker 3: to a kid, or they want to give the stock
23:19
Speaker 3: that they've had for decades to a family member. Because
23:23
Speaker 3: they could use the funds. People don't understand I think
23:27
Speaker 3: the tax complexity to do that. Forget about the liability perspective.
23:30
Speaker 3: I know you focus a lot on that, but talk
23:32
Speaker 3: to me about the tax complications of giving an asset
23:35
Speaker 3: away to a child.
23:37
Speaker 9: Yeah, so this again is a sort of a quick fix,
23:41
Speaker 9: not always the best way to go, because one, if
23:43
Speaker 9: you put our job yours and mind, there's always to
23:47
Speaker 9: make sure we're doing things right for the client. We
23:49
Speaker 9: want the client to be in a position of strength
23:52
Speaker 9: and comfortable and be able to live. So when you
23:54
Speaker 9: say that giving things away first and foremost means maybe
23:57
Speaker 9: they're not going to be able to live, they want
23:59
Speaker 9: to because I gave it away. So setting that aside,
24:02
Speaker 9: if you put your house in the kid's name, now
24:04
Speaker 9: you risk their divorces. They're moving, their changing jobs, and
24:08
Speaker 9: next thing you know, they're selling your house. Well that's
24:12
Speaker 9: not helpful. Do you you know if they get divorced,
24:14
Speaker 9: you could lose your house. So that's not helpful. But
24:17
Speaker 9: even you know, say you've got great kids, you gave
24:20
Speaker 9: them a carryover basis. This is the tax issues that
24:24
Speaker 9: you were talking about, Mike. If you give them the
24:26
Speaker 9: house you give them your cost basis, which translates into
24:31
Speaker 9: whatever the built in gain is they now have, and
24:34
Speaker 9: even if they wait to sell it until you pass,
24:38
Speaker 9: they then will have to pay the capital gains tax
24:41
Speaker 9: versus the fair market value over their basis on the
24:44
Speaker 9: date of death, which means if you had like a
24:46
Speaker 9: four or five six hundred thousand dollars built in gain
24:49
Speaker 9: into your house, you gave that to them. And if
24:52
Speaker 9: they don't live there, which they likely don't if you're
24:54
Speaker 9: living there, then they're going to have to pay you know,
24:58
Speaker 9: thirty percent almost twenty eight, twenty eight percent capital gains tax,
25:01
Speaker 9: never mind the potential one million dollar Massachusetts millionaires tax
25:05
Speaker 9: that people forget about it, but it's there, and so
25:11
Speaker 9: you know, it just causes tax bombs. Or if you're
25:13
Speaker 9: die owning it, you don't have those problems. You get
25:15
Speaker 9: a step up in basis, you keep control of it
25:17
Speaker 9: during your life, you get it to your kids in
25:20
Speaker 9: a much better way. So folks, overall, as you can imagine,
25:24
Speaker 9: we could talk for a lot longer on this, but
25:27
Speaker 9: how you leave your assets to your beneficiaries, which is
25:30
Speaker 9: the guide end of the month, last chance to get
25:32
Speaker 9: it can be more important than the taxes and the
25:35
Speaker 9: probate side of things, right, So controlling it for them,
25:39
Speaker 9: giving it. What if you've got a special needs child.
25:41
Speaker 9: What if you've got, you know, a second marriage, you
25:43
Speaker 9: want to make sure you take care of your kids.
25:44
Speaker 9: What about divorce proofing it for them so they don't
25:47
Speaker 9: lose it if they get divorced. So many ways to
25:50
Speaker 9: think about how to leave your assets to your kids
25:53
Speaker 9: as part of your estate plan. So when you're doing
25:56
Speaker 9: your plan, get this guide eight six six eight four
25:59
Speaker 9: eight five six ninety nine or Legal exchange show dot com.
26:03
Speaker 9: You can download it there again end of the month
26:05
Speaker 9: eight six six eight four eight five six ninety nine
26:09
Speaker 9: or Legal Exchange Show dot com.
26:12
Speaker 4: Todd, thank you so much for joining us. Appreciate it
26:15
Speaker 4: always pleasure.
26:16
Speaker 1: The proceeding was paid for and the views expressed are
26:18
Speaker 1: solely those of Cushing and Dolan. Cushing and Dolan and
26:20
Speaker 1: or Armstrong Advisory may contact you offering legal or investment services.
26:24
Speaker 1: Cushing and Armstrong did not endorse each other and are
26:26
Speaker 1: not affiliated.
26:28
Speaker 2: Mike God, do we want to talk a little bit
26:29
Speaker 2: about baby boomer retirements?
