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Is the market wildly overreacting? · The Financial Exchange Show

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Speaker 1: donation today. This is the Financial Exchange with Chuck Zada,
1:06
Speaker 1: and Mike Armstob.
1:09
Speaker 2: Chuck, Mike and Tucker with you kicking off what is
1:11
Speaker 2: going to be the busiest week of the year. I know,
1:15
Speaker 2: obviously we had a job report last week and that
1:17
Speaker 2: was certainly important. It's not to poop poo it or anything, obviously,
1:20
Speaker 2: given you know, the market activity that we saw on Friday,
1:24
Speaker 2: clearly it means something. But this week we've got economic
1:28
Speaker 2: data pretty much every day. But today tomorrow we get
1:31
Speaker 2: Producer Price Index data coming out at eight thirty am. Wednesday,
1:35
Speaker 2: we're going to be getting Consumer Price Index, so the
1:37
Speaker 2: CPI comes out on Wednesday. Some smaller reports too, but
1:41
Speaker 2: I'm not going to go through.
1:42
Speaker 3: All of those.
1:43
Speaker 2: Thursday retail sales and jobless claims, and Friday we get
1:46
Speaker 2: building permits and housing starts. So it is a really
1:51
Speaker 2: quite a busy week for us as we get things
1:55
Speaker 2: started here. But I think before we, you know, jump
1:58
Speaker 2: forward to this week, we've we got to look back
2:00
Speaker 2: a little bit at what happened on Friday, because hey,
2:03
Speaker 2: we had a really good job support, two hundred and
2:06
Speaker 2: fifty six thousand jobs created, the unemployment rate dropped from
2:09
Speaker 2: four point two to four point one percent, and yet
2:13
Speaker 2: all three major US n disees off anywhere from about
2:15
Speaker 2: one and a half to one and three quarters percent.
2:18
Speaker 3: What gives, Michael, What gives?
2:20
Speaker 1: Yeah?
2:20
Speaker 4: What gives is what we have been warning and talking
2:24
Speaker 4: about for a few weeks now, which is we're back
2:26
Speaker 4: to a market of bad news is good news and
2:28
Speaker 4: good news is bad news. Seems to be the conclusion
2:31
Speaker 4: here as far as I can tell. And markets are
2:34
Speaker 4: much more interested in where rates are going, at least temporarily,
2:38
Speaker 4: than they are on how much growth this economy is
2:41
Speaker 4: going to present and what it means for consumers. And
2:44
Speaker 4: I think Friday, as you mentioned, was the perfect example
2:47
Speaker 4: of that, but we've seen a few others as well,
2:50
Speaker 4: and the overall result here, right, I mean, what's happened
2:55
Speaker 4: now is the ten year US Treasury yield has climbed
2:58
Speaker 4: to over four and three quarters percent. You've had more
3:03
Speaker 4: the average thirty year fixed rate mortgage climbing to seven
3:06
Speaker 4: and a quarter percent, and so and then you're again
3:09
Speaker 4: left with an incoming Trump administration who's looking at an
3:13
Speaker 4: economy that is healthy and you know it is showing
3:16
Speaker 4: some signs of rebound after you know, some weakness in
3:19
Speaker 4: the second half of last year. But an incoming Trump
3:23
Speaker 4: administration that has a number of key policy priorities, none
3:27
Speaker 4: of which are likely to bring down borrowing costs come
3:30
Speaker 4: twenty twenty five, so far as I can.
3:32
Speaker 2: Tell, Yeah, And I think that when we talk about,
3:35
Speaker 2: you know, the growth rate of the economy, I think
3:38
Speaker 2: the read that I get on this in terms of hey,
3:41
Speaker 2: wire stocks selling off there is, Look, you've got bond
3:44
Speaker 2: rates moving up, and I think that equity owners are
3:47
Speaker 2: concerned that as rates move up, it potentially slows the
3:51
Speaker 2: economy and that in turn then impacts all of the
3:55
Speaker 2: projected earnings growth and so on and so forth. So
3:57
Speaker 2: it's hey, rates move up, and can stock stomach higher rates? Now,
4:05
Speaker 2: there have been times, most notably you take a look
4:08
Speaker 2: at twenty twenty two where investors were saying, no, they're
4:12
Speaker 2: not gonna be able to stomach that. And in reality
4:16
Speaker 2: what we saw was, yeah, we did see some earnings
4:18
Speaker 2: declines across you know, multiple parts of the economy. It
4:23
Speaker 2: was something where higher rates absolutely impacted companies' ability to
4:28
Speaker 2: make money. In twenty twenty three, remember the end of
4:33
Speaker 2: twenty three, we saw the ten year treasury rise to
4:35
Speaker 2: five percent at one point, and stock sold off a
4:39
Speaker 2: little bit, but not that much, And so the read was, yeah,
4:42
Speaker 2: there was some concern there, but not as much as
4:45
Speaker 2: what we saw in twenty twenty two. Because in some situations, Mike,
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Speaker 2: higher rates can reflect overall health in the economy if
4:54
Speaker 2: the concern for inflation isn't there and if the growth
4:57
Speaker 2: is there to support it. This is more a question
4:59
Speaker 2: I think of, will those higher rates bite the economy
5:03
Speaker 2: in such a way that the growth that's projected over
5:06
Speaker 2: the next twelve to eighteen months doesn't materialize, right.
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Speaker 4: And to be clear, I mean the sell off that
5:12
Speaker 4: we are seeing everyone's making a big deal of because
5:14
Speaker 4: it's January, and god knows, we're going to see the pieces.
