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The Market Rally Is Thinner Than It Looks · The Financial Exchange Show

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  Speaker 1: is the Financial Exchange with Chuck Zada and Mark Vandetti.
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  Speaker 2: Chuck, Mark, and Tucker with you. And as we kick
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  Speaker 2: things off today, the S & P 500's off 49 points. Remember,
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  Speaker 2: it did hit an all-time high yesterday, so we've got, like,
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  Speaker 2: let's not get too excited. Like, oh, the stocks are down. Like, it'll...
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  Speaker 2: You know, these things do tend to happen. The Dow
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  Speaker 2: is off 558 and the Nasdaq is off 204. What
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  Speaker 2: I will say, under the surface, it's kind of gross
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  Speaker 2: out there in markets. If you just look at what
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  Speaker 2: we're seeing right now, I'll give you just an example
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  Speaker 2: of this. Again, there's all kinds of different stuff that's
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  Speaker 2: out there. I'm not saying like put any stock in this,
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  Speaker 2: but I'm just trying to give you a sense of
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  Speaker 2: like what's happened under the hood that makes this market
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  Speaker 2: look kind of gross despite all-time highs. In the technical
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  Speaker 2: analysis realm, there's the idea of a 50-day moving average.
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  Speaker 2: On average, if you look at the last 50 days,
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  Speaker 2: where has the stock been? And it goes up and
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  Speaker 2: down based on obviously how the stocks perform. One of
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  Speaker 2: the things that some people track is, hey, what percentage
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  Speaker 2: of stocks in the S & P 500 are above
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  Speaker 2: or below that threshold? And Earlier this week, or actually
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  Speaker 2: late last week on Friday, we got down to a
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  Speaker 2: reading of 23% of stocks above their 50-day average. Normally
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  Speaker 2: you get a reading in the 20s. That's like kind
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  Speaker 2: of when stocks have gone through like a meaningful dip
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  Speaker 2: and the index is, you know, off anywhere from like
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  Speaker 2: 8% to 15%. And we had that hit while the
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  Speaker 2: index was basically hitting an all-time high. So it tells
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  Speaker 2: you that if you are just owning the index, you're like, oh,
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  Speaker 2: this is great. If you're someone who has been buying stocks,
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  Speaker 2: like individual ones, other than Mag7, semiconductors, and that's basically
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  Speaker 2: it this year, and energy, you're looking in particular, like
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  Speaker 2: the last two months, and you're like, man, this sucks.
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  Speaker 2: Because your stuff has not been going up for the
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  Speaker 2: last two months. It just hasn't.
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  Speaker 3: I wonder what a technician thinks of that. Do they
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  Speaker 3: throw the rule out when they see an anomaly like that?
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  Speaker 3: Or do they chuck it up to an exception that.
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  Speaker 2: Don't know.
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  Speaker 3: I've never understood, because technicians just look at trends and charts.
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  Speaker 3: They don't care what it is.
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  Speaker 2: Correct.
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  Speaker 3: And they're sort of fun to talk to, as you know.
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  Speaker 2: Oh, they're great fun to talk to.
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  Speaker 3: Because they're very animated and passionate, but there's also an
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  Speaker 3: element of astrology to what they do. To a person
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  Speaker 3: who's fundamentally trained, hey, you look at cash flows. You
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  Speaker 3: discount those cash flows. You get a present value as
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  Speaker 3: a result of that little exercise. You compare that to
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  Speaker 3: the right. That's what we mean by fundamental analysis. Think
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  Speaker 3: of a spreadsheet. Think of earnings versus prices and other
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  Speaker 3: things you would find in financial statements of corporations. Technical analysis.
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  Speaker 2: They don't care.
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  Speaker 3: They don't care what they're looking at. If the chart's
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  Speaker 3: looking bad, whether it's oil, stocks, or baseball cards, you
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  Speaker 3: should sell.
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  Speaker 1: Right.
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  Speaker 3: It's interesting.
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  Speaker 2: We can go off on a tangent, of course.
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  Speaker 3: No, no, I didn't mean to. That was contained.
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  Speaker 2: That was contained. We might as well. So I have
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  Speaker 2: a buddy of mine who basically has done all kinds of...
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  Speaker 2: He was a floor broker back in the 80s and 90s,
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  Speaker 2: back when that was an actual job and stuff. He's
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  Speaker 2: done all kinds of cool stuff in markets. And again,
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  Speaker 2: he's one of these guys who... You mentioned there's a
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  Speaker 2: little bit of astrology in it. He has a whole theory. Again,
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  Speaker 2: I emphasize theory about literally like the moon being an
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  Speaker 2: important driver of financial markets. And his crowning achievement in
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  Speaker 2: his own words was back in, I think it was
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  Speaker 2: 2017 when Bitcoin was going through one of those crazy cycles.