26:31
Speaker 5: I like to.
26:32
Speaker 3: Yeah, let's go there, because it's starting to show up
26:35
Speaker 3: in the labor market.
26:37
Speaker 2: Yeah, so we've got this aging workforce. We've talked about
26:41
Speaker 2: how for the last couple of years now you have
26:43
Speaker 2: more baby boomers retiring than gen zers that are coming
26:46
Speaker 2: into the workforce. And this has a few different places
26:50
Speaker 2: where it can end up impacting the broad economy.
26:55
Speaker 3: So the national labor force participation rate, which is just
26:59
Speaker 3: who's out there looking for work, did fall in March.
27:03
Speaker 3: It felt a sixty one point nine percent, So you
27:05
Speaker 3: know that is that is a drop, it's still historically
27:11
Speaker 3: not at very low levels. We tend to get at
27:13
Speaker 3: low labor force participation rate numbers during really bad recessions,
27:17
Speaker 3: when you can't find work, you get discouraged, more people
27:21
Speaker 3: drop out. But by the end of this decade, the
27:23
Speaker 3: number of people over the age of sixty five will
27:26
Speaker 3: outnumber those under eighteen for the first time in the
27:29
Speaker 3: history of the United States. And I think that clearly
27:31
Speaker 3: just does one thing to the labor market, which has
27:34
Speaker 3: tightened it in the absence of you know, immigration policy
27:37
Speaker 3: that brings a lot more people into the US in
27:39
Speaker 3: that prime age working group. And while I can point
27:43
Speaker 3: to the prime age labor force participation rate all day
27:46
Speaker 3: and say, look, you know those who are between twenty
27:49
Speaker 3: five and fifty four, you know nearly eighty four percent
27:52
Speaker 3: of them are in the labor market. That's close to
27:54
Speaker 3: an all time high that was reached in the late nineties.
27:58
Speaker 3: Those features are clear and clearly. The labor market as
28:01
Speaker 3: it is, even having weakened a little bit over the
28:03
Speaker 3: last year, is still drawing in a lot of prime
28:06
Speaker 3: age workers. But as we just laid out, that prime
28:11
Speaker 3: age working group is not growing like it once did
28:14
Speaker 3: and leads to a lot of complexities for employers. Yes,
28:18
Speaker 3: but I think more importantly and more relevant to a
28:21
Speaker 3: lot of folks listening to our social programs and how
28:24
Speaker 3: they are funded Medicare, social Security, et cetera.
28:27
Speaker 2: Yeah, I was gonna say, from a policy perspective, whether
28:30
Speaker 2: you're talking social programs or even just a monetary policy perspective,
28:34
Speaker 2: it as impacts on it. We've talked about how job
28:37
Speaker 2: growth has been relatively slow, but the FED J. Powell,
28:41
Speaker 2: the last time I checked, can he print workers?
28:45
Speaker 3: Not that I not from what I understand, No, But
28:48
Speaker 3: I'm doing some pretty wild stuff. So between three D
28:51
Speaker 3: printing and AI, maybe it's getting close. We'll see maybe
28:55
Speaker 3: in his retirement. He tries to, you know, get in
28:57
Speaker 3: that direction, but ultimately it's something where This is why
29:01
Speaker 3: the Fed and other central banks they manage based on
29:04
Speaker 3: the unemployment rate, not on the monthly job growth is
29:06
Speaker 3: because if you have a labor force that is not growing,
29:10
Speaker 3: you don't say, well, we want to have one hundred
29:11
Speaker 3: and sixty thousand jobs added per month. Like if there's
29:14
Speaker 3: no one to actually do the work that's you're pushing
29:17
Speaker 3: on a string, you're not gonna get anywhere.
29:19
Speaker 2: So all of these different areas are places where it
29:23
Speaker 2: has impacts. And the other thing that you got to remember,
29:26
Speaker 2: GDP growth is ultimately a function of two things. How
29:29
Speaker 2: many hours do people work in the aggregate and how
29:32
Speaker 2: productive are they during those hours. If you have a
29:36
Speaker 2: slower growing population, all else being equal, and I know
29:39
Speaker 2: that you can't keep it all equal all the time,
29:41
Speaker 2: but just hear me out, all else being equally, a
29:44
Speaker 2: slower growing population, you can't grow the economy as quickly
29:47
Speaker 2: because you can't grow hours worked as quickly. Them's the math,
29:52
Speaker 2: Like that's just kind of how it is. Just take
29:54
Speaker 2: a quick break here. When we come back. We got
29:56
Speaker 2: stack roulette next.