5:18
Speaker 4: Watch out because this is what happens when the markets
5:20
Speaker 4: go down in jail. We haven't seen them yet, I know,
5:22
Speaker 4: but they're coming. Just give a time, jock. But you know, ultimately,
5:26
Speaker 4: what have we seen here? You know, a five percent
5:29
Speaker 4: sell off thereabouts from peaks back in beginning of December.
5:32
Speaker 4: Yeah that bullmark, Yeah, so somewhere in that range. So
5:35
Speaker 4: I don't think you can categorize it as a twenty
5:37
Speaker 4: twenty two reaction to interest rates to this point. But yeah, look,
5:42
Speaker 4: it's an all important question, and the readings we will
5:45
Speaker 4: be getting on inflation while this week's you know it
5:50
Speaker 4: would well, it'd be quite surprising if we saw a
5:54
Speaker 4: significant miss on inflation based on data that we already have.
5:58
Speaker 4: But those will be pretty important readings here on the
6:01
Speaker 4: state of the economy because we are seeing once again
6:05
Speaker 4: a relatively tight labor market as we head into twenty
6:07
Speaker 4: twenty five.
6:08
Speaker 2: And so we do get a piece here today, and
6:12
Speaker 2: this one is kind of the opposite of what we
6:16
Speaker 2: got at this time last year. Remember it was four
6:18
Speaker 2: days into last year and we were getting the pieces
6:21
Speaker 2: you referenced where well, January is not starting well, and
6:26
Speaker 2: that means the whole year's gonna be bad this time.
6:31
Speaker 2: And again, I haven't read like every financial news piece everywhere.
6:34
Speaker 2: I'm sure if you go to like certain corners of
6:36
Speaker 2: the internet there's some of that going on. But this
6:39
Speaker 2: you have from Barons. The headline is the market is overreacting.
6:43
Speaker 2: Don't lose your head, question, Mike, because this we probably.
6:47
Speaker 4: Need to all lose our heads now, Barons is saint
6:49
Speaker 4: don't well.
6:51
Speaker 2: A couple things. The first one is this begs the question,
6:55
Speaker 2: not raises it is the market actually overreacting.
7:02
Speaker 4: We just talked about a five percent market swing from
7:05
Speaker 4: December fourth on interest rates that have moved up. Let
7:10
Speaker 4: me see, how how much has the ten year yield
7:12
Speaker 4: ten years up over December fourth.
7:14
Speaker 2: Well, I'll go even back further. I know it's been
7:17
Speaker 2: since September. Since since December fourth is a reference, but
7:20
Speaker 2: you know, the ten years up about one point one
7:22
Speaker 2: five percent overall since December fourth. Uh, it is up
7:26
Speaker 2: about half a percent.
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Speaker 4: And so it doesn't seem like a gross overreaction to me.
7:31
Speaker 3: No, like it.
7:32
Speaker 2: It doesn't seem like this huge overreaction. It seems completely life.
7:37
Speaker 2: If the market has sold off, you know, thirty five percent,
7:40
Speaker 2: then I think you'd be like, well, the market's overreacted this. Yeah,
7:44
Speaker 2: yields have moved up, and there's been some you know,
7:47
Speaker 2: concerns about you know this and that, and a five
7:50
Speaker 2: percent sell off is not crazy. I mean this to
7:55
Speaker 2: me that The bothersome point here is it makes it
7:59
Speaker 2: makes the lack of volatility that we saw last year
8:03
Speaker 2: seem as if oh, that's how things are supposed to be,
8:06
Speaker 2: when really you're supposed to see some ups and downs
8:10
Speaker 2: and equity markets that's the nature of the beast. Forgive
8:14
Speaker 2: me for being a broken record, but it's a feature,
8:16
Speaker 2: not a bug. This is not a market overreacting. This
8:20
Speaker 2: is a market that is reacting appropriately in my opinion,
8:25
Speaker 2: and quite honestly, is evidence that we have properly functioning
8:29
Speaker 2: markets because they don't just go up all the time.
8:32
Speaker 1: Yeah.
8:33
Speaker 4: The other piece that I think kind of got missed,
8:37
Speaker 4: at least in the title of one of the pieces
8:38
Speaker 4: that we had today. The first story that we had
8:41
Speaker 4: covered US stocks got clawbird Friday despite a blockbuster jobs report.
8:46
Speaker 4: No stocks got clawbired on Friday, That's what you want
8:49
Speaker 4: to describe it as because of not in spite of
8:53
Speaker 4: the blockbuster jobs report that was a causal effect. Is
8:56
Speaker 4: had that been a net loss of jobs in the
8:59
Speaker 4: month of December.
9:00
Speaker 1: I do genuinely believe.
9:02
Speaker 4: Markets might have gone up on that news because investors
9:05
Speaker 4: right now, per the many stories that we're reading and
9:08
Speaker 4: per market reaction too, don't seem immensely concerned about recession.
9:14
Speaker 4: They don't seem intensely concerned about a downturn, and quite frankly,
9:19
Speaker 4: I don't think they should be, only because in the
9:21
Speaker 4: short term, if we see that type of slowdown, I
9:25
Speaker 4: think an incoming Trump administration has a set of tools
9:28
Speaker 4: they would love to pull out on that type of economy.