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  Speaker 2: His model based on moon cycles was, Literally like nailed
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  Speaker 2: like tops and bottoms all through the year. And he
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  Speaker 2: was like, this is why I love he was like,
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  Speaker 2: I don't care about crypto at all. But he's like,
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  Speaker 2: I love Bitcoin because there is fundamentally nothing like there's
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  Speaker 2: no earnings. There's no cash flow. There's no government. There's
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  Speaker 2: no nothing. He's like, it's a pure emotional thing. idea
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  Speaker 2: that drives it. It's literally just how people feel about
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  Speaker 2: it at the time. There's nothing else there. He's like,
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  Speaker 2: so you don't have like an earnings report that interrupts
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  Speaker 2: like a chart that might be developing. You don't have,
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  Speaker 2: you know, random government official come in with a policy
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  Speaker 2: and blah, blah, blah. And so, yeah, like he's very
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  Speaker 2: much like a technician a chartist you know like he's
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  Speaker 2: one of those guys and he's like 2017 to me
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  Speaker 2: proved it that like emotions are what drive prices not
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  Speaker 2: what's actually happening like all the other stuff he thinks
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  Speaker 2: is just noise now i don't know if it's actually
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  Speaker 2: again like a buddy of mine like we chat about
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  Speaker 2: this stuff and it's it's interesting but you know he
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  Speaker 2: tries to basically like make his living doing this now
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  Speaker 2: and i'm like well okay like it's nice that you're
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  Speaker 2: talking about this but uh Thanks. But there's all kinds
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  Speaker 2: of different ways that you can approach markets and all
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  Speaker 2: kinds of games that you can play. The important thing
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  Speaker 2: is just understanding, hey, there are people out there playing
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  Speaker 2: different games than you. And they might have their reasons
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  Speaker 2: for doing something. You need to do things based on
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  Speaker 2: your own reasons. And so the point that I was
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  Speaker 2: making just on the weak breadth was actually going to
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  Speaker 2: be an interesting one, which is, look, again, you normally
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  Speaker 2: see this poor breadth at market bottoms. And we just
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  Speaker 2: hit all-time highs. So it's kind of just a weird
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  Speaker 2: thing that you note there. And I don't know what
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  Speaker 2: you do with it, but it's happening. And you at
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  Speaker 2: least need to be aware of it because some people
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  Speaker 2: do play games based on this. And you have to
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  Speaker 2: understand how it may influence their psychology and what they
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  Speaker 2: may be doing if you're someone who likes to trade
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  Speaker 2: this stuff. If you're a long-term investor, then forget about it.
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  Speaker 2: Who cares? You're not trading anyways. It's useful to.
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  Speaker 3: Know if a really ominous technical signal is triggered by
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  Speaker 3: something because that could in turn trigger computerized stress. The
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  Speaker 3: crash of 87, people blame it on Reagan's fiscal policy,
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  Speaker 3: which seems a little off the wall to me because
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  Speaker 3: that had been a long time in building. People blame
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  Speaker 3: it on portfolio insurance, this idea that when stocks go
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  Speaker 3: below a certain level... Sell orders are placed on computerized trading,
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  Speaker 3: which was newer, new-ish then. Computerized orders are placed automatically,
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  Speaker 3: and things can build a momentum of their own as
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  Speaker 3: a result. And those triggers could be technical in nature.
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  Speaker 3: If the S & P falls below 7,500, we sell
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  Speaker 3: 10% of our position. our chief risk officer is making
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  Speaker 3: us do that.
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  Speaker 1: Yes.
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  Speaker 3: So they have no, you know.
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  Speaker 2: Investors are exercising. They have no say in the matter. Right.
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  Speaker 3: There's no judgment being exercised. It's a rule, and it's
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  Speaker 3: being imposed on them from up on high, from on
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  Speaker 3: high or whatever.
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  Speaker 2: Which, by the way, when we talk about what's going
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  Speaker 2: on in bond markets right now, a lot of people,
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  Speaker 2: a lot of you listening might be familiar with what's
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  Speaker 2: called the VIX, which is basically, it's referred to as
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  Speaker 2: like the fear gauge for the stock market, but it's
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  Speaker 2: basically a measure of hey, how much are investors willing
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  Speaker 2: to pay for volatility that they expect to happen around
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  Speaker 2: the market in the next 30 days? It's basically what
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  Speaker 2: it is. It's volatility pricing. The bond market has its
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  Speaker 2: own index that tracks volatility called the move index. And
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  Speaker 2: one of the things that has happened in the last
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  Speaker 2: couple of weeks is the move index has gone sky high.
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  Speaker 2: And the problem with this is that if you are
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  Speaker 2: an institutional investor that wants to own bonds, by virtue
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  Speaker 2: of that move index being high, your risk budget is
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  Speaker 2: going to be lower because your manager is saying, no,
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  Speaker 2: this is too volatile. You can't buy more even if
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  Speaker 2: you want to. And so that depresses the potential for
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  Speaker 2: buyers to come in and say, yes, we're willing to
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  Speaker 2: take a shot on this because institutionally, they might not
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  Speaker 2: be allowed to in a lot of cases. So what
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  Speaker 2: you see in both equity and basically any market where,
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  Speaker 2: which is any market now, any market out there, What
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  Speaker 2: typically has to happen to form some kind of lasting bottom,
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  Speaker 2: volatility has to drop first before you start to see
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  Speaker 2: the move up. Because that's when risk budgets can start
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  Speaker 2: to get reallocated that way. Sorry for getting into the
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  Speaker 2: weeds on this. but no it's useful to.
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  Speaker 3: Know that not every sell-off is fundamentally driven i think
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  Speaker 3: this is maybe how you'd sum up this conversation.
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  Speaker 2: Yeah you get forced sellers sometimes now.
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  Speaker 3: That said uh a technically driven a sell-off that That
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  Speaker 3: snowballs into a panic can have fundamental implications if people
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  Speaker 3: pull back on spending. I don't want to downplay what
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  Speaker 3: happens in financial markets, but sometimes what happens in financial
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  Speaker 3: markets just stays in financial markets and don't try to
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  Speaker 3: read too much into it.
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  Speaker 2: Let's take a quick break. When we come back, let's
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  Speaker 2: ask this question that Bloomberg is. Why are Americans unhappy
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  Speaker 2: with an economy that looks strong? We'll discuss next.
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• 11:35
  Speaker 2: All right, let's talk about this piece from The Bloomy Bird.