29:58
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30:41
Speaker 7: Trivia question today was which automaker owns the Chrysler brand Today?
30:48
Speaker 7: That would be Stilantis and Tom from Worcester, Mass is
30:52
Speaker 7: our winner today. It's taking on the Financial Exchange show
30:54
Speaker 7: to you Sure, Congrats to Tom and we play trivia
30:57
Speaker 7: every day. You're on the Financial Shane. See complete contest
31:01
Speaker 7: rules at financially chainshow dot com.
31:05
Speaker 2: Mike, do you mind if I kick things off of
31:07
Speaker 2: stack Rulett please due, Chuck. I want to start with
31:11
Speaker 2: an old favorite here of Chipotle, or more commonly known
31:15
Speaker 2: as Chipotle. This is a company whose shares have really
31:21
Speaker 2: had some trouble since the second half of twenty twenty
31:25
Speaker 2: four kicked off. This also interestingly coincides with, you know,
31:33
Speaker 2: basically like dead on with the period in which Brian Nickel,
31:37
Speaker 2: the former CEO, left Chipotle in order to go to Starbucks.
31:42
Speaker 2: And so I think the interesting thing here is Chipotle
31:47
Speaker 2: sales actually saw a same store sales rise of half
31:51
Speaker 2: a percent for the most recent quarter. They're saying it's
31:54
Speaker 2: because of their Chicken outpass store and extra protein options,
31:58
Speaker 2: and so you've got to Potla stock rallying about three
32:01
Speaker 2: and a quarter percent. It still is, you know, well
32:04
Speaker 2: off its highs from a couple of years ago where
32:07
Speaker 2: it got up to sixty eight bucks a share. It's
32:09
Speaker 2: at thirty four now, but maybe some signs of stability
32:13
Speaker 2: because the last several quarters have been marked by declines
32:16
Speaker 2: in same store sales. So you got to walk before
32:19
Speaker 2: you can run, and it seems like that's what Chipotle
32:21
Speaker 2: is doing here.
32:22
Speaker 4: I have no comment other than now I'm very hungry.
32:26
Speaker 5: Well, if you did Chippotle, you won't be You'll be
32:27
Speaker 5: very tired, Chuck.
32:29
Speaker 3: I do know that I was not here on the
32:31
Speaker 3: show on Monday, but have you already covered our fun
32:34
Speaker 3: story about pocket os, the little known software as a
32:39
Speaker 3: service platform for automotive and car rental businesses, and their
32:44
Speaker 3: experience with their AI agent. Nope, okay, so again for
32:50
Speaker 3: those that don't work in this area, pocket Os not
32:54
Speaker 3: a known company that anybody was aware of, but they
32:56
Speaker 3: were using an AI coding agent called Curse. It's powered
33:00
Speaker 3: by Anthropics Claude and YadA YadA. Yeah, a lot of
33:05
Speaker 3: technical specs about how they implemented it, but the AI
33:12
Speaker 3: agent was designed to help develop some software and it
33:17
Speaker 3: instead ran into some issues, tried to fix them, and
33:21
Speaker 3: within nine seconds, deleted the company's entire database of information
33:26
Speaker 3: that needs to you know, critically serve its customers and
33:29
Speaker 3: do much of anything. Then confessed to doing so and
33:34
Speaker 3: broke pretty much. It just kind of went off the rails,
33:37
Speaker 3: like there were guardrails that were put in place on
33:40
Speaker 3: this AI agent, and the AI agent, when asked about it,
33:45
Speaker 3: pretty much said yeah, I didn't really read the rules.
33:49
Speaker 3: I went around them. I violated quote. I violated every
33:53
Speaker 3: principle I was given. I guessed instead of verifying. I
33:56
Speaker 3: ran a destructive action without being asked. I didn't understand
33:59
Speaker 3: what I was doing before doing it.
34:04
Speaker 5: It's great it's so great, is this?
34:07
Speaker 3: Uh, I don't know how to describe this as any
34:10
Speaker 3: more than terrifying.
34:11
Speaker 4: I mean, what was your take?
34:13
Speaker 3: I know you you brought this story to me or
34:16
Speaker 3: you told me generally about it, and then I went
34:17
Speaker 3: and read about it. I'm guessing it's the same one
34:20
Speaker 3: that you read about. Uh, pretty terrifying.
34:24
Speaker 2: Yeah, so I I sent this to a couple of
34:26
Speaker 2: my buddies who work in the tech space, just to
34:28
Speaker 2: get their take on it, and and just because again
34:32
Speaker 2: I read it and I'm like, oh, that sounds bad.