9:31
Speaker 2: Sure, yeah, it's we've talked about this that. In that situation,
9:34
Speaker 2: then you do have something where you say, okay, we
9:37
Speaker 2: can cut taxes this way, and there's something that makes
9:39
Speaker 2: sense there that doesn't make sense, you know, necessarily in
9:42
Speaker 2: a hotter economy with higher inflation than we saw during
9:46
Speaker 2: the first Trump term. So again, I think that in
9:51
Speaker 2: terms of where this market is right now, it remains
9:55
Speaker 2: one that is steeply priced. It remains one that is
10:00
Speaker 2: pricing in an awful lot of growth, and even though
10:02
Speaker 2: markets have come in a little bit, if there are
10:05
Speaker 2: further hiccups, you would expect markets to chop around as well. Now,
10:09
Speaker 2: I think there's probably a case to be made in
10:13
Speaker 2: terms of like what this piece is you know, maybe
10:15
Speaker 2: trying to say, but I don't think quite gets there,
10:18
Speaker 2: which is, Hey, if you're a long term investor, who
10:21
Speaker 2: doesn't you know, study this stuff day in and day out. Yeah,
10:25
Speaker 2: you probably don't need to pay as much attention to this. Uh,
10:28
Speaker 2: you know what's going on in markets. A five percent
10:30
Speaker 2: dip in markets is something that you know happens two
10:34
Speaker 2: or three times a year normally. So if you want
10:37
Speaker 2: to make the case of hey, this is normal, don't
10:40
Speaker 2: freak out. If you're an equity investor, Okay, that's a
10:43
Speaker 2: reasonable case. But like the market is overreacting.
10:47
Speaker 3: No, it's not. Market's not overreacting.
10:51
Speaker 4: That's probably a disclosure that we need to put on
10:53
Speaker 4: just about ninety percent of the stories that we cover
10:56
Speaker 4: on this program, which right really call attention to those
11:01
Speaker 4: ones where we say, oh, even as a long term investor,
11:04
Speaker 4: you need to understand what the heck's going on here,
11:05
Speaker 4: and we do. But yeah, at pieces like this are
11:09
Speaker 4: meant to grab a headline and not meant to really
11:12
Speaker 4: portray a full lot of information for the average investor.
11:15
Speaker 2: Just take a quick break here when we come back.
11:17
Speaker 2: We just talked about what's going on in equity markets,
11:20
Speaker 2: what's going on with the bond of rooneys.
11:22
Speaker 3: We'll fill you in on that after.
11:24
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12:27
Speaker 2: Global Bond Tantrum is a wrenching and worrisome start to
12:30
Speaker 2: new year. That's the headline from Bloomberg. And I do
12:34
Speaker 2: think there's something just that's, you know, worth talking about
12:37
Speaker 2: here in a couple of respects. The first is that
12:39
Speaker 2: word global, where I know that's so often we are
12:42
Speaker 2: just insulated in Hey, what does this mean for like
12:46
Speaker 2: my town or my city, or my state or my
12:49
Speaker 2: country where countrywise, we look at the US and we say, hey,
12:52
Speaker 2: yielda going up in the US. Is this like something
12:55
Speaker 2: that's related to you know, US specifically, And the answer,
12:58
Speaker 2: in my opinion is no, because you do have bond
13:02
Speaker 2: yields across the globe.
13:04
Speaker 3: That are moving up.
13:05
Speaker 2: And it's not something where you look at the UK
13:07
Speaker 2: and say, hey, you know the UK is impacted by
13:10
Speaker 2: you know, tax rates in the US UH and and
13:14
Speaker 2: how you know that the US deficit looks. It's not
13:16
Speaker 2: something where you look at Japan and say something similar.
13:19
Speaker 2: So I think there there is something that's afoot here,
13:22
Speaker 2: but it is clearly not a US only problem. In
13:25
Speaker 2: the US is not the only country that exists. Every
13:27
Speaker 2: other country has agency as well. Like it's it's not
13:30
Speaker 2: just what we do. But I do think the interesting
13:34
Speaker 2: piece on this is, look, you do have this sell
13:36
Speaker 2: off that's been happening in bonds across the globe. What
13:40
Speaker 2: is the reason for it? How much further can it go?
13:45
Speaker 2: And when do we get to a point where markets
13:48
Speaker 2: don't just sag a little bit, but they start, you know,
13:51
Speaker 2: breaking in different areas.
13:52
Speaker 4: Yeah, and I guess importantly has it been overdone, which
13:57
Speaker 4: none of us will know until it's into rearview, But
14:00
Speaker 4: there's one quote in here that I was interested in
14:03
Speaker 4: your take on chat because quote shift upward in yields
14:07
Speaker 4: is part of a natural re alignment after years of
14:10
Speaker 4: a near zero rate environment following the emergency measures taken
14:14
Speaker 4: after the Financial crisis and then COVID, And far too
14:18
Speaker 4: often I feel like there's pieces written like this where
14:20
Speaker 4: it attributes a very short term rise in yields, which
14:23
Speaker 4: is what we've seen over the last what do you
14:26
Speaker 4: call it three months or so, to some long term
14:29
Speaker 4: trend And I just have a really tough time saying
14:32
Speaker 4: with any sort of definitive opinion on this that, oh, yeah,
14:37
Speaker 4: we saw the interest rate on the ten year yield move,
14:40
Speaker 4: you know, a full percentage point over the last ninety
14:43
Speaker 4: days because we're just normalizing out of the Great Financial
14:47
Speaker 4: Crisis and COVID, Like, I don't think so. Can you
14:50
Speaker 4: make an argument that we won't ever see three percent
14:53
Speaker 4: mortgage rates and those were result of COVID and the
14:56
Speaker 4: Great Recession? Sure, but attributing this most recent rise to that,
15:00
Speaker 4: I just don't see the connection.