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  Speaker 2: It's titled, Why Americans Are Unhappy With An Economy That
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  Speaker 2: Looks Strong. And, again, you look at the economy right now,
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  Speaker 2: and the unemployment rate's at 4.2%, which is within sniffing
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  Speaker 2: distance of the lowest that we've ever seen. It's a
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  Speaker 2: very low unemployment rate. You take a look at real
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  Speaker 2: GDP growth. And where we are there, again, it's not
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  Speaker 2: something where you look at this and say, like, it's
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  Speaker 2: crazy strong or anything, but part of that is just
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  Speaker 2: due to population change having slowed, because GDP growth is
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  Speaker 2: now at 2.2%, even though population growth is basically stagnant,
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  Speaker 2: which means, okay, like, it's a pretty good economy for
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  Speaker 2: this level of population growth. So you've got high inflation,
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  Speaker 2: which I think explains a decent chunk of it, in that,
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  Speaker 2: you 3.5% by the time we get the next set
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  Speaker 2: of numbers will probably be closer to 4% on an
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  Speaker 2: annual basis. And I think that there are two numbers,
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  Speaker 2: in my opinion, that get at why people don't like
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  Speaker 2: this economy despite the low unemployment rate and solid GDP
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  Speaker 2: growth rate. The first is the inflation side of things.
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  Speaker 2: People just hate inflation because it's, okay, I'm paying more
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  Speaker 2: for something that... Hasn't changed. Like, the broccoli's still the broccoli.
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  Speaker 2: You know, the milk is still the milk, but you're
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  Speaker 2: making me pay more for it. People don't like that.
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  Speaker 2: And more than that, even, I really think that people
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  Speaker 2: now feel like they're getting ripped off on every purchase.
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  Speaker 1: Mm-hmm.
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  Speaker 2: And it's because, like, I was talking to a buddy
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  Speaker 2: of mine who, he lives out in the Midwest. And
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  Speaker 2: he goes to the dentist like, you know, a person does.
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  Speaker 2: And doesn't have dental insurance. And, you know, he's like, okay,
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  Speaker 2: my cleanings were, you know, $ 110 per, you know, visit previously.
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  Speaker 2: Private equity group came in and bought up a bunch
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  Speaker 2: of dental firms, dental practices in the region, including his.
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  Speaker 2: Goes in for his cleaning. $ 390 for the same cleaning.
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  Speaker 2: Like it's not like a new toothbrush. It's not like,
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  Speaker 2: you know, a new building. It's exact same place and
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  Speaker 2: almost four times the cost. And he's like, I feel
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  Speaker 2: like I'm getting ripped off. And it's true. Like he
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  Speaker 2: is because the private equity firm is making that extra money.
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  Speaker 2: It's not the dentist who's making that extra money. Dentists
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  Speaker 2: not making any more. Dentists sold their practice. They got
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  Speaker 2: a chunk up front, but the private equity firm now
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  Speaker 2: is a bunch of debt probably. that they need to
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  Speaker 2: cover the cost of, and so they jacked up the
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  Speaker 2: cost by 300%. You feel like you're getting ripped off.
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  Speaker 2: You go and you're buying airfare, and every week they're
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  Speaker 2: going higher as you're looking at them. You're like, it's
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  Speaker 2: the same flight, what gives? Granted, yeah, the fuel cost
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  Speaker 2: has gone up, but you feel like you're getting ripped off.
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  Speaker 2: So this is one part of it. It's the spending side.
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  Speaker 2: The other is the labor share of income. has been
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  Speaker 2: declining for how long now, Mark? Like quite a while.
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  Speaker 3: A long time.
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  Speaker 2: What I mean by that is if you look at
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  Speaker 2: the percentage of income that goes to pay out labor today,
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  Speaker 2: it's been declining for, what, 40, 50 years now? Somewhere
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  Speaker 2: in that ballpark, like early 70s, early 80s?
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  Speaker 3: That's fine, yeah.
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  Speaker 2: In that range? And so less of the money that
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  Speaker 2: is earned is going to pay out labor. So you, meanwhile,
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  Speaker 2: are being told by your boss, work harder, do more.
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  Speaker 2: and yet you get paid less of the overall profits
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  Speaker 2: and earnings of the business. And so the feeling is just, hey,
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  Speaker 2: I'm getting less of what I'm producing, and I'm having
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  Speaker 2: to pay more for what I'm buying. And I think
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  Speaker 2: people are just fed up with that. The other thing
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  Speaker 2: that I come back to, I guess if you want
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  Speaker 2: a third factor, is the last seven years, I've said
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  Speaker 2: this before, the last seven years have just been exhausting
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  Speaker 2: for us from an economic perspective. 2020. 2020. Hey, stay
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  Speaker 2: in your house, don't do anything. Okay.
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  Speaker 1: 2021.
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  Speaker 2: Okay, come back out. Try to buy some new stuff. Sorry,
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  Speaker 2: supply chains are a mess, you can't get it.
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  Speaker 1: 2022.
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  Speaker 2: Crazy high inflation, partly because of that supply chain mess,
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  Speaker 2: partly because of Russia invading Ukraine. It's been nuts. 2023. Hey,
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  Speaker 2: inflation's looking better. Silicon Valley Bank blew up. Oh, is
• 16:05
  Speaker 2: there like another bank crisis coming? 2024. Labor market fears, 2025, tariffs, 2026,
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  Speaker 2: energy prices. It's been one thing after another for the
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  Speaker 2: last seven years. Now, this isn't to make it seem
• 16:21
  Speaker 2: like the 2010s were any picnic, but the 2010s were
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  Speaker 2: basically one problem that we dealt with. Growth sucked. That
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  Speaker 2: was it. Like, that was the... It was, okay... Growth
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  Speaker 2: was really slow, unemployment was high, and it very gradually
• 16:38
  Speaker 2: got better. And yeah, there were little scares in there
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  Speaker 2: as well. Tucker, do we have any European listeners or viewers?
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  Speaker 2: I think we have one guy in the UK, actually. Wonderful, okay.
• 16:52
  Speaker 2: I'm not even kidding, yeah. Top of the afternoon to you,
• 16:54
  Speaker 2: because it's like 6pm there right now. But here's the thing.