34:34
Speaker 2: Like that sounds bad, never use AI, And I'll give
34:38
Speaker 2: you their responses now. Quote, Uh, there are actual AI
34:42
Speaker 2: risks that are amplifying things. But this is also pocket
34:46
Speaker 2: Os publicly announces they have poor security practices, allowed production
34:50
Speaker 2: access to developers who don't need it, and do not
34:52
Speaker 2: keep effective backups, including offline off site backups. Yeah, that's
34:56
Speaker 2: that's one response. The other way there is here, well,
35:00
Speaker 2: not just it's it's system design error.
35:03
Speaker 5: Like the other one that I got is quote, yeah.
35:07
Speaker 2: This is the same sort of thing you'd have horror
35:09
Speaker 2: stories of a junior developer doing long before AI was
35:12
Speaker 2: the story. A lot of that is I gave this
35:14
Speaker 2: monkey a handgun and it shot me. How could this happen? So, like, yes,
35:20
Speaker 2: like this is this is bad in terms of if
35:24
Speaker 2: you give AI unfettered access to systems, don't give it
35:28
Speaker 2: clear instructions, and don't have effective security practices and backups,
35:31
Speaker 2: you can run into this situation. The point that they
35:34
Speaker 2: make is basically, if you did these same things with
35:37
Speaker 2: junior developers who didn't know what they're doing, you run
35:40
Speaker 2: into the same things. And this is not uncommon in
35:42
Speaker 2: those scenarios either. So it again, like most things, AI
35:48
Speaker 2: seems to act as an accelerant for either problem solving
35:52
Speaker 2: or problem creating, depending on how you manage it. And
35:55
Speaker 2: their opinion was, yes, this is a risk, but it's
35:58
Speaker 2: a risk even when using here humans And if you
36:01
Speaker 2: design your systems for code production and insertion properly, you
36:07
Speaker 2: should not run into this in either situation.
36:10
Speaker 3: Yeah, again, don't know enough about web design toting software design.
36:14
Speaker 3: But I will also say that there are a lot
36:16
Speaker 3: of companies that seem to be trying to sprint towards
36:19
Speaker 3: adopting different AI tools that seemingly are not prepared for
36:25
Speaker 3: this type of outcome.
36:26
Speaker 2: No, and this is the thing is if you are
36:30
Speaker 2: a marketing company, who is you know, oh, like we
36:33
Speaker 2: want to have AI agents like doing all this stuff.
36:36
Speaker 2: You've probably never thought about these things before.
36:39
Speaker 5: You know.
36:40
Speaker 2: All you've thought about is let's design something that's fun.
36:43
Speaker 2: If you are a law firm that is thinking about
36:47
Speaker 2: using you know, AI agents for you know, preparing briefs
36:49
Speaker 2: in this and that, you've never thought about this stuff.
36:53
Speaker 2: Now you have to or you need to have a
36:56
Speaker 2: someone who does. And so this is the other piece
36:58
Speaker 2: that I get at with AI is there still is
37:01
Speaker 2: going to be a job for a human. It's just
37:04
Speaker 2: a different one than before. Right, Like, Yeah, if you're
37:09
Speaker 2: a law firm that's trying to like roll out AI
37:12
Speaker 2: agents that can do a lot of law firm work,
37:15
Speaker 2: you need to hire someone to Like, you won't just
37:17
Speaker 2: hire an AI agent to do it because you don't
37:19
Speaker 2: know like how to do that and manage that agent.
37:21
Speaker 2: You need someone who specializes in that skill set, and
37:25
Speaker 2: you don't have that. You're a bunch of lawyers and
37:27
Speaker 2: stuff and you're great at what you do, but you
37:29
Speaker 2: don't understand computers very well.
37:32
Speaker 4: Agreed.
37:33
Speaker 5: And that's across a whole bunch of industries. Lawyers.
37:36
Speaker 2: Financial service is advertising medicine like whatever it might be,
37:41
Speaker 2: you specialize in your field.
37:43
Speaker 5: This is different yea in hospitals.
37:45
Speaker 3: If one thing they've proven is that they are not
37:47
Speaker 3: great at cybersecurity.
37:49
Speaker 5: No, but here's the thing about hospitals, they move really slowly.
37:52
Speaker 2: Yeah, Like the sales cycle for getting this into hospitals
37:54
Speaker 2: is like three decades long. It's take a quick break
37:58
Speaker 2: for the entire rest of the day and we'll be
38:01
Speaker 2: back tomorrow to finish up the week.
38:03
Speaker 5: On the Financial Exchange,