15:02
Speaker 2: No, It's something where I again I don't know why
15:09
Speaker 2: this happens, but we often like to attribute something that's happening.
15:16
Speaker 2: You know, in the short term, we like to attribute
15:19
Speaker 2: that to, you know, some broader theme that's playing out,
15:22
Speaker 2: when sometimes it's just completely random noise.
15:25
Speaker 3: Mike, you, I know, you're.
15:26
Speaker 2: Not a basketball, baseball or football guy. So let's let's
15:29
Speaker 2: stick with hockey. What what's the most goals you've scored
15:32
Speaker 2: in a game? Well, personally yeah, you no, no, like
15:36
Speaker 2: you know you.
15:37
Speaker 4: Personally, I've once gotten a hot hat trick, but one time.
15:40
Speaker 3: Okay, So Mike Armstrong scores a hat trick, do you
15:43
Speaker 3: remember the date that.
15:44
Speaker 2: You scored that hat trick? I do not, Come on,
15:47
Speaker 2: You're you're only hat trick and you don't know the dates.
15:48
Speaker 2: So Mike scores a hat trick, and you know, the
15:51
Speaker 2: people following Mike's you know, prospect career for the NHL,
15:55
Speaker 2: they look at that and they say, well, this is
15:58
Speaker 2: all part of his growth and development and we can
16:00
Speaker 2: expect a whole lot more of this or is it
16:03
Speaker 2: just hey, Mike shots found the open net on that
16:06
Speaker 2: night and that was just kind of how it worked.
16:08
Speaker 3: So to bring this back more.
16:09
Speaker 4: Atrivial to the fact that I was playing against ten year.
16:12
Speaker 2: Olds, which is also great, Like you got to play
16:15
Speaker 2: with people your height level, I understand, but it's something
16:20
Speaker 2: where to bring it back to the bond market. Look,
16:23
Speaker 2: just because you have a short term move here, it
16:25
Speaker 2: doesn't mean that you're you know, seeing this permanent not
16:28
Speaker 2: even permanent, this this path to normalization after COVID, as
16:32
Speaker 2: we talked about, you know last week, Hey, all the
16:35
Speaker 2: people that were freaking out about you know, the US
16:38
Speaker 2: deficit when the tenure ran up to five percent in
16:40
Speaker 2: twenty twenty three.
16:42
Speaker 4: That's where I was gonna go It. Ring is very
16:44
Speaker 4: similar to those same arguments as oh, yeah, all of
16:47
Speaker 4: a sudden, the bond market's paying attention to deficits, or
16:50
Speaker 4: all of a sudden we're returning to the normal of
16:53
Speaker 4: post COVID and Great recession. It's like, well, probably not.
16:58
Speaker 4: It seems like an odd time to choose now to
17:01
Speaker 4: readjust to the normal economy.
17:03
Speaker 3: So yeah, you could.
17:04
Speaker 4: Convince me that investors are being overly pessimistic when it
17:07
Speaker 4: comes to inflation and selling their bonds really with a
17:11
Speaker 4: heavy push here. But if you're going to try and
17:14
Speaker 4: make a case that it's some you know, big macro shift,
17:18
Speaker 4: I think you're just cherry picking data points to fit
17:20
Speaker 4: your argument.
17:21
Speaker 2: Yeah, I mean, if if you were too over the
17:24
Speaker 2: next three to four months, see a slow down in
17:28
Speaker 2: growth in the United States, just that you know, finally
17:30
Speaker 2: materializes after like two years of talking about it and
17:35
Speaker 2: the ten year goes back to like three and a half.
17:36
Speaker 2: Do we suddenly sit here and say, well, now you know,
17:40
Speaker 2: the market is pricing in the lower growth rate that's
17:43
Speaker 2: expected in the US and the law no like it.
17:46
Speaker 2: You can't extrapolate that into something bigger. Sometimes it's just
17:51
Speaker 2: what's going on short term, and sometimes it might just
17:54
Speaker 2: be not even stuff that's related to the economy. I
17:59
Speaker 2: think sometimes people don't realize that there's stuff that happens
18:01
Speaker 2: in markets that is purely structural as a result of
18:06
Speaker 2: how people and companies need to access them. At the
18:09
Speaker 2: end of the month, you always see a bunch of
18:11
Speaker 2: rebalancing flows, particularly in foreign exchange, as companies figure out, hey,
18:17
Speaker 2: what did we bring in this month? How much do
18:18
Speaker 2: we need to hold in different currencies? And you just
18:21
Speaker 2: move stuff to where it needs to go. And and
18:23
Speaker 2: if you were to wake up after one of those
18:25
Speaker 2: days and be like, oh, gee, what happened with you know,
18:28
Speaker 2: the pound relative to the US. Is this something bigger? No, Like,
18:31
Speaker 2: sometimes it's just that TJ Max sold a bunch of
18:36
Speaker 2: you know, Japanese stuff into the US, and so they
18:39
Speaker 2: need to, you know, figure out how to make you know,
18:42
Speaker 2: their YenS and dollars work together. It's like, it's oftentimes
18:45
Speaker 2: no more than that going on, and it doesn't need
18:49
Speaker 2: to be some broader thing or this big theme. Sometimes
18:53
Speaker 2: it's just, hey, it's corporate month end and this stuff's happening,
18:57
Speaker 2: and so I find it, you know, bother. Some when
19:00
Speaker 2: when we have to make everything into like some bigger theme,
19:04
Speaker 2: sometimes it's just, hey, some dudes needed to sell some
19:06
Speaker 2: stuff today and that's what happened or this month or
19:10
Speaker 2: this week. Now, sometimes these things can become you know,
19:14
Speaker 2: bigger themes.