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  Speaker 2: Europe had its, like, more pressing matters in the 2010s
• 17:02
  Speaker 2: because of, you know, the Euro debt crisis and this
• 17:05
  Speaker 2: and that and Brexit. But, like, here in the U.S.,
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  Speaker 2: the story was, okay, the economy was really slow in 2010,
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  Speaker 2: and it gradually got better through the 2010s. Like, that
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  Speaker 2: was the deal. We didn't have high inflation. We didn't have,
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  Speaker 2: you know, anything crazy. Whereas the last seven years... I
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  Speaker 2: think people are just exhausted from trying to deal with
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  Speaker 2: all this. And like, it's just, it's built up. It's,
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  Speaker 2: you know, humans are remarkable in that I think we're
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  Speaker 2: incredibly resilient life forms, but it's also, we have our
• 17:35
  Speaker 2: breaking point. And like, eventually you just get to a
• 17:38
  Speaker 2: point where it's like, like we've all had like the
• 17:40
  Speaker 2: bad days where it's like, someone says hi to you
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  Speaker 2: and you snap at them and you're like, I shouldn't
• 17:45
  Speaker 2: have snapped at you because you just said hi. And
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  Speaker 2: I kind of just wonder if we're at our economic
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  Speaker 2: breaking point where it's just been another, another, another, another.
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  Speaker 2: And now we're just like, guys, we can't deal with
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  Speaker 2: it anymore. Like we're just at that breaking point. The
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  Speaker 2: economy said hi to us and we're like, screw you, economy.
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  Speaker 3: It's very hard to answer this question using statistics because
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  Speaker 3: the data that we measure, the sort of trinity, the
• 18:14
  Speaker 3: holy trinity, if I may say, Border on the defamatory
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  Speaker 3: there a little bit. The Holy Trinity of economic statistics
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  Speaker 3: would be inflation, unemployment, and GDP. GDP, as you pointed out,
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  Speaker 3: is growing at about trend. Unemployment has only been this
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  Speaker 3: low in the late 60s, the late 90s, the late 2019,
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  Speaker 3: the late 20-teens briefly, and then today, so pretty rare.
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  Speaker 3: And inflation is high, but not obscenely so, although there's
• 18:41
  Speaker 3: always this worry that it'll break out again.
• 18:44
  Speaker 4: Sure.
• 18:44
  Speaker 3: So by those measures, which are just, they aggregate a
• 18:48
  Speaker 3: lot of data, so they're averages. By those measures, everything
• 18:51
  Speaker 3: looks okay. If you show them to anybody in any
• 18:53
  Speaker 3: past point in time, you'd say, oh, that's a healthy economy.
• 18:57
  Speaker 3: I would think people would be pretty happy with it,
• 18:59
  Speaker 3: yet they're not because of the imprint, the post-traumatic stress
• 19:06
  Speaker 3: from COVID inflation. But it goes back Further than that, though,
• 19:10
  Speaker 3: people have not been happy with the economy for 20 years,
• 19:12
  Speaker 3: so what's up? Growth has slowed a lot from the 70s.
• 19:16
  Speaker 3: The 70s weren't a bad growth decade. Real GDP growth
• 19:19
  Speaker 3: was about the same as the 80s. A little bit
• 19:20
  Speaker 3: higher in the 90s. So think long-term trends here. Maybe
• 19:25
  Speaker 3: we can pick up on the other side.
• 19:26
  Speaker 2: Yeah, we got more. Let's take a quick break. We
• 19:28
  Speaker 2: got Wall Street Watch coming up when we return as well.
• 19:39
  Speaker 1: Bringing the latest financial news straight to your radio every day.
• 19:44
  Speaker 1: It's the Financial Exchange on the Financial Exchange Radio Network.
• 19:50
  Speaker 1: Time now for Wall Street Watch. Tracking the stocks, the data,
• 19:54
  Speaker 1: and the headlines driving markets so far today. Right here
• 19:57
  Speaker 1: on the Financial Exchange Radio Network.
• 20:00
  Speaker 4: Well, markets are pulling back after their recent rally where
• 20:03
  Speaker 4: they notched record highs yesterday as the good old treasury
• 20:07
  Speaker 4: yields are rising. climbing to their highest level since 2002.
• 20:10
  Speaker 4: Right now, the Dow is selling off over 1% or
• 20:14
  Speaker 4: 525 points lower. S & P 500 is off about
• 20:15
  Speaker 4: half a percent or 41 points off. NASDAQ is down
• 20:17
  Speaker 4: two-thirds of a percent or 171 points lower. Russell 2000
• 20:18
  Speaker 4: is down 1.4%. 10-year treasury yield is up four basis
• 20:20
  Speaker 4: points at 5.311%. While crude oil is edging higher, trading
• 20:23
  Speaker 4: at $ 89 a barrel. SpaceX down by 2% following reports
• 20:40
  Speaker 4: that the rocket and AI company was looking to.
• 20:42
  Speaker 2: Raise $ 40.
• 20:43
  Speaker 4: Billion to buy chips from NVIDIA. Meanwhile, Constellation Brands is
• 20:48
  Speaker 4: seeing its stock gain nearly 1% after the beer maker
• 20:51
  Speaker 4: logged a higher profit and revenue in the previous quarter,
• 20:54
  Speaker 4: driven by strong beer sales at bars and restaurants amid
• 20:57
  Speaker 4: slower sales in grocery and liquor stores. However, beer depletion
• 21:01
  Speaker 4: has declined in the quarter, causing worries about underlying demand.
• 21:06
  Speaker 4: Gene Maker, Levi Strauss will report earnings after today's closing bell.
• 21:11
  Speaker 4: And breaking media news as of about half an hour ago,
• 21:14
  Speaker 4: where Super Bowl 61 will be made available on streaming
• 21:18
  Speaker 4: service Disney +, in addition to ESPN and ABC on
• 21:24
  Speaker 4: February 14th. I'm Tucker Silva, and that is Wall Street Watch.
• 21:29
  Speaker 2: Mark, what were we talking about last segment?
• 21:32
  Speaker 3: Consumer sentiment surveys being in the crapper?
• 21:34
  Speaker 2: That's the one. Uh, here, here's the other piece. Like
• 21:37
  Speaker 2: we gave a whole bunch of different theories out there.
• 21:39
  Speaker 2: The other piece that I'll put out there in terms
• 21:41
  Speaker 2: of like why people feel bad about the economy. Uh,
• 21:45
  Speaker 2: I'll toss one more on the pile. People feel bad
• 21:47
  Speaker 2: in general now. I, yeah, well, you know what I
• 21:50
  Speaker 2: was going to end my, Oh, go ahead. You've got,
• 21:52
  Speaker 2: you know, rates of things like depression and anxiety have
• 21:55
  Speaker 2: gone sky high in the last 15, 20 years. The
• 21:57
  Speaker 2: likely culprit is in our pockets. It's our phones in
• 22:01
  Speaker 2: that basically every study out there correlates higher phone usage
• 22:04
  Speaker 2: with uh, feeling worse about your life. And so if
• 22:08
  Speaker 2: you're asked about the economy, you might say it's worse,
• 22:12
  Speaker 2: even though it might not be. And so it could
• 22:14
  Speaker 2: very well be that we just feel bad about everything. Uh,
• 22:17
  Speaker 2: and that's a contributor too. It's more likely than not
• 22:21
  Speaker 2: a combination of all these things. It's not just one
• 22:24
  Speaker 2: of them. Uh, but I'll toss that out as a
• 22:26
  Speaker 2: possibility for some consideration as well, because, uh, we're on
• 22:31
  Speaker 2: our phones an awful lot and basically the polling on anything, uh,
• 22:34
  Speaker 2: is worse now that we're on our phones.
• 22:36
  Speaker 3: I was going to say, I was going to offer
• 22:38
  Speaker 3: the fact that growth slowed a lot from roughly the
• 22:41
  Speaker 3: turn of the century. If the turn of the century
• 22:44
  Speaker 3: is your reference point, growth went from roughly three to two.
• 22:51
  Speaker 3: I'm barely abstracting there. That's pretty much what it did.
• 22:56
  Speaker 3: If growth had continued at the prior pace, we'd all
• 22:58
  Speaker 3: be roughly 50% richer-ish. That's a lot. Now, I'm talking
• 23:06
  Speaker 3: GDP per capita. I'm rounding up a little bit, but
• 23:09
  Speaker 3: that's close. Older folks remember, you know, people my age,
• 23:14
  Speaker 3: 50s and younger, remember the heady 80s and 90s, and
• 23:17
  Speaker 3: we definitely sense that something changed. Maybe it was 9-11.
• 23:21
  Speaker 3: Maybe that's some people's reference point, but something changed. So
• 23:24
  Speaker 3: we sense that, although, you know, stock returns have picked up,
• 23:29
  Speaker 3: income growth on average has slowed. So there may be
• 23:31
  Speaker 3: some people who are making sort of a data analysis based,
• 23:34
  Speaker 3: an individual experienced data-based conclusion, drawing an individual experienced data-based conclusion.
• 23:40
  Speaker 3: So for us, yeah, it was sort of a palpable slowdown.
• 23:43
  Speaker 3: I sense I'm sort of driving slower than I used
• 23:46
  Speaker 3: to be economically. And for younger people, the slower growth
• 23:50
  Speaker 3: economy is just finally catching up, maybe. The fact that
• 23:53
  Speaker 3: real wages, average hourly earnings isn't perfect. There are other measures. Um,
• 23:57
  Speaker 3: they've outpaced inflation, but not by as much as they
• 24:00
  Speaker 3: used to. Um, so it's sort of been a long
• 24:03
  Speaker 3: slog for younger generations. Maybe that's perceptible to them. And
• 24:08
  Speaker 3: then finally, like you said, there's social media. I can
• 24:10
  Speaker 3: see how the wealthy live now. I couldn't, I had
• 24:12
  Speaker 3: to watch lifestyles of the rich and famous too, or
• 24:16
  Speaker 3: our dynasty or something on TV to see how really
• 24:19
  Speaker 3: wealthy people lived.
• 24:20
  Speaker 2: Can I, so it's, I gotta tell you, I'm, I'm,
• 24:25
  Speaker 2: not to take this back to AI, but it's wild
• 24:27
  Speaker 2: because I go through such polarizing thoughts about AI where
• 24:31
  Speaker 2: I was showing Mark something that I had built this
• 24:33
  Speaker 2: morning just because I was looking around. I'm not like
• 24:36
  Speaker 2: trying to buy a house right now, but I was
• 24:38
  Speaker 2: trying to like run a mortgage calculation, just like a
• 24:42
  Speaker 2: hypothetical one. And I was like, oh, like, you know,
• 24:44
  Speaker 2: here's like the Zillow calculator. Like, can I make a
• 24:47
  Speaker 2: better one? And I basically took AI and said, I
• 24:50
  Speaker 2: pointed it at the page and I'm like, make me
• 24:52
  Speaker 2: a better version of this that includes X, Y, and Z.
• 24:56
  Speaker 2: And it did in like two minutes. And I was like, oh,
• 25:00
  Speaker 2: like that. And I wasn't asking it to do anything complicated,
• 25:03
  Speaker 2: but it still was just like, I showed it to
• 25:04
  Speaker 2: Mark and I'm like, take a look at these. He's like, yeah,
• 25:08
  Speaker 2: that's impressive. Like, it looks great. And so now I
• 25:11
  Speaker 2: never have to go to Zillow's calculator again. I have
• 25:13
  Speaker 2: this better one that I built, and I'm like, oh,
• 25:15
  Speaker 2: this is awesome. But to tie it back to the
• 25:17
  Speaker 2: social media thing, I saw something the other day. It
• 25:21
  Speaker 2: was a kid who made two videos, and the first
• 25:24
  Speaker 2: one is him pretending to give investment advice while walking
• 25:30
  Speaker 2: around a Lamborghini and on a private plane and wherever.