19:14
Speaker 5: But.
19:17
Speaker 2: Everyone wants to be first to saying it. But there's
19:21
Speaker 2: no one keeps the scoreboard of you know, who's right
19:23
Speaker 2: and who's wrong on this stuff.
19:25
Speaker 4: No, we only reward those work temporarily.
19:27
Speaker 2: Right quick break, when we come back, we've got Wall
19:31
Speaker 2: Street Watch, and then.
19:32
Speaker 3: Let's talk about fake job postings.
19:34
Speaker 1: After that. Like us on Facebook and follow us on
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19:48
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19:53
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19:56
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20:00
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20:01
Speaker 5: Coming off a losing week where all three major averages
20:04
Speaker 5: shed about two percent on the heels of surging bond yields,
20:07
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20:11
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20:14
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20:17
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20:19
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20:23
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20:26
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20:28
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20:31
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20:34
Speaker 5: reeled up by one basis point now at four point
20:36
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20:39
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20:46
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20:49
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20:53
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20:58
Speaker 5: revenue to come in between one and a half and
20:59
Speaker 5: two and a half billion dollars, most of which will
21:02
Speaker 5: come in the second half of the year. In a release,
21:05
Speaker 5: the company said the majority of those sales will come
21:07
Speaker 5: from its COVID shot and newly launched vaccine for RSV. Meanwhile,
21:12
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21:14
Speaker 5: chips can be exported to certain countries, overriding in videos
21:18
Speaker 5: objections and Video shares down by about three percent, while
21:23
Speaker 5: other chip makers are also seeing losses on the day. Elsewhere,
21:26
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21:30
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21:33
Speaker 5: north of ninety thousand dollars. Coin Based down by five percent,
21:36
Speaker 5: while micro Strategy shares down by three percent. Over to
21:41
Speaker 5: the retail sector, where Macy's provided disappointing fourth quarter guidance
21:45
Speaker 5: while its comparable store sales are expected to be roughly flat,
21:48
Speaker 5: that stock down by six percent. Abercrombie and Fitch shares
21:52
Speaker 5: sinking by eighteen percent, despite the retailer raising its outlook
21:56
Speaker 5: for the fourth quarter on strong holiday sales. Expectations. The
22:00
Speaker 5: company now expects fourth quarter net sales to grow between
22:03
Speaker 5: seven and eight percent, compared with previous guidance of five
22:06
Speaker 5: to seven percent growth. Those holiday expectations are still lower
22:11
Speaker 5: than the year ago period, however, suggesting a slowdown in growth,
22:15
Speaker 5: and Lulu Lemon height its revenue and profit guidance for
22:18
Speaker 5: the fourth quarter. However, that stock down by about a
22:22
Speaker 5: third of a percent. I'm Tucker Silvan, that's Wall Street Watch, Mike.
22:26
Speaker 3: What's a fake job posting?
22:30
Speaker 4: It's something where there's a number of different reasons that
22:35
Speaker 4: companies are doing it, But it's a job posting that
22:38
Speaker 4: a company generally doesn't have any real intent to hire
22:42
Speaker 4: a person on. And there's a few different reasons that
22:45
Speaker 4: companies seem to be doing this. It's all kind of conjecture,
22:48
Speaker 4: because no company is going to admit that they have
22:50
Speaker 4: it posting out there that they never intend to hire for.
22:53
Speaker 4: But some of the reasons given seem to be that
22:55
Speaker 4: they just keep the job posting up to make it
22:57
Speaker 4: seem like they are in still growth mode, which is
23:01
Speaker 4: just super crappy and insinuate something about just how poor
23:08
Speaker 4: the company's growth trajectory actually might be. Others would be, Hey,
23:12
Speaker 4: we're just going to keep this posting open because we're
23:14
Speaker 4: always on the look for this type of role and
23:16
Speaker 4: we're just waiting for some exceptional candidate to come around.
23:19
Speaker 4: That's one in a million. That one I still have
23:22
Speaker 4: an issue with, but certainly less of one than just
23:25
Speaker 4: a fake one. But the other job postings that are
23:28
Speaker 4: serious out there are scams. This article is can talk
23:31
Speaker 4: about that at length, but I think there are a
23:34
Speaker 4: number of different people who have gotten text messages about
23:36
Speaker 4: fake jobs. That's one thing. But they do still exist
23:39
Speaker 4: on job boards where they're attempting to get you to
23:41
Speaker 4: apply to a job that is either something that is
23:45
Speaker 4: not what it seems or is a genuine scam to
23:49
Speaker 4: try and get you to turn over information so it
23:50
Speaker 4: can run the gambit chuck.
23:52
Speaker 2: And so the big thing on this, this is from
23:54
Speaker 2: a piece in the Wall Street Journal, is that it
23:57
Speaker 2: becomes frustrating for individuals who are applying for these jobs
24:02
Speaker 2: where they're like, oh, like this sounds really, you know, interesting,
24:06
Speaker 2: but the company has no intention of filling that job actually,
24:11
Speaker 2: And it's not saying that this is like all that
24:13
Speaker 2: you see, but it's something that hey, if you're out
24:18
Speaker 2: there trying to get a job, and you're spending you know,
24:20
Speaker 2: time and effort working on you know, putting together cover
24:24
Speaker 2: letters and this and that, and hey, you've you know,
24:26
Speaker 2: you're sending out you know, dozens of these. Yeah, the
24:30
Speaker 2: fact that you know, one out of every five might
24:33
Speaker 2: be for a position that is not actually being hired
24:37
Speaker 2: for is kind of a waste of your time. Now,
24:41
Speaker 2: that's kind of the nature of the beast in the
24:43
Speaker 2: job market. I mean, it's for every.