• 25:36
  Speaker 2: And it turns out he just like filmed himself. The
• 25:39
  Speaker 2: second video of them is him just in his yard
• 25:42
  Speaker 2: doing the same thing. And all he did was he
• 25:44
  Speaker 2: plugged it into AI and was like, transform this shot
• 25:46
  Speaker 2: into me on the plane. This one is me getting
• 25:48
  Speaker 2: out of the car. And really he was just like
• 25:50
  Speaker 2: getting off of a bench or like sitting on a
• 25:52
  Speaker 2: chair in his house. And so the point that he
• 25:55
  Speaker 2: was making is, look, even like on social media now,
• 25:58
  Speaker 2: it used to be that you'd see pictures or videos
• 26:00
  Speaker 2: of people and be like, wow, their life is amazing.
• 26:03
  Speaker 2: Look what they're doing. He's like, you can't even trust
• 26:06
  Speaker 2: that they're actually doing those things now because the AI
• 26:08
  Speaker 2: video generation capacity is so great. So I really think
• 26:15
  Speaker 2: that we are heading for a world where the internet
• 26:18
  Speaker 2: might die, but that AI still allows us to do
• 26:23
  Speaker 2: tremendous things from a productivity standpoint if it doesn't really
• 26:29
  Speaker 2: ruin a lot of other things first. and I'm just
• 26:32
  Speaker 2: trying to, like, there's so many contradictions there, and I
• 26:35
  Speaker 2: don't know exactly how it plays out, but we talk
• 26:39
  Speaker 2: a lot about, like, the fears that we have about
• 26:41
  Speaker 2: AI and the danger that we see there, but I
• 26:44
  Speaker 2: do want to point out, like, there's some really, really
• 26:47
  Speaker 2: cool stuff that you can do with it also. Like,
• 26:52
  Speaker 2: I have a buddy who's a super nerd. Like, I'm
• 26:57
  Speaker 2: a B-minus nerd at best. This guy's, like, This guy's
• 27:01
  Speaker 2: like an A-plus nerd, like has a PhD in math
• 27:04
  Speaker 2: from one of the UC schools. Like he's, you know,
• 27:07
  Speaker 2: no dummy. And yesterday, OpenAI dropped, I think it was
• 27:12
  Speaker 2: like 450 like math proofs that they, you know, said, hey, look,
• 27:17
  Speaker 2: we solved this. Like here's 450 of these things. Through
• 27:20
  Speaker 2: my pen, I got so excited just now. And I
• 27:24
  Speaker 2: was texting him. I'm like, what do you think about this?
• 27:26
  Speaker 2: He's like, honestly, every mathematician right now is so discouraged
• 27:30
  Speaker 2: because there's He's like, there's going to be nothing for
• 27:33
  Speaker 2: us to study. He's like, even if these models are
• 27:36
  Speaker 2: wrong right now, and even if these aren't accurate proofs,
• 27:40
  Speaker 2: the fact that we're here now means six or 12
• 27:42
  Speaker 2: months from now, we're going to be so much further
• 27:44
  Speaker 2: ahead that there's no point in me being a mathematician.
• 27:47
  Speaker 4: Wow.
• 27:49
  Speaker 2: And I was like, okay, if I'm hearing that from you,
• 27:53
  Speaker 2: that's meaningful. That's something.
• 27:56
  Speaker 1: Okay.
• 27:57
  Speaker 2: Folks, the Armstrong Advisory Group has a guide available this month.
• 28:00
  Speaker 2: It's titled Building and Sizing Your Emergency Fund. How much
• 28:04
  Speaker 2: do you need to put away in order to feel
• 28:06
  Speaker 2: like you have a decent-sized emergency fund? How do you start?
• 28:10
  Speaker 2: What do you actually do? Where do you keep it?
• 28:13
  Speaker 2: These are questions that lots of people have. And a
• 28:16
  Speaker 2: successful and a good-sized, a properly-sized emergency fund, I really
• 28:21
  Speaker 2: think is kind of one of those foundational building blocks
• 28:24
  Speaker 2: of a successful financial plan. it's something that you really
• 28:28
  Speaker 2: want to focus on to make all of the other
• 28:30
  Speaker 2: pieces work as you get more and more complex and
• 28:34
  Speaker 2: comfortable with your plan. So the guide, again, is titled
• 28:38
  Speaker 2: Building and Sizing Your Emergency Fund. Two ways you can
• 28:40
  Speaker 2: request it. The first is by calling 800-393-4001. The second
• 28:47
  Speaker 2: is by going to armstrongadvisory.com, and there's a button there
• 28:50
  Speaker 2: that says Get Our Free Monthly Guide. You can request
• 28:52
  Speaker 2: it right at that link. Again, that phone number is
• 28:55
  Speaker 2: 800- 393-4001 or go to armstrongadvisory.com.
• 29:01
  Speaker 1: The proceeding was paid for by Armstrong Advisory Group, a
• 29:04
  Speaker 1: registered investment advisor. Nothing in the ad or in any
• 29:06
  Speaker 1: Armstrong guide is specific financial, legal, or tax advice. Consult
• 29:09
  Speaker 1: your own financial, tax, and estate planning advisors before making
• 29:12
  Speaker 1: any investment decisions. Armstrong may contact you to offer investment
• 29:15
  Speaker 1: advisory services.
• 29:17
  Speaker 2: I want to talk a little bit about the housing
• 29:18
  Speaker 2: market briefly. Mortgage rates, according to Mortgage News Daily, we
• 29:23
  Speaker 2: were at 756 yesterday after pulling back from 761. Today,
• 29:28
  Speaker 2: with the 10-year up a few basis points, you're probably
• 29:30
  Speaker 2: getting back towards 7.6%. And Conor Senn, who now writes
• 29:35
  Speaker 2: for uh, the housing frame, uh, basically making the argument
• 29:38
  Speaker 2: that look, labor market appears pretty stable right now. We're
• 29:42
  Speaker 2: not seeing any signs of a change in trajectory in
• 29:45
  Speaker 2: the AI spend that would result in a slowdown in
• 29:49
  Speaker 2: the economy. And so he basically makes the argument, look,
• 29:52
  Speaker 2: unlike the last couple of times that we've gotten rates
• 29:54
  Speaker 2: to this point, uh, It's tough to see a world
• 29:58
  Speaker 2: in which mortgage rates decline significantly from here. And as such,
• 30:03
  Speaker 2: more home sellers are grappling with the realization that they're
• 30:07
  Speaker 2: going to have to take lower prices than they wanted
• 30:09
  Speaker 2: in order to sell their places.
• 30:11
  Speaker 3: Yeah, that's pretty mechanical.
• 30:12
  Speaker 2: Yeah.
• 30:13
  Speaker 3: That's the way it should work, by the way. Yes.
• 30:15
  Speaker 3: If the housing market is overheated, I know rates aren't
• 30:18
  Speaker 3: rising because of demand on the part of people looking
• 30:21
  Speaker 3: for homes.
• 30:22
  Speaker 2: No, and this is the thing is, the Fed can
• 30:24
  Speaker 2: hike all they want because it won't matter in the
• 30:27
  Speaker 2: housing market because the housing market's already operating at a
• 30:30
  Speaker 2: crazy low level of activity. The housing market is operating
• 30:36
  Speaker 2: like 30 to 35% below normal levels of activity.
• 30:39
  Speaker 3: I just think it's amazing that AI... data center construction
• 30:44
  Speaker 3: is contributing more to the change in GDP now than
• 30:47
  Speaker 3: housing investment.
• 30:49
  Speaker 2: Which also raises the question of, hey, if that trajectory slows,
• 30:55
  Speaker 2: what does it mean for the U.S. economy? Because we're
• 30:57
  Speaker 2: in some trouble. The words deep crap get thrown around
• 31:01
  Speaker 2: a lot, but it would be deep crap because you
• 31:05
  Speaker 2: can stabilize the housing market through lower interest rates. If
• 31:11
  Speaker 2: The hyperscalers decide, hey, it's not worth building these data
• 31:14
  Speaker 2: centers anymore at this scale. You can't cut interest rates
• 31:18
  Speaker 2: enough to make that make sense.
• 31:20
  Speaker 3: Yeah, there may be a reduced pressure on inflation. I'm
• 31:24
  Speaker 3: really stretching here, but it may allow the Fed to
• 31:26
  Speaker 3: stimulate demand a little more aggressively if that is what's driving,
• 31:30
  Speaker 3: if AI data center construction is what's driving some inflation.
• 31:33
  Speaker 2: But you would need housing to perk up in a
• 31:35
  Speaker 2: hurry to overcome it.
• 31:37
  Speaker 3: You sure would.
• 31:37
  Speaker 2: Let's take a quick break. When we come back, we've
• 31:39
  Speaker 2: got Stack Roulette.
• 31:41
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• 31:44
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• 31:48
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• 31:52
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• 31:57
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• 32:00
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• 32:15
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• 32:35
  Speaker 2: What do you got for me for stock rule on.
• 32:37
  Speaker 3: The subject of inflation and inflation expectations as one potential
• 32:41
  Speaker 3: culprit for why people continue to say they're down on
• 32:44
  Speaker 3: the economy that new york fed among many many other uh.
• 32:49
  Speaker 3: Institutions does a monthly inflation survey. And the bottom line
• 32:55
  Speaker 3: is this median, the person in the middle who responded,
• 32:57
  Speaker 3: inflation expectations increased by three-tenths of a percentage point. Doesn't
• 33:01
  Speaker 3: sound like a lot, but it's actually quite a bit.
• 33:03
  Speaker 3: At the one-year horizon, so they ask people, what do
• 33:05
  Speaker 3: you think inflation will be a year from now?
• 33:08
  Speaker 4: Sure.
• 33:08
  Speaker 3: They use the word inflation in their question. Michigan and
• 33:11
  Speaker 3: some other places don't. So everybody may have something different
• 33:15
  Speaker 3: in mind when they answer it, but the bottom line is...
• 33:18
  Speaker 3: Year ahead inflation expectations jumping at 3.9%. That's not a
• 33:23
  Speaker 3: multi-year high. It makes it sound more dramatic than it is,
• 33:25
  Speaker 3: but it hasn't been that high since we were coming
• 33:26
  Speaker 3: off the COVID inflation.
• 33:27
  Speaker 2: Sure.
• 33:28
  Speaker 3: Five-year ahead inflation expectations are also quite elevated, well over 3%.
• 33:32
  Speaker 3: And I don't know if the respondents think that those
• 33:35
  Speaker 3: are higher low numbers, but they're certainly higher than, say,
• 33:39
  Speaker 3: the 10 years prior to COVID. And we must have,
• 33:42
  Speaker 3: on average, some sense of that. And this sort of affirms,
• 33:45
  Speaker 3: I think, Chuck, what you were speculating about you listed
• 33:48
  Speaker 3: many potential culprits for why people continue to be a
• 33:51
  Speaker 3: little melancholy about economic uh prospects negative on economic prospects
• 33:56
  Speaker 3: and inflation has to be playing a role there maybe
• 33:59
  Speaker 3: even a big.
• 33:59
  Speaker 2: One it does it would be shocking to me if
• 34:03
  Speaker 2: if it's not uh i want to talk a little
• 34:05
  Speaker 2: bit about this piece from the wall street journal it's
• 34:07
  Speaker 2: titled advanced stats and 500 bats why baseball for six-year-olds
• 34:11
  Speaker 2: is breaking the bank uh and i gotta tell you
• 34:15
  Speaker 2: i like My kids now are, you know, six and three.