24:46
Speaker 3: One of those.
24:47
Speaker 2: I'm sure there are stories from employers about how, hey,
24:50
Speaker 2: we scheduled an interview with candidate X, and when the
24:53
Speaker 2: time came, they didn't show up for their interview.
24:55
Speaker 3: So it's it. This is not.
24:57
Speaker 2: A well of those horrible employers, How could they do this?
25:01
Speaker 3: It's much more.
25:03
Speaker 2: This stuff is always present in the job market to
25:06
Speaker 2: a certain extent, and it's kind of the cost of
25:09
Speaker 2: doing business. The other thing that I have a question
25:10
Speaker 2: on is like, we don't have any historical data on this.
25:14
Speaker 2: So this was figured out by a company called Greenhouse. Sure,
25:18
Speaker 2: Greenhouse did not exist, to the best of my knowledge,
25:21
Speaker 2: back in nineteen seventy, so we don't have any information
25:25
Speaker 2: unlike some kind of longitudinal study, like, hey, has this
25:28
Speaker 2: problem been getting worse? Has it been getting better? Or
25:31
Speaker 2: is it about the same. It's much more. This is
25:34
Speaker 2: what we're seeing right now. And there's probably always some
25:38
Speaker 2: of this, just like they're probably always are some interviewees
25:42
Speaker 2: that don't show up for their interview, and this stuff
25:45
Speaker 2: gets baked into the system. But it does make for
25:47
Speaker 2: a frustrating process. I think is something that's worthwhile to
25:50
Speaker 2: note well.
25:51
Speaker 4: And my conclusion is, you know, much like other types
25:54
Speaker 4: of Again, I don't want to describe this as necessarily
25:57
Speaker 4: a scam, but much like many other types of things
26:01
Speaker 4: that are frustrating in this sense, the ability for a
26:05
Speaker 4: company to post a job has gotten orders of magnitude
26:09
Speaker 4: cheaper over the years, and so therefore the ability for
26:14
Speaker 4: fake job posts to exist. There was probably a lot,
26:17
Speaker 4: at least financially more burdensome back in the nineteen seventies,
26:20
Speaker 4: because you generally probably wouldn't print and add in a
26:22
Speaker 4: newspaper for a job that you weren't actually intending to
26:25
Speaker 4: hire for my sorry.
26:27
Speaker 2: Go ahead, no, you're fine. My mom was a college counselor.
26:31
Speaker 2: While she worked, she helped to you know, get people
26:34
Speaker 2: placed into different schools and this and that, and one
26:36
Speaker 2: of the things that by the end of her career
26:39
Speaker 2: that she said was, look, it's great that they have
26:43
Speaker 2: like this common application that allows you to submit you know,
26:45
Speaker 2: one set of you know, paperwork to different schools with
26:48
Speaker 2: a couple of changes here and there. But honestly, it's
26:51
Speaker 2: made it so easy to apply to schools that instead
26:53
Speaker 2: of you know, actually having to like filter down your
26:56
Speaker 2: list and do the work, it became just, oh, like,
26:59
Speaker 2: I'm going to apply and I'm applying to twenty five
27:01
Speaker 2: schools instead of you know, maybe seven or eight that
27:03
Speaker 2: I should.
27:04
Speaker 3: And you see the.
27:05
Speaker 2: Same thing, Like, it's kind of the same type of
27:07
Speaker 2: thing where hey, if it's so easy for someone to
27:10
Speaker 2: post a job now, but also if it's so easy
27:13
Speaker 2: to just you know, click on LinkedIn and be like
27:15
Speaker 2: here's my resume, like you you don't have to think
27:18
Speaker 2: about it in either one of those situations, are you
27:21
Speaker 2: actually improving the hiring process or have you just pretended
27:26
Speaker 2: to make it easier. But now, as an example, if
27:29
Speaker 2: you are a let's say that you are a company
27:33
Speaker 2: that's hiring, well, gee, because it's so easy to post
27:36
Speaker 2: on LinkedIn, you get two hundred resumes. How do you
27:40
Speaker 2: sort through that? Well, now you're you know, causing You're like, well,
27:43
Speaker 2: we got to hire like someone to do that, or
27:45
Speaker 2: we've got to you know, have AI do that, and
27:47
Speaker 2: maybe the AI misses something that a human would and
27:49
Speaker 2: now you've actually missed out on your good candidate. Like
27:52
Speaker 2: are you actually building a better hiring process? And how
27:55
Speaker 2: often do HR departments go through those reviews to be
27:58
Speaker 2: like are we actually doing this better? Or does it
28:01
Speaker 2: just feel good because like this is what everyone else
28:04
Speaker 2: is doing.