• 34:19
  Speaker 2: And so, you know, the older one is at the
• 34:22
  Speaker 2: point where, you know, a lot of her friends and
• 34:23
  Speaker 2: everything are playing, you know, different sports and doing this
• 34:26
  Speaker 2: and that. And I got to tell you, it's broken, man. Tucker,
• 34:35
  Speaker 2: you're seeing this too. Well, I'm seeing it, but what's broken?
• 34:39
  Speaker 2: there are two things that are broken. The number one
• 34:41
  Speaker 2: thing that's broken is parents thinking that their kids are
• 34:45
  Speaker 2: going to be professional athletes and trying to live vicariously
• 34:50
  Speaker 2: through them because we see the, I see so many
• 34:54
  Speaker 2: parents that basically use their kids to chase clout that
• 34:58
  Speaker 2: they didn't get in their lifetime. And look, if you
• 35:02
  Speaker 2: have the money, like fine, like go for it. But
• 35:04
  Speaker 2: like a lot of these leagues and stuff ends up
• 35:06
  Speaker 2: being like thousands of dollars when it's all said and done.
• 35:09
  Speaker 2: And the parents put their kids in these leagues because
• 35:11
  Speaker 2: they think their kids are going to be something great,
• 35:13
  Speaker 2: and they're not. Like, I'm sorry, your kid's not going
• 35:18
  Speaker 2: to be a professional athlete. They're just not. And I
• 35:22
  Speaker 2: say this as someone who was a pretty good athlete myself,
• 35:25
  Speaker 2: but even I didn't get anywhere close to becoming a
• 35:29
  Speaker 2: professional because it's nearly impossible. So I think that a
• 35:34
  Speaker 2: lot of parents are just not honest, and they're like, oh,
• 35:36
  Speaker 2: if I just put my kid on this team and
• 35:38
  Speaker 2: spend the money, like, that's the path? No, like, it's not. Like,
• 35:42
  Speaker 2: it really isn't.
• 35:44
  Speaker 4: Some of these travel teams are outrageous.
• 35:46
  Speaker 2: They're crazy. Like, the cost. Again, you end up spending, like,
• 35:49
  Speaker 2: very easily, like, $ 6, 000 to $ 15, 000 a year for five-
• 35:53
  Speaker 2: and six-year-olds. And it's insane, and it makes no sense.
• 35:58
  Speaker 2: So I think that, honestly, like, I blame the parents
• 36:03
  Speaker 2: to a certain extent. The other piece, just for not
• 36:06
  Speaker 2: having realistic expectations about what their kid is going to be,
• 36:10
  Speaker 2: the second piece is I blame a lot of cities
• 36:14
  Speaker 2: and towns because as budgets have gotten tighter, what you've
• 36:18
  Speaker 2: seen is that cities and towns have cut back on
• 36:21
  Speaker 2: their funding for any kind of public spaces, parks and
• 36:24
  Speaker 2: things like that, which means that the cheap local town
• 36:29
  Speaker 2: leagues get nowhere to play because all of the higher-priced
• 36:33
  Speaker 2: travel teams end up taking up all of the space,
• 36:35
  Speaker 2: and so you don't have the options for a cheap
• 36:38
  Speaker 2: local team for your kids to play on once you
• 36:41
  Speaker 2: get past a certain age, and that sucks because I
• 36:44
  Speaker 2: think sports are critically important in my mind to developing
• 36:48
  Speaker 2: ideas like teamwork and resilience and camaraderie and all the
• 36:51
  Speaker 2: stuff that makes... successful people winning and losing right understanding
• 36:56
  Speaker 2: how to lose without throwing your bat at like the
• 36:58
  Speaker 2: other team and stuff like that and understanding how to
• 37:01
  Speaker 2: compete and come back and get better and understanding how
• 37:03
  Speaker 2: to work on something and that if you practice over
• 37:06
  Speaker 2: time you get better at it like these are all
• 37:08
  Speaker 2: important things and you don't have to learn them just
• 37:10
  Speaker 2: through sports like you can do it through you know
• 37:12
  Speaker 2: music and drama and all kinds of other places too
• 37:15
  Speaker 2: But sports is an important avenue, and I think we're
• 37:17
  Speaker 2: just doing our kids a disservice by just making it
• 37:19
  Speaker 2: crazy expensive on promises that, hey, you'll get better if
• 37:23
  Speaker 2: you pay us money. And I think that that just sucks.
• 37:28
  Speaker 2: What do you think, Tucker? No, I mean, asking me
• 37:29
  Speaker 2: to pay $ 2, 500 for a.
• 37:30
  Speaker 4: 7-year-old to play soccer on a club team is ridiculous.
• 37:38
  Speaker 1: It's insane.
• 37:39
  Speaker 2: And that's a spring season. That's not even the full year.
• 37:42
  Speaker 4: $ 2, 500 is cheap.
• 37:43
  Speaker 2: That's not the full year. That's what I was told. Again.
• 37:45
  Speaker 2: I was like, no, it's not, buddy. They very easily
• 37:48
  Speaker 2: get into like $ 5, 000 to $ 7, 000 a season.
• 37:51
  Speaker 4: Stupid.
• 37:51
  Speaker 2: And it's just like, we're not doing our kids a
• 37:54
  Speaker 2: service by doing this. And I don't know how to
• 37:59
  Speaker 2: fix it, but it's broken right now. And I don't
• 38:04
  Speaker 2: know what to do. And it sucks because it's taking
• 38:08
  Speaker 2: away an important avenue for personal development because most of us,
• 38:13
  Speaker 2: nearly all of us, will not be professional athletes. Let's
• 38:16
  Speaker 2: take a quick break for the rest of the day.
• 38:18
  Speaker 2: We're going to be back tomorrow, and you can join
• 38:20
  Speaker 2: us on The Financial Exchange.