28:05
Speaker 4: I recently saw a story from Reddit, so you know,
28:08
Speaker 4: take it with a grain of salt as to whether
28:10
Speaker 4: or not this actually occurred, but one Reddit user claim
28:13
Speaker 4: to have used generative AI to be able to automatically
28:16
Speaker 4: apply to about a thousand jobs that you know, met
28:19
Speaker 4: certain search criterias, write up cover letters, and you know,
28:23
Speaker 4: basically do a bunch of tasks you know, effectively, very quickly,
28:27
Speaker 4: and therefore received fifty job interviews. And at first I
28:30
Speaker 4: was like, oh, that seems a bit disingenuous, But I've
28:33
Speaker 4: actually turned on that quite a bit because most certainly
28:37
Speaker 4: a lot of companies are going to use artificial intelligence
28:40
Speaker 4: to screen candidates out, uh, huh. And if you're good
28:43
Speaker 4: enough at generative AI to use it to apply to
28:45
Speaker 4: jobs and get an interview from that, then that seems
28:49
Speaker 4: absolutely reasonable.
28:50
Speaker 2: We you And ultimately you're going to be judged on No,
28:54
Speaker 2: Ultimately you're going to be judged on can you do
28:56
Speaker 2: the work? And if you can't, then here's what's going on.
29:00
Speaker 2: End up happening is that company is going to have
29:02
Speaker 2: to adjust its hiring process. And maybe they don't go
29:05
Speaker 2: through this because they get burned by it a bunch,
29:07
Speaker 2: and maybe that goes away. Like this is how the market,
29:10
Speaker 2: you know, either gives or takes based on you know,
29:14
Speaker 2: the results that that you're getting from these types of things.
29:17
Speaker 3: But yeah, I mean, look, what.
29:20
Speaker 2: As long as you are not lying and making stuff up? Okay,
29:26
Speaker 2: Like if if here's I will say, if the generative
29:28
Speaker 2: AI is just making up stuff, problem, But if it's, hey,
29:34
Speaker 2: here's my work experience generative and this is stuff the
29:38
Speaker 2: generative AI can do. Here's my resume, here is the
29:42
Speaker 2: the the job listing. Transform this resume into something that
29:47
Speaker 2: like captures all of the buzzwords from this job listing
29:50
Speaker 2: so that their AI will pick up on my AI's stuff.
29:55
Speaker 3: Fine, Like you.
29:56
Speaker 2: But if you are just you, it is hey, come
30:01
Speaker 2: up with like a fake you know, resume of you know,
30:04
Speaker 2: but that's I don't think that's what we're talking about here,
30:07
Speaker 2: are we, Mike.
30:08
Speaker 4: No, No, that's not what we're describing here. And so yeah,
30:12
Speaker 4: I'm right there with you. The application for jobs market
30:15
Speaker 4: is well, it's already changed quite a bit. It's going
30:18
Speaker 4: to continue to do so. And yeah, if you're a
30:21
Speaker 4: company that's just leaving a job post up in perpetuity
30:24
Speaker 4: just to seem like you're growing, then I have a
30:27
Speaker 4: problem with you. But that's probably par for the course.
30:30
Speaker 2: Now, can I can I make a I don't want
30:34
Speaker 2: to call it a prediction, but you want to know
30:39
Speaker 2: what my my black Swan event is for the next
30:42
Speaker 2: twenty years, And this is something like something I think
30:46
Speaker 2: is unlikely, but at the same time, I wouldn't be
30:51
Speaker 2: surprised if it happens. The Internet is going to kill
30:55
Speaker 2: itself going to and what I mean by that is
31:02
Speaker 2: we're going to have so much AI slop that's created
31:07
Speaker 2: that we're going to pull back from the Internet because
31:11
Speaker 2: we can't tell what's real there or not. And as
31:14
Speaker 2: a result, the Internet is going to become useless for us,
31:19
Speaker 2: and we're going to get back to having to actually
31:21
Speaker 2: talk to people because we just don't trust anything that
31:25
Speaker 2: we are seeing on the internet.
31:28
Speaker 1: I don't.
31:28
Speaker 4: I hope we do get to the point where we
31:31
Speaker 4: don't trust things that we see on the internet. But
31:34
Speaker 4: and that may be where we're heading. Unfortunately, that's one
31:38
Speaker 4: piece that I see we are not there on. People
31:40
Speaker 4: still trust far too much the internet more than they should.
31:43
Speaker 3: Take a quick break here.
31:44
Speaker 2: When we come back, we'll talk a little bit about
31:47
Speaker 2: the latest coming out of la As far as hey.
31:52
Speaker 2: People there losing their homes. It's where a lot of
31:55
Speaker 2: their wealth is held. How do they move forward world
32:00
Speaker 2: in which that wealth is at least temporarily not there
32:04
Speaker 2: the way it used to be.
32:06
Speaker 1: This is your home for the most comprehensive coverage of
32:09
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32:12
Speaker 1: the Financial Exchange Radio Network. Find daily interviews and full
32:17
Speaker 1: shows of the Financial Exchange on our YouTube page. Like
32:21
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32:23
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32:27
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32:33
Speaker 2: Peace and Wall Street journals titled their Wealth is in
32:36
Speaker 2: Their Homes, Their Homes are now ash. And what this
32:38
Speaker 2: is talking about is, Look, I know that no one
32:42
Speaker 2: likes to have sympathy.
32:43
Speaker 3: For people in la for whatever reason.
32:46
Speaker 2: But when you've got you know, people that have had
32:48
Speaker 2: their homes burned to the ground, I hope that you
32:49
Speaker 2: can find just a little bit of it and maybe
32:52
Speaker 2: not make this into something else, because you have people,
32:56
Speaker 2: just as an example, who might have bought their homes
32:59
Speaker 2: as you know, average middle class people. They might have
33:02
Speaker 2: spent you know, a few hundred thousand dollars twenty years
33:06
Speaker 2: ago to go and buy a home, and now that
33:08
Speaker 2: home by virtue of you know, being in a state
33:10
Speaker 2: where they do a horrible job of building new homes
33:13
Speaker 2: and you know, actually having a vibrant real estate market,
33:17
Speaker 2: that home that was purchased for three hundred thousand is
33:19
Speaker 2: now one point five million and burnt to the ground.
33:22
Speaker 2: But the family that lives there hasn't you know, seen
33:25
Speaker 2: their income go up five x. It's you know, there's
33:27
Speaker 2: still a middle class family and now they're trying to rebuild.
33:32
Speaker 2: And in a world in which you have all kinds
33:34
Speaker 2: of insurance problems in the state and reports that are
33:37
Speaker 2: coming out about you know, small local insurance that may
33:40
Speaker 2: be insolvent and not able to pay all claims and
33:42
Speaker 2: things like that. You've got questions from these families as to, hey,
33:46
Speaker 2: we lived here for you know, twenty thirty forty years.
33:50
Speaker 2: We don't know if we can afford to rebuild here
33:51
Speaker 2: because we don't actually have the money to do so,
33:54
Speaker 2: and we're not sure we're going to get enough from
33:57
Speaker 2: our insurance claim to be able to cover know what's
34:00
Speaker 2: there as well.
34:01
Speaker 4: Yeah, look, I think this is a pretty relatable story
34:05
Speaker 4: for anybody on either of the coasts quite frankly, right,
34:08
Speaker 4: I mean, you talk about the town from which we're
34:11
Speaker 4: broadcasting right fifty years ago, very middle class town where
34:15
Speaker 4: you could afford it as a trades person or you know,
34:20
Speaker 4: in a middle class job. Today, home prices, yeah, are
34:25
Speaker 4: appreciated too levels similar to what you're probably seeing across
34:29
Speaker 4: Los Angeles. And for a lot of people, that was
34:33
Speaker 4: their rainy day fund, it was their nest egg. And
34:37
Speaker 4: you know, you certainly hope that most of those had
34:40
Speaker 4: insurance coverage. But honestly, that group of people, the people
34:45
Speaker 4: that you know did see that type of appreciation and
34:48
Speaker 4: maybe bought it in the nineteen seventies are probably the
34:51
Speaker 4: most likely group to be uninsured at the moment when
34:53
Speaker 4: you talk about the cost, when you talk about the
34:55
Speaker 4: fact they might not have a mortgage anymore, that cohort
34:58
Speaker 4: is probably the most likely to said over the years, Hey,
35:01
Speaker 4: I need to cut somewhere, and so either I'm going
35:03
Speaker 4: for a really really slimmed down insurance package or I'm
35:08
Speaker 4: doing without insurance entirely. You hope that's certainly the minority,
35:11
Speaker 4: but it may exist. Look, ultimately, I think that with
35:17
Speaker 4: a disaster of this size there will be a fair
35:19
Speaker 4: bit of aid. But you bring up a very reasonable point.
35:22
Speaker 4: These are densely populated areas. It's going to take years
35:24
Speaker 4: to rebuild, and for a lot of folks it's going
35:27
Speaker 4: to mean an inability to move back to an area
35:30
Speaker 4: that they have in many cases raised families in and
35:33
Speaker 4: and grown in and have jobs and all sorts of
35:38
Speaker 4: things that are going to be massively disruptive. And Look,
35:43
Speaker 4: this is one of the I think one of the
35:46
Speaker 4: key risks to having a huge portion of wealth in
35:49
Speaker 4: your home is you know, you buy its very nature
35:53
Speaker 4: have a concentration risk that is unlike kind of any
35:56
Speaker 4: other investment out there. When we talk about investing, not
36:00
Speaker 4: that a lot of people were doing this as an investment.
36:03
Speaker 4: It is their residence. But when you talk about having
36:05
Speaker 4: a huge portion of your investible or uninvestable wealth in
36:10
Speaker 4: value of real estate, this is one of those key
36:12
Speaker 4: risks out there that we see and talk about frequently,
36:15
Speaker 4: and hopefully most of it was insured, even if that
36:18
Speaker 4: insurance market looks a lot different in the future.
36:21
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37:22
Speaker 3: Mike, you see the Chuck E Cheese is making a
37:25
Speaker 3: bit of a comeback.
37:26
Speaker 4: No, when did they enter bankruptcy? Was that last year,
37:29
Speaker 4: the year before?
37:29
Speaker 2: I don't recall, but twenty twenty actually five years ago,
37:32
Speaker 2: I believe it or not. I know, time flies. But
37:35
Speaker 2: so they came out, you know, missing seven hundred and
37:37
Speaker 2: five million dollars in debt. And the big thing they have,
37:41
Speaker 2: I guess their locations that are still around. They've moved
37:45
Speaker 2: more towards things like trampolines and you know, more active
37:51
Speaker 2: type stuff and gotten rid of some of the stuff
37:53
Speaker 2: that they used to have. They've also ballpets, what's that
37:58
Speaker 2: p filled ballpits?
37:59
Speaker 3: You mean, I'm not going to.
38:04
Speaker 4: That's that's kind of what they were known for before.
38:07
Speaker 2: We're gonna take a break now, and uh yeah, well,
38:11
Speaker 2: we'll come back and discuss that an hour two on
38:12
Speaker 2: the Financial Exchange. We've got a lot more, including uh,
38:16
Speaker 2: what we can expect from the Trump administration on tariffs, UH,
38:20
Speaker 2: and where earning season is projected as well.
38:22
Speaker 3: All that and more coming up in a bit